Exhibit 10.1
PARTICIPATING BROKER AGREEMENT
COMMONWEALTH INCOME & GROWTH FUND V
LIMITED PARTNERSHIP
THIS PARTICIPATING BROKER AGREEMENT (the "Agreement") is made and entered
into as of the day indicated on Exhibit A attached hereto and by this reference
incorporated herein, between Commonwealth Capital Securities Corp., a
Pennsylvania corporation (the "Dealer Manager"), and the Participating Broker
(the "Participating Broker") identified in Exhibit A hereto.
WHEREAS COMMONWEALTH INCOME & GROWTH FUND V, is a limited partnership (the
"Partnership") duly organized under the Revised Uniform Limited Partnership Act
(1986), as amended, as enacted in the Commonwealth of Pennsylvania; and
WHEREAS, COMMONWEALTH INCOME & GROWTH FUND, INC., a Pennsylvania
corporation is serving as the general partner (the "General Partner") of the
Partnership; and
WHEREAS, the Partnership proposes to offer and sell up to 1,000,000 Units of
limited partnership interest in the Partnership ("Units") to the general public,
pursuant to a public offering (the "Offering") of the Units which shall be
registered with the Securities and Exchange Commission ("SEC"); and
WHEREAS, the Dealer Manager, which has heretofore entered into an agency
agreement with the Partnership pursuant to which it has been designated the
Dealer Manager to sell and manage the sale by others of the Units pursuant to
the terms of such agreement and the Offering (the "Dealer Manager Agreement"),
is a corporation incorporated in and presently in good standing in the
Commonwealth of Pennsylvania, and is presently registered with the Pennsylvania
Securities Commission and with the National Association of Securities Dealers,
Inc. ("NASD") as a securities broker-dealer qualified to offer and sell to
members of the public securities of the type represented by the Units; and
WHEREAS, the Participating Broker is an entity, as designated in Exhibit A
hereto, organized and presently in good standing in the state or states
designated in Exhibit A hereto, presently registered as a broker-dealer with the
NASD, and presently licensed by the appropriate regulatory agency of each state
in which it will offer and sell the Units as a securities broker-dealer
qualified to offer and sell to members of the public securities of the type
represented by the Units; and
WHEREAS, the Partnership has filed with the SEC a registration statement on
Form S-1, including a preliminary or final prospectus, for the registration of
the Units under the Securities Act of 1933, as amended (the "Securities Act")
(such registration statement, as it may be amended, and the prospectus and
exhibits on file with the SEC at the time the registration statement becomes
effective, including any post-effective amendments or supplements to such
registration statement or prospectus after the effective date of registration,
being herein respectively referred to as the "Registration Statement" and the
"Prospectus"); and
1
WHEREAS, the offer and sale of the Units shall be made pursuant to the terms
and conditions of the Registration Statement and the Prospectus and, further,
pursuant to the terms and conditions of all applicable securities laws of all
states in which the Units are offered and sold; and
WHEREAS, the Dealer Manager desires to retain the Participating Broker to
use its best efforts to sell the Units, and the Participating Broker is willing
and desires to serve as a broker for the Dealer Manager for the sale of the
Units upon the following terms and conditions;
NOW THEREFORE, in consideration of the premises and terms and conditions
thereof, it is agreed between the Dealer Manager and the Participating Broker as
follows.
1. Engagement.
-----------
(a) Subject to the terms and conditions herein set forth, the Dealer
Manager hereby engages the Participating Broker and the Participating Broker
hereby agrees and covenants to use its best efforts to sell for the account of
the Partnership a portion of the Units described in the Registration Statement,
as specified on Exhibit A hereto. The Participating Broker hereby accepts such
engagement and covenants, warrants and agrees to sell the Units according to all
of the terms and conditions of the Registration Statement, all applicable state
and federal laws, including the Securities Act and any and all regulations and
rules pertaining thereto, heretofore or hereafter issued by the SEC and the
NASD, including but not limited to NASD'S Rules of Fair Practice.
(b) The Participating Broker shall use its best efforts, promptly
following receipt of written notice from the Dealer Manager of the effective
date of the Registration Statement, to sell the Units in such quantities and for
the account of such Partnership as shall be agreed between the Participating
Broker and Dealer Manager and specified on Exhibit A hereto, and to such persons
and according to all such terms as are contained in the Registration Statement
and the Prospectus. The Participating Broker shall comply with all requirements
set forth in the Registration Statement and Prospectus. The Participating Broker
understands and will advise potential investors that all sales of the Units will
be for Units of limited partnership interest in COMMONWEALTH INCOME & GROWTH
FUND V. The Participating Broker shall use and distribute, in connection with
the offer and sale of the Units, only the Prospectus and such sales materials
and advertising as shall conform in all respects to any restrictions of local
law and the applicable requirements of the Securities Act and which has been
approved in writing by the General Partner or the Dealer Manager. The
Participating Broker will make a record of its distribution of each preliminary
prospectus, and Participating Broker will, upon the request of the Dealer
Manager, promptly forward copies thereof to each person to whom Participating
Broker has theretofore distributed a preliminary prospectus. The Dealer Manager
reserves the right to establish such additional procedures as it may deem
necessary to ensure compliance with the requirements of the Registration
Statement, and the Participating Broker shall comply with all such additional
procedures to the extent that it has received written notice thereof.
(c) The Participating Broker shall be permitted to accept subscriptions
for the Units (the "Subscription(s)") by telephone from residents of those
states identified on Schedule A attached hereto and made a part hereof provided
that (1) the registered representative
2
and branch manager of the Participating Broker execute the subscription
agreement attached to the Prospectus (the "Subscription Agreement") on behalf of
any investor who subscribes for Units by telephone; and (2) the Participating
Broker does not charge any additional fees, including but not limited to, fees
relating to the opening of an account with the Participating Broker, to any
investor who telephonically or orally subscribes for Units. It is understood and
agreed between the Dealer Manager and the Participating Broker that the Dealer
Manager may, in its discretion, change, modify, add to or delete from the list
of states identified on Schedule A. Any such modification shall be effective
three (3) days from the date written notice to the Participating Broker has been
mailed by the Dealer Manager. The Participating Broker shall not execute a
Subscription Agreement on behalf of any investor who subscribes for Units by
telephone unless such investor has specifically authorized the registered
representative and the branch manager of the Participating Broker to execute the
Subscription Agreement on behalf of such investor and has made or agreed to make
full payment for all Units covered by such Subscription Agreement.
Notwithstanding anything contained herein to the contrary, the Participating
Broker shall have no authority to make representations on behalf of an investor
or to initial representations contained in the Subscription Agreement on behalf
of an investor. In connection with telephonic or other oral Subscriptions for
Units, the Participating Broker represents and warrants as follows: (i) that a
Prospectus was delivered to the investor before the investor made a decision to
invest; (ii) that the investor meets the suitability requirements set forth in
the Prospectus; and (iii) that, in compliance with Rule 2810 of the NASD's
Conduct Rules, the Participating Broker has reasonable grounds to believe and
does believe that the investment in the Partnership is suitable for the
investor, based upon information supplied by the investor to such Participating
Broker.
(d) Notwithstanding anything to the contrary contained in Section 2 of
this Agreement, in the event that the Dealer Manager pays any commission to the
Participating Broker for sale of one or more Units, including, but not limited
to, those Units sold pursuant to a telephonic or other oral Subscription
therefore, where representatives of the Participating Broker execute the
Subscription Agreement relating to such Units, and the Subscription is rescinded
as to one or more of the Units covered by such Subscription, the Dealer Manager
shall decrease the next payment of commission or other compensation otherwise
payable to the Participating Broker by the Dealer Manager under this Agreement
by an amount equal to the commissions rate established in Section 2 and Exhibit
A of this Agreement, multiplied by the number of Units as to which the
Subscription is rescinded. In the event that no payment of commissions or other
compensation is due to the Participating Broker after such withdrawal occurs,
the Participating Broker shall pay the amount specified in the preceding
sentence to the Dealer Manager within ten (10) days following mailing of notice
to the Participating Broker by the Dealer Manager stating the amount owed as a
result of rescinded Subscriptions.
(e) All monies received for purchase of any of the Units shall be
forwarded by the Participating Broker to the Dealer Manager for delivery to
X.X.Xxxxxx Trust Company (the "Escrow Agent") or, if final internal supervisory
review is conducted at a different location, to such final review office by the
end of such next business day, which in turn will transmit same to the Escrow
Agent by the end of the next business day following its receipt thereof, where
such monies will be deposited in an escrow account established by the
Partnership solely for such Subscriptions ("Escrow Account") until such time (if
any) that such monies are deliverable to the Partnership pursuant to the escrow
agreement between the Partnership and the Escrow Agent ("Escrow Agreement"),
except the Participating Broker shall return any check not made payable
3
to "X.X.Xxxxxx Trust Company, Escrow Agent" directly to the Subscriber who
submitted the check. After such time that monies are deliverable to the
Partnership, the Participating Broker may accept checks made payable to either
the Partnership or the Escrow Agent. Subscriptions will be executed as described
in the Registration Statement or as directed by the Dealer Manager. The monies
shall be deposited or transmitted by the Participating Broker to the Dealer
Manager no later than the close of business of the next business day after
receipt of the Subscription documents by the Participating Broker; provided,
however, that if the Participating Broker maintains a branch office, the branch
office shall transmit the Subscription documents and check to the Participating
Broker by the close of business on the first business day following their
receipt by the branch office and the Participating Broker shall review the
Subscription documents and check to ensure their proper execution and form and,
if they are acceptable, transmit the check to the Dealer Manager by the close of
business on the first business day after their receipt by the Participating
Broker. Pursuant to the terms of the Dealer Manager Agreement, the Dealer
Manager will transmit the check or monies to the Escrow Agent by no later than
the close of business on the next business day after the check is received from
the Participating Broker, unless a final supervisory review is being conducted
as set forth above, in which instance the final review office will transmit the
same to the Escrow Agent by the end of the next business day following receipt
thereof.
(f) During the term of this Agreement, the Dealer Manager shall have
authority to take such action as it may deem advisable in respect to all matters
pertaining to the performance of the Participating Broker under this Agreement.
(g) The Units shall be offered and sold by the Participating Broker only
where the Units may be legally offered and sold, and only to such persons in
such states who shall be legally qualified to purchase the Units. The Dealer
Manager shall give the Participating Broker written notice at the time of
effectiveness of those states in which the offering and sale of Units may be
made, and shall amend such notice thereafter as additional states are added; no
Units shall be offered or sold in any other states.
(h) The Participating Broker shall have no obligation under this Agreement
to purchase any of the Units for its own account.
(i) The Participating Broker will use every reasonable effort to assure that
Units are sold only to investors who:
(1) meet the investor suitability standards, including the minimum income
and net worth standard established by the Partnership, and minimum purchase
requirements set forth in the Registration Statement;
(2) can reasonably benefit from investment in the Partnership based on the
prospective investor's overall investment objectives and portfolio structure;
(3) is able to bear the economic risk of the investment based on the
prospective investor's overall financial situation; and
(4) has apparent understanding of: (a) the fundamental risks of the
investment; (b) the risk that the prospective investor may lose the entire
investment; (c) the lack
4
of liquidity of the Units; (d) the restrictions on transferability of the Units;
(e) the background and qualifications of the General Partner; and (f) the tax
consequences of an investment in the Units.
(j) The Participating Broker will make the determinations required to be
made by it pursuant to Section 1(i) based on information it has obtained from a
prospective investor, including, at a minimum, but not limited to, the
prospective investor's age, investment objectives, investment experience,
income, net worth, financial situation, other investments of the prospective
investor, as well as any other pertinent factors deemed by the Participating
Broker to be relevant.
(k) In addition to complying with the provisions of Section 1(i) above, and
not in limitation of any other obligations of the Participating Broker to
determine suitability imposed by state or federal law, the Participating Broker
agrees that it will comply fully with all of the provisions of Rules 2310 and
2810 of the NASD's Conduct Rules, including specifically the following
provisions:
(1) In recommending to a customer the purchase, sale or exchange of any
security, the Participating Broker shall have reasonable grounds for believing
that the recommendation is suitable for such customer upon the basis of the
facts, if any, disclosed by such customer as to his other security holdings and
as to his financial situation and needs.
(2) Prior to the execution of a transaction recommended to a non-
institutional customer, other than transactions with customers where investments
are limited to money market mutual funds, the Participating Broker shall make
reasonable efforts to obtain information concerning:
(a) the customer's financial status;
(b) the customer's tax status;
(c) the customer's investment objectives; and
(d) such other information used or considered to be
reasonable by such member or registered representative in
making recommendations to the customer.
(3) The Participating Broker shall have reasonable grounds to believe and
shall believe, based upon information provided by the investor concerning the
investor's other investments, financial situation and needs, and upon any other
information known by the Participating Broker, that (a) each investor to whom
the Participating Broker sells Units is or will be in a financial position
appropriate to enable the investor to realize to a significant extent the
benefits (including tax benefits) of an investment in the Units, (b) each
investor to whom the Participating Broker sells Units has a net worth sufficient
to sustain the risks inherent in an investment in the Units (including potential
loss and lack of liquidity), and (c) the Units otherwise are or will be suitable
investment for each investor to whom it sells Units, and the Participating
Broker shall maintain files disclosing the basis upon which the determination of
suitability was made;
5
(4) The Participating Broker shall not execute any transaction involving
the purchase of Units in a discretionary account without prior written approval
of the transaction by the investor;
(5) The Participating Broker shall have reasonable grounds to believe and
shall believe, based upon the information made available to it, that all
material facts are adequately and accurately disclosed in the Registration
Statement and provide a basis for evaluating the Units;
(6) In making the determination set forth in subparagraph (3) above, the
Participating Broker shall evaluate items of compensation, physical properties,
tax aspects, financial stability and experience of the sponsor, conflicts of
interest and risk factors, appraisals, as well as any other information deemed
pertinent by it;
(7) If the Participating Broker relies upon the results of any inquiry
conducted by another member of the NASD with respect to the obligations set
forth in Section 1 (k)(5) or (6) above, the Participating Broker shall have
reasonable grounds to believe and shall believe that such inquiry was conducted
with due care, that the member or members conducting or directing the inquiry
consented to the disclosure of the results of the inquiry and that the person
who participated in or conducted the inquiry is not a sponsor or an affiliate of
the sponsor of the Partnership; and
(8) Prior to executing a purchase transaction in the Units, the
Participating Broker shall have informed the prospective investor of all
pertinent facts relating to the liquidity and marketability of the Units.
(l) The Participating Broker agrees that it will comply with NASD Conduct
Rules 2730, 2740 and 2750.
(m) The Participating Broker agrees to retain in its files, for a period of
at least 6 years, information which will establish that each purchaser of Units
falls within the permitted class of investors.
(n) The Participating Broker shall not, directly or indirectly, pay or award
any finder's fees, commissions or other compensation to any persons engaged by a
potential Limited Partner for investment advice as an inducement to such advisor
to advise the potential investor to purchase Units in the Partnership.
(o) The Participating Broker either (i) shall not purchase Units for its own
account or (ii) shall hold for investment any Units purchased for its own
account.
(p) The Participating Broker hereby confirms that it is familiar with
Securities Act Release No. 4968 and Rule 15c2-8 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), relating to the distribution of
preliminary and final prospectuses, and confirms that it has and will comply
therewith.
(q) The Participating Broker represents and warrants that it is (i) an
entity, as designated in Exhibit A hereto, organized and presently in good
standing in the state or states
6
designated in Exhibit A hereto, (ii) duly registered as a broker-dealer under
the provisions of the Exchange Act, and the regulations promulgated there under,
(iii) a member in good standing of NASD; (iv) presently licensed by the
appropriate regulatory agency of each state in which it will offer and sell the
Units as a securities broker-dealer qualified to offer and sell to members of
the public securities of the type represented by the Units; and (v) neither
Participating Broker nor any of Participating Broker's officers, directors or
agents is the subject of any federal or state administrative or judicial
proceeding or order which would disqualify it from participating in offerings
registered under the Securities Act.
2. Compensation of Participating Broker.
------------------------------------
The Dealer Manager shall pay the Participating Broker, as compensation for
all services to be rendered by the Participating Broker hereunder, a commission
equal to 8.0% on sales of Units by such Participating Broker, as set forth in
Exhibit A hereto, subject to reduction as specified in the Prospectus. The
Dealer Manager, in its sole discretion, may reallow to the Participating Broker
from its Dealer Manager fee, up to an additional 1.0% on sales of Units by such
Participating Broker, based on such factors as the number of Units sold by the
Participating Broker, bona fide due diligence expenses incurred by the
Participating Broker. Such commission rates shall remain in effect during the
term of this Agreement unless otherwise changed by a written agreement between
the parties hereto. A sale of Units shall be deemed to be completed only after a
Partnership receives a properly completed Subscription Agreement for Units of
such Partnership from the Participating Broker evidencing the fact that the
investor had received a final Prospectus for a period of not less than five full
business days, together with payment of the full purchase price of each
purchased Unit of such Partnership from a buyer who satisfies each of the terms
and conditions of the Registration Statement and Prospectus, and only after such
Subscription Agreement has been accepted in writing by the General Partner of
the Partnership. Such compensation shall be payable to the Participating Broker
by the Dealer Manager after such acceptance of the subscription agreement;
provided, however, that compensation or commissions shall not be paid by the
Dealer Manager (i) other than from funds received as compensation or commissions
from the Partnership for the sale of Units; (ii) until such time as
Subscriptions for a minimum of 57,500 Units of such Partnership ($1,150,000)
have been received and approved by the General Partner, and deposited into the
Escrow Account provided for in Section 1(e) hereof; (iii) until any and all
compensation or commissions payable by such Partnership to the Dealer Manager
have been received by the Dealer Manager; and (iv) the commission payable to any
broker-dealer or salesman exceeds the amount allowed by any regulatory agency.
The Partnership (and the Dealer Manager) may pay reduced commissions or may
eliminate commissions on certain sales of Units in accordance with, and on the
terms set forth in, the following five paragraphs (including the following
table) of this Section 2, which reduction or elimination of commissions will
not, however, change the net proceeds to the Partnership.
A registered principal or representative of the Dealer Manager or a
Participating Broker, when purchasing on its own behalf, may purchase Units net
of all or a portion of the 8% selling commission. In connection with purchases
of certain minimum numbers of Units, the amount of commissions otherwise payable
to the Dealer Manager or a Participating Broker, shall be reduced in accordance
with the following schedule:
7
Dollar Amount Purchase Price Reallowed Commissions
of Units Purchased Per Unit on Sales/Unit
------------------------------------------------------------------------------------------------------------------------------------
$ 1,000 - $ 250,000 $20.00 8.0%
$ 250,020 - $ 350,000 $19.80 7.0%
$ 350,020 - $ 500,000 $19.60 6.0%
$ 500,020 - $ 750,000 $19.40 6.0%
$ 750,020 - $1,000,000 $19.20 5.0%
$1,000,020 or more $19.00 4.0%
Subscriptions for Units of COMMONWEALTH INCOME & GROWTH FUND V may not be
combined in determining the volume discount to which an investor may be
entitled. Any such reduction in commissions will be credited to the purchaser as
defined below ("Purchaser"), by reducing the total purchase price otherwise
payable by the Purchaser.
Subscriptions may be combined for the purpose of determining the volume
discounts in the case of Subscriptions made by any Purchaser, provided all such
units are purchased through the same Participating Broker or through the Dealer
Manager. The volume discount will be prorated among the separate Subscribers
considered to be a single Purchaser.
Any request to combine more than one Subscription must be made in writing in
a form satisfactory to the General Partner and must set forth the basis for such
request. Any such request will be subject to verification by the Dealer Manager
that all of such Subscriptions were made by a single Purchaser. If a Purchaser
does not reduce the per Unit purchase price, the excess purchase price over the
discounted purchase price will be returned to the actual separate Subscribers
for Units.
For purposes of such volume discounts, Purchaser is defined as: (i) an
individual, his or her spouse, and their children under the age of 21, who
purchase the Units for his or her or their own accounts, and all pension or
trust funds established by each such individual; (ii) a corporation,
partnership, association, joint-stock company, trust fund, or any organized
group of persons, whether incorporated or not (provided that the entities
described in this clause (ii) must have been in existence for at least six
months before purchasing the Units and must have formed such group for a purpose
other than to purchase the Units at a discount); (iii) an employee's trust,
pension, profit-sharing, or other employee benefit plan that qualifies under
Section 401 of the Internal Revenue Code of 1986, as amended; and (iv) all
pension, trust, or other funds are maintained by a given bank. In addition, the
General Partner may aggregate and combine separate subscriptions for Units
received during the Offering from (i) the Dealer Manager or the same
Participating Broker; (ii) investors whose accounts are managed by a single
investment adviser registered under the Investment Advisers Act of 1940; (iii)
investors over whose accounts a designated bank, insurance company, trust
company, or other entity exercises discretionary investment responsibility, or
(iv) a single corporation, partnership, trust association, or other organized
group of persons, whether incorporated or not, and whether such subscriptions
are by or for the benefit of such corporation, partnership, trust association,
or group.
3. Association with Other Dealers.
------------------------------
It is expressly understood between the Dealer Manager and the Participating
Broker that the Dealer Manager may cooperate with other broker- dealers who are
registered as broker-dealers with the NASD and duly licensed by the appropriate
regulatory agency of each state in which they will offer and sell the Units of
the Partnership. Such other participating broker-
8
dealers may be engaged by the Dealer Manager as brokers on terms and conditions
identical or similar to this Agreement and shall receive such rates of
commission as are agreed to between the Dealer Manager and the respective other
participating broker-dealers and as are in accordance with the terms of the
Registration Statement. The Participating Broker understands that, to that
extent, such other participating broker-dealers shall compete with the
Participating Broker in the sale of the Units. If the participating broker-
dealers, including the Participating Broker, among themselves, should be deemed
to constitute a partnership for Federal income tax purposes, then Participating
Broker hereby elects to be excluded from the application of Subchapter K,
Chapter 1, Subtitle A of the Internal Revenue Code of 1986 and agrees not to
take any position inconsistent with that election. Participating Broker further
hereby authorizes the Dealer Manager, in its discretion, to execute and file on
behalf of the Participating Broker such evidence of that election as may be
required by the Internal Revenue Service.
4. Conditions of the Participating Broker's Obligations.
-----------------------------------------------------
The Participating Broker's obligations hereunder are subject, during the
term of this Agreement and the Offering, to: (a) the performance by the Dealer
Manager of its obligations hereunder; and (b) the conditions that: (i) the
Registration Statement shall become and remain effective, and (ii) no stop order
shall have been issued suspending the effectiveness of the Offering.
5. Conditions to the Dealer Manager's Obligations.
-----------------------------------------------
The obligations of the Dealer Manager hereunder are subject, during the term
of this Agreement and the Offering, to the conditions that: (a) at the effective
date of the Registration Statement and thereafter during the term of this
Agreement while any Units remain unsold, the Registration Statement shall remain
in full force and effect authorizing the offer and sale of the Units; (b) no
stop order suspending the effectiveness of the Offering or other order
restraining the offer or sale of the Units shall have been issued nor
proceedings therefore initiated or threatened by any state regulatory agency or
the SEC; and (c) the Participating Broker shall have satisfactorily performed
all of its obligations hereunder.
6. Covenants of the Dealer Manager.
--------------------------------
The Dealer Manager covenants, warrants and represents, during the full term
of this Agreement, that:
(a) It shall use its best efforts to cause the Partnership to maintain the
effectiveness of the Registration Statement and to file such applications or
amendments to the Registration Statement as may be reasonably necessary for that
purpose.
(b) It shall advise the Participating Broker whenever and as soon as it
receives or learns of any order issued by the SEC, any state regulatory agency
or any other regulatory agency which suspends the effectiveness of the
Registration Statement or prevents the use of the Prospectus or which otherwise
prevents or suspends the offering or sale of the Units, or receives notice of
any proceedings regarding any such order.
9
(c) It shall use its best efforts to prevent the issuance of any order
described herein at Section 6 (b) hereof and to obtain the lifting of any such
order if issued.
(d) It shall give the Participating Broker written notice when the
Registration Statement becomes effective and shall deliver to the Participating
Broker such number of copies of the Prospectus, and any supplements and
amendments thereto, which are finally approved by the SEC, as the Participating
Broker may reasonably request for sale of the Units.
(e) It shall promptly notify the Participating Broker of any post-
effective amendments or supplements to the Registration Statement or Prospectus,
and shall furnish the Participating Broker with copies of any revised Prospectus
and/or supplements and amendments to the Prospectus.
(f) To the extent to which the Dealer Manager has knowledge, it shall
keep the Participating Broker fully informed of any material development to
which either Partnership is a party or which concerns the business and condition
of either Partnership.
(g) In conjunction with the Partnership on whose behalf Units are
being offered, it shall use its best efforts to cause, at or prior to the time
the Registration Statement becomes effective, the qualification of the Units for
offering and sale under the securities laws of such states as that Partnership
shall elect.
7. Payment of Costs and Expenses.
-----------------------------
The Participating Broker shall pay all costs and expenses incident to the
performance of its obligations under this Agreement, including:
(a) All expenses incident to the preparation, printing and filing of
all advertising originated by it related to the sale of the Units; and
(b) All other costs and expenses incurred in connection with its sales
efforts related to the sales of the Units, which are not expressly assumed by
the Partnership in its Dealer Manager Agreement with the Dealer Manager.
8. Indemnification.
---------------
(a) The Participating Broker agrees to indemnify, defend and hold
harmless the Partnership, the General Partner, the General Partner's affiliates
and its officers, directors, employees and agents, including the Dealer Manager,
against all losses, claims, demands, liabilities and expenses, joint or several,
including reasonable legal and other expenses incurred in defending such claims
or liabilities, whether or not resulting in any liability to the Partnership,
the General Partner, its affiliates and its officers, directors, employees or
agents, which they or any of them may incur arising out of any offer or sale by
the Participating Broker, or any person acting on its behalf, of any Units
pursuant to this Agreement if such loss, claim, demand, liability, or expense
arises out of or is based upon (i) an untrue statement or alleged untrue
statement of a material fact, or any omission or alleged omission of a material
fact, other than a statement, omission, or alleged omission by the Participating
Broker which is also, as the case may be, contained in or omitted from the
Prospectus or the Registration Statement, as filed and
10
in effect with the SEC, or in the amendment or supplement thereto and which
statement or omission was not based on information supplied to the Partnership
or the Dealer Manager by such Participating Broker, or (ii) the breach by the
Participating Broker, or any person acting on its behalf, of any of the terms
and conditions of this Agreement. This indemnity provision shall survive the
termination of this Agreement.
(b) In the Dealer Manager Agreement, the General Partner has agreed
that it will indemnify and hold harmless the Dealer Manager and Participating
Broker against any losses, claims, damages or liabilities, joint or several, to
which they may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i) a
breach of any covenant or obligation of the General Partner in the Dealer
Manager Agreement or any representation or warranty of the General Partner in
the Dealer Manager Agreement or in the certificates provided pursuant to
Paragraph 6(f) of the Dealer Manager Agreement, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus or any
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading; and will reimburse the Dealer Manager and
Participating Broker for any legal or other expenses reasonably incurred by it
in connection with investigating or defending against such loss, claim, damage,
liability or action; provided, however, that it shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Prospectus in reliance upon and in conformity with
information supplied with respect to the Dealer Manager or Participating Broker
or any other agent which may offer and sell the Units, or their affiliates, in
writing, expressly for use therein. This indemnity agreement is in addition to
any liability which the General Partner may otherwise have.
(c) No indemnifying party shall be liable under Sections 8(a) and 8(b)
above unless the party to be indemnified shall have notified such indemnifying
party in writing promptly after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the party to
be indemnified, but failure to notify an indemnifying party of any such claim
shall not relieve it from any liabilities which it may have to the indemnified
party against whom action is brought other than on account of its indemnity
agreement contained in Sections 8(a) and 8(b) above. In the cases of any such
claim, if the party to be indemnified notified the indemnifying party of the
commencement thereof as aforesaid, the indemnifying party shall be entitled to
participate at its own expense in the defense of such claim. If it so elects, in
accordance with arrangements satisfactory to any other indemnifying party or
parties similarly notified, the indemnifying party has the option to assume the
defense of the claim, with counsel who shall be satisfactory to such indemnified
party and all other indemnified parties who are defendants in such action; and
after notice from the indemnifying party of its election so to assume the
defense thereof and the retaining of such counsel by the indemnifying party, the
indemnifying party shall not be liable to such indemnified party under Sections
8(a) and 8(b) above for any legal or other expenses, other than for the
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof, including but not limited to any
legal expenses the indemnified party will incur if the indemnified party elects,
at its option, to retain additional counsel to participate in the defense. No
indemnifying party shall be liable to indemnify any person for any settlement of
any action effected without the consent of such indemnifying party.
11
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided in Sections 8(a), (b) and
(c) is for any reason other than the terms thereof held to be unavailable, the
parties entitled to indemnification by the terms hereof shall be entitled to
contribution for liabilities and expenses (including the reasonable costs of
investigation but after deducting any contribution received by such parties from
any other person) in such proportion as is appropriate to reflect the relative
benefits received by such parties from the offering of the Units. If, however,
the allocation provided by the preceding sentence is not permitted by applicable
law, then such contribution shall be in such proportion as is appropriate to
reflect such relative benefits and also the relative fault of such parties in
connection with the misstatement or omissions which result in such losses,
claims, damages or liabilities, as well as other equitable considerations. The
parties agree that it would not be just and equitable if contribution were
determined by pro rata allocation or by any other method which does not take
into account the equitable considerations referred to above, and that no person
guilty of such fraudulent misrepresentation shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. Each
party who may seek contribution under this Section 8(d) shall, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 8 (d), give written notice of the
commencement of such action, suit or proceeding to the other party or parties
from whom such contribution may be sought, but the omission so to notify such
contributing party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
otherwise than on account of the Section 8(d).
9. Term of Agreement.
-----------------
This agreement shall become effective at 8:00 a.m. (Eastern Standard Time)
of the first full business day following the day on which the Registration
Statement becomes effective, or if later, the date on which this Agreement is
executed by the Dealer Manager and the Participating Broker. The Participating
Broker and the Dealer Manager may each prevent this Agreement from becoming
effective, without liability to the other, by written notice before the time
this Agreement would otherwise become effective. After this Agreement becomes
effective, either party may terminate it at any time for any reason by giving
thirty (30) days written notice to the other party; provided, however, that this
Agreement shall in any event automatically terminate at the first occurrence of
any of the following events: (a) the Registration Statement for offer and sale
of the Units shall cease to be effective; (b) the Partnerships shall be
terminated; or (c) the Participating Broker's license or registration to act as
a broker-dealer shall be revoked or suspended by any federal, self- regulatory
or state agency and such revocation or suspension is not cured within ten (10)
days from the date of such occurrence. In any event, this Agreement shall be
deemed suspended during any period for which such license is revoked or
suspended.
10. Notices.
-------
All notices and communications hereunder shall be in writing and shall be
deemed to have been given and delivered when deposited in the United States
mail, postage prepaid, registered or certified mail, to the applicable address
set forth below.
If sent to the Dealer Manager:
12
Commonwealth Capital Securities Corp.
0000 XX Xxxxxxx 00
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: President
If sent to the Participating Broker:
to the person whose name and address are identified in Exhibit A hereto.
11. Successors.
----------
This agreement shall be binding upon and inure to the benefit of the parties
hereto, and shall not be assigned or transferred by the Participating Broker by
operation of law or otherwise.
12. Miscellaneous.
-------------
(a) This Agreement shall be construed in accordance with the applicable
laws of the Commonwealth of Pennsylvania.
(b) Exclusive Jurisdiction. Any disputes arising out of or related to this
Agreement shall be subject to the exclusive jurisdiction of the Court of Common
Pleas of Pennsylvania in the County of Delaware or the Federal District Court
for the Eastern District of Pennsylvania.
(c) Nothing in this Agreement shall constitute the Participating Broker as
in association with or in partnership with the Dealer Manager. Instead, the
Participating Broker is an independent contractor, and this Agreement shall only
authorize the Participating Broker to sell the Units according to the terms as
expressly set forth herein; provided, further, that the Participating Broker
shall not in any event have any authority to act except according to the terms
expressly set forth herein. The Dealer Manager is under no obligation to the
Participating Broker except for the obligations assumed hereby or in any written
communication from the Dealer Manager in connection with this offering. Further,
the Participating Broker shall have no independent authority to appoint any
person or other entity as an agent or sub-agent.
(d) This Agreement, including Exhibit A and Schedule A hereto, embodies
the entire understanding between the parties to the Agreement, and no variation,
modification or amendment to this Agreement shall be deemed valid or effective
unless it is in writing and signed by other parties hereto.
(e) If any provision of this Agreement shall be deemed void, invalid or
ineffective for any reason, the remainder of the Agreement shall remain in full
force and effect.
(f) This Agreement may be executed in counterpart copies, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument comprising this Agreement.
13
(g) All representations, warranties and covenants made by Participating
Broker and/or Dealer Manager contained herein or in certificates delivered
pursuant hereto, and the indemnity agreements contained herein, shall remain
operative and in force and effect regardless of any investigation made by or on
behalf of a party hereto, and shall survive the completion of the sale of the
Units.
14
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year indicated on Exhibit A hereto.
PARTICIPATING BROKER: DEALER MANAGER:
COMMONWEALTH CAPITAL
______________________________ SECURITIES CORP.
(Name of Participating Broker)
By:___________________________ By:_________________________
Print Name:___________________ Print Name:_________________
Title:________________________ Title:______________________
Witness:______________________ Witness:____________________
15
EXHIBIT A
TO
PARTICIPATING BROKER AGREEMENT
OF
COMMONWEALTH
INCOME & GROWTH FUND V
This Exhibit A is attached to and made a part of that certain
Participating Broker Agreement, dated as of the ______day of _______, 20 ______,
by and between COMMONWEALTH CAPITAL SECURITIES CORP., as Dealer Manager,
and ___________, as Participating Broker.
1. Date of Agreement:__________________________________________________________
2. Identity of Participating Broker:
Name:_______________________________________________________________________
Firm NASD (CRD) No._________________________________________________________
Type of Entity:_____________________________________________________________
(To be completed by Participating Broker; i.e.
Corporation, Partnership, Sole Proprietorship)
State Organized In:_________________________________________________________
(To be completed by Participating Broker)
Qualified To Do Business and in Good Standing in the Following Jurisdictions
(including your state of organization) (Note: Qualification to do business
in any jurisdiction is generally a requirement imposed by the secretary of
state or other authority of jurisdictions in which you do business, and is
not related to your holding a license as a securities broker-dealer in such
jurisdictions. Questions concerning this matter should be directed to you or
your legal counsel):
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(To be completed by Participating Broker)
Licensed as Broker-Dealer in the following states:__________________________
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(To be completed by Participating Broker)
16
3. Schedule of Commissions Payable to participating broker (see Section 2
of Agreement):
Number of Units Purchased In Sales Price As a Percentage
Individual Order To Subscriber of the Sales Price (1) Dollar Amount
1 or more $20.00 8.0% $1.60
(1) Subject to reduction as set forth in Section 2 of the
Participating Broker Agreement.
4. Name and Address for Notice Purposes (see Paragraph 10 of Agreement):
Name:_______________________________________________________________________
Title:______________________________________________________________________
Company:____________________________________________________________________
Address:____________________________________________________________________
City, State & Zip Code:_____________________________________________________
Telephone Number (including area code):_____________________________________
5. Please complete the following for our records:
(a) Please name those individuals who hold the following positions:
President:_______________________________________________________
Due Diligence Officer:___________________________________________
Marketing Director:______________________________________________
In-House Editor:_________________________________________________
(b) Does your company hold national or regional conferences?
Yes__________ No__________
If so, when?_____________________________________________________
Who is the coordinator?__________________________________________
(c) How many representatives are registered with your broker-
dealer?__________________________________________________________
PLEASE ENCLOSE A CURRENT LIST. ALL INFORMATION WILL BE HELD IN
CONFIDENCE.
(d) Does your firm publish a newsletter? Yes_________ No__________
(e) Does your firm have regular internal mailings, or bulk package
mailings to representatives?
Yes___________ No__________
17
