BROKER/DEALER AGREEMENT
LAKESIDE MORTGAGE FUND LLC, a California limited liability company
("Issuer"), and ePLANNING SECURITIES, INC., a California corporation,
("Broker"), effective as of June 2, 2003, agree as follows:
1. Background and Purpose.
1.1. Issuer wishes to issue, offer and sell units of membership interest
in Issuer ("Units") as described in that certain Offering Circular of Issuer
dated February 24, 2003, as the same may be amended and supplemented from time
to time (the "Offering Circular").
1.2. Broker represents that Broker is registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
licensed as a broker-dealer under California's Corporate Securities Law of 1968
("California Securities Law"). Broker, through its registered representative(s),
wishes to act as Issuer's non-exclusive broker in selling the Units, all on the
terms and subject to the conditions set forth herein.
2. Appointment of Broker. Issuer hereby engages Broker to serve as a
non-exclusive broker for the offering and sale of the Units (the "Offering").
Broker shall serve as Issuer's broker for the sale of the Units during the term
of this Agreement. Units may also be offered and sold directly by the Company.
Unless terminated earlier as provided herein, the term of this Agreement shall
continue for so long as an offering permit issued by the California Department
of Corporations remains in effect as extended from time to time. Issuer shall
use its best efforts to give Broker prompt notice of any anticipated termination
of the effectiveness of such offering permit upon knowledge by Issuer of such
anticipated termination.
3. Registered Representatives of Broker. Broker shall perform its obligations
under this Agreement through its registered representatives. Only registered
representatives of the Broker are authorized to sell the Units under this
Agreement.
4. Duties of Broker.
4.1. Referral of Prospective Investors. Broker shall:
(a) use its standard reasonable efforts to procure qualified
subscribers for Units on the terms described in the Offering Circular;
(b) distribute offering materials prepared by Issuer, which include
without limitation the Offering Circular, the Operating Agreement ("Operating
Agreement") and Subscription Agreement ("Subscription Agreement") attached to
the Offering Circular, the ePlanning Securities, Inc. Supplement to Lakeside
Mortgage Fund, LLC Offering Circular ("Supplement"), and all other documents
attached to the Offering Circular or otherwise provided to Broker by Issuer for
distribution to investors (collectively, the "Offering Materials"), only to
Broker's clients which Broker reasonably determines are qualified to invest in
the Units;
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(c) keep accurate records as to the clients to whom Broker has
distributed the Offering Materials;
(d) use Broker's best efforts to assure that no client to which the
Offering Materials are distributed will make an investment decision with respect
to the Units until such client has read all of the Offering Materials completely
and thoroughly;
(e) assist Broker's clients to whom Offering Materials have been
distributed in understanding the contents of the Offering Materials and in
completing the Subscription Agreement and any other documents required to be
completed by the client;
(f) collect completed and executed Subscription Agreements and
payments of investment amounts from clients on behalf of Issuer, and deliver
these promptly to Issuer;
(g) comply at all times with all material federal, state, local and
common laws and all rules, regulations and orders of any court, government or
unit or agency thereof applicable to the services to be rendered by the Broker;
(h) retain for at least four (4) years all information relevant to
establishing that each purchaser of the Units sold by the Broker is within the
permitted class of investors under the terms of the Offering Documents;
(i) supply the Issuer and its counsel with such written reports of
the Broker's activities relating to sales of the Units as Issuer may from time
to time reasonably request, provided that the creation of such reports is not
unreasonably burdensome to Broker;
(j) make no representations in offering Units inconsistent with the
Offering Materials or other information supplied by the Issuer and use no sales
materials other than those provided by the Issuer without the Issuer's prior
approval; and
(k) keep the Issuer reasonably informed as to the progress of the
Offering by periodic reports, either orally or in writing.
4.2. Compliance with Applicable Securities Laws. Broker acknowledges that
the Units are being offered pursuant to: (i) the exemption from the registration
requirement of the Securities Act of 1933, as amended (the "Securities Act"),
provided by Section 3(a)(11) of the Securities Act and Rule 147 promulgated
thereunder; and (ii) a permit dated February 24, 2003 issued by the California
Department of Corporations. In order to preserve this exemption for Issuer, and
to assure compliance with other applicable securities laws and the Permit,
Broker shall:
(a) offer the Units and sell the Units only to persons which Broker
reasonably believes, after reasonable inquiry, to be resident within the State
of California, as that term is defined in Section 4.2.1;
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(b) use Broker's best efforts to prevent any resale of the Units to
any persons other than persons resident within the State of California during
the period that Units are being offered by Issuer, and for nine (9) months
thereafter (which efforts shall consist of informing Broker's clients of the
prohibition on such resale, and refusing to facilitate, either directly or
indirectly, such resale); and
(c) use Broker's best efforts to assure that a written
representation is obtained from each purchaser as to the purchaser's residence.
4.2.1. Definition of "Resident Within the State of California." In
determining whether a person is a resident of the State of California:
(a) a corporation, partnership, trust, or other form of
business organization is a resident of the State of California if the
organization has its principal office in the State of California;
(b) an individual is a resident of the State of California if
the individual's principal residence is in the State of California; and
(c) a corporation, partnership, trust, or other form of
business organization which is organized for the specific purpose of investing
in Units is a resident of the State of California only if all beneficial owners
are residents of the State of California.
5. Duties of Issuer. Issuer shall collect the completed and executed
Subscription Agreements delivered by Broker, shall review the representations
set forth in each agreement by each prospective investor, and shall decide
whether to accept the offer to invest made by each prospective investor, in
Issuer's sole discretion, all in accordance with the provisions of the
Subscription Agreement. Issuer shall contact Broker with respect to the decision
made as to each prospective investor. Issuer shall comply with the provisions of
the Subscription Agreement with respect to delivery of materials required to be
delivered to the investor. To the extent Issuer offers and sells Units
concurrently with the offer and sale by Broker, Issuer shall comply with all
duties set forth in Section 4.2 (a) through (c). Issuer shall comply at all
times with all material federal, state, local and common laws and all rules,
regulations and orders of any court, government or unit or agency thereof
applicable to any services to be rendered by Issuer to Broker.
6. Commissions. As consideration for the services provided by Broker hereunder,
Issuer shall pay to Broker the following commissions based on amounts paid to
Issuer by investors which have been referred by Broker, and which have purchased
Units, after having been accepted by Issuer ("Investor Amounts"). Issuer
reserves the right to reject any offer (in the form of a completed and executed
Subscription Agreement) by a prospective investor referred by Broker, and Broker
will be paid the commission hereunder only on consummated sales of Units to
investors referred by Broker. Issuer shall pay Broker the following amounts:
(a) a commission of three percent (3%) of all Investor Amounts;
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(b) a marketing fee of one half percent (0.5%) of all Investor Amounts;
and
(c) an annual trailing commission of one half percent (0.5%) of all
Investor Amounts remaining invested with Issuer.
The amounts described in (a) and (b) shall be paid within thirty (30) days
following the acceptance of a subscription by Issuer as evidenced by the deposit
of the accepted amount into Issuer's Subscription Account. The amount described
in (c) shall be paid quarterly, within ten (10) days following the last day of
the quarter in which the anniversary of the investment occurred.
7. Offering Expenses. Issuer shall be responsible for all expenses involved in
the preparation of the Offering Materials, and all expenses involved in
compliance with applicable securities laws, including without limitation legal
fees incurred for the preparation and review of documents to be filed under
federal and state securities laws. Broker shall be responsible for all of
Broker's expenses with regard to the sale of the Units; provided, however,
Issuer shall pay all legal fees incurred by Broker in connection with this
offering up to a maximum of $15,000.
8. Representation and Warranties of Broker. Broker represents and warrants as
follows:
(a) Broker is a corporation which has been validly formed and duly
organized, and is in good standing, under the laws of the State of California;
(b) Broker is duly registered and in good standing as a broker-dealer with
the Securities and Exchange Commission (SEC) under the Exchange Act, and is a
member of the National Association of Securities Dealers (NASD) and/or the New
York Stock Exchange (NYSE);
(c) Broker is duly licensed and in good standing as a broker-dealer in the
State of California;
(d) Neither Broker, nor any officer, director, partner, member, manager,
or controlling person of Broker, is subject to any of the disqualification
provisions set forth in Rule 262 promulgated under the Securities Act; and
(e) Performance under this Agreement and the consummation of the
transactions contemplated in the Offering Circular will not result in a breach
or violation of the terms or provisions of, or constitute a default under, any
statute, indenture or other agreement or instrument to which the Broker or any
of its affiliates are a party or by which they are bound, or any order, rule or
regulation directed to them by any court or government agency.
9. Representations and Warranties of Issuer. Issuer represents and warrants as
follows:
(a) Issuer is a limited liability company which has been validly formed
and duly organized, and is in good standing, under the laws of the State of
California;
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(b) The Offering Materials prepared by Issuer set forth information which
is complete, correct and accurate, and, to the best knowledge of Issuer, contain
no material misstatements or omissions;
(c) Issuer has provided complete, correct and accurate information to
Broker in response to Broker's due diligence questions relative to the Units and
such information, to the best knowledge of Issuer, contains no material
misstatements or omissions; and
(d) Issuer will use its best efforts to assure that the offering of the
Units complies with the exemptions from registration and qualification described
in Section 3(a)(11) and Rule 147, including, without limitation and to the
extent applicable due to Issuer's offering of the Units concurrently with
Broker, those obligations set forth in Section 4.2 (a) through (c).
10. Indemnification.
10.1. Indemnification by Issuer. To the extent permitted by law, Issuer
shall protect, defend, indemnify and hold harmless Broker, and each of its
officers, directors, agents, employees, representatives, and legal counsel,
against any losses, claims, damages or liabilities, joint or several, to which
Broker or any such officers, directors, agents, employees, representatives, or
legal counsel may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise from or relate to: (i) any untrue or alleged untrue statement of any
material fact contained in the Offering Materials; (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (iii) any violation by
Issuer of any rule or regulation promulgated under the Securities Act or other
securities laws applicable to Issuer in connection with the offering and sale of
the Units; (iv) any negligence, violation of law, or other wrongful act by
Issuer in connection with the Units; or (v) any breach by Issuer of its
obligations, covenants, representations, or warranties made in this Agreement.
Issuer will reimburse any legal or other expenses reasonably incurred by Broker
or its officers, directors, agents, employees, representatives, and legal
counsel in connection with investigating or defending any such loss, claim,
damage, liability or action. The indemnity obligations set forth in this Section
10.1 shall not apply to: (i) amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected by Broker without the
consent of Issuer (which consent shall not be unreasonably withheld); or (ii)
any such loss, claim, damage, liability or action to the extent that it arises
out of or is based upon any action, statement or omission of Broker.
10.2. Indemnification by Broker. To the extent permitted by law, Broker
will protect, defend, indemnify and hold harmless Issuer, and each of its
officers, directors, agents, employees and legal counsel, against any losses,
claims, damages or liabilities to which Issuer or any such officer, director,
employee, agent or legal counsel may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of: (i) any untrue or alleged untrue statement of any
material fact in connection with the Units made by Broker; (ii) any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements made by Broker not misleading in connection
with the Units; (iii) any negligence, violation of law, or other wrongful act by
Broker in connection with its offering of the Units; (iv) any failure by Broker
to meet its obligations as set forth in this Agreement including, without
limitation, the manner of offering obligations set forth in Section 4.2; or (v)
any breach, default or misstatement by Broker with respect to any of its
representations, warranties, or covenants set forth herein. Broker will
reimburse any legal or other expenses reasonably incurred by Issuer or its
officers, directors, agents, employees, representatives, and legal counsel in
connection with investigating or defending any such loss, claim, damage,
liability or action. The indemnity agreement contained in this Section 10.2
shall not apply to: (i) amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of Broker (which consent shall not be unreasonably withheld); or (ii) any such
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon any action, statement or omission of Issuer.
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10.3. Notice. Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this paragraph, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties.
The failure to notify an indemnifying party promptly of the commencement of any
such action, if prejudicial to the indemnifying party's ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this paragraph, but the failure to notify the
indemnifying party shall not relieve him of any liability that the indemnifying
party may have to any indemnified party otherwise than under this Section 10.
10.4. Contribution. If the indemnification provided for in this Section 10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party hereunder with respect to any loss, liability, claim, damage or expense
for which indemnification would otherwise be required, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and of the indemnified
party in connection with the action, inaction, statement or omissions that
resulted in such loss, liability, claim, damage or expense as well as any other
relevant equitable considerations.
11. Termination. Either party may terminate this Agreement as follows:
(a) following a material breach of this Agreement by the other party,
which remains uncured to the reasonable satisfaction of the terminating party
after ten (10) days following written notice of such breach by the terminating
party; and
(b) for any reason, with thirty (30) days' prior written notice to the
non-terminating party.
12. Authority. It is understood that the Broker's relationship with the Issuer
is as an independent contractor. Nothing herein shall be construed as creating a
relationship of partners, joint venturers, or employer and employee between or
among the Broker or the Issuer. Broker is not authorized to give any information
or make any representation to any person that is not consistent with the
Offering Circular or with such materials as the Issuer supplies to the Broker
for use in connection with the offering or as may be necessary in order to
permit the Broker to investigate the offering and to permit offerees to protect
their own interests in connection with the transaction.
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13. Miscellaneous.
13.1. Entire Agreement. This document constitutes the entire agreement
between the parties, all oral agreements being merged herein, and supersedes all
prior representations. There are no representations, agreements, arrangements,
or understandings, oral or written, between or among the parties relating to the
subject matter of this Agreement that are not fully expressed herein.
13.2. Survival. All representations, warranties, covenants, and agreements
of the parties contained in this Agreement, or in any instrument, certificate,
opinion, or other writing provided for in it, shall survive the termination of
this Agreement.
13.3. Amendment. The provisions of this Agreement may be modified at any
time by agreement of the parties. Any such agreement hereafter made shall be
ineffective to modify this Agreement in any respect unless in writing and signed
by each of the parties to this Agreement.
13.4. Waiver. Any of the terms or conditions of this Agreement may be
waived at any time by the party entitled to the benefit thereof, but no such
waiver shall affect or impair the right of the waiving party to require
observance, performance or satisfaction either of that term or condition as it
applies on a subsequent occasion or of any other term or condition.
13.5. Nonassignability. This Agreement shall not be assigned by any party
without the prior written consent of the other parties. Any assignment contrary
to the provisions of this Agreement shall be deemed a default under the
Agreement, allowing the nondefaulting parties to exercise all remedies available
under law.
13.6. Succession. Subject to the provisions regarding assignability
otherwise contained in this Agreement, this Agreement shall inure to the benefit
of and be binding on the successors and assigns of the respective parties.
13.7. Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action against any party to this Agreement.
13.8. Specific Performance. Each party's obligations under this Agreement
are unique. The parties each acknowledge that, if any party should default in
performance of the duties and obligations imposed by this Agreement, it would be
extremely impracticable to measure the resulting damages. Accordingly, the
nondefaulting party, in addition to any other available rights or remedies, may
xxx in equity for specific performance, and the parties each expressly waive the
defense that a remedy in damages will be adequate.
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13.9. Notices. Any notice under this Agreement shall be in writing, and
any written notice or other document shall be deemed to have been duly given (i)
on the date of personal service on the parties, (ii) on the third business day
after mailing, if the document is mailed by registered or certified mail, (iii)
one day after being sent by professional or overnight courier or messenger
service guaranteeing one-day delivery, with receipt confirmed by the courier, or
(iv) on the date of transmission if sent by telegram, facsimile, telecopy or
other means of electronic transmission resulting in written copies, with receipt
confirmed. Any such notice shall be delivered or addressed to the parties at the
addresses set forth below or at the most recent address specified by the
addressee through written notice under this provision. Failure to give notice in
accordance with any of the foregoing methods shall not defeat the effectiveness
of notice actually received by the addressee.
13.10. Attorneys' Fees; Prejudgment Interest. If the services of an
attorney are required by any party to secure the performance of this Agreement
or otherwise upon the breach or default of another party to this Agreement, or
if any judicial remedy or arbitration is necessary to enforce or interpret any
provision of this Agreement or the rights and duties of any person in relation
thereto, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and other expenses, in addition to any other relief to which such party
may be entitled. Any award of damages following judicial remedy or arbitration
as a result of the breach of this Agreement or any of its provisions shall
include an award of prejudgment interest from the date of the breach at the
maximum amount of interest allowed by law.
13.11. Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if the parties had all signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
13.12. Captions. All paragraph captions are for reference only and shall
not be considered in construing this Agreement.
13.13. Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement which can be given effect without the invalid provision shall continue
in full force and effect and shall in no way be impaired or invalidated.
13.14. Governing Law. The rights and obligations of the parties and the
interpretation and performance of this Agreement shall be governed by the law of
California, excluding its conflict of laws rules.
13.15. Venue. Each party consents to the jurisdiction of, and any actions
arising under this Agreement shall be heard and resolved in, courts in the State
of California.
13.16. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall whenever possible be cumulative with all other
remedies at law or in equity.
Signatures on following pages
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13. Signatures.
LAKESIDE MORTGAGE FUND, LLC,
A California limited liability company
By: Lakeside Financial Group, Inc., Manager
By:
-----------------------------------------
(Xxxxxxx X. Xxxxxxx,
President and General Counsel)
Address: 000 Xxxxxxxx Xx., Xxxxx 000
Xxxxxxx, XX 00000
ePLANNING, SECURITIES INC., a California
corporation
By:
-----------------------------------------
(Xxxxx Xxxxxx, President and CEO)
Address: 0000 Xxxxxxx, Xxxx., Xxxxx 000
Xxxxxxxxx, XX 00000
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