PARTICIPATING BROKER AGREEMENT COMMONWEALTH INCOME & GROWTH FUND VII LIMITED PARTNERSHIP
Exhibit10.1
COMMONWEALTH
INCOME & GROWTH FUND VII
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 VII, 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 2,500,000 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 Financial Industry Regulatory Authority (“FINRA”) 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 FINRA, 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
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 FINRA,
including but not limited to FINRA’s Conduct Rules.
(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
VII. 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 of such record to the
Dealer Manager. 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 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 FINRA’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 JPMorgan 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 to “X.X.Xxxxxx
Trust Company, Escrow Agent” directly to the Subscriber who submitted the
check. 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 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
FINRA’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
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(d)
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such
other information used or considered to be reasonable by such member or
registered representative in making recommendations to the
customer.
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(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;
(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 FINRA 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 FINRA 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 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 FINRA; (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.
(r) The
Participating Broker agrees to have in place and to adhere to a commercially
reasonable program of customer privacy in compliance with applicable laws and
industry best practices designed to assure the confidentiality and security of
confidential investor information, as required by Regulation S-P and other
applicable laws. The Participating Broker will promptly notify the
Dealer Manager of any breaches of security or loss of confidential customer
information in respect of investors in the Partnership.
(s) The
Participating Broker shall verify the identity of each investor to whom it
offers and sells Units under its “customer identification program” and verify
the source of the investor’s funds as required by the anti-money laundering
rules of FINRA, the SEC and the Department of Treasury, and screen such
investors against current lists of individuals and organizations available from
the Office of Foreign Asset Control (“OFAC”). The Participating Broker shall not
accept subscriptions from any person, entity or organization in a blocked
jurisdiction. The Participating Broker shall file any necessary or appropriate
suspicious activity reports and currency transaction reports and other required
under applicable “know your customer” and “anti-money laundering” laws and
regulations in respect of investors or potential investors. The Participating
Broker has in place and adheres to a comprehensive anti-money laundering program
that meets the requirements of FINRA Conduct Rule 3011, Department of Treasury
regulations issued pursuant to Title III of the USA PATRIOT Act and other
applicable laws and regulations. The Broker agrees to cooperate with the
Partnership and the Dealer Manager in gathering additional information in
respect of an investor or the source of the investors funds as reasonably
requested by the Dealer Manager or the Partnership, and agrees to cooperate with
the Partnership and the Dealer Manager in connection with anti-money laundering
laws and regulations. By forwarding an investor’s subscription information to
the Partnership, the Participating Broker represents and warrants that it has
verified the identity of the investor and the source of the investor’s funds,
that the investor is not listed on the OFAC list, and that the Participating
Broker, after conducting commercially reasonable diligence, is not aware of any
suspicious or illegal activity associated with the investor or the source of the
investor’s funds.
2. Compensation of
Participating Broker.
(a) 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 7.0% 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, a Marketing Reallowance of up to an additional 1.0%
on sales of Units by such Participating Broker, based on the Participating
Broker’s agreement to provide marketing assistance and support, as described
below. 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 ($1,150,000) have been received and approved by the General Partner,
and deposited into the Escrow Account provided for in Section 1(e) hereof; (iii)
until any and all compensation or commissions payable by such Partnership to the
Dealer Manager have been received by the Dealer Manager; and (iv) if the
commission payable to any broker-dealer or salesman exceeds the amount allowed
by any regulatory agency. The Partnership (and the Dealer Manager) may pay
reduced commissions or may eliminate commissions on certain sales of Units in
accordance with, and on the terms set forth in, the following five paragraphs
(including the following table) of this Section 2, which reduction or
elimination of commissions will not, however, change the net proceeds to the
Partnership.
(b) A
registered principal or representative of the Dealer Manager or a Participating
Broker, when purchasing on its own behalf, may purchase Units net of all or a
portion of the 7% selling commission. In connection with purchases of certain
minimum numbers of Units, the amount of commissions otherwise payable to the
Dealer Manager or a Participating Broker shall be reduced in accordance with the
following schedule:
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Dollar
Amount of Units Purchased
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Purchase
Price per Unit
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Reallowed
Commissions on Sales/Units
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$ 1,000
- $ 250,000
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$20.00
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7.00%
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$ 250,020
- $ 350,000
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$19.80
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6.00%
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$ 350,020
- $ 500,000
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$19.60
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5.00%
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$ 500,020
- $ 750,000
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$19.40
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4.00%
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$ 750,020
- $1,000,000
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$19.20
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3.00%
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$1,000,020
or more
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$19.00
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2.00%
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(c) Subscriptions
for Units of COMMONWEALTH INCOME & GROWTH FUND VII 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.
(d) 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. The volume discount will be
prorated among the separate Subscribers considered to be a single
Purchaser.
(e) 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.
(f) 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.
(g) Eligibility
to receive the Marketing Reallowance described in Section 2(a) above is
conditioned upon the Participating Broker’s agreement to the terms and
conditions set forth below. Any determination regarding the
Participating Broker’s compliance with the listed conditions will be made by the
Dealer Manager, in its sole discretion.
(1) The
Dealer Manager may advance the Participating Broker fees related to
Participating Broker conferences. Any such advances will be deducted
from any Marketing Reallowance that may otherwise be paid to the Participating
Dealer.
(2) If
the Participating Dealer has earned a Marketing Reallowance, and later charges
the Dealer Manager a fee for attendance at a Participating Broker conference,
then such conference expense will first be reduced by the amount of Marketing
Allowance previously paid to such Participating Broker, and the remainder shall
be deducted from any additional Marketing Reallowance earned as described in
Section 2(g)(1) above.
(3) If
sales volume permits, the Dealer Manager may reallow some or all of the
Marketing Reallowance to the Participating Broker for additional marketing
expenses.
BY
INITIALING HERE, PARTICIPATING BROKER AGREES TO THE TERMS OF ELIGBILITY FOR THE
MARKETING REALLOWANCE SET FORTH ABOVE. SHOULD THE PARTICIPATING
BROKER CHOOSE TO OPT OUT OF THIS PROVISION, IT WILL NOT BE ELIGIBLE TO RECEIVE
THE MARKETING REALLOWANCE AND NO INITIAL IS NECESSARY.
(Initials)__________
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
FINRA 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-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.
(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 the
Partnership is a party or which concerns the business and condition of the
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 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.
(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:
Commonwealth Capital Securities
Corp.
000 Xxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxxxxx, XX 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) 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.
(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.
[Signatures
appear on next page]
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:____________________________
|
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 FINRA (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)
3. Schedule
of Commissions Payable to participating broker (see Section 2 of
Agreement):
|
Commissions (1)
|
Marketing Reallowance
(2)
|
||||
|
Units
Purchased per Order
|
Sale
Price to Subscriber
|
As
% of Sale Price
|
Dollars
|
As
% of Sale Price
|
Dollars
|
|
1
or more
|
$20.00
|
7.0%
|
$1.40
|
1.0%
|
$0.20
|
(1) Subject
to reduction pursuant to Section 2 of the Participating Broker
Agreement.
(2) If
eligible, pursuant to Section 2(g) of the Participating Broker
Agreement.
4. Name
and Address for Notice Purposes (see Paragraph 10 of Agreement):
Name and
Title:_________________________________________________________________________
Company:
____________________________________________________________________________
Address:
_____________________________________________________________________________
City, State & Zip Code:
_________________________________________________________________
Telephone Number (including area
code): __________________________________________________
5. Please
complete the following for our records:
(a) Please
provide the name and telephone number of individuals holding 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 IS 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
___________
|
|
(f)
|
Does
your firm require a principal’s signature on all investments? If so,
please attach list of authorized
signers.
|
|
|
Yes
____________ No ___________
|
|
|
(g)
|
Does
your firm accept NAV purchases? Yes ____________
No____________
|
|
|
(h)
|
Does
your firm hold distributions in a brokerage account? If so, how would you
like the checks made payable and where should they be directed when
requested by an investor?
|
|
|
Yes
____________ No ___________
|
|
|
Payable
to:
_______________________________________________________________
|
|
|
Address:
_________________________________________________________________
|
|
6.
|
Name,
telephone number and email address of head of your firm’s Customer
Identification Program or Customer Accounts Department:
|
|
|
________________________________________________________________________________________ |
