DEALER MANAGER AGREEMENT
Exhibit 1.1
THIS
AGREEMENT, dated as of ________, 2009, is made by and between COMMONWEALTH
INCOME & GROWTH FUND, INC., a Pennsylvania corporation (the “Company”); and
COMMONWEALTH CAPITAL SECURITIES CORP., a Pennsylvania corporation (the “Dealer
Manager”).
WHEREAS,
the company proposes to offer and sell up to an aggregate of 2,500,000 units
(the “Units”) in COMMONWEALTH INCOME & GROWTH FUND VII, a Pennsylvania
limited partnership (“the Limited Partnership”) to the public
pursuant to a public offering;
SECTION
1
Whenever
used in this agreement, the following terms shall have the following specified
meanings.
1.1
“FINRA” means the Financial Industry Regulatory Authority.
1.2
“Offering” means the offering of up to 2,500,000 Units of the Limited
Partnership to the public pursuant to the terms and conditions of the
Registration Statement.
1.3
“Offering Period” means the period commencing on the effective date of the
Registration Statement and ending on the earliest of the following: (i) the
later of one year after the initial date of the Prospectus or, at the Company’s
election, two years after the initial date of the Prospectus; or (ii) one year
after the initial date of the Prospectus, if subscriptions for fewer than 57,500
Units are received and accepted within such one year period.
1.4
“Participating Brokers” means those broker-dealers engaged by the Dealer Manager
to participate in the Offering pursuant to Paragraph 3.2
1.5
“Prospectus” means the final prospectus included in the Registration Statement,
pursuant to which the Company will offer Units to the public, as the same may be
amended or supplemented from time to time after the effective date of the
Registration Statement.
1.6
“Registration Statement” means the registration statement pursuant to which the
Company has registered the Units with the SEC as provided in the Securities Act
of 1933, as amended, as such registration statement may be amended or
supplemented from time to time.
1.7
“SEC” means the United States Securities and Exchange Commission.
1.8
“Units” means the Units of the Limited Partnership, par value $20.00 per unit,
with a purchase price of $20.00 per unit. An aggregate of up to 2,500,000 Units
will be offered pursuant to the Registration Statement.
1.9
“State Regulatory Authorities” means the commissions, departments, agencies or
other authorities in the fifty states of the United States, the District of
Columbia, and the Commonwealth of Puerto Rico which regulate the offer and sale
of securities.
1.10
“Company” means Commonwealth Income & Growth Fund, Inc., a Pennsylvania
corporation.
1.11
“Dealer Manager” means Commonwealth Capital Securities Corp., a Pennsylvania
corporation.
SECTION
2
Subject
to the terms and conditions set forth in this agreement, the Company hereby
appoints the Dealer Manager as the dealer manager of the Offering to use its
best efforts to sell up to 2,500,000 Units of the Limited Partnership and to
manage the sale by others of such Units for the Company’s account. The Dealer
Manager hereby accepts such appointment.
SECTION
3
(a) The Dealer Manager will use every
reasonable effort, to the extent it sells Units to investors, to assure that any
such Units are sold only to investors who:
(i)
meet the investor suitability standards, including the minimum income and net
worth standard established by the Company, and minimum purchase requirements set
forth in the Registration Statement;
(ii)
can reasonably benefit from the Company based on each prospective investor’s
overall investment objectives and portfolio structure; and
(iii)
are able to bear the economic risk of the investment based on each prospective
investor’s overall financial situation.
(b) The Dealer Manager will make the
determinations required to be made by it pursuant to Paragraph 3.3 (a) above
based on the 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 Dealer Manager to be relevant.
(c) The Dealer Manager shall
maintain such records evidencing compliance with the determination of the
investor suitability standards and minimum purchase requirements set forth in
the Registration Statement, as required by Paragraphs 3.3(a) and 3.3(b) above
for a period of not less than six years, or for such greater time period as
shall comply with all federal, state and other regulatory
requirements.
(d) In addition to the foregoing, the
Dealer Manager shall comply fully with all the applicable provisions of FINRA’s
Conduct Rules and the following provisions:
(i)
the Dealer Manager shall have reasonable grounds to believe, based upon
information provided by the investor concerning his investment objectives, other
investments, financial situation and needs, and upon any other information known
by the Dealer Manager, that (A) each investor to whom the Dealer Manager sells
Units is or will be in a financial position appropriate to enable him to realize
to a significant extent the benefits (including tax benefits) of an investment
in the Units, (B) each investor to whom the Dealer Manager sells Units has a
fair market 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 a suitable investment for each investor to whom the
Dealer Manager sells Units, and the Dealer Manager shall maintain files
disclosing the basis upon which the determination of suitability was
made;
(ii)
the Dealer Manager shall not execute any transaction involving the purchase of
Units in a discretionary account without prior written approval of the
transaction by the investor;
(iii) the
Dealer Manager shall have reasonable grounds to believe, based upon the
information made available to it, that all material facts are adequate and
accurately disclosed in the Registration Statement and provide a basis for
evaluating the shares;
(iv) in
making the determination set forth in item (iii) above, the Dealer Manager shall
evaluate items of compensation, properties, tax aspects, financial stability and
experience of the sponsor, conflicts of interest and risk factors, and any other
information deemed pertinent by it; and
(v)
prior to executing a purchase transaction in the Units, the Dealer Manager shall
have informed the prospective investor of all pertinent facts relating to the
liquidity and marketability of the Units.
(e) The Dealer Manager shall
comply with the requirements above for determining the suitability of investors
who elect to participate in the Distribution Reinvestment Plan (the
“Reinvestment Plan”) described in the Prospectus.
SECTION
4
(a) The
Company shall pay to the Dealer Manager, as compensation for sales services to
be rendered by the Dealer Manager pursuant to this Agreement, a commission equal
to seven percent (7%) of the selling price of each Unit for which a sale is
completed, regardless of whether such Unit is sold by the Dealer Manager or a
Participating Broker: provided, however that the Company will pay reduced
commissions or may eliminate commissions on certain sales of Units, including
the reduction or elimination of commissions in accordance with, and on the terms
set forth in, the Prospectus and the paragraphs following this Paragraph 4.1,
which reduction or elimination of commissions will not change the net proceeds
to the Company. Unitholders who elect to participate in the Reinvestment Plan
will be not be charged commissions on Units purchased through the Reinvestment
Plan.
(b) The
Company shall pay to the Dealer Manager, as compensation for marketing services
rendered and expenses incurred by the Dealer Manager pursuant to this Agreement,
a Marketing Reallowance equal to one percent (1%) of the selling price of each
Unit for which a sale is completed, regardless of whether such Unit is sold by
the Dealer Manager or a Participating Broker. The Marketing
Reallowance shall be paid to the selling Participating Broker if such
Participating Broker is eligible to receive the same pursuant to the terms of
the Participating Broker Agreement to which it is a party. The
Marketing Reallowance is not paid with respect to Units purchased through the
Reinvestment Plan.
(a) A sale of a Unit shall
be deemed to be completed under Paragraph 4.1 if and only if (i) the Company has
received a properly completed and executed subscription agreement, together with
payment of the full purchase price of each purchased Unit, from or, in
accordance with Paragraph 3.3(a), on behalf of an investor who satisfies the
applicable suitability standards and minimum purchase requirements set forth in
the Registration Statement as determined by the Dealer Manager in accordance
with the provisions of this Agreement, (ii) the Company has accepted
such subscription, and (iii) such investor has been admitted as a Unitholder of
the Company.
(b) The Dealer Manager
hereby acknowledges and agrees that:
(i)
the Company, in its sole and absolute discretion, may accept or reject any
subscription, in whole or in part, for any reason whatsoever, and no commission
will be paid to the Dealer Manager with the respect to that portion of any
subscription, which is rejected;
(ii)
no commission will be paid to the Dealer Manager unless, within one year after
the initial date of the Prospectus, subscriptions for an aggregate of at least
57,500 Units have been received and accepted; and
(iii) no
commission will be paid to the Dealer Manager prior to acceptance by the Company
of subscriptions for the minimum number of Units specified in subparagraph (ii)
above.
Item of Compensation
|
Amount in Dollars(1)
|
As
a Percentage of
Gross Offering Proceeds
|
||||||
Retail
Commissions
|
$ | 3,500,000 | 7.0 | % | ||||
Dealer
Manager Fee
|
1,000,000 | 2.0 | % | |||||
Marketing
Reallowance
|
500,000 | 1.0 | % | |||||
Total
|
$ | 5,000,000 | 10.0 | % |
(1)
Assumes the maximum gross offering proceeds of $50,000,000.
The 2% Dealer Manager Fee, above, is
used by the Dealer Manager to pay all other costs and expenses associated with
the sale, distribution and marketing of the units, as estimated
below:
Item of Compensation
|
Amount in Dollars(1)
|
As
a Percentage of
Gross Offering Proceeds
|
||||||
Wholesale
Commissions
|
$ | 550,000 | 1.100 | % | ||||
Wholesale
Salaries
|
270,000 | 0.540 | % | |||||
Wholesale
Expense Reimbursements
|
165,000 | 0.330 | % | |||||
Other
(travel and seminar expenses)
|
15,000 | 0.030 | % | |||||
Total
|
$ | 1,000,000 | 2.000 | % |
(1)
Assumes the maximum gross offering proceeds of $50,000,000.
SECTION
5
(a) In addition to any other
obligations of the Dealer Manager that survive the expiration or termination of
this Agreement, the Dealer Manager, upon the expiration or termination of this
Agreement, shall (i) promptly deposit any and all funds in its possession which
were received from investors for the sale of Units into the appropriate escrow
account specified in Paragraph 3.7 or, if the minimum number of Units have been
sold and accepted by the Company, into such other accounts as the Company may
designate, and (ii) promptly deliver to the Company all records and documents in
its possession which relate to the Offering and are not designated as dealer
copies. The Dealer Manager, at its sole expense, may make and retain copies of
all such records and documents, but shall keep all such information
confidential. The Dealer Manager shall use its best efforts to cooperate with
the Company to accomplish an orderly transfer of management of the Offering to a
party designated by the Company.
(b) In addition to any other
obligations of the Company that survive the expiration or termination of this
Agreement, the Company, upon expiration or termination of this Agreement, shall
pay to the Dealer Manager all commissions to which the Dealer Manager is or
becomes entitled under Section 4 at such time or times as such commissions
become payable pursuant to paragraph 4.3.
SECTION
6
The Company covenants, warrants and
represents, during the full term of this Agreement, that:
(a) it
will use its best efforts to maintain the effectiveness of the Registration
Statement, and will file, or cause to be filed, such amendments to the
Registration Statement as may be reasonably necessary for that
purpose;
(b) It
will use its best efforts to (i) prevent the issuance of any order by the SEC,
any State Regulatory Authorities or any other regulatory authority which
suspends the effectiveness of the Registration Statement, prevents the use of
the Prospectus, or otherwise prevents or suspends the Offering, and (ii) obtain
the lifting of any such order if issued;
(c) It
will give the Dealer Manager written notice when the Registration Statement
becomes effective and shall deliver to the Dealer Manager a signed copy of the
Registration Statement, including its exhibits, and such number of copies of the
Registration Statement, without exhibits, and the Prospectus, and any
supplements and amendments thereto which are finally approved by the SEC, as the
Dealer Manager may reasonably request for sale of the Units, which Prospectus
shall not contain any untrue statement of a material fact required to be stated
therein or omit any material statement necessary to make the statements therein,
in light of the circumstances under which they are made, not
misleading;
(d) If
at any time any event occurs and becomes known to the Company prior to the end
of the Offering Period, as a result of which the Registration Statement or
Prospectus would include an untrue statement of a material fact, in view of the
circumstances under which they were made, omit to state any material fact
necessary to make the statements therein not misleading, the Company will effect
the preparation of an amended or supplemented Registration Statement or
Prospectus which will correct such statement or omission;
(e) It
will promptly notify the Dealer Manager of any post-effective amendments or
supplements to the Registration Statement or Prospectus;
(f) It
will, during the full term of this Agreement abide by all applicable provisions
to its governing instruments, as the same may be amended; and
(g) It
will use its best efforts to cause, at or prior to the time the Registration
Statement becomes effective, the qualification or registration of the Units for
offering and sale under the securities laws of such jurisdictions as shall be
determined by the Company.
SECTION
7
(a) the registration of the
Offer and sale of the Units with the SEC, including the cost of preparation,
printing, filing and delivery of the Registration Statement and all copies of
the Prospectus used in the Offering, and amendments or supplements to such
documents;
(b) the preparation and
printing of the form of subscription agreement to be used in the sale of the
Units;
(c) the qualification
or registration of the Units under state securities or “blue
sky” laws of states where the Units are to be offered or
sold;
(d) the filing of the
Registration Statement and any related documents, including any amendments or
supplements to such documents, with FINRA;
(e) any filing fees, and
fees and disbursements to counsel, accountants and escrow agents which are in
any way related to any of the above items;
(f) the preparation,
printing and filing of all advertising originated by it relating to the sale of
Units; and
(g) the reimbursement to Participating
Brokers of bona fide due diligence expenses, upon the presentation of itemized
invoices therefor by such Participating Brokers.
SECTION
8
The Dealer Manager agrees to indemnify,
defend and hold harmless the Company from all losses, claims, demands,
liabilities and expenses, including reasonable legal and other expenses incurred
in defending such claims or liabilities, whether or not resulting in any
liability to the Company, which the Company may incur in connection with the
offer or sale of any Units, either by the Dealer Manager pursuant to this
Agreement or any Participating Broker acting on the Dealer Manager’s behalf
pursuant to the Participating Broker Agreement which arise out of or
are 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 or omission contained in the Prospectus, the Registration Statement,
or any state securities filing which was not based on information supplied to
the Company by the Dealer Manager or a Participating Broker, or (ii) the breach
by the Dealer Manager or any Participating Broker acting on its behalf of any of
the terms and conditions of this Agreement or any Participating
Broker Agreement, including but not limited to, alleged violations of the
Securities Act of 1933, as amended.
SECTION
9
If
to the Company:
|
Commonwealth
Income & Growth Fund, Inc.
|
Brandywine
One Building, Suite 200
|
|
0
Xxxxxxx Xxxxx
|
|
Xxxxxx
Xxxx, XX 00000
|
|
Attention:
Xxxxxxxx Xxxxxxxxxxx-Xxxxxx, Chief Executive Officer
|
|
If
to the Dealer Manager:
|
Commonwealth
Capital Securities Corp.
|
000
Xxxxxxxxx Xxxxxx, 0xx
Xxxxx
|
|
Xxxxxxxxxx,
XX 00000
|
|
Attention:
Xxxxxxx Xxxxxxxxxx, President
|
|
Any party
may change its address specified above by giving each other party notice of such
change in accordance with this Paragraph 9.1
9.9 Applicable
Law. This Agreement shall be interpreted, construed and
enforced in all respects in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the parties have
executed this Dealer Manager Agreement as of the date first above
written.
Company:
|
Commonwealth
Income & Growth Fund, Inc.
|
By:_______________________________________
|
|
Xxxxxxxx
X. Xxxxxxxxxxx-Xxxxxx, Chief Executive Officer
|
|
Dealer
Manager:
|
Commonwealth
Capital Securities Corp.
|
By:________________________________________
|
|
Xxxxxxx
Xxxxxxxxxx, President
|
|