DEALER MANAGER AGREEMENT
THIS AGREEMENT, dated as of ___________, 2001, 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 750,000 units in the Limited Partnerships ( the "Units") to the public
pursuant to a public offering:
WHEREAS, the Dealer Manager is registered with the National
Association of Securities Dealers, Inc. as a broker dealer, and is presently or,
prior to any offers or sales of units, will be licensed in all fifty states, the
District of Columbia, and the Commonwealth of Puerto Rico as a broker dealer
qualified to offer and sell to the public securities of the type represented by
the units; and
WHEREAS, the Company desires to retain the Dealer Manager to use
its best efforts to sell the units and to manage the sale by others of the
units, and the Dealer Manager is willing and desires to serve as the Dealer
Manager for the Company for the sale of the units upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the Company and the
Dealer Manager agree as follows:
SECTION 1
APPOINTMENT
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 750,000 Units of the Company and
to manage the sale by others of such Units for the Company's account. The Dealer
Manager hereby accepts such appointment.
SECTION 2
SALE OF UNITS
2.1 Best Efforts. The Dealer Manager shall use its best efforts
during the Offering period to sell or cause to be sold the Units in such
quantities and to such persons and in accordance with such terms as are set
forth in this Agreement, the Prospectus and the Registration Statement.
Notwithstanding anything herein to the contrary, the Dealer Manager shall have
no obligation under this Agreement to purchase any of the Units for its own
account.
2.2 Association of Other Broker-Dealers. The Company hereby
acknowledges and agrees that the Dealer Manager may engage Participating Brokers
to participate in the Offering, provided that (i) all Participating Brokers are
registered with the NASD and are duly licensed by the State Regulatory
Authorities in the jurisdictions in which they will offer and sell Units or
exempt from broker-dealer registration with the NASD and the State Regulatory
Authorities, and (ii) all such are evidenced by written agreements, the terms
and conditions of which substantially conform to the form of Participating
Broker Agreement approved by the Company and attached hereto as Exhibit A (the
"Participating Broker Agreement"). The Dealer Manager is authorized to reallow
so much of the commissions which it receives under Paragraph 4.1 to
Participating Brokers as it sees fit.
2.3 Suitability and Minimum Purchase Requirements.
(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
prospectus, and minimum purchase requirements set forth in the Registration
Statement;
(ii) can reasonably benefit from the investment
based on the prospective investor's overall investment objectives and portfolio
structure;
(iii) is able to bear the economic risk of the
investment based on the prospective investor's overall financial situation:
(b) The Dealer Manager will make the determinations
required to be made by it pursuant to Paragraph 2.3 (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 2.3(a) and 2.3(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 the NASD Rules of Fair
Practice 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 for determining the suitability of investors who elect to
participate in the Dividend Reinvestment Plan (the " Reinvestment Plan") in
accordance with the procedure set forth in the Prospectus.
2.4 Sales Literature. The Dealer Manager shall use and distribute
in conjunction with the offer and sale of any Units only the Prospectus and such
sales literature and advertising as shall have been previously approved in
writing by the Company.
2.5 Jurisdictions. The Dealer Manager shall cause Units to be
offered and sold only in those jurisdictions specified in writing by the Company
for whose account Units are then offered for sale, and such list of
jurisdictions shall be updated by the Company as additional states are added.
The Company shall specify only such jurisdictions in which the Offering and sale
of its Units has been authorized by the appropriate State Regulatory
Authorities. No Units shall be offered or sold for the account of the company in
any other states.
2.6 Escrow. All funds received by the Deale Manager for the sale of
Units shall be deposited in an escrow account established by the Company at
Chase Manhattan Bank (the Escrow Agent), within 2 business days following
receipt of such funds by the Dealer Manager. Such escrow account shall be
denominated "ESCROW ACCOUNT FOR THE BENEFIT OF SUBSCRIBERS FOR UNITS OF
COMMONWEALTH INCOME & GROWTH FUND IV" Until such time (if any) as the funds held
in escrow are deliverable to the Company pursuant to the Escrow Agreement
between the Company and the Escrow Agent, the Dealer Manager shall, and shall
cause Participating Brokers to, instruct subscribers to make checks for
subscriptions payable to the order of " CHASE BANK, ESCROW AGENT." and shall
return checks made payable to another party to the Participating Broker or
subscriber who submitted the check. Thereafter, checks may be made payable to
either the Escrow Agent or the Company. The Dealer Manager may authorize certain
Participating Brokers which are "$25,000 broker-dealers" to instruct their
customers to make their checks for Units subscribed for payable directly to the
Participating Broker. In such case, the Soliciting Dealer will collect the
proceeds of the subscribers' checks and issue a check made payable to the order
of the Escrow Agent for the aggregate amount of the subscription proceeds.
SECTION 3
COMPENSATION
3.1 Commissions.
(a) The Company shall pay to the Dealer Manager, as
compensation for all services to be rendered by the Dealer Manager pursuant to
this Agreement, a commission equal to eight percent (8%) 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 following
paragraph of 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 charged commissions on Units
purchased for their accounts on the same basis as investors who otherwise
purchase Units in the Offering.
3.2 Marketing Support and Due Diligence. The Company shall pay to
the Dealer Manager a nonaccountable fee for expenses incurred in selling and
marketing the Units and for bona fide expenses incurred in connection with due
diligence expenses. The reimbursement fee shall not exceed one percent (1.0%) 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. All
due diligence expense reimbursements shall be paid by the Dealer Manager from
this fee.
3.3 Completed Sale.
(a) A sale of a Unit shall be deemed to be completed 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 2.3(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 it's 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) unless, within two years after the initial
date of the Prospectus, subscriptions for an aggregate of at least 50,000 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.
3.4 Payment. The commissions for the sale of any Unit shall be
payable in cash by the Company, as specified in Paragraph 4.1 no later than the
end of the calendar month in which the investor subscribing for the Unit is
admitted as a Unitholder of the company. Investors shall first be admitted as
unitholders of the Company within 30 days after acceptance by the Company of
subscriptions for at least 50,000 Units. The Company will accept or reject all
subscriptions within 30 days after receipt, Notwithstanding anything to the
contrary contained herein, in the event that the Company pays any commission to
the Dealer Manager for sale by a Participating Broker of one or more Units and
the subscription is rescinded as to one or more of the Units covered by such
subscription, the Company shall decrease the next payment of commissions or
other compensation otherwise payable to the Dealer Manager by the Company under
this Agreement by an equal amount to the commission rate established in 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 Dealer Manager after such withdrawal occurs, the Dealer Manager shall
pay the amount specified in the preceding sentence to the Company within ten
(10) days following receipt of notice by the Dealer Manager from the Company
stating the amount owed as a result of rescinded subscriptions.
3.5 Sales Incentives. The Company or its Affiliates also may
provide incentive items for registered representatives of the Dealer Manager and
the Participating Brokers, which in no event shall exceed an aggregate of
$100.00 per annum per participating sales person. In the event other incentives
are provided to registered representatives of the Dealer Manager or the
Participating Brokers, they will only be paid in cash and such payments will
only be made to the Dealer Manager or the Participating Brokers rather than
their registered representatives. Before any such sales incentive program is
offered, the Company agrees to obtain prior approval of the terms of such
program from the NASD.
3.6 Wholesaling Compensation. The Company hereby acknowledges that
the Dealer Manager may pay each of its wholesalers 1% of the gross sales price
(computed at $20.00 per Unit) of all Units sold in such Wholesaler's geographic
territory (as the same may be established from time to time by agreement between
the Dealer Manager and one or more of its wholesalers) but not in excess, in the
aggregate, of 1% of the gross sales price (computed at $20.00 per Unit) of all
Units sold. The Company hereby agrees to reimburse reasonable out-of-pocket
expenses that such wholesalers incur in connection with the distribution of its
Units, provided, however,, that in no event will the Dealer Manager or the
Company pay any amounts to any person if (i) such amounts constitute
"underwriting compensation," and (ii) payment of such amounts could cause total
underwriting compensation paid to underwriters, broker-dealers, or affiliates
thereof from any source, and deemed to be in connection with or related to the
distribution of the Offering, to exceed then applicable compensation NASD
guidelines.
SECTION 4
TERM OF AGREEMENT
4.1 Commencement and Expiration. This Agreement shall commence as
of the date first above written and, unless sooner terminated pursuant to or by
operation of law or otherwise, shall expire at the end of the Offering period.
4.2 Termination. Any party may terminate this agreement at any time
and for any reason by giving 30 days ` prior written notice of intention to
terminate to each other party hereto.
4.3 Obligations Surviving Expiration or termination.
(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 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
3.3.
SECTION 5
COVENANTS OF THE COMPANY
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 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 factor, 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 6
PAYMENT OF COSTS AND EXPENSES
6.1 Company. The Company shall pay all costs and expenses
related to:
(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 an 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 the NASD:
(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: and
(f) the preparation, printing and filing of all
advertising originated by it relating to the sale of Units.
SECTION 7
INDEMNIFICATION
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 8
MISCELLANEOUS
8.1 Notices. Any notice, approval, request, authorization, direction
or other communication under this Agreement shall be given in writing and shall
be deemed to be delivered when delivered in person or deposited in the United
States mail, properly addressed and stamped with the required postage,
registered or certified mail, return receipt requested, to the intended
recipient as set forth below.
If to the Company: Commonwealth Income & Growth Fund IV, Inc.
000 Xxxx Xxxxx Xxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxxxx,
Chairman of the Board
If to the Dealer Manager: Commonwealth Capital Securities Corp.
000 Xxxx Xxxxx Xxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxxxxx,
President
Any party may change its address specified above by giving each other party
notice of such change.
8.2 Invalid provision. The invalidity or unenforceability of any
provision of this agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
8.3 No Partnership. Nothing in this Agreement shall be construed or
interpreted to constitute the Dealer Manager as in association with or in
partnership with the Company, and instead, this Agreement only shall constitute
the Dealer Manager as a dealer authorized by the Company to sell and to manage
the sale by others of the Units according to the terms set forth in the
Registration Statement, the Prospectus or this Agreement.
8.4 No Third Party Beneficiaries. No provision of this Agreement is
intended to be for the benefit of any person or entity not a party to this
Agreement, and no third party shall be deemed to be a beneficiary of any
provision of this Agreement. Further, no third party shall by virtue of any
provision of this Agreement have a right of action or an enforceable remedy
against either party to this Agreement.
8.5 Survival. Paragraph 5.3 and Section 9 and all Provisions of this
Agreement which may reasonably be interpreted or construed as surviving the
expiration or termination of this Agreement shall survive the Expiration or
termination of this Agreement.
8.6 Entire Agreement. This Agreement constitutes the complete
understanding among the parties hereto, and no variation, modification or
amendment to this Agreement shall be deemed valid or effective unless and until
it is signed by all parties hereto.
8.7 Successors and Assigns. No party shall assign (voluntarily, by
operation of law or otherwise) this Agreement or any right, interest or benefit
under this Agreement without the prior written consent of each other party.
Subject to the foregoing, this Agreement shall be fully binding upon, inure to
the benefit of, and be enforceable by, the parties hereto and their respective
successors and assigns.
8.8 Nonwaiver. The failure of any party to insist upon or enforce
strict performance by any other party of any provision of this Agreement or to
exercise any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such party's right to assert or rely upon any
such provision or right in that or any other instance; rather such provision or
right shall be and remain in full force and effect.
8.9 Applicable Law. This Agreement shall be interpreted, construed
and enforced in all respects in accordance with the laws of the State of
Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Company: Commonwealth Income & Growth Fund, Inc.
By:____________________________________________
Xxxxxx X. Xxxxxxxxxxx, Chairman of the Board
Dealer Manager: Commonwealth Capital Securities Corp.
By:____________________________________________
Xxxxxxxx X. Xxxxxxxxxxx, President
