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PARTICIPATING BROKER AGREEMENT
COMMONWEALTH INCOME & GROWTH FUND VI
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 VI, 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
National
Association of Securities Dealers, Inc. ("NASD") as a securities
broker-dealer
qualified to offer and sell to members of the public securities of
the type
represented by the Units; and
WHEREAS, the Participating Broker is an entity, as designated in
Exhibit
A hereto, organized and presently in good standing in the state or
states
designated in Exhibit A hereto, presently registered as a
broker-dealer with the
NASD, and presently licensed by the appropriate regulatory agency
of each state
in which it will offer and sell the Units as a securities
broker-dealer
qualified to offer and sell to members of the public securities of
the type
represented by the Units; and
WHEREAS, the Partnership has filed with the SEC a registration
statement
on Form S-1, including a preliminary or final prospectus, for the
registration
of the Units under the Securities Act of 1933, as amended (the
"Securities Act")
(such registration statement, as it may be amended, and the
prospectus and
exhibits on file with the SEC at the time the registration
statement becomes
effective, including any post-effective amendments or supplements
to such
registration statement or prospectus after the effective date of
registration,
being herein respectively referred to as the "Registration
Statement" and the
"Prospectus"); and
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
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WHEREAS, the Dealer Manager desires to retain the Participating
Broker
to use its best efforts to sell the Units, and the Participating
Broker is
willing and desires to serve as a broker for the Dealer Manager for
the sale of
the Units upon the following terms and conditions;
NOW THEREFORE, in consideration of the premises and terms and
conditions
thereof, it is agreed between the Dealer Manager and the
Participating Broker as
follows.
1.
Engagement.
(a)
Subject to the terms and conditions herein set forth,
the Dealer Manager hereby engages the Participating Broker and the
Participating
Broker hereby agrees and covenants to use its best efforts to sell
for the
account of the Partnership a portion of the Units described in the
Registration
Statement, as specified on Exhibit A hereto. The Participating
Broker hereby
accepts such engagement and covenants, warrants and agrees to sell
the Units
according to all of the terms and conditions of the Registration
Statement, all
applicable state and federal laws, including the Securities Act and
any and all
regulations and rules pertaining thereto, heretofore or hereafter
issued by the
SEC and the NASD, including but not limited to NASD'S 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 VI. The Participating Broker
shall use and
distribute, in connection with the offer and sale of the Units,
only the
Prospectus and such sales materials and advertising as shall
conform in all
respects to any restrictions of local law and the applicable
requirements of the
Securities Act and which has been approved in writing by the
General Partner or
the Dealer Manager. The Participating Broker will make a record of
its
distribution of each preliminary prospectus, and Participating
Broker will, upon
the request of the Dealer Manager, promptly forward copies thereof
to each
person to whom Participating Broker has theretofore distributed a
preliminary
prospectus. The Dealer Manager reserves the right to establish such
additional
procedures as it may deem necessary to ensure compliance with the
requirements
of the Registration Statement, and the Participating Broker shall
comply with
all such additional procedures to the extent that it has received
written notice
thereof.
(c)
The Participating Broker shall be permitted to accept
subscriptions for the Units (the "Subscription(s)") by telephone
from residents
of those states identified on Schedule A attached hereto and made a
part hereof
provided that (1) the registered representative 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,
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in its discretion, change, modify, add to or delete from the list
of states
identified on Schedule A. Any such modification shall be effective
three (3)
days from the date written notice to the Participating Broker has
been mailed by
the Dealer Manager. The Participating Broker shall not execute a
Subscription
Agreement on behalf of any investor who subscribes for Units by
telephone unless
such investor has specifically authorized the registered
representative and the
branch manager of the Participating Broker to execute the
Subscription Agreement
on behalf of such investor and has made or agreed to make full
payment for all
Units covered by such Subscription Agreement. Notwithstanding
anything contained
herein to the contrary, the Participating Broker shall have no
authority to make
representations on behalf of an investor or to initial
representations contained
in the Subscription Agreement on behalf of an investor. In
connection with
telephonic or other oral Subscriptions for Units, the Participating
Broker
represents and warrants as follows: (i) that a Prospectus was
delivered to the
investor before the investor made a decision to invest; (ii) that
the investor
meets the suitability requirements set forth in the Prospectus; and
(iii) that,
in compliance with Rule 2810 of the NASD's Conduct Rules, the
Participating
Broker has reasonable grounds to believe and does believe that the
investment in
the Partnership is suitable for the investor, based upon
information supplied by
the investor to such Participating Broker.
(d)
Notwithstanding anything to the contrary contained in
Section 2 of this Agreement, in the event that the Dealer Manager
pays any
commission to the Participating Broker for sale of one or more
Units, including,
but not limited to, those Units sold pursuant to a telephonic or
other oral
Subscription therefore, where representatives of the Participating
Broker
execute the Subscription Agreement relating to such Units, and the
Subscription
is rescinded as to one or more of the Units covered by such
Subscription, the
Dealer Manager shall decrease the next payment of commission or
other
compensation otherwise payable to the Participating Broker by the
Dealer Manager
under this Agreement by an amount equal to the commissions rate
established in
Section 2 and Exhibit A of this Agreement, multiplied by the number
of Units as
to which the Subscription is rescinded. In the event that no
payment of
commissions or other compensation is due to the Participating
Broker after such
withdrawal occurs, the Participating Broker shall pay the amount
specified in
the preceding sentence to the Dealer Manager within ten (10) days
following
mailing of notice to the Participating Broker by the Dealer Manager
stating the
amount owed as a result of rescinded Subscriptions.
(e)
All monies received for purchase of any of the Units
shall be forwarded by the Participating Broker to the Dealer
Manager for
delivery to J.P.Morgan 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 "J.P.Morgan Trust Company, Escrow Agent" directly to the
Subscriber
who submitted the check. After such time that monies are
deliverable to the
Partnership, the Participating Broker may accept checks made
payable to either
the Partnership or the Escrow Agent. Subscriptions will be executed
as described
in the Registration Statement or as directed by the Dealer Manager.
The monies
shall be deposited or transmitted by the Participating Broker to
the Dealer
Manager no later than the close of business of the next business
day after
receipt of the Subscription documents by the Participating Broker;
provided,
however, that if the Participating Broker maintains a branch
office, the branch
office shall transmit the Subscription documents and check
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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.
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(k)
In addition to complying with the provisions of Section
1(i) above, and not in limitation of any other obligations of the
Participating
Broker to determine suitability imposed by state or federal law,
the
Participating Broker agrees that it will comply fully with all of
the provisions
of Rules 2310 and 2810 of the NASD's Conduct Rules, including
specifically the
following provisions:
(1)
In recommending to a customer the purchase, sale
or exchange of any security, the Participating Broker shall have
reasonable
grounds for believing that the recommendation is suitable for such
customer upon
the basis of the facts, if any, disclosed by such customer as to
his other
security holdings and as to his financial situation and needs.
(2)
Prior to the execution of a transaction
recommended to a non-institutional customer, other than
transactions with
customers where investments are limited to money market mutual
funds, the
Participating Broker shall make reasonable efforts to obtain
information
concerning:
(a)
the customer's financial status;
(b)
the customer's tax status;
(c)
the customer's investment objectives;
and
(d)
such other information used or
considered to be reasonable by such
member or registered representative in
making recommendations to the customer.
(3)
The Participating Broker shall have reasonable
grounds to believe and shall believe, based upon information
provided by the
investor concerning the investor's other investments, financial
situation and
needs, and upon any other information known by the Participating
Broker, that
(a) each investor to whom the Participating Broker sells Units is
or will be in
a financial position appropriate to enable the investor to realize
to a
significant extent the benefits (including tax benefits) of an
investment in the
Units, (b) each investor to whom the Participating Broker sells
Units has a net
worth sufficient to sustain the risks inherent in an investment in
the Units
(including potential loss and lack of liquidity), and (c) the Units
otherwise
are or will be suitable investment for each investor to whom it
sells Units, and
the Participating Broker shall maintain files disclosing the basis
upon which
the determination of suitability was made;
(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,
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financial stability and experience of the sponsor, conflicts of
interest and
risk factors, appraisals, as well as any other information deemed
pertinent by
it;
(7)
If the Participating Broker relies upon the
results of any inquiry conducted by another member of the NASD with
respect to
the obligations set forth in Section 1 (k)(5) or (6) above, the
Participating
Broker shall have reasonable grounds to believe and shall believe
that such
inquiry was conducted with due care, that the member or members
conducting or
directing the inquiry consented to the disclosure of the results of
the inquiry
and that the person who participated in or conducted the inquiry is
not a
sponsor or an affiliate of the sponsor of the Partnership; and
(8)
Prior to executing a purchase transaction in the
Units, the Participating Broker shall have informed the prospective
investor of
all pertinent facts relating to the liquidity and marketability of
the Units.
(l)
The Participating Broker agrees that it will comply with
NASD Conduct Rules 2730, 2740 and 2750.
(m)
The Participating Broker agrees to retain in its files,
for a period of at least 6 years, information which will establish
that each
purchaser of Units falls within the permitted class of
investors.
(n)
The Participating Broker shall not, directly or
indirectly, pay or award any finder's fees, commissions or other
compensation to
any persons engaged by a potential Limited Partner for investment
advice as an
inducement to such advisor to advise the potential investor to
purchase Units in
the Partnership.
(o)
The Participating Broker either (i) shall not purchase
Units for its own account or (ii) shall hold for investment any
Units
