Date: July 24, 2019 Crescent Securities Group, Inc. Dallas, Texas 75231
Exhibit 1(a)
Date:
July 24, 2019
Crescent Securities
Group, Inc.
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Ladies
and Gentlemen:
This
letter sets forth the agreement (“Agreement”) among Red
Oak Capital Fund III, LLC, a Delaware limited liability company
(the “Company”) and Crescent Securities Group, Inc., a
Texas corporation (“Crescent”), the “Managing
Broker-Dealer/Underwriter” or “MBD/U”), regarding
the offering and sale by the Company of Securities in the Company
(the “Offering”).
1. Appointment of the
MBD/U.
1.1 On the basis of the
representations, warranties and covenants herein contained, but
subject to the terms and conditions herein set forth, the MBD/U is
hereby appointed and agrees to sell the Securities on a “best
efforts” basis through an offering exempt from the
registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”) and the various state securities
laws pursuant to Tier II of Regulation A promulgated under the
Securities Act by the Securities and Exchange Commission
(“SEC”). The MBD/U is authorized to solicit and enlist
other members of the Financial Industry Regulatory Authority, Inc.
(“FINRA”) with the prior written consent of the Company
prior to such solicitation, such consent not to be unreasonably
withheld, (the “Selling Group Members”) to sell the
Securities.
1.2 It is understood
that no sale of the Securities shall be regarded as effective
unless and until accepted by the Company. The Company reserves the
right in its sole discretion to accept or reject any purchase
agreement for the Securities (the “Purchase Agreement”)
in whole or in part for a period of 30 days after receipt of the
Purchase Agreement. Any proposed purchase of the Securities not
accepted within 30 days of receipt shall be deemed rejected. The
Securities will be offered during a period commencing and ending on
such dates as shall be mutually agreed upon by the Company and the
MBD/U and as set forth in the Offering Statement and Offering
Circular contained therein the (“Offering Period:”) for
the Offering that shall be prepared by the Company, as either may
be supplemented and amended (together with all exhibits or
schedules thereto, the “Offering
Document”).
1.3 Subject to the
performance by the Company of all the obligations to be performed
hereunder, and to the completeness and accuracy of all the
representations and warranties contained herein, MBD/U hereby
accepts such agency and agrees on the terms and conditions herein
set forth to use its best efforts during the Offering Period to
find qualified purchasers (the “Purchasers”) for the
Securities.
1.4 Capitalized terms
used but not defined herein shall have the meanings ascribed to
them in the Offering Document.
2. Representations and Warranties of the
Company. The Company hereby represents and warrants to the
MBD/U that:
2.1 The Company has
been duly organized and is validly existing as a limited liability
company in good standing under the laws of the State of Delaware,
has all requisite power and authority to enter into this Agreement
and has all requisite power and authority to conduct its business
as described in the Offering Document.
2.2 No defaults exist
in the due performance or observance of any material obligation,
term, covenant or condition of any material agreement or instrument
to which the Company is a party or by which it is
bound.
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2.3 Subject to Section
3.3, for the entirety of the Offering Period, the Offering Document
will not include, through the date that the Offering shall
terminate (as defined in the Offering Document, the “Offering
Termination Date”), any untrue statement of a material fact
nor will it omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading.
2.4 No consent,
approval, authorization or other order of any governmental
authority is required in connection with the execution or delivery
by the Company of this Agreement or the issuance and sale by the
Company of the Securities, except an amendment to the
Company’s certificate of incorporation that will be filed to
increase the number of authorized shares of the Company, or such as
may be required under the Securities Act or applicable state
securities laws.
2.5 At the time of the
issuance of the Securities, the Securities will have been duly
authorized and validly issued, and upon payment therefor, will be
fully paid and non-assessable and will conform to the description
thereof contained in the Offering Document.
2.6 The Company hereby
represents and warrants to the MBD/U and each of the Selling Group
Members as of the date of this Agreement (the “Effective
Date”) that neither the Company nor any of its executive
officers, directors, general partners, managing members, or
officers involved in the Offering or persons who own 20% or more of
the Company:
2.6.1 Has
been convicted, within 10 years prior to the date of the Offering
Document of any felony or misdemeanor that was:
(a) In connection with
the purchase or sale of any security;
(b) Involving or making
of any false filing with the Securities and Exchange Commission
(the “SEC”); or
(c) Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of purchasers of securities.
2.6.2 Is
subject to any order, judgment or decree of any court of competent
jurisdiction, entered within 5 years before the date of the
Offering Document, that restrains or enjoins such person from
engaging or continuing in any conduct or practice:
(a) In connection with
the purchase or sale of any security;
(b) Involving the
making of any false filing with the SEC; or
(c) Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of purchasers of securities.
2.6.3 Is
subject to a final order of a state securities commission (or an
agency or officer of a state performing like functions), a state
authority that supervises or examines banks, savings associations
or credit unions, a state insurance commission (or an agency or
officer of a state performing like functions), an appropriate
federal banking agency, the U.S. Commodity Futures Trading
Commission or the National Credit Union Administration
that:
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(a) As of the date of
the Offering Document, bars the person from:
(i)
Association with an
entity regulated by such commission,
authority, agency
or officer;
(ii)
Engaging in the
business of securities, insurance or
banking;
or
(iii)
Engaging in savings
association or credit union activities.
(b) Constitutes a final
order based on a violation of any law or regulation that prohibits
fraudulent, manipulative or deceptive conduct entered within 10
years before the date of the Offering Document.
2.6.4 Is
subject to an order of the SEC pursuant to sections 15(b) or 15B(c)
of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) or section 203(e) or (f) of the
Investment Advisers Act of 1940, as amended (the “Investment
Advisers Act”) that, as of the date of the Offering
Document:
(a) Suspends or revokes
such person’s registration as a broker, dealer, municipal
securities dealer or investment advisor;
(b) Places limitations
on the activities, functions or operations of such
person;
or
(c) Bars such person
from being associated with any entity or from participating in the
offering of any ▇▇▇▇▇ stock.
2.6.5 Is
subject to any order of the SEC entered within 5 years before the
date of the Offering Document, as of the date hereof, that orders
the person to cease and desist from committing or causing a
violation or future violation of:
(a) Any scienter-based
anti-fraud provisions of the federal securities laws including,
without limitation, section 17(a)(1) of the Securities Act, section
10(b) of the Exchange Act and 17 CFR 240.10b-5, section 15(c)(1) of
the Exchange Act and section 206(1) of the Investment Advisers Act,
or any other rule or regulation thereunder; or
(b) Section 5 of the
Securities Act.
2.6.6 Is
suspended or expelled from membership in, or suspended or barred
from association with, a member of a registered national securities
exchange or a registered national or affiliated securities
association for any act or omission to act constituting conduct
inconsistent with just and equitable principles of
trade.
2.6.7 Has
filed (as a registrant or issuer), or was or was named as an
underwriter in, any registration statement or Regulation A offering
statement filed with the SEC that, within 5 years of the date of
the Offering Document, was the subject of a refusal order, stop
order or order suspending the Regulation A exemption or, is, at the
time of such filing, the subject of an investigation or proceeding
to determine whether a stop order or suspension order should be
issued.
2.6.8 Is
subject to a United States Postal Service false representation
order entered within 5 years before the date of the Offering
Document, or is, as of the date of the Offering Document,
subject
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to a
temporary restraining order or preliminary injunction with respect
to conduct alleged by the United States Postal Service to
constitute a scheme or device for obtaining money or property
through the mail by means of false representations.
The
representations and warranties made in this Section 2 are and shall
be continuing representations and warranties throughout the term of
the Offering. In the event that any of these representations or
warranties becomes untrue, the Company will immediately notify the
MBD/U in writing of the fact which makes the representation or
warranty untrue.
3. Covenants of the Company. The
Company agrees that:
3.1 The Company will
deliver to the MBD/U such numbers of copies of the Offering
Document and any amendment or supplement thereto, with all
appendices thereto, as the MBD/U may reasonably request for the
purposes contemplated by federal and applicable state securities
laws. The Company also will deliver to the MBD/U such number of
copies of any printed sales literature or other materials as the
MBD/U may reasonably request in connection with the Offering. Any
use in writing of the MBD/U name, beyond use in the Offering
Document, must be first approved by the MBD/U. The MBD/U will, if
required or deemed advisable by the Managing Broker Dealer, submit
to FINRA for review all materials deemed by the MBD/U to be
advertising.
3.2 The Company will
use reasonable commercial efforts to comply with all requirements
imposed upon it by the rules and regulations of the SEC, and by all
applicable state securities laws and regulations, to permit the
continuance of offers and sales of the Securities, in accordance
with the provisions of this Agreement and in the Offering Document,
and will amend or supplement the Offering Document in order to make
the Offering Document as required in the good faith determination
of Company’s counsel to comply with the requirements of
federal and applicable state securities laws and
regulations.
3.3 If at any time any
event occurs as a result of which the Offering Document would
include an untrue statement of a material fact or, in view of the
circumstances under which it was made, omit to state any material
fact necessary to make the statements therein not misleading, the
Company will notify the MBD/U thereof, effect the preparation of an
amended or supplemental Offering Document which will correct such
statement or omission, and deliver to the MBD/U as many copies of
such amended or supplemental Offering Document as the MBD/U may
reasonably request.
3.4 The Company will
apply the net proceeds from the Offering received by it in the
manner set forth in the Offering Document.
3.5 Subject
to the MBD/U’s actions and the actions of others in
connection with the Offering, the Company will comply with all
requirements imposed upon it by Regulation A and applicable state
securities laws. Upon request, the Company will furnish to the
MBD/U a copy of all filings by the Company with any state or
federal regulatory pursuant to state or federal securities laws and
regulations.
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4. Duties and Obligations of the
MBD/U.
4.1 The MBD/U will
serve in a “best-efforts” capacity in the offering,
sale and distribution of the Securities. The MBD/U may offer the
Securities as an agent, but all sales shall be made by the Company,
acting through the MBD/U as an agent, and not by the MBD/U as a
principal. The MBD/U shall have no authority to appoint any person
or other entity as an agent or sub-agent of the MBD/U or the
Company, except to appoint Selling Group Members acceptable to the
Company in its sole discretion. It is acknowledged that the Company
may enter into selling agreements with non-commissioned registered
investment advisors and the MBD/U shall assist the Company and the
registered investment advisors in completing any sales through the
registered investment advisor.
4.2 The MBD/U shall not
execute any transaction in which a Purchaser invests in the
Securities in a discretionary account without prior written
approval of the transaction by the Purchaser.
4.3 The MBD/U will
comply in all respects with the purchase procedures and plan of
distribution set forth in the Offering Document.
4.4 The MBD/U shall
complete all steps necessary to permit the MBD/U to perform its
obligations under this Agreement pursuant to exemptions available
under applicable federal law and applicable state laws. Except to
the extent the Company and MBD/U agree that the Offering shall be
conducted pursuant to Regulation A, the MBD/U shall conduct all of
its solicitation and sales efforts in conformity with Rule 506, and
exemptions available under applicable state law. To the extent the
Company and MBD/U agree that the Offering shall be conducted
pursuant to Regulation A, the MBD/U shall conduct all solicitation
and sales efforts in conformity with Regulation A and applicable
state law.
4.5 In the event the
MBD/U receives any customer funds for the Securities, the MBD/U
will transmit such customer funds, not later than noon of the next
business day following receipt
of such
funds for the Securities to UMB Bank, N.A. (the “Escrow
Agent”) pursuant to the terms of the Escrow Agreement between
the MBD/U, the Company and the Escrow Agent.
4.6 The MBD/U shall
notify the Company of Purchase Agreements it receives within 2
business days of receipt so that the Company may make any required
federal or state law filings.
4.7 The MBD/U will
furnish to the Company upon request a complete list of all persons
who have been offered the Securities and such persons’ places
of residence.
4.8 The MBD/U will
immediately bring to the attention of the Company any circumstance
or fact which causes the MBD/U to believe the Offering Document, or
any other literature distributed pursuant to the Offering, or any
information supplied by prospective Purchasers in their purchase
materials, may be inaccurate or misleading.
4.9 The MBD/U will
terminate the Offering upon request of the Company at any time and
will resume the Offering upon subsequent request of the
Company.
4.10 The
MBD/U shall enter into a Soliciting Dealer Agreement in the form
attached hereto as Exhibit A with each Selling Group Member, and
shall not modify, amend or supplement the terms of the Soliciting
Dealer Agreement without the prior written consent of the Company
and the MBD/U.
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5. Representations and Warranties of the
MBD/U. The MBD/U represents and warrants to the Company
that:
5.1 MBD/U is a duly
organized Texas corporation.
5.2 This Agreement,
when executed by MBD/U, will have been duly authorized and will be
a valid and binding agreement of MBD/U, enforceable in accordance
with its terms.
5.3 The consummation of
the transactions contemplated herein and those contemplated by the
Offering Document will not result in a breach or violation of any
order, rule or regulation directed to MBD/U by any court or any
federal or state regulatory body or administrative agency having
jurisdiction over MBD/U or its affiliates.
5.4 MBD/U is, and
during the term of this Agreement will be, duly registered as a
broker-dealer pursuant to the provisions of the Exchange Act, a
member in good standing of FINRA, and a broker or dealer duly
registered as such in any state where offers are made by the MBD/U.
MBD/U will comply with all applicable laws, regulations and
requirements of the Securities Act, the Exchange Act, applicable
state law and FINRA. The MBD/U has all required licenses and
permits.
5.5 Prior to delivering
the Offering Document to any third party, MBD/U will determine it
has reasonable grounds to believe, based on information made
available to it by the Company, that all material facts are
adequately and accurately disclosed in the Offering Document, the
Offering Document does not contain any material misstatements or
omissions, and the Offering Document provides an adequate basis for
evaluating an investment in the Securities.
5.6 This Agreement, or
any supplement or amendment hereto, may be filed by the Company
with the SEC, if such should be required, and may be filed with,
and may be subject to the approval of, any applicable federal and
applicable state securities regulatory agencies, if
required.
5.7 MBD/U may not
permit, and no agreement will be made by MBD/U with any person
permitting, the resale, repurchase or distribution of the
Securities purchased by such person.
5.8 MBD/U’s
acceptance of this Agreement constitutes a representation to the
Company that such MBD/U has established and implemented
anti-money-laundering compliance programs, in accordance with FINRA
Rule 3310 and Section 352 of the Money Laundering Abatement Act and
Section 326 of the Patriot Act of 2001, which are reasonably
expected to detect and cause reporting of suspicious transactions
in connection with the sale of the Securities.
5.9 MBD/U may become a
Selling Group Member. In the event MBD/U becomes a Selling Group
Member, MBD/U shall comply with all requirements of the Selling
Group Members as set forth in the Soliciting Dealer
Agreement.
5.10 MBD/U
hereby represents and warrants as of the Effective Date to the
Company that neither MBD/U nor any of its executive officers,
directors, general partners, managing members, or officers involved
in the Offering or persons who own 20% or more of the
MBD/U:
5.10.1 Has
been convicted, within 10 years of date of the Offering Document of
any felony or misdemeanor that was:
(a) In connection with
the purchase or sale of any security;
(b) Involving or making
of any false filing with the SEC; or
(c) Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of purchasers of securities.
5.10.2 Is
subject to any order, judgment or decree of any court of competent
jurisdiction, entered within 5 years before the date of the
Offering Document, that restrains or enjoins such person from
engaging or continuing in any conduct or practice:
(a) In connection with
the purchase or sale of any security;
(b) Involving the
making of any false filing with the SEC; or
(c) Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of purchasers of securities.
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5.10.3 Is
subject to a final order of a state securities commission (or an
agency or officer of a state performing like functions), a state
authority that supervises or examines banks, savings associations
or credit unions, a state insurance commission (or an agency or
officer of a state performing like functions), an appropriate
federal banking agency, the U.S. Commodity Futures Trading
Commission or the National Credit Union Administration
that:
(a) As of the date of
the Offering Document, bars the person from:
(i)
Association with an
entity regulated by such commission,
authority, agency
or officer;
(ii)
Engaging in the
business of securities, insurance or
banking;
or
(iii)
Engaging in savings
association or credit union activities.
(b) Constitutes a final
order based on a violation of any law or regulation that prohibits
fraudulent, manipulative or deceptive conduct entered within 10
years before the date of the Offering Document.
5.10.4 Is
subject to an order of the SEC pursuant to sections 15(b) or 15B(c)
of the Exchange Act or section 203(e) or (f) of the Investment
Advisers Act that, at the time of such sale:
(a) Suspends or revokes
such person’s registration as a broker, dealer, municipal
securities dealer or investment advisor;
(b) Places limitations
on the activities, functions or operations of such
person;
or
(c) Bars such person
from being associated with any entity or from participating in the
offering of any ▇▇▇▇▇ stock.
5.10.5 Is
subject to any order of the SEC entered within 5 years before the
date of the Offering Document, as of the date hereof, that orders
the person to cease and desist from committing or causing a
violation or future violation of:
(a) Any scienter-based
anti-fraud provisions of the federal securities laws including,
without limitation, section 17(a)(1) of the Securities Act, section
10(b) of the Exchange Act and 17 CFR 240.10b-5, section 15(c)(1) of
the Exchange Act and section 206(1) of the Investment Advisers Act,
or any other rule or regulation thereunder; or
(b) Section 5 of the
Securities Act.
5.10.6 Is
suspended or expelled from membership in, or suspended or barred
from association with, a member of a registered national securities
exchange or a registered national or affiliated securities
association for any act or omission to act constituting conduct
inconsistent with just and equitable principles of
trade;
5.10.7 Has
filed (as a registrant or issuer), or was or was named as an
underwriter in, any registration statement or Regulation A offering
statement filed with the SEC that, within 5 years of the date of
the Offering Document, was the subject of a refusal order, stop
order or order pursuant to Rule 252 of the Securities Act or
otherwise suspending the Regulation A exemption or, is, at the time
of such sale, the subject of an investigation or proceeding to
determine whether a stop order or suspension order should be
issued.
5.10.8 Is
subject to a United States Postal Service false representation
order entered within 5 years before the Effective Date, or is, as
of the date of the Offering Document, subject to a temporary
restraining order or preliminary injunction with respect to conduct
alleged by the United States Postal Service to constitute a scheme
or device for obtaining money or property through the mail by means
of false representations.
5.10.9 Is
or was within 5 years of the date of the Offering Document subject
of any proceeding or examination under Section 8 of the Exchange
Act or Rule 258 of the Exchange Act or any similar rule adopted
under Section 3(b) of the Securities Act.
The
representations and warranties made in this Section 5.10 are and
shall be continuing representations and warranties throughout the
term of the Offering. In the event that any of these
representations or warranties becomes untrue, the MBD/U will
immediately notify the Company in writing of the fact which makes
the representation or warranty untrue.
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6. Compensation. The Company shall
promptly reimburse MBD/U for all additional reasonable
out-of-pocket expenses incurred by MBD/U and its directors,
officers and employees in connection with the performance of MBD/U
services under this Agreement. For these purposes,
“out-of-pocket expenses” shall include, but not limited
to, due diligence performed by MBD/U or its agent, attorneys’
fees and costs, courier, mail, supplies, travel and similar
expenses and FINRA required fees for the Offering.. Except for
bills for Federal Express, courier, mail and supplies, Any
reimbursements for accountable expenses made to the MBD/U hereunder
shall be set off against, and reduce dollar-for-dollar, the cash
placement fee set forth in Section 6.2 below. MBD/U will not incur
any expenses exceeding Five Hundred Dollars ($500) without the
prior consent of the Company; and the Parties will attempt to have
the Company direct billed as often as possible for such expenses.
Subject to Section 9, as compensation for services rendered by the
MBD/U under this Agreement, the MBD/U jointly will be entitled to
receive from the Company, as appropriate:
6.1 A selling
commission equal to 1.95% of the gross offering proceeds of Series
A Bonds (the “Series A Total Sales”) sold by the MBD/U
through the Selling Group Members and 6.50% of the gross offering
proceeds of Series B Bonds (the “Series B Total Sales”
and collectively with the Series A Total Sales, the “Total
Sales”), which it will re-allow to the Selling Group Members;
provided, however, that this amount will be reduced to the extent a
lower commission rate is negotiated with a Selling Group Member and
the commission rate will be the lower agreed upon
rate.
6.2 A managing
broker-dealer fee equal to 0.95% of the Total Sales.
6.3 A wholesaler fee in
an amount up to 0.95% of the Total Sales, which will be re-allowed,
in whole or in part, to certain wholesalers, some of which may be
internal to the MBD/U and its Affiliates.
6.4 Subject to Section
5.9, the MBD/U may also sell the Securities as part of the Selling
Group, thereby becoming entitled to selling
commissions.
Notwithstanding the
foregoing provisions of this Section 6, the Company reserves the
right, in its sole discretion, to refuse to accept any or all
Purchase Agreements tendered by the MBD/U and/or to terminate the
Offering of the Securities, at any time before the Offering
Termination Date.
7. Expense Allowances. Subject to
Section 9, in addition to the compensation described in Section 6,
the Company will pay the MBD/U for sales of the Securities an
amount up to One Percent (1.0%) of the Total Sales as a
non-accountable marketing and due diligence allowance to the extent
passed on by the MBD/U to the Selling Group Members.
8. Offering. The Offering of the
Securities shall be at the offering price and upon the terms and
conditions set forth in the Offering Document.
9. Conditions to Payment of Commissions,
Allowances and Expense Reimbursements. No selling
commissions, allowances, expense reimbursements or other
compensation will be payable with respect to any Purchase
Agreements that are rejected by the Company, or if the Company
terminates the Offering for any reason whatsoever. No selling
commissions, allowances, expense reimbursements or other
compensation will be payable to the MBD/U with respect to any sale
of the Securities by the MBD/U unless and until such time as the
Company has received the total proceeds of any such sale from the
Escrow Agent.
10. Indemnification by the
Company.
10.1 Subject
to the conditions set forth below, the Company, with respect to the
Offering, agrees to indemnify and hold harmless the MBD/U and the
Selling Group Members, and their respective owners, managers,
members, partners, directors, officers, employees, agents,
attorneys and accountants (the “MBDSD Parties”),
against any and all loss, liability, claim, damage and expense
whatsoever (“Loss”) arising out of or based
upon:
10.1.1 Any
untrue statement or alleged untrue statement of a material fact
contained in the Offering Document (as from time to time amended
and supplemented), or in any application or other document filed in
any jurisdiction in order to qualify the Securities under or exempt
the Offering of
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the
Securities from the registration or qualification requirements of
the securities laws thereof unless any of the MBDSD Parties know
such statement to be untrue;
10.1.2 The
omission or alleged omission from the Offering Document (as from
time to time amended and supplemented), or in any sales or other
materials provided by the Company to the MBD/U for use by the
Selling Group Members, of a material fact required to be stated
therein or necessary to make the statements therein not misleading
unless any of the MBDSD Parties know such statement to be
untrue;
10.1.3 The
failure of the Company as a result of its acts or omissions to
comply with any of the applicable provisions of the Securities Act,
Regulation A or the regulations thereunder, or any applicable state
laws or regulations;
10.1.4 Any
verbal or written representations made in connection with the
Offering by the Company in violation of the Securities Act, or any
other applicable federal or state securities laws and regulations;
or
10.1.5 The
breach by the Company of any term, condition, representation,
warranty or covenant in this Agreement.
10.2 If
any action is brought against any of the MBDSD Parties in respect
of which indemnity may be sought hereunder, the MBD/U or the
Selling Group Members, as the case may be, shall promptly notify
the Company in writing of the institution of such action, and the
Company shall assume the defense of such action; provided, however,
that the failure to notify the Company shall not affect the
provisions in this Section 10 except to the extent such failure to
notify the Company has a material and adverse effect on the defense
of such claims.
10.3 The
Company agrees to promptly notify the MBD/U of the commencement of
any litigation or proceedings against the Company or any of its
respective managers, members, partners, officers, employees,
agents, attorneys and accountants in connection with the
Offering.
10.4 The
indemnity provided to the MBD/U pursuant to this Section 10 shall
not apply to the extent that any loss arises out of or is based
upon any untrue statement or alleged untrue statement of material
fact made by a MBDSD Party or any agent of a MBDSD Party, or any
omission or alleged omission of a material fact required to be
disclosed by a MBDSD Party or any agent of a MBDSD
Party.
10.5 The
indemnity provided to the Selling Group Member pursuant to this
Section 10 shall not apply to the extent that any Loss arises out
of or is based upon any untrue statement or alleged untrue
statement of material fact made by the Selling Group Member or any
agent of the Selling Group Member, or any omission or alleged
omission of a material fact required to be disclosed by the Selling
Group Member or any agent of the Selling Group Member.
11. Indemnification by the
MBD/U.
11.1 Subject
to the conditions set forth below, the MBD/U agrees to indemnify
and hold harmless the Company and the Selling Group Members, and
their respective owners, managers, members, partners, directors,
officers, employees, agents, attorneys and accountants (the
“TSGMD Parties”), against any and all Loss arising out
of or based upon:
9
11.1.1 Any
verbal or written representations in connection with the Offering
made by the MBD/U in violation of the Securities Act, or any other
applicable federal or state securities laws and
regulations;
11.1.2 Any
misrepresentation contained in any sales or other materials
provided by the MBD/U to the Selling Group Members;
11.1.3 The
MBD/U’s failure to comply with any of the applicable
provisions of the Securities Act, the Exchange Act, Regulation A,
the applicable requirements and rules of FINRA, or any applicable
state laws or regulations; or
11.1.4 The
breach by the MBD/U of any term, condition, representation,
warranty or covenant of this Agreement.
11.2 If
any action is brought against the TSGMD Parties in respect of which
indemnity may be sought hereunder, the Company or the Selling Group
Members shall promptly notify the MBD/U in writing of the
institution of such action, and the MBD/U shall assume the defense
of such action; provided, however, that the failure to notify the
MBD/U shall not affect the provisions in this Section 11 except to
the extent such failure to notify the MBD/U has a material and
adverse effect on the defense of such claims. The affected TSGMD
Parties shall have the right to employ counsel in any such case.
The reasonable fees and expenses of such counsel shall be at the
MBD/U’s expense and authorized in writing by the MBD/U,
provided that the MBD/U will not be obligated to pay for legal fees
and expenses for more than one law firm in connection with the
defense of similar claims arising out of the same alleged acts or
omissions.
11.3 The
MBD/U agrees to promptly notify the Company of the commencement of
any litigation or proceedings against the MBD/U or any of its
managers, members, partners, officers, employees, agents, attorneys
and accountants in connection with the Offering.
11.4 The
indemnity provided to the Company pursuant to this Section 11 shall
not apply to the extent that any Loss arises out of or is based
upon any untrue statement or alleged untrue statement of material
fact made by the Company or any agent of the Company (other than a
MBDSD Party), or any omission or alleged omission of a material
fact required to be disclosed by the Company any agent of the
Company (other than a MBDSD Party).
11.5 The
indemnity provided to the Selling Group Member pursuant to this
Section 11 shall not apply to the extent that any Loss arises out
of or is based upon any untrue statement or alleged untrue
statement of material fact made by the Selling Group Member or any
agent of the Selling Group Member, or any omission or alleged
omission of a material fact required to be disclosed by the Selling
Group Member or any agent of the Selling Group Member.
12. Indemnification by the Selling Group
Member.
12.1 Subject
to the conditions set forth below, each Selling Group Member agrees
to indemnify and hold harmless the Company and the MBD/U and their
respective owners, managers, members, partners, directors,
officers, employees, agents, attorneys and accountants (the
“TMBDD Parties”), against any and all Loss arising out
of or based upon:
12.1.1 Any
verbal or written representations in connection with the Offering
made by such Selling Group Member, its employees or affiliates in
violation of the Securities Act, or any other applicable federal or
state securities laws and regulations;
10
12.1.2 Any
use of sales materials or use of unauthorized verbal
representations by such Selling Group Member, its employees or
affiliates concerning the Offering in violation of the Soliciting
Dealer Agreement or otherwise;
12.1.3 Such
Selling Group Member’s failure to comply with any of the
applicable provisions of the Securities Act, the Exchange Act,
Regulation A, the applicable requirements and rules of FINRA, or
any applicable state laws or regulations;
12.1.4 The
breach by such Selling Group Member of any term, condition,
representation, warranty, or covenant of the Soliciting Dealer
Agreement; or
12.1.5 The
failure by any Purchaser of an Interest to comply with any
suitability requirements for investors set forth in the Offering
Document.
12.2 If
any action is brought against the TMBDD Parties in respect of which
indemnity may be sought hereunder, the Company or the MBD/U shall
promptly notify the applicable Selling Group Member in writing of
the institution of such action, and the Selling Group Member shall
assume the defense of such action; provided, however, that the
failure to notify the Selling Group Member shall not affect the
provisions in this Section 12 except to the extent such failure to
notify the Selling Group Member has a material and adverse effect
on the defense of such claims. The affected TMBDD Parties shall
have the right to employ counsel in any such case. The reasonable
fees and expenses of such counsel shall be at such Selling Group
Member’s expense and authorized in writing by such Selling
Group Member, provided that such Selling Group Member will not be
obligated to pay for legal fees and expenses for more than one law
firm in connection with the defense of similar claims arising out
of the same alleged acts or omissions.
12.3 The
Selling Group Member agrees to promptly notify the Company and the
MBD/U of the commencement of any litigation or proceedings against
the Selling Group Member or any of the Selling Group Member’s
officers, directors, partners, affiliates or agents in connection
with the Offering.
12.4 The
indemnity provided to the MBD/U pursuant to this Section 12 shall
not apply to the extent that any Loss arises out of or is based
upon any untrue statement or alleged untrue statement of material
fact made by the MBD/U or any agent of the MBD/U, or any omission
or alleged omission of a material fact required to be disclosed by
the MBD/U or any agent of the MBD/U.
12.5 The
indemnity provided to the Company pursuant to this Section 12 shall
not apply to the extent that any loss arises out of or is based
upon any untrue statement or alleged untrue statement of material
fact made by the Company or any agent of the Company (other than
the MBD/U), or any omission or alleged omission of a material fact
required to be disclosed by the Company or any agent of the Company
(other than the MBD/U).
13. Contribution. In order to
provide for just and equitable contribution in circumstances in
which the indemnification provided pursuant to Sections 10, 11 and
12 is for any reason held to be unavailable from the Company, the
MBD/U or the Selling Group Members, as the case may be, the
Company, the MBD/U and the Selling Group Members shall contribute
to the aggregate Loss, liabilities, claims, damages and expenses
(including any amount paid in settlement of any action, suit, or
proceeding or any claims asserted) in such amounts as a court of
competent jurisdiction may determine (or in the case of settlement,
in such amounts as may be agreed upon by the parties) in such
proportion to reflect the relative fault of the Company, the MBD/U
and the Selling Group Members and their respective owners,
managers, members, partners, directors, officers, employees,
agents, attorneys and accountants in connection with the events
described in Sections 10, 11 and 12, as the case may be, which
resulted in such
11
Loss,
liabilities, claims, damages or expenses, as well as any other
equitable considerations. The relative fault of the parties shall
be determined by reference to, among other things, whether any
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company, the MBD/U and the Selling
Group Members and their respective owners, managers, members,
partners, directors, officers, employees, agents, attorneys and
accountants and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such
omission or statement. The parties and any person who controls the
MBD/U shall also have rights to contribution under this Section
13.
14. Compliance. All actions, direct
or indirect, by the MBD/U and its agents, members, employees and
affiliates, shall conform to (i) requirements applicable to
broker-dealers under federal and applicable state securities laws,
rules and regulations and (ii) applicable requirements and rules of
FINRA.
15. Privacy Act. To protect
Customer Information (as defined below) and to comply as may be
necessary with the requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, the
relevant state and federal regulations pursuant thereto and state
privacy laws, the parties wish to include the confidentiality and
non- disclosure obligations set forth herein.
15.1 Customer
Information. “Customer Information” means any
information contained on a customer’s application or other
form and all nonpublic personal information about a customer that a
party receives from the other party. Customer Information shall
include, but not be limited to, name, address, telephone number,
social security number, health information and personal financial
information (which may include consumer account
number).
15.2 Usage
and Nondisclosure. The parties understand and acknowledge
that they may be financial institutions subject to applicable
federal and state customer and consumer privacy laws and
regulations, including Title V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act (15
U.S.C. 6801, et seq.) and regulations promulgated thereunder
(collectively, the “Privacy Laws”), and any Customer
Information that one party receives from the other party is
received with limitations on its use and disclosure. The parties
agree that they are prohibited from using the Customer Information
received from the other party other than (i) as required by law,
regulation or rule or (ii) to carry out the purposes for which one
party discloses Customer Information to the other party pursuant to
the Agreement, as permitted under the use in the ordinary course of
business exception to the Privacy Laws.
15.3 Safeguarding
Customer Information. The parties shall establish and
maintain safeguards against the unauthorized access, destruction,
loss, or alteration of Customer Information in their control which
are no less rigorous than those maintained by a party for its own
information of a similar nature. In the event of any improper
disclosure of any Customer Information, the party responsible for
the disclosure will immediately notify the other
party.
15.4 Survivability.
The provisions of this Section 15 shall survive the termination
of
this
Agreement.
16. Representations and Agreements to
Survive Sale and Payment. Except as the context otherwise
requires, all representations, warranties and agreements contained
in this Agreement shall be deemed to be representations, warranties
and agreements at and as of the Offering Termination Date, and such
representations, warranties and agreements by the MBD/U or the
Company, including the indemnity agreements contained in Sections
10, 11 and 12 and the contribution agreements contained in Section
13 shall remain operative and in full force and effect regardless
of any investigation made by the MBD/U, the Company and/or any
controlling person, and shall survive the sale of, and payment for,
the Securities.
12
17. Costs of Offering. Except for
the compensation payable to the MBD/U described in Section 6 and
the allowances and reimbursements described in Section 7, which are
the sole obligations of the Company or its affiliates, the MBD/U
will pay all of its own costs and expenses, including, but not
limited to, all expenses necessary for the MBD/U to remain in
compliance with any applicable federal, state or FINRA laws, rules
or regulations in order to participate in the Offering as a
broker-dealer, and the fees and costs of the MBD/U’s counsel.
The Company agrees to pay all other expenses incident to the
performance of its obligations hereunder, including all expenses
incident to filings with federal and state regulatory authorities
and to the exemption of the Securities under federal and state
securities laws, including fees and disbursements of the
Company’s counsel, and all costs of reproduction and
distribution of the Offering Document and any amendment or
supplement thereto.
18. Termination. This Agreement is
terminable by any party for any reason whatsoever or for no reason
at any time upon written notice to the other parties. Such
termination shall not affect the indemnification agreements set
forth in Sections 10, 11 and 12 or the contribution agreements set
forth in Section 13.
19. Governing Law. This Agreement
shall be governed by, subject to and construed in accordance with,
the laws of the State of Michigan without regard to conflict of law
provisions.
20. Venue. Any action relating to
or arising out of this Agreement shall be brought only in a court
of competent jurisdiction located in Kent County,
Michigan.
21. Severability. If any portion of
this Agreement shall be held invalid or inoperative, then so far as
is reasonable and possible (i) the remainder of this Agreement
shall be considered valid and operative and (ii) effect shall be
given to the intent manifested by the portion held invalid or
inoperative.
22. Counterparts. This Agreement
may be executed in 2 or more counterparts, each of which shall be
deemed to be an original, and together which shall constitute one
and the same instrument.
23. Modification or Amendment. This
Agreement may not be modified or amended except by written
agreement executed by the parties hereto.
24. Notices. All communications
hereunder, except as herein otherwise specifically provided, shall
be in writing and, (i) if sent to the MBD/U, shall be mailed or
delivered to Crescent Securities Group, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇▇▇▇▇, and
if sent to the Company shall be mailed or delivered to Red Oak Capital Fund III, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: CFO. The
notice shall be deemed to be received on the date of its actual
receipt by the party entitled thereto.
25. Parties. This Agreement shall
be binding upon and inure solely to the benefit of the parties
hereto, the persons referred to in Sections 10, 11, 12 and 13,
their respective successors, legal representatives, heirs and
assigns, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under, in respect of, or
by virtue of, this Agreement or any provision herein
contained.
26. Delay. Neither the failure nor
any delay on the part of any party to this Agreement to exercise
any right, remedy, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall a waiver of any right,
remedy, power, or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power, or privilege
with respect to any subsequent occurrence.
13
27. Recovery of Costs. If any legal
action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to
recover reasonable attorneys’ fees and other costs incurred
in that action or proceeding (and any additional proceeding for the
enforcement of a judgment) in addition to any other relief to which
it or they may be entitled.
28. Noncircumvention;
Noninterference. Neither the Company, the MBD/U, nor their
affiliates shall (i) notify or solicit any persons who have been
identified to the Company as clients of the MBD/U or its affiliates
with respect to any future transactions of the Company or (ii)
release the name and/or account information for any client of the
MBD/U or its affiliates to any other person (other than agents of
or persons affiliated with the parties hereto) unless required by
court order, an authorized government or self-regulatory agency, or
by any other agreement among the parties to do so. The Company
shall establish and maintain safeguards against the unauthorized
access, destruction, loss, or alteration of any personal
information of the clients of the MBD/U or its affiliates. In the
event of any improper disclosure of any client information, the
party responsible for the disclosure will immediately notify the
other party. The provisions of this section shall survive any
termination of this Agreement for a period of 5 years.
29. Entire Agreement. This
Agreement contains the entire understanding between the parties
hereto and supersedes any prior understandings or written or oral
agreements between them respecting the subject matter
hereof.
30. Confirmation. The Company
agrees to confirm all orders for purchase of Securities that are
accepted by the Company and provide such confirmation to the MBD/U
and the Selling Group Members. To the extent practicable and
permitted by law, all such confirmations may be provided
electronically.
31. Due Diligence. The Company will
authorize a collection of information regarding the Offering (the
“Due Diligence Information”), which collection the
Company may amend and supplement from time to time, to be delivered
by the MBD/U to the Selling Group Members (or their agents
performing due diligence) in connection with their due diligence
review of the Offering. In the event a Selling Group Member (or its
agent performing due diligence) requests access to additional
information or otherwise wishes to conduct additional due diligence
regarding the Offering, the Company and the MBD/U will reasonably
cooperate with such Selling Group Member to accommodate such
request. All Due Diligence Information received by the MBD/U and/or
the Selling Group Members in connection with their due diligence
review of the Offering are confidential and shall be maintained as
confidential and not disclosed by the MBD/U or the Selling Group
Members except to the extent such information is disclosed in the
Offering Document.
If the
foregoing correctly sets forth the understanding between the MBD/U
and the Company, please so indicate in the space provided below for
that purpose, and return one of the signed copies of this letter
agreement to the Company whereupon this letter agreement shall
constitute a binding agreement among us.
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Very truly
yours,
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Company Name: Red
Oak Capital Fund III, LLC
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By:
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/s/ ▇▇▇▇
▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇
▇▇▇▇▇▇▇▇
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Title:
Authorized Signatory
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AGREED AND
ACCEPTED:
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Crescent Securities
Group, Inc., a Texas Corporation
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By: /s/
▇▇▇▇ ▇▇▇▇▇ |
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Name:
▇▇▇▇ ▇▇▇▇▇
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Title:
President
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Commission checks
to be sent to: Crescent Securities Group, Inc.
▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
15
EXHIBIT
A
Soliciting Dealer Agreement
Ladies
and Gentlemen:
The
undersigned, Crescent Securities Group, Inc., a Texas corporation
(the “Managing Broker-Dealer”), has entered into an
agreement (the “MBD Agreement”) with Red Oak Capital
Fund III, LLC, a Delaware Limited Liability Company (the
“Company”), for the sale of up to 50,000 bonds (the
“Bonds”) to be issued by the Company, pursuant to which
the Managing Broker-Dealer has agreed to use its best efforts to
form and manage, as the Managing Broker-Dealer, a group of
securities dealers (the “Selling Group Members”) for
the purpose of soliciting offers for the purchase of the Bonds. The
MBD Agreement is attached as Exhibit A. The terms of the Offering
and the Bonds are set forth in the Company’s Offering Statement on Form 1-A
filed with the Securities and Exchange Commission
(“SEC”) on June 25, 2019, as amended (together with all
exhibits thereto, the “Offering Statement”) and the
Final Offering Circular dated , as may be supplemented (the
“Offering Circular”). The Bonds will be offered during
a period commencing on the date of the Offering Circular and
continuing until the Offering Termination Date and all extensions
thereof (as defined in the Offering Circular). Terms used but not
otherwise defined in this Soliciting Dealer Agreement (this
“Agreement”) have the same meanings as in the MBD
Agreement.
You are
invited to become a Selling Group Member and by your confirmation
hereof you agree to act in such capacity and to use your best
efforts, in accordance with the following terms and conditions, to
find qualified Investors (the “Investors”) for the
Bonds. By your acceptance of this Agreement, you will become one of
the Selling Group Members and will be entitled to and subject to
the indemnification and contribution provisions contained in the
MBD Agreement, including the provisions of the MBD Agreement
wherein the Selling Group Members severally agree to indemnify and
hold harmless the Company and the Managing Broker-Dealer for
certain actions.
1.
Selling Group Member Representations.
1.1
You hereby confirm
that you (i) are a member in good standing of the Financial
Industry Regulatory Authority, Inc. (“FINRA”), (ii) are
qualified and duly registered to act as a broker-dealer within all
states in which you will sell the Bonds, (iii) are a broker-dealer
duly registered with the SEC pursuant to the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) and (iv)
will maintain all such registrations and qualifications in good
standing for the duration of your involvement in the Offering. You
agree to immediately notify the Managing Broker-Dealer if you cease
to be a member of FINRA in good standing.
1.2
You hereby agree to
solicit, as an independent contractor and not as the Managing
Broker-Dealer’s agent, or as an agent of the Company or its
affiliates, persons acceptable to the Company to purchase the Bonds
pursuant to the Subscription Agreement (the “Subscription
Agreement”) in the form attached to the Offering Statement on
Form 1-A, as amended (the “Offering Statement”) of
which the Offering Circular is a part and in accordance with the
terms of the Offering Circular, and to diligently make inquiries as
required by this Agreement, the Offering Circular or applicable law
with respect to prospective Investors in order to ascertain whether
a purchase of the securities is suitable for the Investor. You
shall solicit the purchase of Bonds in a manner that complies with
Regulation A promulgated under the Securities Act of 1933, as
amended (the “Securities Act”) and the rules of FINRA
applicable to public offerings. In accordance with the instructions
set forth in the Subscription Agreement, all the Subscription
Agreements and all funds received by you with respect to any
Subscription Agreement shall be transmitted to the Managing
Broker-Dealer by noon of the next business day following receipt
thereof. To the extent received by the Managing Broker-Dealer, the
Managing Broker-Dealer will be responsible for the prompt deposit
of funds for the purchase of Bonds with UMB Bank, N. A. (the “Escrow Agent”).
The funds shall be maintained in accordance with SEC Rule 15c2-4.
No Subscription Agreement shall be effective unless and until
accepted by the Company, it being understood that the Company may
accept or reject any Investor in its sole discretion and that the
Company may terminate the Offering at any time for any
reason.
1.3
You understand and
agree that your compensation under this Agreement for the sale of
Bonds is conditioned upon the Company’s acceptance of sales
by you, and that the failure to accept a purchase for Bonds shall
relieve the Company, the Managing Broker-Dealer or any other party
of any obligation to pay you for any services rendered by you in
connection with the sale of Bonds under this Agreement or
otherwise.
1.4
You agree that
before participating in the Offering, you will have reasonable
grounds to believe based on information made available to you by
the Managing Broker-Dealer and/or the Company through the Offering
Circular, that all material facts are adequately and accurately
disclosed in the Offering Circular and provide a basis for
evaluating the Company and the Bonds.
16
1.5
You agree not to
execute any transaction in which an Investor invests in the Bonds
in a discretionary account without prior written approval of the
transaction by the Investor and the Managing
Broker-Dealer.
1.6
You agree to comply
in all respects with the purchase procedures and plan of
distribution set forth in the Offering Circular. Further, you agree
that although you may receive due diligence and other information
regarding the Offering from the Company in electronic form, you
will not distribute to any prospective Investor or any other person
any such material. All material distributions to prospective
Investors shall only be in hard copy form.
1.7
All Subscriptions
solicited by you will be strictly subject to confirmation by the
Managing Broker-Dealer and acceptance thereof by the Company. The
Managing Broker-Dealer and the Company reserve the right in their
absolute discretion to reject any such Subscriptions and to accept
or reject Subscriptions in the order of their receipt by the
Company, as appropriate or otherwise. Neither you nor any other
person is authorized to and neither you nor any of your employees,
agents or representatives shall give any information or make any
representation other than those contained in the Offering Circular
or in any supplemental sales literature furnished by the Managing
Broker-Dealer or the Company for use in making solicitations in
connection with the offer and sale of the Bonds.
1.8
Upon authorization
by the Managing Broker-Dealer, you may offer the Bonds at the
Offering price set forth in the Offering Circular, subject to the
terms and conditions thereof.
1.9
The Company or the
Managing Broker-Dealer will provide you with such number of copies
of the Offering Circular and such number of copies of amendments
and supplements thereto as you may reasonably request. You will be
responsible for correctly placing orders of such materials and will
reimburse the Company or the Managing Broker-Dealer for any costs
incurred in connection with unreasonable or mistaken orders. The
Managing Broker-Dealer also understands that the Company may
provide you with certain supplemental sales material to be used by
you in connection with the solicitation of purchases of the Bonds.
If you elect to use such supplemental sales material, you agree
that such material shall not be used in connection with the
solicitation or purchase of the Bonds unless accompanied or
preceded by the Offering Circular, as then currently in effect, and
as it may be amended or supplemented in the future.
1.10
The Managing
Broker-Dealer shall have full authority to take such action as it
may deem advisable with respect to all matters pertaining to the
Offering. The Managing Broker-Dealer shall be under no liability to
you except for lack of good faith and for obligations expressly
assumed by it in this Agreement. Nothing contained in this section
is intended to operate as, and the provisions of this section shall
not constitute a waiver by you of, compliance with any provision of
the Securities Act, the Exchange Act, other applicable federal law,
applicable state law or of the rules and regulations
thereunder.
1.11
You agree that you
will not sell the Bonds to any Investor who has not confirmed to
you, in writing, that such Investor meets the suitability
requirements set forth in the section captioned “PLAN OF DISTRIBUTION – Determination of
Suitability” in the Offering Circular. Nothing
contained in this Section 1.11 shall be construed to relieve you of
your suitability obligations under FINRA Rule 2111.
1.12
For the sale of
Bonds made prior to the break of escrow, you will instruct all
Investors to make their checks payable to UMB Bank,
N.A. as escrow agent for Red
Oak Capital Fund III, LLC or by wire or electronic funds
transfer (via ACH) into the escrow account (wiring instructions are
attached). Following the break of escrow, you will instruct all
Investors to make their checks payable to Red Oak Capital Fund III, LLC or by wire
or electronic funds transfer (via ACH) in accordance to the wiring
instructions attached. If you receive a check that does not conform
with the foregoing instructions, you shall return such check
directly to such subscriber not later than noon of the business day
following its receipt.
1.13
You will limit the
offering of the Bonds to persons whom you have reasonable grounds
to believe, and in fact believe, meet the financial suitability and
other Investor requirements set forth in the Offering
Circular.
1.14
After the Offering
Statement has been filed with the SEC but prior to date the SEC
qualifies the Bonds for sale under Regulation A (the
“Qualification Date”), you are required to provide each
prospective Investor with a copy of the most recent preliminary
offering circular contained within the Offering Statement (the
“Preliminary Offering Circular”). After the
Qualification Date, you are required to provide each prospective
Investor with a copy of the final Offering Circular. If a
prospective Investor received the Preliminary Offering Circular,
then you will be required to deliver to the Investor the final
Offering Circular at least 48 hours before such Investor will be
permitted to acquire Bonds. If an Investor purchases Bonds within
90 calendar days of the Qualification Date, you will deliver to the
Investor, no later than two business days following the completion
of such sale, a copy of the final Offering Circular and all
exhibits and appendices thereto either by (i) electronic delivery
of the final Offering Circular or the uniform resource locator (the
“URL”) to where the final Offering Circular may be
accessed on the SEC’s Electronic Data Gathering, Analysis and
Retrieval System (“▇▇▇▇▇”), or (ii) mailing the final
Offering Circular and all exhibits and appendices thereto to the
Investor at the address indicated in the Subscription
Agreement.
17
1.15
During the course
of the Offering, you will advise each prospective Investor at the
time of the initial offering to him or her that the Company and/or
its agents and consultants will, during the course of the Offering
and prior to any sale, accord said Investor and his or her
purchaser representative, if any, the opportunity to ask questions
of and to receive answers from the Company and/or its agents and
consultants concerning the terms and conditions of the Offering and
to obtain any additional information, which information is
possessed by the Company or may be obtained by it without
unreasonable effort or expense and which is necessary to verify the
accuracy of the information contained in the Offering
Circular.
1.16
You will
immediately bring to the attention of the Company and the Managing
Broker-Dealer any circumstance or fact which causes you to believe
the Offering Circular, or any other literature distributed pursuant
to the Offering, or any information supplied to prospective
Investors in their purchase materials, may be inaccurate or
misleading.
1.17
You agree that in
recommending to an Investor the purchase or sale of the Bonds, you
shall have reasonable grounds to believe, on the basis of
information obtained from the prospective Investor concerning his
or her investment objectives, other investments, financial
situation and needs, and any other information known by you,
that:
1.17.1
The prospective
Investor meets the suitability requirements set forth in the
Offering Circular and the acquisition of Bonds is otherwise a
suitable investment for such Investor as may be required by all
applicable laws, rules and regulations;
1.17.2
The prospective
Investor is or will be in a financial position appropriate to
enable him or her to realize to a significant extent the benefits
described in the Offering Circular;
1.17.3
The prospective
Investor has a fair market net worth sufficient to sustain the
risks inherent in an investment in the Bonds, including, but not
limited to, the total loss of the investment, lack of liquidity and
other risks described in the Offering Circular; and
1.17.4
An investment in
the Bonds is otherwise suitable for the prospective
Investor.
1.18
You agree to retain
in your records and make available to the Managing Broker-Dealer
and to the Company, for a period of at least 6 years following the
Offering Termination Date, information establishing that (i) each
person who purchases the Bonds pursuant to a Subscription Agreement
solicited by you is within the permitted class of Investors under
the requirements of the jurisdiction in which such Investor is a
resident, (ii) each person met the suitability requirements set
forth in the Offering Circular and the Subscription Agreement and
(iii) each person is suitable for such investment and the basis on
which such suitability determination was made.
1.19
You agree that upon
request by the Managing Broker-Dealer, you will furnish a complete
list of all persons who have been offered the Bonds (including the
corresponding number of the Offering Circular delivered to such
persons) and such persons’ place of residence.
1.20
You agree that
before executing a purchase transaction in the Bonds, you will
inform the prospective Investor and his or her investor
representative, if any, of all pertinent facts relating to the
liquidity and marketability of the Bonds, as appropriate, during
the term of the investment.
1.21
You hereby
undertake and agree to comply with all obligations applicable to
you as set forth in FINRA rules, including, but not limited to, any
new suitability and filing requirements.
1.22
You agree not to
rely upon the efforts of the Managing Broker-Dealer in (i)
performing due diligence related to the Company (including its
members, managers, trustees, officers, directors, employees and
Affiliates), the Bonds, or the suitability thereof for any
Investors and (ii) determining whether the Company has adequately
and accurately disclosed all material facts upon which to provide a
basis for evaluating the Company to the extent required by federal
law, state law and/or FINRA. You further agree that you are solely
responsible for performing adequate due diligence, and you agree to
perform adequate due diligence as required by federal law, state
law and/or FINRA.
1.23
You will refrain
from making any representations to any prospective Investor other
than those contained in the Offering Circular, and will not allow
any other written materials to be used to describe the potential
investment to prospective Investors other than the Offering
Circular or factual summaries and sales brochures of the Offering
prepared by the Company and distributed by the Managing
Broker-Dealer.
18
1.24
You will refrain
from distributing any material to prospective Investors that is
marked “Financial Advisor Use Only” or
“Broker-Dealer Use Only,” or any other due diligence
material related to the Offering received by you.
1.25
The Selling Group
Member hereby represents and warrants as of the date of this
Agreement to the Managing Broker-Dealer and to the Company that
neither the Selling Group Member nor any of its executive officers,
directors, general partners, managing members, or officers involved
in the offering or persons who own 20% or more of the Selling Group
Member or any person receiving a commission from the Selling Group
Member with respect to the Offering:
1.25.1
Has been convicted,
within 10 years of the Qualification Date of any felony or
misdemeanor that was:
(a)
In connection with
the purchase or sale of any security;
(b)
Involving or making
of any false filing with the SEC; or
(c)
Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of investors of securities.
1.25.2
Is subject to any
order, judgment or decree of any court of competent jurisdiction,
entered within 5 years before the Qualification Date that restrains
or enjoins such person from engaging or continuing in any conduct
or practice:
(a) In
connection with the purchase or sale of any security;
(b) Involving
the making of any false filing with the SEC; or
(d)
Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of investors of securities.
1.25.3
Is subject to a
final order of a state securities commission (or an agency or
officer of a state performing like functions), a state authority
that supervises or examines banks, savings associations or credit
unions, a state insurance commission (or an agency or officer of a
state performing like functions), an appropriate federal banking
agency, the U.S. Commodity Futures Trading Commission or the
National Credit Union Administration that:
(a)
As of the
Qualification Date, bars the person from: (i) Association with an
entity regulated by such commission, authority, agency or officer;
(ii) Engaging in the business of securities, insurance or banking;
or (iii) Engaging in savings association or credit union
activities.
(b)
Constitutes a final
order based on a violation of any law or regulation that prohibits
fraudulent, manipulative or deceptive conduct entered within ten
years before the Qualification Date.
1.25.4
Is subject to an
order of the SEC pursuant to sections 15(b) or 15B(c) of the
Exchange Act or section 203(e) or (f) of the Investment Advisers
Act of 1940 (the “Investment Advisers Act”) that, at
the time of such sale:
(a)
Suspends or revokes
such person’s registration as a broker, dealer, municipal
securities dealer or investment advisor;
(b)
Places limitations
on the activities, functions or operations of such person;
or
(c)
Bars such person
from being associated with any entity or from participating in the
offering of any ▇▇▇▇▇ stock.
19
1.25.5
Is subject to any
order of the SEC entered within 5 years before the Effective Date,
as of the date hereof, that orders the person to cease and desist
from committing or causing a violation or future violation
of:
(a)
Any scienter-based
anti-fraud provisions of the federal securities laws including,
without limitation, section 17(a)(1) of the Securities Act, section
10(b) of the Exchange Act and 17 CFR 240.10b-5, section 15(c)(1) of
the Exchange Act and section 206(1) of the Investment Advisers Act,
or any other rule or regulation thereunder; or
(b) Section
5 of the Securities Act.
1.25.6
Is suspended or
expelled from membership in, or suspended or barred from
association with, a member of a registered national securities
exchange or a registered national or affiliated securities
association for any act or omission to act constituting conduct
inconsistent with just and equitable principles of
trade;
1.25.7
Has filed (as a
registrant or issuer), or was or was named as an underwriter in,
any registration statement or Regulation A offering statement filed
with the SEC that, within 5 years of the Qualification Date, was
the subject of a refusal order, stop order or order suspending the
Regulation A exemption or, is, at the time of such sale, the
subject of an investigation or proceeding to determine whether a
stop order or suspension order should be issued.
1.25.8
Is subject to a
United States Postal Service false representation order entered
within 5 years before the Qualification Date, or is, at the
Qualification Date, subject to a temporary restraining order or
preliminary injunction with respect to conduct alleged by the
United States Postal Service to constitute a scheme or device for
obtaining money or property through the mail by means of false
representations. The representations and warranties made in this
Section 1.24 are and shall be continuing representations and
warranties throughout the term of the Offering. In the event that
any of these representations or warranties becomes untrue, the
Selling Group Member will immediately notify the Managing
Broker-Dealer in writing of the fact which makes the representation
or warranty untrue.
1.26
You acknowledge
that this Offering is being made in reliance on Regulation A
promulgated under the Securities Act and that the Company is
relying on a certification from you that a potential Investor meets
with the suitability requirements set forth in the Offering
Circular.
1.27
You will provide
the Managing Broker-Dealer with such information relating to the
offer and sale of the Bonds by you as the Managing Broker-Dealer
may from time to time reasonably request.
1.28
You agree not to
rely upon the efforts of the Managing Broker-Dealer in determining
whether the Company has adequately and accurately disclosed all
material facts upon which to provide a basis for evaluating the
Company to the extent required by federal or state law, or FINRA.
You further agree to conduct your own investigation to make that
determination independent of the efforts of the Managing
Broker-Dealer.
1.29
You agree to
promptly provide to the Managing Broker-Dealer copies of any
written or otherwise documented complaints from customers received
by you relating in any way to the Offering (including, but not
limited to, the manner in which the Bonds are offered by
you.
2.
Compensation. Subject to
certain conditions, and in consideration of your services
hereunder, the Managing Broker-Dealer will pay you sales
commissions and marketing allowances as follows:
2.1
You will receive a
selling commission in an amount up to ________ % of the purchase price of the Series A Bonds sold
by you and up to ______% of
the Series B Bonds sold by you; provided, however, that this amount
will be reduced to the extent the Managing Broker-Dealer negotiates
a lower commission rate with you, in which event the commission
rate will be the lower agreed upon rate (the above being referred
to as the “Commissions”).
2.2
You may receive a
non-accountable marketing and due diligence allowance of up to
_________% of the purchase
price of the Bonds sold by you (the
“Allowances”).
20
2.3
Payment of the
Commissions and the Allowances shall be subject to the following
conditions:
(a)
No Commissions or
Allowances will be payable with respect to any Subscription
Agreements that are rejected by the Company or the Managing
Broker-Dealer, or if the Company terminates the Offering for any
reason whatsoever.
(b)
No Commissions or
Allowances will be payable to you with respect to any sale of the
Bonds by you unless and until such time as the Company has received
the total proceeds of any such sale from the Escrow Agent and the
Managing Broker-Dealer has received the aggregate amount of sales
commission to which it is entitled.
(c)
All other expenses
incurred by you in the performance of your obligations hereunder,
including, but not limited to, expenses related to the Offering and
any attorneys’ fees, shall be at your sole cost and expense,
and the foregoing shall apply notwithstanding the fact that the
Offering is not consummated for any reason.
2.4
Once Commissions or
Allowances become payable, they will be paid within 7 days of
receipt by the Managing Broker-Dealer of such Commissions or
Allowances from the Company. You agree that, in the event the
Company has paid any Commissions or Allowances to the Managing
Broker-Dealer, you will look solely to the Managing Broker-Dealer
for payment of any Commissions or Allowances.
2.5
In the event that a
purchase is revoked or rescinded, the Selling Group Member will be
obligated to return to the Managing Broker-Dealer any Commissions
or Allowances previously paid to the Selling Group Member in
connection with such purchase.
3.
Solicitation.
3.1
In soliciting
persons to acquire the Bonds, you agree to comply with any
applicable requirements of the Securities Act, the Exchange Act,
applicable state securities laws, the published rules and
regulations thereunder and FINRA rules and, in particular, you
agree that you will not give any information or make any
representations other than those contained in the Offering Circular
and in any supplemental sales literature furnished to you by the
Managing Broker-Dealer or the Company for use in making such
solicitations.
3.2
You will conduct
all solicitation and sales efforts in conformity with Regulation A
promulgated under the Securities Act, and exemptions available
under applicable state law and conduct reasonable investigation to
ensure that all prospective Investors are not (i) listed on the
Specially Designated Nationals and Blocked Persons List maintained
by the Office of Foreign Asset Control, Department of the Treasury
(“OFAC”) pursuant to Executive Order No. 133224, 66
Fed. Reg. 49079 (September 25, 2001) and/or on any other list of
terrorists or terrorist organizations maintained pursuant to any of
the rules and regulations of OFAC or pursuant to any other
applicable enabling legislation or other Executive Orders in
respect thereof (such lists are collectively referred to as
“Lists”) or (ii) owned or controlled by, nor act for or
on behalf of, any person or entity on the Lists.
4.
Offer and Sale Activities. It
is understood that under no circumstances will you engage in any
activities hereunder in any state other than those for which
permission has been granted by the Managing Broker-Dealer to you,
as evidenced by written acknowledgement by the Managing
Broker-Dealer that such state has been cleared for offer and sale
activity. It is further understood that you shall notify the
Company of Subscription Agreements you receive within 2 business
days of receipt so that the Company may make any required federal
or state law filings.
5.
Relationship of Parties.
Nothing contained herein shall constitute the Selling Group Members
as an association, partnership, unincorporated business, or other
separate entity. The Managing Broker-Dealer shall be under no
liability to make any payment to you except out of the funds
received pursuant to the terms of the Managing broker-Dealer
Agreement as hereinabove provided, and the Managing Broker-Dealer
shall not be under any liability for, or in respect of the value or
validity of the Subscription Agreements, the Bonds or the
performance by anyone of any agreement on its part, or for, or in
respect of any matter connected with this Agreement, except for
lack of good faith by the Managing Broker-Dealer, and for
obligations expressly assumed by the Managing Broker-Dealer in this
Agreement.
6.
Indemnification and
Contribution. You hereby agree and acknowledge that you
shall be entitled to the rights, and be subject to the obligations
and liabilities, of the indemnification and contribution provisions
contained in the MBD Agreement, including without limitation, the
provisions by which the Selling Group Members shall severally agree
to indemnify and hold harmless the Company and the Managing
Broker-Dealer and their respective owners, managers, members,
trustees, partners, directors, officers, employees, agents,
attorneys and accountants.
21
7.
Privacy Act. To protect
Customer Information (as defined below) and to comply as may be
necessary with the requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, the
relevant state and federal regulations pursuant thereto and state
privacy laws, the parties wish to include the confidentiality and
non-disclosure obligations set forth herein.
7.1
Customer
Information. “Customer Information” means any
information contained on a customer’s application or other
form and all nonpublic personal information about a customer that a
party receives from the other party. Customer Information shall
include, but not be limited to, name, address, telephone number,
social security number, health information and personal financial
information (which may include consumer account
number).
7.2
Usage and
Nondisclosure. The parties understand and acknowledge that they may
be financial institutions subject to applicable federal and state
customer and consumer privacy laws and regulations, including Title
V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act (15 U.S.C. 6801, et seq.) and
regulations promulgated thereunder (collectively, the
“Privacy Laws”), and any Customer Information that one
party receives from the other party is received with limitations on
its use and disclosure. The parties agree that they are prohibited
from using the Customer Information received from the other party
other than (i) as required by law, regulation or rule or (ii) to
carry out the purposes for which one party discloses Customer
Information to the other party pursuant to this Agreement, as
permitted under the use in the ordinary course of business
exception to the Privacy Laws.
7.3
Safeguarding
Customer Information. The parties shall establish and maintain
safeguards against the unauthorized access, destruction, loss, or
alteration of Customer Information in their control which are no
less rigorous than those maintained by a party for its own
information of a similar nature. In the event of any improper
disclosure of any Customer Information, the party responsible for
the disclosure will immediately notify the other
party.
7.4
Survivability. The
provisions of Section 6 and this Section 7 shall survive the
termination of this Agreement.
8.
Survival of Representations and
Warranties. Except as the context otherwise requires, all
representations, warranties and agreements contained in this
Agreement and in the applicable provisions of the MBD Agreement
shall be deemed to be representations, warranties and agreements at
and through the Offering Termination Date, and such
representations, warranties and agreements by the Managing
Broker-Dealer or the Selling Group Members, including the indemnity
agreements contained in Sections 10, 11 and 12, the contribution
agreements contained in Section 13 and the representations and
warranties contained in Section 2.6 of the MBD Agreement shall
remain operative and in full force and effect regardless of any
investigation made by the Managing Broker-Dealer, the Selling Group
Members and/or any controlling person, and shall survive the sale
of, and payment for, the Bonds and the termination of this
Agreement.
9.
Termination. The Selling Group
Member will suspend or terminate the Offering upon request of the
Company or the Managing Broker-Dealer at any time and will resume
the Offering upon the subsequent request of the Company or the
Managing Broker-Dealer. This Agreement may be terminated by the
Managing Broker-Dealer or a Selling Group Member at any time upon 5
days written notice to the other party. If this Agreement is
terminated the Selling Group Member is still obligated to fulfill
its delivery requirements pursuant to Section 1.14.
10.
Managing Broker-Dealer
Obligations.
10.1
Notifications. The
Managing Broker-Dealer shall provide prompt written notice to the
Selling Group Members of any material changes to the Offering
Circular that in its judgment could materially and adversely affect
a Selling Group Member with respect to this Offering.
10.2
Records. The
Managing Broker-Dealer shall retain in its records and make
available to the Selling Group Members, for a period of at least 6
years following the Offering Termination Date, any communications
and information with respect to a prospective Investor that has
otherwise not been provided to a Selling Group Member.
10.3
[Reserved]
10.4
Confirmation. The Managing
Broker-Dealer hereby acknowledges that it has assumed the duty to
confirm on behalf of the Selling Group Members all orders for
purchases of Bonds accepted by the Company. Such confirmations will
comply with the rules of the SEC and FINRA and will comply with the
applicable laws of such other jurisdictions to the extent that the
Managing Broker-Dealer is advised of such laws in writing by the
Selling Group Member.
22
11.
Governing Law. This Agreement
shall be governed by, subject to and construed in accordance with
the laws of the State of Texas without regard to conflict of law
provisions.
12.
Venue. Any action relating to
or arising out of this Agreement shall be brought only in a court
of competent jurisdiction located in Dallas County,
Texas.
13.
Severability. If any portion of
this Agreement shall be held invalid or inoperative, then so far as
is reasonable and possible (i) the remainder of this Agreement
shall be considered valid and operative and (ii) effect shall be
given to the intent manifested by the portion held invalid or
inoperative.
14.
Counterparts. This Agreement
may be executed in 2 or more counterparts, each of which shall be
deemed to be an original, and together which shall constitute one
and the same instrument.
15.
Modification or Amendment. This
Agreement may not be modified or amended except by written
agreement executed by the parties hereto.
16.
Notices. All communications
hereunder, except as herein otherwise specifically provided, shall
be in writing and, (i) if sent to the Managing Broker-Dealer, shall
be mailed or delivered to Crescent Securities Group, Inc., ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇
▇▇▇▇▇, (ii) if sent to the Company, Red Oak Capital Fund III, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: CFO (iii)
if sent to you, shall be mailed or delivered to you at your address
set forth below. The notice shall be deemed to be received on the
date of its actual receipt by the party entitled
thereto.
17.
Parties. This Agreement shall
be binding upon and inure solely to the benefit of the parties
hereto, the persons referred to in Sections 10, 11, 12 and 13 of
the MBD Agreement, their respective successors, legal
representatives, heirs and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or
claim under, in respect of, or by virtue of, this Agreement or any
provision herein contained.
18.
Delay. Neither the failure nor
any delay on the part of any party to this Agreement to exercise
any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall a waiver of any right,
remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege
with respect to any subsequent occurrence.
19.
Recovery of Costs. If any legal
action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to
recover reasonable attorneys’ fees and other costs incurred
in that action or proceeding (and any additional proceeding for the
enforcement of a judgment) in addition to any other relief to which
it or they may be entitled.
20.
Entire Agreement. This
Agreement, along with the applicable provisions of the MBD
Agreement, constitute the entire understanding between the parties
hereto and supersede any prior understandings or written or oral
agreements between them respecting the subject matter
hereof.
21.
Anti-Money Laundering Compliance
Programs. Each Selling Group Member’s acceptance of
this Agreement constitutes a representation to the Managing
Broker-Dealer that the Selling Group Member has established and
implemented an anti-money laundering (“AML”) compliance
program (“AML Program”), in accordance with FINRA Rule
3310 and Section 352 of the Money Laundering Abatement Act and
Section 326 of the Patriot Act of 2001, which are reasonably
expected to detect and cause reporting of suspicious transactions
in connection with the sale of Bonds. In addition, the Selling
Group Member represents that it has established and implemented a
program (“OFAC Program”) for compliance with OFAC and
will continue to maintain its OFAC Program during the term of this
Agreement. Upon request by the Managing Broker-Dealer at any time,
the Selling Group Member hereby agrees to (i) furnish a copy of its
AML Program and OFAC Program to the Managing Broker-Dealer for
review and (ii) furnish a copy of the findings and any remedial
actions taken in connection with the Selling Group Member’s
most recent independent testing of its AML Program and/or its OFAC
Program.
23
The
parties acknowledge that for the purposes of the FINRA rules the
Investors who purchase Bonds through the Selling Group Member are
“Customers” of the Selling Group Member and not the
Managing Broker-Dealer. Nonetheless, to the extent that the
Managing Broker-Dealer deems it prudent, the Selling Group Member
shall cooperate with the Managing Broker-Dealer’s auditing
and monitoring of the Selling Group Member’s AML Program and
its OFAC Program by providing, upon request, information, records,
data and exception reports, related to the Company’s
Investors introduced to, and serviced by, the Selling Group Member
(the “Customers”). Such documentation could include,
among other things: (i) copies of Selling Group Member’s AML
Program and its OFAC Program, (ii) documents maintained pursuant to
the Selling Group Member’s AML Program and its OFAC Program
related to the Customers, (iii) any suspicious activity reports
filed related to the Customers, (iv) audits and any exception
reports related to the Selling Group Member’s AML activities
and (v) any other files maintained related to the Customers. In the
event that such documents reflect, in the opinion of the Managing
Broker-Dealer, a potential violation of the Managing
Broker-Dealer’s obligations in respect of its AML or OFAC
requirements, the Selling Group Member will permit the Managing
Broker-Dealer to further inspect relevant books and records related
to the Customers (with respect to the Offering) and/or the Selling
Group Member’s compliance with AML or OFAC requirements.
Notwithstanding the foregoing, the Selling Group Member shall not
be required to provide to the Managing Broker-Dealer any
documentation that, in the Selling Group Member’s reasonable
judgment, would cause the Selling Group Member to lose the benefit
of attorney-client privilege or other privilege which it may be
entitled to assert relating to the discoverability of documents in
any civil or criminal proceedings. The Selling Group Member hereby
represents that it is currently in compliance with all AML rules
and all OFAC requirements, specifically including, but not limited
to, the Customer Identification Program requirements under Section
326 of the USA PATRIOT Act. The Selling Group Member hereby agrees,
upon request by the Managing Broker-Dealer to (i) provide an annual
certification to the Managing Broker-Dealer that, as of the date of
such certification (A) its AML Program and its OFAC Program are
consistent with the AML Rules and OFAC requirements, (B) it has
continued to implement its AML Program and its OFAC Program and (C)
it is currently in compliance with all AML Rules and OFAC
requirements, specifically including, but not limited to, the
Customer Identification Program requirements under Section 326 of
the USA PATRIOT Act and (ii) perform and carry out, on behalf of
both the Managing Broker-Dealer and the Company, the Customer
Identification Program requirements in accordance with Section 326
of the USA PATRIOT Act and applicable SEC and Treasury Department
Rules thereunder.
22.
Due Diligence.
Pursuant to the MBD Agreement, the Company will authorize a
collection of information regarding the Offering (the “Due
Diligence Information”), which collection the Company may
amend and supplement from time to time, to be delivered by the
Managing Broker-Dealer to the Selling Group Member (or their agents
performing due diligence) in connection with its due diligence
review of the Offering. In the event the Selling Group Member (or
its agent performing due diligence) requests access to additional
information or otherwise wishes to conduct additional due diligence
regarding the Offering, the Company, the Company’s sponsor or
the sponsor’s affiliates, the Company and the Managing
Broker-Dealer will reasonably cooperate with the Selling Group
Member to accommodate such request. All Due Diligence Information
received by the Selling Group Member in connection with its due
diligence review of the Offering is confidential and shall be
maintained as confidential and not disclosed by the Selling Group
Member, except to the extent such information is disclosed in the
Offering Circular.
23.
Managing
Broker-Dealer Representations. The Managing Broker-Dealer hereby
represents and warrants as of the Qualification Date to the Selling
Group Member that neither the Managing Broker-Dealer nor any of its
executive officers, directors, general partners, managing members,
or officers involved in the offering or persons who own 20% or more
of the Managing Broker-Dealer:
23.1
Has been convicted,
within 10 years of the Qualification Date of any felony or
misdemeanor that was:
23.1.1
In connection with
the purchase or sale of any security;
23.1.2
Involving or making
of any false filing with the SEC; or
23.1.3
Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of investors of securities.
23.2
Is subject to any
order, judgment or decree of any court of competent jurisdiction,
entered within 5 years before the Qualification Date, which
restrains or enjoins such person from engaging or continuing in any
conduct or practice:
23.2.1 In
connection with the purchase or sale of any security;
23.2.2 Involving
the making of any false filing with the SEC; or
23.2.3
Arising out of the
conduct of the business of an underwriter, broker, dealer,
municipal securities dealer, investment adviser or paid solicitor
of investors of securities.
24
23.3
Is subject to a
final order of a state securities commission (or an agency or
officer of a state performing like functions), a state authority
that supervises or examines banks, savings associations or credit
unions, a state insurance commission (or an agency or officer of a
state performing like functions), an appropriate federal banking
agency, the U.S. Commodity Futures Trading Commission or the
National Credit Union Administration that:
23.3.1
As of the
Qualification Date, bars the person from:
(a)
Association with an
entity regulated by such commission, authority, agency or
officer;
(b) Engaging
in the business of securities, insurance or banking;
or
(c) Engaging
in savings association or credit union activities.
23.3.2
Constitutes a final order based on a violation of any law or
regulation that prohibits fraudulent, manipulative or deceptive
conduct entered within 10 years before the Qualification
Date.
23.4
Is subject to an
order of the SEC pursuant to sections 15(b) or 15B(c) of the
Exchange Act or section 203(e) or (f) of the Investment Advisers
Act that, as of the Qualification Date:
23.4.1
Suspends or revokes
such person’s registration as a broker, dealer, municipal
securities dealer or investment advisor;
23.4.2
Places limitations
on the activities, functions or operations of such person;
or
23.4.3
Bars such person
from being associated with any entity or from participating in the
offering of any ▇▇▇▇▇ stock.
23.5
Is subject to any
order of the SEC entered within 5 years before the Qualification
Date that, as of the date hereof, orders the person to cease and
desist from committing or causing a violation or future violation
of:
23.5.1
Any scienter-based
anti-fraud provisions of the federal securities laws including,
without limitation, section 17(a)(1) of the Securities Act, section
10(b) of the Exchange Act and 17 CFR 240.10b-5, section 15(c)(1) of
the Exchange Act and section 206(1) of the Investment Advisers Act,
or any other rule or regulation thereunder; or
23.5.2
Section 5 of the
Securities Act.
23.6
Is suspended or
expelled from membership in, or suspended or barred from
association with, a member of a registered national securities
exchange or a registered national or affiliated securities
association for any act or omission to act constituting conduct
inconsistent with just and equitable principles of
trade.
23.7
Has filed (as a
registrant or issuer), or was or was named as an underwriter in,
any registration statement or offering statement filed with the SEC
that, within 5 years of the Qualification Date, was the subject of
a refusal order, stop order or order suspending the Regulation A
exemption or, is, as of the Qualification Date, the subject of an
investigation or proceeding to determine whether a stop order or
suspension order should be issued.
23.8
Is subject to a
United States Postal Service false representation order entered
within 5 years before the Qualification Date, or is, at the
Qualification Date, subject to a temporary restraining order or
preliminary injunction with respect to conduct alleged by the
United States Postal Service to constitute a scheme or device for
obtaining money or property through the mail by means of false
representations.
The
representations and warranties made in this Section 23 are and
shall be continuing representations and warranties throughout the
term of the Offering. In the event that any of these
representations or warranties becomes untrue, the Managing
Broker-Dealer will immediately notify the Selling Group Member in
writing of the fact which makes the representation or warranty
untrue.
25
24.
Electronic Delivery
of Information; Electronic Processing of Subscriptions. Pursuant to
the MBD Agreement, the Company has agreed to confirm all orders for
the purchase of Bonds accepted by the Company. In addition, the
Company, the Managing Broker-Dealer and/or third parties engaged by
the Company or the Managing Broker-Dealer may, from time to time,
provide to the Selling Group Member copies of Company Investor
letters, annual reports and other communications provided to the
Company Investors. The Selling Group Member agrees that, to the
extent practicable and permitted by law, all confirmations,
statements, communications and other information provided to or
from the Company, the Managing Broker-Dealer, the Selling Group
Member and/or their agents or customers may be provided
electronically, as a preference but not as a
requirement.
With
respect to Bonds held through custodial accounts, the Selling Group
Member agrees and acknowledges that to the extent practicable and
permitted by law, all confirmations, statements, communications and
other information provided from the Company, the Managing
Broker-Dealer and/or their agents to Company interest holders may
be provided solely to the custodian that is the registered owner of
the Bonds, rather than to the beneficial owners of the Bonds. In
such case it shall be the responsibility of the custodian to
distribute the information to the beneficial owners of
Bonds.
The
Selling Group Member agrees and acknowledges that the Managing
Broker-Dealer may, as a preference but not as a requirement, use an
electronic platform to process purchases, including but not limited
to the Depository Trust Company (DTC) model. If an electronic
platform is used, the Selling Group Member agrees to cooperate with
the processing of purchases through such an electronic platform if
reasonably practical.
25.
Third Party
Beneficiaries. The Company and its affiliates, successors and
assigns shall be express third party beneficiaries of Section 1 of
this Agreement.
26.
Successors and Assigns. No
party shall assign this Agreement or any right, interest or benefit
under this Agreement without the prior written consent of the other
party. This Agreement shall be binding upon the Managing
Broker-Dealer and Selling Group Member and their respective
successors and permitted assigns.
Please
confirm this Agreement to solicit persons to acquire the Bonds on
the foregoing terms and conditions by signing and returning the
form enclosed herewith.
Very
truly yours,
CRESCENT
SECURITIES GROUP, INC., a
Texas
Corporation
|
By:
_____________________________
|
|
Name: Nick
Duren__________________________
|
|
Title: President______________________________
|
26
CRESCENT
SECURITIES GROUP, INC.
▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Re: Offering of
Bonds in ______________________
Ladies
and Gentlemen:
The
undersigned confirms its agreement to act as a Selling Group Member
as referred to in the foregoing Soliciting Dealer Agreement,
subject to the terms and conditions of such Agreement. The
undersigned confirms that it is a member in good standing of the
Financial Industry Regulatory Authority, Inc., and is qualified
under federal law and the laws of the states in which sales are to
be made by the undersigned to act as a Selling Group
Member.
Dated:
_____________________, 20__
(Print
Name of Firm)
By:
(Authorized
Representative)
Address:
Taxpayer
Identification Number:
Firm
CRD Number:
27
Firm is registered in the following states:
|
☐ Alaska
|
☐
Nebraska
|
|
☐
Arizona
|
☐
Nevada
|
|
☐
Arkansas
|
☐ New
Hampshire
|
|
☐
California
|
☐ New
Jersey
|
|
☐
Colorado
|
☐ New
Mexico
|
|
☐
Connecticut
|
☐ New
York
|
|
☐
Delaware
|
☐ North
Carolina
|
|
☐
Florida
|
☐ North
Dakota
|
|
☐
Georgia
|
☐
Ohio
|
|
☐
Hawaii
|
☐
Oklahoma
|
|
☐
Idaho
|
☐
Oregon
|
|
☐
Illinois
|
☐
Pennsylvania
|
|
☐
Indiana
|
☐ Rhode
Island
|
|
☐
Iowa
|
☐ South
Carolina
|
|
☐
Kansas
|
☐ South
Dakota
|
|
☐
Kentucky
|
☐
Tennessee
|
|
☐
Louisiana
|
☐
Texas
|
|
☐
Maine
|
☐
Utah
|
|
☐
Maryland
|
☐
Vermont
|
|
☐
Massachusetts
|
☐
Virginia
|
|
☐
Michigan
|
☐
Washington
|
|
☐
Minnesota
|
☐ West
Virginia
|
|
☐
Mississippi
|
☐
Wisconsin
|
|
☐
Missouri
|
☐
Wyoming
|
28
EXHIBIT A
MBD AGREEMENT