EXHIBIT A (3)
FORM OF DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT
AGREEMENT, made this___day of____________, ______ by and between Genesis
Financial Group, Inc. (the "Sponsor") on behalf of and for the benefit of Gen
Net Realty (the "Trust") a grantor trust organized by the Sponsor and
existing under the laws of the State of Michigan, and _______________
("Distributor"), a __________ corporation.
WHEREAS, the Distributor is a broker-dealer registered with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934 ("1934 Act") and is a member of the National Association of
Securities Dealers, Inc. ("NASD"); and
WHEREAS, the Trust is a unit investment trust registered with the
Securities and Exchange Commission under the Investment Company Act of 1940
("1940 Act"); and
WHEREAS, the Trust proposes to offer for public sale units of direct
beneficial interest ("Units"), and
WHEREAS, the Trust desires the Distributor to act as the soliciting and
distribution party, on an agency basis, in connection with the offer of the
Units of the Trust for sale to the public, and the Distributor desires to so
act in these capacities;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants set forth herein and for other good and valuable
consideration, receipt of which is acknowledged, the Sponsor and Distributor
mutually agree that Distributor will provide distribution services for the
Trust as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Sponsor hereby appoints Distributor
and Distributor hereby accepts the appointment as the distributor, on a
non-exclusive, agency basis, of Units issued by the Trust and registered with
the SEC in accordance with the Trust's registration statement together with
its final prospectus as filed and declared subsequently effective pursuant to
the Securities Act of 1933, as amended ("1933 Act") together with any
amendments or supplements to the Trust's registration statement which are
contained in the prospectus ("Prospectus").
2. ACCEPTANCE OF APPOINTMENT. Distributor hereby accepts the
appointment and agrees to use its best efforts to promote, offer for sale and
sell the Units of the Trust to the public pursuant to the terms and
conditions governing the offering of Units as provided by the Prospectus. In
so doing, Distributor shall conduct its affairs in accordance with the
Conduct Rules of the NASD and all other applicable laws and regulations.
3. PRICE OF UNITS. The price at which the Units of the Trust shall be
sold to the public shall be the price as set forth in the Trust's Prospectus.
4. DISTRIBUTOR NOT AGENT IN CERTAIN CIRCUMSTANCES. Distributor is
authorized, upon receipt of the prior written consent of the Sponsor, to enter
into dealer agreements for the sale of Trust Units with registered
broker-dealers who are members of NASD. Distributor may also distribute Trust
Units directly through its own registered representatives. In either event,
Distributor shall be responsible for the payment of any and all fees or
conmmissions to such broker-dealers or representatives as set forth in
paragraph 6. In making agreements with its salesmen, broker-dealers, financial
institutions, and other institutions, organizations, and associations, the
Distributor shall act only in its own behalf as principal and not as agent for
the Trust or the Sponsor. The Distributor shall be agent for the Trust only in
respect to its offer and sale of the Trust's Units.
5. DISTRIBUTOR'S COMPENSATION. As compensation for all of its services
provided and its costs assumed under this Agreement, Distributor shall receive
on sales of Units of the Trust effected by or on behalf of the Distributor
pursuant to this Agreement or any dealer sales agreement entered into by the
Distributor for the distribution of the Units, the Sales Charge according to the
schedule which is mutually agreed upon and designated from time to time in an
effective registration statement or amendment thereto for the Trust under the
1933 Act.
6. ALLOCATION OF EXPENSES.
(a) Distributor shall be responsible for all costs and expenses incurred
in its distribution of Trust Units consisting of the following: (i)
compensation and expenses of sales and marketing personnel of the
Distributor; (ii) compensation (in addition to Sales Charges, if any) paid
to registered representatives of Distributor and other broker-dealers that
have entered into written dealer sales agreements with the Distributor; and
(iii) compensation to financial institutions and other institutions,
organizations and associations which have rendered assistance in the
distribution of the Units. The Trust shall pay for or cause to be paid all
expenses, costs and fees incurred by or on behalf of the Trust which are
not specifically assumed by the Distributor pursuant to this Distribution
Agreement except that any expenses and compensation paid to persons
associated with NASD member firms who arrange for other broker-dealers to
be distributors of Units on behalf of the Trust shall be paid for by the
Sponsor without reimbursement from the Trust.
(b) Except as specifically noted in paragraph 6(a) above, the Trust shall
be directly responsible for all costs associated with filing and
registration fees, printing expenses, costs of preparing sales literature,
blue sky expenses and miscellaneous expenses associated with the offering.
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7. ISSUANCE OF UNITS. The Trust shall not issue certificates representing
Trust Units unless requested by a Unitholder. If such request is transmitted
through Distributor, the Trust will cause certificates evidencing the Units
owned to be issued in the names and denominations as Distributor shall from time
to time direct. Nothing herein shall prevent the Trust from issuing directly,
without payment of any sales charge to Distributor, Trust Units as a dividend or
distribution to its Unitholders or in a reorganization.
8. MODIFICATION OF AGREEMENT. The terms and provisions of this Agreement,
shall be modified automatically to conform with the requirements imposed by the
1933 Act, the 1940 Act and the 1934 Act and the rules and regulations
promulgated thereunder. Otherwise, this Agreement may be modified only if the
modification is approved either: (a) by action of a majority of the Sponsor's
Directors who are not interested or affiliated persons of the Distributor or of
the Trust or of the trustee for the Trust.
9. TERM AND RENEWAL. This Agreement shall take effect upon its execution.
Thereafter, this Agreement shall continue in effect, unless sooner terminated as
hereinafter provided, for one year periods so long as its continuance is
approved by the Trust's Board of Directors including the vote of a majority of
the Sponsor's Board of Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval in accordance with the procedures and
requirements of the 1940 Act. Notwithstanding the foregoing, this Distribution
Agreement may be terminated at any time by the Sponsor as provided in paragraph
11 below.
10. ASSIGNMENT TERMINATES AGREEMENT. This Agreement shall automatically
terminate in the event of its assignment, as defined in the 1940 Act.
11. TERMINATION UPON NOTICE. Either party hereto shall have the right to
terminate this Agreement without payment of a penalty upon ten (10) days'
written notice to the other party, which notice may be waived by such other
party. Termination by the Trust shall be effectuated by notice from the Sponsor.
In the event of a material breach of this Agreement by the Distributor,
notwithstanding anything herein to the contrary, the Sponsor shall have the
right to terminate this Agreement immediately upon transmitting written notice
to the Distributor which shall include an explanation of the grounds for
termination.
12. INDEPENDENT CONTRACTOR. Distributor shall be deemed to be an
independent contractor and shall be free to render to other similar or
dissimilar services as those rendered under this Agreement.
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13. INFORMATION FURNISHED BY TRUST TO UNDERWRITER. The Trust shall furnish
the Distributor from time to time for use in connection with the registration of
the Trust and its securities under the Federal securities laws and with the sale
of its Units, such information with the respect to the Trust and its Units as
the Distributor may reasonably request, all of which shall be signed by one or
more of the Trust's duly authorized officers. The Trust warrants that the
statements containing any such information when so signed by its officers shall
be true and correct in all material respects. The Trust shall also furnish the
Distributor with any audits of its books and accounts made by independent public
accountants; with a monthly itemized list of the securities in its portfolio;
with monthly balance sheets as soon as practical after the end of each month;
and from time to time with such additional information regarding its financial
condition as the Distributor may reasonably request. The Trust shall cooperate
fully in the efforts of the Distributor to perform its duties under this
Agreement, and the Trust shall execute all documents reasonably necessary to
enable registration of the Trust and its Units under the Federal and State
securities laws and to maintain such registration as current.
14. REGISTRATION AND QUALIFICATION. In connection with the organization of
the Trust and the offering of its Units the Trust shall assume all expenses of
preparation, registration and qualification of Units of the Trust under Federal
and State laws and the filing of registration statements and copies of corporate
documents, agreements and any other related documents; specifically the Trust
shall pay all legal, county, registration and filing fees incident to such
registrations and filings. During such organizational and initial offering, the
Trust will also pay for the preparation and printing of Registration Statements
and Prospectuses when such documents are distributed to persons who are not
already shareholders of the Trust.
15. INDEMNITIES.
(a) The Trust agrees to indemnify, defend and hold Distributor, its
officers and directors and any person who controls Distributor within the
meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs
of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its
officers and directors or any such controlling person may incur under the
1933 Act, or under the common law or otherwise, arising out of or based
upon any alleged untrue statements of a material fact contained in the
Trust's Registration Statement and Exhibits and Prospectuses, or arising
out of or based upon any alleged omission to state a material fact required
to be stated in such documents or necessary to make the statements in them
not misleading, provided, however, that this indemnity, to the extent that
it might require indemnity of a person who is an officer or director or
controlling person of Distributor and who is also a director or officer of
the Trust, shall not inure to the benefit of such officer or director or
controlling person unless a court of competent
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jurisdiction shall determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy as expressed
in the 1933 Act; and further provided that in no event shall anything herein
contained be so construed as to protect Distributor (or its officers and
directors or any controlling persons) against any liability to the Trust or
its stockholders to which Distributor would otherwise be subject by reason of
willful misfeasance, bad faith or negligence, in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
under this Agreement. The Trust's agreement to indemnify Distributor, its
officers and directors and any such controlling person as aforesaid is
expressly conditioned upon its being notified of any action brought against
Distributor, its officers and directors or any such controlling person, such
notification to be given by letter or telegram address to the Trust at its
principal office in______________, Michigan, and sent to it by the person
against whom such action is brought, within ten (10) days after the summons
or legal process shall have been serviced. The failure to so notify the Trust
of any such action shall not relieve it from any liability which it may have
to the person against whom such action is brought by reason of any such
alleged untrue statement or omission otherwise than on the account of the
indemnity contained in this paragraph. The Trust will be entitled at its
election, to assume the defense of any suit brought to enforce any such
claim, demand or liability, but, in such case, such defense shall be
conducted by counsel of good standing chosen by the Trust and approved by the
Distributor. In the event that the Trust does elect to assume the defense of
any such suit and retain counsel of good standing approved by the
Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor does not approve of counsel chosen the Trust will reimburse
Distributor, its officers and directors, or the controlling person named as
defendant or defendants in such suit, for the reasonable fees and expenses of
any counsel retained by Distributor or them. The indemnification contained in
this paragraph and the representations and warranties in this Agreement shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of Distributor, its officers and directors, or any
controlling person, and shall survive the delivery of any Units of the Trust
hereunder. This indemnity will inure exclusively to Distributor's benefit, to
the benefit of its successors, to the benefit of its officers and directors
and their respective estates, and to the benefit of any controlling person
and its successors. The Trust agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of its Units.
(b) The Distributor agrees to indemnify, defend and hold the Trust, its several
officers and directors, and any person who controls the Trust within the meaning
of the Section 15 of the 1933 Act, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the costs of
investigating or
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defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which Trust, its officers or directors, or any such
controlling person may incur under the 1933 Act or under the common law or
otherwise; but only to the extent that such liability or expense incurred by the
Trust, its officers or directors or such controlling person resulting from such
claims or demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained information furnished in writing by
Distributor to the Trust for use in the Trust's Registration Statements and
Exhibits or Prospectuses or shall arise out of or be based upon any alleged
omission to stating material fact in connection with such information required
to be stated in such document and necessary to make the statements in them not
misleading. Distributor's agreement to indemnify the Trust, its officers and
directors, and any such controlling person as aforesaid is expressly conditioned
upon Distributor being notified of any action brought against Trust, its
officers or directors, or any such controlling person, such notification to be
given by letter or telegram addressed to the Distributor at its principal office
in ______________________________, Michigan, and sent to it by the person
against whom such action is brought, within ten (10) days after the summons or
other first legal process shall have been served. Distributor shall have a right
to control the defense of such action, with counsel of its own choosing,
satisfactory to the Trust, if such action is based solely upon such alleged
misstatement or omission on its part, and in any other event the Distributor or
such controlling person shall each have the right to participate in the defense
or preparation of the defense of any such action. Failure to so notify
Distributor of any such action shall not relieve Distributor from any liability
which Distributor may have to the Trust, it officers or directors, or to such
controlling person by reason of such untrue statement or omission on
Distributor's part otherwise than on account of its indemnity contained in this
paragraph.
16. LIMITATION OF LIABILITY. The Sponsor's Board of Directors, the Trustee
of the Trust, and the Unitholders of the Trust shall not be liable for any
obligations of the Trust under this agreement, and Distributor agrees that, in
asserting any rights of claims under this agreement, it shall look only to the
assets and property of the Trust in settlement of such right or claim, and not
to such Directors, Trustee or Unitholders.
17. REGISTRATION AND QUALIFICATION OF DISTRIBUTOR. Distributor is
registered and qualified as a broker-dealer with the U.S. Securities and
Exchange Commission and the Securities Commission of the States where the Units
of the Trust will be offered, and is a member of the NASD. Distributor will
comply with all Federal and State Securities laws applicable to the offer and
sale of the securities into the operation and conduct of the business of a
broker-dealer.
18. INTERESTED PERSONS. Absent law or regulation to the contrary, neither
this Agreement nor any transaction entered into pursuant hereto, shall be
invalidated or
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in any way affected by the fact that the Sponsor's Board of Directors, officers
or stockholders of the Trust are or may be interested persons of Distributor as
directors, officer or stockholders or otherwise; or that directors, officers or
stockholders of Distributor may be interested persons of the Sponsor as
directors, officers, shareholders, or otherwise.
19. NOTICES. Any notice under this Agreement shall be in writing and shall
be addressed and delivered, telecopied, electronically mailed or mailed, postage
prepaid, to the other party's principal place of business, or to such other
address as shall have been previously specified by written notice given to the
other party.
For notice purposes the address of the Trust and the Sponsor is c/o Genesis
Financial Group, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
20. GOVERNING LAW. This Agreement is executed and delivered in the State
of Michigan and shall be governed by the laws of Michigan without regard to
Michigan's conflicts of laws principles and the 1933 Act, the 1934 Act, and 1940
Act.
21. DEFINITIONS. For the purpose of this Agreement, the terms "vote of the
majority of the outstanding securities", "assignment", "affiliated person" and
"interested person" shall have the respective meanings specified in the 1940
Act, as amended.
22. This writing constitutes the entire Distribution Agreement between the
parties and no conditions or warranties shall be implied herefrom unless
expressly set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day first above written.
(Name of Distributor)
Attest: By:
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Title:
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Address:
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Genesis Financial Group, Inc.
Attest: By:
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