$150,000,000
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
15,000,000 Limited Partnership Units at $10 per Unit
Best Efforts
SELLING AGREEMENT
_________, 1996
ATEL Securities Corporation
235 Pine Street, 6th Floor
San Francisco, California 94104
as Dealer-Manager for the
above described Units
Gentlemen:
ATEL Financial Corporation ("ATEL" or the "General Partner") as general
partner and on behalf of ATEL Capital Equipment Fund VII, L.P., a California
limited partnership (the "Partnership") pursuant to the Limited Partnership
Agreement (the "Partnership Agreement") set forth as Exhibit B to the Prospectus
(as hereinafter defined), hereby confirms its agreement with you as follows:
l. Description of Units. Subject to the terms hereof the Partnership
proposes to issue and to offer for sale an aggregate of 15,000,000 of its
limited partnership units (the "Units"), at a price of $10 per Unit through you
and those licensed brokers, if any, designated by you.
2. Representations, Warranties and Agreements of the Partnership and
the General Partner. The Partnership and the General Partner, jointly and
severally, represent and warrant to, and agree with, you as follows:
(a) The Partnership has prepared and filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement and
amendments thereto, on Form S-l (File No. 33-_____) covering the
registration of the Units under the Securities Act of 1933 (the
"Securities Act"), including the related preliminary prospectus. Such
preliminary prospectus bears, and any amended prospectus will bear, the
legend required by the rules and regulations of the Commission under
the Securities Act (the "Rules and Regulations"). Such Registration
Statement, as amended, at the time it becomes effective, and the final
prospectus
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included therein, are herein respectively called the "Registration
Statement" and the "Prospectus."
(b) The Registration Statement and the Prospectus, and all amendments
or supplements thereto, will contain all statements which are required
to be stated therein in accordance with the Securities Act and the
Rules and Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit any material fact required
to be stated therein or necessary to make the statements therein not
misleading. In this connection, it is understood by the Partnership and
the General Partner that Rule 2810(b)(3) of the Conduct Rules of the
National Association of Securities Dealers, Inc. requires that you
determine that all material facts relating to the subject offering are
adequately and accurately disclosed to prospective subscribers and
provide a basis for evaluating the offering, and the Partnership and
the General Partner therefore specifically represent and warrant that:
(i) all items of compensation payable to them and their
affiliates are and will be set forth in the Prospectus
under the caption "Management Compensation";
(ii) all types of equipment to be acquired by the Partnership
are and will be described in the Prospectus under the caption
"Investment Objectives and Policies Types of Equipment" or in
a supplement to be included inside the back cover of the
Prospectus;
(iii) all material tax aspects are and will be set forth
in the Prospectus under the captions "Income Tax
Consequences" and "Risk Factors";
(iv) the financial position and business experience of the
General Partner and of those affiliates of the General Partner
who are of relevance to the subject offering are and will be
accurately and adequately reflected in the Prospectus under
the captions "Management" and "Prior Performance Summary";
(v) all material conflicts of interest and risk factors are
and will be set forth in the Prospectus under the captions
"Conflicts of Interest" and "Risk Factors"; and
(vi) all pertinent facts relating to the liquidity and
marketability of the Units are and will be set forth in the
Prospectus under the captions "Risk Factors - Limited
Transferability of Units" and "Summary of the Partnership
Agreement - Transferability of Units."
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(c) The accountants who have certified or shall certify the audited
financial statements filed and to be filed with the Commission as parts
of the Registration Statement and the Prospectus are independent
accountants as required by the Act and the Rules and Regulations.
(d) The financial statements filed with and as part of the Registration
Statement present fairly the respective financial positions of the
Partnership and ATEL as of the date of such financial statements, in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the period involved.
(e) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any material adverse change in the condition,
financial or otherwise, of the General Partner or the Partnership; and
except as set forth in or contemplated by the Registration Statement
and the Prospectus, neither the General Partner nor the Partnership
have incurred any liability or obligation or entered into any
transaction since the date as of which information is given in the
Registration Statement and the Prospectus, otherwise than in the
ordinary course of business, which is material to the financial
condition of the General Partner or the Partnership.
(f) The Units conform to the description thereof contained in the
Prospectus in all material respects.
(g) Neither the issuance nor the sale of the Units, nor the
consummation of any other of the transactions herein contemplated, nor
the fulfillment of the terms hereof, will conflict with, result in a
breach of or constitute a default under the terms of any indenture, or
other material agreement or instrument to which the General Partner or
the Partnership are, or will be, a party or are, or will be, bound, or,
to the best of the knowledge of the General Partner, any order or
regulation applicable to the General Partner or the Partnership of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over the General Partner or the Partnership or any
of their respective assets or operations.
(h) The Units, when issued, will be duly authorized, validly issued,
fully paid and nonassessable.
(i) The Partnership has been duly formed pursuant to the California
Revised Limited Partnership Act and is validly existing as a limited
partnership in good standing under the laws of the State of California
with full power and authority
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to own properties (or interests therein) and conduct its business as
described in the Prospectus. The Partnership is qualified to do
business as a limited partnership or similar entity offering limited
liability in those jurisdictions where such qualification is necessary
to assure limited liability for the limited partners.
(j) The person or persons who have signed this Selling Agreement on
behalf of the Partnership and the General Partners are duly authorized
so to sign, and this Selling Agreement has been duly executed and
delivered by, and is the valid, legal and binding agreement of, the
Partnership and the General Partner, enforceable in accordance with its
terms.
3. Representations and Warranties of the Dealer Manager. You
represent and warrant to and agree with the Partnership as follows:
(a) You are a member in good standing of the National Association of
Securities Dealers, Inc., and will maintain such membership throughout
the term of this Agreement.
(b) You will comply with all federal laws pertaining to the sale of
securities, the laws of the jurisdictions in which you sell the Units,
the Rules and Regulations of the Commission and the Constitution,
By-Laws and Rules of the National Association of Securities Dealers,
Inc., specifically including and Rule 15c2-4 under the Securities
Exchange Act of 1934, as interpreted in NASD Notice to Members 84-64
(which requires that during the escrow period checks be transmitted by
you to the escrow agent as soon as practicable, but in any event by
noon of the second business day following receipt by you).
(c) You will make no sale of the Units unless such sale is preceded or
accompanied by the Prospectus.
(d) You will assist the Partnership in qualifying the Units for sale
under the laws of the State of California and such other jurisdictions
as the Dealer Manager and the General Partner shall mutually agree.
(e) You will (i) diligently make inquiries as required by law of all
prospective investors in order to ascertain whether a purchase of Units
is suitable for the investors and (ii) inform each prospective investor
of all pertinent facts relating to the liquidity and marketability of
the Units during the term of the investment. In recommending a
purchase, sale or exchange of the Units you shall:
(1) have reasonable grounds to believe, on the basis of
information obtained from the participant concerning his
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investment objectives, other instruments, financial situation and
needs, and any other information known by you, that:
(i) the participant is or will be in a financial
position appropriate to enable him to realize to a
significant extent the benefits described in the
Prospectus;
(ii) the participant has a fair market net worth
sufficient to sustain the risks inherent in the program,
including loss of investment and lack of liquidity; and
(iii) the program is otherwise suitable for the
participant; and
(2) maintain in your files for at least six years documents
disclosing the basis upon which the determination of suitability was
reached as to each participant.
(f) All Subscription Agreements shall be promptly transmitted to the
Partnership in accordance with instructions set forth in the
Subscription Agreements, and all funds received by you with respect to
any Subscription Agreement shall be promptly transmitted to the
Partnership, provided, however, that pending sale of a minimum of
120,000 Units, all subscription checks shall be made payable to, and
all Subscription Agreements and funds shall be promptly transmitted by
you to, Bank of America, San Francisco, California, or such other bank
as may be selected to act as escrow agent for the Partnership. As used
herein, the term "promptly transmitted" shall have the meaning set
forth in Rule 15c2-4 under the Securities Exchange Act of 1934.
(g) You will maintain copies of all Subscription Agreements in your
records for the longer of the periods prescribed by either (i) Rule
17a-4 of the Securities Exchange Act of 1934 or (ii) applicable state
blue sky laws.
(h) You will execute no transaction in a discretionary account without
prior written approval of the transaction by the investor.
4. Sale of Units. On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, you
agree to sell the Units on a "best efforts" basis, as agent for the Partnership.
You are authorized to enlist other members of the National Association of
Securities Dealers, Inc. ("Soliciting Dealers"), acceptable to the Partnership,
to sell the Units. As compensation for these services, the Partnership agrees
that it will pay you a selling commission in an amount equal to 9.5% of the
offering price of the Units sold pursuant to the terms of this Agreement, from
which you
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may reallow a dealer commission of up to 8% of such offering price. You will pay
wholesaling compensation to your personnel out of the selling commissions you
will receive hereunder. You will reimburse the General Partner for overhead
costs advanced by the General Partner, including salaries and other costs of
persons involved in wholesaling activities. All of such costs will be reimbursed
out of wholesaling commissions and expense reimbursements received by you from
the Partnership. The Partnership may, in the General Partner's sole discretion,
reimburse expenses and compensate you and certain Soliciting Dealers for
wholesaling activities in connection with the offering, provided that the
aggregate amount of such reimbursements and compensation, when added to all
other selling compensation paid in connection with the offering, does not exceed
a total equal to 10% of the Gross Proceeds, plus an additional one-half of 1% as
provided in the following sentence. The Partnership may, in the General
Partner's sole discretion, reimburse the Soliciting Dealers for their bona fide
and accountable expenses for due diligence purposes, in an amount not to exceed
one-half of l% of the offering price of the Units sold pursuant to this
Agreement. In addition to the selling compensation described above, the
Partnership may establish a non-cash sales incentive program as described in the
Prospectus, subject to the prior review and approval of the NASD and compliance
with all applicable NASD rules and procedures.
Notwithstanding the foregoing, however, it is understood and agreed
that the General Partner has reserved the right to accept or reject any
subscriptions for Units as set forth in the Prospectus and no selling commission
will be payable to you or any of the Soliciting Dealers with respect to the
tender of any Subscription Agreement which is rejected by you or the General
Partner as aforesaid. Furthermore, no subscription will be deemed binding until
at least five days following delivery of a Prospectus.
The Partnership further agrees that it will pay the foregoing selling
commission with respect to the purchase price of each of the Units upon the
General Partner's acceptance of the order for such Units; provided, however,
that none of such commissions will be payable or paid until release to the
Partnership from the escrow account in which they are to be deposited of
proceeds from subscriptions for a minimum of 120,000 Units.
It is understood and agreed that you may, in your discretion, rebate
to a purchaser of Units the selling commissions otherwise payable in connection
with any investment in Units by you, the General Partner, a Soliciting Dealer or
any Affiliate or employee of any of the foregoing or certain clients of
registered investment advisors, as more specifically described in the Prospectus
under "Plan of Distribution - Investments by Certain Persons." Any such rebate
to you, the General Partner, a Soliciting Dealer or any Affiliate or employee of
such person will only be made if and to the extent that any Soliciting Dealer
which would otherwise be entitled to a selling commission on any such
atel7-2/08.sa
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transaction agrees to such rebate.
5. Certain Covenants of the Partnership and the General Partner. The
Partnership and the General Partner covenant and agree with you as follows:
(a) The Partnership will not at any time file or make any amendment or
supplement to the Registration Statement or Prospectus of which you
shall not have previously been advised and furnished a copy, or to
which you shall object in writing.
(b) The Partnership will advise you immediately, and confirm the advice
in writing, (i) when the Registration Statement shall have become
effective with the Commission, (ii) when any post-effective amendment
to the Registration Statement shall have become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been
filed, (iii) of any request of the Commission for amendment or
supplementation of the Registration Statement or Prospectus or for
additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of
the Units for offering or sale in any jurisdiction, or of the
institution of any proceedings for any such purposes. The Partnership
will use its best efforts to prevent the issuance of any such stop
order or of any order preventing or suspending such use and to obtain
as soon as possible the lifting thereof, if issued.
(c) The Partnership will deliver to you without charge, and when
requested, such number of copies of the preliminary and amended
preliminary prospectus, and the Prospectus (as supplemented or amended,
if the Partnership shall have made any supplements or amendments to the
Prospectus) as you may reasonably request.
(d) The Partnership will comply to the best of its ability with the
Securities Act and the Rules and Regulations so as to permit the
continuance of sales of and dealings in the Units under the Securities
Act. If at any time when a prospectus is required to be delivered under
the Securities Act, an event shall have occurred as a result of which
it is necessary to amend or supplement the Prospectus in order to make
the statements therein not untrue or misleading or to make the
Prospectus comply with the Securities Act, the Partnership will notify
you promptly thereof and will furnish to you an amendment or supplement
which will correct such statement in accordance with the requirements
of Section l0 of the Securities Act.
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(e) The Partnership will use its best efforts to qualify the Units for
sale under the laws of the State of California and such other
jurisdictions as the General Partner and you shall mutually agree and
will comply to the best of its ability with such laws so as to permit
the continuance of sales of and dealings in the Units thereunder.
(f) The Partnership will furnish to you copies of all such documents,
reports and information as shall be of general interest and are
furnished by the Partnership to investors in the Units generally.
(g) The Partnership and the General Partner will pay and bear all costs
and expenses in connection with the preparation, printing and filing of
the Registration Statement, preliminary and amended preliminary
prospectus and Prospectus and amendments or supplements thereto,
including fees of legal counsel for the Partnership, the qualifying of
the Units under the laws of certain jurisdictions as aforesaid,
including filing fees and fees and disbursements of counsel in
connection therewith, and the cost of furnishing to you and the
Soliciting Dealers copies of the Registration Statement, preliminary
and amended preliminary prospectus and Prospectus as herein provided.
6. Conditions to Dealer Manager's Obligations. Within a period of
five days after the effective date of the Prospectus (the "Effective Date"),
there shall be furnished to you the following:
(a) The favorable opinion of Messrs. Derenthal & Dannhauser, counsel
for the Partnership and the General Partner, dated the Effective Date,
in form and substance satisfactory to your legal counsel, to the effect
that:
(i) The Registration Statement has become effective under the
Securities Act and, to the best of the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are pending or are contemplated under the
Securities Act.
(ii) The Registration Statement, the Prospectus, and each amendment
or supplement thereto (except for the financial statements, as to
which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and
the Rules and Regulations.
(iii) Such counsel have participated in the preparation of the
Registration Statement and Prospectus and no facts have come to the
attention of such counsel to lead them to believe that either the
atel7-2/08.sa
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Registration Statement or the Prospectus or any such amendment or
supplement (except for the financial statements, as to which such
counsel need express no opinion) contains any untrue statement of
a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(iv) The description in the Registration Statement and Prospectus of
the contracts and other documents therein described are accurate and
fairly represent the information required to be shown.
(v) Such counsel do not know of any statutes or regulations or legal
or governmental proceedings required to be described in the
Prospectus which are not described as required, nor of any contract
or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement which are not described and filed as
required.
(vi) This Agreement has been duly executed and delivered by the
General Partner; and (upon the assumption that the Registration
Statement complies with the Securities Act) this Agreement is a
valid and binding agreement of the General Partner in accordance
with its terms.
(b) A certificate, dated the Effective Date, signed by the General
Partner, to the effect that (i) the representations and warranties of
the Partnership and the General Partner contained in this Agreement are
correct; and (ii) the signers of said certificate have carefully
examined the Registration Statement and the Prospectus, and in their
opinion (A) neither the Registration Statement nor the Prospectus nor
any amendment or supplement thereto contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(B) there are no material legal or governmental proceedings to which
the Partnership or General Partner are a party or of which the business
or assets of the Partnership or General Partner are the subject which
are not disclosed in the Registration Statement and the Prospectus.
(c) A letter addressed to you from Ernst & Young dated not earlier than
the business day immediately preceding the Effective Date, stating
that:
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(i) With respect to the Partnership, they are "independent
public accountants" as such term is defined in the Securities
Act and the Rules and Regulations, and they were not employed
by the Partnership on a contingent basis and they (and their
partners and associates individually) do not, either at the
time of the preparation of financial statements reported upon
by them or at any time thereafter, have substantial interest
in the Partnership or any of its parents (as such term is
defined in Rule 405(n) of the Commission) or have any
connection with the Partnership as a promoter, underwriter,
voting trustee, director, officer, partner or employee.
(ii) In their opinion, the balance sheets of the Partnership
and ATEL reported upon by them and included in the
Registration Statement comply in all material respects with
all of the accounting requirements contained in the Securities
Act and the Rules and Regulations with respect to Registration
Statements on Form S-1.
(iii) On the basis of a reading of the audited balance sheets
of the Partnership and ATEL included in the Registration
Statement and upon inquiries of officers of the Partnership
responsible for financial and accounting matters and other
specified procedures, nothing has come to their attention
which caused them to believe that (a) said balance sheets: (x)
do not comply as to form in all material respects with the
applicable requirements of the Securities Act and the Rules
and Regulations with respect to Registration Statements on
Form S-1 and (y) are not fairly presented in conformity with
generally accepted accounting principles applied on a
consistent basis; or (b) as of the date of the latest
available unaudited interim balance sheets prepared by the
Partnership or ATEL, there was any material change from the
amounts shown in the balance sheets included in the
Prospectus, except in all instances for changes or decreases
which the Prospectus discloses have occurred or may occur.
(iv) On the basis of inquiries of officers of the Partnership
responsible for financial and accounting matters and such
other procedures as they have deemed adequate in connection
with said opinion, nothing has come to their attention which
caused them to believe that at a specific date within five
days of the date of such letter there was any material change
from amounts shown on the balance sheet included in the
Prospectus except in all instances for changes or decreases
which the Prospectus discloses have occurred or may occur.
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7. Indemnification.
(a) The General Partner shall indemnify and hold you and any Soliciting
Dealers harmless against any losses, claims, damages or liabilities,
joint or several:
(i) to which you or any Soliciting Dealer may become subject
under the Securities Act, the various State securities laws or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, the Prospectus or any amendment or supplement
thereto or in any sales literature furnished by us, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; or
(ii) to which you or any Soliciting Dealer may become subject
due to the misrepresentation by the Partnership or the General
Partner or its agents (other than you or any Soliciting
Dealer) of material facts in connection with the sale of the
Units, unless the misrepresentation of such material facts was
the direct result of misleading information provided to the
Partnership or the General Partner or its agents by you; or
(iii) to which you or any Soliciting Dealer may become subject
as a result of any breach by the Partnership or the General
Partner of the representations and warranties contained
herein.
The General Partner will reimburse you and any Soliciting Dealers
for any legal or other expenses reasonably incurred in connection with
investigating or defending any such loss, claim, damage or liability
(or actions in respect thereof); provided, however, that the General
Partner shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, the Prospectus, or such
amendment or supplement or in any sales literature, in reliance upon
and in conformity with written information furnished to the Partnership
or the General Partner by you specifically for use in the preparation
thereof. This indemnity agreement shall be in addition to any
liabilities which
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the Partnership or the General Partner may otherwise have in connection
with this offering.
The foregoing indemnity agreement shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each person, if
any, who controls you or any Soliciting Dealer within the meaning of
the Securities Act.
(b) You agree and each Soliciting Dealer will agree to indemnify and
hold harmless the Partnership and the General Partner against any
losses, claims, damages or liabilities, joint or several, to which the
Partnership or the General Partner may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto or in any sales literature, or arise
out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or such amendment or supplement or in any
sales literature, in reliance upon and in conformity with written
information furnished to the Partnership or the General Partners by you
specifically for use in the preparation thereof; and will reimburse the
Partnership and the General Partner for any legal or other expenses
reasonably incurred in connection with investigating or defending any
such loss, claim, damage or liability (or action in respect thereof).
This indemnity agreement shall be in addition to any liabilities which
you or any Soliciting Dealer may otherwise have in connection with this
offering.
The foregoing indemnity agreement shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each person, if
any, who controls the Partnership or the General Partner within the
meaning of the Securities Act.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under
subparagraphs (a) and (b) of this Paragraph 7, notify the indemnifying
party in writing of the commencement thereof; but the omission so to
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notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise
than under such subparagraph. In case any such action shall be
brought against such indemnified party, and it shall notify the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party,
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnifying and indemnified parties, and
after the indemnified party shall have received notice from the
agreed upon counsel that the defense has been so assumed, in the
event that the indemnified party nonetheless elects to
participate in the defense of any such action for any reason
other than the presence of a conflict of interest, the
indemnifying party shall not be responsible for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof.
8. Termination. This Agreement shall automatically be terminated, and
the Partnership shall have no liability for the payment of any commissions or
fees hereunder, in the event of the failure of you and the Soliciting Dealers to
sell at least 120,000 of the Units prior to the termination of the offering by
the General Partner.
9. Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of California.
l0. Notices. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Partnership or the General Partner, such notice shall be in writing
addressed to the Partnership or the General Partner, or both, as the case may
be, at 235 Pine Street, 6th Floor, San Francisco, California 94104 and (b)
whenever notice is required by the provisions of this Agreement to be given to
the Dealer Manager or the Soliciting Dealers, such notice shall be in writing
addressed to you at 235 Pine Street, 6th Floor, San Francisco, California 94104.
11. Benefit. This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.
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If the foregoing correctly sets forth your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between us.
Very truly yours,
ATEL CAPITAL EQUIPMENT FUND VII, L.P.,
a California limited partnership
By: ATEL Financial Corporation,
a California corporation,
General Partner
By: ____________________________
Accepted this ______ day of __________, 1996:
ATEL SECURITIES CORPORATION,
a California corporation, Dealer Manager
By: __________________________
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