EXHIBIT 1.1
FORM OF DISTRIBUTION AGREEMENT
▇▇▇▇▇ TOTAL RETURN REIT, INC.
Up to 225,000,000 Shares of Common Stock
[-], 2007
▇▇▇▇▇ Investment Securities, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇ Total Return REIT, Inc., a Maryland corporation (the "COMPANY"), has
registered for public sale 225,000,000 shares of its common stock, $.01 par
value per share, (the "SHARES"), of which 25,000,000 are intended to be offered
pursuant to the Company's distribution reinvestment plan ("DRP"), [-] are
intended to be offered pursuant to the Company's share redemption plan ("SRP"),
and [-] are intended to be offered pursuant to the Company's long term incentive
plan ("LTIP"). The Company desires for ▇▇▇▇▇ Investment Securities, Inc. (the
"DISTRIBUTOR") to act as its agent in connection with the offer and sale of the
Shares to the public and the redemption of the Shares from the public (the
"OFFERING").
Until 200,000 Shares have been sold (the "MINIMUM OFFERING"), the Shares will be
sold for a per Share cash price of $10.00. At all times after the Minimum
Offering has been achieved, the Shares will be sold and redeemed at the price
per Share determined at the end of business on the date of the applicable
purchase order or notice of redemption.
In connection with the sale of Shares, the Company hereby agrees with you, the
Distributor, as follows:
1. Representations and Warranties of the Company. As an inducement to the
Distributor to enter into this Agreement, the Company represents and
warrants to the Distributor and each dealer with whom the Distributor
has entered into or will enter into a Selling Agreement in the form
attached to this Agreement as Exhibit A (said dealers being hereinafter
referred to as the "DEALERS") or a Dealer Service Agreement in the form
attached to this Agreement as Exhibit B, and each investment adviser
with whom the Distributor has entered or will enter into an Adviser
Service Agreement in the form attached to this Agreement as Exhibit C
(said investment advisers being hereinafter referred to as the
"ADVISERS"), that:
1.1. The Company has prepared and filed with the Securities and Exchange
Commission (the "SEC") a registration statement (Registration No.
333-[-]) which has become effective for the registration of the Shares
under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and the applicable rules and regulations (the "RULES AND REGULATIONS")
of the SEC promulgated thereunder. Copies of such registration
statement as initially filed and each amendment thereto have been or
will be delivered to the Distributor. The registration statement and
the prospectus contained therein, as finally amended at the effective
date of the registration statement (the "EFFECTIVE DATE"), are
respectively hereinafter referred to as the "REGISTRATION STATEMENT"
and the "PROSPECTUS," except that if the Company files a
prospectus or prospectus supplement pursuant to Rule 424(b) under the
Securities Act, or if the Company files a post-effective amendment to
the Registration Statement, the term "Prospectus" includes the
prospectus filed pursuant to Rule 424(b) or the prospectus included in
such post-effective amendment. The term "PRELIMINARY PROSPECTUS" as
used herein shall mean a preliminary prospectus related to the Shares
as contemplated by Rule 430 or Rule 430A of the Rules and Regulations
included at any time as part of the Registration Statement.
1.2. On the date of the Prospectus, on the date the Minimum Offering (as
hereinafter defined) is obtained and when any post-effective amendment
to the Registration Statement becomes effective or any amendment or
supplement to the Prospectus is filed with the SEC, the Registration
Statement, each Preliminary Prospectus and the Prospectus, as
applicable, including the financial statements contained therein,
complied or will comply with the Securities Act and the Rules and
Regulations. On the Effective Date, the Registration Statement did not
or will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. On the date of the
Prospectus, as amended or supplemented, as applicable, and on the date
the Minimum Offering is obtained, the Prospectus did not or will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the foregoing
provisions of this Section 1.2 will not extend to such statements
contained in or omitted from the Registration Statement or the
Prospectus, as amended or supplemented, as are primarily within the
knowledge of the Distributor or any of the Dealers and are based upon
information furnished by the Distributor in writing to the Company
specifically for inclusion therein.
1.3. No order preventing or suspending the use of any Preliminary Prospectus
or the Prospectus has been issued and no proceedings for that purpose
are pending, threatened, or, to the knowledge of the Company,
contemplated by the SEC; and to the knowledge of the Company, no order
suspending the offering of the Shares in any jurisdiction has been
issued and no proceedings for that purpose have been instituted or
threatened or are contemplated.
1.4. The Company intends to use the funds received from the sale of the
Shares as set forth in the Prospectus.
1.5. The Company has full legal right, power and authority to enter into
this Agreement and to perform the transactions contemplated hereby, and
the Company has duly authorized, executed and delivered this Agreement.
1.6. The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and the compliance with the terms of
this Agreement by the Company will not conflict with or constitute a
default or violation under any charter, bylaw, contract, indenture,
mortgage, deed of trust, lease, rule, regulation, writ, injunction or
decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over the Company, except to
the extent that the enforceability of the indemnity and contribution
provisions contained in Section 6 of this Agreement may be limited
under applicable securities laws.
1.7. 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 or redemption by
the Company of the Shares, except such as may be
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required under the securities laws of certain states, if any, which we
have identified to you.
1.8. The Shares have been duly authorized and, upon payment therefor as
provided in this Agreement, will be validly issued, fully paid and
nonassessable and will conform to the description thereof contained in
the Prospectus.
2. Representations and Warranties of the Distributor. As an inducement to
the Company to enter into this Agreement, the Distributor represents
and warrants to the Company that:
2.1. The Distributor is a member of the National Association of Securities
Dealers, Inc. (the "NASD") in good standing and a broker-dealer
registered as such under the Exchange Act and under the securities laws
of the states in which the Shares are to be offered and sold. The
Distributor and its employees and representatives have all required
licenses and registrations to act under this Agreement.
2.2. The Distributor has full legal right, power and authority to enter into
this Agreement and to perform the transactions contemplated hereby, and
the Distributor has duly authorized, executed and delivered this
Agreement.
2.3. The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and the compliance with the terms of
this Agreement by the Distributor will not conflict with or constitute
a default or violation under any charter, bylaw, contract, indenture,
mortgage, deed of trust, lease, rule, regulation, writ, injunction or
decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over the Distributor, except
to the extent that the enforceability of the indemnity and contribution
provisions contained in Section 6 of this Agreement may be limited
under applicable securities laws.
2.4. No consent, approval, authorization or other order of any governmental
authority is required in connection with the execution, delivery or
performance by the Distributor of this Agreement.
2.5. The Distributor represents and warrants to the Company and each person
that signs the Registration Statement that the information under the
caption "Plan of Distribution" in the Prospectus and all other
information furnished to the Company by the Distributor in writing
expressly for use in the Registration Statement, any Preliminary
Prospectus, or the Prospectus, does not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
3. Covenants of the Company. The Company covenants and agrees with the
Distributor that:
3.1. It will, at no expense to the Distributor, furnish the Distributor with
such number of printed copies of the Registration Statement, including
all amendments and exhibits thereto, as the Distributor may reasonably
request. It will similarly furnish to the Distributor and others
designated by the Distributor as many copies as the Distributor may
reasonably request in connection with the offering of the Shares of:
(a) the Prospectus; (b) this Agreement; and (c) any other printed sales
literature or other materials (provided that the use of said sales
literature and other materials has been first approved for use by the
Company and all appropriate regulatory agencies).
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3.2. It will furnish such information and execute and file such documents as
may be necessary for the Company to qualify the Shares for offer and
sale under the securities laws of such jurisdictions as the Distributor
may reasonably designate and will file and make in each year such
statements and reports as may be required. The Company will furnish to
the Distributor a copy of such papers filed by the Company in
connection with any such qualification.
3.3. It will inform the Distributor of the applicable purchase price for the
Shares on each business day.
3.4. It will: (a) furnish copies of any proposed amendment or supplement of
the Registration Statement or the Prospectus to the Distributor; (b)
file every amendment or supplement to the Registration Statement or the
Prospectus that may be required by the SEC or any state securities
administration; (c) file an amendment to the Prospectus on each
business day reflecting the then current price per Share; and (d) if at
any time the SEC shall issue any stop order suspending the
effectiveness of the Registration Statement or any state securities
administration shall issue any order or take other action to suspend or
enjoin the sale of the Shares, it will promptly notify the Distributor
and will use its best efforts to obtain the lifting of such order or to
prevent such other action at the earliest possible time.
3.5. If at any time when a prospectus is required to be delivered under the
Securities Act any event occurs as a result of which, in the opinion of
either the Company or the Distributor, the Prospectus would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in view of the circumstances
under which they were made, not misleading, the Company will promptly
notify the Distributor thereof (unless the information shall have been
received from the Distributor) and will effect the preparation of an
amendment or supplement to the Prospectus which will correct such
statement or omission.
3.6. It will comply with all requirements imposed upon it by the Securities
Act and the Exchange Act, by the rules and regulations of the SEC
promulgated thereunder as from time to time in effect, and by all state
securities laws and regulations of those states in which an exemption
has been obtained or qualification of the Shares has been effected, to
permit the continuance of offers and sales of the Shares in accordance
with the provisions hereof and of the Prospectus.
3.7. Subject to Section 5.3 and Section 5.4.B, the Company will submit to
the transfer agent, not later than twenty-five (25) days following the
date of any notice of redemption of Shares from the Distributor, funds
sufficient to redeem such Shares at the then-current per share price as
of the date of such notice of redemption is received by the Company,
subject to any discount withheld by any Dealer pursuant to the terms of
the applicable agreement between the Distributor and such Dealer.
4. Covenants of the Distributor. The Distributor covenants and agrees with
the Company that:
4.1. In connection with the offer and sale of the Shares, the Distributor
will comply with all requirements imposed upon it by the Securities Act
and the Exchange Act, by the rules and regulations of the SEC
promulgated thereunder or other federal regulations applicable to the
Offering, the sale of Shares or its activities and by all applicable
state securities laws and regulations, as from time to time in effect,
and by this Agreement, including the obligation to deliver a copy of
the Prospectus as required by the Securities Act, the Exchange Act or
the rules and regulations promulgated under either. The Distributor
will not offer the Shares for sale in any jurisdiction unless and until
it has been advised that the Shares are either registered in accordance
with, or exempt from, the securities and other laws applicable thereto.
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4.2. The Distributor will make no representations concerning the Offering
except as set forth in the Prospectus.
4.3. The Distributor will not offer the Shares, or accept purchase orders
from any broker-dealer or investment adviser the purports to subscribe
for Shares, at a price other than the then-current per share purchase
price.
4.4. The Distributor will provide the Company with such information relating
to the offer and sale of the Shares by it as the Company may from time
to time reasonably request or as may be requested to enable the Company
to prepare such reports of sale as may be required to be filed under
applicable Federal or state securities laws.
4.5. The Distributor will pay all expenses incident to the performance of
its obligations under this Agreement, including (a) the preparation,
filing and printing of the Registration Statement as originally filed
and of each amendment thereto, (b) the preparation, printing and
delivery of this Agreement, the Selling Agreement, the Service
Agreements and such other documents as may be required in connection
with the offering, sale, issuance and delivery of the Shares, (c) the
fees and disbursements of the Company's counsel, accountants and other
advisors, in connection with the Offering (d) the fees and expenses
related to the review of the terms and fairness of the Offering by the
NASD; (e) the fees and expenses related to the qualification of the
Shares under securities laws in accordance with the provisions of
Section 3.2 hereof, including the fees and disbursements of counsel in
connection with the preparation of any Blue Sky survey and any
supplement thereto, (f) the printing and delivery of copies of any
Preliminary Prospectus and the Prospectus, (g) the fees and expenses of
any registrar, transfer agent or paying agent in connection with the
Shares and (h) certain costs and expenses of the Company relating to
investor presentations undertaken in connection with the marketing of
the offering of the Shares, including, without limitation, expenses
associated with the production of slides and graphics, fees and
expenses of any consultants engaged in connection with presentations
with the prior approval of the Company, and travel and lodging expenses
of the representatives of the Company and any such consultants.
4.6. Subject to Section 5.3 and Section 5.4.B, the Distributor shall submit
to the Escrow Agent, or after the Minimum Offering has been achieved,
to the transfer agent all orders for the sale of Shares, whether to its
customers or through the Dealers, and orders for the redemption of
Shares, whether by its customers or through the Dealers, on the day the
Distributor receives such orders for sale or notices of redemption. The
Distributor shall deliver funds for redeemed Shares to its customers or
to the Dealers providing notice of redemption not later than the next
business day following receipt of funds sufficient to redeem such
Shares from the Escrow Agent or transfer agent, as the case may be.
5. Obligations and Compensation of Distributor.
5.1. The Company hereby appoints the Distributor as its agent and principal
distributor, until this Agreement is terminated pursuant to Section 11,
for the purpose of finding, on a best efforts basis, purchasers for the
Shares for cash through the Dealers, all of whom shall be members of
the NASD. The Distributor may also arrange for the sale of Shares for
cash directly to its own clients and customers at the then-current per
Share, and in accordance with the terms of, the then current
Prospectus. The Distributor hereby accepts such agency and
distributorship and agrees to use its best efforts to find purchasers
for the Shares on said terms and conditions, commencing as soon as
practicable.
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5.2. The Distributor agrees to be bound by the terms of the Escrow Agreement
dated [-], 2007 among The Bank of New York as escrow agent, the
Distributor and the Company, a copy of which is attached hereto as
Exhibit D.
5.3. The "Offering Period" shall mean that period during which Shares may be
offered for sale, commencing on the date the registration was filed
with the SEC, during which period offers, sales and redemptions of the
Shares shall occur continuously, except that the Distributor and the
Dealers shall suspend or terminate offering of the Shares upon request
of the Company at any time and shall resume offering the Shares upon
subsequent request of the Company, and except that the Distributors and
the Dealers shall not redeem any Shares at any time when the Company
has cancelled or suspended redemptions.
5.4. A. The Distributor will be paid a distribution charge equal to 0.25% of
the aggregate NAV per shares of the Shares sold by or through the
Distributor, calculated as of the last day of each month; provided,
that the Distributor will not be entitled to receive distribution
charges after the earlier of (i) the date on which the aggregate
distribution charges received by the Distributor equal or exceed 10% of
the total aggregate NAV per share of the Shares sold by or through the
Distributor, calculated as of such date, and (ii) the thirty-year
anniversary of the Effective Date.
The parties agree that the Distributor may enter into a Selling
Agreement in the form attached to this Agreement as Exhibit A with
registered broker-dealers (such third party broker-dealers, the
"DEALERS"), and may reallow some or all of the distribution charge to
the Dealers pursuant to the terms of the Selling Agreements.
The parties hereby agree that the foregoing fees are not in excess of
the usual and customary distributors' or sellers' commission received
in the sale of securities similar to the Shares, that Dealer's interest
in the offering is limited to such fees from the Distributor and
Dealer's indemnity referred to in Section 6 of the Distribution
Agreement, and that the Company is not liable or responsible for the
direct payment of such fees to the Dealer.
The Distributor will be paid a service fee of up to __% of the
aggregate NAV per share of the Shares sold by or through the
Distributor, calculated as of the last day of each month for
administrative services to be provided by the Distributor.
The parties agree that the Distributor may enter into a Dealer Service
Agreement in the form attached to this Agreement as Exhibit B with
Dealers who have also executed a Selling Agreement, or an Adviser
Service Agreement in the form attached to this Agreement as Exhibit C
with Advisers and may pay service fees to such parties out of the
service fees paid to the Distributor pursuant to the terms of such
Dealer Service Agreements and Adviser Service Agreement.
Shareholders purchasing through investment advisers affiliated with a
dealer, through investment advisers not affiliated with a dealer, or
through banks acting as trustees or fiduciaries are referred to in this
agreement as "ADVISER AFFILIATED SHAREHOLDERS").
The Company will also reimburse the Distributor for its reimbursement
of the bona fide due diligence expenses of the Dealers in the amount of
up to 0.5% of the aggregate NAV per shares for the Shares sold by or
through the Distributor.
B. Notwithstanding the foregoing, (i) no distribution charge or
service fee will be paid to the Distributor under this Section 5.4
unless and until the Minimum Offering has been
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achieved, and (ii) no distribution charge will be paid to the
Distributor or reallowed to any Dealer at any time with respect to
Shares issued pursuant to the DRP. The Shares will initially not be
registered in Pennsylvania; however, the Company, in its sole
discretion, may apply to register the Shares in Pennsylvania. Until the
registration of the Shares has been declared effective by the
Securities Commissioner of the State of Pennsylvania, the Distributor
will accept no investments from Pennsylvania investors, and no
distribution charge or service fee will be paid to the Distributor with
respect to any Shares sold to Pennsylvania investors. If the Minimum
Offering is not obtained within the time periods specified in the
Prospectus, investments will be returned to the investors in accordance
with the Prospectus. The Company will not be liable or responsible to
any Dealer or Adviser for direct payment of distribution charges or
service fees to such Dealer or Adviser, it being the sole and exclusive
responsibility of the Distributor for payment of distribution charges
and service fees to Dealers and Advisers. Notwithstanding the above, at
its discretion, the Company may act as agent of the Distributor by
making direct payment of distribution charges or service fees to such
Dealers or Advisers without incurring any liability therefor.
5.5. The Distributor will not represent or imply that The Bank of New York,
as the escrow agent identified in the Prospectus, has investigated the
desirability or advisability of investment in the Company or has
approved, endorsed or passed upon the merits of the Shares or the
Company, nor will the Distributor use the name of said escrow agent in
any manner whatsoever in connection with the offer or sale of the
Shares other than by acknowledgment that it has agreed to serve as
escrow agent.
6. Indemnification.
6.1. The Company will indemnify and hold harmless the Dealers, Advisers and
(to the extent permitted by the Company's charter) the Distributor,
their officers and directors and each person, if any, who controls such
Dealer, Adviser or Distributor within the meaning of Section 15 of the
Securities Act (the "INDEMNIFIED PERSONS") from and against any losses,
claims, damages or liabilities ("LOSSES"), joint or several, to which
such Indemnified Persons may become subject, under the Securities Act
or otherwise, insofar as such Losses (or actions in respect thereof)
arise out of or are based upon (a) any untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration
Statement or any post-effective amendment thereto or in the Prospectus
or (ii) in any blue sky application or other document executed by the
Company or on its behalf specifically for the purpose of qualifying any
or all of the Shares for sale under the securities laws of any
jurisdiction or based upon written information furnished by the Company
under the securities laws thereof (any such application, document or
information being hereinafter called a "BLUE SKY APPLICATION"), or (b)
the omission or alleged omission to state in the Registration Statement
(including the Prospectus as a part thereof) or any post-effective
amendment thereto or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (c) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus,
if used prior to the effective date of the Registration Statement, or
in the Prospectus or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company will reimburse each
Indemnified Person for any legal or other expenses reasonably incurred
by such Indemnified Person, in connection with investigating or
defending such Loss. Notwithstanding the foregoing provisions of this
Section 6.1, the Company will not be liable in any such case to the
extent that any such Loss or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
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omission made in reliance upon and in conformity with written
information furnished (x) to the Company by the Distributor or (y) to
the Company or the Distributor by or on behalf of any Dealer
specifically for use in the preparation of the Registration Statement
or any such post-effective amendment thereto, any such Blue Sky
Application or any such Preliminary Prospectus or the Prospectus, and,
further, the Company will not be liable in any such case if it is
determined that such Dealer or the Distributor was at fault in
connection with the Loss, expense or action. Notwithstanding foregoing,
the Company shall not indemnify or hold harmless an Indemnified Person
for any Losses or expenses arising from or out of an alleged violation
of federal or state securities laws by such party unless one or more of
the following conditions are met: (a) there has been a successful
adjudication on the merits of each count involving alleged securities
law violations as to the particular Indemnified Person, (b) such claims
have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular Indemnified Person and (c)
a court of competent jurisdiction approves a settlement of the claims
against a particular Indemnified Person and finds that indemnification
of the settlement and the related costs should be made, and the court
considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the published
position of any state securities regulatory authority in which
securities of the Company were offered or sold as to indemnification
for violations of securities laws.
6.2. The Distributor will indemnify and hold harmless the Company, each
director of the Company (including any person named in the Registration
Statement, with his consent, as about to become a director), each other
person who has signed the Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act (each a "COMPANY INDEMNITEE"), from and against any
Losses to which any of the Company Indemnitees may become subject,
under the Securities Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon (a) any
untrue statement of a material fact contained (i) in the Registration
Statement (including the Prospectus as a part thereof) or any
post-effective amendment thereto or (ii) any Blue Sky Application, or
(b) the omission to state in the Registration Statement (including the
Prospectus as a part thereof) or any post-effective amendment thereto
or in any Blue Sky Application a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
(c) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, if used prior to the effective
date of the Registration Statement, or in the Prospectus or the
omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein in the light of
the circumstances under which they were made not misleading, in the
case of each of clauses (a) - (c) to the extent, but only to the
extent, that such untrue statement or omission was made in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Distributor specifically for use with
reference to the Distributor in the preparation of the Registration
Statement or any such post-effective amendments thereto or any such
Blue Sky Application or any such Preliminary Prospectus or the
Prospectus, or (d) any unauthorized use of sales materials or use of
unauthorized verbal representations concerning the Shares by the
Distributor. The Distributor will reimburse the aforesaid parties for
any legal or other expenses reasonably incurred by them in connection
with investigating or defending such Loss, expense or action. This
indemnity agreement will be in addition to any liability that the
Distributor may otherwise have.
6.3. Each Dealer and Adviser severally will indemnify and hold harmless the
Company, the Distributor, each of their directors (including any person
named in the Registration Statement, with his consent, as about to
become a director), each other person who has signed
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the Registration Statement and each person, if any, who controls the
Company and the Distributor within the meaning of Section 15 of the
Securities Act (each, as the case may be, a "DEALER INDEMNIFIED PERSON"
or "ADVISER INDEMNIFIED PERSON" from and against any Losses to which a
Dealer Indemnified Person or Adviser Indemnified Person may become
subject, under the Securities Act or otherwise, insofar as such Losses
(or actions in respect thereof) arise out of or are based upon (a) any
untrue statement or alleged untrue statement of a material fact
contained (i) in the Registration Statement (including the Prospectus
as a part thereof) or any post-effective amendment thereto or (ii) in
any Blue Sky Application, or (b) the omission or alleged omission to
state in the Registration Statement (including the Prospectus as a part
thereof) or any post-effective amendment thereto or in any Blue Sky
Application a material fact required to be stated therein or necessary
to make the statements therein not misleading, or (c) any untrue
statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, if used prior to the effective date of the
Registration Statement, or in the Prospectus or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, in the
case of each of clauses (a) - (c) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company or the
Distributor by or on behalf of such Dealer or Adviser specifically for
use with reference to such Dealer or Adviser in the preparation of the
Registration Statement or any such post-effective amendments thereto or
any such Blue Sky Application or any such Preliminary Prospectus, or
(d) any unauthorized use of sales materials or use of unauthorized
verbal representations concerning the Shares by such Dealer or Adviser
or their respective representatives or agents in violation of Section
VII of the Selling Agreement or otherwise. Each such Dealer or Adviser
will reimburse each Dealer Indemnified Person or Adviser Indemnified
Person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Loss, expense or
action. This indemnity agreement will be in addition to any liability
that such Dealer or Adviser may otherwise have.
6.4. Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying
party under this Section 6, notify in writing the indemnifying party of
the commencement thereof. The failure of an indemnified party so to
notify the indemnifying party will relieve the indemnifying party from
any liability under this Section 6 as to the particular item for which
indemnification is then being sought, but not from any other liability
that it may have to any indemnified party. In case any such action is
brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be
entitled, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to participate in the defense
thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified
party for reasonable legal and other expenses (subject to Section 6.5)
incurred by such indemnified party in defending itself, except for such
expenses incurred after the indemnifying party has deposited funds
sufficient to effect the settlement, with prejudice, of the claim in
respect of which indemnity is sought. Any such indemnifying party shall
not be liable to any such indemnified party on account of any
settlement of any claim or action effected without the consent of such
indemnifying party. Any indemnified party shall not be bound to perform
or refrain from performing any act pursuant to the terms of any
settlement of any claim or action effected without the consent of such
indemnified party.
- 9 -
6.5. The indemnifying party shall pay all legal fees and expenses of the
indemnified party in the defense of such claims or actions; provided,
however, that the indemnifying party shall not be obliged to pay legal
expenses and fees to more than one law firm in connection with the
defense of similar claims arising out of the same alleged acts or
omissions giving rise to such claims notwithstanding that such actions
or claims are alleged or brought by one or more parties against more
than one indemnified party. If such claims or actions are alleged or
brought against more than one indemnified party, then the indemnifying
party shall only be obliged to reimburse the expenses and fees of the
one law firm that has been selected by a majority of the indemnified
parties against which such action is finally brought; and in the event
a majority of such indemnified parties is unable to agree on which law
firm for which expenses or fees will be reimbursable by the
indemnifying party, then payment shall be made to the first law firm of
record representing an indemnified party against the action or claim.
Such law firm shall be paid only to the extent of services performed by
such law firm and no reimbursement shall be payable to such law firm on
account of legal services performed by another law firm.
6.6. If the indemnity agreements contained in this Section 6 are for any
reason unavailable to or insufficient to hold harmless an indemnified
party in respect of any Losses or expenses referred to therein, then
each indemnifying party shall contribute to the aggregate amount of
such Losses and expenses incurred by such indemnified party, as
incurred, (a) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Distributor, Dealer or Adviser on the other hand from the offering of
the Shares in question or (b) if the allocation provided by clause (a)
is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (a) but also the relative fault of the Company on the one hand
and of the Distributor, Dealer or Adviser on the other hand in
connection with the statements or omissions which resulted in such
Losses or expenses, as well as any other relevant equitable
considerations.
The relative benefits received by the Company on the one hand and the
Distributor, Dealer or Adviser on the other hand in connection with the
Offering shall be deemed to be in the same respective proportions as
the aggregate NAV as of the date of determination and the total
distribution charge or service fee actually received by the
Distributor, Dealer or Adviser bear to the aggregate NAV as of the date
of determination. The relative fault of the Company on the one hand and
the Distributor, Dealer or Adviser on the other hand shall be
determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by
the Company or by the Distributor, Dealer or Adviser and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. It is understood that it
would not be just and equitable if contribution pursuant to this
Section 6.6 were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 6.6. The aggregate
amount of Losses and expenses incurred by an indemnified party and
referred to above in this Section 6.6 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 6.6, the Distributor,
Dealer or Adviser shall not be required to contribute any amount in
excess of the amount by which the total price at
- 10 -
which the Shares sold by it exceeds the amount of any damages that such
Distributor, Dealer or Adviser has otherwise been required to pay by
reason of any such untrue or alleged untrue statement or omission or
alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 6.6, each director of the Company, each
other person who signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as the
Company, and each person, if any, who controls the Distributor or any
Dealer or Adviser within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such Distributor,
Dealer or Adviser.
7. Survival of Provisions.
7.1. The respective agreements, representations and warranties of the
Company and the Distributor set forth in this Agreement shall remain
operative and in full force and effect regardless of (a) any
investigation made by or on behalf of the Distributor or any Dealer or
Adviser or any person controlling the Distributor or any Dealer or
Adviser or by or on behalf of the Company or any person controlling the
Company, and (b) the acceptance of any payment for the Shares.
7.2. The obligations of the Company to pay the Distributor pursuant to
Section 5.4, Section 5.5, Sections 6 through 10 and Section 12 shall
survive the termination of this Agreement.
8. Applicable Law. This Agreement was executed and delivered in, and its
validity, interpretation and construction shall be governed by, the
laws of the State of Georgia; provided however, that causes of action
for violations of federal or state securities laws shall not be
governed by this Section.
9. Counterparts. This Agreement may be executed, by facsimile or
otherwise, in any number of counterparts. Each counterpart, when
executed and delivered, shall be an original contract, but all
counterparts, when taken together, shall constitute one and the same
Agreement.
10. Successors and Amendment.
10.1. This Agreement shall inure to the benefit of and be binding upon the
Distributor and the Company and their respective successors. Nothing in
this Agreement is intended or shall be construed to give to any other
person any right, remedy or claim, except as otherwise specifically
provided herein. This Agreement shall inure to the benefit of the
Dealers and Advisers to the extent set forth in Sections 1 and 4
hereof.
10.2. This Agreement may be amended by the written agreement of the
Distributor and the Company.
11. Termination. Any party to this Agreement shall have the right to
terminate this Agreement on 60 days' written notice.
12. Confirmation. The Company hereby agrees and assumes the duty to confirm
on its behalf and
- 11 -
on behalf of Dealers, Advisers and the Distributor all orders for
purchase of Shares accepted by the Company. Such confirmations will
comply with the rules of the SEC and the NASD and will comply with
applicable laws of such other jurisdictions to the extent the Company
is advised of such laws in writing by the Distributor.
13. Suitability of Investors. The Distributor will offer Shares, and (i) in
its agreements with Dealers will require that the Dealers offer Shares
and (ii) in its agreements with Advisers will require that the Advisers
recommend Shares, only to persons who meet the suitability standards
set forth in the Prospectus or in any suitability letter or memorandum
sent to it by the Company and will only make offers to persons in the
states in which it is advised in writing that the Shares are qualified
for sale or that such qualification is not required. In offering
Shares, the Distributor will, and in its agreements with Dealers and
Advisers, the Distributor will require that the Dealer and Adviser,
comply with the provisions of all applicable rules and regulations
relating to suitability of investors, including without limitation, the
provisions of Article III.C. of the Statement of Policy Regarding Real
Estate Investment Trusts of the North American Securities
Administrators Association, Inc. (the "NASAA GUIDELINES"). In making
the determinations as to suitability required by the NASAA Guidelines
and the Prospectus, the Distributor may rely on representations from
(i) investment advisers who are not affiliated with a Dealer, or (ii)
banks acting as trustees or fiduciaries. With respect to the
maintenance of records required by the NASAA Guidelines, the Company
agrees that the Distributor may satisfy its obligations by
contractually requiring such information to be maintained and made
available to the Distributor by the investment advisers or banks
discussed in the preceding sentence.
14. Submission of Orders.
14.1. Those persons who purchase Shares will be instructed by the
Distributor, the Dealer or the Adviser to make their checks payable to
"▇▇▇▇▇ Total Return REIT, Inc." The Distributor and any Dealer or
Adviser receiving a check not conforming to the foregoing instructions
shall return such check directly to such purchaser not later than the
end of the next business day following its receipt. Checks received by
the Distributor or Dealer or Adviser which conform to the foregoing
instructions shall be transmitted for deposit pursuant to one of the
methods described in this Section 14.
14.2. Where, pursuant to a Dealer's internal supervisory procedures, internal
supervisory review is conducted at the same location at which purchase
orders and checks are received from investors, checks will be
transmitted by the end of the next business day following receipt by
the Dealer for deposit either to the escrow agent for the Company or,
after the Minimum Offering has been achieved, to the Company.
14.3. Where, pursuant to a Dealer's internal supervisory procedures, final
internal supervisory review is conducted at a different location,
checks will be transmitted by the end of the next business day
following receipt by the Dealer to the office of the Dealer conducting
such final internal supervisory review (the "FINAL REVIEW OFFICES").
The Final Review Office will in turn by the end of the next business
day following receipt by the Final Review Office, transmit such checks
for deposit either to the escrow agent for the Company or, after the
Minimum Offering has been achieved, to the Company.
14.4. Where the Distributor is involved in the distribution process, checks
will be transmitted by the Distributor for deposit either to the escrow
agent for the Company or, after the Minimum Offering has been achieved,
to the Company as soon as practicable but in any event by noon
- 12 -
of the next business day following receipt by the Distributor. Checks
of rejected potential investors will be promptly returned to such
potential investors.
14.5 When the Distributor receives an order from any customer in which such
customer requests that any Shares be redeemed, whether by its customers
or through the Dealers or Advisers, the Distributor shall, by the end
of the day on which it receives such notice, submit to an escrow agent
for the Company or, after the Minimum Offering has been achieved, to
the transfer agent, a Redemption Notice setting forth the number of
Shares as to which redemption is requested.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter and your acceptance shall constitute a binding agreement
between us as of the date first above written.
- 13 -
Very truly yours,
▇▇▇▇▇ TOTAL RETURN REIT, INC.
By:
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
Accepted and agreed as of the
date first above written.
▇▇▇▇▇ INVESTMENT SECURITIES, INC.
By:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
- 14 -
EXHIBIT A
▇▇▇▇▇ TOTAL RETURN REIT, INC.
Up to 225,000,000 Shares of Common Stock
FORM OF SELLING AGREEMENT
Ladies and Gentlemen:
▇▇▇▇▇ Investment Securities, Inc., as the distributor ("DISTRIBUTOR")
for ▇▇▇▇▇ Total Return REIT, Inc. (the "COMPANY"), a Maryland corporation,
invites you (the "DEALER") to participate in the distribution of shares of
common stock ("SHARES") of the Company subject to the following terms.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Distribution Agreement.
I. Distribution Agreement.
The Distributor and the Company have entered into that certain
Distribution Agreement dated [-], 2007, in the form attached hereto as Exhibit
A. By your acceptance of this Agreement, you will become one of the Dealers
referred to in such Distribution Agreement between the Company and the
Distributor and will be entitled and subject to the indemnification provisions
contained in such Distribution Agreement, including specifically the provisions
of such Distribution Agreement (Section 6.3) wherein each Dealer severally
agrees to indemnify and hold harmless the Company, the Distributor and each
officer and director thereof, and each person, if any, who controls the Company
and the Distributor within the meaning of the Securities Act of 1933, as
amended.
Dealer hereby agrees:
A. to use its best efforts to sell the Shares for cash on the
terms and conditions stated in the Prospectus, and to redeem Shares sold by it
for cash on the terms and conditions stated in the Prospectus;
B. that it will not offer to sell the Shares to Pennsylvania
investors until such time as the registration of the Shares has been declared
effective by the Securities Commissioner of the State of Pennsylvania;
C. to purchase Shares only from Company through Distributor or
from Dealer's customers;
D. to purchase Shares from Distributor only for the purpose of
covering purchase orders already received;
E. that it will not purchase an Shares from its customers at any
time when the Company has cancelled or suspended redemptions, or at a price
lower than the then-current redemption price;
F. that it will not offer, sell or redeem Shares for the account
of its record owners at a price higher or lower than the then-current per share
purchase price or redemption price;
G. that it will not intentionally withhold placing any customer's
order to purchase or redeem Shares so as to profit Dealer as a result of such
withholding; and
H. that it will not act for the Distributor or the Company or
make any representations on their behalf except as set forth in the Prospectus
and such other printed information furnished to Dealer by the Distributor or the
Company to supplement the Prospectus ("SUPPLEMENTAL INFORMATION").
Nothing in this Agreement shall be deemed or construed to make Dealer an
employee, agent, representative or partner of the Distributor or of the Company.
II. Submission of Orders for Purchases and Notices of Redemptions.
Those persons who purchase Shares will be instructed by the Dealer to
make their checks payable to "▇▇▇▇▇ Total Return REIT, Inc." Any Dealer
receiving a check not conforming to the foregoing instructions shall return such
check directly to such purchaser not later than the end of the next business day
following its receipt. Checks received by the Dealer which conform to the
foregoing instructions shall be transmitted for deposit pursuant to one of the
following methods:
Where, pursuant to the Dealer's internal supervisory procedures,
internal supervisory review is conducted at the same location at which purchase
orders and checks are received from investors, checks will be transmitted by the
end of the next business day following receipt by the Dealer for deposit either
to an escrow agent for the Company or, after the Minimum Offering (as defined in
the Distribution Agreement) has been achieved, to the Company.
Where, pursuant to the Dealer's internal supervisory procedures, final
and internal supervisory review is conducted at a different location, checks
will be transmitted by the end of the next business day following receipt by the
Dealer to the office of the Dealer conducting such final internal supervisory
review (the "FINAL REVIEW OFFICE"). The Final Review Office will in turn by the
end of the next business day following receipt by the Final Review Office,
transmit such checks for deposit to either the escrow agent for the Company or,
after the Minimum Offering has been achieved, to the Company, except for
investments from Pennsylvania Investors. The Final Review Office will transmit
checks from Pennsylvania Investors for deposit to either the escrow agent for
the Company or, after the Pennsylvania Minimum has been achieved, to the
Company.
When Dealer receives a request from any customer that any Shares be
redeemed, Dealer shall, by the end of the day on which Dealer receives such
request, submit to an escrow agent for the Company or, after the Minimum
Offering has been achieved, to the Company, a notice of redemption setting forth
the number of Shares as to which redemption is requested.
III. Pricing.
Except as described in the Prospectus, until the Minimum Offering has
been achieved, the Shares will be offered, sold and redeemed for a per Share
cash price of $10.00. At all times after the Minimum Offering has been achieved,
the Shares are to be offered, sold and redeemed at the price per Share
determined at the end of business on the date the applicable purchase order
or notice of redemption is received by the Company.
In the event of a redemption, Dealer shall (i) redeem the Shares being
redeemed at the then-current redemption price, or (ii) if the date of the
redemption request for any redeemed Shares is within 270 days of the date of
purchase for such Shares, shall redeem the Shares being redeemed at the
then-current redemption price, less a discount equal to 2% of the price at which
such Shares were purchased. Dealer shall not redeem any Shares at any time when
the Company has cancelled or suspended redemptions.
- 2 -
IV. Distribution Charges.
The Dealer will be paid a distribution charge of [__]% of the aggregate
NAV per share of the Shares sold by the Dealer, calculated as of the last day of
each month. Notwithstanding the foregoing, (i) no distribution charge will be
paid to the Dealer unless and until the Company has sold $2,000,000 of the
Shares, (ii) no distribution charge will be paid to the Dealer at any time with
respect to Shares issued pursuant to the Company's distribution reinvestment
plan, and (iii) no distribution charge will be paid with respect to Shares
offered or sold in Pennsylvania until the registration of the Shares has been
declared effective by the Securities Commissioner of the State of Pennsylvania.
Dealer acknowledges that Distributor has entered into (i) a
Distribution Agreement pursuant to which Distributor has agreed that it shall
not be entitled to receive distribution charges that exceed, in the aggregate,
10% of the total aggregate NAV per share of the Shares sold by or through the
Distributor, and (ii) Selling Agreements substantially similar to this Agreement
with other NASD member broker-dealers. Dealer agrees that Dealer shall not be
entitled to receive any distribution charge after the earlier of (A) the date on
which the aggregate distribution charges paid by the Company to the Distributor
equal to or exceed 10% of the total aggregate NAV per share of the Shares sold
by or through the Distributor (including Shares sold pursuant to this Agreement
and any other Selling Agreement with any other NASD member broker-dealer),
calculated as of such date, and (B) the thirty-year anniversary of the Effective
Date.
The parties hereby agree that (i) the foregoing distribution charge is
not in excess of the usual and customary distributors' or sellers' commission
received in the sale of securities similar to the Shares, (ii) that Dealer's
interest in the offering pursuant to this Selling Agreement is limited to such
distribution charge from the Distributor and Dealer's indemnity referred to in
Section 6 of the Distribution Agreement, and (iii) that the Company is not
liable or responsible for the direct payment of such distribution charge to the
Dealer.
The parties hereby agree that the rates of any distribution charge paid
with respect to any Shares, including outstanding Shares, are subject to change
by Distributor from time to time, upon 10 days' written notice, and any
calculation of fees after the effective date of such change will take into
account the new rate with respect only to any period subsequent to the effective
date of such change.
V. Payment.
Payments of distribution charges will be made by the Distributor (or by
the Company as provided in the Distribution Agreement) to Dealer [monthly]
[quarterly] in arrears no later than the fifteenth (15th) day of the [next
succeeding month] [first month of each quarter]. Dealer acknowledges that if the
Company pays any distribution charge directly to the Distributor, Company is
relieved of any obligation for such distribution charge to the Dealer. The
Company may rely on and use the preceding acknowledgment as a defense against
any claim by Dealer for distribution charges that the Company pays to
Distributor but that Distributor fails to remit to Dealer.
V. Right to Reject Orders or Cancel Sales.
All orders, whether initial or additional, are subject to acceptance by
and shall only become effective upon confirmation by the Company, which reserves
the right to reject any order. Orders not accompanied by the required check in
payment for the Shares may be rejected. Issuance and delivery of the Shares will
be made only after actual receipt of payment therefor. If any check is not paid
upon presentment, or if the Company is not in actual receipt of clearinghouse
funds or cash, certified or cashier's check or the equivalent in payment for the
Shares within 15 days of sale, the Company reserves
- 3 -
the right to cancel the sale without notice. In the event an order is rejected,
canceled or rescinded for any reason, the Dealer agrees to return to the
Distributor any distribution charge theretofore paid with respect to Shares sold
pursuant to such order.
VI. Prospectus and Supplemental Information.
Dealer is not authorized or permitted to give, and will not give, any
information or make any representation concerning the Shares except as set forth
in the Prospectus and supplemental information. The Distributor will supply
Dealer with reasonable quantities of the Prospectus, as well as any supplemental
information, for delivery to investors, and Dealer will deliver a copy of the
Prospectus as required by the Securities Act, the Exchange Act, and the rules
and regulations promulgated under both. The Dealer agrees that it will not send
or give any supplemental information to an investor unless it has previously
sent or given a Prospectus to that investor or has simultaneously sent or given
a Prospectus with such supplemental information. Dealer agrees that it will not
show or give to any investor or prospective investor or reproduce any material
or writing that is supplied to it by the Distributor and marked "dealer only" or
otherwise bearing a legend denoting that it is not to be used in connection with
the sale of Shares to members of the public. Dealer agrees that it will not use
in connection with the offer or sale of Shares any material or writing that
relates to another company supplied to it by the Company or the Distributor
bearing a legend that states that such material may not be used in connection
with the offer or sale of any securities of the Company. Dealer further agrees
that it will not use in connection with the offer or sale of Shares any
materials or writings that have not been previously approved by the Distributor.
Each Dealer agrees, if the Distributor so requests, to furnish a copy of any
revised Preliminary Prospectus to each person to whom it has furnished a copy of
any previous Preliminary Prospectus, and further agrees that it will itself mail
or otherwise deliver all preliminary and final Prospectuses required for
compliance with the provisions of Rule 15c2-8 under the Securities Exchange Act
of 1934. Regardless of the termination of this Agreement, Dealer will deliver a
Prospectus in transactions in the Shares for a period of 90 days from the
effective date of the Registration Statement or such longer period as may be
required by the Exchange Act or the rules and regulations thereunder. On
becoming a Dealer, and in offering and selling Shares, Dealer agrees to comply
with all the applicable requirements under the Securities Act and the Exchange
Act.
VIII. License and Association Membership.
Dealer's acceptance of this Agreement constitutes a representation to
the Company and the Distributor that Dealer is a properly registered or licensed
broker-dealer, duly authorized to sell Shares under Federal and state securities
laws and regulations and in all states where it offers or sells Shares, and that
it is a member in good standing of the NASD. This Agreement shall automatically
terminate if the Dealer ceases to be a member in good standing of such
association. Dealer agrees to notify the Distributor immediately if Dealer
ceases to be a member in good standing. The Distributor hereby agrees to abide
by the Rules of Fair Practice of the NASD and to comply with Rules 2730, 2740,
2420 and 2750 of the NASD Conduct Rules.
IX. Anti-Money Laundering Compliance Programs.
Dealer's acceptance of this Agreement constitutes a representation to
the Company and the Distributor that Dealer has established and implemented
anti-money laundering compliance programs in accordance with proposed NASD Rule
3011 and Section 352 of the Money Laundering Abatement Act reasonably expected
to detect and cause the reporting of suspicious transactions in connection with
the sale of Shares of the Company.
- 4 -
X. Limitation of Offer.
Dealer will offer Shares only to persons who meet the suitability
standards set forth in the Prospectus or in any suitability letter or memorandum
sent to it by the Company or the Distributor and will only make offers to
persons in the states in which it is advised in writing that the Shares are
qualified for sale or that such qualification is not required. Until the
registration of the Shares has been declared effective by the Securities
Commissioner of the State of Pennsylvania, the Dealer will accept no investments
from Pennsylvania investors, and no distribution charge will be paid to the
Dealer with respect to any Shares sold to Pennsylvania investors. In offering
Shares, Dealer will comply with the provisions of the Rules of Fair Practice set
forth in the NASD Manual, as well as all other applicable rules and regulations
relating to suitability of investors, including without limitation, the
provisions of Article III.C. of the Statement of Policy Regarding Real Estate
Investment Trusts of the North American Securities Administrators Association,
Inc. (the "NASAA GUIDELINES"). Dealer will make available the records that it
maintains pursuant to the NASAA Guidelines to the Distributor upon reasonable
notice from the Distributor.
XI. Termination and Amendment.
Dealer will suspend or terminate its offer, sale and redemption of
Shares upon the request of the Company or the Distributor at any time and will
resume its offer, sale and redemption of Shares hereunder upon subsequent
request of the Company or the Distributor. Any party may terminate this
Agreement by written notice. Such termination shall be effective 48 hours after
the mailing of such notice. This Agreement and the exhibits hereto are the
entire agreement of the parties and supersede all prior agreements, if any,
relating to the subject matter hereof between the parties hereto.
This Agreement may be amended at any time by the Distributor by written
notice to the Dealer, and any such amendment shall be deemed accepted by Dealer
upon placing an order for sale of Shares after he has received such notice.
XII. Privacy Laws.
The Distributor and Dealer (each referred to individually in this
section as "party") agree as follows:
A. Each party agrees to abide by and comply with (i) the privacy
standards and requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999 ("GLB ACT"),
(ii) the privacy standards and requirements of any other applicable Federal or
state law, and (iii) its own internal privacy policies and procedures, each as
may be amended from time to time.
B. Each party agrees to refrain from the use or disclosure of
nonpublic personal information (as defined under the GLB Act) of all customers
who have opted out of such disclosures except as necessary to service the
customers or as otherwise necessary or required by applicable law; and
C. Each party shall be responsible for determining which
customers have opted out of the disclosure of nonpublic personal information by
periodically reviewing and, if necessary, retrieving a list of such customers
(the "LIST") as provided by each to identify customers that have exercised their
opt-out rights. In the event either party uses or discloses nonpublic personal
information of any customer for purposes other than servicing the customer, or
as otherwise required by applicable law, that party will consult the List to
determine whether the affected customer has exercised his or her opt-out rights.
Each party understands that each is prohibited from using or disclosing any
nonpublic personal information of any customer that is identified on the List as
having opted out of such disclosures.
- 5 -
XIII. Notice.
All notices will be in writing and will be duly given to the
Distributor when mailed to ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, and to Dealer when mailed to the address specified by Dealer
herein.
XIV. Attorney's Fees and Applicable Law.
In any action to enforce the provisions of this Agreement or to secure
damages for its breach, the prevailing party shall recover its costs and
reasonable attorney's fees. This Agreement shall be construed under the laws of
the State of Georgia and shall take effect when signed by Dealer and
countersigned by the Distributor.
THE DISTRIBUTOR:
Attest:
▇▇▇▇▇ INVESTMENT SECURITIES, INC.
By:
-----------------------------------
Name By:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
--------------------------------
We have read the foregoing Agreement and we hereby accept and agree to
the terms and conditions therein set forth. We hereby represent that the list
below of jurisdictions in which we are registered or licensed as a broker or
dealer and are fully authorized to sell securities is true and correct, and we
agree to advise you of any change in such list during the term of this
Agreement.
1. Identity of Dealer
Name:
-------------------------------------------------------------------------
Type of entity:
---------------------------------------------------------------
(to be completed by Dealer) (corporation, partnership or
proprietorship)
Organized in the State of
-----------------------------------------------------
(to be completed by Dealer) (State)
Licensed as broker dealer in the following states:
----------------------------
(to be completed by Dealer)
Tax I.D. #
--------------------------------------------------------------------
2. Person to receive notice pursuant to Section XIII.
Name:
----------------------------------------------------------------
Company:
-------------------------------------------------------------
- 6 -
Address:
-------------------------------------------------------------
City, State and Zip Code:
--------------------------------------------
Telephone No. (_____)
------------------------------------------------
Telefax No. (_____)
--------------------------------------------------
e-mail address:
------------------------------------------------------
AGREED TO AND ACCEPTED BY THE DEALER
-----------------------------------------------------
(Dealer's Firm Name)
By:
-------------------------------------------------
Signature
Title:
----------------------------------------------
- 7 -
EXHIBIT B
▇▇▇▇▇ TOTAL RETURN REIT, INC.
Up to 225,000,000 Shares of Common Stock
FORM OF DEALER SERVICE AGREEMENT
Ladies and Gentlemen:
▇▇▇▇▇ Investment Securities, Inc., as the distributor ("DISTRIBUTOR")
for ▇▇▇▇▇ Total Return REIT, Inc. (the "COMPANY"), a Maryland corporation,
invites you (the "DEALER") to perform certain services with respect to shares of
common stock ("SHARES") of the Company subject to the following terms.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Distribution Agreement.
I. Distribution Agreement.
The Distributor and the Company have entered into that certain
Distribution Agreement dated [-], 2007, in the form attached hereto as Exhibit
A, and you and the Distributor have entered into that certain Selling Agreement
dated [-], 2007. By your acceptance of the Selling Agreement and this Agreement,
you will become one of the Dealers referred to in such Distribution Agreement
between the Company and the Distributor and will be entitled and subject to the
indemnification provisions contained in such Distribution Agreement, including
specifically the provisions of such Distribution Agreement (Section 6.3) wherein
each Dealer severally agrees to indemnify and hold harmless the Company, the
Distributor and each officer and director thereof, and each person, if any, who
controls the Company and the Distributor within the meaning of the Securities
Act of 1933, as amended.
Dealer hereby agrees:
A. that it will not offer for sale the Shares, or accept any
orders for the purchase of Shares, except pursuant to the terms and conditions
of the Selling Agreement between it and the Distributor;
B. that it will not act for the Distributor or the Company or
make any representations on their behalf except as set forth in the Prospectus
and such other printed information furnished to Dealer by the Distributor or the
Company to supplement the Prospectus ("SUPPLEMENTAL INFORMATION"); and
C. that it will perform certain services with respect to the
Shares sold by it, including sub-accounting, record-keeping, shareholder
services and other administrative services.
Nothing in this Agreement shall be deemed or construed to make Dealer an
employee, agent, representative or partner of the Distributor or of the Company.
II. Service Fees.
The Dealer will be paid a fee of [___]% of the aggregate NAV per shares
of the Shares sold by the Dealer, calculated as of the last day of each quarter.
Notwithstanding the foregoing, (i) no service fees will be paid to the Dealer
unless and until the Company has sold $2,000,000 of the Shares, and (ii) no
service fees will be paid with respect to Shares offered or sold in Pennsylvania
until the registration of the Shares has been declared effective by the
Securities Commissioner of the State of Pennsylvania.
The parties hereby agree (i) that the foregoing service fees represent
reasonable compensation for services to be performed by the Dealer (ii) that
Dealer's interest in the offering pursuant to this Dealer Service Agreement is
limited to such service fees from the Distributor and Dealer's indemnity
referred to in Section 6 of the Distribution Agreement, and (iii) that the
Company is not liable or responsible for the direct payment of such service fees
to the Dealer.
The parties hereby agree that the rates of any service fee paid with
respect to any Shares, including outstanding Shares, are subject to change by
Distributor from time to time, upon 10 days' written notice, and any calculation
of fees after the effective date of such change will take into account the new
rate with respect only to any period subsequent to the effective date of such
change.
III. Payment.
Payments of service fees will be made by the Distributor (or by the
Company as provided in the Distribution Agreement) to Dealer [monthly]
[quarterly] in arrears no later than the fifteenth (15th) day of the [next
succeeding month] [first month of each quarter]. Dealer acknowledges that if the
Company pays any service fees directly to the Distributor, Company is relieved
of any obligation for such service fees to the Dealer. The Company may rely on
and use the preceding acknowledgment as a defense against any claim by Dealer
for service fees that the Company pays to Distributor but that Distributor fails
to remit to Dealer.
IV. License and Association Membership.
Dealer's acceptance of this Agreement constitutes a representation to
the Company and the Distributor that Dealer is a properly registered or licensed
broker-dealer, duly authorized to sell Shares under Federal and state securities
laws and regulations and in all states where it offers or sells Shares, and that
it is a member in good standing of the NASD. This Agreement shall automatically
terminate if the Dealer ceases to be a member in good standing of such
association or to be so licensed or registered. Dealer agrees to notify the
Distributor immediately if Dealer ceases to be a member in good standing or to
be so licensed or registered. Dealer hereby agrees to abide by the Rules of Fair
Practice of the NASD and to comply with Rules 2730, 2740, 2420 and 2750 of the
NASD Conduct Rules.
V. Anti-Money Laundering Compliance Programs.
Dealer's acceptance of this Agreement constitutes a representation to
the Company and the Distributor that Dealer has established and implemented
anti-money laundering compliance programs in accordance with proposed NASD Rule
3011 and Section 352 of the Money Laundering Abatement Act reasonably expected
to detect and cause the reporting of suspicious transactions in connection with
the sale of Shares of the Company.
VI. Termination and Amendment.
Any party may terminate this Agreement by written notice. Such
termination shall be effective 48 hours after the mailing of such notice. This
Agreement and the exhibits hereto are the entire agreement of the parties and
supersede all prior agreements, if any, relating to the subject matter hereof
between the parties hereto.
- 2 -
This Agreement may be amended at any time by the Distributor by written
notice to the Dealer, and any such amendment shall be deemed accepted by Dealer
upon placing an order for sale of Shares after he has received such notice.
VII. Privacy Laws.
The Distributor and Dealer (each referred to individually in this
section as "party") agree as follows:
A. Each party agrees to abide by and comply with (i) the privacy
standards and requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999 ("GLB ACT"),
(ii) the privacy standards and requirements of any other applicable Federal or
state law, and (iii) its own internal privacy policies and procedures, each as
may be amended from time to time.
B. Each party agrees to refrain from the use or disclosure of
nonpublic personal information (as defined under the GLB Act) of all customers
who have opted out of such disclosures except as necessary to service the
customers or as otherwise necessary or required by applicable law; and
C. Each party shall be responsible for determining which
customers have opted out of the disclosure of nonpublic personal information by
periodically reviewing and, if necessary, retrieving a list of such customers
(the "LIST") as provided by each to identify customers that have exercised their
opt-out rights. In the event either party uses or discloses nonpublic personal
information of any customer for purposes other than servicing the customer, or
as otherwise required by applicable law, that party will consult the List to
determine whether the affected customer has exercised his or her opt-out rights.
Each party understands that each is prohibited from using or disclosing any
nonpublic personal information of any customer that is identified on the List as
having opted out of such disclosures.
VIII. Notice.
All notices will be in writing and will be duly given to the
Distributor when mailed to ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, and to Dealer when mailed to the address specified by Dealer
herein.
IX. Attorney's Fees and Applicable Law.
In any action to enforce the provisions of this Agreement or to secure
damages for its breach, the prevailing party shall recover its costs and
reasonable attorney's fees. This Agreement shall be construed under the laws of
the State of Georgia and shall take effect when signed by Dealer and
countersigned by the Distributor.
- 3 -
THE DISTRIBUTOR:
Attest:
▇▇▇▇▇ INVESTMENT SECURITIES, INC.
By:
-----------------------------------
Name By:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
--------------------------------
We have read the foregoing Agreement and we hereby accept and agree to
the terms and conditions therein set forth. We hereby represent that the list
below of jurisdictions in which we are registered or licensed as a broker or
dealer and are fully authorized to sell securities is true and correct, and we
agree to advise you of any change in such list during the term of this
Agreement.
1. Identity of Dealer
Name:
-------------------------------------------------------------------------
Type of entity:
---------------------------------------------------------------
(to be completed by Dealer) (corporation, partnership or
proprietorship)
Organized in the State of
-----------------------------------------------------
(to be completed by Dealer) (State)
Licensed as broker dealer in the following states:
----------------------------
(to be completed by Dealer)
Tax I.D. #
--------------------------------------------------------------------
2. Person to receive notice pursuant to Section XIII.
Name:
---------------------------------------------------------------
Company:
-------------------------------------------------------------
Address:
-------------------------------------------------------------
City, State and Zip Code:
--------------------------------------------
Telephone No. (_____)
------------------------------------------------
Telefax No. (_____)
--------------------------------------------------
e-mail address:
------------------------------------------------------
AGREED TO AND ACCEPTED BY THE DEALER
-----------------------------------------------------
(Dealer's Firm Name)
- 4 -
By:
-------------------------------------------------
Signature
Title:
----------------------------------------------
- 5 -
EXHIBIT C
▇▇▇▇▇ TOTAL RETURN REIT, INC.
Up to 225,000,000 Shares of Common Stock
FORM OF ADVISER SERVICE AGREEMENT
Ladies and Gentlemen:
▇▇▇▇▇ Investment Securities, Inc., as the distributor ("DISTRIBUTOR")
for ▇▇▇▇▇ Total Return REIT, Inc. (the "COMPANY"), a Maryland corporation,
invites you (the "ADVISER") to perform certain services with respect to the
shares of common stock ("SHARES") of the Company subject to the following terms.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Distribution Agreement.
I. Distribution Agreement.
The Distributor and the Company have entered into that certain
Distribution Agreement dated [-], 2007, in the form attached hereto as Exhibit
A. By your acceptance of this Agreement, you will be deemed to be an Adviser, as
referred to in such Distribution Agreement between the Company and the
Distributor and will be entitled and subject to the indemnification provisions
contained in such Distribution Agreement, including specifically the provisions
of such Distribution Agreement (Section 6.3) wherein each Adviser severally
agrees to indemnify and hold harmless the Company, the Distributor and each
officer and director thereof, and each person, if any, who controls the Company
and the Distributor within the meaning of the Securities Act of 1933, as
amended.
Adviser hereby agrees:
A. that it will not offer for sale the Shares, or accept
any orders for the purchase of Shares, and that it will, in performing
investment advisory services to its clients, recommend Shares only to persons
who meet the suitability standards set forth in the Prospectus or in any
suitability letter or memorandum sent to it by the Company and the provisions of
Article III.C. of the Statement of Policy Regarding Real Estate Investment
Trusts of the North American Securities Administrators Association, Inc. (the
"NASAA GUIDELINES"). Adviser will make available the records that it maintains
pursuant to the NASAA Guidelines to the Distributor upon reasonable notice from
the Distributor.
B. that it will not act for the Distributor or the
Company or make any representations on their behalf except as set forth in the
Prospectus and such other printed information furnished to Adviser by the
Distributor or the Company to supplement the Prospectus ("SUPPLEMENTAL
INFORMATION"); and
C. that it will perform certain services with respect to
the Shares sold by it, including sub-accounting, record-keeping, shareholder
services, services related to the allocation of investments that the Adviser
manages and other administrative services.
Nothing in this Agreement shall be deemed or construed to make Adviser an
employee, agent, representative or partner of the Distributor or of the Company.
II. Service Fees.
The Adviser will be paid a fee of [___]% of the aggregate NAV per
shares of the Shares sold to or held by programs that the Adviser manages,
calculated as of the last day of each quarter. Notwithstanding the foregoing,
(i) no service fees will be paid to the Adviser unless and until the Company has
sold $2,000,000 of the Shares, and (ii) no service fees will be paid with
respect to Shares offered or sold in Pennsylvania until the registration of the
Shares has been declared effective by the Securities Commissioner of the State
of Pennsylvania.
The parties hereby agree that (i) the foregoing service fees represent
reasonable compensation for services to be performed by the Adviser (ii) that
Adviser's interest in the offering pursuant to this Adviser Service Agreement is
limited to such fees from the Distributor and Adviser's indemnity referred to in
Section 6 of the Distribution Agreement, and (iii) that the Company is not
liable or responsible for the direct payment of such fees to the Adviser.
The parties hereby agree that the rates of any service fee paid with
respect to any Shares, including outstanding Shares, are subject to change by
Distributor from time to time, upon 10 days' written notice, and any calculation
of service fees after the effective date of such change will take into account
the new rate with respect only to any period subsequent to the effective date of
such change.
III. Payment.
Payments of service fees will be made by the Distributor (or by the
Company as provided in the Distribution Agreement) to Adviser [monthly]
[quarterly] in arrears no later than the fifteenth (15th) day of the [next
succeeding month] [first month of each quarter]. Adviser acknowledges that if
the Company pays any service fees directly to the Distributor, Company is
relieved of any obligation for such service fees to the Adviser. The Company may
rely on and use the preceding acknowledgment as a defense against any claim by
Adviser for service fees that the Company pays to Distributor but that
Distributor fails to remit to Adviser.
IV. License and Association Membership.
Adviser's acceptance of this Agreement constitutes a representation to
the Company and the Distributor that Adviser is a properly registered investment
adviser under Federal and state securities laws and regulations and in all
states where it conducts operations. This Agreement shall automatically
terminate if the Adviser ceases to be so registered. Adviser agrees to notify
the Distributor immediately if Adviser ceases to be so registered.
V. Anti-Money Laundering Compliance Programs.
Adviser's acceptance of this Agreement constitutes a representation to
the Company and the Distributor that Adviser has established and implemented
anti-money laundering compliance programs in accordance with Section 352 of the
Money Laundering Abatement Act reasonably expected to detect and cause the
reporting of suspicious transactions in connection with the sale of Shares of
the Company.
VI. Termination and Amendment.
Any party may terminate this Agreement by written notice. Such
termination shall be effective 48 hours after the mailing of such notice. This
Agreement and the exhibits hereto are the entire agreement of the parties and
supersede all prior agreements, if any, relating to the subject matter hereof
between the parties hereto.
- 2 -
This Agreement may be amended at any time by the Distributor by written
notice to the Adviser, and any such amendment shall be deemed accepted by
Adviser upon placing an order for sale of Shares after he has received such
notice.
VII. Privacy Laws.
The Distributor and Adviser (each referred to individually in this
section as "party") agree as follows:
A. Each party agrees to abide by and comply with (i) the privacy
standards and requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999 ("GLB ACT"),
(ii) the privacy standards and requirements of any other applicable Federal or
state law, and (iii) its own internal privacy policies and procedures, each as
may be amended from time to time.
B. Each party agrees to refrain from the use or disclosure of
nonpublic personal information (as defined under the GLB Act) of all customers
who have opted out of such disclosures except as necessary to service the
customers or as otherwise necessary or required by applicable law; and
C. Each party shall be responsible for determining which
customers have opted out of the disclosure of nonpublic personal information by
periodically reviewing and, if necessary, retrieving a list of such customers
(the "LIST") as provided by each to identify customers that have exercised their
opt-out rights. In the event either party uses or discloses nonpublic personal
information of any customer for purposes other than servicing the customer, or
as otherwise required by applicable law, that party will consult the List to
determine whether the affected customer has exercised his or her opt-out rights.
Each party understands that each is prohibited from using or disclosing any
nonpublic personal information of any customer that is identified on the List as
having opted out of such disclosures.
VIII. Notice.
All notices will be in writing and will be duly given to the
Distributor when mailed to ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, and to Adviser when mailed to the address specified by Adviser
herein.
IX. Attorney's Fees and Applicable Law.
In any action to enforce the provisions of this Agreement or to secure
damages for its breach, the prevailing party shall recover its costs and
reasonable attorney's fees. This Agreement shall be construed under the laws of
the State of Georgia and shall take effect when signed by Adviser and
countersigned by the Distributor.
- 3 -
THE DISTRIBUTOR:
Attest:
▇▇▇▇▇ INVESTMENT SECURITIES, INC.
By:
--------------------------------
Name By:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
--------------------------------
We have read the foregoing Agreement and we hereby accept and agree to
the terms and conditions therein set forth. We hereby represent that the list
below of jurisdictions in which we are registered or licensed as a broker or
dealer and are fully authorized to sell securities is true and correct, and we
agree to advise you of any change in such list during the term of this
Agreement.
e. Identity of Adviser
Name:
-------------------------------------------------------------------------
Type of entity:
---------------------------------------------------------------
(to be completed by Adviser) (corporation, partnership or
proprietorship)
Organized in the State of
-----------------------------------------------------
(to be completed by Adviser) (State)
Licensed or registered in the following states:
-------------------------------
(to be completed by Adviser)
Tax I.D. #
--------------------------------------------------------------------
e. Person to receive notice pursuant to Section XIII.
Name:
---------------------------------------------------------------
Company:
-------------------------------------------------------------
Address:
-------------------------------------------------------------
City, State and Zip Code:
--------------------------------------------
Telephone No. (_____)
------------------------------------------------
Telefax No. (_____)
--------------------------------------------------
e-mail address:
------------------------------------------------------
AGREED TO AND ACCEPTED BY THE ADVISER
-----------------------------------------------------
(Adviser's Firm Name)
- 4 -
By:
-------------------------------------------------
Signature
Title:
----------------------------------------------
- 5 -
EXHIBIT D
ESCROW AGREEMENT
