GRUBB & ELLIS APARTMENT REIT, INC. UP TO 105,000,000 SHARES OF COMMON STOCK DEALER MANAGER AGREEMENT
Exhibit 1.1
XXXXX & XXXXX APARTMENT REIT, INC.
UP TO 105,000,000 SHARES OF COMMON STOCK
DEALER MANAGER AGREEMENT
UP TO 105,000,000 SHARES OF COMMON STOCK
DEALER MANAGER AGREEMENT
, 2009
Xxxxx & Xxxxx Securities, Inc.
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
Ladies and Gentlemen:
Xxxxx & Xxxxx Apartment REIT, Inc., a Maryland corporation (the “Company”), is
registering $1,047,500,000 in shares of its common stock, $.01 par value per share (the
“Shares”), for sale to the public (the “Offering”), of which (i) $1,000,000,000 in
Shares are intended to be offered pursuant to the primary offering and (ii) $47,500,000 in Shares
are intended to be offered pursuant to the Company’s distribution reinvestment plan (the
“DRIP”). The Company reserves the right to reallocate the Shares being offered between the
primary offering and the DRIP. Except as described in the Prospectus (as defined below) or in
Section 5.1 hereof, the Shares are to be sold pursuant to the primary offering for a cash price of
$10.00 per Share and the Shares are to be sold pursuant to the DRIP for $9.50 per Share.
The Company hereby appoints Xxxxx & Xxxxx Securities, Inc., a California corporation (the
“Dealer Manager”), as its exclusive agent and principal distributor during the Offering
Period (as defined below) for the purpose of selling for cash, on a best efforts basis, the Shares
through such securities dealers that the Dealer Manager may retain (individually, a
“Dealer” and collectively, the “Dealers”), all of whom shall be members of the
Financial Industrial Regulation Authority, Inc.
(“FINRA”), pursuant to a Participating
Broker-Dealer Agreement in the form attached to this Agreement as Exhibit A (the “Participating
Broker-Dealer Agreement”). The Dealer Manager may also sell Shares for cash directly to its own
clients and customers subject to the terms and conditions stated in the Prospectus. The Dealer
Manager hereby accepts such agency and distributorship and agrees to use its best efforts to sell
the Shares on said terms and conditions, commencing promptly following the Effective Date (as
defined in Section 1.1) in jurisdictions in which the Shares are registered or qualified for sale
or in which such offering is otherwise permitted.
The term “Offering Period” shall mean that period during which Shares may be offered
for sale, commencing on the date the Registration Statement (as defined below) was filed with the
United States Securities Exchange Commission (“SEC”), during which period offers and sales of the Shares shall
occur continuously unless and until the Offering is terminated as provided in Section 11 hereof,
except that the Dealer Manager and the Dealers shall immediately suspend or terminate the offering
of the Shares, in total or in any state or states, upon request of the Company at any time and
shall resume offering the Shares upon subsequent request of the Company. The Offering Period shall
in all
events terminate upon the sale of all of the Shares. Upon termination of the Offering Period,
the Dealer Manager’s agency and this Agreement shall terminate without obligation on the part of
the Dealer Manager or the Company except as set forth in this Agreement.
In connection with the sale of Shares, the Company hereby agrees with you, the Dealer Manager,
as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As an inducement to the Dealer Manager to enter
into this Agreement, the Company represents and warrants to the Dealer Manager that:
1.1 The Company has prepared and filed with the SEC a registration statement on Form S-11 for
the registration of the Shares under the Securities Act of 1933, as amended (the “Securities
Act”), and the applicable rules and regulations of the SEC promulgated thereunder (the
“Securities Act Rules and Regulations”). Copies of such registration statement as initially
filed and each amendment thereto have been or will be delivered to the Dealer Manager. The
registration statement on Form S-11 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) and any 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 Securities Act Rules and Regulations included at any
time as part of the Registration Statement.
1.2 On the date that any Preliminary Prospectus was filed with the SEC, on the Effective Date,
on the date of the Prospectus, on the date the Minimum Offering (as defined in Section 5.1 hereof)
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
and the Prospectus, including the financial statements contained therein, complied or will comply
with the Securities Act and the Securities Act Rules and Regulations. On the Effective Date, the
Registration Statement did not or will not, as the case may be, 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 the 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, as the case may be,
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 the 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
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within the knowledge of the Dealer Manager or any of the Dealers or are based upon information
furnished by the Dealer Manager in writing to the Company specifically for inclusion therein.
1.3 No order preventing or suspending the use of 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 been duly organized and is validly existing as a corporation under the
laws of the state of Maryland, with the full power and authority to conduct its business as
described in the Prospectus, and has full legal right, power and authority to enter into this
Agreement and to perform the transactions contemplated hereby, 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.
1.6 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, by-law, 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 by the Company of the Shares, except such as may be required under the Securities
Act or the securities laws of certain states, if any, that the Company identifies to the Dealer
Manager.
1.8 The Shares have been duly authorized and validly issued and upon payment therefore will be
fully paid and nonassessable and will conform to the description thereof contained in the
Prospectus.
1.9 There are no actions, suits or proceedings pending or to the knowledge of the Company,
threatened against the Company at law or in equity or before or by any federal or state commission,
regulatory body or administrative agency or other governmental body, domestic or foreign, which
will have a material adverse effect on the business or property of the Company.
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2.
REPRESENTATIONS AND WARRANTIES OF THE DEALER MANAGER. As an inducement to the Company to enter into this Agreement, the Dealer Manager represents
and warrants to the Company that:
The Dealer Manager is, and during the term of this Agreement will be, a member of FINRA in
good standing and a broker-dealer registered as such under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and under the securities laws of the states in which the
Shares are to be offered and sold. The Dealer Manager and its employees and representatives possess
all required licenses and registrations to act under this Agreement. The Dealer Manager will comply
with all applicable laws, rules, regulations and requirements of the Securities Act, the Exchange
Act, other federal securities laws, state securities laws and the rules of FINRA, specifically
including, but not in any way limited to, FINRA Conduct Rules 2340, 2420, 2730, 2740 and 2750. Each
Dealer and each salesperson acting on behalf of the Dealer Manager or a Dealer will be registered
with FINRA and duly licensed by each state regulatory authority in each jurisdiction in which it or
he will offer and sell Shares.
The Dealer Manager was duly organized and is validly existing as a corporation in good
standing under the laws of the State of California, and has full legal right, power and authority
to enter into this Agreement and to perform the transactions contemplated hereby, and the Dealer
Manager has duly authorized, executed and delivered this Agreement.
2.1 This Agreement, when executed by the Dealer Manager, will have been duly authorized and
will be a valid and binding agreement of the Dealer Manager, enforceable in accordance with its
terms, 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.
2.2 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 Dealer Manager will not
conflict with or constitute a default or violation under any charter, by-law, 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 Dealer
Manager.
2.3 No consent, approval, authorization or other order of any governmental authority is
required in connection with the execution, delivery or performance by the Dealer Manager of this
Agreement.
2.4 The Dealer Manager 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 Dealer Manager in writing
expressly for use in the Registration Statement, any Preliminary Prospectus, or the Prospectus,
does not contain any untrue statement of a
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material fact or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
2.5 The Dealer Manager has reasonable grounds to believe, based on information made available
to it by the Company, that the Prospectus discloses all material facts adequately and accurately
and provides an adequate basis for evaluating an investment in the Shares.
3.
COVENANTS OF THE COMPANY. The Company covenants and agrees with the Dealer Manager that:
3.1 It will, at no expense to the Dealer Manager, furnish the Dealer Manager with such number
of printed copies of the Registration Statement, including all amendments and exhibits thereto, as
the Dealer Manager may reasonably request. It will similarly furnish to the Dealer Manager and
others designated by the Dealer Manager as many copies as the Dealer Manager 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 have been first approved for use by the Company and all appropriate
regulatory agencies). It also will furnish to the Dealer Manager and its designees copies of any
material deemed necessary by the Dealer Manager and commercially reasonable for the Company to
furnish, for due diligence purposes in connection with the Offering.
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 Dealer Manager 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 Dealer Manager a
copy of such papers filed by the Company in connection with any such qualification.
3.3 It will: (a) furnish copies of any proposed amendment or supplement of the Registration
Statement or the Prospectus to the Dealer Manager; (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; and (c) 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
Dealer Manager and will use its best efforts to obtain the lifting of such order or to prevent such
other action at the earliest possible time.
3.4 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 Dealer Manager, 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 the light of the circumstances under which they were
made, not misleading, the Company will promptly notify the Dealer Manager thereof (unless the
information shall have been
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received from the Dealer Manager) and will effect the preparation of an amendment or
supplement to the Prospectus that will correct such statement or omission.
3.5 It will comply with all requirements imposed upon it by the Securities Act, the Securities
Act Rules and Regulations, the Exchange Act and the applicable rules and regulations of the SEC
promulgated thereunder (the “Exchange Act Rules and Regulations” and collectively with the
Securities Act Rules and Regulations, the “Rules and Regulations”), 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. It will not allow its
officers, directors or employees to be involved in the securities distribution activities of the
Dealer Manager, including but not limited to written, oral or electronic communication with Dealers
or associated persons of Dealers without the express consent, invitation or instruction of the
Dealer Manager, which will not be unreasonably withheld. All securities distribution activities
and the relationships with Dealers and associated persons of Dealers are the exclusive property and
dominion of the Dealer Manager. The Company acknowledges that the identity and contact information
of the Dealers and associated persons of Dealers are the exclusive property of the Dealer Manager
and that upon the expiration or termination of this Agreement the Company shall return to the
Dealer Manager and delete from all of its Stockholder and other systems any information, including
but not limited to identity or contact information, about Dealers or associated persons of Dealers.
3.6 All expenses incident to the performance of the Company’s 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 to the
Dealer Manager of this Agreement, the Participating Broker-Dealer Agreement 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 advisers,
(d) the fees and expenses related to the review of the terms and fairness of the Offering by FINRA,
(e) the fees and expenses related to the qualification of the Shares under the 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 to the Dealer Manager of copies of the Prospectus, (g) the fees and
expenses of any registrar, transfer agent or paying agent in connection with the Shares and (h) the
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, will be paid for by the
Company or, to the extent such expenses exceed 1.0% of the gross offering proceeds received by the
Company in the primary offering, by Xxxxx & Xxxxx Apartment REIT Advisor, LLC, a Delaware limited
liability company and the Company’s advisor (the “Advisor”).
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3.7 It will deliver to the Dealer Manager copies of each written communication delivered to
the holders of Shares (“Stockholders”), including but not limited to reports as described
in the Prospectus under “Reports to Stockholders,” at the time that such communications are
furnished to the Stockholders, and such other information concerning the Company as the Dealer
Manager may reasonably request from time to time.
4. COVENANTS OF THE DEALER MANAGER. The Dealer Manager covenants and agrees with the Company that:
4.1 In connection with the offer and sale of the Shares, the Dealer Manager will comply with
all requirements imposed upon it by the Securities Act, the Exchange Act, the Rules and Regulations
or other federal regulations applicable to the Offering, the sale of Shares or its activities and
by all applicable state securities laws and regulations and the rules of FINRA, 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. The Dealer
Manager will not make any sales of the Shares 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.
4.2 The Dealer Manager will make no representations concerning the Offering except as set
forth in the Prospectus.
4.3 The Dealer Manager will provide the Company with such information relating to the offer
and sale of the Shares by it 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.
4.4 All engagements of the Dealers will be evidenced by a Participating Broker-Dealer
Agreement, except when the Dealer Manager obtains the prior written consent of the Company. When
Dealers are used in this Offering, the Dealer Manager will use commercially reasonable efforts to
cause such Dealers to comply with all their respective obligations pursuant to the Participating
Broker-Dealer Agreement.
4.5 The Dealer Manager will provide each prospective investor with a copy of the Prospectus
and any supplements thereto during the course of the Offering and prior to the sale. The Company
may also provide the Dealer Manager with certain supplemental sales material to be used by the
Dealer Manager and the Dealers in connection with the solicitation of purchasers of the Shares. In
the event the Dealer Manager elects to use such supplemental sales material, the Dealer Manager
agrees that such material shall not be used in connection with the solicitation of purchasers of
the Shares unless accompanied or preceded by the Prospectus, as then currently in effect, and as it
may be amended or supplemented in the future. The Dealer Manager agrees that it will not use any
sales materials in conjunction with the offer and sale of the Shares other than those either
provided to the Dealer Manager by the Company or approved by the Company for use in the Offering.
The use of any other sales material is expressly prohibited.
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4.6 The Dealer Manager will comply in all material respects with the subscription procedures
and “Plan of Distribution” set forth in the Prospectus.
5. COMPENSATION OF DEALER MANAGER.
5.1 Except as may be provided in the “Plan of Distribution” section of the Prospectus, as
compensation for the services rendered by the Dealer Manager, the Company agrees that it will pay
to the Dealer Manager a selling commission equal to 7.0% of the $10.00 per Share cash price for
Shares sold in the primary offering plus a dealer manager fee of 3.0% of the $10.00 per Share cash
price for Shares sold in the primary offering; provided however, that the Company, the Dealer
Manager and/or a Dealer may agree to reduce or eliminate selling commissions and/or dealer manager
fees, as applicable, generally or with respect to a particular investment to accommodate a
prospective investor or a Dealer.
No selling commissions will be paid, and the per Share cash price shall be reduced to $9.30,
in connection with Shares sold in the primary offering in the event that the investor has engaged
the services of a registered investment adviser or other financial advisor, paid on a
fee-for-service or assets under management basis by the investor.
No selling commissions will be paid, and the per Share cash price shall be reduced to $9.30,
in connection with Shares sold to (i) retirement plans of participating Dealers, (ii) participating
Dealers in their individual capacities, or (iii) IRAs and qualified plans of their registered
representatives or any one of their registered representatives in their individual capacities.
Selling commissions or dealer manager fee will be reduced, and the per Share cash price shall
be adjusted accordingly to no lower than $9.00, where the Dealer Manager and/or a participating
Dealer agree to reduce or eliminate selling commissions and/or dealer manager fees, as applicable,
generally or with respect to a particular investment to accommodate a prospective investor or
participating Dealer.
No selling commissions, dealer manager fees or other organizational and offering expenses will
be paid in connection with Shares sold under the DRIP.
The Company will not be liable or responsible to any Dealer for direct payment of commissions
to such Dealer, it being the sole and exclusive responsibility of the Dealer Manager for payment of
commissions to Dealers.
5.2 Notwithstanding anything to the contrary contained herein, in the event that the Company
pays any commission to the Dealer Manager for sale by a Dealer of one or more Shares and the
subscription is rescinded as to one or more of the Shares covered by such subscription, the Company
shall decrease the next payment of commissions or other compensation otherwise payable to the
Dealer Manager by the Company under this Agreement by an amount equal to the commission rate
established in Section 5.1 of this Agreement, multiplied by the number of Shares as to which the
subscription is rescinded. In the event that no payment of commissions or other compensation is due
to the Dealer Manager after such withdrawal occurs, the Dealer
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Manager shall pay the amount specified in the preceding sentence to the Company within ten
(10) days following receipt of notice by the Dealer Manager from the Company stating the amount
owed as a result of rescinded subscriptions.
5.3 The Company will reimburse the Dealer Manager for legal fees and expenses, travel, food
and lodging for employees of the Dealer Manager to sponsor educational meetings, attendance fees
and expense reimbursements for broker-dealer sponsored conferences, attendance fees and expenses
for industry sponsored conferences, and informational seminars.
5.4 In no event shall the total aggregate underwriting compensation payable to the Dealer
Manager and any Dealers participating in the Offering, including, but not limited to, selling
commissions, the dealer manager fee and expenses reimbursable pursuant to Section 5.3 exceed 10.0%
of gross offering expenses in the aggregate.
6. INDEMNIFICATION.
6.1 The Company will indemnify and hold harmless (to the extent permitted by the Company’s
charter) the Dealers and the Dealer Manager, their officers and directors and each person, if any,
who controls such Dealer or Dealer Manager 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, 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 omission made in reliance upon and in conformity with
written information furnished (x) to the Company by the Dealer Manager or (y) to the Company or the
Dealer Manager by or on behalf of any Dealer specifically for use in the preparation of the
Registration Statement or any such post-
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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 Dealer Manager was at fault in connection with the Loss, expense
or action. Notwithstanding the 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 SEC 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 Dealer Manager 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, 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
Dealer Manager specifically for use with reference to the Dealer Manager 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 Dealer
Manager. The Dealer Manager 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 Dealer Manager may
otherwise have.
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6.3 Each Dealer severally will indemnify and hold harmless the Company, the Dealer Manager,
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 the Registration
Statement and each person, if any, who controls the Company and the Dealer Manager within the
meaning of Section 15 of the Securities Act (each, a “Dealer Indemnified Person”) from and
against any Losses to which a Dealer 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, 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 Dealer Manager by or on behalf of such Dealer
specifically for use with reference to such Dealer 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 Dealer’s representatives or agents
in violation of Section VII of the Participating Broker-Dealer Agreement or otherwise. Each such
Dealer will reimburse each Dealer 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 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
11
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.
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
obligated 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.
7. SURVIVAL OF PROVISIONS.
7.1 The respective agreements, representations and warranties of the Company and the Dealer
Manager 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 Dealer Manager or any Dealer or any person
controlling the Dealer Manager or any Dealer 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 Dealer Manager pursuant to Section 5.1 of this
Agreement, and the provisions of Section 5.2, Sections 6 through 10 and Sections 12 and 17 of this
Agreement 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 California; 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 in any number of counterparts. Each counterpart,
when executed and delivered, shall be an original
12
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 Dealer Manager 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.
10.2 This Agreement may only be amended by the written agreement of the Dealer Manager and the
Company.
11. TERM.
11.1 Any party to this Agreement shall have the right to terminate this Agreement on 60 days
written notice.
11.2 In any case, this Agreement shall terminate at the close of business on the effective
date that the Offering terminates.
11.3 In addition to any other obligations of the Company that survive the expiration or
termination of this Agreement, the Company, upon expiration or termination of this Agreement, shall
pay to the Dealer Manager all commissions and fees to which the Dealer Manager is or becomes
entitled under Section 5.1 of this Agreement at such time or times as such commissions and fees
become payable pursuant to this Agreement.
12. CONFIRMATION. The Company hereby agrees and assumes the duty to confirm on its behalf and on
behalf of Dealers and the Dealer Manager all orders for purchase of Shares accepted by the Company.
Such confirmations will comply with the rules of the SEC and FINRA.
13. SUITABILITY OF INVESTORS; COMPLIANCE WITH PRIVACY AND ANTI-MONEY LAUNDERING REGULATIONS.
13.1 The Dealer Manager will offer Shares, and in its agreements with Dealers will require
that the Dealers offer Shares, only to persons who meet the financial qualifications 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 Dealer
Manager will comply, and in its agreements with Dealers, the Dealer Manager will require that the
Dealers 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, the Dealer Manager may rely on representations from
13
(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 Dealer Manager can satisfy its obligation by contractually requiring such
information to be maintained by the investment advisers or banks discussed in the preceding
sentence.
13.2 The Company, the Dealer Manager and each Dealer shall: (x) abide by and comply with
(i) the privacy standards and requirements of the Xxxxx-Xxxxx-Xxxxxx 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;
and (y) refrain from the use or disclosure of nonpublic personal information (as defined under the
GLB Act) of all customers.
13.3 The Company, the Dealer Manager and each Dealer agree to comply with the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001 (the “USA PATRIOT Act”) and any applicable U.S. Department of Treasury regulations
issued thereunder that require reasonable efforts to verify the identity of new customers, maintain
customer records, and check the names of new customers against the list of Specially Designated
Nationals and Blocked Persons. In addition, the Company, the Dealer Manager, and each Dealer agree
to comply with all Executive Orders and federal regulations administered by the U.S. Department of
Treasury Department’s Office of Foreign Asset Control. Further, the Dealer Manager agrees, upon
receipt of an “information request” issued under Section 314 (a) of the USA PATRIOT Act, to provide
the Financial Crimes Enforcement Network with information regarding: (i) the identity of a
specified individual or organization; (ii) account number; (iii) all identifying information
provided by the account holder; and (iv) the date and type of transaction. The Dealer Manager from
time to time will monitor account activity to identify patterns of unusual size or volume,
geographic factors, and any other potential signals of suspicious activity, including possible
money laundering or terrorist financing. The Company reserves the right to reject account
applications from new customers who fail to provide necessary account information or who
intentionally provide misleading information.
14. SUBMISSION OF ORDERS.
14.1 Those persons who purchase Shares will be instructed by the Dealer Manager or the Dealer
to make their checks payable to “Xxxxx & Xxxxx Apartment REIT, Inc.” The Dealer Manager may
authorize certain Dealers that have “net capital,” as defined in the applicable federal securities
regulations, of $250,000 or more, to instruct their customers to make their checks for Shares
subscribed for payable directly to the Dealer. In such case, the Dealer will collect the proceeds
of the subscribers’ checks and issue a check made payable to the order of the Company for the
aggregate amount of the subscription proceeds or wire such funds to the Company. The Dealer Manager
and any Dealer receiving a check that does not conform to the foregoing instructions shall promptly
return such check directly to such subscriber. Checks received by the Dealer Manager or Dealer that
conform to the foregoing instructions shall be transmitted for
14
deposit pursuant to one of the methods described in this Section 14 and in accordance with the
requirements set forth in Rule 15c2-4 promulgated under the Exchange Act.
14.2 It is understood and agreed that the Company reserves the right in its sole discretion to
refuse to sell any of the Shares to any person. A sale of a Share shall be deemed to be completed
if and only if (i) the Company has received a properly completed and executed subscription
documents, together with payment of the full purchase price of each purchased Share, from or on
behalf of an investor who satisfies the applicable suitability standards and minimum purchase
requirements set forth in the Registration Statement as determined by the Dealer Manager in
accordance with the provisions of this Agreement and (ii) the Company has accepted such
subscription.
15. SEVERABILITY. If any portion of this Agreement shall be held invalid or inoperative, then so far as is
reasonable and possible the remainder of this Agreement shall be considered valid and operative and
effect shall be given to the intent manifested by the portion held invalid or inoperative.
16. NOTICES. All communications hereunder, except as herein otherwise specifically provided, shall
be sufficiently given or made if sent by hand delivery, national commercial courier service for
next day delivery, United States mail, first-class, postage prepaid, addressed or sent by
facsimile. Notice delivered by hand or by commercial courier shall be effective at the time of
delivery. Notice deposited by mail shall be effective 48 hours after such deposit. Notice delivered
by facsimile shall be effective at the time evidenced on the written confirmation of delivery:
| If to the Company: | Xxxxx & Xxxxx Apartment REIT, Inc. | |||||
| Xxxxx 000 | ||||||
| 0000 X. Xxxxxx Xxxxxx | ||||||
| Xxxxx Xxx, XX 00000 | ||||||
| Facsimile No.: (000) 000-0000 | ||||||
| Attention: Xxxxxxx X. Xxxxxxx, Xx., Chief Executive Officer and President | ||||||
| If to the Dealer Manager: | Xxxxx & Xxxxx Securities, Inc. | |||||
| Xxxxx 000 | ||||||
| 0 Xxxxxx Xxxxxx Xxxxx | ||||||
| Xxxxx Xxx, XX 00000 | ||||||
| Facsimile No.: (000) 000-0000 | ||||||
| Attention: Xxxxx X. Xxxx, Chief Executive Officer and President | ||||||
Any party may change its address specified above by giving the other party notice of such
change in accordance with this Section 16.
15
17. DELAY. Except as expressly provided otherwise in this Agreement, neither the failure nor any
delay on the part of any party to this Agreement to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall a waiver of any right remedy,
power or privilege with respect to any occurrence be construed as a waiver of such right, remedy,
power, or privilege with respect to any subsequent occurrence.
18. NO PARTNERSHIP. Nothing in this Agreement shall be construed or interpreted to constitute the
Dealer Manager as in association with or in partnership with the Company, and instead, this
Agreement only shall constitute the Dealer Manager as a broker-dealer authorized by the Company to
sell and to manage the sale by others of the Shares according to the terms set forth in the
Registration Statement, the Prospectus or this Agreement.
19. NO THIRD PARTY BENEFICIARIES. Except as expressly provided otherwise in this Agreement, no
provision of this Agreement is intended to be for the benefit of any person or entity not a party
to this Agreement, and no third party shall be deemed to be a beneficiary of any provision of this
Agreement. Further, no third party shall, by virtue of any provision of this Agreement, have a
right of action or an enforceable remedy against either party to this Agreement.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other than by an agreement
in writing.
[SIGNATURE PAGE FOLLOWS]
16
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.
Very truly yours,
Xxxxx & Xxxxx Apartment REIT, Inc.
By: |
||||
| Xxxxxxx X. Xxxxxxx, Xx. | ||||
| Chief Executive Officer and President | ||||
| Accepted and agreed as of the date first above written. | ||||
| Xxxxx & Xxxxx Securities, Inc. | ||||
By: |
||||
| Xxxxx X. Xxxx | ||||
| Chief Executive Officer and President | ||||
[SIGNATURE PAGE TO DEALER MANAGER AGREEMENT]
17
EXHIBIT A
XXXXX & XXXXX APARTMENT REIT, INC.
Up to 105,000,000 Shares of Common Stock
PARTICIPATING BROKER-DEALER AGREEMENT
Up to 105,000,000 Shares of Common Stock
PARTICIPATING BROKER-DEALER AGREEMENT
Ladies and Gentlemen:
Xxxxx & Xxxxx Securities, Inc., a California corporation, as the dealer manager (“Dealer
Manager”) for Xxxxx & Xxxxx Apartment REIT, Inc., a Maryland corporation (the “Company”), invites
you (“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 Dealer Manager Agreement between the Dealer Manager and the Company
dated , 2009 in the form attached hereto as Exhibit “A” (the “Dealer Manager
Agreement”).
I. Dealer Manager Agreement
By Dealer’s acceptance of this Agreement, Dealer will become one of the Dealers referred to in
the Dealer Manager Agreement and will be entitled and subject to the terms and conditions of the
Dealer Manager Agreement, including, but not limited to, Section 6.3 of the Dealer Manager
Agreement wherein the Dealers severally agree to indemnify and hold harmless the Dealer Indemnified
Persons.
Dealer hereby agrees to use its best efforts to sell the Shares for cash on the terms and
conditions stated in the Prospectus. Nothing in this Agreement shall be deemed or construed to make
Dealer an employee, agent, representative or partner of the Dealer Manager or of the Company, and
Dealer is not authorized to act for the Dealer Manager or the Company or to make any
representations on their behalf except as set forth in the Prospectus and such other printed
information furnished to Dealer by the Dealer Manager to supplement the Prospectus (“Supplemental
Information”).
II. Submission of Orders
Dealer hereby agrees to solicit, as an independent contractor and not as the agent of the
Dealer Manager or of the Company (or their affiliates), persons acceptable to the Company to
purchase the Shares pursuant to the subscription agreement in the form attached to the Prospectus
and in accordance with the terms of the Prospectus. Dealer hereby agrees to diligently make
inquiries as required by this Agreement, as set forth in the Prospectus, and as required by all
applicable laws of all prospective investors in order to ascertain whether a purchase of the Shares
is suitable for each such investor.
Those persons who purchase Shares will be instructed by the Dealer to make their checks
payable to “Xxxxx & Xxxxx Apartment REIT, Inc.” Checks received by the Dealer which conform to the
foregoing instructions shall be transmitted for deposit pursuant to one of the following methods:
1. Where, pursuant to the Dealer’s internal supervisory procedures, internal supervisory
review is conducted at the same location at which subscription documents and checks are received
from subscribers, checks will be transmitted by the end of the next business day following receipt
by Dealer for deposit to the Company.
2. Where, pursuant to the 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 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
the Company.
III. Pricing
Except as described in the Prospectus, 100,000,000 Shares shall be offered to the public at
the offering price of $10.00 per Share, payable in cash pursuant to the primary offering and up to
5,000,000 Shares will be offered pursuant to the Company’s distribution reinvestment plan at the
higher of 95% of the estimated value of a share of the Company’s common stock, as estimated by the
Company’s board of directors, or $9.50 per Share. Except as otherwise indicated in the Prospectus
or in any letter or memorandum sent to the Dealer by the Company or Dealer Manager, a minimum
initial purchase of 100 Shares, or generally, $1,000, is required. Except as otherwise indicated
in the Prospectus, additional investments may be made in cash in minimal increments of at least 100
Shares. The Shares are nonassessable.
IV. Dealers’ Commissions
Except for discounts described in or as otherwise provided in the “Plan of Distribution”
section of the Prospectus, Dealer’s selling commission applicable to the total public offering
price of Shares sold in the primary offering by Dealer that it is authorized to sell hereunder is
7.0% of the gross proceeds of the Shares sold by it and accepted and confirmed by the Company,
which commissions will be paid by the Dealer Manager. For these purposes, a “sale of Shares” shall
occur if and only if a transaction has closed with a securities purchaser pursuant to all
applicable offering and subscription documents and the Company has thereafter distributed the
commission to the Dealer Manager in connection with such transaction. The Dealer affirms that the
Dealer Manager’s liability for commissions payable is limited solely to the proceeds of commissions
receivable associated therewith, and the Dealer hereby waives any and all rights to receive payment
of commissions due until such time as the Dealer Manager is in receipt of the commission from the
Company.
No selling commissions will be paid, and the per Share cash price shall be reduced to $9.30,
in connection with Shares sold in the primary offering in the event that the investor has engaged
the services of a registered investment adviser or other financial advisor, paid on a
fee-for-service basis by the investor.
No selling commissions will be paid, and the per Share cash price shall be reduced to $9.30,
in connection with Shares sold to (i) retirement plans of Dealer, (ii) Dealer in its individual
capacity, (iii) IRAs and qualified plans of Dealer’s registered representatives or (iv) any one of
Dealer’s registered representatives in their individual capacities.
No selling commissions or a dealer manager fee will be paid in connection with Shares sold
under the DRIP.
Except as otherwise provided herein, all expenses incurred by Dealer in the performance of
Dealer’s obligations hereunder, including, but not limited to, expenses related to the Offering and
any attorneys’ fees, shall be at Dealer’s sole cost and expense, and the foregoing shall apply
notwithstanding the fact that the Offering is not consummated for any reason.
In addition, as set forth in the Prospectus, the Dealer Manager may, in its sole discretion,
reallow all or a portion of the dealer manager fee to a Dealer. The Dealer Manager will also
reimburse bona fide due diligence expenses of a Dealer. Reimbursement requests for accountable bona
fide due diligence
2
expenses must be made by Dealer within six months of the date of sale of Shares or such
requests will not be honored by the Dealer Manager.
The parties hereby agree that the foregoing commission is 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 commission from the Dealer
Manager and Dealer’s indemnity referred to in Section 6 of the Dealer Manager Agreement, and that
the Company is not liable or responsible for the direct payment of such commission to the Dealer.
V. Payment
Payments of selling commissions will be made by the Dealer Manager to Dealer within 10 days of
the receipt by the Dealer Manager of the gross commission payments from the Company. Dealer
acknowledges that if the Company pays selling commissions to the Dealer Manager, the Company is
relieved of any obligation for selling commissions to Dealer. The Company may rely on and use the
preceding acknowledgment as a defense against any claim by Dealer for selling commissions Company
pays to Dealer Manager but that Dealer Manager fails to remit to Dealer.
VI. Covenants of Dealer
Prior to participating in the Offering, Dealer will have reasonable grounds to believe, based
on information made available to Dealer by the Dealer Manager and/or the Company through the
Prospectus, that all material facts are adequately and accurately disclosed in the Prospectus and
provide a basis for evaluating an investment in the Company and the Shares.
Dealer agrees not to rely upon the efforts of the Dealer Manager, which is affiliated with the
Company, in determining whether the Company has adequately and accurately disclosed all material
facts upon which to provide a basis for evaluating the Company to the extent required by federal or
state laws or the Financial Industry Regulatory Authority (“FINRA”). Dealer further agrees to
conduct its own investigation to make that determination independent of the efforts of the Dealer
Manager.
Dealer agrees to retain in its records and make available to the Dealer Manager and to the
Company for a period of at least six (6) years following the termination of the Offering,
information establishing that each investor who purchases the Shares solicited by Dealer is within
the permitted class of investors under the requirements of the jurisdiction in which such purchaser
is a resident and the suitability standards set forth in the Prospectus and the subscription
agreement.
Dealer agrees that, prior to accepting a subscription for the Shares, it will inform the
prospective investor of all pertinent facts relating to the illiquidity and lack of marketability
of the Shares, as appropriate, during the term of the investment.
Dealer hereby undertakes and agrees to comply with all obligations applicable to Dealer under
all applicable laws, rules and regulations, including those set forth by FINRA. In soliciting
persons to acquire the Shares, Dealer further agrees to comply with any applicable requirements of
the Securities Act, the Exchange Act, other applicable federal securities laws, applicable state
securities laws, the rules and regulations promulgated thereunder and the rules of FINRA and, in
particular, Dealer agrees that it will not give any information or make any representations other
than those contained in the Prospectus and in any supplemental sales literature furnished to Dealer
by the Dealer Manager for use in making such solicitations.
3
VII. 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 a Subscription Signature Page and 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 therefore. 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 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 Dealer Manager any commission theretofore paid with respect to such order.
VIII. 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 the Supplemental
Information. The Dealer Manager 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.
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
Dealer Manager 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 Dealer Manager 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 Dealer Manager. Each Dealer
agrees, if the Dealer Manager 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 Exchange Act Rules
and Regulations thereunder.
IX. License and Association Membership
Dealer’s acceptance of this Agreement constitutes a representation to the Company and the
Dealer Manager that Dealer is a broker-dealer properly registered with the SEC, 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 FINRA. This Agreement shall
automatically terminate if the Dealer ceases to be a member in good standing of such association.
Dealer agrees to notify the Dealer Manager immediately if Dealer ceases to be a member in good
standing.
X. Anti-Money Laundering Compliance Programs
Dealer’s acceptance of this Agreement constitutes a representation to the Company and the
Dealer Manager that Dealer has established and implemented anti-money laundering compliance
4
programs in accordance with FINRA Rule 3011, Section 352 of the Money Laundering Abatement Act
and Sections 103.19, 103.35, and 103.122 of the regulations of the U.S. Treasury Department, and is
in compliance with all Executive Orders and Federal Regulations administered by the U.S. Treasury
Department’s Office of Foreign Assets Control. Further, Dealer agrees, upon receipt of an
“information request” issued under Section 314 (a) of the USA PATRIOT Act to provide the Financial
Crimes Enforcement Network with information regarding: (i) the identity of a specified individual
or organization; (ii) account number; (iii) all identifying information provided by the account
holder; and (4) the date and type of transaction. The Dealer Manager from time to time will monitor
account activity to identify patterns of unusual size or volume, geographic factors, and any other
potential signals of suspicious activity, including possible money laundering or terrorist
financing. The Company and the Dealer Manager reserve the right to reject account applications from
new customers who fail to provide necessary account information or who intentionally provide
misleading information.
XI. Limitation of Offer
Dealer will offer Shares only to persons who meet the financial qualifications set forth in
the Prospectus or in any suitability letter or memorandum sent to it by the Company or the Dealer
Manager 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,
Dealer will comply with the provisions of the rules and requirements of FINRA, 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.
XII. Termination
Dealer will suspend or terminate its offer and sale of Shares upon the request of the Company
or the Dealer Manager at any time and will resume its offer and sale of Shares hereunder upon
subsequent request of the Company or the Dealer Manager. 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 Dealer Manager by written notice to 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.
XIII. Privacy Laws
The Dealer Manager 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 Xxxxx-Xxxxx-Xxxxxx Act of 1999 (the “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.
5
XIV. Confidentiality of Due Diligence Information
Dealer understands that the Company, Dealer Manager or third party due diligence providers may
from time to time furnish Dealer with certain information which is non-public, confidential or
proprietary in nature (the “Due Diligence Information”) in connection with its due diligence
obligations under FINRA rules and the federal securities laws. Dealer agrees that the Due
Diligence Information will be kept confidential and shall not, without our prior written consent,
be disclosed by Dealer, or by Dealer’s affiliates, agents, representatives or employees, in any
manner whatsoever, in whole or in part, and shall not be used by Dealer, its agents,
representatives or employees, other than in connection with Dealer’s due diligence evaluation of
the Offering. Dealer agrees to reveal the Due Diligence Information only to its affiliates,
agents, representatives and employees who need to know the Due Diligence Information for the
purpose of the due diligence evaluation. Further, Dealer and its affiliates, agents,
representatives and employees will not disclose to any person the fact that the Due Diligence
Information has been made available to it.
The term Due Diligence Information shall not include information which (i) is already in
Dealer’s possession or in the possession of Dealer’s parent corporation or affiliates, provided
that such information is not known by Dealer to be subject to another confidentiality agreement
with or other obligation of secrecy to the Company or another party; (ii) is or becomes generally
available to the public other than as a result of a disclosure by Dealer, its affiliates, or their
respective directors, officers, employees, agents, advisors and representatives in violation of
this agreement; (iii) becomes available to Dealer or its affiliates on a non-confidential basis
from a source other than the Company or its advisors, provided that such source is not known by
Dealer or its affiliates to be bound by a confidentiality agreement with or other obligation of
secrecy to the Company or another party; or (iv) is independently developed by Dealer or by its
affiliates without use of the Due Diligence Information.
Dealer agrees that its obligation of non-disclosure, non-use and confidentiality of the Due
Diligence Information as set forth herein shall terminate two (2) years after the date on which the
Due Diligence Information is received by Dealer.
XV. Notice
All notices or other communications required or permitted hereunder shall be in writing and
shall be deemed given or delivered: (i) when delivered personally or by commercial messenger; (ii)
one business day following deposit with a recognized overnight courier service, provided such
deposit occurs prior to the deadline imposed by such service for overnight delivery; (iii) when
transmitted, if sent by facsimile copy, provided confirmation of receipt is received by sender and
such notice is sent by an additional method provided hereunder, in each case above provided such
communication is addressed to the intended recipient thereof as set forth below:
| If to the Dealer Manager: | Xxxxx & Xxxxx Securities, Inc. | |||||
| Xxxxx 000 | ||||||
| 0 Xxxxxx Xxxxxx Xxxxx | ||||||
| Xxxxx Xxx, XX 00000 | ||||||
| Facsimile No.: (000) 000-0000 | ||||||
| Attention: Xxxxx X. Xxxx, CEO and President | ||||||
If to Dealer, to the address or facsimile number and address specified by Dealer on the
signature page hereto.
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XVI. 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 California and shall take effect when signed by Dealer
and countersigned by the Dealer Manager.
We have read the foregoing Agreement and we hereby accept and agree to the terms and
conditions set forth therein.
[SIGNATURE PAGE FOLLOWS]
7
We have read the foregoing Agreement and we hereby accept and agree to the terms and
conditions set forth therein.
Dealer Name:
|
(as shown in FINRA records) | |||||||
Attention: |
||||||||
Address: |
||||||||
City: |
||||||||
State:
|
Zip Code: | |||||||
Telephone No.: |
||||||||
Facsimile No.: |
||||||||
E-mail: |
||||||||
| AGREED TO AND ACCEPTED BY THE DEALER: | ||||
| By: | ||||
| Signature | ||||
| Printed Name | ||||
| Title | ||||
AGREED TO AND ACCEPTED BY
THE DEALER MANAGER:
XXXXX & XXXXX SECURITIES, INC.
THE DEALER MANAGER:
XXXXX & XXXXX SECURITIES, INC.
| By: | ||||
| Xxxxx X. Xxxx | ||||
| Chief Executive Officer and President | ||||
