GK INVESTMENT PROPERTY HOLDINGS II, LLC MANAGING BROKER-DEALER AGREEMENT
Exhibit (1)(a)
GK INVESTMENT PROPERTY HOLDINGS II, LLC
[______________],
2019
JCC
Advisors, LLC
Ladies
and Gentlemen:
GK
Investment Property Holdings II, LLC, a Delaware limited liability
company (the “Company”), is qualifying for the
public sale of a maximum of 50,000 7% Bonds of the Company (the
“Bonds”),
pursuant to an exemption from registration under Regulation A
(“Regulation A”)
promulgated by the Securities and Exchange Commission
(“SEC”) pursuant
to the Securities Act of 1933 (the “Securities Act”), at the purchase
price per Bond set forth in the Offering Statement (as defined
below) (the “Offering”). The Company desires to
appoint JCC Advisors, LLC, a Texas limited liability company, as
managing broker-dealer for the Offering (the “Managing Broker-Dealer”) on the
terms and conditions described herein. The Managing Broker-Dealer
shall have the right to enter into (i) Participating Dealer
Agreements substantially in the form attached to this Managing
Broker-Dealer Agreement (this “Agreement”) as “Exhibit B” with broker-dealers
participating in the Offering (each broker-dealer entering into a
Participating Dealer Agreement being referred to herein as a
“Dealer” and
said broker-dealers being collectively referred to herein as the
“Dealers”); and
(ii) additional agreements with broker-dealers (each broker-dealer
entering into such an agreement being referred to herein as a
“Procurement
Dealer” and said broker-dealers being collectively
referred to herein as the “Procurement Dealers”), all of whom
must be members of the Financial Industry Regulatory Authority
(“FINRA”), for
the purposes of wholesaling the Bonds or procuring other
broker-dealers to participate in the Offering as a Dealer (each
such agreement being referred to herein as a “Procurement Agreement”). The
Company shall have the right to approve any material modifications
or addendums to the form of the Participating Dealer Agreement. The
indemnities, representations and warranties to the Company in
Section 4 herein shall be required of each Procurement Dealer
entering into a Procurement Agreement and becoming a Dealer. The
Company shall have the right to approve any material modification
Terms not defined herein shall have the same meaning as in the
Offering Circular prepared by the Company for use in connection
with the Offering, as it may be amended from time to time in the
future by the Company. In connection with the Offering, the Company
hereby agrees with the Managing Broker-Dealer, as
follows:
1.
Representations and Warranties of the Company
The
Company represents and warrants to the Managing Broker-Dealer, each
Procurement Dealer with whom the Managing Broker-Dealer enters into
a Procurement Agreement, and each Dealer with whom the Managing
Broker-Dealer enters into a Participating Dealer Agreement
that:
1.1 An Offering
Statement on Form 1-A (the “Offering Statement”), including a
preliminary offering circular (the “Preliminary Offering Circular”),
with respect to the Bonds has been prepared by the Company in
accordance with the requirements of the Securities Act, Regulation
A promulgated thereunder and any other rules and regulations (as
applicable) of the SEC (the “Rules and Regulations”) applicable
to the Offering and sale of the Bonds. Upon qualification of the
Offering Statement, the Company shall file a final offering
circular with the SEC pursuant to Rule 253 of Regulation A (the
“Offering
Circular”).
1.2 The Company has
been duly organized and is validly existing as a limited liability
company under the laws of the State of Delaware, and has, and at
all times during the Offering will have, the power and authority to
conduct its business as described in the Offering Circular and the
limited liability company agreement of the Company (the
“Operating
Agreement”). The Company is qualified, or, on or prior
to the date of qualification of the Offering Statement with the
SEC, will qualify to do business in each jurisdiction in which the
ownership or leasing of its properties or the nature or conduct of
its business, as described in the Offering Circular and the
Operating Agreement, requires such qualification, except where the
failure to do so would not have a material adverse effect on the
condition, financial or otherwise, results of operations or cash
flows of the Company (a “Material Adverse
Effect”).
1.3 Upon qualification
of the Offering Statement, the Offering Circular will comply with
the Securities Act and the Rules and Regulations, and the Offering
Circular and any and all authorized printed sales literature or
other sales materials prepared and authorized by the Company for
use with potential investors in connection with the Offering
(“Authorized Sales
Materials”), including without limitation, all testing
the waters material under Rule 255 (“TTW Materials”), when used in
conjunction with the Offering Circular, do not contain any untrue
statements of material facts or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that the foregoing
provisions of this Section 1.3 will not extend to such
statements contained in or omitted from the Offering Circular or
Authorized Sales Materials as are primarily within the knowledge of
the Managing Broker-Dealer, any Procurement Dealer or any of the
Dealers and are based upon information either (a) furnished by
a Dealer in writing to the Managing Broker-Dealer, any Procurement
Dealer or the Company, or (b) furnished by the Managing
Broker-Dealer in writing to the Company specifically for inclusion
therein.
1.4 The Company intends
to use the funds received from the sale of the Bonds as set forth
in the Offering Circular and the Operating Agreement.
1.5 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 Bonds, except such as have been or are to be
obtained under the Securities Act, or where the failure to obtain
such consent, approval, authorization or other order of any
governmental authority would not have a Material Adverse
Effect.
1.6 Unless otherwise
described in the Offering Circular, 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 would be
reasonably expected to have a Material Adverse Effect.
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1.7 There are no
contracts or other documents required by the Securities Act or the
Rules and Regulations to be described in or incorporated by
reference into the Offering Circular which have not been accurately
described in all material respects in the Offering Circular or
incorporated or filed as required.
1.8 The execution and
delivery of this Agreement, the consummation of the transactions
herein contemplated and compliance with the terms of this Agreement
by the Company will not conflict with or constitute a default under
the Operating Agreement or any indenture, mortgage, deed of trust,
lease, or, to the Company’s knowledge, under any rule,
regulation, writ, injunction or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company, except (i) to the extent that
the enforceability of the indemnity and/or contribution provisions
contained in Section 4 of this Agreement may be limited under
applicable securities laws, and (ii) for such conflicts or
defaults that would not reasonably be expected to have a Material
Adverse Effect.
1.9 The Company 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/or contribution
provisions contained in Section 4 of this Agreement may be
limited under applicable securities laws.
1.10 Since
the respective dates as of which information is given in the
Offering Circular and solely through the closing of the Offering,
there has not been any Material Adverse Effect, except as set forth
in or contemplated in the Offering Circular, (a) there has not been
any change in the capitalization of the Company, or in the
business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company, arising for any
reason whatsoever other than in the ordinary course of business and
(b) the Company has not incurred and will not incur any material
liabilities or obligations, direct or contingent.
2.
Covenants of the Company
The
Company covenants and agrees with the Managing Broker-Dealer
that:
2.1 It will prepare and
file with the SEC the Offering Statement (or the equivalent, if a
state securities commission requires a different format), including
all amendments thereto. In addition, it will furnish the Managing
Broker-Dealer, at no expense to the Managing Broker-Dealer, with
such number of printed copies of the Offering Circular, including
all amendments thereto, as the Managing Broker-Dealer may
reasonably request. It will similarly furnish to the Managing
Broker-Dealer and others designated by the Managing Broker-Dealer
as many copies as the Managing Broker-Dealer may reasonably request
in connection with the Offering of: (a) the offering circular,
in preliminary and final form, and every form of supplemental or
amended offering circular; and (b) this
Agreement.
2.2 It will prepare, at
no expense to the Managing Broker-Dealer, the Authorized Sales
Materials. In addition, it will furnish the Managing Broker-Dealer,
at no expense to the Managing Broker-Dealer, with such number of
printed copies of Authorized Sales Materials as the Managing
Broker-Dealer may reasonably request.
2.3 It will use its
reasonable best efforts to cause the Offering Statement to become
qualified with the SEC. If at any time the SEC shall issue any stop
order suspending the qualification of the Circular, and to the
extent the Company determines that such action is in the best
interest of its members, it will use its reasonable best efforts to
obtain the lifting of such order at the earliest possible
time.
2.4 It will not use any
Offering Circular or sales materials for the Offering which have
not been approved by the Managing Broker-Dealer prior to use, and
shall make such modifications, amendments or supplements to the
Offering Circular and Authorized Sales Materials as reasonably
requested by the Managing Broker-Dealer to eliminate any materially
inaccurate or misleading statement contained therein, but no
failure to make any objection or to request any modification,
amendment or supplement shall constitute any representation by the
Managing Broker-Dealer regarding the accuracy or completeness of
the Offering Circular or sales materials prepared by the Company.
If at any time when an Offering Circular 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 Managing
Broker-Dealer, the Offering Circular or Authorized Sales Materials
would include an untrue statement of a material fact or, in view of
the circumstances under which they were made, omit to state any
material fact necessary to make the statements therein not
misleading, the Company will promptly notify the Managing
Broker-Dealer thereof (unless the information shall have been
received from the Managing Broker-Dealer) and will affect the
preparation of an amended or supplemental Offering Circular and
Authorized Sales Materials which will correct such statement or
omission and file such amended or supplemental Offering Circular
and Authorized Sales Materials as required under federal
law.
2.5 Neither the Company
nor any of its affiliates shall make any written or oral
representations or statements to investors that contradict or are
inconsistent with the statements made in the Offering Circular or
the Authorized Sales Material, as then amended or
supplemented.
2.6 The Company will,
as long as any Bonds placed by the Managing Broker-Dealer or any
Dealer remain held by investors purchasing them in the Offering,
furnish directly to the Managing Broker-Dealer one (1) copy of each
report furnished to investors and/or the trustee in the Bonds at
the time such report is furnished to the investors and/or the
trustee.
2.7 Neither the
Company, nor any predecessor of the Company; nor any other issuer
affiliated with the Company; nor any director or executive officer
of the Company or other officer of the Company participating in the
Offering, nor any beneficial owner of 20% or more of the Company's
outstanding voting equity securities, nor any promoter connected
with the Company, is subject to the disqualification provisions of
Rule 262 of the Rules and Regulations.
2.8 Each of the
representations and warranties contained in this Agreement are true
and correct and the Company will comply with each covenant and
agreement contained in this Agreement.
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3.
Agreements and Compensation of Managing Broker-Dealer
3.1 The
Company hereby appoints the Managing Broker-Dealer as its agent and
principal distributor for the purpose of selling for cash, on a
“best efforts”
basis, up to a maximum of 50,000 Bonds through the Dealers, all of
whom shall be members of the FINRA. The Managing Broker-Dealer may
also sell Bonds for cash directly to its own clients and customers
at the public offering price and subject to the terms and
conditions stated in the Offering Circular. The Managing
Broker-Dealer hereby accepts such agency and distributorship and
agrees to use its best efforts to sell the Bonds on said terms and
conditions. The Managing Broker-Dealer represents to the Company
that it is a member of FINRA, that it and its employees and
representatives have all required licenses and registrations to act
under this Agreement, and that each shall remain a member or duly
licensed, as the case may be, during the Offering.
3.2 Promptly after the
qualification of the Bonds as exempt from registration pursuant to
Regulation A by the SEC, the Managing Broker-Dealer and the
Dealers shall commence the offering of the Bonds for cash to the
public in jurisdictions in which the Bonds are registered or
qualified for sale or in which such offering is otherwise
permitted. The Managing Broker-Dealer and the Dealers will suspend
or terminate offering of the Bonds upon request of the Company at
any time and will resume offering the Bonds upon subsequent request
of the Company. Subject to the Company’s compliance with its
obligations hereunder, the Managing Broker-Dealer will comply with
all applicable federal securities laws, including the Securities
Act, Exchange Act, and the applicable rules and regulations of
FINRA (the “FINRA
Rules”).
3.3 Except as otherwise
provided in the “Plan of
Distribution” section of the Offering Circular, as
compensation for the services rendered by the Managing
Broker-Dealer, the Company agrees that it will pay to the Managing
Broker-Dealer sales commissions, Managing Broker-Dealer Fee,
allowances and reimbursements set forth on Exhibit A attached hereto. It is
understood that no sale shall be regarded as effective unless and
until accepted by the Company. The Company reserves the right in
its sole discretion to accept or reject any subscription for Bonds
(each a “Subscription”) in whole or in part
for a period of thirty (30) days from the receipt of the
Subscription. Any Subscription not accepted within thirty (30) days
of receipt shall be deemed rejected. The Bonds will be offered
during a period commencing at such time as set forth in the
Offering Circular, and continuing until the earlier of the second
anniversary of qualification of the Offering Statement, subject to
extension in the sole discretion of GK Development, Inc. dba GK
Real Estate (the “Manager”) for an additional twelve
(12) months, or the date upon which all $50,000,000 in offering
proceeds have been received (the “Offering Termination
Date”). The Company may accept purchases of the Bonds as soon
as the Offering Statement has been qualified by the SEC. Following
qualification, the Company will conduct closings in the Offering at
its discretion. The Managing Broker-Dealer further understands and
agrees that the fees, commission or compensation to the Managing
Broker-Dealer for the sale of Bonds described herein is conditioned
upon acceptance of sales by the Company as set forth in this
Section 3.3, and that the failure to do so shall relieve the
Company or any other party of any obligation to pay Managing
Broker-Dealer for any services rendered by Managing Broker-Dealer
in connection with the sale of Bonds under this Agreement, other
than as specified herein. The Company will not be liable or
responsible to any Dealer for direct payment of commissions to any
Dealer, it being the sole and exclusive responsibility of the
Managing Broker-Dealer for payment of commissions to Dealers. The
Company will not be liable or responsible to any Procurement Dealer
for direct payment of fees to any Procurement Dealer, it being the
sole and exclusive responsibility of the Managing Broker-Dealer for
payment of fees to Procurement Dealers. Notwithstanding the above,
at the direction of the Managing Broker-Dealer, the Company may act
as agent of the Managing Broker-Dealer by making direct payment of
commissions to Dealers or fees to Procurement Dealers on behalf of
the Managing Broker-Dealer without incurring any liability;
provided, that the Managing Broker-Dealer may direct the Company in
writing to discontinue payments of commissions to any Dealer or
fees to Procurement Dealers at any time, and the Company shall
comply with the Managing Broker-Dealer’s written instructions
regarding such payments.
Notwithstanding the
foregoing, no fee, compensation or expense reimbursement may be
paid to the Managing Broker-Dealer, any Procurement Dealer or any
Dealer following the termination of this Agreement in violation of
FINRA Conduct Rule 5110(f)(2)(D). No compensation in connection with
the Offering will be paid to underwriters, broker-dealers, or
affiliates thereof out of the proceeds of the Offering prior to the
release of such proceeds from the Escrow Account of the Offering
(as defined hereinafter). Any such payments from sources other than
proceeds of the Offering shall be made only on the basis of bona
fide transactions.
3.4 The Managing
Broker-Dealer represents and warrants to the Company that the
information under the caption “Plan of Distribution” in the
Offering Circular and all other information furnished to the
Company by the Managing Broker-Dealer in writing expressly for use
in the Offering Circular, or any amendment or supplement thereto,
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.
3.5 The Managing
Broker-Dealer represents and warrants to the Company that it will
not use any sales literature not authorized and approved by the
Company, use any “broker-dealer use only” materials
with members of the public, or make any unauthorized verbal
representations or verbal representations which contradict or are
inconsistent with the statements made in the Offering Circular or
the Authorized Sales Material in connection with offers or sales or
the Bonds.
3.6 The Managing
Broker-Dealer is a duly organized and validly existing limited
liability company under the laws of Texas.
3.7 No consent,
approval, authorization or other order of any governmental
authority is required in connection with the execution or delivery
by the Managing Broker-Dealer of this Agreement, except such as may
be required under the Securities Act.
3.8 There are no
actions, suits or proceedings pending or to the knowledge of the
Managing Broker-Dealer, threatened against the Managing
Broker-Dealer 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 could be reasonably
expected to have a material adverse effect on the Managing
Broker-Dealer or the ability of the Managing Broker-Dealer to
perform its obligations under this Agreement or to participate in
the Offering as contemplated by the Offering Circular.
3.9 The execution and
delivery of this Agreement, the consummation of the transactions
herein contemplated and compliance with the terms of this Agreement
by the Managing Broker-Dealer will not conflict with or constitute
a default under any operating agreement or other similar agreement,
indenture, mortgage, deed of trust, lease, or, to the Managing
Broker-Dealer’s knowledge, under any rule, regulation, writ,
injunction or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction
over the Managing Broker-Dealer, except to the extent that the
enforceability of the indemnity and/or contribution provisions
contained in Section 4 of this Agreement may be limited under
applicable securities laws.
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3.10 The
Managing Broker-Dealer 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/or contribution provisions contained in
Section 4 of this Agreement may be limited under applicable
securities laws.
3.11 Except
for Participating Dealer Agreements and Procurement Agreements, no
agreement will be made by the Managing Broker-Dealer with any
person permitting the resale, repurchase or distribution of any
Bonds purchased by such person.
3.12 The
Managing Broker-Dealer represents that the commissions and fees
payable to the Managing Broker-Dealer as set forth in this
Agreement are fair, reasonable and not in excess or violation of
applicable rules, regulations and other requirements of the SEC,
FINRA, Act, the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”).
3.13 Neither
the Managing Broker-Dealer, any Procurement Dealer nor any Dealer,
nor any managing member of the Managing Broker-Dealer, any
Procurement Dealer or any Dealer, nor any director or executive
officer of the Managing Broker-Dealer, any Procurement Dealer or
any Dealer or other officer of the Managing Broker-Dealer, any
Procurement Dealer or any Dealer participating in the Offering is
subject to the disqualification provisions of Rule 262 of the Rules
and Regulations. No registered representative of the Managing
Broker-Dealer, any Procurement Dealer or any Dealer, or any other
person being compensated by or through the Managing Broker-Dealer,
any Procurement Dealer or any Dealer for the solicitation of
investors, is subject to the disqualification provisions of Rule
262 of the Rules and Regulations.
3.14 If
and to the extent that the Managing Broker-Dealer directly places
any of the Bonds sold to investors in the Offering, the Managing
Broker-Dealer shall be deemed to have made the representations,
warranties and covenants of a Dealer as contained in the
Participating-Dealer Agreement as if it had entered into a
Participating Dealer Agreement, as a Dealer, with the
Company.
4.
Indemnification
4.1 For
the purposes of this Section 4, an entity’s
“Indemnified
Parties” shall include such entity’s officers,
directors, employees, members, partners, affiliates, agents and
representatives, and each person, if any, who controls such entity
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act.
4.2 The Company will
indemnify, defend (subject to Section 4.6) and hold harmless the
Managing Broker-Dealer, the Procurement Dealers and the Dealers, as
applicable, and their respective Indemnified Parties, from and
against any losses, claims (including the reasonable cost of
investigation), damages or liabilities, joint or several, to which
such Dealers, Procurement Dealers or the Managing Broker-Dealer, as
applicable, or their respective Indemnified Parties, may become
subject, under the Securities Act or the Exchange Act, or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (a)
in whole or in part, any material inaccuracy in a representation or
warranty contained herein by the Company, any material breach of a
covenant contained herein by the Company or any material failure by
the Company to perform its obligations hereunder or to comply with
state or federal securities laws applicable to the Offering, or (b)
any untrue statement or alleged untrue statement of a material fact
contained (i) in any Offering Statement or any post-qualification
amendment thereto or in the Offering Circular or any amendment or
supplement to the Offering Circular or (ii) in any Authorized Sales
Materials, or (c) the omission or alleged omission to state a
material fact required to be stated in the Offering Statement or
any post-qualification amendment thereof necessary to make the
statements therein not misleading, and the Company will reimburse
each Dealer, Procurement Dealer or the Managing Broker-Dealer, as
applicable, and their respective Indemnified Parties, for any legal
or other expenses reasonably incurred by such Dealer, Procurement
Dealer or the Managing Broker-Dealer, as applicable, and their
respective Indemnified Parties, in connection with investigating or
defending such loss, claim, damage, liability or action;
provided, however, that the
Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of, or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission, , made in reliance upon and in conformity with
written information furnished either (x) to the Company by the
Managing Broker-Dealer or (y) to the Company or the Managing
Broker-Dealer by or on behalf of any Dealer, in each case expressly
for use in the Offering Statement or any post-qualification
amendment thereof, or the Offering Circular or any such amendment
thereof or supplement thereto. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
Notwithstanding the foregoing the indemnification and agreement to
hold harmless provided in this Section 4.2 is further limited to
the extent that no such indemnification by the Company of a Dealer
or the Managing Broker-Dealer, or their respective Indemnified
Parties, shall be permitted under this Agreement for, or arising
out of, an alleged violation of federal or state securities laws,
unless one or more of the following conditions are met: (i) there
has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular
indemnitee; (ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the
particular indemnitee; or (iii) a court of competent jurisdiction
approves a settlement of the claims against the particular
indemnitee 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
Commission and of the published position of any state securities
regulatory authority in which the Bonds were offered or sold as to
indemnification for violations of securities laws. The Manager will
indemnify and hold harmless the Dealer Manager and Dealers, their
officers and directors and each person, if any, who controls the
Dealer Manager and Dealers within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against
any losses, claims, damages or liabilities, joint or several, to
which the Dealer Manager, its officers and directors, or such
controlling person may become subject, under the Securities Act or
the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of
or are based upon the termination of the Offering, and underwriting
compensation has exceeded 10% of gross proceeds of this Offering at
the time of such termination.
4.3 The Managing
Broker-Dealer will indemnify, defend and hold harmless the Company,
its Indemnified Parties and each person who has signed the Offering
Statement, from and against any losses, claims, damages or
liabilities to which any of the aforesaid parties may become
subject, under the Securities Act or the Exchange Act, or
otherwise, insofar as such losses, claims (including the reasonable
cost of investigation), damages or liabilities (or actions in
respect thereof) arise out of or are based upon (a) in whole or in
part, any material inaccuracy in a representation or warranty
contained herein by the Managing Broker-Dealer, any material breach
of a covenant contained herein by the Managing Broker-Dealer, or
any material failure by the Managing Broker-Dealer to perform its
obligations hereunder or (b) any untrue statement or any alleged
untrue statement of a material fact contained (i) in any Offering
Statement or any post-qualification amendment thereto or (ii) in
any Authorized Sales Materials, or (c) the omission or alleged
omission to state a material fact required to be stated in the
Offering Statement or any post-qualification amendment thereof
necessary to make the statements therein not misleading,
provided, however, that in
each case described in clauses (b) and (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 the Managing Broker-Dealer specifically for use
with reference to the Managing Broker-Dealer in the preparation of
the Offering Statement or any such post-qualification amendments
thereof or the Offering Circular or any such amendment thereof or
supplement thereto, or (d) any use of sales literature by the
Managing Broker-Dealer not authorized or approved by the Company or
any use of “broker-dealer use only” materials with
members of the public concerning the Bonds by the Managing
Broker-Dealer, or (e) any untrue statement made by the Managing
Broker-Dealer or its representatives or agents or omission to state
a fact necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading in
connection with the offer and sale of the Bonds, or (f) any
material violation by the Managing Broker-Dealer of this Agreement,
or (g) any failure by the Managing Broker-Dealer to comply with
applicable laws governing money laundry abatement and
anti-terrorist financing efforts in connection with the Offering,
including applicable FINRA Rules, regulations pursuant to the
Exchange Act (“Exchange Act
Regulations”) and the USA PATRIOT Act, or (h) any
other failure by the Managing Broker-Dealer to comply with
applicable FINRA Rules or Exchange Act Regulations. The Managing
Broker-Dealer will reimburse the aforesaid parties in connection
with investigation or defense of such loss, claim, damage,
liability or action. This indemnity agreement will be in addition
to any liability which the Managing Broker-Dealer may otherwise
have.
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4.4 Promptly after
receipt by any indemnified party under this Section 4 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 4, promptly notify the indemnifying party
of the commencement thereof; provided, however, the failure to give
such notice shall not relieve the indemnifying party of its
obligations hereunder except to the extent it shall have been
prejudiced by such failure. 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 4.6) 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.
4.5 An indemnifying
party under Section 4 of this Agreement shall be obligated to
reimburse an indemnified party for reasonable legal and other
expenses as follows:
(a) In
the case of the Company indemnifying the Managing Broker-Dealer,
the advancement of Company funds to the Managing Broker-Dealer for
legal expenses and other costs incurred as a result of any legal
action for which indemnification is being sought shall be
permissible only if all of the following conditions are satisfied:
(i) the legal action relates to acts or omissions with respect to
the performance of duties or services on behalf of the Company;
(ii) the legal action is initiated by a third party who is not a
stockholder of the Company or the legal action is initiated by a
stockholder of the Company acting in his or her capacity as such
and a court of competent jurisdiction specifically approves such
advancement; and (iii) the Managing Broker-Dealer undertakes to
repay the advanced funds to the Company, together with the
applicable legal rate of interest thereon, in cases in which the
Managing Broker-Dealer is found not to be entitled to
indemnification.
(b) In
any case of indemnification other than that described in Section
4.6(a) above, the indemnifying party shall pay all legal fees and
expenses reasonably incurred by 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 participating 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.
4.6 To provide for just
and equitable contribution in circumstances in which the
indemnification provided pursuant to this Section 4 is for any
reason held to be unavailable from the Company, the Managing
Broker-Dealer or the Dealers, as the case may be, the Company, the
Managing Broker-Dealer and the Dealers shall contribute to the
aggregate losses, claims, damages or liabilities (including any
amount paid in settlement of any action, suit, or proceeding or any
claims asserted) in such amounts as a court of competent
jurisdiction may determine (or in the case of settlement, in such
amounts as may be agreed upon by the parties) in such proportion to
reflect the relative fault of the Company, on the one hand, and the
Managing Broker-Dealer and Dealers, on the other hand, in
connection with the events which resulted in such losses, claims,
damages or liabilities. The relative fault of the parties
shall be determined by reference to, among other things, whether
any untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or Managing
Broker-Dealer or Dealer, on the other, and the parties’
relative intent, knowledge, access to information and opportunity
to correct or prevent such omission or statement.
4.7 The indemnity
agreements contained in this Section 4 shall remain operative
and in full force and effect regardless of (a) any
investigation made by or on behalf of the Company, the Managing
Broker-Dealer, any Dealer, (b) delivery of any Bonds and payment
therefor, and (c) any termination or completion of this
Agreement or any Participating Dealer Agreement. A successor of any
Dealer, any Procurement Dealer, or of any of the parties to this
Agreement, as the case may be, shall be entitled to the benefits of
the indemnity agreements contained in this
Section 4.
5.
Applicable Law and Venue
This
Agreement was executed and delivered in, and its validity,
interpretation and construction shall be governed by, the laws of
the State of Delaware; provided however, that causes of action for
violations of federal or state securities laws shall not be
governed by this Section. The Company, the Managing Broker-Dealer
and each Dealer hereby agree that venue for any action brought in
connection with this Managing Broker-Dealer Agreement shall lie
exclusively in ▇▇▇▇ County, Illinois.
6.
Counterparts
This
Agreement may be executed 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.
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7.
Successors and Amendment
7.1 This
Agreement shall inure to the benefit of and be binding upon the
Managing Broker-Dealer and the Company and their respective
successors, and to the benefit of the Dealers to the extent set
forth in Sections 1 and 4 hereof. 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.
7.2 This Agreement may
be amended by the written agreement of the Managing Broker-Dealer
and the Company.
8.
Term
This
Agreement may be terminated by either party (a) immediately upon
notice to the other party in the event that the other party shall
have materially failed to comply with any of the material
provisions of this Agreement on its part to be performed during the
term of this Agreement or if any of the representations,
warranties, covenants or agreements of such party contained herein
shall not have been materially complied with or satisfied within
the times specified or (b) by either party on 60 days’
prior written notice.
In any
case, this Agreement shall expire at the close of business on the
Offering Termination Date. The provisions of Sections 4, 5 and
13-17 hereof shall survive such termination. In addition, the
Managing Broker-Dealer, upon the expiration or termination of this
Agreement, shall (1) promptly deposit any and all funds in its
possession which were received from investors for the sale of Bonds
into such account as the Company may designate; and
(2) promptly deliver to the Company all records and documents
in its possession which relate to the Offering which are not
designated as dealer copies. The Managing Broker-Dealer, at its
sole expense, may make and retain copies of all such records and
documents, but shall keep all such information confidential. The
Managing Broker-Dealer shall use its best efforts to cooperate with
the Company to accomplish any orderly transfer of management of the
Offering to a party designated by the Company. Upon expiration or
termination of this Agreement, the Company shall pay to the
Managing Broker-Dealer all commissions to which the Managing
Broker-Dealer is or becomes entitled under Section 3 at such
time as such commissions become payable.
9.
Confirmations
The
Company hereby agrees to prepare and send confirmations to all
purchasers of Bonds whose Subscriptions are accepted by the
Company.
10.
Submission of Orders
10.1 On
or after the date of this Agreement, the Company, the Managing
Broker-Dealer and UMB Bank (the “Escrow Agent”) will enter into an
Escrow Agreement substantially in the form included as an exhibit
to the Offering Statement (the “Escrow Agreement”), pursuant to
which an escrow account will be established (the
“Escrow
Account”), at the Company’s expense, for the
benefit of those persons subscribing for Bonds (the
“Subscribers”).
10.2 Prior
to closing on each Subscription, (i) each Subscriber will execute
and deliver a Purchaser Questionnaire and Subscription Agreement
(each, a “Subscription
Agreement”) to the Company and the Company will make
available to the Managing Broker-Dealer and the Escrow Agent copies
of each such Subscription Agreement; (ii) each Subscriber will
transfer to the Escrow Account funds in an amount equal to the
price per Bond as shown on the cover page of the Offering Circular
multiplied by the number of Bonds subscribed by such Subscriber
(the “Subscription
Amount”); and (iii) the Escrow Agent will notify the
Company and the Managing Broker-Dealer in writing when the Escrow
Account contains collected funds in the amount equal to the
Subscription Amount.
10.3 If
on any date the Escrow Agent shall have received the Subscription
Amount and the Company accepts such Subscription (each such date, a
“Closing Date”),
the Escrow Agent will release the Subscription Amount from the
Escrow Account for collection by the Company and the Managing
Broker-Dealer as provided in the Escrow Agreement and the Company
shall deliver the Bonds purchased on such Closing Date to the
Subscriber, which delivery may be made through the facilities of
the Depository Trust Company (“DTC”) or via book entry
with the Company’s securities registrar and transfer agent,
UMB Bank (the “Transfer
Agent”). All closings (each, a “Closing”) shall take place at the
office of the Managing Broker-Dealer or such other location as the
Managing Broker-Dealer and the Company shall mutually agree. All
actions taken at the Closing shall be deemed to have occurred
simultaneously on such Closing Date.
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11.
Notice
Any
notice in this Agreement permitted to be given, made or accepted by
either party to the other, must be in writing and may be given or
served by (1) overnight courier, (2) depositing the same
in the United States mail, postpaid, certified, return receipt
requested, or (3) facsimile transmission. Notice deposited in
the United States mail shall be deemed given three (3) business
days after mailing. Notice given in any other manner shall be
effective when received at the address of the addressee. For
purposes hereof the addresses of the parties, until changed as
hereafter provided, shall be as follows:
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To
Company:
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GK
Investment Property Holdings II, LLC
c/o GK
Development, Inc. dba GK Real Estate
▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
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To
Managing Broker-Dealer:
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JCC
Advisors, LLC
▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇
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12.
Severability
In the
event that any court of competent jurisdiction declares any
provision of this Agreement invalid, such invalidity shall have no
effect on the other provisions hereof, which shall remain valid and
binding and in full force and effect, and to that end the
provisions of this Agreement shall be considered
severable.
13.
No Waiver
Failure
by either party to promptly insist upon strict compliance with any
of the obligations of the other party under this Agreement shall
not be deemed to constitute a waiver of the right to enforce strict
compliance with respect to any obligation hereunder.
14.
Recovery of Costs
If any
legal action or other proceeding is brought for the enforcement of
this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys’ fees and other
costs incurred in that action or proceeding (and any additional
proceeding for the enforcement of a judgment) in addition to any
other relief to which it or they may be entitled.
15.
Assignment
This
Agreement may not be assigned by either party, except with the
prior written consent of the other party. This Agreement shall be
binding upon the parties hereto, their heirs, legal
representatives, successors and permitted assigns.
16.
Privacy Act
To
protect Customer Information (as defined below) and to comply as
may be necessary with the requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act, the relevant state and federal regulations pursuant thereto
and state privacy laws, the Managing Broker-Dealer hereby agrees to
the confidentiality and non-disclosure obligations set forth
herein.
16.1 “Customer
Information” means any information contained on a
customer’s application or other form and all nonpublic
personal information about a customer that a party receives from
the other party. “Customer
Information” shall include, but not be limited to,
name, address, telephone number, social security number, health
information and personal financial information (which may include
consumer account number).
16.2 The
Managing Broker-Dealer understands and acknowledges that it may be
financial institutions subject to applicable federal and state
customer and consumer privacy laws and regulations, including Title
V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act (15 U.S.C. 6801, et seq.) and
regulations promulgated thereunder (collectively, the
“Privacy Laws”),
and any Customer Information received by the Managing Broker-Dealer
is received with limitations on its use and disclosure. The
Managing Broker-Dealer agrees that it is prohibited from using the
Customer Information received other than (i) as required by law,
regulation or rule, or (ii) to carry out the purposes for which one
party discloses Customer Information to the other party pursuant to
this Agreement, as permitted under the “use in the ordinary course of
business” exception to the Privacy Laws.
16.3 The
Managing Broker-Dealer shall establish and maintain safeguards
against the unauthorized access, destruction, loss, or alteration
of Customer Information in its control which are no less rigorous
than those maintained by the Managing Broker-Dealer for its own
information of a similar nature. In the event of any improper
disclosure of any Customer Information, the Managing Broker-Dealer
will immediately notify the Company.
17.
Third Party Beneficiary
Each
Procurement Dealer is expressly made a third party beneficiary of
this Agreement, including, without limitation, regarding the
representations and warranties contained in Section 1 and the
indemnification obligations contained in Section 4.
[Signatures
appear on next page]
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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,
GK
Investment Property Holdings II, LLC
By: GK
Development, Inc. dba GK Real
Estate
Its:
Manager
By:
________________________
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its:
President and Sole Director
Accepted
and agreed as of the
date
first above written.
MANAGING BROKER-DEALER
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JCC ADVISORS,
LLC
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By:
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▇▇▇▇
▇▇▇▇▇▇▇
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President &
CEO
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8
Exhibit A
Managing Broker-Dealer Compensation:
The
Managing Broker-Dealer will receive selling commissions equal to
5.5% of aggregate gross offering proceeds, which it may re-allow,
in whole or in part to the Procurement Dealers and Dealers. The
Managing Broker-Dealer will also receive a Managing Broker-Dealer
Fee of up to 2.5% of aggregate gross offering proceeds, which it
may re-allow, in whole or in part to the Procurement Dealers and
Dealers. Additionally, the Company has agreed to pay to the
Managing Broker-Dealer a non-accountable marketing and due
diligence expense reimbursement in an amount up to 1% of aggregate
gross offering proceeds, which will be re-allowed to the
Procurement Dealers and Dealers. The aggregate of the selling
commissions, the Managing Broker-Dealer Fee and non-accountable
marketing and due diligence expense reimbursements equate to a
maximum amount of 9% of gross proceeds from the
Offering.
The
Company intends to reimburse its Manager, GK Development, Inc.
dba GK
Real Estate, for the cumulative organizational and offering
expenses incurred by its Manager and its affiliates in connection
with the Offering and its organization in an amount equal to up to
2.5% of the gross offering proceeds from this
Offering.
The
Manager intends to use, in whole or in part, the aforementioned
organizational and offering fee to reimburse the Managing
Broker-Dealer for its underwriting expenses in connection with the
Offering. Such underwriting expenses of the Managing Broker-Dealer
may include, without limitation, fees paid by registered
representatives associated with the Managing Broker-Dealer to
attend retail seminars sponsored by the Procurement Dealers and
Dealers, costs associated with sponsoring conferences, including
reimbursements for registered representatives associated with the
Procurement Dealers and Dealers to attend educational conferences
sponsored by the Company or the Managing Broker-Dealer,
reimbursements for customary lodging, meals and reasonable
entertainment expenses and promotional items, technology costs and
legal fees of the Managing Broker-Dealer. The marketing fees may be
paid to any particular Procurement Dealer or Dealer based upon
prior or projected volume of sales and the amount of marketing
assistance and the level of marketing support provided by a
Procurement Dealer and Dealer in the past and anticipated to be
provided in this Offering. Any such underwriting expenses must
comply with FINRA Rules, including FINRA Rules concerning non-cash
compensation. In no event will the maximum amount of underwriting
compensation from any source (including fees described in this
paragraph, or the selling commissions, the Managing Broker-Dealer
Fee and non-accountable marketing and due diligence expense
reimbursements discussed above) payable to underwriters,
broker-dealers or affiliates exceed 10% of the gross offering
proceeds of this offering.
The
Managing Broker-Dealer will monitor the aggregate amount of
underwriting compensation that the Company and its Manager pay in
connection with this Offering in order to ensure compliance with
the underwriting compensation limits of applicable FINRA rules,
including FINRA Rule 2310, which prohibits underwriting
compensation in excess of 10% of the gross offering
proceeds.
9
Exhibit B
PARTICIPATING DEALER AGREEMENT
10