Exhibit 1.1
UNITED MORTGAGE TRUST
A MARYLAND REAL ESTATE INVESTMENT TRUST
SELLING GROUP MANAGER AGREEMENT
_______________________, 1996
First Financial United Investments, Ltd.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
United Mortgage Trust, a Maryland real estate investment trust (the
"Company"), of which the Advisor (the "Advisor") is Mortgage Trust Advisors,
Inc., a Texas corporation, has been organized to invest in mortgage
investments. The Company will invest primarily in first lien mortgages, most
if not all of which will not be guaranteed by ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇ or
▇▇▇▇▇▇▇ Mac or insured by FHA. Unless otherwise stated herein, defined terms
are used herein as defined in the Prospectus (as hereinafter defined),
included in the Registration Statement (as hereinafter defined), filed with
the Securities and Exchange Commission (the "Commission").
This Agreement sets forth the understandings and agreements between
the Company and you whereby, subject to the terms and conditions herein
contained, you will offer to sell, on a best commercially reasonable efforts
basis, and the Company will sell, 2,500,000 shares of a beneficial interest
(the "Shares") in the Company, priced at $20 per share.
1. Representations and Warranties of the Company.
1.1. Registration Statement. The Company has filed with the Commission
a registration statement on Form S-11 (File No. 333-10109), including a
related preliminary prospectus, for the registration of the Shares under the
Securities Act of 1933, as amended (the "Securities Act") and has filed such
amendments of such registration statement and such amended preliminary
prospectuses as may have been required to the date hereof. Such registration
statement, as amended, and the prospectus on file with the Commission at the
time such registration statement becomes effective (including financial
statements and schedules, exhibits and all other documents filed as a part
thereof or incorporated therein) are herein called, respectively, the
"Registration Statement" and the "Prospectus", except that if the registration
statement is amended by a post-effective amendment, from and after the date of
effectiveness of such post-effective amendment, the term "Registration
Statement" shall refer to the Registration Statement as so amended, and if a
prospectus or prospectus supplement is filed or transmitted for filing
pursuant to Rule 424(b) of the Rules and Regulations of the Commission under
the Securities Act (the "Regulations"), the term "Prospectus" shall refer to
the prospectus filed or transmitted for filing pursuant to Rule 424(b) of the
Regulations from and after the date on which it shall have been so filed or
transmitted to the Commission for filing or to the Prospectus as supplemented,
if supplemented pursuant to Rule 424(c) of the Regulations, from and after the
date on which such supplement shall have been so filed or transmitted to the
Commission for filing.
1.2. Organization; Qualification. The Company has been duly formed and
is validly existing as a real estate investment trust pursuant to its
Declaration of Trust under the laws of the State of Maryland with full power
and authority to own its property and to conduct its business as described in
the Prospectus. The Company is or will be duly qualified under the laws of
each other jurisdiction, if
any, in which the conduct of its business or ownership of its assets requires
such action, except where the failure to be so qualified will not have a
material adverse effect on the business of the Company.
1.3 Lack of Subsidiaries. The Company does not have any interest in
any corporation, partnership or other entity that would constitute a
"significant subsidiary" as defined in the regulations promulgated under the
Securities Act.
1.4. Validity of Declaration of Trust; Shares. The Amended and
Restated Declaration of Trust of the Company (the "Declaration of Trust") has
been duly and validly authorized, executed and delivered by or on behalf of
each of the Trustees, and constitutes the valid, binding and enforceable
agreement of each of them. The Company has an authorized capitalization of
100,000,000 Shares, par value $.01 per Share. The Declaration of Trust
provides for the issuance and sale of the Shares; all action required to be
taken by the Company and the Trustees as a condition to the offering or sale
of the Shares has been, or prior to the Initial Closing (as hereinafter
defined), if any, will have been, taken; and upon recordation of the holders
of the Shares on the books of the Company in accordance with the Declaration
of Trust, the purchasers will be entitled to the interest and rights
specifically set forth in the Declaration of Trust and will be entitled to
direct any voting of such Shares all as provided in the Declaration of Trust.
On each Closing Date (as hereinafter defined) the Shares will conform to all
statements with respect to the descriptions thereof contained in the
Prospectus. At each Closing Date, the Shares sold at such Closing will have
been duly authorized and validly issued, and upon payment therefor, will be
fully paid and non-assessable by or on behalf of the Company. The Company does
not have and, at each Closing Date will not have, any options to purchase
Shares or securities that are convertible into Shares or any rights to
subscribe for Shares other than as described in the Registration Statement. No
person has any preemptive rights with respect to the Shares.
1.5. Compliance with Securities Act. At the time the Registration
Statement is declared effective by the Commission (the "Effective Date") and
at each Closing Date, the Registration Statement and the Prospectus and any
supplemental sales material will contain all statements which are required to
be stated therein in accordance with the Securities Act and the Regulations,
will comply with the provisions of the Securities Act and the Regulations and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the representations
and warranties in this Section 1.5. shall not apply to statements in or
omissions from the Registration Statement or the Prospectus in reliance upon
and in conformity with information furnished to the Company in writing by you
expressly for use in the Registration Statement or the Prospectus. Every
contract or other document required by the Securities Act or the Regulations
to be filed as an exhibit to the Registration statement has been so filed.
1.6. Tax Status. The Company intends to qualify as a real estate
investment trust (a "REIT") under the Internal Revenue Code of 1986 (the
"Code") and to make an election to be treated as such. Within the times and in
the manner prescribed by law, the Company has filed all federal, state and
local tax returns required by law and has paid all taxes, assessments and
penalties due and payable that could become a lien on the Company's assets.
1.7. Litigation. There is not pending, threatened, or to the knowledge
of the Company, contemplated, any action, suit or proceeding before or by any
court or any Federal, state or local governmental authority or agent to which
the Company is or may be a party, or to which its properties or assets is or
may be subject, or which is not described in the Prospectus, and which might
result in any
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material adverse change in the condition (financial or otherwise), business or
prospects of the Company or might materially and adversely affect any of its
properties or assets.
1.8. Financial Statements. The financial statements of the Company
filed as part of the Registration Statement and included in the Prospectus
fairly present the financial position of the Company at the date indicated.
Such financial statements comply as to form in all material respects with the
requirements of the Securities Act and the Regulations and has been prepared
in conformity with generally accepted accounting principles. The accountants
who expressed an opinion on the financial statements filed as part of the
Registration Statement with the Commission are, with respect to the Company,
independent public accountants as required by the Securities Act and the
Regulations.
1.9. Description of the Company. The condition (financial or
otherwise) of the Company, the business of the Company and the terms and
provisions of the Declaration of Trust conform in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
1.10. Validity of Selling Group Manager Agreement. This Agreement has
been duly and validly authorized, executed and delivered by or on behalf of
the Company and constitutes the valid, binding and enforceable agreement of
the Company.
1.11. Authorized Transaction. The Company is not in default under its
Declaration of Trust or bylaws or any material obligation, agreement or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
evidence of indebtedness, note, lease, franchise, license, permit or other
agreement, instrument, judgment, decree or order to which it is a party, by
which it is bound or to which it or any of its properties or assets is
subject; and there exists no condition which, at the Closing Date, either by
itself or upon notice of passage of time, or both, would constitute a material
default under any such document or instrument or result in the imposition of
any material penalty or acceleration of any indebtedness. The Company will
take steps necessary to comply with all applicable laws and obtain any and all
necessary regulatory and other approvals in connection with the offer and sale
of the Shares, and in connection with the conduct of operations by the Company
as described in the Prospectus. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated by this
Agreement, including the offer and sale of the Shares, will constitute a
breach of, or default under, any instrument or agreement to which the Company
is a party or by which it or any material portion of its assets are bound or
under any order, rule or regulation issued by any court or governmental body
or administrative agency having jurisdiction over the Company. Neither the
nature of the Company or its business or properties, nor any relationship
between the Company and any other person, nor any circumstance in connection
with the offer, issue, sale or delivery of the Shares is such as to require on
behalf of the Company any consent, approval or other action by governmental
body (other than filings required by the Securities Act and applicable state
securities laws) in connection with the execution and delivery of this
Agreement, or the transactions contemplated herein or in the Prospectus, other
than filings which have been made or consents which have been obtained or
which are not required to be made or obtained until after the Closing Date.
1.12. Property. The Company has good and marketable title to or valid
and binding leasehold interests in, all properties and assets described in the
Prospectus as being owned or leased by the Company which are material to its
business, free and clear of all liens (including liens arising under federal
and state environmental codes and regulations), charges, mortgages, pledges,
encumbrances or restrictions, security interests, title defects or defaults of
any kind except those reflected in the Prospectus
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and those which do not materially affect the value of such properties and
assets and do not interfere with the use made and proposed to be made of such
properties and assets.
1.13. Insider Transactions. Except as described in the Prospectus and
excluding payments of salaries to employees in the ordinary course of
business, no current or former shareholder, director, officer or key employee
of the Company or any "Associate" (as defined in Rule 405 promulgated under
the Securities Act) of any such person, is presently, directly or indirectly
through his affiliation with any other person or entity, a party to any
material transaction with the Company providing for the furnishing of services
by or to, or rental of real or personal property from or to, or otherwise
requiring cash payments to or by any such person. In addition, except as
described in the Prospectus, there are no outstanding loans or advances, other
than ordinary travel and expense advances, or guarantees of indebtedness by
the Company to or for the benefit of any officer, director, shareholder or
affiliate (as defined in Rule 405) of the Company, or any member of the
families of such, and there are no material transactions between or among the
Company or any of its officers, directors, shareholders or affiliates of a
type or character required to be described in Item 404 of Regulation S-K
promulgated under the Securities Act which are not described in the
Prospectus.
1.14. Securities Violations and Litigation; Bankruptcy. Neither the
Company, any affiliate of the Company, or any officer, director, beneficial
owner of 10% or more of any class of equity securities of the Company:
(a) has filed a registration statement which is the subject of
a currently effective registration stop order entered pursuant to any
state's securities laws within five (5) years prior to the date of
this Agreement;
(b) has been convicted within five (5) years prior to the date
of this Agreement of any felony or misdemeanor in connection with the
offer, purchase or sale of any security, or any felony involving fraud
or deceit, including, but not limited to, forgery, embezzlement,
obtaining money under false pretenses, larceny or conspiracy to
defraud;
(c) is currently subject to any self-regulatory, federal or
state administrative enforcement complaint, investigation, preliminary
or permanent restraining order or judgment entered by any
self-regulatory, federal or state securities administrator within five
(5) years prior to the date of this Agreement, or is subject to any
self-regulatory, federal or state's administrative enforcement
complaint, investigation, preliminary or permanent restraining order
or judgment entered within five (5) years prior to the date of this
Agreement in which fraud or deceit, including, but not limited to,
making untrue statements of material facts and/or omitting to state
material facts, was found;
(d) is subject to any state's administrative enforcement order
or judgment which revokes, denies or prohibits utilization by the
Company of any exemption from registration in connection with the
offer, purchase or sale of securities; or
(e) is currently subject to any order, judgment or decree of
any court of competent jurisdiction temporarily or preliminarily
restraining or enjoining, or is subject to any order, judgment or
decree of any court of competent jurisdiction permanently restraining
or enjoining, such party from engaging in or continuing any conduct or
practice in connection with the
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purchase or sale of any security or involving the making of any false
filing with any jurisdiction, entered within five (5) years prior to
the date of this Agreement; and
The is not nor has there ever been any litigation or governmental
proceeding against the Company involving a charge of fraud or deceit,
violation of state or federal securities laws, or any similar charge. Further,
the Company has not filed any form of bankruptcy proceeding, nor does the
Company contemplate filing any form of bankruptcy proceeding or have any
knowledge with respect to any contemplated or threatened filing of an
involuntary bankruptcy proceeding.
1.15. Insurance. The Company maintains insurance of the types and in
the amounts which is reasonable and customary for its business, including, but
not limited to, general liability insurance and insurance covering all
material real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
1.16. Proceeds. The net proceeds derived from the sale of Securities
will be used in the manner described in the Prospectus subject to the
qualifications set forth therein.
1.17. Changes, etc. Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as may
otherwise be stated in or contemplated by the Registration Statement and the
Prospectus: (a) there has not been any material adverse change in the
condition (financial or otherwise) of the Company, or to any properties or
assets of the Company or to the earnings, affairs or business prospects of the
Company, whether or not arising in the ordinary course of business; (b) there
has not been any material transaction entered into by the Company whether or
not relating to any properties or assets of the Company, or to the knowledge
of the Company other than in the ordinary course of business; (c) there has
not been any increase in the indebtedness or borrowings of or any change in
the capitalization of the Company; and (d) the Company has not issued or sold
any Shares or any right or option to acquire any such interest other than at a
Closing pursuant to this Agreement (other than the 10,000 Shares purchased by
the Advisor prior to the commencement of the offering).
1.18. Investment Company Act. The Company is not an investment company
as that term is defined in the Investment Company Act of 1940, as amended.
1.19. Receipt of Commissions and Fees. Neither the Company nor any
affiliate thereof has received or is entitled to receive, directly or
indirectly, any compensation or other benefit including, but not limited to,
any real estate commission, finder's fee, acquisition fee, selection fee,
nonrecurring management fee or other fee relating to the investments of the
Company, except as described in the Prospectus.
1.20. Payment of Commissions and Fees. Neither the Company nor any
affiliate thereof has paid or awarded, nor will the Company or any affiliate
thereof pay or award, directly or indirectly, any commission or other
compensation to any person engaged to render investment advice to a potential
purchaser of Shares as an inducement to advise the purchase of Shares, except
as such commissions or other compensation may be paid or awarded by you or by
Selected Dealers in connection with the sale of Shares as described in the
Prospectus.
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1.21. Government Consents. Except as set forth in the Registration
Statement and the Prospectus, no authorization, approval or consent of any
court or Federal, state or local governmental authority or agency is necessary
on the part of the Company in connection with the execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby or
the issuance and sale of the Shares, except such as may be required (i) by the
National Association of Securities Dealers, Inc. (the "NASD"), (ii) under the
Securities Act or (iii) under the "blue sky" or securities laws of the
jurisdictions referred to in Section 3.1.3, which in each case have been
obtained or will be obtained when required. With respect to any authorization,
approval or consent which has not yet been obtained, the Company does not have
any reason to believe that such authorization, approval or consent will not be
obtained when required.
1.22. Tax Benefit. The Prospectus does not contain any statement with
respect to the availability of any credit, allowance of any deduction, the
exclusion of income or the securing of any other federal income tax benefit
which the Company knows or has reason to know is incorrect in any material
respect.
2. Sales of Shares.
2.1. Exclusive Agency. The Company hereby appoints you as its
exclusive agent to offer for sale, and hereby agrees to sell, the Initial
Shares and, on the basis of the representations and warranties and subject to
the terms and conditions herein set forth, you accept such appointment and
agree to use your best commercially reasonable efforts as agent to offer for
sale for the account of the Company, the Initial Shares at the public offering
price of $20 per share, payable upon such terms and in such amounts as are
described in the Prospectus. Subject to Section 3.2.3 hereof, you are also
authorized to associate yourself with any securities broker or dealer for the
sale of the Initial Shares (the "Selected Dealers") pursuant to the terms of
this Agreement and a soliciting dealer agreement (the "Selected Dealer
Agreement") in a form satisfactory to the Company, which consent shall not be
unreasonably withheld. Except for the Shares distributed to the Advisor
pursuant to the Advisory Agreement, during the period (the "Offering Period")
from the Effective Date through the Termination Date (as hereinafter defined)
the Company will not sell or agree to sell Shares other than through you as
herein provided. Nothing in this Agreement shall prevent you from entering
into any agency agreement, underwriting agreement or other similar agreement
governing the offer and sale of securities with any other issuer of
securities, and nothing contained herein shall be construed in any way as
precluding or restricting your right to sell or offer for sale securities
issued by any other person; including securities similar to, or competing
with, the Shares.
2.2. Minimum Offering; Termination Date. All sales of Shares will be
conditioned on the receipt and acceptance, within one year from the date of
the Prospectus, of purchases of an aggregate minimum of 125,000 Shares by a
minimum of 100 investors independent of the Company and of each other (the
"Minimum Offering"). The Offering will commence on or about the Effective Date
or such later date as the Company and you shall agree. Subject to the
provisions of Section 8, the Offering will continue until the date (the
"Termination Date") which is the earlier of (i) the date which is one year
from the Effective Date if the Minimum Offering has not been sold at that
date, (ii) the date to which the offering is extended if the Minimum Offering
has been sold by the date which is one year from the Effective Date and the
Company elects to extend the offering from time to time to a date not later
than 24 months after the Effective Date (subject to requalification in any
State in which it is necessary) or (iii) the effective date of termination of
this Agreement pursuant to Section 8 hereof; provided, however, that the
Offering may be terminated by the Company at any time for any reason
whatsoever.
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2.3. Subscription for Shares. Each person desiring to purchase Shares
shall be required to provide an Subscription Agreement and make payment for
the Shares as described in the Prospectus and below. The Company, upon receipt
of a copy of the Subscription Agreement and such other documents as it may
deem necessary or desirable, shall inform such person within 10 days whether
it wishes to accept the proposed purchaser, it being understood that the
Company reserves the right to reject any proposed purchaser.
Payment for subscriptions may be made by an investor by delivery of a
check made payable to "Texas Commerce Bank Escrow," or by a wire transfer of
funds into the escrow account maintained by the Escrow Agent. Each investor
must subscribe for not less than the minimum subscription of 250 Shares (50
Shares (for IRA's and ▇▇▇▇▇ plans).
You will maintain a cumulative list of all investors, denoting thereon
the name and mailing address of each investor, the number of Shares subscribed
for by each investor, the amount of any volume discounts applicable to that
investor and the amount and date of receipt by the Escrow Agent (as defined in
Section 2.4 below) of the deposit of each investor.
2.4. Escrow Agent. Upon receipt of any checks for the purchase price
for the Shares, pursuant to Section 2.3 above, you shall deposit the same in a
segregated interest-bearing escrow account (the "Escrow Account") with Texas
Commerce Bank National Association or such other agent as shall be designated
by you and the Company (the "Escrow Agent") pursuant to the escrow agreement
substantially in the form filed as an exhibit to the Registration Statement
(the "Escrow Agreement"). All such amounts shall be held in the Escrow Account
pursuant to the terms of the Escrow Agreement and in compliance with Rule
15c2-4 of the Securities Exchange Act of 1934. In the event that the Minimum
Offering is not achieved on or before the Termination Date, all Escrow Agent
fees and expenses shall be paid by the Company and all cleared funds then held
in the Escrow Account (including accrued interest) shall be promptly returned
to the respective purchasers as provided in the Escrow Agreement. Each such
deposit shall be accompanied by a properly completed and executed Subscription
Agreement (as set forth in the Prospectus), along with a statement setting
forth the name, address and social security or taxpayer identification number
of each investor whose payment is then being deposited, the amount received
from each such investor, any volume discount given to that investor and the
number of Shares which each such investor has agreed to purchase. You
represent that you will communicate sales data to the Escrow Agent on a daily
basis.
2.5. Initial Closing Date. Upon the receipt of purchases of Shares
representing at least the Minimum Offering, and if the conditions set forth
herein have been satisfied or waived, you and the Company shall determine the
date (the "Initial Closing Date"), time and place at which the initial closing
of the sale of Shares shall occur and provide the Escrow Agent with at least
two business days advance notice of the Initial Closing Date. On the Initial
Closing Date the Escrow Agent will notify you and the Company of: (i) the
amount received for subscriptions for Shares that was on deposit in the Escrow
Account for at least three business days prior to the Initial Closing Date
(the "Initial Subscription Proceeds"), (ii) any volume discounts applicable to
those Initial Subscription Proceeds, (iii) the amount of accrued interest on
the Initial Subscription Proceeds, and (iv) any then unpaid escrow fees and
expenses. On the Initial Closing Date, the Escrow Agent shall: (x) deliver to
you by wire transfer in immediately available funds, as payment of the amounts
owed to you pursuant to Sections 2.7 (a) and (b), an amount equal to ten and
one half percent (10.5%) of the Initial Subscription Proceeds grossed up for
any applicable volume discounts, minus the amount of any volume discounts
applicable to those Initial Subscription Proceeds and (y) deliver to the
Company by wire transfer in immediately available funds
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an amount equal to the balance of the Initial Subscription Proceeds minus any
then unpaid escrow fees and expenses. The Escrow Agent will be directed to
distribute the aggregate accrued interest on the funds held in the Escrow
Account to the purchasers of the Shares, on a pro rata basis, calculated based
on the number of days each purchaser's cleared funds are held in escrow,
without reduction for any fees and reimbursements to be paid to the Escrow
Agent and subject to the applicable withholding provisions of the Internal
Revenue Code. You will, upon your receipt from the Escrow Agent of funds
pursuant to this Section 2.5, deliver (or cause to be delivered) to the
Selected Dealers, by wire transfer in immediately available funds, an amount
equal to the selling commissions payable to them.
2.6. Additional Closing Date. If, after the Initial Closing Date and
on or before the Termination Date, proceeds are received for additional sales
of Shares, and if the conditions set forth herein have been satisfied or
waived, you and the Company shall determine the date ("Additional Closing
Date"), time and place at which each additional closing of the sale of Shares
shall occur and provide the Escrow Agent with at least two business days
advance notice of each Additional Closing Date (the Initial Closing Date and
each Additional Closing Dates are herein referred to each as a "Closing
Date"). On each Additional Closing Date the Escrow Agent will notify you and
the Company of: (i) the amount received for subscriptions for Shares that was
on deposit in the Escrow Account for at least three business days prior to the
Additional Closing Date (the "Additional Subscription Proceeds"), (ii) any
volume discounts applicable to those Additional Subscription Proceeds, (iii)
the amount of accrued interest on the Additional Subscription Proceeds, and
(iv) any then unpaid escrow fees and expenses. On each Additional Closing
Date, the Escrow Agent shall: (x) deliver to you by wire transfer in
immediately available funds, as payment of the amounts owed to you pursuant to
Sections 27.(a) and (b), an amount equal to ten and one half percent (10.5%)
of the Additional Subscription Proceeds grossed up for any applicable volume
discounts, minus any volume discounts applicable to those Additional
Subscription Proceeds; and (y) deliver to the Company by wire transfer in
immediately available funds an amount equal to the balance of the Additional
Subscription Proceeds minus any then unpaid escrow fees and expenses. The
Escrow Agent will be directed to distribute the aggregate accrued interest on
the funds held in the Escrow Account to the purchasers of the Shares, on a pro
rata basis, calculated based on the number of days each purchaser's cleared
funds are held in escrow, without reduction for any fees and reimbursements to
be paid to the Escrow Agent and subject to the applicable withholding
provisions of the Internal Revenue Code. You will, upon your receipt from the
Escrow Agent of funds pursuant to this Section 2.6, deliver (or cause to be
delivered) to the Selected Dealers, by wire transfer in immediately available
funds, an amount equal to the selling commissions payable to them.
2.7. Selling Commissions and Other Compensation. In consideration for
your execution of this Agreement and for the performance of your obligations
hereunder:
(a) The Company agrees to pay you a selling commission (the
"Selling Commission") equal to 10% of the Gross Offering Proceeds
(subject to any volume discounts) from the sale of Shares made by you
and each Selected Dealer. The Gross Offering Proceeds will be equal to
the sum of the Initial Subscription Proceeds and all Additional
Subscription Proceeds grossed up for any applicable volume discounts.
You may, in your sole discretion, provide volume discounts of up to 2%
to any bank, trust company, savings institution, insurance company,
securities dealer, investment company or business development company
as defined in the Investment Company Act of 1940, or a pension or
profit sharing trust with assets of at least $5,000,000
("Institutional Investors") who purchase at least 50,000 Shares. The
application of any volume discounts will reduce the amount of
commissions that would be paid to you but will not change
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the net offering proceeds to the Company. The Selling Commissions will
be paid as provided in Sections 2.5 and 2.6.
(b) The Company agrees to pay you, a due diligence expense
allowance of 0.5% of the Gross Offering Proceeds from the sale of
Shares by you and such Selected Dealers. The due diligence expense
allowance will be paid as provided in Sections 2.5 and 2.6.
(c) At each Closing Date, you shall be entitled to purchase
Shares equal to 0.5% of all Shares sold (12,500 Shares if all Shares
offered are sold) (the "SGM Shares") for a purchase price of $.01 per
Share.
(d) You shall have the right to associate yourself with
Selected Dealers, all of whom will be members of the National
Association of Securities Dealers, Inc. ("NASD") to participate in
selling the shares and you shall have the right to reallow all or any
portion of the Selling Commission and SGM Shares to such Selected
Dealers.
2.8. Finder's Fees. Except as set forth in the Prospectus, none of
you, the Company or the Advisor, or any affiliate thereof, shall pay or award
any finder's fee, commission or other compensation to any person engaged by a
potential purchaser for investment advice as an inducement to such advisor to
advise the purchase of Shares or for any other purpose.
2.9. Effect of Misstatements or Omissions. Notwithstanding anything
contained in this Agreement to the contrary, you shall not, in your sole
discretion, be required to hold a Closing on any Closing Date if at any time
during the period between the immediately preceding Closing Date (or the
Effective Date if there has not been a Closing) and such Closing Date, the
Registration Statement or the Prospectus contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, including, without
limitation, any such untrue statement or omission subsequently cured by an
amendment to the Registration Statement or a supplement to the Prospectus. In
that event, upon your request, the Company will instruct the Escrow Agent to
deliver all funds then remaining in the Escrow Account and all interest earned
thereon to the investors who provided those funds.
3. Covenants.
3.1. The Company. The Company further covenants with you as follows:
3.1.1. Notices. The Company immediately will notify you, and
confirm the notice in writing, (i) when the Registration Statement and any
post-effective amendment thereto become effective, (ii) when any Prospectus is
filed with the Commission or mailed to the Commission for filing pursuant to
Rule 424(b) of the Regulations or any prospectus supplement is filed with the
Commission or transmitted to the Commission for filing pursuant to Rule 424(c)
of the Regulations, (iii) of the issuance by the Commission of any stop order
or of the initiation or threatening of any proceeding for that purpose, (iv)
of the receipt of comments from the Commission with respect to the
Registration Statement or of any request, written or oral, by the Commission
for any amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information relating thereto and (v) of
any fact which would make inaccurate any representation or warranty by the
Company or of any change in facts on which your obligation to perform under
this Agreement is dependent. If the
9
Commission shall enter a stop order at any time, the Company will make every
reasonable effort to obtain the lifting of such order at the earliest possible
moment.
3.1.2. Delivery of Registration Statements, Prospectuses, etc.
The Company will deliver to you, without expense to you, at such locations as
you shall request, (1) as soon as practicable, three signed copies of the
Registration Statement and all amendments thereto, including exhibits and (ii)
as soon as any Prospectus is filed with the Commission or is transmitted to
the Commission for filing pursuant to Rule 424(b) of the Regulations, or any
supplement to the Prospectus is filed with the Commission or is transmitted
for filing pursuant to Rule 424(C) of the Regulations, such number of copies
of the Prospectus and supplements and amendments thereto, if any, as you may
reasonably request.
3.1.3. Blue Sky Qualification. The Company, in good faith, in
cooperation with you will use its best efforts to qualify the Shares, or to
establish an exemption of the Shares from qualification, at or prior to the
time the Registration Statement becomes effective or as soon thereafter as
possible, for offering and sale under the "blue sky" or securities laws of
California, Florida, Illinois, Michigan, Ohio and Texas, with the number of
Shares to be so qualified in each such jurisdiction being as determined by
you, and thereafter to maintain such qualification in effect until the
Termination Date. The Company will cause a "blue sky" survey advising you as
to the jurisdictions in which the Shares have been qualified for offering and
sale to be prepared and delivered to you on or before the Effective Date and
an amendment to be prepared and delivered on each date that (i) the Shares are
qualified in any additional jurisdiction or (ii) the status of the
qualification of the Shares in any jurisdiction is altered in any respect. In
each jurisdiction where such qualification shall be effected, the Company will
file and make such statements or reports at such time as may be required by
the laws of such jurisdiction. The Company immediately will notify you, and
confirm such advice in writing, of the issuance by the authorities in any such
jurisdiction of any stop order or of the initiation or the threatening of any
proceeding for that purpose. If any such authority shall enter a stop order at
any time, the Company will make every reasonable effort to obtain the lifting
of such order at the earliest possible moment.
The filings, notices, applications and other submissions to
state securities administrators required in connection with obtaining
qualification or exemption of the Shares in each state may be made by an
affiliate of the Company or counsel to the Company or by both of them acting
together. The "blue sky" surveys may be prepared by an affiliate of the
Company or counsel to the Company. If a "blue sky" survey is prepared by
counsel to the Company, you understand and acknowledge that counsel to the
Company may rely on representations by the affiliate of the Company concerning
both the actions taken by such affiliate to obtain qualification or exemption
in the states included in the "blue sky" survey and any communications
received by such affiliate from state securities administrators and that
counsel to the Company will have no liability or responsibility for any
actions or omissions of such affiliate of the Company or for any consequences
thereof.
3.1.4. Amendment to Registration Statement, etc. The Company
will not, before the Registration Statement becomes effective, file any
amendment thereto to which you reasonably shall object after being furnished
with a copy thereof. If during the time when a Prospectus is required to be
delivered under the Securities Act any event, including, but not limited to,
any event relating to or affecting the Company shall occur as a result of
which it is necessary to amend or supplement the Prospectus in order to make
the statements in the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a potential purchaser,
the Company will notify you promptly of the occurrence of each such event and
prepare and file with the Commission an amendment or amendments of, or a
supplement or supplements to, the Registration Statement and the Prospectus
will
10
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that the Company will
not file any amendment to the Registration Statement or any supplement to the
Prospectus to which you reasonably shall object after being furnished with a
copy thereof. The Company will furnish to you such information with respect to
themselves as you or your counsel may at any time or from time to time
reasonably request. During the time when a Prospectus is required to be
delivered under the Securities Act, the Company shall comply at their own
expense with all requirements imposed upon them by the Securities Act, the
Regulations, the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"), and by the laws
of the jurisdictions in which the States shall have been qualified for
offering and sale in accordance with the provisions of Section 3.1.3. in order
to permit continued sales of the Shares in accordance with the provisions
hereof and of the Prospectus.
3.1.5. Financial and Other Information. During a period of five
years from the date hereof, the Company will furnish to the person designated
in Section 10 of this Agreement as the recipient of Notices for you (but not
withstanding anything to the contrary contained in such section, not
necessarily to your counsel or any other persons designated in such section),
the following:
(a) as soon as available, and not later than the date on which
the same is filed with the Commission, two copies of each of the
Company's annual and interim financial and other report, application,
communication or document furnished to the Shareholders or filed with
the Commission, including, without limitation, any accountants'
reports;
(b) as soon as available, a copy of any report, application or
document which the Company shall file with or submit to any
administrative authority under the "blue sky" or securities laws of
any state or other jurisdiction;
(c) as soon as available, two copies of every press release to
be issued and every material news item and article in respect of the
Company or its affairs to be released by the Company; and
(d) promptly, such additional documents and information with
respect to the Company and its affairs as you at any time or from time
to time reasonably may request.
3.1.6. Supplemental Sales Material. The Company will deliver to
you in such reasonable quantities as you may request all supplemental sales
material (whether designated solely for broker-dealer use or otherwise)
proposed to be used or delivered by the Company in connection with the
offering of the Shares prior to the use or delivery to third parties of such
material and will not use or deliver any such material to which you shall
object. Prior to the use or delivery to third parties of any such supplemental
sales material, the Company, at its expense, will file such materials (i) in
any jurisdiction where so required by law in which an application for
qualification is pending and (ii) if you so request, with the NASD.
3.1.7. Earnings Statement. The Company will make generally
available to the Shareholders (through compliance with Rule 158 under the
Securities Act or otherwise) as soon as practicable, but not later than 120
days after the close of the period covered thereby, an earnings statement
covering the first complete 12-month fiscal year of the Company commencing
after the Effective Date which shall satisfy the provisions of Section 11(a)
of the Securities Act.
11
3.1.8. Application of Net Proceeds. The Company will apply the
proceeds of the sale of the Shares substantially as set forth under the
caption "Use of Proceeds" in the Prospectus and will file such reports on Form
SR with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required in accordance with
Rule 463 of the Regulations.
3.1.9. Solicitation of Purchasers.
(a) The Company will, and will require its affiliates to,
maintain the confidentiality of the list of Shareholders except as
provided in the Declaration of Trust, and not to use such list to
solicit Shareholders in respect of any other transaction.
(b) The Company agrees and understands that violation of the
provisions of Section 3.1.9(a) of this Agreement will cause you, your
subsidiaries and affiliates irreparable harm and injury and that money
damages you receive will not compensate you for any breach thereof.
Accordingly, the Company agrees that, in addition to monetary damages,
you will be entitled to all such equitable relief, including, without
limitation, injunctive relief, as a court of equity or proper
jurisdiction shall deem appropriate in the circumstances. Such relief
shall not be exclusive of any other rights you may have at law or in
equity. All of the rights and remedies you have hereunder shall be
cumulative and not alternative. The provisions of this Section shall
not limit your remedies upon the breach by the Company of any other
Section of this Agreement.
3.1.10. Other Transactions. The Company will not change its
investment objectives as stated in the Prospectus, except as permitted by the
Declaration of Trust and disclosed in the Prospectus.
3.1.11. Undertakings. The Company will comply with all
provisions of any undertaking contained in the Registration Statement and will
timely file all documents, and any amendments to previously filed documents,
required to be filed by the Company pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
3.1.12. Filings. The Company shall execute or cause to be
executed all such certificates and other documents consistent with the
Declaration of Trust and to do or cause to be done all such filing, recording,
publishing and other acts as may be appropriate to comply with the
requirements of law for the formation and operation of a real estate
investment trust in the State of Maryland and the qualification of the Company
to do business in each jurisdiction in which the conduct of its business
requires such qualification.
3.1.13. Availability of Documentation. The Company shall make
available to you or your authorized representatives ("Authorized
Representatives"), any and all documentation reasonably requested in
connection with your due diligence efforts regarding the Company or the offer
and sale of shares including, but not limited to, information included in the
Registration Statement and the Prospectus.
3.2. The Selling Group Manager. You agree as follows:
3.2.1. Suitability and Disclosure Requirements. You agree, and
you shall use your best commercially reasonable efforts to cause any Selected
Dealers to agree, that:
12
(a) In recommending to a customer the purchase, sale or
exchange of Shares, each of you or they, as the case may be, will
comply with all applicable laws and the rules of the NASD.
(b) Each of you or they, as the case may be, will not execute
any transaction for the discretionary accounts maintained by you or
them, as the case may be, respectively.
(c) Each of you or they, as the case may be, will provide the
Company with accurate blue sky information for all sales made by you
or they, as the case may be, including the state of residence of each
beneficial owner of Shares.
(d) All subscribers must be of a majority age in the
jurisdictions in which they subscribe.
3.2.2. Solicitation of Purchasers. You agree, and you shall
require the Selected Dealers to agree, that each of you or they, as the case
may be:
(a) will not give any information or make any representation in
connection with the offering of Shares other than those contained in
the Prospectus;
(b) will not distribute any sales or advertising material that
has not been approved by the Company and will distribute such
materials in accordance with the legends thereon and applicable
securities laws;
(c) will solicit purchasers for Shares only in the states in
which and to the extent that you have been advised by Berry, Moorman,
King & ▇▇▇▇▇▇, P.C. ("▇▇▇▇▇, ▇▇▇▇▇▇▇"), counsel to the Company, that
such solicitation can be made in accordance with applicable securities
laws and in which you are qualified to so act;
(d) will not sell to an investor that is a Qualified Plan,
including an ▇▇▇ or a ▇▇▇▇▇ Plan (or is using the assets of a
Qualified Plan to make the investment) if the Company, the Sponsor,
the Advisor or any of their Affiliates (i) has investment discretion
with respect to the assets of the Qualified Plan to be invested in the
Company, (ii) regularly gives individualized investment advice which
serves as the primary basis for the investment decisions made with
respect to such assets, or (iii) is otherwise a fiduciary with respect
to such assets; and
(e) will deliver a Prospectus and current supplements, if any,
to each potential investor.
3.2.3. Selected Dealers. You agree to notify the Company, in
writing, prior to entering into any Selected Dealer Agreement. The Company may
reasonably object to the use of such entity as a Selected Dealer, in writing,
within five days from the receipt of such notice and must give reasons for
such objection. You agree not to include in the offering of the Shares any
Selected Dealer to which the Company reasonably objects pursuant to this
Section.
3.2.4. Taxpayer Identification. You acknowledge that the
persons signing the Subscription Agreement as office manager/dealer authorized
signature have the authority to inform the Company, on behalf of your firm, of
the taxpayer identification number of an investor and whether (i)
13
back-up withholding is required under Section 3406 of the Internal Revenue
Code of 1986; and (ii) withholding is required because the investor is a
foreign corporation or a non-resident alien. You further acknowledge that the
company is permitted to rely on such information upon the execution of the
Subscription Agreement by such persons. You will require in your Selected
Dealer Agreements that your Selected Dealers make the same acknowledgements to
the Company.
4. Payment of Expenses.
4.1. Expenses of the Company and the Advisor. The Company will
pay all costs and expenses incident to the performance of the obligations of
the Company and of the Advisor under this Agreement (the "Organization and
Offering Expenses"), including all costs and expenses incident to (i) the
preparation, printing, filing and delivery of the Registration Statement and
the Prospectus, including the cost of all copies thereof and of any
preliminary prospectus and of the Prospectus and any amendment thereof or
supplement thereto, including such quantities of each such document as you
reasonably may request, (ii) the preparation of this Agreement, the
Declaration of Trust, the Advisory Agreement, the Escrow Agreement and all
amendments or supplements thereto, other solicitation material and related
documents and the filing or recording of such certificates or other documents
necessary to comply with the laws of the State of Maryland and other
jurisdictions in which the Company may own properties or conduct business to
the extent applicable thereto, (iii) the delivery of the Shares, including
payment of any applicable transfer tax, (iv) any escrow arrangement in
connection with the offering and sale of the Shares, including any
compensation and reimbursement to the Escrow Agent, (v) the qualification of
the Shares under, and continued compliance with "Blue Sky" or securities laws
of the jurisdictions designated in Section 3.1.3, including filing fees and
the fees and disbursements of counsel incurred in connection therewith and the
cost of printing of the "blue sky" survey and supplements thereto referred to
in Section 3.1.3, (vi) the filing fees payable to the Commission and to the
NASD, (vii) printing and distribution expenses, and (viii) the fees of counsel
and accountants for the Company.
4.2. Expenses of Selling Group Manager. You and the Selected
Dealers will pay all costs and expenses incurred by any of you in connection
with the offering of Shares and, except with respect to the amounts payable
pursuant to Section 2.7, shall not be entitled to reimbursement therefor by
the Company or the Advisor. In the event the Minimum Offering is not achieved,
neither you nor any Selected Dealer shall receive any Selling Commissions or
SGM Shares or other compensation or expense reimbursement in connection with
this offering.
5. Conditions of Your Obligations. Your obligations hereunder and the
right of the Company to the receipt of subscription funds at any closing
hereunder shall be subject to the continued accuracy throughout the Offering
period of the representations, warranties and agreements of the Company of
their obligations hereunder and to the following terms and conditions:
5.1. Effective Registration Statement. The Registration
Statement shall have been declared effective not later than 5:30 p.m., Eastern
time, on the date of this Agreement or such later date and time as shall be
consented to in writing by you and, at any time during the term of this
Agreement, no stop order shall have been issued or proceeding therefor
initiated or threatened by the Commission or by the authorities in any
jurisdiction in which the Shares shall have been qualified for offering and
sale in accordance with the provisions of Section 3.1.3, unless such order or
proceedings have been withdrawn or terminated by the Commission or such
authorities.
14
5.2. Opinion of Counsel for the Company. At the Initial Closing
Date, you shall receive the opinion of Berry, Moorman, counsel for the
Company, in form and substance satisfactory to you and your counsel, to the
effect that:
(a) The Company has been duly formed and is validly existing as
a Maryland real estate investment trust pursuant to its Declaration of
Trust under the laws of the State of Maryland and has the power to
conduct its business as described in the Prospectus.
(b) The Company has authorized the Shares for issuance to the
public pursuant to the Prospectus and such Shares, when issued
pursuant to the Registration Statement and the Declaration of Trust
against full payment therefor, as provided in this Agreement, will,
under the laws of the State of Maryland, be duly and validly issued,
fully paid and nonassessable by the Company.
(c) No approval, authorization or other action by or filing
with, 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 state securities laws.
(d) The execution, delivery and performance of this Agreement
have been duly and validly authorized by all requisite Company action,
and this Agreement has been duly executed and delivered by the
Company.
(e) This Agreement is a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms, (i) subject to bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and to
general principles of equity (whether considered in a proceeding in
equity or at law), and (ii) except to the extent that the
enforceability of the indemnity and/or contribution provisions
contained in Section 6 of this Agreement may be limited under
applicable securities laws.
(f) The Registration Statement and the Prospectus and any
further amendment or supplement thereto made by the Company prior to
the Initial Closing Date comply as to form in all material respects
with the requirements of the Securities Act and the Regulations
promulgated thereunder (except that no opinion need be expressed as to
any financial statement, schedules or other financials or statistical
data included) and such counsel has no reason to believe that either
the Registration Statement or the Prospectus or any amendment or
supplement thereto contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances under which they were made.
(g) The Registration Statement has been filed on Form S-11,
which is in the proper form for registration of the Company's Shares
in the offering described in the Registration Statement.
(h) As to such other matters incident to the transactions
contemplated hereby as you may reasonably request.
15
In rendering the opinions set forth above, ▇▇▇▇▇, ▇▇▇▇▇▇▇ may rely (a)
as to matters of fact upon certificates furnished to them by the Company or
the Advisor and (b) as to all matters of law other than Federal and Michigan
law upon the opinion of local counsel. Such opinions may expressly state that
any agreement covered by such opinion is a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms
(i) subject to bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and to general principles of
equity (whether considered in a proceeding in equity or at law), and (ii)
except to the extent that the enforceability of the indemnity and/or
contribution provisions contained in Section 6 of this Agreement may be
limited under applicable securities laws.
5.3. Opinion of Tax Counsel. At the Initial Closing Date, you
shall receive the opinion of ▇▇▇▇▇, Moorman in the Registration Statement, and
to the further effect that the information in the Prospectus under the
captions "Risk Factors Tax Risks" and "Income Tax Consequences" to the extent
that it constitutes matters of law or legal conclusions, has been reviewed by
them and is correct.
5.4. Opinion of Counsel for Selling Group Manager. At the
Initial Closing Date, you shall receive the favorable opinion of such counsel
as you shall designate, if any, with respect to the Shares, the Registration
Statement, the Prospectus and such other related matters as you may reasonably
require.
5.5. Certificates of Company. At each Closing Date with respect
to which you or a Selected Dealer (who sold Shares involved in that Closing)
requests, you shall receive certificates signed on behalf of the Company to
the effect that (i) at all times from the Effective Date to that Closing Date,
the Registration Statement did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Prospectus did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) the representations and warranties
of the Company in this Agreement are true and correct on and as of such
Closing Date with the same effect as though expressly made at such Closing
Date; and (iii) the Company has performed all covenants or conditions on their
or its part to be performed or satisfied at or prior to the Effective Date and
such Closing Date.
5.6. Satisfactory Proceeding. All proceedings taken in
connection with the sale of the Shares herein contemplated shall be
satisfactory in form and substance to you and your counsel.
5.7. No Stop Order. You shall receive notification upon the
receipt of any stop order suspending the sale of Shares in any jurisdiction.
At the Initial Closing Date and at each Additional Closing Date, you shall
receive such evidence as you reasonably shall request to evidence that no
order suspending the sale of the Shares in any jurisdiction designated in
Section 3.1.3 shall have been issued and no proceeding for that purpose shall
have been instituted or contemplated.
5.8. Additional Information. At the Initial Closing Date, such
counsel as you shall designate, if any, shall have been furnished with such
additional information, opinions, certificates and documents as they
reasonably may require for the purpose of enabling them to pass upon the sale
of the Shares as herein contemplated and related proceedings, in order to
evidence the accuracy or completeness of any of the representations or
warranties or the fulfillment of any of the conditions herein contained and
all actions taken by the Company in connection with satisfactory in form and
substance to you.
16
6. Indemnification and Contribution.
6.1. Indemnification by the Company. Subject to the conditions
set forth below, the Company agrees to indemnify and hold harmless, you, each
Selected Dealer and each person, if any, who controls you and each Selected
Dealer within the meaning of Section 15 of the Securities Act, against any and
all loss, liability, claim, damage and expense whatsoever (including but not
limited to any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon (a) any
untrue statement or alleged untrue statement of a material fact contained (i)
in any preliminary prospectus, the Registration Statement or the Prospectus
(including, without limitation, any untrue statement or alleged untrue
statement subsequently cured by an amendment to the Registration Statement or
supplement to the Prospectus), (ii) in any application or other document (in
this Section 6 collectively called "application") filed in any jurisdiction in
order to qualify the Shares under the "blue sky" or securities laws thereof or
filed with the Commission or any securities exchange, (iii) in any
supplemental sales material (whether designated for broker-dealer use or
otherwise; however, if broker-dealer use only material is distributed to
investors by you or a Selected Dealer, you and the Selected Dealers shall not
be entitled to indemnification hereunder) approved by the Company for use by
you or (iv) in any additional written or oral information provided to
prospective purchasers of Shares by an authorized representative of the
Company other than you or a Selected Dealer or (b) the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading (including, without
limitation, any omission or alleged omission subsequently cured by an
amendment to the Registration Statement or supplement to the Prospectus),
except insofar as such untrue statement or omission was made in reliance upon
and in conformity with information furnished by you or a Selected Dealer
expressly for use in the Registration Statement or the Prospectus and any
other information relating to you, a Selected Dealer or your programs for the
inclusion in any future amendment to the Registration Statement or supplement
to the Prospectus; provided, however, that the foregoing indemnity in
subclause (ii) above shall not extend to any losses, claims, damages or
liabilities incurred as a result of (x) you or a Selected Dealer selling
Shares in jurisdictions other than those set forth in Section 3.1.3 hereof or
(y) you or a Selected Dealer selling more Shares than were registered in any
jurisdiction pursuant to your request under said Section 3.1.3.
6.2. Indemnification by Selling Group Manager. You agree to
indemnify and hold harmless the Company, its officers and Trustees, and the
Advisor and its officers and directors, and each person, if any, who controls
any of the foregoing persons within the meaning of Section 15 of the
Securities Act to the same extent as the foregoing indemnity from the Company
to you but only with respect to the statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished by you or a Selected Dealer specifically
or inclusion in the Registration Statement or the Prospectus and any other
information relating to you or a Selected Dealer or your programs for the
offering and sale of the Shares furnished by you or a Selected Dealer
expressly for inclusion in any future amendment to the Registration Statement
or supplement to the Prospectus.
6.3. Notices of Claims; Employment of Counsel. Any party which
proposes to assert the right to be indemnified under this Section 6 promptly
shall notify in writing each party against which a claim is to be made under
this Section 6 of the institution of such action but the omission so to notify
such indemnifying party of any action shall not relieve it from any liability
it may have to any indemnified party otherwise than under this Section 6. Such
indemnifying party or parties shall assume the defense of such action,
including the employment of counsel (satisfactory to the indemnified party)
17
and payment of fees and expenses. An indemnified party shall have the right to
employ its own counsel in any such case but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party or parties in connection with the defense of such action or
the indemnifying party or parties shall not have employed counsel to have
charge of the defense of such action or such indemnified party or parties
reasonably shall have concluded that there may be defenses available to it or
them which are different from or parties (in which case such indemnifying
party or parties shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events such
fees and expenses shall be borne by such indemnifying party or parties.
Anything in this paragraph to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any such claim or action
effected without its written consent.
6.4. Contribution. If the indemnification provided for in
Section 6.1 or 6.2 is unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then the Company and you
shall contribute to the amount paid or payable as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion so that you shall be responsible for the portion represented by the
percentage that the commissions and other compensation paid to you and the
Selected Dealers pursuant to Section 2.7 hereof, bears to the aggregate public
offering price of the Shares as set forth on the cover page of the Prospectus,
and the Company, on the other had, shall be responsible for the remaining
portion (subject to the last sentence of this Section 6.4). If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then the Advisor and you shall contribute to such amount paid
or payable in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Advisor
on the one hand and you and the Selected Dealers on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Advisor on the one hand and you and the Selected Dealers on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total selling commissions and other compensation received by you
and the Selected Dealers, as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the 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 to information with
respect to you and the Selected Dealers furnished in writing specifically for
inclusion in the Registration Statement or the Prospectus on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Advisor and
you agree that it would not be just and equitable if contribution pursuant to
this Section 6.4 were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Section 6.4. The amount paid or payable as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 6.4 shall be deemed to include any legal or
other expenses reasonably incurred by any such party in connection with
investigating or defending any such action or claim. Notwithstanding any other
provisions of this Agreement, no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) with respect to
the transactions giving rise to the right of contribution provided in this
Section 6.4 shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
18
7. Representations and Agreements to Survive. Except as the context
otherwise requires, all indemnity agreements set forth in Section 6, all
representations, warranties, covenants and other agreement of the Company, the
Advisor and you contained in this Agreement shall remain operative and in full
force and effect regardless of any investigation made by you, or on your
behalf, or by a controlling person, or by or on behalf of the Company or the
Advisor, and shall survive any termination or cancellation of this Agreement
and shall survive the delivery of and payment for the Shares,and any successor
of yours or of the Company or the Advisor, as the case may be, shall be
entitled to the benefit of the respective indemnity agreements.
8. Effective Date and Termination of Agreement.
8.1. Effective Date. This Agreement shall become effective on
the Effective Date, unless prior thereto you or the Company have elected to
prevent this Agreement form becoming effective without liability of any party
to any other party except as provided in Section 8.3, by giving written notice
of such election to the other parties hereto before the time this Agreement
otherwise would become effective.
8.2. Termination of Agreement. You shall have the right to
terminate this Agreement at any time prior to the Initial Closing Date or any
Additional Closing Date (i) if any representation or warranty hereunder shall
be found to have been incorrect or misleading when made or the Company or the
Advisor shall fail, refuse or be unable to perform any of their agreement
hereunder or to fulfill any condition of your obligations hereunder, (ii) if
there shall have been a material adverse change in the condition (financial or
otherwise) or prospects of the Company or any of its affiliates (including the
Advisor) or if the Company has sustained a material or substantial loss by
fire, flood, accident, earthquake or other calamity or malicious act which,
whether or not said loss shall have been insured, will in your opinion make it
inadvisable to proceed with the offering and sale of the Shares, (iii) if
trading on the New York Stock Exchange or the American Stock Exchange shall
have been suspended, or minimum or maximum prices for trading generally shall
have been fixed or maximum ranges for prices for all securities that shall
have been required on either such exchange by such exchange or by order of the
Commission or any other governmental authority having jurisdiction, (iv) if
the United States shall have become involved in a war or majority hostilities,
(v) if a banking moratorium has been declared by a state or Federal authority,
(vi) if there shall have been such change in the condition of securities
markets generally as in your judgment would make it inadvisable to proceed
with the offering and sale of the Shares or (vii) there shall have been
Federal legislation, a change in Internal Revenue Services rulings or a
proposed change in Treasury Regulations or relevant court decisions which in
your reasonable judgment have a material adverse effect on the tax
consequences to Shareholders as set forth in the Registration Statement.
In addition, you shall have the right, upon thirty days advance
written notice, to terminate this Agreement after the earlier of: (i) the sale
of the Minimum Offering, or (ii) one year after the Effective Date. In
addition, the Company shall have the right to terminate this Agreement at any
time. This Agreement will also terminate upon the Termination Date of the
Offering as provided in Section 2.2.
8.3. Result of Termination. If for any reason this Agreement
shall not become effective or the Offering hereunder is terminated before the
Minimum Offering is achieved, the Company and the Advisor shall nevertheless
meet the obligations assumed pursuant to Section 4, but shall have no
additional liability to you except for the obligations of the Company with
respect to indemnification and
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contribution as provided in Section 6, and you shall have no liability to the
Company or the Advisor except for your obligations with respect to
indemnification and contribution as provided in Section 6.
9. Entire Agreement. This Agreement embodies the entire Agreement
among the Company, the Advisor and you with respect to the matters covered
hereby. There are no promises, agreements, terms, conditions or obligations
relating to such matters other than those contained in this Agreement. This
Agreement cannot be changed or terminated orally.
10. Method of Notice. Except as this Agreement otherwise provides,
whenever notice is required by this Agreement, it shall be made in writing or
by telegram if promptly confirmed in writing and shall be sufficient in all
respects if delivered or sent by certified or registered mail to the address
set forth in the beginning of this Agreement or at such other addresses as the
party addressed may have designated to the other.
11. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon you, the Company, the Advisor and the other persons
referred to in Section 6 hereof who are entitled to indemnification hereunder,
and their respective successors, legal representatives and assigns, and no
other person shall have or be construed to have a legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
12. Limited Recourse. You agree that you shall look solely to the
assets of the Company for satisfaction of all claims against the Company, and
in no event shall any Shareholder, Trustee, officer or agent of the Company
have any personal liability for the obligations of the Company under this
Agreement.
13. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
UNITED MORTGAGE TRUST
By: ___________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Administrator
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Confirmed and accepted with respect to
Sections 2.4, 2.8, 4.1, 4.2, 6.2, 6.3,
6.4, 7., 8.2, 8.3 and 9.
MORTGAGE TRUST ADVISORS, INC.
By: __________________________________
▇▇▇▇ ▇▇▇▇▇, President
Confirmed and accepted as of the date first above written.
FIRST FINANCIAL UNITED INVESTMENT, INC.
By: ___________________________________
As ▇▇▇▇▇ ▇▇▇▇▇▇, General and Compliance Manager
And By: H & H Services, Inc., General Partner
By: ___________________________________
▇▇▇ ▇▇▇▇, President
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