1
EXHIBIT 1.1
MANAGING DEALER AGREEMENT
__________________, 1997
BROOKSTREET SECURITIES CORPORATION
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies/Gentlemen:
Capital Alliance Income Trust Ltd., A Real Estate Investment Trust, a
Delaware corporation (the "Company"), desires to increase the capital of the
Company in the maximum amount of $12,000,000 by the sale of (a) 1,500,000
shares of Common Stock, $0.01 par value per share, of the Company ("Shares")
and up to 150,000 detachable Warrants ("Shareholder Warrant") to purchase an
additional share of Common Stock (a "Shareholder Warrant Share") at an exercise
price of $5.60 per share to be issued in the ratio of one Shareholder Warrant
for each ten Shares purchased. The Shares and Shareholder Warrants are
hereinafter sometimes referred to collectively as the "Securities." The
purchasers therefor, each of whom will execute an order form substantially
similar to the form attached as an exhibit to the Prospectus hereinafter
referred to (the "Order"), and by which all such purchasers will be bound, will
become security holders ("Security holders") of the Company.
SECTION 1. Representations and Warranties of the Company.
(a) The Company represents, warrants, and agrees with you for your
benefit that:
(i) The Company has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-11
(No. 333-11625) for the registration of the Securities under the Securities Act
of 1933, as amended (the "Act"), and will file such amendments thereto as may
be required. The Company will not, at any time after the date hereof and
before the Registration Statement becomes effective, file any other amendment
to the Registration Statement or any other amended prospectus to which you
shall object. The Registration Statement as amended and the prospectus on file
with the Commission at the time the Registration Statement becomes effective
are hereinafter called the "Registration Statement" and the "Prospectus",
respectively, except that (1) if the Company files a post-effective amendment
to the Registration Statement then the term "Registration Statement" shall,
from and after the declaration of the effectiveness of such post-effective
amendment, refer to the Registration Statement as amended by such
post-effective amendment thereto, and the term "Prospectus" shall refer to the
amended prospectus then on file with the Commission and (2) if the Company
files a prospectus pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act (the "Regulations") that shall differ from the
prospectus on file at the time the Registration Statement or any post-effective
amendment thereto shall have become effective, the term "Prospectus" shall
refer to the prospectus filed pursuant to Rule 424(b) from and after the date
on which it shall have been filed. The Company will not at any time after the
Registration Statement initially becomes effective file any amendment to the
Registration Statement or any amendment or supplement to the Prospectus without
your prior consent or to which you shall object.
107
2
(ii) Upon payment of the consideration therefor specified
in the Order, the Shares, and upon exercise of the Warrants by the holders
thereof, Shareholder's Warrant and the Warrant Shares, will constitute valid
Shares of the Company duly issued, fully paid and nonassessable.
(iii) The Company is duly organized and validly existing as
a corporation under the laws of the State of Delaware with full power and
authority to invest in, acquire, hold, maintain, sell, transfer and otherwise
use the mortgage loans referred to or to be referred to in the Prospectus (the
"Mortgages"), or to own and manage its interest in any partnership or joint
venture holding title to particular Mortgages and to conduct the business in
which it is engaged or proposes to engage as described in the Prospectus. The
Company is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification.
(iv) At the time the Registration Statement initially
becomes effective and at the time that any post-effective amendment thereto
becomes effective, the Registration Statement and the Prospectus, and at the
Initial Closing Date and each Subsequent Closing Date, if any, referred to
below, the Prospectus, will comply with the provisions of the Act and the
Regulations; at the time the Registration Statement initially becomes effective
and at the time that any post-effective amendment thereto becomes effective,
the Registration Statement will 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 the light of the circumstances
under which they were made, not misleading; and at the time the Registration
Statement initially becomes effective and at the time that any post-effective
amendment thereto becomes effective; and at each Closing Date, including the
Initial Closing Date, the Prospectus will 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 the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and
warranties in this paragraph shall not apply to statements in or omissions from
the Registration Statement or the Prospectus made in reliance upon and in
conformity with written information furnished to the Company by you expressly
for use in the Registration Statement or the Prospectus.
(v) The accountants who certified the financial
statements filed with the Commission as part of the Registration Statement are,
with respect to the Company, independent public accountants as required by the
Act and the Regulations.
(vi) The financial statements filed as a part of the
Registration Statement and those included in the Prospectus present fairly the
financial position of the Company as at the dates indicated; and said financial
statements have been prepared in conformity with generally accepted accounting
principles (as described therein).
(vii) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and Prospectus: (A)
there has not been any material adverse change in the condition, financial or
otherwise, of the Company, or any of the Mortgages, or in the earnings, affairs
or business prospects of the Company, whether or not arising in the ordinary
course of business, and (B) there have not been any material transactions
entered into by the Company, or relating to any of the Mortgages, other than
those in the ordinary course of business.
(viii) This Managing Dealer 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.
(ix) The execution and delivery of this Managing Dealer
Agreement and the incurrence of the obligations herein and therein set forth
and the consummation of the transactions contemplated herein and therein and in
the Prospectus will not constitute a breach of, or default under, any
instrument by which the Company or any of the Mortgages is bound or, to the
best of its knowledge, information and belief, any order, rule or regulation
applicable to the Company or the Mortgages or of any court or any governmental
body or administrative agency having jurisdiction over the Company or any of
the Mortgages.
(x) The Company has good and marketable title to the
Mortgages and other investments owned by it.
108
3
(xi) To the best of its knowledge, information and belief,
there is not pending, threatened or contemplated any action, suit or proceeding
before or by any court or other governmental body to which the Company is or
may be a party, or to which any of the Mortgages, or any property or assets of
the Company is or may be subject which is not referred to in the Prospectus and
which might result in any material adverse change in the condition (financial
or otherwise), business or prospects of the Company or might materially
adversely affect any of the Mortgages or other properties or assets of the
Company.
(xii) Neither the Company nor any affiliate thereof, has
received, or is entitled to receive, directly or indirectly, any commission,
finder's fee or similar fee from any person other than as described in the
Prospectus in connection with the acquisition, or the commitment for the
acquisition of the Mortgages by the Company.
(xiii) On the date hereof, and at all times through the
Offering Termination Date, referred to below, the Company is not and shall not
be an investment company as that term is defined in the Investment Company Act
of 1940, as amended.
(xiv) Neither the Company nor any affiliate thereof shall
give any information or make any representation in connection with the offering
other than those contained in the Prospectus or such other material as may be
provided or approved by you.
(b) Any certificate signed by the Company and delivered to you for
the purposes of this Agreement shall be deemed a representation and warranty by
the Company to you as to the matters covered thereby.
SECTION 2. Offering and Sale of Securities.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, you
are hereby appointed the agent of the Company during the term herein specified
(the "Offering Period") for the purpose of finding purchasers for the
Securities for the account and risk of the Company through a public offering,
and subject to the performance by the Company of all of its obligations to be
performed hereunder and to the completeness and accuracy of all the
representations and warranties contained herein, you hereby accept such agency
and agree on the terms and conditions herein set forth to use your best efforts
during the Offering Period to find purchasers for the Securities at a public
offering price of (i) $8.00 for each Share. Except as provided in Section
2(f) hereof, your agency hereunder, which is coupled with an interest and,
therefore, is not terminable by the Company without your permission, shall
continue until the close of business on such date not later than 24 months
following the effective date of the Offering unless extended by the Company
with your consent. The offering may be terminated at any time by the Company
and you (the close of business of such date being hereinafter referred to as
the "Offering Termination Date").
(b) An Order must be completed by or on behalf of each person
desiring to purchase Securities in the form attached to the Prospectus, and you
shall provide such other information the Company deems reasonably necessary,
and all documents, if any, required under state securities laws. You shall
ascertain that each Order sent in by or on behalf of a prospective purchaser of
Securities has been properly completed and executed. You shall return the
Order together with the customer's check or your check or funds transfer (in
the amount or amounts required by paragraph (a) above) payable to "Golden Gate
Bank as Escrow Agent - Capital Alliance Income Trust", ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Escrow Holder"). In the
case of on-site supervisory review, your check must be transmitted to the
Escrow Holder by the end of the next business day following receipt of the
purchaser's check and, in the case of off-site supervisory review, the
subscriber's check must be transmitted to your final review office by the end
of the next business day following receipt thereof. Following receipt of the
purchaser's check by your final review office, your check must be transmitted
to the Escrow Holder by the end of the next business day. Upon receipt of an
Order and a check, the Escrow Holder will forward the original Order to the
Company.
You will comply with the requirements of Rule 15c2-4 of the Securities
Exchange Act of 1934, as amended.
109
4
(c) You represent that you are aware of your responsibilities
under the Rules of the National Association of Securities Dealers, Inc. (the
"NASD").
(d) Prior to the Initial Closing Date (as hereinafter defined),
the Company will have no right to obtain such funds from the Escrow Holder.
The right of the Company to receive such funds on the Initial Closing Date is
subject to fulfillment of the conditions specified in Section 6 hereof.
(e) "Minimum Offering" as used herein shall mean that there shall
have occurred, no later than six (6) months from the effective date of the
Offering (unless extended by the Company with the consent of the American Stock
Exchange) (the "Minimum Offering Date") the sale of at least $4,000,000, or the
minimum dollar level of Shares approved by the NASD, of Shares, which shall be
evidenced by notification to you in writing by the Company and the Escrow Holder
that Orders and payments for at least $4,000,000 (or the proceeds of such
minimum level) of Shares shall have been received pursuant to Section 2(b)
above. The Initial Closing Date as used herein shall mean the first full
business day following the date on which the Minimum Offering is achieved or
such day thereafter as shall be mutually agreed upon by you and the Company.
(f) In the event the offering is commenced and the Minimum
Offering is not achieved by the Minimum Offering Date, all funds received from
prospective purchasers (if any) shall be returned in full, with any interest
actually earned thereon and without deduction of any escrow or other fees and
expenses; and your agency and this Managing Dealer Agreement shall terminate
without obligation on your part or on the part of the Company, except as
provided in Section 5 hereof and except that the indemnification or
contribution, as the case may be, provided in Section 7 hereof shall continue
after such termination of this Managing Dealer Agreement.
(g) Subject to fulfillment of the conditions specified in Section
6 hereof, at the Initial Closing Date payment of the purchase price for the
Securities for which you have found purchasers as of said Initial Closing Date,
and delivery, with respect to each purchaser, of a copy of the Order signed by
such purchaser, shall be made to the Company at the office of the Escrow
Holder, or at such other place as shall be agreed between you and the Company.
(h) If at least the Minimum Offering has been achieved but less
than all of the Securities have been purchased at the Initial Closing Date, the
Offering Period shall continue until the earlier to occur of the Offering
Termination Date or the date on which all Securities shall have purchased. At
all times during the Offering Period you shall follow the procedures prescribed
by Section 2(b) hereof. Securities will be issued at closing dates
("Subsequent Closing Dates") occurring after the Initial Closing Date and prior
to the Offering Termination Date as agreed upon by you and the Company.
(i) As consideration for your services and undertakings herein,
your compensation will be paid to you as follows:
(i) If the Minimum Offering is achieved and all
conditions precedent hereunder to the obligations of you and the Company are
satisfied on the Initial Closing Date or any Subsequent Closing Date, as the
case may be, you will be paid a commission of six percent (6%) of the gross
proceeds from the sale of a Security paid for at the applicable Closing Date.
Any other Selected Dealer (as defined below in clause (j)) selling Securities
shall be paid a commission as provided in subparagraphs 2(i)(i) and (j).
(ii) At the Initial Closing Date and any Subsequent
Closing Date, you will be paid a Managing Dealer's accountable expense
allowance equal to one-half of one percent (0.5%) of the gross proceeds from
the sale of Securities (other than Shareholder Warrants and Warrant Shares),
whether arranged by you or a Selected Dealer.
110
5
From such amounts payable in connection with the sale of Shares, the
Managing Dealer will pay all costs and expenses associated with the printing of
the Prospectus and related sales material which expenses are estimated to be
.5%.
(j) Orders may be solicited by one or more dealers either
affiliated with you by reason of direct or indirect ownership or unaffiliated
members of the NASD (including Capital Alliance Investments, Inc.) (the
"Selected Dealers") and sales by Selected Dealers shall be made under a
Selected Dealer Agreement substantially in the form attached hereto as Exhibit
A. Pursuant to any Selected Dealer Agreements, you will re-allow each Selected
Dealer a concession of up to a maximum of six percent (6%) of the gross
proceeds of Securities sold with respect to each Security sold by the Company
pursuant to an Order solicited by such Selected Dealer and may re-allow a
maximum of 100% of that portion of the non-accountable allowance referred to in
subparagraph (i)(iii) of this Section 2 that relates to sales of Securities
solicited by such Selected Dealer, subject to the terms of subparagraph (i) of
this Section 2.
(k) Neither you, the Company, nor any dealer participating in the
offering of the Securities shall, directly or indirectly, pay or award any
finder's fees, commissions or other compensation to any person engaged by a
potential investor for investment advice as an inducement to such advisor to
the purchase of Securities, provided, however, that normal sales commissions
referred to in the Prospectus payable to a registered broker-dealer or other
properly licensed person for selling Securities shall not be prohibited hereby.
(l) You agree that you will not disseminate or publish any
advertisement relating to your solicitation of subscribers for the Securities
(including, without limitation, any advertisement relating to seminars) (i) the
form of which has not been submitted to the NASD by the Company and (ii) that
has not been approved by the Company.
SECTION 3. Covenants of the Company.
The Company covenants with you as follows:
(a) It shall have notified you immediately and confirmed the
notice in writing (i) when the Registration Statement and any amendment thereto
shall have become effective, (ii) of the receipt of any comments from the
Commission with respect to the Registration Statement, (iii) of any request 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 (iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any proceedings for that
purpose. The Company will make every reasonable effort to prevent the issuance
by the Commission of any stop order and, if any such stop order shall at any
time be issued, to obtain the lifting thereof at the earliest possible moment.
(b) It will deliver to you, as soon as available, two signed
copies of the Registration Statement as originally filed and of each amendment
thereto and two sets of the exhibits thereto, and will also deliver to you such
number of conformed copies of the Registration Statement as originally filed
and of each amendment thereto (without exhibits) as you shall require for the
purposes contemplated by the Act.
(c) It will deliver to you from time to time, before the
Registration Statement becomes effective, such number of copies of the
Registration Statement as originally filed and any amendments thereto and as
soon as the Registration Statement initially becomes effective and thereafter
from time to time during the period when the Prospectus is required to be
delivered under the Act, such number of copies of the Prospectus (as amended or
supplemented) as you may reasonably request for the purposes contemplated by
the Act or the Regulations.
(d) During the period when the Prospectus is required to be
delivered pursuant to the Act, the Company will comply, so far as it is able
and at its own expense, with all requirements imposed upon it by the Act, as
now and hereafter amended, and by the Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings
in, the Securities during such period in accordance with the provisions herein
and as set forth in the Prospectus.
111
6
(e) If any event relating to or affecting the Company or the
Mortgages Loans shall occur as a result of which it is necessary to amend or
supplement the Prospectus in order to make the Prospectus not misleading in the
light of the circumstances existing at the time it is delivered to a
subscriber, the Company will forthwith prepare and furnish to you, without
expense to you, a reasonable number of copies of an amendment or amendments of,
or a supplement or supplements to, the Prospectus which will amend or
supplement the Prospectus so that as amended or supplemented it will 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 the light of the
circumstances existing at the time the Prospectus is delivered to a subscriber,
not misleading. For the purposes of this subsection the Company will furnish
such information with respect to themselves as you may from time to time
reasonably request.
(f) It will make generally available to the Company's security
holders (i.e., the holders of Shares) as soon as practicable, but not later
than 120 days after the close of the period covered thereby, an earnings
statement of the Company (in form complying with the provisions of Section
11(a) of the Act and Rule 158 promulgated thereunder, which need not be
certified by independent public accountants unless required by the Act or the
Regulations) covering the twelve-month period beginning not later than the
first day of the Company's fiscal quarter following the effective date of the
Registration Statement. As used in this subsection, the terms "earnings
statement" and "made generally available to the Company's security holders"
shall have the meanings contained in Rule 158 promulgated under the Act.
(g) It will, so long as any Securities remain outstanding, furnish
directly to you the following:
(i) as soon as practicable after the end of each fiscal
year, one copy of the Company's annual report, including therein the
accountants' report, the balance sheet, the related statements of profit and
loss and cash flows for the Company (which need not be audited), together with
such accountants' comments and notations with respect thereto in such detail as
the Company may customarily receive from such accountants;
(ii) as soon as practicable after the end of each fiscal
quarterly period, one copy of a balance sheet of the Company as at the end of
such period, setting forth in reasonable detail its financial position,
together with related statements of profit and loss and cash flows, none of
which statements need be audited, but shall be certified as correct by the
Chief Financial Officer of the Company;
(iii) copies of any report, application or documents which
the Company shall file with the Commission; and
(iv) as soon as the same shall be sent to holders of
Shares, each communication which shall be sent to the holders of Shares,
including any other annual or interim report of the Company.
(h) It will deliver to you, from time to time, 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 Securities.
SECTION 4. Covenants of Brookstreet Securities Corporation.
You covenant with the Company as follows:
(a) You agree to manage the distribution of the Securities and to
sell the Securities according to all of the terms and conditions of the
Registration Statement, the Rules of the NASD, including Rules 2420, 2730, 2740
and 2750 of the NASD Conduct Rules, all applicable state and federal laws,
including the Securities Act of 1933, as amended, and any and all regulations
related thereto. You agree to develop an acceptable Marketing Plan for the
offering of the Securities, and assign the equivalent of a member and/or
employee to devote a full time effort to all aspects of the marketing of the
Offering of the Securities (together with such support as is reasonably
required), including, but not limited to, developing the Selling Group,
drafting and preparing marketing materials and presentations and any other
marketing functions needed to successfully complete the Offering. You shall not
have any authority to give any information or make any representations in
connection with any offer or sale of the Securities other than as contained in
the Prospectus or as is otherwise expressly authorized in writing by the
Company, provided, however, that you shall use only such sales literature and/or
advertising in connection with the sale of the Securities as shall be approved
by the Company.
112
7
(b) The Securities shall be offered and sold only where the
Securities may be legally offered and sold, and only to such persons in such
states who shall be legally qualified to purchase the Securities. The Company
shall give you written notice at the time of effectiveness of the Registration
Statement of those states in which the offering and sale of the Securities may
be made, and shall amend such notice thereafter as additional states are added.
No Securities shall be offered or sold in any other states.
(c) Neither you nor any person associated with you shall give any
information, written or oral, or make any representation, written or oral, in
connection with the offering other than those contained in the Prospectus or
such other material as may be provided or approved by the Company.
(d) You agree to engage as Selected Dealers only entities
affiliated with you by direct or indirect ownership or entities which are
members of the NASD.
SECTION 5. Payment of Expenses and Fees.
The Company will pay all expenses incident to the performance of the
obligations of the Company under this Managing Dealer Agreement, including (i)
the printing and delivery to you in quantities as hereinabove stated of copies
of the Registration Statement and all amendments thereto and of the Prospectus
and any supplements or amendments thereto; (ii) the printing, execution, filing
and delivery to you in quantities as hereinabove stated of copies of any
supplemental sales material to be used in connection with the offering approved
by the Company and utilized in sales of the Securities directly to the public;
(iii) the listing of the Shares on the NASDAQ-NMS, including filing fees; (iv)
the fees and disbursements of counsel and accountants for the Company; and (v)
the filing fee of the NASD.
Expenses of the Offering: The Trust shall bear all costs and expenses
incident to the registration, issuance and delivery of the Securities,
specifically all expenses and fees incident to preparation and filing of the
registration statement and the amendments thereto, the Trust's counsel fees for
qualification of the offering under state securities laws in such states as may
be designated by you, the fees and reimbursements of counsel and the
accountants for the Trust, the cost of printing the registration statement and
such number of "Red ▇▇▇▇▇▇▇" prospectuses as we may determine to be
appropriate, fees of the Trust's transfer agent and registrar, the filing fee
with the SEC and the National Association of Securities Dealers and all such
cost and fees of listing the Common Stock on AMEX. The Trust shall not be
required to pay or advance you more than $175,000 for the following: 1) due
diligence expense; 2) Managing Dealer's counsel legal fees; 3) printing of the
prospectuses and supplements thereto and other necessary marketing material;
4) $10,000 per month non-accountable expenses provided below which shall be
paid by you; and 5) the $65,000 signing fee. All of your other expenses shall
be borne by you to be reimbursed to you only from the proceeds of the offering
up to a maximum of 3% of the offering proceeds as set forth in sub-subparagraph
(b), below.
The Company will reimburse you from the proceeds of the Offering an
amount equal to 3% of the gross Offering proceeds. In addition to the $65,000
signing fee described below, the Trust agrees to advance the sum of $10,000 per
month for up to eleven (11) months commencing on the date you give your consent
to proceed with the Offering, which consent shall be given within 10 days of
the Trust's receipt of the initial comments of the SEC. Such payment shall not
include payment for general overhead, salaries, supplies or similar expenses of
the Underwriter included in the normal conduct of business. Such amount shall
be considered a reasonable advance against out-of-pocket accountable expenses
actually anticipated to be incurred by the Underwriter, which advance is
reimbursable to the Trust to the extent not actually incurred. Upon conclusion
of the offering the exact amount of the 3% Non-Accountable expense allowance
shall be calculated. To the extent the 3% non- Accountable expense allowance
exceeds $175,000 there shall be deducted from the amount due to you the amount
of the expense reimbursement payment (up to $175,000) previously made or
advanced by the Trust to you pursuant to this sub-paragraph (iii). To the
extent the 3% Non- Accountable expense allowance equals or is less than
$175,000 (resulting
113
8
from gross offering proceeds of approximately $4,835,000 or less) the Trust
shall pay you an amount equal to 3% of the actual gross offering proceeds,
provided that if the aggregate amount advanced by the Trust to you pursuant to
this sub-paragraph (iii) (up to $175,000) exceeds 3% of the gross offering
proceeds, you shall be entitled to retain the entire amount of such previous
advances without refund to the Trust. In the event the offering is canceled
because the Trust elects not to proceed with the Offering for any reason (other
than your failure to adequately perform), the Trust will pay all of your costs
and expenses, including, but not in excess of, (a) the fee of $65,000, $35,000
of which was advanced to you upon the signing of the Letter of Intent dated May
8, 1996 (b) any of the $10,000 monthly payment previously made (c) due diligence
expense including third party reports that have been pre-approved and produced
by such firms as ▇▇▇▇▇▇▇▇ Valuation Advisors (d) Managing Dealer's Counsel legal
fees (e) all costs related to the printing of the Prospectuses and other
necessary marketing material (if previously approved by us). In the event the
offering is canceled by you for a reason other than the one set forth in
paragraph 9(b) the Trust's maximum obligation to Brookstreet Securities shall be
limited to the amount (up to $175,000) advanced pursuant to this sub-paragraph.
Such commissions, fees and expense allowances shall be paid or
advanced by the Trust to you by the Escrow Holder out of the funds deposited in
the Escrow Account on the applicable Closing Date. Notwithstanding the
foregoing, if the Minimum Offering is not achieved, you will not receive any of
the foregoing compensation, except for compensation negotiated and paid to you
in connection with a transaction that occurs in lieu of the Minimum Offering as
a result of your efforts, provided that you shall be entitled to reimbursement
for your out-of-pocket accountable expenses actually incurred by you in
connection with the Minimum Offering, if not achieved.
SECTION 6. Conditions of Your Obligations.
Your obligations hereunder are subject to the accuracy of and
compliance with the representations and warranties of the Company, to the
performance by the Company of its obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall initially become effective
not later than 5:30 P.M., Eastern time, on the date hereof, or, with your
consent, at a later time and date not later, however, than 5:30 P.M., Eastern
time, on the date following the date hereof, or at such later time and date as
may be approved by you; and at the Initial Closing Date and no stop order
suspending the effectiveness thereof shall have been issued under the Act or
proceeding therefor initiated or threatened by the Commission and not
rescinded. The Shares shall have been approved for listing on the NASDAQ-NMS
on notice of issuance.
(b) At the Initial Closing Date and each Subsequent Closing Date
you shall receive the opinion of Landels, ▇▇▇▇▇▇ & Diamond LLP, as counsel for
the Company, in the form set forth in Exhibit B hereto.
(c) At the Initial Closing Date and each Subsequent Closing Date
you shall receive a certificate signed by the Company to the effect that (i)
the signer has carefully examined the Registration Statement and the Prospectus
and, in the signer's opinion, at the time the Registration Statement initially
became effective and at the Initial Closing Date and each Subsequent 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 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 the light of the
circumstances under which they were made, not misleading; (ii) since the
initial effective date of the Registration Statement no event has occurred
which should have been set forth in an amendment of, or supplement to, the
Prospectus but which has not been so set forth; (iii) no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings therefor have been instituted or threatened by the Commission and
not rescinded; (iv) the representations, warranties and agreements contained in
Section l(a) are true and correct in all material respects with the same effect
as though expressly made at the Initial Closing Date and each Subsequent
Closing Date; and (v) since the initial effective date of the Registration
Statement, no material adverse change in circumstance has occurred with regard
to the transactions described in any letters of intent contained in the
Prospectus which should have been set forth in an amendment of, or supplement
to, the Prospectus, but which has not been so set forth, provided, however,
that with respect to clauses (i) and (ii) above, such certificate may exclude
from its coverage any matters relating to you.
114
9
(d) At the time the Registration Statement initially becomes
effective, you shall have received from Novogradac & Company, LLP a letter, in
form and substance satisfactory to you and your counsel, advising that (i) they
are independent public accountants as required by the Act and the published
Regulations, (ii) it is their opinion that the financial statements of the
Company included in the Prospectus, and covered by their opinions therein,
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations relating to financial statements in
registration statements on Form S-11, (iii) based on procedures set forth in
such letter nothing has come to their attention which would indicate that
during the period from April 30, 1996 to a specified date not more than five
business days prior to the date the Registration Statement becomes effective
there has been any change in the equity, capital accounts, or short-term or
long-term indebtedness of the Company or any decrease in net assets as compared
with the amounts shown in the balance sheet as of April 30, 1996, included in
the Registration Statement, except for changes or decreases that the
Registration Statement discloses have occurred or may occur; (iv) they have
carried out certain procedures, as specified in a draft of such letter approved
by you, performed for the purpose of comparing certain financial information
and percentages appearing in the Registration Statement, as specified in such
draft letter, with indicated amounts in the financial statements or accounting
records of the Company and certain of its affiliates and have found such
information and percentages to be in agreement with the relevant accounting and
financial information of the Company and certain of its affiliates.
At the Initial Closing Date and each Subsequent Closing Date, you
shall receive from Novogradac & Company, LLP a letter dated as of the Closing
Date or Subsequent Closing Date to the effect that they reaffirm, as of such
date and as though made at such date, the statements made in the letter
furnished by such accountants pursuant to this subsection (e) of this Section
6, except that the specified date referred to in such subsection will be a date
not more than five days prior to the Initial Closing Date or Subsequent Closing
Date.
(e) At the Initial Closing Date and each Subsequent Closing Date,
Landels ▇▇▇▇▇▇ & Diamond LLP shall have been furnished with such additional
information, opinions and documents, including supporting documents relating to
parties described in the Prospectus and certificates signed by such parties
with regard to information relating to them and included in the Prospectus as
they may reasonably require for the purpose of enabling them to pass upon the
sale of the Securities 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 the sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance
to you and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ & Associates.
(f) If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Managing Dealer Agreement to
be fulfilled, this Managing Dealer Agreement and all your obligations hereunder
may be canceled by you by notifying the Company of such cancellation in writing
or by facsimile or telegram at any time at or prior to the Initial Closing
Date, or at any time after the Initial Closing Date, all your obligations
hereunder may be canceled or terminated by you by notifying the Company of such
cancellation or termination in writing or by telegram at any time at or prior
to the Offering Termination Date and any such cancellation or termination shall
be without liability of any party to any other party except as otherwise
provided in Section 6.
SECTION 7. Indemnification.
(a) The Company agrees to indemnify and hold harmless you, your
representatives and employees, and each person, if any, who controls you within
the meaning of Section 15 of the Act, you and such person (referred to
collectively as the "Indemnified Parties"), as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto) or any omission or alleged omission therefrom of a material
fact required to be stated therein
115
10
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact contained in
the Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made not misleading unless such untrue statement or omission was made in
reliance upon and in conformity with information furnished to the Company in
writing by you expressly for use in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto);
(ii) against any and all loss, liability, claim, damage
and expense whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in any supplemental sales material
approved by the Company for use by you, or any omission or alleged omission
therefrom of a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made and in conjunction with the Prospectus delivered
therewith, not misleading; provided, however, that with respect to any
indemnification relating to supplemental sales material designated for
broker-dealer use only such indemnification shall be limited to any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission of a material fact related to the Company or the offering;
(iii) against any and all loss, liability, claim, damage
and expense whatsoever to the extent of the aggregate amount paid in settlement
of any litigation, commenced or threatened, or of any claim whatsoever based
upon any such untrue statement or omission or any such alleged untrue statement
or omission as provided in subparagraph (a)(i) and (a)(ii) above, if such
settlement is effected with the written consent of the Company; and
(iv) against any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under clause (i), (ii) or (iii) above.
The foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any untrue statement, alleged untrue statement,
omission or alleged omission made in the Prospectus or any supplemental sales
material, it shall not inure to the benefit of any of the Indemnified Parties
if you failed to send or give a copy of the Prospectus (as amended or
supplemented, if the Company shall have furnished any amendment or supplement
thereto to you which shall correct such untrue statement or omission which is
the basis of the loss, liability, claim, damage or expense for which
indemnification is sought) to the person asserting any such loss, liability,
claim, damage or expense prior to or together with the written confirmation of
the receipt of the Order for Securities from such person; or if you sell any
Securities and deliver to the person asserting any such loss, liability, claim,
damage or expense a Prospectus containing an alleged untrue statement or
omission which is the basis of the loss, liability, claim, damage or expense
for which indemnification is sought at a time subsequent to having been
notified by the Company that it believes that such Prospectus should be amended
or supplemented.
(b) You agree to indemnify and hold harmless the Company, each of its
representatives and employees, and each person, if any, who controls any such
person, within the meaning of Section 15 of the Act, to the same extent as the
foregoing indemnity from the Company in Section 7(a) but only with respect to
statements or omissions in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto) or relating
to you or your affiliates in the supplemental sales literature distributed to
the public made in reliance upon and in conformity with information furnished
to the Company in writing by you expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) or the supplemental sales literature distributed to the
public. In case any action shall be brought against the Company based on the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) or the supplemental sales literature
distributed to the public and in respect of which indemnity may be sought
against you, you shall have the rights and duties given to the Company, and the
Company shall have the rights and duties given to you, by the provisions of
Sections 7(a), 7(b) and 7(c).
(c) In no case shall the Company be liable under this indemnity
agreement with respect to any claim made against any of the Indemnified Parties
unless the Company shall be notified in writing of the nature of the claim
116
11
within a reasonable time after the assertion thereof, but failure so to notify
the Company shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In no case shall the Company be
liable under this indemnity agreement to the Indemnified Parties for any loss,
liability, claim, damage or expense described in subparagraph 7(a) above if
such loss, liability, claim, damage or expense arose entirely or primarily,
directly or indirectly, from your negligence, misconduct, or fault. For
purposes of the foregoing sentence, an Indemnified Party shall be considered at
fault for purposes of this Managing Dealer Agreement if, without limitation,
such Indemnified Party shall be found to be at fault by any order of any court
having jurisdiction or in any settlement agreement approved by any court having
jurisdiction. The Company shall be entitled to participate at its own expense
in the defense or, if it so elects within a reasonable time after receipt of
such notice, to assume the defense of any suit so brought, which defense shall
be conducted by counsel chosen by it and satisfactory to the Indemnified
Parties, defendant or defendants therein. In the event that the Company elects
to assume the defense of any such suit and retain such counsel, the Indemnified
Parties, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel thereafter retained by them. In the event that the
parties to any such action (including impleaded parties) include the Company
and any of the Indemnified Parties and such Indemnified Party or Parties shall
have been advised by counsel chosen by such Indemnified Party or Parties and
satisfactory to the Company that there may be one or more legal defenses
available to such Indemnified Party or Parties which are different from or
additional to those available to the Company, the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified Party
or Parties and will reimburse such Indemnified Party or Parties as aforesaid
for the reasonable fees and expenses of any counsel retained by such
Indemnified Party or Parties, it being understood that the Company shall not,
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for such Indemnified Party or Parties, which firm
shall be designated in writing by such Indemnified Party or Parties. The
Company agrees to notify you within a reasonable time of the assertion of claim
in connection with the sale of the Shares against it, any of its officers or
directors or any person who controls the Company within the meaning of Section
15 of the Act.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 7 is
for any reason held by a court of competent jurisdiction to be unavailable to
you from the Company or to the Company from you, as the case may be, for any
matters covered by Sections 7(a) or 7(b), the Company and you shall contribute
to the aggregate losses, claims, expenses, damages and liabilities (including
any investigation, legal and other expenses incurred in connection with, and
any amount paid in settlement of, any action, suit or proceeding or any claims
asserted) to which the Company and you may be subject as a result of a matter
referred to in Sections 7(a) or 7(b) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and you
and your affiliates on the other from the offering of the Shares and the
operation of the Company or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and you and your affiliates
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and you and your affiliates on the other shall be
deemed to be in the same proportions so that you and your affiliates are
responsible for that portion represented by the percentage that the sales
commission and other compensation from the proceeds of the offering and the
operation of the Company received by you or your affiliates in the aggregate
bears to the aggregate payments made for the purchase of the Shares, and the
Company shall be responsible for the balance. The relative fault of the
Company on the one hand and you and your affiliates on the other 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 by you and your affiliates on the other and the parties' relative
intent, knowledge and access to information. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section
7(d), notify such party or parties from whom contribution may be sought; and
the omission so to notify such party or parties will relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have hereunder as to the particular item for which contribution is then being
sought but not from any other liability which it or they may have to the party
seeking contribution.
117
12
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery.
All representations, warranties and agreements contained in this
Managing Dealer Agreement (including your covenants provided in Section 4
hereof) or contained in certificates of the Company submitted pursuant hereto
shall remain operative and in full force and effect, regardless of any
investigation made by, or on behalf of, you or any person who controls you, or
by or on behalf of the Company and shall survive the Offering Termination Date.
SECTION 9. Effective Date of this Managing Dealer Agreement and
Termination Thereof.
(a) This Managing Dealer Agreement shall become effective (i) at 9:30
A.M., Eastern time, on the day on which the Registration Statement initially
becomes effective or (ii) at the time of the initial public offering by you,
after the Registration Statement initially becomes effective, of the
Securities, whichever shall first occur. The time of the initial public
offering shall mean the time of the release by you, for publication, of the
first newspaper advertisement, which is subsequently published, relating to the
Securities or the time at which the Securities are first generally offered by
you to subscribers by letter or telegram, whichever shall first occur. You or
the Company may prevent this Managing Dealer Agreement from becoming effective
without liability of any party to any other party, except as otherwise provided
in Section 4 by giving the notice indicated below in this Section prior to the
time when this Managing Dealer Agreement would otherwise become effective as
herein provided.
(b) You shall have the right to terminate this Managing Dealer
Agreement by giving the notice indicated below in this Section (A) at any time
at or prior to the Minimum Offering Date or any Subsequent Closing Date if
there shall have been, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, any material adverse
change in the condition of the Company's Mortgages, the Company, financial or
otherwise, or in the earnings, affairs or business prospects of the Mortgages,
the Company, whether or not arising in the ordinary course of business, or (B)
at any time at or prior to the Minimum Subscription Date (i) if there shall
have occurred any new outbreak of hostilities or other national or
international calamity or crisis, or a bankruptcy default with respect to the
debt obligations of, or the institution of proceedings under the Federal
bankruptcy laws by or against, any State of the United States, the effect of
such outbreak, calamity or crisis on the financial markets of the United States
being such as in your judgment would make the offering or delivery of the
Securities impracticable, or (ii) if trading on the New York Stock Exchange
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been
required on such Exchange, or if a banking moratorium shall have been declared
by either Federal or California authorities. If you terminate this Managing
Dealer Agreement as provided in this Section, such termination shall be without
liability of any party to any other party except as otherwise provided in
Section 4.
(c) If you elect to prevent this Managing Dealer Agreement from
becoming effective or to terminate this Managing Dealer Agreement as provided
in this Section 9, the Company shall be notified promptly by you, by telephone
or telegram, confirmed by letter. If the Company elects to prevent this
Managing Dealer Agreement from becoming effective as provided in this Section
9, you shall be notified promptly by the Company by telephone or telegram,
confirmed by letter.
SECTION 10. Post-Effective Amendment.
The Company represents and warrants to you that if as of one year from
the effective date of this Offering (unless extended by the Company with the
consent of the American Stock Exchange) the Minimum Offering has not been
achieved, they will file a post-effective amendment to the Registration
Statement deregistering all of the Shares and if at the Offering Termination
Date subscriptions for all the Shares shall not have been received they will
file a post- effective amendment to the Registration Statement de-registering
the unsold Securities and will terminate any additional offerings of Securities
pursuant to such Registration Statement. In addition, the Company represents
and warrants to you that they will file all reports required by the regulations
with regard to sales of the Shares and use of the proceeds therefrom.
118
13
SECTION 11. Notices and Authority to Act.
All communications hereunder shall be in writing and, if sent to you,
shall be mailed, delivered or telegraphed and confirmed to you at Brookstreet
Securities Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇, or, if sent to the Company, shall be delivered or telegraphed and
confirmed at Capital Alliance Income Trust, ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ at ▇▇▇▇▇▇▇ ▇.
▇▇▇▇ & Associates, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. at ▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇.
SECTION 12. Parties.
This Managing Dealer Agreement shall inure to the benefit of and be
binding upon each of you, the Company and your and the Company's respective
successors, this Managing Dealer Agreement and the conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective successors and controlling persons, and for
the benefit of no other person, firm or corporation, except as otherwise
specifically provided herein.
SECTION 13. Applicable Law.
This Managing Dealer Agreement shall be construed in accordance with
the laws of the State of California Arbitration.
If the foregoing is accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among you and the Company in
accordance with its terms.
Very truly yours,
CAPITAL ALLIANCE INCOME TRUST LTD.,
A REAL ESTATE INVESTMENT TRUST
a Delaware corporation
By: ______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
ACCEPTED: Brookstreet Securities Corporation
By: _______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
119