Form of PASSCO APARTMENT REIT, INC. Up to 110,000,000 Shares of Common Stock DEALER MANAGER AGREEMENT
Exhibit
1.1
Form
of
Up to
110,000,000 Shares of Common Stock
___________,
2009
PASSCO
Capital, Inc.
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Ladies
and Gentlemen:
Passco
Apartment REIT, Inc., a Maryland corporation (the “Company”), has registered for
public sale (the “Offering”)110,000,000 shares of its common stock, $.01 par
value per share (the “Shares”), of which amount: (i) up to 10,000,000 Shares are
to be offered pursuant to the Company’s distribution reinvestment plan for a
purchase price of $9.50 per share (the “DRIP”); and (ii) up to 100,000,000
Shares (the “Primary Offering”) are to be issued and sold to the public on a
“best efforts” basis through you, Passco Capital, Inc. (the “Dealer Manager”) at
an initial offering price of $10.00 per Share (subject in certain circumstances
to discounts based upon the volume of shares purchased and for certain
categories of purchasers). 10,000,000 Shares are intended to be
offered pursuant to the Company’s dividend reinvestment plan (the
“DRIP”). The Company has reserved the right to reallocate the Shares
between the Primary Offering and the DRIP.
It is
anticipated that the Dealer Manager will enter into Participating Dealer
Agreements (in the form attached to this Agreement as Exhibit A) with other
broker-dealers participating in the Offering (each participating broker-dealer
being referred to herein as a “Dealer”). The Company shall have the
right to approve any material modifications or addendums to the form of the
Participating Dealer Agreement.
In
connection with the sale of Shares, the Company hereby agrees with you, the
Dealer Manager, as follows:
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1.
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Representations and
Warranties of the Company. As an inducement to the
Dealer Manager to enter into this Agreement, the Company represents and
warrants to the Dealer Manager and to each Dealer
that:
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1.1
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The
Company has prepared and filed with the Securities and Exchange Commission
(the “SEC”) a registration statement (Registration No. XXX-XXXXXX) that
has become effective for the registration of the Shares under the
Securities Act of 1933, as amended (the “Securities Act”), and the
applicable rules and regulations (the “Rules and Regulations”) of the SEC
promulgated thereunder. Copies of such registration statement
as initially filed and each amendment thereto have been or will be
delivered to the Dealer Manager. The registration statement and
the prospectus contained therein, as finally amended at the effective date
of the registration statement (the “Effective Date”), are respectively
hereinafter referred to as the “Registration Statement” and the
“Prospectus,” except that if the Company files a prospectus or prospectus
supplement pursuant to Rule 424(b) under the Securities Act, or if the
Company files a post-effective amendment to the Registration Statement,
the term “Prospectus” includes the prospectus filed pursuant to Rule
424(b) or the prospectus included in such post-effective
amendment. The term “Preliminary Prospectus” as used herein
shall mean a preliminary prospectus related to the Shares as contemplated
by Rule 430 or Rule 430A of the Rules and Regulations included at any time
as part of the registration
statement.
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1.2
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On
the Effective Date, on the date of the Prospectus and on the date any
post-effective amendment to the Registration Statement becomes effective
or any amendment or supplement to the Prospectus is filed with the SEC,
the Registration Statement and the Prospectus, as applicable, including
the financial statements contained therein, complied or will comply with
the Securities Act and the Rules and Regulations. On the
Effective Date, the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. On the date of the Prospectus, as amended or
supplemented, as applicable, the Prospectus did not or will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding anything contained herein to the
contrary, the Company’s representations in this Section 1.2 will not
extend to such statements contained in or omitted from the Registration
Statement or the Prospectus, as amended or supplemented, that are
primarily within the knowledge of the Dealer Manager or any of the Dealers
and are based upon information furnished by the Dealer Manager in writing
to the Company specifically for inclusion
therein.
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1.3
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No
order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus has been issued and no proceedings for that purpose are
pending, threatened or, to the knowledge of the Company, contemplated by
the SEC; and, to the knowledge of the Company, no order suspending the
offering of the Shares in any jurisdiction has been issued and no
proceedings for that purpose have been instituted or threatened or are
contemplated.
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1.4
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The
Company intends to use the funds received from the sale of the Shares as
set forth in the Prospectus.
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1.5
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The
Company has full legal right, power and authority to enter into this
Agreement and to perform the transactions contemplated hereby, except to
the extent that the enforceability of the indemnity provisions contained
in Section 6 of this Agreement may be limited under applicable securities
laws and to the extent that the enforceability of this Agreement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws that affect creditors’ rights generally or by equitable
principles relating to the availability of
remedies.
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1.6
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The
execution and delivery of this Agreement, the consummation of the
transactions contemplated herein and compliance with the terms of this
Agreement by the Company will not conflict with or constitute a default or
violation under any charter, bylaw, contract, indenture, mortgage, deed of
trust, lease, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or foreign,
having jurisdiction over the Company, except to the extent that the
enforceability of the indemnity provisions contained in Section 6 of this
Agreement may be limited under applicable securities law and to the extent
that the enforceability of this Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws that affect
creditors’ rights generally or by equitable principles relating to the
availability of remedies.
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1.7
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No
consent, approval, authorization or other order of any governmental
authority is required in connection with the execution or delivery by the
Company of this Agreement or the issuance and sale by the Company of the
Shares, except as may be required under the Securities Act and the Rules
and Regulations thereunder, by the Financial Industry Regulatory Authority
(“FINRA”) or under applicable state securities
laws.
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1.8
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The
Shares have been duly authorized and, when issued and sold as contemplated
by the Prospectus and upon payment therefor as provided in the Prospectus
and this Agreement, the Shares will be validly issued, fully paid and
nonassessable and will conform to the description thereof contained in the
Prospectus.
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2
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2.
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Representations and
Warranties of the Dealer Manager. As an inducement to
the Company to enter into this Agreement, the Dealer Manager represents
and warrants to the Company that:
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2.1
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The
Dealer Manager is a member in good standing of FINRA and a broker-dealer
registered as such under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). The Dealer Manager and its employees and
representatives have all required licenses and registrations to act under
this Agreement.
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2.2
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The
Dealer Manager represents and warrants to the Company and each person that
signs the Registration Statement that the information under the caption
“Plan of Distribution” in the Prospectus, as amended and supplemented, and
all other information furnished and to be furnished to the Company by the
Dealer Manager in writing expressly for use in the Registration Statement,
any Preliminary Prospectus or the Prospectus, does not and will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading.
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3.
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Covenants of the
Company. The Company covenants and agrees with the
Dealer Manager that:
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3.1
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It
will, at no expense to the Dealer Manager, furnish the Dealer Manager with
such number of printed copies of the Registration Statement, including all
amendments and exhibits thereto, as the Dealer Manager may reasonably
request. It will similarly furnish to the Dealer Manager and
others designated by the Dealer Manager as many copies as the Dealer
Manager may reasonably request in connection with the offering of the
Shares of: (a) the Prospectus, including any amendments and supplements
thereto and (b) this Agreement.
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3.2
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The
Company will prepare and file with the appropriate regulatory authorities,
on behalf of and at no expense to the Dealer Manager, the printed sales
literature or other materials authorized by the Company to be used in the
Offering (“Authorized Sales Materials”). In addition, the
Company will furnish the Dealer Manager and others designated by the
Dealer Manager, at no expense to the Dealer Manager, with such number of
printed copies of Authorized Sales Materials as the Dealer Manager may
reasonably request.
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3.3
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The
Company will furnish such information and execute and file such documents
as may be necessary for it to qualify the Shares for offer and sale under
the securities laws of such jurisdictions as the Dealer Manager may
reasonably designate and will file and make in each year such statements
and reports as may be required. The Company will furnish to the
Dealer Manager upon request a copy of such papers filed by the Company in
connection with any such
qualification.
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3.4
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It
will: (a) file every amendment or supplement to the Registration Statement
or the Prospectus that may be required by the SEC or any state securities
administration and (b) if at any time the SEC shall issue any stop order
suspending the effectiveness of the Registration Statement or any state
securities administration shall issue any order or take other action to
suspend or enjoin the sale of the Shares, it will promptly notify the
Dealer Manager.
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3.5
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If
at any time when a Prospectus is required to be delivered under the
Securities Act and the Rules and Regulations thereunder any event occurs
as a result of which, in the opinion of either the Company or the Dealer
Manager, the Prospectus would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in view of the circumstances under which they were made, not
misleading, the Company will promptly notify the Dealer Manager thereof
(unless the information shall have been received from the Dealer Manager)
and will prepare an amendment or supplement to the Prospectus that will
correct such statement or omission.
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3.6
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It
will comply with all requirements imposed upon it by the Securities Act
and the Exchange Act, by the rules and regulations of the SEC promulgated
thereunder and by all securities laws and regulations of those states in
which an exemption has been obtained or qualification of the Shares has
been effected, to permit the continuance of offers and sales of the Shares
in accordance with the provisions hereof and of the
Prospectus.
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3
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3.7
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The
Company will pay all expenses incident to the performance of its
obligations under this Agreement, including (a) the preparation, filing
and printing of the Registration Statement as originally filed and of each
amendment thereto, (b) the preparation, printing and delivery to the
Dealer Manager of this Agreement, the Participating Dealer Agreement and
such other documents as may be required in connection with the offer,
sale, issuance and delivery of the Shares, (c) the fees and disbursements
of the Company’s counsel, accountants and other advisors, (d) the fees and
expenses related to the review of the terms and fairness of the Offering
by FINRA, (e) the fees and expenses related to the registration and
qualification of the Shares under federal and state securities laws,
including the fees and disbursements of counsel in connection with the
preparation of any Blue Sky survey and any supplement thereto, (f) the
printing and delivery to the Dealer Manager of copies of any Preliminary
Prospectus and the Prospectus, including any amendments and supplements
thereto, (g) the fees and expenses of any registrar or transfer agent in
connection with the Shares and (h) the costs and expenses of the Company
relating to the preparation and printing of any Authorized Sales Materials
and Company-approved investor presentations undertaken in connection with
the marketing of the Shares, including, without limitation, expenses
associated with the production of slides and graphics, fees and expenses
of any consultants engaged in connection with presentations with the prior
approval of the Company and travel and lodging expenses of the
representatives of the Company and any such
consultants.
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4.
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Covenants of the
Dealer Manager. The Dealer Manager covenants and agrees
with the Company that:
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4.1
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In
connection with the Dealer Manager’s participation in the offer and sale
of Shares (including, without limitation, any resales and transfers of
Shares), the Dealer Manager will comply, and in its agreements with
Dealers will require that the Dealers comply, with all requirements and
obligations imposed upon any of them by (a) the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated under
both such acts, including the obligation to deliver a copy of the
Prospectus as amended or supplemented; (b) all applicable state securities
laws and regulations as from time to time in effect; (c) the applicable
rules of FINRA, including, but not in any way limited to, Rules 2440,
2730, 2740 and 2750 of the NASD Conduct Rules; (d) all applicable rules
and regulations relating to the suitability of the investors, including,
without limitation, the provisions of Articles III.C and III.E of the
Statement of Policy regarding Real Estate Investment Trusts of the North
American Securities Administrators Association, Inc. (“NASAA Guidelines”);
(e) any other state and federal laws and regulations applicable to the
Offering, the sale of Shares or the activities of the Dealer Manager
pursuant to this Agreement, including without limitation the privacy
standards and requirements of state and federal laws, including the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999, and the laws governing money laundering
abatement and anti-terrorist financing efforts, including the applicable
rules of the SEC, FINRA and the USA Patriot Act of 2001; and (f) this
Agreement and the Prospectus as amended and
supplemented.
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4.2
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The
Dealer Manager will not offer the Shares, and in its agreements with
Dealers will require that the Dealers not offer Shares, in any
jurisdiction unless and until (a) the Dealer Manager has been advised by
the Company in writing that the Shares are either registered in accordance
with, or exempt from, the securities laws of such jurisdiction and (b) the
Dealer Manager and any Dealer offering Shares in such jurisdiction have
all required licenses and registrations to offer Shares in that
jurisdiction.
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4.3
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The
Dealer Manager will make, and in its agreements with Dealers will require
that Dealers make, no representations concerning the Offering except as
set forth in the Prospectus as amended and supplemented and in the
Authorized Sales Materials.
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4.4
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The
Dealer Manager will offer Shares, and in its agreements with Dealers will
require that the Dealers offer Shares, only to persons who meet the
financial qualification and suitability standards set forth in the
Prospectus as amended and supplemented or in any suitability letter or
memorandum sent to the Dealer Manager by the Company. The
Dealer Manager further agrees that the Company, in its sole and absolute
discretion, may accept or reject any subscription, in whole or in part,
for any reason whatsoever and no commission will be paid to the Dealer
Manager with respect to the portion of any subscription that is
rejected.
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4
The
Dealer Manager shall maintain, or in its agreements with Dealers shall require
the Dealers to maintain, for at least six years, a record of the information
obtained to determine that an investor meets the financial qualification and
suitability standards imposed on the offer and sale of the Shares (both at the
time of the initial subscription and at the time of any additional
subscriptions).
In making
these determinations as to financial qualification and suitability, the Dealer
Manager may rely on representations from (i) investment advisers who are not
affiliated with a Dealer or (ii) banks acting as trustees or
fiduciaries. With respect to the Dealer Manager’s obligation to
maintain records of an investor’s financial qualification and suitability, the
Company agrees that the Dealer Manager can satisfy its obligations by
contractually requiring such information to be maintained by the investment
advisers or banks discussed in the preceding sentence.
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4.5
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Except
for Authorized Sales Materials, the Company has not authorized the use of
any supplemental literature or sales material in connection with the
Offering and the Dealer Manager agrees not to use any such material that
has not been authorized by the Company. The Dealer Manager
further agrees (a) not to deliver any Authorized Sales Materials to any
person unless it is accompanied or preceded by the Prospectus as amended
and supplemented and (b) not to show or give to any investor or
prospective investor or reproduce any material or writing that is supplied
to it by the Company and marked “broker-dealer use only” or otherwise
bearing a legend denoting that it is not to be used in connection with the
sale of Shares to members of the
public.
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4.6
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The
Dealer Manager agrees to be bound by the terms of the Escrow Agreement
dated [date],
among Union Bank, N.A., as escrow agent, the Dealer Manager and the
Company, copies of which are attached hereto as Exhibit B and the Dealer
Manager further agrees that it will not represent or imply that Union
Bank, N.A., as the escrow agent identified in the Prospectus, has
investigated the desirability or advisability of an investment in the
Company or has approved, endorsed or passed upon the merits of the Shares
or of the Company, nor will the Dealer Manager use the name of said escrow
agent in any manner whatsoever in connection with the offer or sale of the
Shares other than by acknowledgment that it has agreed to serve as escrow
agent.
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4.7
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The
Dealer Manager will provide the Company with such information relating to
the offer and sale of the Shares by it as the Company may from time to
time reasonably request or as may be requested to enable the Company to
prepare such reports of sale as may be required to be filed under
applicable federal or state securities
laws.
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4.8
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The
Dealer Manager will permit a Dealer to participate in the Offering only if
such Dealer is a member of FINRA.
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5.
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Obligations and
Compensation of Dealer
Manager.
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5.1
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The
Company hereby appoints the Dealer Manager as its agent and principal
distributor during the Offering Period (as defined in Section 5.2) for the
purpose of finding, on a best-efforts basis, purchasers for the Shares for
cash through the distribution channels contemplated herein. The
Dealer Manager may also arrange for the sale of Shares for cash directly
to clients and customers identified by the Company on the terms and
conditions stated herein and in the Prospectus. The Dealer
Manager hereby accepts such agency and distributorship and agrees to use
its best efforts to find purchasers for the Shares on said terms and
conditions.
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5.2
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The
“Offering Period” shall mean that period during which Shares may be
offered for sale, commencing on the Effective Date of the Registration
Statement (but in no event prior to the Effective Date of the Registration
Statement), during which period offers and sales of the Shares shall occur
continuously in the jurisdictions in which the Shares are registered or
qualified or exempt from registration (as confirmed in writing by the
Company to the Dealer Manager) unless and until the Offering is
terminated, provided that the Dealer Manager and the Dealers will suspend
or terminate offering Shares upon request of the Company at any time and
will resume offering Shares upon subsequent request of the
Company. The Offering Period shall in all events terminate upon
the sale of all of the Shares. Upon termination of the Offering
Period, the Dealer Manager’s agency and this Agreement shall terminate
without obligation on the part of the Dealer Manager or the Company except
as set forth in this Agreement.
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5
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5.3
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As
compensation for the services rendered by the Dealer Manager, the Company
agrees that it will pay to the Dealer
Manager:
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5.3.1 A dealer
manager fee in the amount of 3.0% of the gross proceeds from the sale of Shares
in the Primary Offering (the “Dealer Manager Fee”), a portion of which may be
reallowed to other Dealers (as described more fully in the Participating Dealer
Agreement entered into with such Dealer), which reallowance, if any, shall be
determined by the Dealer Manager in its discretion based on factors including,
but not limited to, the number of shares sold by such Dealer, the assistance of
such Dealer in marketing the Offering and due diligence expenses incurred, and
the extent to which similar fees are reallowed to Dealers in similar offerings
being conducted during the Offering Period; and
5.3.2 subject
to volume discounts and other special circumstances described in or otherwise
provided in the “Plan of Distribution” section of the Prospectus, selling
commissions in the amount of 7.0% of the gross proceeds of the sale of Shares in
the Primary Offering, which commissions may be reallowed in whole or in part to
the Dealer who sold the Shares giving rise to such commissions, as described
more fully in the Participating Dealer Agreement entered into with such Dealer;
provided, however, that no commissions described in this Section 5.3.2 shall be
payable in respect of the purchase of Shares: (i) through an investment advisory
representative affiliated with a Dealer who is paid on a fee-for-service basis
by the investor (ii) by a Participating Dealer (or such Participating Dealer’s
registered representative), or (iii) by an officer, director or employee of the
Company or its affiliates and others identified by the Company to the extent
consistent with applicable laws and regulations; provided, however
5.3.3 the
Company will not pay to the Dealer Manager any Dealer Manager Fee or selling
commission for Shares sold in the Drip.
5.3.4 Notwithstanding
the foregoing, no commissions, payments or amounts whatsoever will be paid to
the Dealer Manager under this Section 5.3 unless or until the Company raises
$2.5 million in the Offering from persons not affiliated with the Company or its
advisor (the “Minimum Offering”). Until the Minimum Offering is
reached, investments will be held in escrow. If the Minimum Offering
is not reached within the time period specified in the Prospectus, investments
will be returned to the investors in accordance with the
Prospectus.
5.3.5 The
Company will not be liable or responsible to any Dealer for direct payment of
commissions to such Dealer; it is the sole and exclusive responsibility of the
Dealer Manager for payment of commissions to Dealers. Notwithstanding
the above, at its discretion, the Company may act as agent of the Dealer Manager
by making direct payment of commissions to such Dealers without incurring any
liability therefor.
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6.
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Indemnification.
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6.1
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To
the extent permitted by the Company’s charter and the provisions of
Article II.G of the NASAA Guidelines, and subject to the limitations
below, the Company will indemnify and hold harmless the Dealers and the
Dealer Manager, their officers and directors and each person, if any, who
controls such Dealer or Dealer Manager within the meaning of Section 15 of
the Securities Act (the “Indemnified Persons”) from and against any
losses, claims, damages or liabilities (“Losses”), joint or several, to
which such Indemnified Persons may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon (a) any untrue statement
or alleged untrue statement of a material fact contained (i) in the
Registration Statement, the Prospectus, any Preliminary Prospectus used
prior to the effective date of the Registration Statement or any
post-effective amendment or supplement to any of them or (ii) in any blue
sky application or other document executed by the Company or on its behalf
specifically for the purpose of qualifying any or all of the Shares for
sale under the securities laws of any jurisdiction or based upon written
information furnished by the Company under the securities laws thereof
(any such application, document or information being hereinafter called a
“Blue Sky Application”) or (iii) in any Authorized Sales Materials, or (b)
the omission or alleged omission to state in the Registration Statement,
the Prospectus, any Preliminary Prospectus used prior to the effective
date of the Registration Statement or any post-effective amendment or
supplement to any of them or in any Blue Sky Application or Authorized
Sales Materials 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. The Company will reimburse each
Indemnified Person for any legal or other expenses reasonably incurred by
such Indemnified Person in connection with investigating or defending such
Loss.
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6
Notwithstanding
the foregoing provisions of this Section 6.1, the Company will not be liable in
any such case to the extent that any such Loss or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished (x) to the Company by the Dealer Manager or (y) to the
Company or the Dealer Manager by or on behalf of any Dealer specifically for use
in the Registration Statement, the Prospectus, any Preliminary Prospectus used
prior to the effective date of the Registration Statement or any post-effective
amendment or supplement to any of them, any Blue Sky Application or any
Authorized Sales Materials, and, further, the Company will not be liable in any
such case if it is determined that such Dealer or the Dealer Manager was at
fault in connection with the Loss, expense or action.
The
foregoing indemnity agreement of this Section 6.1 is subject to the further
condition that, insofar as it relates to any untrue statement, alleged untrue
statement, omission or alleged omission made in the Prospectus (or amendment or
supplement thereto) that was eliminated or remedied in any subsequent amendment
or supplement thereto, such indemnity agreement shall not inure to the benefit
of an Indemnified Party from whom the person asserting any Losses purchased the
Shares that are the subject thereof, if a copy of the Prospectus as so amended
or supplemented was not sent or given to such person at or prior to the time the
subscription of such person was accepted by the Company, but only if a copy of
the Prospectus as so amended or supplemented had been supplied to the Dealer
Manager or the Dealer prior to such acceptance.
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6.2
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The
Dealer Manager will indemnify and hold harmless the Company, its officers
and directors (including any person named in the Registration Statement,
with his consent, who will become a director), each other person who has
signed the Registration Statement and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act (the
“Company Indemnified Persons”), from and against any Losses to which any
of the Company Indemnified Persons may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of a material fact contained (i) in
the Registration Statement, the Prospectus, any Preliminary Prospectus
used prior to the effective date of the Registration Statement or any
post-effective amendment or supplement to any of them or in any Blue Sky
Application or Authorized Sales Materials; or (b) the omission or alleged
omission to state in the Registration Statement, the Prospectus, any
Preliminary Prospectus used prior to the effective date of the
Registration Statement or any post-effective amendment or supplement to
any of them or in any Blue Sky Application or Authorized Sales Materials a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that clauses (a) and (b)
apply, to the extent, but only to the extent, that such untrue statement
or omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Dealer Manager
specifically for use with reference to the Dealer Manager in the
preparation of the Registration Statement, the Prospectus, any Preliminary
Prospectus used prior to the effective date of the Registration Statement
or any post-effective amendment or supplement to any of them or in
preparation of any Blue Sky Application or Authorized Sales Materials; or
(c) any use of sales literature not authorized or approved by the Company
or any use of “broker-dealer use only” materials with members of the
public by the Dealer Manager in the offer and sale of the Shares; or (d)
any untrue statement made by the Dealer Manager or its representatives or
agents or omission to state a fact necessary in order to make the
statements made, in light of the circumstances under which they were made,
not misleading in connection with the offer and sale of the Shares; or (e)
any material violation of this Agreement; or (f) any failure to comply
with applicable laws governing privacy issues, money laundering abatement
and anti-terrorist financing efforts, including applicable rules of the
SEC, FINRA and the USA PATRIOT Act of 2001; or (g) any other failure to
comply with applicable rules of FINRA or federal or state securities laws
and the rules and regulations promulgated thereunder. The
Dealer Manager will reimburse the aforesaid parties for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending such Loss, expense or action. This indemnity
agreement will be in addition to any liability that the Dealer Manager may
otherwise have.
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7
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6.3
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Each
Dealer severally will indemnify and hold harmless the Company, the Dealer
Manager, each of their officers and directors (including any person named
in the Registration Statement, with his consent, who will become a
director), each other person who has signed the Registration Statement and
each person, if any, who controls the Company or the Dealer Manager within
the meaning of Section 15 of the Securities Act (the “Dealer Indemnified
Persons”) from and against any Losses to which a Dealer Indemnified Person
may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Losses (or actions in respect thereof) arise
out of or are based upon (a) any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement,
the Prospectus, any Preliminary Prospectus used prior to the effective
date of the Registration Statement or any post-effective amendment or
supplement to any of them or in any Blue Sky Application or Authorized
Sales Materials; or (b) the omission or alleged omission to state in the
Registration Statement, the Prospectus, any Preliminary Prospectus used
prior to the effective date of the Registration Statement or any
post-effective amendment or supplement to any of them or in any Blue Sky
Application or Authorized Sales Materials a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that clauses (a) and (b) apply, to the extent, but only to the
extent, that such untrue statement or omission was made in reliance upon
and in conformity with written information furnished to the Company or the
Dealer Manager by or on behalf of the Dealer specifically for use with
reference to the Dealer in the preparation of the Registration Statement,
the Prospectus, any Preliminary Prospectus used prior to the effective
date of the Registration Statement or any post-effective amendment or
supplement to any of them or in preparation of any Blue Sky Application or
Authorized Sales Materials; or (c) any use of sales literature not
authorized or approved by the Company or any use of “broker-dealer use
only” materials with members of the public by the Dealer in the offer and
sale of the Shares; or (d) any untrue statement made by the Dealer or its
representatives or agents or omission to state a fact necessary in order
to make the statements made, in light of the circumstances under which
they were made, not misleading in connection with the offer and sale of
the Shares; or (e) any material violation of this Agreement; or (f) any
failure to comply with applicable laws governing privacy issues, money
laundering abatement and anti-terrorist financing efforts, including
applicable rules of the SEC, FINRA and the USA PATRIOT Act of 2001; or (g)
any other failure to comply with applicable rules of FINRA or federal or
state securities laws and the rules and regulations promulgated
thereunder. Each such Dealer will reimburse each Dealer
Indemnified Person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Loss, expense
or action. This indemnity agreement will be in addition to any
liability that such Dealer may otherwise
have.
|
|
6.4
|
Promptly
after receipt by an indemnified party under this Section 6 of notice of
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 6, notify in writing the indemnifying party of the commencement
thereof. The failure of an indemnified party to so notify the
indemnifying party will relieve the indemnifying party from any liability
under this Section 6 as to the particular item for which indemnification
is then being sought, but not from any other liability that it may have to
any indemnified party. In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled, to the
extent it may wish, jointly with any other indemnifying party similarly
notified, to participate in the defense thereof, with separate
counsel. Such participation shall not relieve such indemnifying
party of the obligation to reimburse the indemnified party for reasonable
legal and other expenses (subject to Section 6.5) incurred by such
indemnified party in defending itself, except for such expenses incurred
after the indemnifying party has deposited funds sufficient to effect the
settlement, with prejudice, of the claim in respect of which indemnity is
sought. Any such indemnifying party shall not be liable to any
such indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party. Any
indemnified party shall not be bound to perform or refrain from performing
any act pursuant to the terms of any settlement of any claim or action
effected without the consent of such indemnified
party.
|
8
|
6.5
|
The
indemnifying party shall pay all legal fees and expenses of the
indemnified party in the defense of such claims or actions; provided,
however, that the indemnifying party shall not be obliged to pay legal
expenses and fees to more than one law firm in connection with the defense
of similar claims arising out of the same alleged acts or omissions giving
rise to such claims notwithstanding that such actions or claims are
alleged or brought by one or more parties against more than one
indemnified party. If such claims or actions are alleged or
brought against more than one indemnified party, then the indemnifying
party shall only be obliged to reimburse the expenses and fees of the one
law firm that has been selected by a majority of the indemnified parties
against which such action is finally brought; and in the event a majority
of such indemnified parties are unable to agree on which law firm for
which expenses or fees will be reimbursable by the indemnifying party,
then payment shall be made to the first law firm of record representing an
indemnified party against the action or claim. Such law firm
shall be paid only to the extent of services performed by such law firm
and no reimbursement shall be payable to such law firm on account of legal
services performed by another law
firm.
|
|
7.
|
Survival of
Provisions.
|
|
7.1
|
The
respective agreements, representations and warranties of the Company and
the Dealer Manager set forth in this Agreement shall remain operative and
in full force and effect regardless of (a) any investigation made by or on
behalf of the Dealer Manager or any Dealer or any person controlling the
Dealer Manager or any Dealer or by or on behalf of the Company or any
person controlling the Company and (b) the acceptance of any payment for
the Shares.
|
|
7.2
|
The
respective agreements and obligations of the Company and the Dealer
Manager set forth in Sections 3.7, 4.6 and 4.4 (with respect to the
maintenance of records required by Article III.C.4 of the NASAA Guidelines
and transfers and resales of shares), 4.7, 5.3, 6 through 10 and 12
through 13 of this Agreement shall remain operative and in full force and
effect regardless of (a) any investigation made by or on behalf of the
Dealer Manager or any Dealer or any person controlling the Dealer Manager
or any Dealer or by or on behalf of the Company or any person controlling
the Company, (b) the acceptance of any payment for the Shares and (c) the
termination of this Agreement.
|
|
8.
|
Applicable Law and
Invalid Provision.
|
|
8.1
|
This
Agreement shall be governed by the laws of the State of Delaware;
provided, however, that causes of action for violations of federal or
state securities laws shall not be governed by this Section
8.1.
|
|
8.2
|
The
invalidity or unenforceability of any provision of this Agreement shall
not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision
was omitted.
|
|
9.
|
Counterparts. This
Agreement may be executed in any number of counterparts. Each
counterpart, when executed and delivered, shall be an original contract,
but all counterparts, when taken together, shall constitute one and the
same agreement.
|
|
10.
|
Successors and
Assigns.
|
|
10.1
|
This
Agreement shall inure to the benefit of and be binding upon the Dealer
Manager and the Company and their respective successors and permitted
assigns. This Agreement shall inure to the benefit of the
Dealers to the extent set forth in Sections 1, 3 and 6
hereof. Nothing in this Agreement is intended or shall be
construed to give to any other person any right, remedy or claim, except
as otherwise specifically provided
herein.
|
9
|
10.2
|
No
party shall assign this Agreement or any right, interest or benefit under
this Agreement without the prior written consent of the other
party.
|
|
11.
|
Amendments. This
Agreement may be amended by the written agreement of the Dealer Manager
and the Company.
|
|
12.
|
Term. Any
party to this Agreement shall have the right to terminate this Agreement
on 60 days’ written notice or immediately upon notice to the other party
in the event that such other party shall have failed to comply with any
material provision hereof. If not sooner terminated, the Dealer
Manager’s agency and this Agreement shall terminate upon termination of
the Offering Period without obligation on the part of the Dealer Manager
or the Company, except as set forth in this Agreement. Upon
termination of this Agreement, (a) the Company shall pay to the Dealer
Manager all amounts payable under Section 5 hereof at such time as such
amounts become payable and (b) the Dealer Manager shall promptly deliver
to the Company all records and documents in its possession that relate to
the Offering and that are not designated as “dealer”
copies.
|
|
13.
|
Customer
Complaints. Each party herby agrees to promptly provide
to the other party copies of any written or otherwise documented
complaints from customers of the Dealer Manager or any Dealer received by
such party relating in any way to the Offering (including, but not limited
to, the manner in which the Shares are offered by the Dealer Manager or
the Dealer).
|
|
14.
|
No
Partnership. Nothing in this Agreement shall be
construed or interpreted to constitute the Dealer Manager as in
association with or in partnership with the Company; instead, this
Agreement shall only constitute the Dealer Manager as a dealer authorized
by the Company to sell and to manage the sale by others of the Shares
according to the terms set forth in the Registration Statement and the
Prospectus as amended or supplemented and in this
Agreement.
|
|
15.
|
Submission of
Orders.
|
|
15.1
|
Those
persons who purchase Shares will be instructed by the Dealer Manager or
the Dealer to make their checks payable to “Union Bank, N.A., as escrow
agent for Pasco Apartment REIT, Inc.” or, after the Minimum Offering has
been achieved, to the Company. The Dealer Manager, any agent of
the Dealer Manager and any Dealer receiving a check not conforming to the
foregoing instructions shall return such check directly to such subscriber
not later than the end of the next business day following its
receipt. Checks received by the Dealer Manager, any agent of
the Dealer Manager or a Dealer that conform to the foregoing instructions
shall be transmitted for deposit pursuant to one of the methods described
in this Section 15.
|
|
15.2
|
Where,
pursuant to a Dealer’s internal supervisory procedures, internal
supervisory review is conducted at the same location at which subscription
documents and checks are received from subscribers, checks will be
transmitted by the end of the next business day following receipt by the
Dealer for deposit to the escrow agent for the Company or to the Dealer
Manager (or an agent of the Dealer Manager) if the Dealer Manager is
acting as processing broker-dealer or, after the Minimum Offering has been
achieved, to the Company or its
agent.
|
|
15.3
|
Where,
pursuant to a Dealer’s internal supervisory procedures, final internal
supervisory review is conducted at a different location, checks will be
transmitted by the end of the next business day following receipt by the
Dealer to the office of the Dealer conducting such final internal
supervisory review (the “Final Review Office”). The Final
Review Office will in turn by the end of the next business day following
receipt by the Final Review Office, transmit such checks for deposit to
the escrow agent for the Company or to the Dealer Manager (or an agent of
the Dealer Manager) if the Dealer Manager is acting as processing
broker-dealer or, after the Minimum Offering has been achieved, to the
Company or its agent.
|
10
|
15.4
|
Where
the Dealer Manager (or its agent) receives investor proceeds, checks will
be transmitted by the Dealer Manager (or its agent) for deposit to the
escrow agent for the Company or, after the Minimum Offering has been
achieved, to the Company or its as soon as practicable but in any event by
the end of the second business day following receipt by the Dealer Manager
(or its agent). Checks of rejected potential investors will be
promptly returned to such potential
investors.
|
[signature
page follows]
11
If the
foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
letter and your acceptance shall constitute a binding agreement between us as of
the date first above written.
| Very truly yours, | |
| PASSCO APARTMENT REIT, INC. | |
|
By:_______________________________________
Name:
Title:
|
Accepted
and agreed as of the date first above written.
PASSCO
CAPITAL, INC.
By:_______________________________________
Name:
Title:
12
EXHIBIT
A
Up to
110,000,000 Shares of Common Stock
FORM OF
PARTICIPATING DEALER AGREEMENT
Ladies
and Gentlemen:
PASSCO
Capital Inc., as the dealer manager (the “Dealer Manager”) for Passco Apartment
REIT, Inc. (the “Company”), a Maryland corporation, invites you (the “Dealer”)
to participate in the distribution of shares of common stock (the “Shares”) of
the Company subject to the following terms. Capitalized terms not
otherwise defined herein shall have the meanings set forth in the Dealer Manager
Agreement between the Dealer Manager and the Company, dated [_____________], in
the form attached hereto as Exhibit A (the “Dealer Manager
Agreement”).
By your
acceptance of this Agreement, you will become one of the Dealers referred to in
the Dealer Manager Agreement and will be entitled and subject to the
indemnification provisions contained in Section 6 of the Dealer Manager
Agreement, including specifically the provisions of such Dealer Manager
Agreement (Section 6.3) wherein each Dealer severally agrees to indemnify and
hold harmless the Company, the Dealer Manager and each their officers and
directors (including any person named in the Registration Statement, with his
consent, as about to become a director), each person who signed the Registration
Statement and each person, if any, who controls the Company and the Dealer
Manager within the meaning of Section 15 the Securities Act of 1933, as amended
(the “Securities Act”). The indemnification agreements contained in
Section 6 of the Dealer Manager Agreement shall survive the termination of this
Agreement and the Dealer Manager Agreement.
II. Submission
of Orders
Those
persons who purchase Shares will be instructed by the Dealer to make their
checks payable to “Union Bank, N.A., as escrow agent for Passco Apartment REIT,
Inc.” or, after the Minimum Offering has been achieved, to the
Company. The Dealer will return any check it receives not conforming
to the foregoing instructions directly to such subscriber not later than the end
of the next business day following its receipt. Checks received by
the Dealer that conform to the foregoing instructions shall be transmitted for
deposit pursuant to one of the following methods:
Where,
pursuant to the Dealer’s internal supervisory procedures, internal supervisory
review is conducted at the same location at which subscription documents and
checks are received from subscribers, checks will be transmitted by the end of
the next business day following receipt by the Dealer for deposit to an escrow
agent for the Company or to the Dealer Manager (or an agent of the Dealer
Manager) if the Dealer Manager is acting as processing broker-dealer or, after
the Minimum Offering has been achieved, to the Company or its
agent.
Where,
pursuant to the Dealer’s internal supervisory procedures, final internal
supervisory review is conducted at a different location, checks will be
transmitted by the end of the next business day following receipt by the Dealer
to the office of the Dealer conducting such final internal supervisory review
(the “Final Review Office”). The Final Review Office will in turn by
the end of the next business day following receipt by the Final Review Office
transmit such checks for deposit to the escrow agent for the Company or to the
Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is
acting as processing broker-dealer or, after the Minimum Offering has been
achieved, to the Company or its agent.
III. Pricing
Except as
otherwise provided in the “Plan of Distribution” section of the Prospectus (as
amended and supplemented), the Shares are to be sold at a per Share cash price
as follows: (i) up to 10,000,000 Shares are to be offered pursuant to the
Company’s distribution reinvestment plan for a purchase price of $9.50 per share
(the “DRIP”); and (ii) up to 100,000,000 Shares (the “Primary Offering”) are to
be issued and sold at an initial offering price of $10.00 per Share (subject in
certain circumstances to discounts based upon the volume of shares purchased and
for certain categories of purchasers). The Company has reserved the
right to reallocate the Shares between the Primary Offering and the
DRIP.
A-1
IV. Dealer’s
Commissions
Subject
to volume discounts and other special circumstances described in or otherwise
provided in the “Plan of Distribution” section of the Prospectus, Dealer’s
selling commissions applicable to the total public offering price of Shares sold
by Dealer which it is authorized to sell in the Primary Offering is 7.0% of the
gross proceeds of the Shares sold by it and accepted and confirmed by the
company, which commission will be paid by the Dealer Manager. No
selling commissions will be paid in connection with the purchase of any Shares
in the Drip. For these purposes, a “sale” of Shares in the Primary
Offering shall occur if and only if a transaction has closed with a securities
purchaser pursuant to all applicable offering and subscription documents and the
Company has thereafter distributed the commission to the Dealer Manager in
connection with such transaction. Dealer hereby waives any and all
rights to receive payment of commissions due until such time as the Dealer
Manager is in receipt of the commission from the Company. Dealer
affirms that the Dealer Manager’s liability for commissions payable to Dealer is
limited solely to the commissions received by the Dealer Manager from the
Company associated with Dealer’s sale of Shares in the Primary
Offering. In addition, as set forth in the Prospectus, the Dealer
Manager in its sole discretion may reallow a portion of the Dealer Manger Fee to
Dealer as marketing fees or to defray other distribution-related expenses, which
reallowance, if any, shall be determined by the Dealer Manager in its discretion
based on factors including, but not limited to, the number of shares sold by
such Dealer, the assistance of such Dealer in marketing the Offering and due
diligence expenses incurred, and the extent to which similar fees are reallowed
to Dealers in similar offerings being conducted at the same
time. Such reallowance, if any, is described on Schedule 1 to this
Agreement.
Dealer
acknowledges and agrees that no selling commissions or Dealer Manager Fee shall
be payable for Shares sold in the DRIP or in respect of the purchase of Shares:
(i) through an investment advisory representative affiliated with a Dealer who
is paid on a fee-for-service basis by the investor (ii) by a Participating
Dealer (or such Participating Dealer’s registered representative), or (iii) by
an officer, director or employee of the Company or its affiliates and others
identified by the Company to the extent consistent with applicable laws and
regulations.
Notwithstanding
the foregoing, no commissions, payments or amounts whatsoever will be paid to
Dealer Manager unless or until the Company raises $2.5 million in the Offering
from persons not affiliated with the Company or its advisor (the “Minimum
Offering”). Until the Minimum Offering is reached, investments will
be held in escrow. If the Minimum Offering is not reached within the
time period specified in the Prospectus, investments will be returned to the
investors in accordance with the Prospectus.
The
parties hereby agree that the foregoing commission is not in excess of the usual
and customary distributors’ or sellers’ commission received in the sale of
securities similar to the Shares, that Dealer’s interest in the offering is
limited to such commission from the Dealer Manager and Dealer’s indemnity
referred to in Section 6 of the Dealer Manager Agreement and that the Company is
not liable or responsible for the direct payment of such commission to the
Dealer.
V. Payment
Payment
of selling commissions or any reallowance of a portion of the dealer manager fee
will be made by the Dealer Manager (or by the Company as provided in the Dealer
Manager Agreement) to the Dealer within 30 days of the receipt by the Dealer
Manager of the gross commission payments from the Company. Dealer
acknowledges that, if the Company pays selling commissions to the Dealer
Manager, the Company is relieved of any obligation for selling commissions to
the Dealer. The Company may rely on and use the preceding
acknowledgment as a defense against any claim by the Dealer for selling
commissions the Company pays to Dealer Manager but that Dealer Manager fails to
remit to the Dealer.
A-2
VI. Right
to Reject Orders or Cancel Sales
All
orders, whether initial or additional, are subject to acceptance by and shall
only become effective upon confirmation by the Company. The Dealer
agrees that the Company, in its sole and absolute discretion, may accept or
reject any subscription, in whole or in part, for any reason whatsoever, and no
commission will be paid to the Dealer with respect to the portion of any
subscription that is rejected. Orders not accompanied by a
Subscription Agreement with the signature page and the required check in payment
for the Shares may be rejected. Issuance and delivery of the Shares
will be made only after actual receipt of payment therefor. If any
check is not paid upon presentment, or if the Company is not in actual receipt
of clearinghouse funds or cash, certified or cashier’s check or the equivalent
in payment for the Shares, the Company reserves the right to cancel the sale
without notice. In the event an order is rejected, canceled or
rescinded for any reason, the Dealer agrees to return to the Dealer Manager any
commission theretofore paid with respect to such order within 30 days thereafter
and, failing to do so, the Dealer Manager shall have the right to offset amounts
owed against future commissions due and otherwise payable to the
Dealer.
VII. Covenants
of the Dealer
Dealer
covenants and agrees with the Dealer Manager and the Company that:
|
7.1.
|
Dealer
will use its best efforts to sell the Shares for cash on the terms and
conditions set forth in this Agreement and the Prospectus as amended and
supplemented.
|
|
7.2.
|
In
connection with the Dealer’s participation in the offer and sale of Shares
(including, without limitation, all initial and additional subscriptions
for Shares and any resales and transfers of Shares), the Dealer will
comply with all requirements and obligations imposed upon it by (a) the
Securities Act, the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the rules and regulations of the SEC promulgated
under both such acts; (b) all applicable state securities laws and
regulations as from time to time in effect; (c) the applicable rules of
the FINRA, including, but not in any way limited to, Rule 2730, Rule 2740,
Rule 2420, Rule 2440 and Rule 2750 of the NASD Conduct Rules; (d) all
applicable rules and regulations relating to the suitability of investors,
including, without limitation, the provisions of Articles III.C. and III.E
of the Statement of Policy regarding Real Estate Investment Trusts of the
North American Securities Administrators Association, Inc. (the “NASAA
Guidelines”); (e) any other state and federal laws and regulations
applicable to the Offering, the sale of Shares or the activities of the
Dealer pursuant to this Agreement, including without limitation the
privacy standards and requirements of state and federal laws, including
the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999, and the laws governing money
laundering abatement and anti-terrorist financing efforts, including the
applicable rules of the SEC, FINRA and the USA Patriot Act of 2001; and
(f) this Agreement and the Prospectus as amended and
supplemented.
|
|
7.3.
|
The
Dealer will not offer Shares in any jurisdiction unless and until (a) the
Dealer has been advised in writing by the Company or the Dealer Manager
that the Shares are either registered in accordance with, or exempt from,
the securities laws of such jurisdiction and (b) the Dealer has all
required licenses and registrations to offer shares in that
jurisdiction.
|
|
7.4.
|
The
Dealer will offer Shares (both at the time of an initial subscription and
at the time of any additional subscription) only to persons who meet the
financial qualifications and suitability standards set forth in the
Prospectus as amended or supplemented or in any suitability letter or
memorandum sent to the Dealer by the Company or the Dealer
Manager. Nothing contained in this section shall be construed
to relieve the Dealer of the Dealer’s suitability obligations under Rule
2310 of the NASD Conduct Rules.
|
|
7.5.
|
The
Dealer agrees to comply with the record-keeping requirements imposed by
(a) federal and state securities laws and the rules and regulations
thereunder, (b) the applicable rules of FINRA and (c) the NASAA
Guidelines, including the requirement to maintain records (the
“Suitability Records”) of the information used to determine that an
investment in Shares is suitable and appropriate for each subscriber for a
period of six years from the date of the sale of the
Shares. The Dealer further agrees to make the Suitability
Records available to the Dealer Manager and the Company upon request and
to make them available to representatives of the SEC and FINRA and
applicable state securities administrators upon the Dealer’s receipt of a
subpoena or other appropriate document request from such
agency.
|
A-3
|
7.6.
|
The
Dealer will provide the Dealer Manager with such information relating to
the offer and sale of the Shares by it as the Dealer Manager may from time
to time reasonably request or as may be requested to enable the Dealer
Manager or the Company, as the case may be, to prepare such reports of
sale as may be required to be filed under applicable federal or state
securities laws and the rules and regulations
thereunder.
|
|
7.7.
|
The
Dealer agrees to be bound by the terms of the Escrow Agreement dated [date], among Union
Bank, N.A., as escrow agent, the Dealer Manager and the Company, copies of
which are attached hereto as Exhibit B and the Dealer further agrees that
it will not represent or imply that Union Bank, N.A., as the escrow agent
identified in the Prospectus, has investigated the desirability or
advisability of an investment in the Company or has approved, endorsed or
passed upon the merits of the Shares or of the Company, nor will the
Dealer use the name of said escrow agent in any manner whatsoever in
connection with the offer or sale of the Shares other than by
acknowledgment that it has agreed to serve as escrow
agent.
|
VIII. Prospectus
and Sales Literature
Dealer is
not authorized or permitted to give, and will not give, any information or make
any representation (written or oral) concerning the Shares except as set forth
in the Prospectus as amended and supplemented or in the Authorized Sales
Materials. The Dealer Manager will supply Dealer with reasonable
quantities of the Prospectus, including amendments of and supplements to the
Prospectus, and any Authorized Sales Materials, for delivery to investors, and
Dealer will deliver a copy of the Prospectus, including any amendments and
supplements thereto, as required by the Securities Act, the Exchange Act and the
rules and regulations promulgated under both. The Dealer agrees that
(a) it will deliver a copy of the Prospectus as amended and supplemented to each
investor to whom an offer is made prior to or simultaneously with the first
solicitation of an offer to sell the Shares to an investor and (b) it will not
send or give any Authorized Sales Materials to an investor unless the Authorized
Sales Materials are accompanied by or preceded by the Prospectus as amended and
supplemented.
Except
for the Authorized Sales Materials, the Company has not authorized the use of
any supplemental literature or sales materials in connection with the Offering
and the Dealer agrees not to use any material unless it has been authorized by
the Company and provided to the Dealer by the Dealer Manager. Dealer
agrees that it will not show or give to any investor or prospective investor or
reproduce any material or writing that is supplied to it by the Dealer Manager
and marked “broker-dealer use only” or otherwise bearing a legend denoting that
it is not to be used in connection with the sale of Shares to members of the
public. Dealer agrees that it will not use in connection with the
offer or sale of Shares any material or writing that relates to another company
supplied to it by the Company or the Dealer Manager bearing a legend that states
that such material may not be used in connection with the offer or sale of any
securities of the Company.
Dealer
agrees to furnish a copy of the Prospectus (as amended and supplemented)
required for compliance with the provisions of federal and state securities laws
and the rules and regulations thereunder, including Rule 15c2-8 under Exchange
Act. Regardless of the termination of this Agreement, Dealer will
deliver a Prospectus (as amended and supplemented) in transactions in the Shares
for a period of 90 days from the effective date of the Registration Statement or
such other period as may be required by the Exchange Act or the rules and
regulations thereunder.
IX. License
and Association Membership
Dealer
represents and warrants to the Company and the Dealer Manager that it is a
properly registered or licensed broker-dealer, duly authorized to offer and sell
Shares under federal securities laws and regulations and the securities laws and
regulations of all states where it offers or sells Shares and that it is a
member of FINRA in good standing. This Agreement shall automatically
terminate if the Dealer ceases to be a member of FINRA in good standing or is
subject to a FINRA suspension or if the Dealer’s registration or license under
the Exchange Act or any state securities laws or regulations is terminated or
suspended; the Dealer agrees to notify the Dealer Manager immediately if any of
these events occur.
A-4
X. Anti-Money
Laundering Compliance Programs
Dealer’s
acceptance of this Agreement constitutes a representation to the Company and the
Dealer Manager that the Dealer has established and implemented an anti-money
laundering compliance program in accordance with applicable laws and
regulations, including federal and state securities laws, the USA Patriot Act of
2001, Executive Order 13224 – Executive Order on Terrorist Financing Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism, and applicable rules of FINRA.
In
accordance with these applicable laws and regulations, Dealer agrees to verify
the identity of its new customers; to maintain customer records; to check the
names of new customers against government watch lists, including the Office of
Foreign Asset Control’s (OFAC) list of Specially Designated Nationals and
Blocked Persons, and, as required, to provide the Financial Crimes Enforcement
Network with information regarding: (a) the identity of a specified individual
or organization; (b) an account number; (c) all identifying information provided
by the account holder; and (d) the date and type of transaction, upon
request. Additionally, Dealer will manually monitor account activity
to identify patterns of unusual size or volume, geographic factors and any other
“red flags” described in the USA Patriot Act as potential signals of money
laundering or terrorist financing, and disclose such activity to applicable
federal and state law enforcement when required by law. The Dealer
hereby agrees to certify annually to the Dealer Manager that it has implemented
an AML Program and completes due diligence on correspondent accounts as required
by Section 312 of the Money Laundering Abatement Act in connection with the
selling of the Shares.
XI. Effectiveness,
Termination and Amendment
This
Agreement shall become effective upon the execution hereof by the Dealer and the
receipt of this executed Agreement by the Dealer Manager. Dealer will
immediately suspend or terminate its offer and sale of Shares upon the request
of the Company or the Dealer Manager at any time and will resume its offer and
sale of Shares hereunder upon subsequent request of the Company or the Dealer
Manager. In addition to termination pursuant to Section IX, any party
may terminate this Agreement by written notice. Such termination
shall be effective 48 hours after the mailing of such notice. Upon
the sale of all of the Shares, this Agreement shall terminate without obligation
on the part of the Dealer or the Dealer Manager, except as set forth in this
Agreement. The indemnification agreements contained in Section 6 of
the Dealer Manager Agreement shall survive the termination of this Agreement and
the Dealer Manager Agreement, and the respective agreements and obligations of
the Dealer Manager and the Dealer set forth in Sections IV, V, VI, 7.2, 7.5,
7.6, VIII and XI through XXI of this Agreement shall remain operative and in
full force and effect regardless of the termination of this
Agreement.
This
Agreement may be amended at any time by the Dealer Manager by written notice to
the Dealer. Any such amendment shall be deemed accepted by the Dealer
upon the Dealer placing an order for the sale of Shares after it has received
such notice.
XII. Privacy
Laws
The
Dealer Manager and Dealer (each referred to individually in this section as a
“party”) agree as follows:
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12.1.
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Each
party agrees to abide by and comply in all respects with (a) the privacy
standards and requirements of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999 (“GLBA”)
and applicable regulations promulgated thereunder, (b) the privacy
standards and requirements of any other applicable federal or state law,
including the Fair Credit Reporting Act (“FCRA”) and (c) its own internal
privacy policies and procedures, each as may be amended from time to
time.
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12.2.
|
Dealer
shall not disclose nonpublic personal information (as defined under the
GLBA) of all customers who have opted out of such disclosures, except to
service providers (when necessary and as permitted under the GLBA) or as
otherwise required by applicable
law;
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12.3.
|
Except
as expressly permitted under the FCRA, Dealer shall not disclose any
information that would be considered a “consumer report” under the FCRA;
and
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12.4.
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Dealer
shall be responsible for determining which customers have opted out of the
disclosure of nonpublic personal information by periodically reviewing
and, if necessary, retrieving a list of such customers (the “List”) to
identify customers that have exercised their opt-out rights. In
the event either party expects to use or disclose nonpublic personal
information of any customer for purposes other than servicing the
customer, or as otherwise required by applicable law, that party must
first consult the List to determine whether the affected customer has
exercised his or her opt-out rights. Each party understands
that it is prohibited from using or disclosing any nonpublic personal
information of any customer that is identified on the List as having opted
out of such disclosures.
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XIII. Customer
Complaints
Each
party agrees to promptly provide to the other party copies of any written or
otherwise documented complaints from customers of the Dealer received by such
party relating in any way to the Offering (including, but not limited to, the
manner in which the Shares are offered by the Dealer).
XIV. Notice
All
notices will be in writing and will be duly given to the Dealer Manager when
mailed to the address set forth below, and to Dealer when mailed to the address
specified by the Dealer below.
PASSCO
Capital Inc.
▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
XV. Confirmation
The
Dealer Manager hereby acknowledges that the Dealer Manager has assumed the duty
to confirm on behalf of the Dealers all orders for purchases of Shares accepted
by the Company. Such confirmations will comply with the rules of the
SEC and FINRA and will comply with the applicable laws of such other
jurisdictions to the extent that the Dealer Manager is advised of such laws in
writing by the Dealer.
XVI. Entire
Agreement
This
Agreement and the exhibits hereto are the entire agreement of the parties and
supersede all prior agreements, if any, relating to the subject matter hereof
between the parties hereto.
XVII. Successors
and Assigns
No party
shall assign this Agreement or any right, interest or benefit under this
Agreement without the prior written consent of the other party. This
Agreement shall be binding upon the Dealer Manager and the Dealer and their
respective successors and permitted assigns.
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XVIII. Arbitration,
Attorney’s Fees, Jury Trial and Applicable Law
In the
event of a dispute concerning any provision of this Agreement (including any
provisions of the Dealer Manager Agreement incorporated into this Agreement),
either party may require the dispute to be submitted to binding arbitration,
conducted on a confidential basis, under the then current commercial arbitration
rules of FINRA or the American Arbitration Association (at the discretion of the
party requesting arbitration) in accordance with the terms of this Agreement
(including the governing law provisions of this section) and pursuant to the
Federal Arbitration Act (9 U.S.C. §§ 1 – 16). The parties will
request that the arbitrator or arbitration panel (“Arbitrator”) issue written
findings of fact and conclusions of law. The Arbitrator shall not be
empowered to make any award or render any judgment for punitive damages, and the
Arbitrator shall be required to follow applicable law in construing this
Agreement, making awards, and rendering judgments. The decision of
the arbitration panel shall be final and binding, and judgment upon any
arbitration award may be entered by any court having
jurisdiction. All arbitration hearings will be held at the Los
Angeles FINRA District Office or at another mutually agreed upon
site. The parties may agree on a single arbitrator, or, if the
parties cannot so agree, each party will have the right to choose one
arbitrator, and the selected arbitrator will choose a third
arbitrator. Each arbitrator must have experience and education that
qualify him or her to competently address the specific issues to be designated
for arbitration. Notwithstanding the preceding, no party will be
prevented from immediately seeking provisional remedies in courts of competent
jurisdiction, including but not limited to, temporary restraining orders and
preliminary injunctions, but such remedies will not be sought as a means to
avoid or stay arbitration. Except as provided otherwise in Section 6
of the Dealer Manager Agreement, in any action or arbitration to enforce the
provisions of this Agreement or to secure damages for its breach, the prevailing
party shall recover its costs and reasonable attorney’s fees. Each
party to this Agreement hereby waives a trial by jury in any legal action or
proceeding relating to this Agreement. This Agreement shall be
construed under the laws of the State of California; provided, however, that the
governing law for causes of action for violations of federal or state securities
law shall be governed by the applicable federal or state securities
law.
XIX. Severability
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision was omitted.
XX. Counterparts
This
Agreement may be executed in any number of counterparts. Each
counterpart, when executed and delivered, shall be an original contract, but all
counterparts, when taken together, shall constitute one and the same
agreement.
XXI. No
Partnership
Nothing
in this Agreement shall be construed or interpreted to constitute the Dealer as
in association with or in partnership with the Dealer Manager, the Company or
the other Dealers; instead, this Agreement shall only constitute the Dealer as a
dealer authorized by the Dealer Manager to sell the Shares according to the
terms set forth in the Registration Statement and the Prospectus as amended and
supplemented and in this Agreement.
[signature
page follows]
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Attest:
By:_____________________________________
Name
____________________________________
Title
|
THE
DEALER MANAGER:
PASSCO
CAPITAL, INC.
By:___________________________________
Name
__________________________________
Title
|
We have
read the foregoing Agreement and we hereby accept and agree to the terms and
conditions set forth therein. We hereby represent that the list below
of jurisdictions in which we are registered or licensed as a broker or dealer
and are fully authorized to sell securities is true and correct, and we agree to
advise you of any change in such list during the term of this
Agreement.
1. Identity
of Dealer:
Name:__________________________________________________________________________________________________
Type of
entity:___________________________________________________________________________________________
(corporation,
partnership or proprietorship)
Organized
in the State
of:___________________________________________________________________________________
(State)
Licensed
as broker-dealer in the following
States:_________________________________________________________________
______________________________________________________________________________________________________
Tax I.D.
#:_______________________________________________________________________________________________
2. Person
to receive notice pursuant to Section XIV:
Name:__________________________________________________________________________________________________
Company:_______________________________________________________________________________________________
Address:________________________________________________________________________________________________
City,
State and Zip
Code:____________________________________________________________________________________
Telephone
No.: ( )
Telefax
No.: ( )
E-mail
Address:___________________________________________________________________________________________
AGREED TO
AND ACCEPTED BY THE DEALER:
___________________________________________
(Dealer’s
Firm Name)
By:________________________________________
(Authorized
Signature)
Title:_______________________________________
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