EXHIBIT 1.1
FORM OF DEALER MANAGER AGREEMENT
INLAND RETAIL REAL ESTATE TRUST, INC.
56,000,000
SHARES OF COMMON STOCK
$.01 PAR VALUE PER SHARE
DEALER MANAGER AGREEMENT
________ ___, 1999
Inland Securities Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies/Gentlemen:
Inland Retail Real Estate Trust, Inc. (the "Company"), a Maryland
corporation, intends to qualify as a real estate investment trust (a "REIT")
under federal income tax laws. The Company was formed on September 3, 1998, and
is governed by the Bylaws, as amended (the "Bylaws") and the Articles of
Incorporation, as amended (the "Articles") in the form included as Exhibits to
the Registration Statement, as described in Section 1(a) hereof (such Bylaws
and Articles being hereinafter referred to as the "Organizational Documents").
The advisor to the Company is Inland Retail Real Estate Advisory Services,
Inc., an Illinois corporation (the "Advisor"). Unless otherwise defined,
capitalized terms used herein shall have the same meaning as in the Registration
Statement on Form S-11.
The Company is offering (i) on a "best efforts" basis up to 50,000,000
shares of common stock, $.0l par value per share (the "Shares") for a
purchase price of $10.00 per Share with a minimum initial investment of
$3,000 ($1,000 in the case of tax-exempt investors, except for residents of
the State of Iowa where Individual Retirement Accounts must have a minimum
investment of $3,000, and for residents of the State of Minnesota where
Individual Retirement Accounts and qualified plan accounts must have a
minimum investment of $2,000), (ii) 2,000,000 Soliciting Dealer Warrants and
the 2,000,000 Shares issuable on exercise of the Soliciting Dealer Warrants
and (iii) up to 4,000,000 Shares for a purchase price of $9.50 per Share for
issuance through the Company's Distribution Reinvestment Program, all upon
the other terms and conditions set forth in the Prospectus, as described in
Section 1(a) hereof. The subscribers, each of whom will be required to enter
into a subscription agreement substantially similar to the form of the
Subscription Agreement attached as Appendix C to the Prospectus (the
"Subscription Agreement"), will, upon acceptance of their subscriptions by and
in the discretion of the Company, become stockholders of the Company (the
"Stockholders").
1. REPRESENTATION AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and agrees with you that:
(a) REGISTRATION STATEMENT AND PROSPECTUS. A registration statement
(File No. 333-64391) on Form S-11 with respect to an aggregate of
56,000,000 Shares, plus 2,000,000 Soliciting Dealer Warrants (the
"Warrants") (which are issuable in certain circumstances in connection with
sale of the Shares), and such 56,000,000 Shares include 2,000,000 Shares
issuable on exercise of the Warrants and 4,000,000 Shares issuable pursuant
to the Company's Distribution Reinvestment Program, has been prepared by
the Company pursuant to the Securities Act of 1933, as amended (the "Act"),
and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission under the Act; one or more amendments to
such registration statement have been or may be so prepared and filed. As
used in this Agreement, the term "Registration Statement" means such
registration statement in the form in which it becomes effective, the term
"Effective Date" means the date upon which the Registration Statement is or
was first declared effective by the Commission and the term "Prospectus"
means the prospectus in the form constituting a part of the Registration
Statement as well as in the form first filed with the Commission pursuant
to its Rule 424 after the Registration Statement becomes effective. The
Commission has not issued any stop order suspending the effectiveness of
the Registration Statement and no proceedings for that purpose have been
instituted or are pending before or threatened by the Commission under the
Act.
(b) COMPLIANCE WITH THE ACT. From the time the Registration
Statement becomes effective and at all times subsequent thereto up to and
including the Termination Date (as defined in Section 2(c) hereof):
(i) the Registration Statement, the Prospectus and any
amendments or supplements thereto will contain all statements which
are required to be stated therein by the Act and the Rules and
Regulations and will comply in all material respects with the Act and
the Rules and Regulations; and
(ii) neither the Registration Statement nor the Prospectus nor
any amendment or supplement thereto will at any such time include 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, in light of the circumstances under which they were made, not
misleading.
(c) NO SUBSEQUENT MATERIAL EVENTS. Subsequent to the respective
dates as of which information is given in the Registration Statement and
Prospectus and prior to the Termination Date, except as contemplated in the
Prospectus or as disclosed in a supplement or amendment thereto or in the
periodic financial statements of the Company, the Company has not and will
not have:
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(i) incurred any material liabilities or obligations, direct
or contingent; or
(ii) entered into any material transaction, not in the ordinary
course of business and, except as so disclosed, there has not been and
will not be any material adverse change in the financial position or
results of operations of the Company.
(d) CORPORATION STATUS. The Company is a corporation duly formed and
validly existing under the General Corporation Law of Maryland.
(e) AUTHORIZATION OF AGREEMENT. This Agreement has been duly and
validly authorized, executed and delivered by or on behalf of the Company
and constitutes the valid and binding agreement of the Company enforceable
in accordance with its terms (except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
of the United States, any state or any political subdivision thereof which
affect creditors' rights generally or by equitable principles relating to
the availability of remedies). The performance of this Agreement, the
consummation of the transactions contemplated herein and the fulfillment of
the terms hereof, do not and will not result in a breach of any of the
terms and provisions of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, voting trust agreement, note, lease or
other agreement or instrument to which the Company is a party or by which
the Company or its property is bound, or under any rule or regulation or
order of any court or other governmental agency or body with jurisdiction
over the Company or any of its properties; and no consent, approval,
authorization or order of any court or governmental agency or body has been
or is required for the performance of this Agreement or for the
consummation of the transactions contemplated hereby (except as have been
obtained under the Act, from the National Association of Securities
Dealers, Inc. [the "NASD"] or as may be required under state securities or
blue sky laws in connection with the offer and sale of the Shares or under
the laws of states in which the Company may own real properties in
connection with its qualification to transact business in such states or as
may be required by subsequent events which may occur).
(f) PENDING ACTIONS. There is no material action, suit or proceeding
pending or, to the knowledge of the Company, threatened, to which the
Company is a party, before or by any court or governmental agency or body
which adversely affects the offering of the Shares.
(g) REQUIRED FILINGS. There are no contracts or other documents
required to be filed by the Act or the Rules and Regulations of the
Commission thereunder as exhibits to the Registration Statement which have
not been so filed.
(h) FEDERAL INCOME TAX LAWS. The Corporation has obtained an opinion
of Wildman, Harrold, ▇▇▇▇▇ & ▇▇▇▇▇ stating that, under existing federal
income tax laws and regulations, assuming the Company acts as described in
the "Federal Income Tax
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Considerations" section of the Prospectus and timely files the requisite
elections, counsel is of the opinion that the Company has been organized
in conformity with the requirements for qualification as a REIT beginning
with its taxable year ending December 31, 1999, and that its prior,
current and anticipated methods of operation (as described in the
Prospectus and represented by management) has enabled and should enable
it to satisfy the REIT Requirements (as defined in the Prospectus).
(i) INDEPENDENT PUBLIC ACCOUNTANTS. To the best of the Company's
knowledge, the accountants who have certified certain financial statements
appearing in the Prospectus are independent public accountants within the
meaning of the Act and the Rules and Regulations.
(j) ESCROW AGREEMENT. The Company has entered into an escrow
agreement (the "Escrow Agreement") with Inland Securities Corporation, Oak
Brook, Illinois (the "Dealer Manager"), and LaSalle National Bank, N.A.,
Chicago, Illinois (the "Escrow Agent"), in the form included as an exhibit
to the Registration Statement, which provides for the establishment of an
escrow account (the "Escrow Account"). During the period commencing with
the Effective Date and ending on the Termination Date, the Company will
deposit subscribers funds in the Escrow Account as described in Section 2
below.
(k) SALES LITERATURE. In addition to and apart from the Prospectus,
the Company may use certain supplemental sales material in connection with
the offering of the Shares. This material, prepared by the Advisor, would
consist of a brochure describing the Advisor and its Affiliates and the
objectives of the Company and may also contain pictures and summary
descriptions of properties similar to those to be acquired by the Company
that Affiliates of the Company have previously acquired. This material may
also include pictures and summary descriptions of properties similar to
those to be acquired by the Company, as well as a brochure, audio-visual
materials and tape presentations highlighting and explaining various
features of the Offering, properties of prior real estate programs and real
estate investments in general; and articles and publications concerning
real estate. Business reply cards, introductory letters and seminar
invitation forms may be sent to Soliciting Dealers (as hereinafter defined)
and prospective investors. These materials shall be hereinafter referred
to collectively as the "sales literature." No person has been authorized
to prepare for, or furnish to, a prospective investor, any sales literature
other than: (i) that described herein; and (ii) so-called "tombstone"
newspaper advertisements/solicitations of interest, limited to identifying
the Offering and the location of sources of further information. Use of
any sales literature is conditioned upon filing with and, if required,
clearance by appropriate regulatory agencies (including, without
limitation, the NASD and any state securities regulator or commissioner).
Such clearance (if provided), however, does not indicate that the
regulatory agency allowing the use of the materials has passed on the
merits of the Offering or the adequacy or accuracy of the sales materials.
Except as described herein, the Company has not authorized the use of other
supplemental literature or sales material in connection with this Offering.
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Although it is believed that the information contained in the sales
literature or sales material will not conflict with any of the information
set forth in the Prospectus, the sales literature will not purport to be
complete, and should not be considered as a part of the Prospectus, or as
incorporated in the Prospectus by reference, or as forming the basis of the
Offering.
(l) AUTHORIZATION OF THE SHARES. The Company has an authorized and
outstanding capitalization as set forth in the Registration Statement and
Prospectus. The sale of the Shares has been duly and validly authorized by
the Company, and when subscriptions for the Shares have been accepted by
the Company as contemplated in the Prospectus and the Shares have been
issued to the respective subscribers, the Shares will represent ownership
in the Company and will conform to the description thereof contained in the
Prospectus. Stockholders have no preemptive rights to purchase or
subscribe for securities of the Company, and the Shares are not convertible
or subject to redemption at the option of the Company. The Shares are
entitled to one vote per Share and do not have cumulative voting rights.
Subject to the rights of the holders of any class of capital stock of the
Company having any preference or priority over the Shares, the Stockholders
are entitled to distributions in such amounts as may be declared by the
Board of Directors from time to time out of funds legally available for
such payments and, in the event of liquidation, to share ratably in any
assets of the Company remaining after payment in full of all creditors and
provisions for any liquidation preferences on any outstanding preferred
stock ranking prior to the Shares.
2. OFFERING AND SALE OF THE SHARES. On the basis of the representations,
warranties and agreements herein contained, and subject to the terms and
conditions herein set forth, the Company hereby appoints you as its exclusive
Dealer Manager to solicit and to cause other dealers (as described in Section
2 (a) hereof) to solicit subscriptions for the Shares at the subscription price
to be paid and otherwise upon the other terms and conditions set forth in the
Prospectus and in the Subscription Agreement, and you agree to use your best
efforts as such Dealer Manager to procure subscribers for the Shares, during the
period commencing with the Effective Date and ending on the Termination Date
(the "Offering Period"). The number of Shares, if any, to be reserved for sale
by each Soliciting Dealer may be decided by the mutual agreement, from time to
time, of you and the Company. In the absence of such mutual agreement, the
Company shall, subject to the provisions of Section 2(b) hereof accept
Subscription Agreements based upon a first-come, first accepted reservation or
other similar method.
(a) SOLICITING DEALERS. The Shares offered and sold through you
under this Agreement shall be offered and sold only by you and, at your
sole option, any other securities dealers whom you may retain (collectively
the "Soliciting Dealers"), each of whom are members of the NASD, executing
agreements with you substantially in the form of the Soliciting Dealers
Agreement attached hereto as Exhibit A.
(b) SUBSCRIPTION AGREEMENTS AND SUBSCRIBERS' FUNDS. Each person
desiring to purchase Shares through you or any other Soliciting Dealer will
be required to
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complete and execute the Subscription Agreement and to deliver such
document to you or such Soliciting Dealer, together with a check payable
to the order of "LNB, Escrow Agent for IRRET" in the amount of $10 per
Share.
Each Soliciting Dealer shall forward any such Subscription Agreement
and check to you not later than noon of the next business day after receipt
of such Subscription Agreement, if the Soliciting Dealer conducts its
internal supervisory procedures at the location where the Subscription
Agreement and check were initially received. When such internal
supervisory procedures are to be performed at a different location (the
"Final Review Office"), the Subscription Agreement and check must be
transmitted to the Final Review Office by the end of the next business day
following receipt of the Subscription Agreement and check by the Soliciting
Dealer. The Final Review Office will, by the next business day following
receipt of the Subscription Agreement and check, forward both the
Subscription Agreement and check to you as processing broker-dealer in
order that you may complete your review of the documentation and process
the Subscription Agreement and check. The Company will have
representatives available to review the Subscription Agreement at your
location in order to determine whether it wishes to accept the proposed
purchaser as a Stockholder, it being understood that the Company reserves
the unconditional right to reject the tender of any Subscription Agreement
and check (exclusive of the Company's Distribution Reinvestment Program).
Any check received by you directly or as processing broker-dealer from the
Soliciting Dealers will, in all cases, be forwarded to the Escrow Agent as
soon as practicable, but in any event by the end of the second business day
following receipt by you of the Subscription Agreement and check. The
Company will promptly notify you or the Soliciting Dealer, as appropriate,
of any rejection, and you shall send the check and the Subscription
Agreement to the Escrow Agent with directions to promptly return both the
Subscription Agreement and check to the rejected subscriber. All
subscription funds may be deposited directly with the Company.
Nothing contained in this Section 2 shall be construed to impose upon
the Company the responsibility of assuring that prospective purchasers meet
the suitability standards contained in the Prospectus or to relieve you or
any of the Soliciting Dealers of the responsibility of complying with the
Rules of the NASD.
(c) TERMINATION OF THE OFFERING. The Offering Period will
terminate on a date (i) six months from the date of the original
Prospectus in the event the Minimum Offering is not sold by that date,
and if the Minimum Offering is sold and if the Offering continues
thereafter, (ii) on or before one year from the date of the original
Prospectus (subject to requalification in certain states, the Company
may extend the Offering Period from time to time, but in no event for
longer than two years from the date of the original Prospectus), subject
in any event to the Company's right to terminate the Offering at any
time (the "Termination Date") and the proceeds will be applied as set
forth in the Prospectus.
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(d) DEALER-MANAGER COMPENSATION.
(i) The Company agrees to pay to you a selling commission of
7% of the sales price for each Share sold (except for Special Sales)
from the 50,000,000 Shares offered on a "best efforts" basis, as set
forth in the Prospectus under the caption "Plan of Distribution,"
subject to the limitations described below, as well as to offer to issue
and sell to you for a purchase price of $.0008 per Soliciting Dealer
Warrant, one Soliciting Dealer Warrant for every 25 Shares sold from the
50,000,000 Shares offered on a "best efforts" basis, of which such
compensation may be retained or reallowed by you, subject to federal and
state securities laws, to the Soliciting Dealer who sold the Shares, as
described more fully in the Soliciting Dealers Agreement; provided,
however, that Warrants will not be issued in connection with the sale of
Shares to residents of the States of Minnesota, South Carolina or Texas
and, provided further, that the Company will not issue more than
2,000,000 Warrants in connection with the Offering of the Shares. In
lieu of reimbursement of specific expenses, you will also receive,
subject to the limitations described herein and in the Prospectus, a
marketing contribution (equal to 2%) and due diligence expense allowance
(equal to 0.5%), both aggregating 2.5% of the sale price from the
50,000,000 Shares offered on a "best efforts" basis (except for certain
Special Sales), some portion of which may be reallowed by you to the
Soliciting Dealers.
Notwithstanding the foregoing, no sales commissions, marketing
contribution or due diligence expense allowance or any payments or
amounts whatsoever will be paid to you or the Soliciting Dealers, and no
Soliciting Dealer Warrants will be offered, sold or issued to you unless
and until the Minimum Offering has been sold and the proceeds therefrom
are released from escrow and paid to the Company.
Subject to certain conditions and exceptions explained below,
investors making an initial purchase of at least $250,000 worth of
Shares (25,000 Shares) through the same Soliciting Dealer will be
entitled to a reduction of the customary 7% selling commission payable
in connection with the purchase of those Shares in accordance with the
following schedule:
Amount of Maximum Selling Amount of the
Purchaser's Investment Commission Per Share Volume Discount
--------------------------------- -----------------------------------------------
From To
---- --
$ 250,000 $ 500,000 6% 1%
500,010 1,000,000 5% 2%
1,000,010 2,500,000 4% 3%
2,500,010 5,000,000 3% 4%
5,000,010 10,000,000 2% 5%
10,000,010 and over 1% 6%
Any reduction in the amount of the selling commission in
respect of volume discounts will be credited to the investor in the form
of additional whole Shares or fractional Shares. As to sales of Shares
which are entitled to volume discounts, the Company will pay the maximum
selling commissions per Share set forth above.
Certain purchases may be combined for the purpose of qualifying for a
volume discount and crediting a purchaser or purchasers with additional
Shares for the above described volume discount, and for determining
commissions payable to you and reallowable to Soliciting Dealers so long
as all such combined purchases are made through the same Soliciting
Dealer and approved by the Company. Purchases by spouses may be combined
and purchases by any investor may be combined with other purchases of
Shares to be held as a joint tenant or a tenant in common by such investor
with others
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for purposes of computing amounts invested. Purchases by Tax-Exempt
Entities may only be combined with purchases by other Tax-Exempt
Entities for purposes of computing amounts invested only if investment
decisions are made by the same Person, provided that if the investment
decisions are made by an independent investment adviser, that investment
adviser may not have any direct or indirect beneficial interest in any
of the Tax-Exempt Entities whose purchases are sought to be combined.
The investor must ▇▇▇▇ the "Additional Investment" space on the
Subscription Agreement Signature Page in order for purchases to be
combined. The Company is not responsible for failing to combine
purchases, where the investor fails to ▇▇▇▇ the "Additional Investment"
space.
If the Subscription Agreements for the purchases to be
combined are submitted at the same time, then the additional Shares to be
credited to the purchasers as a result of such combined purchases will be
credited on a pro rata basis. If the Subscription Agreements for the
purchases to be combined are not submitted at the same time, then any
additional Shares to be credited as a result of such combined purchases
will be credited to the last component purchase, unless the Company is
otherwise directed in writing at the time of such submission; except
however, the additional Shares to be credited to any Tax-Exempt Entities
whose purchases are combined for purposes of the volume discount will
be credited only on a pro rata basis based on the amount of the investment
of each Tax-Exempt Entity and their combined purchases.
Notwithstanding the preceding paragraphs, in no event shall
any investor receive a discount greater than 5% on any purchase of
Shares if such investor already owns, or may be deemed to already own,
any Shares. This restriction may limit the amount of the volume discount
available to a purchaser after the purchaser's initial purchase and the
amount of additional Shares that may be credited to a purchaser as a
result of the combination of purchases.
In the event the dollar amount of commissions paid for such
combined purchases exceeds the maximum commissions for such combined
purchases (taking the volume discount into effect), you will be obligated
to forthwith return to the Company any excess commissions received. The
Company may adjust any future commissions due to you for any such excess
commissions that have not been returned.
Notwithstanding the foregoing, it is understood and agreed that
no commission shall be payable with respect to particular Shares if the
Company rejects a proposed subscriber's Subscription Agreement, which it
may do for any reason or for no reason, as set forth in the form of
Subscription Agreement. In addition, no selling commission, Marketing
Contribution or Due Diligence Expense Allowance shall be payable in
connection with the sale of Shares directly by the Company in connection
with the performance of services to employees and associates of the
Company and its Affiliates, the Advisor, Affiliates of the Advisor, the
Dealer Manager or their respective officers and employees and certain of
their affiliates who request and are entitled to such discount.
(ii) All selling commissions payable to you will be paid on a
weekly basis, substantially concurrently with the acceptance of a
subscriber as a Stockholder by the Company, in an amount equal to the
selling commissions payable with respect to such Shares; provided
however, the Company reserves the right, at its sole discretion, to
change the frequency of the payment of such commissions to a monthly
basis.
(iii) Certain other Special Sales shall be effected directly
by the Company and not pursuant to this Agreement, and no selling
commission shall be payable in connection with such Special Sales,
including sales to one or more Soliciting Dealers and their respective
officers and employees and certain of their respective affiliates who
request and are entitled to purchase Shares net of selling commissions.
Furthermore, no selling commission shall be payable on the Shares
credited to an investor as a result of a volume discount or on sales of
Shares to certain investors whose contracts for investment advisory and
related brokerage services include a fixed or "wrap" fee feature. The
term "Special Sales" shall have the meaning ascribed to it in the
Prospectus. The Marketing Contribution and Due Diligence Expense
Allowance will, however, be allowed and paid with respect to those sales
which are "Special Sales" solely by virtue of (a) the presence of a
contract for investment advisory and related brokerage services with the
proposed investor/subscriber which includes a fixed or "wrap" fee
feature , (b) being sales to the Soliciting Dealers and their respective
officers and employees and certain of their respective affiliates who
request and are entitled to purchase Shares net of selling commissions,
and (c) being sales of Shares which are entitled to a volume discount,
including the Shares credited to an investor as a result of a volume
discount. Any subsequent purchases of Shares by investors who initially
purchased Shares net of the 7% selling commission are limited to a
maximum discount of 5% of the public offering price per Share.
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3. COVENANTS OF THE COMPANY. The Company covenants and agrees with you
as follows:
(a) REGISTRATION STATEMENT. The Company will use its best efforts to
cause the Registration Statement and any subsequent amendments thereto to
become effective as promptly as possible and will not, at any time after
the Effective Date, file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been
advised and furnished a copy at a reasonable time prior to the proposed
filing or to which you shall have reasonably objected or which is not, to
the best of the Company's knowledge in compliance with the Act and the
Rules and Regulations. The Company will prepare and file with the
Commission and will use its best efforts to cause to become effective as
promptly as possible:
(i) any amendments to the Registration Statement or
supplements to the Prospectus which may be required pursuant to the
undertakings in the Registration Statement; and
(ii) upon your reasonable request any amendments to the
Registration Statement or supplements to the Prospectus which, in the
opinion of you or your counsel, may be necessary or advisable in view
of the requirements of the Act and the Rules and Regulations in
connection with the offer and sale of the Shares during the Offering
Period.
(b) SEC ORDERS. As soon as the Company is advised or obtains
knowledge thereof, it will advise you of any request made by the Commission
for amending the Registration Statement, supplementing the Prospectus or
for additional information, or of the issuance by the Commission of any
stop order or of any other order preventing or suspending the use of the
Prospectus or the institution of any proceedings for that purpose, and will
use its best efforts to prevent the issuance or any such order and, if any
such order is issued, to obtain the removal thereof as promptly as
possible.
(c) BLUE SKY QUALIFICATIONS. The Company will use its best efforts
to qualify the Shares for offering and sale under the securities or blue
sky laws of such jurisdictions as you may reasonably request and to make
such applications, file such documents and furnish such information as may
be reasonably required for that purpose. The Company will, at your
request, furnish you copies of all material documents and correspondence
sent to or received from such jurisdictions (including, but not limited to,
summaries of telephone calls and copies of telegrams) and will promptly
advise you as soon as the Company obtains knowledge thereof to the effect
that the Shares are qualified for offering and sale in each such
jurisdiction. The Company will promptly advise you of any request made by
the securities administrators of each such jurisdiction for revising the
Registration Statement or the Prospectus or for additional information or
of the issuance by such securities administrators of any stop order
preventing or suspending the use of the Prospectus or of the institution of
any proceedings for that purpose, and will use its best efforts to prevent
the issuance of any
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such order and if any such order is issued, to obtain the removal thereof
as promptly as possible. The Company will furnish you with a Blue Sky
Survey dated as of the Effective Date, which will be supplemented to
reflect changes or additions to the information disclosed in such survey.
(d) AMENDMENTS AND SUPPLEMENTS. If at any time when a Prospectus
relating to the Shares is required to be delivered under the Act, any event
shall have occurred to the knowledge of the Company as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements therein not misleading in light of the circumstances
existing at the time it is so required to be delivered to a subscriber, or
if it is necessary at any time to amend the Registration Statement or
supplement the Prospectus relating to the Shares to comply with the Act,
the Company will promptly notify you thereof and will prepare and file with
the Commission an amendment or supplement which will correct such statement
or effect such compliance.
(e) COPIES OF REGISTRATION STATEMENT. The Company will furnish you
copies of the Registration Statement (only one of which need be signed and
need include all exhibits), the Prospectus and all amendments and
supplements thereto, including any amendment or supplement prepared after
the Effective Date, and such other information with respect to the Company
as you may from time to time reasonably request, in each case as soon as
available and in such quantities as you may reasonably request.
(f) QUALIFICATION TO TRANSACT BUSINESS. The Company will take all
steps necessary to ensure that at all times the Company will be validly
existing as a Maryland corporation and will be qualified to do business in
all jurisdictions in which the conduct of its business requires such
qualification and where such qualification is required under local law.
(g) AUTHORITY TO PERFORM AGREEMENTS. The Company undertakes to
obtain all consents, approvals, authorizations or orders of any court or
governmental agency or body which are required for the performance of this
Agreement and under the Organizational Documents or the consummation of the
transactions contemplated hereby and thereby, respectively, or the
conducting by the Company of the business described in the Prospectus.
(h) COPIES OF REPORTS. The Company will use its best efforts to
furnish to you as promptly as shall be practicable the following:
(i) a copy of each report or general communication (whether
financial or otherwise) sent to the Stockholders;
(ii) a copy of each report (whether financial or otherwise)
filed with the Commission; and
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(iii) such other information as you may from time to time
reasonably request regarding the financial condition and operations of
the Company including, but not limited to, copies of operating
statements of properties acquired by the Company.
(i) USE OF PROCEEDS. The Company will apply the proceeds from the
sale of the Shares as stated in the Prospectus or, if for any reason
whatsoever all or a portion of the proceeds of the Offering are not applied
or committed for use as stated within 12 months of the Termination Date,
the Company shall promptly return those proceeds from the sale of the
Shares not so applied or committed as stated in the Prospectus, with
interest, to the subscribers, each subscriber sharing in the return in the
ratio that the number of the Shares owned by such subscriber bears to the
total number of the Shares owned by all subscribers.
(j) ORGANIZATION AND OFFERING EXPENSES. In no event shall the total
of the organizational expenses and expenses of the Offering to be paid
directly by the Company exceed 15% of the gross proceeds of the Offering.
4. COVENANTS OF THE DEALER MANAGER. You covenant and agree with the
Company on your behalf and on behalf of the Soliciting Dealers as follows:
(a) COMPLIANCE WITH LAWS. With respect to your participation and the
participation by each Soliciting Dealer in the offer and sale of the Shares
(including, without limitation any resales and transfers of Shares), you
agree, and each Soliciting Dealer agrees, to comply and shall comply with
any applicable requirements of the Act, the Securities Exchange Act of
1934, as amended, and the published rules and regulations of the Commission
thereunder, and the applicable state securities or blue sky laws, and the
Rules of the NASD, specifically including, but not in any way limited to,
Rules 2440, 2730, 2740, and 2750 therein. In particular, you agree not to
deliver the sales literature (as defined above) to any person prior to the
Effective Date and, after the Effective Date, not to deliver the sales
literature to any person unless the sales literature is accompanied or
preceded by the Prospectus. In addition, you shall, in accordance with
applicable law or as prescribed by any state securities administrator,
provide or cause Soliciting Dealers to provide to any prospective investor
copies of any prescribed document which is part of the Registration
Statement.
With respect to your and each Soliciting Dealer's participation in any
resales or transfers of the Shares, you agree, and each Soliciting Dealer
agrees, to comply and shall comply with any applicable requirements as set
forth above. In addition, you and each Soliciting Dealer agree that should
you or they assist with the resale or transfer of the Shares, you and each
Soliciting Dealer will fulfill the obligations pursuant to Sections 3(b)
and 4(d) of Rule 2810 of the Rules of the NASD.
(b) NO ADDITIONAL INFORMATION. In offering the Shares for sale, you
and each Soliciting Dealer shall not give or provide any information or
make any representation
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other than those contained in the Prospectus, the sales literature or any
other document provided to you for such purpose by the Company.
(c) SALES OF SHARES. You and each Soliciting Dealer shall solicit
purchases of the Shares only in the jurisdictions in which you and such
Soliciting Dealer are legally qualified to so act and in which you and each
Soliciting Dealer have been advised by the Company that such solicitations
can be made.
(d) SUBSCRIPTION AGREEMENT. Subscriptions will be submitted by you
and each Soliciting Dealer to the Company only on the form which is
included as Appendix C to the Prospectus. You and each Soliciting Dealer
understand and acknowledge that the Subscription Agreement must be executed
and initialed by the subscriber.
(e) SUITABILITY. In offering the Shares to any person, you and each
Soliciting Dealer shall have reasonable grounds to believe (based on such
information as the investment objectives, other investments, financial
situation and needs of the person or any other information known by you
after due inquiry) that: (i) such person has the capability of
understanding the fundamental aspects of the Company, which capacity may be
evidenced by the following: (A) the nature of employment experience;
(B) educational level achieved; (C) access to advice from qualified
sources, such as attorneys, accountants and tax advisors; and (D) prior
experience with investments of a similar nature; (ii) such person has
apparent understanding of: (A) the fundamental risks and possible
financial hazards of this type of investment; (B) the lack of liquidity of
this investment; (C) the Advisor's role in directing or managing the
investment; and (D) the tax consequences of the investment; and (iii) such
person has the financial capability to invest in the Company and you or
each Soliciting Dealer (as the case may be) shall maintain records
disclosing the basis upon which you and each Soliciting Dealer determined
the suitability of any persons offered Shares. Notwithstanding the
foregoing, you and each Soliciting Dealer shall have reasonable grounds to
believe that such person has either: (a) a minimum annual gross income of
$45,000 and a minimum net worth (exclusive of home, home furnishing and
automobiles) of $45,000; or (b) a minimum net worth (determined with the
foregoing exclusions) of $150,000. Suitability standards are higher in
certain states as set forth in the Subscription Agreement and the
Prospectus. You and/or the Soliciting Dealers shall maintain, for at least
six years, a record of the information obtained to determine that an
investor meets the 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) and a representation of the investor that the
investor is investing for the investor's own account or, in lieu of such
representation, information indicating that the investor for whose account
the investment was made met the suitability standards.
(f) DUE DILIGENCE. Prior to offering the Shares for sale, you and
each Soliciting Dealer shall have conducted an inquiry such that you have
reasonable grounds to believe, based on information made available to you
by the Company
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through the Prospectus or other materials, that all material facts
are adequately and accurately disclosed and provide a basis for
evaluating the purchase of the Shares. In determining the adequacy of
disclosed facts pursuant to the foregoing, you and each Soliciting Dealer
may obtain, upon request, information on material facts relating at a
minimum to the following:
(1) items of compensation;
(2) Company properties;
(3) tax aspects;
(4) conflicts and risk factors; and
(5) appraisals and other pertinent reports.
Notwithstanding the foregoing, you and each Soliciting Dealer may rely upon the
results of an inquiry conducted by another Soliciting Dealer, provided that:
(i) such Soliciting Dealer has reasonable grounds to believe
that such inquiry was conducted with due care;
(ii) the results of the inquiry were provided to you with the
consent of the Soliciting Dealer conducting or directing the inquiry;
and
(iii) no Soliciting Dealer that participated in the inquiry is
an affiliate of the Company or the Advisor.
(g) OFFERING PRICE ADJUSTMENT. If, after the Effective Date, the
Company shall adjust the initial purchase price of $10.00 per Share for the
50,000,000 Shares to be offered for sale on a "best efforts" basis in the
Offering, you agree (and each Soliciting Dealer agrees) that the total of
all compensation payable to the Dealer Manager as provided in Section 2(d)
above, shall be adjusted proportionally. In no event shall the total of
all such compensation paid to you and to all Soliciting Dealers (I.E., the
aggregate of the sales commission and the marketing contribution and due
diligence expense allowance) exceed nine and one half percent (9.5%) of the
total of all subscription proceeds received by the Company.
Prior to the sale of the Shares, you and each Soliciting Dealer shall inform the
prospective purchaser of all pertinent facts relating to the liquidity and
marketability of the Shares during the term of the investment.
5. EXPENSES. The Company agrees with you that, whether or not the
transactions contemplated in this Agreement are consummated, the Company will
pay all fees and expenses incident to the performance of its obligations under
this Agreement, including, but not limited to:
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(a) the Commission's registration fee;
(b) expenses of printing the Registration Statement, the Prospectus
and any amendment or supplement thereto and the expense of furnishing to
you copies of the Registration Statement, the Prospectus and any amendment
or supplement thereto as herein provided;
(c) fees and expenses of its and your accountants and counsel in
connection with the Offering contemplated by this Agreement;
(d) fees and expenses incurred in connection with any required filing
with the NASD;
(e) all of your expenses in connection with the Offering, subject to
the limitations contained in the Prospectus, including, but not limited to,
the salaries, fringe benefits, travel expenses and similar expenses of your
employees and personnel incurred in connection with the Offering; and
(f) expenses of qualifying the Shares for offering and sale under
state blue sky and securities laws, and expenses in connection with the
preparation and printing of the Blue Sky Survey.
In no event, however, will the total of: (a) the selling commissions paid
to you (which you may reallow to the Soliciting Dealers) and (b) the marketing
contribution and due diligence expense allowance paid to you (which you may
reallow to the Soliciting Dealers) and (c) the value attributable to the
Soliciting Dealer Warrants, exceed 10.5% of the gross proceeds of the Offering.
6. CONDITIONS OF OBLIGATIONS. Your obligations hereunder shall be
subject to the accuracy of the representations and warranties on the part of the
Company contained in Section 1 hereof, the accuracy of the statements of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its covenants, agreements and obligations contained in Sections 3 and
5 hereof, and to the following additional conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective not later than 5:00 p.m., Chicago,
Illinois time, on the day following the date of this Agreement, or such
later time and date as you and the Company shall have agreed; no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and, to the best knowledge of the Company or you,
no proceedings for that purpose shall have been instituted, threatened or
contemplated by the Commission; and any request by the Commission for
additional information (to be included in the Registration Statement or
Prospectus or otherwise) shall have been complied with to the reasonable
satisfaction of you or your counsel.
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(b) ACCURACY OF REGISTRATION STATEMENT. You shall not have advised
the Company that the Registration Statement or the Prospectus, or any
amendment or any supplement thereto, in the reasonable opinion of you or
your counsel, contains any untrue statement of fact which is material, or
omits to state a fact which is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless you, each Soliciting
Dealer and each person, if any, who controls you or any Soliciting Dealer within
the meaning of the Act (collectively, the "Indemnified Parties"), against any
and all loss, liability, claim, damage and expense whatsoever caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission therefrom of 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. Such indemnification
shall be subject to the provisions of Sections 7(b) and (c) of this Agreement.
The Company shall not provide indemnification for any liability or loss
suffered by you, nor shall it provide that you be held harmless for any
liability suffered by the Company unless all of the following conditions are
met: (i) the party seeking indemnification has determined, in good faith, that
its course of conduct, if such course of conduct caused the loss or liability,
was in the best interests of the Company; (ii) the person seeking
indemnification was acting on behalf of or performing services on behalf of the
Company; (iii) such liability or loss was not the result of negligence or
misconduct on the part of the party seeking indemnification or the Indemnified
Party; and (iv) such indemnification or agreement to be held harmless is
recoverable only out of the assets of the Company and not from the Stockholders.
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 have been notified in writing (in the manner provided in
Section 10 hereof) of the nature of the claim within a reasonable time after the
assertion thereof; but the failure to so notify the Company shall not relieve
the Company from any liability which the Company would have incurred otherwise
than on account of this indemnity agreement. The Company shall be entitled to
participate, at its own expense, in the defense of, or if it so elects within a
reasonable time after receipt of such notice, to assume the defense of any claim
or suit for which any of the Indemnified Parties seek indemnification hereunder.
If the Company elects to assume said defense, such defense shall be conducted by
counsel chosen by it and reasonably satisfactory to the Indemnified Parties.
In the event that the Company elects to assume the defense of any such suit
and retains such counsel, the Company shall not be liable under this Section 7
to the Indemnified Parties in the suit for any legal or other expenses
subsequently incurred by the Indemnified Parties, and
15
the Indemnified Parties shall bear the fees and expenses of any additional
counsel retained by the Indemnified Parties unless: (A) the employment of
counsel by the Indemnified Party has been authorized by the Company; or (B)
the Company shall not in fact have employed counsel to assume the defense of
such action, in either of which events such fees and expenses shall be borne
by the Company.
The Company may advance amounts to the Indemnified Parties for legal and
other expenses and costs incurred as a result of any legal action for which
indemnification is being sought only if all of the following conditions are
satisfied: (i) the legal action relates to acts or omissions with respect to the
performance of duties or services by one or more Indemnified Parties for or on
behalf of the Company; (ii) the legal action is initiated by a third party who
is not a Stockholder and a court of competent jurisdiction specifically approves
such advancement; and (iii) the Indemnified Parties receiving such advances
undertake to repay the advanced funds to the Company, together with the
applicable legal rate of interest thereon, in cases in which such Indemnified
Parties are thereafter found not to be entitled to indemnification.
Notwithstanding the foregoing provisions of this Section 7, the Company
will not be liable in any such case to the extent that any loss, liability,
claim, damage 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 to the Company by or on
behalf of you or any Soliciting Dealer for use in the preparation of the
Registration Statement (or any amendment thereof) or the Prospectus (or any
supplement thereto). The foregoing indemnity agreement 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 but
eliminated or remedied in any amendment or supplement thereto, such indemnity
agreement shall not inure to your benefit or to any Soliciting Dealer from whom
the person asserting any loss, liability, claim, damage or expense purchased the
Shares which are the subject thereof (or to the benefit of any person who
controls you or any Soliciting Dealer), 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 by the
Company to you or any Soliciting Dealer prior to such acceptance. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) The indemnification and agreement to hold harmless provided in
subparagraph (a) of this Section 7 is further limited to the extent that no such
indemnification by the Company of you or a Soliciting Dealer shall be permitted
under this Agreement for or arising out of an alleged violation of federal or
state securities laws unless one or more of the following conditions are met:
(i) there has been a successful adjudication on the merits of each count
involving alleged securities law violations by you or any Soliciting Dealer and
a court of competent jurisdiction has approved indemnification of the litigation
costs; (ii) such claims against you or any Soliciting Dealer have been dismissed
with prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee and the court has approved indemnification of the
litigation costs; or (iii) a court of competent jurisdiction approves a
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settlement of the claims against you or any Soliciting Dealer and finds that
indemnification of the settlement and related costs should be made and the court
considering the request has been advised of the position of the Commission and
of the published positions of the Tennessee Securities Division and any other
state securities regulatory authority in which securities of the Company were
offered and sold respecting the availability and/or propriety of indemnification
for securities law violations.
(c) You and each Soliciting Dealer agree to indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the Act and any controlling person of the Company: (i) to the same
extent as in the foregoing indemnity from the Company to you and each Soliciting
Dealer, but only with reference to statements or omissions based upon the
information relating to you or any Soliciting Dealer furnished in writing by you
or such Soliciting Dealer or on your or their behalf for use in the Registration
Statement or the Prospectus, or any amendment or supplement thereto; and
(ii) for any violation by you or any Soliciting Dealer in the sale of the Shares
of any applicable state or federal law or any rule, regulation or instruction
thereunder, provided that such violation is not committed in reliance on any
violation by the Company of such law, rule, regulation or instruction.
You and each Soliciting Dealer further agree to indemnify and hold harmless
the Company and any controlling person of the Company against any losses,
liabilities, claims, damages or expenses to which the Company or any such
controlling person may become subject under the securities or blue sky laws of
any jurisdiction insofar as such losses, liabilities, claims, damages or
expenses (or actions, proceedings or investigations in respect thereof) arise by
reason of a sale of the Shares through the efforts of you (with respect to sales
effected without the assistance of a Soliciting Dealer) or a Soliciting Dealer
(with respect to sales effected by such Soliciting Dealer) which is effected
other than in accordance with the Blue Sky Survey supplied to you by the Company
(a "Non-Permitted Sale"), whether such Non-Permitted Sale is caused by a sale in
a jurisdiction other than those specified in the Blue Sky Survey, by a sale in a
jurisdiction in which you or the Soliciting Dealer is not registered to sell the
Shares or which results in a sale in a jurisdiction in excess of the number of
Shares permitted to be sold in such jurisdiction, and will reimburse the Company
or any such controlling person for any legal fees, monetary penalties or other
expenses reasonably incurred by any of them in connection with investigating,
curing or defending against any such losses, liabilities, claims, damages,
actions, proceedings or investigations. This indemnity agreement will be in
addition to any liability which you or any Soliciting Dealer may otherwise have.
(d) The notice provisions contained in Section 7(a) hereof, relating to
notice to the Company, shall be equally applicable to you and each Soliciting
Dealer if the Company or any controlling person of the Company seeks
indemnification pursuant to Section 7(c) hereof. In addition, you and each
Soliciting Dealer may participate in the defense, or assure the defense, of any
such suit so sought under Section 7(c) hereof and have the same rights and
privileges as the Company enjoys with respect to such suits under Section 7(a)
hereof.
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8. TERMINATION OF THIS AGREEMENT. This Agreement may be terminated by
you in the event that the Company shall have materially failed to comply with
any of the material provisions of this Agreement on its part to be performed at
or prior to the Effective Date or if any of the representations, warranties,
covenants or agreements of the Company herein contained shall not have been
materially complied with or satisfied within the times specified.
In any case, this Agreement shall terminate at the close of business on the
Termination Date. Termination of this Agreement pursuant to this Section 8
shall be without liability of any party to any other party other than as
provided in Sections 5 and 7 hereof, which shall survive such termination.
9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement 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 Termination Date.
10. NOTICES. All communications hereunder shall be in writing and, if
sent to you, shall be mailed by registered mail or delivered, telefacsimilied or
telegraphed and confirmed in writing to Inland Securities Corporation, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President) and, if sent to the Company, shall be mailed by registered mail or
delivered, telefacsimilied or telegraphed and confirmed in writing to Inland
Retail Real Estate Trust, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, (Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President).
11. REFERENCE TO INLAND SECURITIES CORPORATION. All references herein to
Inland Securities Corporation or the Dealer Manager hereunder shall be deemed to
include all successors and assigns of Inland Securities Corporation.
12. PARTIES. This Agreement shall inure to the benefit of and be binding
upon you, the Company and the successors and assigns of you and the Company.
This Agreement and the conditions and provisions hereof, are intended to be and
shall be 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, and the term "successors and assigns," as used
herein, shall not include any purchaser of Shares as such.
13. APPLICABLE LAW. This Agreement and any disputes relative to the
interpretation or enforcement hereto shall be governed by and construed under
the internal laws, as opposed to the conflicts of laws provisions, of the State
of Illinois.
14. EFFECTIVENESS OF AGREEMENT. This Agreement shall become effective at
5:00 p.m., Chicago, Illinois time, on the Effective Date, or at such earlier
time as you and the Company agree.
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15. NOT A SEPARATE ENTITY. Nothing contained herein shall constitute you
and/or the Soliciting Dealers or any of them an association, partnership,
limited liability company, unincorporated business or other separate entity.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return it to us, whereupon this instrument will become a binding
agreement between you and the Company in accordance with its terms.
Inland Retail Real Estate Trust, Inc.,
a Maryland corporation
By:
--------------------------------
Title:
--------------------------------
Accepted as of the date
first above written:
Inland Securities Corporation
By:
-------------------------------------
Title:
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