COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC. Up to $4,000,000,000 in Shares of Common Stock FORM OF DEALER MANAGER AGREEMENT
Exhibit 1.1
XXXX
REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.
Up to $4,000,000,000 in Shares of Common Stock
FORM
OF DEALER MANAGER AGREEMENT
_________ ____, 2011
Xxxx Capital Corporation
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Ladies and Gentlemen;
Xxxx
Real Estate Income Strategy (Daily NAV), Inc., a Maryland corporation (the “Company”), is registering
for a public sale a maximum of $4,000,000,000 in shares of its common stock, $0.01 par value per
share (the “Offering”), of which amount $3,500,000,000 in shares are to be offered to the public at
an initial price of $15.00 per share (collectively the “Shares” or the “Stock”) until the release
or proceeds from escrow. Thereafter, the per share purchase price will vary from day-to-day and, on
each day, will equal the net asset value of the Company, or NAV, divided by the number of shares
of our common stock outstanding as of the end of business on such day (“NAV per share”). Up to
$500,000,000 in additional shares are to be offered pursuant to the Company’s distribution
reinvestment plan at a price equal to the NAV per share on the distribution date, after giving
effect to all distributions.
The Company reserves the right to reallocate the Shares included in the Offering between those
offered to the public and those offered pursuant to the distribution reinvestment plan. There
shall be a minimum purchase by any one person of $2,500 (except as otherwise indicated in the
Prospectus or in any letter or memorandum from the Company to Xxxx Capital Corporation (the “Dealer
Manager”)). Terms not defined in this Dealer Manager Agreement (the “Agreement”) shall have the
same meaning as in the Prospectus. In connection therewith, the Company hereby agrees with you,
the Dealer Manager, as follows:
1. 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 that:
1.1 A registration statement (Registration No. 333-169535) on Form S-11 with respect to the
Company has been prepared by the Company in accordance with applicable requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and the applicable rules and regulations
(the “Rules and Regulations”) of the Securities and Exchange Commission (the “SEC”) promulgated
thereunder, covering the Shares. Such registration statement, including any amendment thereto
filed prior to the date hereof, has become effective. Copies of such registration statement and
each amendment thereto have been or will be delivered to the Dealer Manager. The registration
statement and prospectus contained therein, as finally amended at the
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effective date of the
registration statement, are respectively hereinafter referred to as the
“Registration Statement” and the “Prospectus,” except that if the Company files a Prospectus
or a 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. “Effective Date” shall mean each date and time that the Registration Statement and any
post-effective amendment or amendments thereto became or becomes effective.
1.2 On the Effective Date, the Registration Statement did, and when the Prospectus is first
filed in accordance with Rule 424(b), the Prospectus (and any supplement thereto) will, comply in
all material respects with the applicable requirements of the Securities Act; on the Effective Date
and on the date hereof, the Registration Statement did 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 in order to make the statements therein not misleading; and on the date of any filing
pursuant to Rule 424(b), the Prospectus (together with any supplement thereto) will not include any
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading.
1.3 The Company has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Maryland with full corporate power and authority to own or
lease, as the case may be, and to operate its properties and conduct its business as described in
the Prospectus, and is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such qualification.
1.4 The Company’s authorized equity capitalization is as set forth in the Prospectus.
1.5 All issued and outstanding securities of the Company have been duly and validly authorized
and issued and are fully paid and nonassessable; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The offers and sales of the outstanding securities of
the Company were at all relevant times either registered under the Securities Act, the applicable
state securities or “blue sky” laws, or, based in part on the representations and warranties of the
purchasers of such securities, exempt from such registration requirements. The holders of
outstanding shares of capital stock of the Company are not entitled to preemptive or other rights
to subscribe for the Shares; and, except as set forth in the Prospectus and for the Company’s
distribution reinvestment plan, no options, warrants or other rights to purchase, agreements or
other obligations to issue, or rights to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the Company are outstanding.
1.6 At the time of the issuance of the Shares, the Shares will have been duly authorized and
validly issued, and upon payment therefor, will be fully paid and nonassessable and will conform to
the description thereof contained in the Prospectus.
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1.7 The Company has full legal right, power and authority to enter into this Agreement and to
perform the transactions contemplated hereby, except to the extent that the
enforceability of the indemnity and/or contribution provisions contained in Section 4 of this
Agreement may be limited under applicable securities laws.
1.8 This Agreement has been duly authorized, executed and delivered by the Company and is a
valid and binding agreement of the Company, enforceable against the Company in accordance with its
terms except as the enforceability thereof may be limited by bankruptcy, insolvency, or similar
laws affecting creditors’ rights generally from time to time in effect and by equitable principles
of general applicability.
1.9 The Company intends to use the funds received from the sale of the Shares as set forth in
the “Use of Proceeds” section of the Prospectus.
1.10 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 such as may be required under the Securities
Act or applicable state securities laws.
1.11 No action, suit or proceeding by or before any court or governmental agency, authority or
body or any arbitrator involving the Company or its property is pending or, to the knowledge of the
Company, threatened that (i) could reasonably be expected to have a material adverse effect on the
performance of this Agreement by the Company or (ii) could reasonably be expected to have a
material adverse effect on the financial condition, prospects, earnings, business or properties of
the Company, taken as a whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus.
1.12 Neither the execution and delivery of this Agreement, the issue and sale of the Shares
nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of, or
imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant
to (i) the charter or by-laws of the Company, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which the Company is a party or bound or to which its property is
subject, or (iii) any statute, law, rule, or regulation, judgment, order or decree applicable to
the Company of any court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or any of its properties, except to the extent
that the enforceability of the indemnity and/or contribution provisions contained in Section 4 of
this Agreement may be limited under applicable securities laws.
1.13 The SEC has not issued any order or, to the Company’s knowledge, threatened to issue any
order preventing or suspending the effectiveness of the Registration Statement or the use of the
Prospectus or any part thereof, and has not instituted or, to the Company’s knowledge, threatened
to institute any proceedings with respect to such an order.
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1.14 The Company intends to qualify as a real estate investment trust pursuant to Sections 856
through 860 of the Internal Revenue Code of 1986, as amended, for the taxable year ended December
31, 2011, or the first year during which the Company commences material
operations, and no transaction or other event has occurred or is contemplated which would
prevent the Company from so qualifying.
1.15 The Company is not and, after giving effect to the offering and sale of the Shares and
the application of the proceeds thereof as described in the Prospectus, will not be an “investment
company” as defined in the Investment Company Act of 1940, as amended.
1.16 To the best of the Company’s knowledge, Deloitte & Touche LLP, who have certified certain
of the financial statements filed with the SEC as part of the Registration Statement and the
Prospectus, is an independent registered public accounting firm with respect to the Company as
required by the Securities Act and the Rules and Regulations thereof and the Public Company
Accounting Oversight Board.
2. Covenants of the Company
The Company covenants and agrees with the Dealer Manager that:
2.1 The Company will file every amendment or supplement to the Registration Statement or the
Prospectus that may be required by the SEC. The Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed with the SEC pursuant to the applicable paragraph
of Rule 424(b) within the time period prescribed. The Company will promptly advise the Dealer
Manager (i) when the Prospectus, and any supplement thereto, shall have been filed (if required)
with the SEC pursuant to Rule 424(b), (ii) when any amendment to the Registration Statement shall
have been filed or become effective, (iii) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or of any notice objecting to its use or the
institution or threatening of any proceeding for that purpose and (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification of the Shares for
sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such stop order or the occurrence
of any such suspension or objection to the use of the Registration Statement and, upon such
issuance, occurrence or notice of objection, to obtain as soon as possible the withdrawal of such
stop order or relief from such occurrence or objection, including, if necessary, by filing an
amendment to the Registration Statement or a new registration statement and using its best efforts
to have such amendment or new registration statement declared effective as soon as practicable.
2.2 If, at any time when a prospectus relating to the Shares is required to be delivered under
the Securities Act (including in circumstances where such requirement may be satisfied pursuant to
Rule 172), any event occurs as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made or the
circumstances then prevailing not misleading, or if it shall be necessary to amend the Registration
Statement or supplement the Prospectus to comply with the Securities Act or the
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rules thereunder,
the Company promptly will (i) prepare and file with the SEC, an amendment or supplement which will
correct such statement or omission or effect such compliance; and (ii) supply any supplemented
Prospectus to the Dealer Manager in such quantities as it may reasonably request.
2.3 The Company will, at no expense to the Dealer Manager, furnish the Dealer Manager with
such number of printed copies of the Registration Statement, including all supplements, 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
in preliminary and final form and every form of supplemental or amended prospectus; (b) this
Agreement; and (c) any other printed sales literature or other materials (provided that the use of
said sales literature and other materials has been first approved for use by the Company and all
appropriate regulatory agencies).
2.4 The Company will endeavor in good faith, in cooperation with the Dealer Manager, to
qualify the Shares for offering and sale under the securities laws of such jurisdictions as the
Dealer Manager may reasonably designate and use all reasonable efforts to file and make such
statements or reports at such times as are or may be required to continue the qualification of the
Shares for offering and sale under the securities laws of such jurisdiction. The Company will
furnish to the Dealer Manager a copy of such papers filed by the Company in connection with any
such qualification.
3. Obligations and Compensation of Dealer Manager
3.1 The Company hereby appoints the Dealer Manager as its agent and principal distributor for
the purpose of selling for cash up to a maximum of $3,500,000,000 in Shares (or such other amount
as the Company allocates to the primary Offering of Shares as described in the second paragraph of
this Agreement), through financial intermediaries including dealers selected to participate in the
distribution of Shares in the Offering who have executed Selected Dealer Agreements with the Dealer
Manager (each, a “Dealer” and, collectively, the “Dealers”), all of whom shall be members of the
Financial Industry Regulatory Authority, Inc. (FINRA). The Dealer Manager may also sell Shares for
cash directly to its own clients and customers at the public offering price and subject to the
terms and conditions stated in the Prospectus. The Dealer Manager hereby accepts such agency and
distributorship and agrees to use its best efforts to sell the Shares on said terms and conditions.
The Dealer Manager represents to the Company that (i) it is a member of FINRA; (ii) it and its
employees and representatives have all required licenses and registrations to act under this
Agreement; and (iii) it has established and implemented anti-money laundering compliance programs
in accordance with applicable law, including applicable FINRA rules, SEC rules, and the USA PATRIOT
Act of 2001, reasonably designed to detect and cause the reporting of suspicious transactions in
connection with the sale of Shares of the Company.
3.2 Promptly after the effective date of the Registration Statement, the Dealer Manager and
the Dealers shall commence the offering of the Shares for cash to the public only in jurisdictions
in which the Shares are registered or qualified for sale or in which such offering is
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otherwise
permitted. The Dealer Manager and the Dealers will suspend or terminate offering of the Shares upon
request of the Company at any time and will resume offering the Shares upon subsequent request of
the Company.
3.3 Except as provided in the “Plan of Distribution” section of the Prospectus the Company
will not pay the Dealer Manager or any participating Dealer up-front selling
commissions. The Dealer Manager shall receive an asset-based dealer manager fee that is
payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of
0.55% of the NAV for such day. At the Dealer Manager’s discretion it may reallow a portion of the
dealer manager fee equal to an amount up to 1/365th of 0.20% of the NAV to Dealers. If
for any reason, a sale is cancelled or rescinded, the Dealer Manager shall return to the Company
the dealer manager fee paid to it with respect to such sales.
In connection with the Offering, the Dealer Manager will not be entitled to receive
underwriting compensation (as defined in accordance with the applicable FINRA rules) to the extent
the aggregate dealer manager fees and all other forms of underwriting compensation received by the
Dealer Manager and all Dealers exceeds 10% of the gross proceeds raised from the sale of Shares in
the Offering, excluding proceeds from the Company’s distribution reinvestment plan.
3.4 The Dealer Manager shall use and distribute, in conjunction with the offer and sale of any
Shares, only the Prospectus and such sales literature and advertising as shall have been previously
approved in writing by the Company.
The Dealer Manager agrees to be bound by the terms of an escrow agreement among UMB Bank,
N.A., as escrow agent (the “Escrow Agent”), the Dealer Manager and the Company (the “Escrow
Agreement”), in a form reasonably acceptable to the parties thereto, as such agreement may be
amended from time to time. Notwithstanding the provisions of Section 3.3 above, no commissions,
payments or amounts whatsoever will be paid to the Dealer Manager unless or until the gross
proceeds of the Shares sold have reached the minimum offering amount set forth in the Prospectus
(the “Minimum Offering”) and are disbursed to the Company pursuant to the Escrow Agreement. Until
the Minimum Offering is reached, investments will be held in escrow. If the Minimum Offering is not
obtained within the time period specified in the Prospectus, investments will be returned to the
investors in accordance with the Prospectus. Furthermore, notwithstanding the provisions of
Section 3.3 above, no payments or amounts whatsoever will be paid to the Dealer Manager with
respect to sales of Shares to Pennsylvania residents unless or until the gross proceeds of the
Shares sold in the Offering (including sales made to residents of other jurisdictions) have reached
a minimum of $200,000,000 (the “Pennsylvania Minimum Offering”) and are disbursed to the Company
pursuant to the Escrow Agreement. Until the Pennsylvania Minimum Offering is reached, investments
from Pennsylvania residents will be held in escrow. If the Pennsylvania Minimum Offering is not
obtained, Pennsylvania residents may request a return of their funds in accordance with the
Prospectus. The Dealer Manager acknowledges that the Company expects to reimburse its advisor for
the full amount of all organization and offering costs, beginning after the escrow period, without
interest, in monthly installments, but the aggregate amount reimbursed can never exceed 0.50% of
the aggregate gross offering proceeds, including shares issued in connection
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with the distribution
reinvestment plan. If, during any period, the total unreimbursed amount of such organization and
offering costs exceeds the reimbursement limit described above, the excess will be eligible for
reimbursement in subsequent periods up to the limit, calculated on an accumulated basis, until
reimbursed in full.
4. Indemnification
4.1 The Company agrees to indemnify and hold harmless the Dealer Manager and the directors,
officers, employees and agents of the Dealer Manager, each person who controls the Dealer Manager
within the meaning of either the Securities Act or the Exchange Act and each affiliate of the
Dealer Manager (such directors, officers, employees, agents, controlling persons and affiliates
being referred to collectively as “Dealer Manager Affiliates” and, individually, as a “Dealer
Manager Affiliate”) against any and all losses, claims, damages or liabilities (“Losses”), joint or
several, to which they or any of them may become subject under the Securities Act, the Exchange Act
or other federal or state statutory law or regulation, at common law or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration Statement for the
registration of the Shares as originally filed or in any amendment thereof, or in the Prospectus or
in any amendment thereof or supplement thereto, or 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 (a “Blue Sky Application”), or
arise out of or are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such Losses or action; provided, however,
that the Company shall not indemnify or hold harmless the Dealer Manager or any Dealer Manager
Affiliates in any such case to the extent that any such Loss arises out of, or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission in the information
relating to the Dealer Manager that appears in the following sections of the Prospectus or any
amendment thereof: Prospectus Summary — Our Dealer Manager; Management — Affiliated Dealer
Manager; and Plan of Distribution — Xxxx Capital Corporation (collectively, the “Dealer Manager
Sections”). Notwithstanding the foregoing, the Company shall not indemnify or hold harmless the
Dealer Manager or any Dealer Manager Affiliates in any manner that would be inconsistent with the
provisions of Section II.G. of the Statement of Policy Regarding Real Estate Investment Trusts of
the North American Securities Administrators Association, Inc. effective May 7, 2007, as may be
amended (the “NASAA Guidelines”). In particular, but without limitation, the Company shall not be
required to provide indemnity or hold harmless any person under this Section 4.1 for any Loss or
expense unless: (i) the person seeking indemnification has determined, in good faith, that its
course of conduct 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) the Loss or expense
was not the result of negligence or misconduct on the part of the person seeking indemnification;
and (iv) any Loss or expense is recoverable only out of the net assets of the Company and not from
the personal assets of the Company’s stockholders. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
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In addition, the Company shall not indemnify or hold harmless the Dealer Manager or any Dealer
Manager Affiliates for liabilities arising from or out of a violation of state or federal
securities laws, unless one or more of the following conditions are met:
| (a) | there has been a successful adjudication on the merits of each count involving alleged securities law violations; |
| (b) | such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or |
| (c) | a court of competent jurisdiction approves a settlement of the claims against the indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which the securities were offered as to indemnification for violations of securities laws. |
The advancement of Company funds to the Dealer Manager or any Dealer Manager Affiliate for
legal expenses and other costs incurred as a result of any legal action for which indemnification
is being sought shall be permissible only if all of the following conditions are satisfied:
| (a) | the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; |
| (b) | the legal action is initiated by a third party who is not a stockholder of the Company or the legal action is initiated by a stockholder of the Company acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and |
| (c) | the Dealer Manager or the Dealer Manager Affiliate undertakes to repay the advanced funds to the Company, together with the applicable legal rate of interest thereon, in cases in which the Dealer Manager or the Dealer Manager Affiliate is found not to be entitled to indemnification. |
4.2 The Company agrees to indemnify and hold harmless each Dealer, the directors, officers,
employees and agents of each Dealer, each person who controls any Dealer within the meaning of
either the Securities Act or the Exchange Act and each affiliate of each Dealer (such directors,
officers, employees, agents, controlling persons and affiliates being referred to collectively as
“Dealer Affiliates” and, individually, as a “Dealer Affiliate”) against any and all Losses, joint
or several, to which they or any of them may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as
such Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration Statement for the
registration of the Shares as originally filed or in any amendment thereof, or in the Prospectus or
in any amendment thereof or supplement thereto, or in any Blue Sky Application, or arise out of or
are based upon the omission or alleged omission to state therein a
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material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such Losses or action; provided, however, that
the Company shall not indemnify or hold harmless a Dealer or any of its Dealer Affiliates in
any such case if it is determined that such Dealer was at fault in connection with the Loss.
Notwithstanding the foregoing, the Company shall not indemnify or hold harmless the Dealer or any
Dealer Affiliates in any manner that would be inconsistent with the provisions of Section II.G. of
the NASAA Guidelines. In particular, but without limitation, the Company shall not indemnify or
hold harmless a Dealer or any of its Dealer Affiliates for liabilities arising from or out of a
violation of state or federal securities laws, unless one or more of the following conditions are
met:
| (a) | there has been a successful adjudication on the merits of each count involving alleged securities law violations; |
| (b) | such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or |
| (c) | a court of competent jurisdiction approves a settlement of the claims against the indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which the securities were offered as to indemnification for violations of securities laws. |
This indemnity agreement will be in addition to any liability which the Company may otherwise have.
4.3 The Dealer Manager agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signs the Registration Statement, and each person who controls
the Company within the meaning of either the Securities Act or the Exchange Act (such directors,
officers and controlling persons being referred to collectively as “Company Affiliates” and,
individually, as a “Company Affiliate”) against any and all Losses, joint or several, to which they
or any of them may become subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law 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 in the information relating to the Dealer Manager that
appears in the Dealer Manager Sections of the Prospectus or any amendment thereof, or arise out of
or are based upon the omission or alleged omission to state in the Dealer Manager Sections 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; (b) any unauthorized use of sales
materials or use of unauthorized verbal representations concerning the Shares by the Dealer
Manager; or (c) the Dealer Manager’s failure to comply with applicable laws governing money laundry
abatement and anti-terrorist financing efforts, including applicable FINRA rules,
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SEC rules and the
USA PATRIOT Act of 2001; and, in each case, agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such Losses or action. This indemnity agreement will be in addition
to any liability which the Dealer Manager may otherwise have.
4.4 Each Dealer, severally, agrees to indemnify and hold harmless the Company, the Dealer
Manager and their respective Company Affiliates and Dealer Manager Affiliates against any and all
Losses, joint or several, to which they or any of them may become subject under the Securities Act,
the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise,
insofar as such Losses (or actions in respect thereof) arise out of or are based upon: (a) any
unauthorized use of sales materials or use of unauthorized verbal representations concerning the
Shares by such Dealer or Dealer’s representatives or agents in violation of Section VII of the
Selected Dealer Agreement, in substantially the form attached hereto as Exhibit A, or
otherwise, or any other violation of Section VII of the Selected Dealer Agreement by Dealer; (b)
the Dealer’s failure to comply with applicable laws governing money laundry abatement and
anti-terrorist financing efforts, including applicable FINRA rules, SEC rules and the USA PATRIOT
Act of 2001; or (c) the Dealer’s failure to determine the suitability of any purchase as provided
for in Section 11 of this Agreement; and, in each case, will reimburse each such indemnified party,
as incurred, for any legal or other expenses reasonably incurred by any of them in connection with
investigating or defending any such Losses or action. This indemnity agreement will be in addition
to any liability which any Dealer may otherwise have.
4.5 Promptly after receipt by an indemnified party under Sections 4.1, 4.2, 4.3 or 4.4 of
notice of the commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under Section 4.1, 4.2, 4.3 or 4.4, as the
case may be, notify the indemnifying party in writing of the commencement thereof; but the failure
so to notify the indemnifying party (i) will not relieve it from liability under such Section of
this Agreement unless and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in such Section of this Agreement. The
indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the
indemnifying party’s expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be subject to approval by
the indemnified party, not to be unreasonably withheld or delayed. Notwithstanding the
indemnifying party’s election to appoint counsel to represent the indemnified party in an action,
the indemnified party shall have the right to employ separate counsel (including local counsel)
selected by the indemnifying party, subject to approval by the indemnified party not to be
unreasonably withheld or delayed, and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it and/or other indemnified parties which
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are different
from or additional to those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel for the indemnified party (subject to approval by the indemnified party
not to be unreasonably withheld or delayed) to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party may settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought hereunder but may not
do so without the prior written consent of the indemnified parties, unless such settlement,
compromise or consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
4.6 If the right to indemnification provided for in Sections 4.1, 4.2, 4.3 and 4.4 herein
would by its terms be available to a person hereunder, but is held to be unavailable by a court of
competent jurisdiction for any reason, then each indemnifying party shall contribute to the
aggregate amount paid or payable by such indemnified party as a result of such Losses and expenses
in respect thereof, as incurred, in such proportion as is appropriate to reflect the relative fault
of the Company, the Dealer Manager and the Dealer, as applicable, in connection with the
statements, omissions or other circumstances which resulted in such Losses or expenses, as well as
any other relevant equitable considerations.
The relative fault of the Company, the Dealer Manager and the Dealer, as applicable, shall be
determined by reference to, among other things, the parties’ relative intent, knowledge, and access
to information. It is understood that it would not be just and equitable if contribution pursuant
to this Section 4.6 were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in this Section 4.6.
Notwithstanding the provisions of this Section 4, the Dealer Manager or Dealer shall not be
required to contribute any amount in excess of the total price of the Shares sold by it.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
For purposes of this Section 4, each Company Affiliate shall have the same rights to
contribution as the Company, each Dealer Manager Affiliate shall have the same rights to
contribution as the Dealer Manager and each Dealer Affiliate of a particular Dealer shall have the
same rights to contribution as that Dealer.
5. Survival of Provisions
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
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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.
6. Applicable Law; Venue
This Agreement was executed and delivered in, and its validity, interpretation and
construction shall be governed by the laws of, the State of Arizona; provided however, that causes
of action for violations of federal or state securities laws shall not be governed by this Section.
Venue for any action brought hereunder shall lie exclusively in Phoenix, Arizona.
7. 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.
8. Successors and Amendment
8.1 This Agreement shall inure to the benefit of and be binding upon the Dealer Manager and
the Company and their respective successors. 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. This Agreement shall inure to the benefit of the Dealers to the extent set forth
in Sections 1 and 4 hereof.
8.2 This Agreement may be amended only by the written agreement of the Dealer Manager and the
Company.
9. Term
This Agreement may be terminated by either party (i) immediately upon notice to the other
party in the event that the other party shall have materially failed to comply with any of the
material provisions of this Agreement on its part to be performed during the term of this Agreement
or if any of the representations, warranties, covenants or agreements of such party contained
herein shall not have been materially complied with or satisfied within the times specified or (ii)
by either party on 60 days written notice.
In any case, this Agreement shall expire at the close of business on the effective date that
the Offering is terminated. The provisions of Section 4 hereof shall survive such termination. In
addition, the Dealer Manager, upon the expiration or termination of this Agreement, shall (i)
promptly deposit any and all funds in its possession which were received from investors for the
sale of Shares into such account as the Company may designate; and (ii) promptly deliver to the
Company all records and documents in its possession which relate to the Offering and are not
designated as dealer copies. The Dealer Manager, at its sole expense, may make and retain copies of
all such records and documents, but shall keep all such information confidential, except as
otherwise required by applicable law. The Dealer Manager shall use its commercially reasonable
efforts to cooperate with the Company to accomplish an orderly transfer of management of the
Offering to a party designated by the Company. Upon expiration or
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termination of this Agreement,
the Company shall pay to the Dealer Manager all fees to which the Dealer Manager is or becomes
entitled under Section 3 at such time as such fees become payable. In such event, participating
Dealers shall only be entitled to receive the actual fees earned to which they are entitled as a
reallowance of the fees received by the Dealer Manager.
10. Confirmation
The Company hereby agrees and assumes the duty to confirm on its behalf and on behalf of
dealers or brokers who sell the Shares, including the Dealer Manager, all orders for purchase of
Shares accepted by the Company. Such confirmations will comply with applicable rules of the
SEC and FINRA, and will comply with applicable laws of such other jurisdictions to the extent
the Company is advised of such laws in writing by the Dealer Manager.
11. Suitability of Investors
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 qualifications set forth in the
Prospectus and will only make offers to persons in the states in which it is advised in writing by
the Company that the Shares are qualified for sale or that such qualification is not required. In
offering Shares, the Dealer Manager will, and in its agreements with Dealers, the Dealer Manager
will require that the Dealers will, comply with the provisions of all applicable rules and
regulations relating to suitability of investors, including without limitation, the provisions of
Article III of the NASAA Guidelines. The Dealer Manager shall determine if a purchaser meets the
minimum initial suitability standards specified in the Company’s Prospectus and any applicable
state specific suitability standards. In making the determinations as to suitability, the Dealer
Manager shall be entitled to rely on the Dealers and/or information provided by the purchasers. In
addition, the Dealer Manager shall make every reasonable effort to determine that the purchase of
the Shares is a suitable and appropriate investment for each purchaser. The Dealer Manager shall
be entitled to rely on representations as to suitability provided by the Dealer based on
information provided by such purchaser to the Dealer. In making its suitability determination, the
Dealer will consider, based on the information provided by the purchaser, such purchaser’s age,
investment objectives, investment experience, income, net worth, financial situation, and other
investments held by such purchaser, and whether the purchaser: meets the state specific minimum
income and net worth standards set forth in the Suitability Standards section of the Prospectus for
purchasers resident in those states; can reasonably benefit from an investment in the Shares based
on his overall investment objectives and portfolio structure; is able to bear the economic risk of
the investment based on his overall financial situation; and has an apparent understanding of the
fundamental risks of an investment in the Shares, the risk that he may lose his entire investment,
the lack of liquidity of the Shares, the restrictions on transferability of the Shares, the
background and qualifications of the Company’s advisor, and the tax, including ERISA, consequences
of an investment in the Shares. With respect to the maintenance of records required by the NASAA
Guidelines, the Company agrees that the Dealer Manager can satisfy its obligations by contractually
requiring such information to be maintained by the Dealers for at least six (6) years.
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12. Submission of Subscriptions
12.1 Those persons who purchase Shares will be instructed by the Dealer Manager or the Dealer
to make their checks payable, prior to the time the Company reaches the Minimum Offering, to “UMB
Bank, N.A., Agent for Xxxx Real Estate Income Strategy (Daily NAV), Inc.” or a recognizable contraction or
abbreviation thereof, including but not limited to “UMB Bank,
N.A., f/b/x Xxxx REIT.” “ After the Company reaches the Minimum Offering, checks should be made payable to “Xxxx
Real Estate Income Strategy (Daily NAV), Inc.” or,
alternatively, “Xxxx REIT.” Checks received by
the Dealer Manager or Dealer that conform to the foregoing instructions shall be transmitted for
deposit as set forth below. The Dealer Manager may authorize certain Dealers that are “$250,000
broker-dealers” to instruct their customers to make their checks for Shares subscribed for payable
directly to the Dealer. In such case, the Dealer
will collect the proceeds of the subscribers’ checks and issue a check for the aggregate
amount of the subscription proceeds, without any reductions or offset, made payable in the manner
described above. Transmittal of received investor funds will be made in accordance with the
following procedures:
| (a) | If a Dealer conducts its internal supervisory procedures at the location where subscription documents and checks are initially received, the Dealer shall conduct its suitability review of the transaction and if the transaction is suitable and the paperwork is in good order forward (i) the subscription documents to the Dealer Manager and (ii) the checks to the Escrow Agent by the end of the next business day following receipt of the subscription documents and the check, prior to the completion of the Minimum Offering. After completion of the Minimum Offering, the Company may instruct the Dealer to forward paperwork in good order and the check directly to the Company. |
| (b) | If a Dealer’s internal supervisory procedures are to be performed at a different location (the “Final Review Office”), the subscription documents and check must be transmitted to the Final Review Office by noon of the next business day following receipt by the Dealer of the subscription documents and check. The Final Review Office will, by the end of the next business day following receipt by the Final Review Office of the subscription documents and check, conduct its suitability review of the transaction and if the transaction is suitable and the paperwork is in good order forward (i) the subscription documents to the Dealer Manager and (ii) the checks to the Escrow Agent, prior to the completion of the Minimum Offering. After completion of the Minimum Offering, the Company may instruct the Dealer to forward paperwork in good order and the check directly to the Company. |
If the Dealer Manager or any Dealer receives a check that is made payable to the Escrow Agent after
the Minimum Offering is obtained, the Dealer Manager shall deposit such check with the Escrow Agent
for payment to the Company at its request.
13. Notices
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Any notice, approval, request, authorization, direction or other communication under this
Agreement shall be given in writing and shall be deemed to be delivered when delivered in person or
deposited in the United States mail, properly addressed and stamped with the required postage,
registered or certified mail, return receipt requested, to the intended recipient as set forth
below:
If to the Company;
|
Xxxx Real Estate Income Strategy (Daily NAV), Inc. | |
| 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000 | ||
| Phoenix, Arizona 85016 | ||
| Attention: Chief Executive Officer and President | ||
If to the Dealer Manager;
|
Xxxx Capital Corporation | |
| 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000 | ||
| Phoenix, Arizona 85016 | ||
| Attention: President |
Any party may change its address specified above by giving the other party notice of such
change in accordance with this Section 13.
14. Independent Contractor
The Company hereby acknowledges that the Company’s engagement of the Dealer Manager in
connection with the Offering and the process leading up to the Offering is as an independent
contractor and not in any other capacity.
15. Integration
This Agreement supersedes all prior agreements and understandings (whether written or oral)
between the Company and the Dealer Manager with respect to the subject matter hereof.
16. Waiver of Jury Trial
The Company and the Dealer Manager hereby irrevocably waive, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
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If the foregoing correctly sets forth our understanding, please indicate your acceptance
thereof in the space provided below for that purpose, whereupon this letter and your acceptance
shall constitute a binding agreement between us as of the date first above written.
| Very truly yours, XXXX REAL ESTATE INCOME STRATEGY (DAILY NAV), INC. |
||||
| By: | ||||
| Xxxxxxxxxxx X. Xxxx, | ||||
| Chief Executive Officer and President | ||||
| Accepted and agreed as of the date first above written. XXXX CAPITAL CORPORATION |
||||
| By: | ||||
| Xxxx X. Xxxxx, President | ||||
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