EXHIBIT 1.1
CORNERSTONE REALTY FUND, LLC
FORM OF
DEALER-MANAGER AGREEMENT
Pacific Cornerstone Capital, Incorporated
0000 XxxXxxxxx Xxxx.
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Dear Sirs:
Cornerstone Realty Fund, LLC, a California limited liability company
(the "Fund"), and its managing member, Cornerstone Industrial Properties, a
California limited liability company (the "Managing Member"), propose to
offer and sell to selected persons or entities acceptable to the Managing
Member, upon the terms and subject to the conditions set forth in the
enclosed Prospectus, up to 100,000 units of limited liability company
interest ("Units") aggregating a maximum of $50,000,000, and to enter into
the Operating Agreement in the form included in such Prospectus as Exhibit
"A" ("Operating Agreement") with such persons or entities.
The Fund hereby invites you, Pacific Cornerstone Capital,
Incorporated, a California corporation ("Dealer Manager"), to become the
Dealer Manager in connection with the offer and sale of the Units. By your
acceptance hereof, you agree to act in such capacity and to use commercially
reasonable efforts to find purchasers for the Units in accordance with the
terms and conditions of the Prospectus and this Agreement, but with no
obligation or understanding, express or implied, that you are making a
commitment to purchase or sell the Units. You agree to use commercially
reasonable efforts to find purchasers of Units both directly and indirectly
through a selling group consisting of participating brokers ("Participating
Brokers") with whom you shall contract pursuant to a Participating Broker
Agreement substantially in the form attached as Attachment 1 hereto or such
other form as may be requested by a Participating Broker provided the consent
of the Managing Member is obtained for the use of such form.
Accompanying this Agreement is a copy of the Prospectus and the
Supplemental Material (as hereinafter defined) prepared by the Fund for use
in conjunction with the offer and sale of the Units. You are not authorized
to use any solicitation material other than that referred to in this section,
which material has been furnished by the Fund.
1. REPRESENTATIONS AND WARRANTIES OF THE FUND AND THE MANAGING
MEMBER.
The Fund and the Managing Member, jointly and severally,
represent and warrant to Dealer Manager and Participating Brokers that:
(a) The Fund is a limited liability company duly organized
under the laws of the State of California, is validly existing as a limited
liability company under such laws and has power and authority to conduct
business as described in the Prospectus under the laws of the State of
California and every other jurisdiction in which it conducts business or owns
or leases property.
(b) The Fund has prepared and filed with the Securities and
Exchange Commission ("SEC") a Registration Statement on Form S-11
("Registration Statement") and may have prepared and filed amendments thereto
for the offer and sale of the Units together with a Prospectus to be used in
connection
with the offer and sale of the Units to persons and entities which are
residents of the States of ___________________________ only. Copies of the
Registration Statement and amendments thereto, if any, will be made available
to Dealer Manager upon request. The Registration Statement, including the
Prospectus, financial statements and exhibits and all amendments, if any, as
of the time when the Registration Statement became effective ("Effective
Date") and the Prospectus included therein, is referred to herein as the
"Prospectus".
(c) The SEC has not issued any order preventing or suspending
the use of the Prospectus, and no proceedings for that purpose have been
instituted or are pending before or threatened by the SEC.
(d) From the Effective Date and at all times subsequent
thereto up to and including the Termination Date (as defined in Section 3
below), the Registration Statement and the Prospectus, and all amendments or
supplements thereto, have fully complied with and will fully comply with the
provisions of the Securities Act of 1933, as amended (the "Act") and the
published rules and regulations thereunder and have not contained and will
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
warranties in this subparagraph shall apply to statements in, or omissions
from, the Registration Statement or the Prospectus or any amendment thereof
or supplement thereto based upon and in conformity with written information
furnished to the Fund by Dealer Manager or on Dealer Manager's behalf
specifically for use with reference to Dealer Manager in the preparation of
the Registration Statement or the Prospectus or any such amendment or
supplement.
(e) All additional written, audio or audio-visual material,
including an investment xxxxxxx, xxxxx tape, video tape and internet site
prepared by the Fund for use in conjunction with the offer or sale of the
Units ("Supplemental Material") will be distributed by the Fund and the
Managing Member only in full compliance with the requirements of the Act
(including, without limitation, the requirement that such Supplemental
Material not be delivered to any prospective purchaser unless accompanied or
preceded by a Prospectus), and at the time the Registration Statement is
declared effective and at all times subsequent thereto up to and including
the Termination Date, such Supplemental Material has not contained and will
not contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(f) The Fund will obtain an opinion of Xxxxxxxxxxx Xxxxx &
Xxxxxxxx LLP confirming that the Fund will be classified as a partnership
subject to subchapter K of the Internal Revenue Code of l986, as amended, and
not as an association taxable as a corporation for federal income tax
purposes. The conditions on which the opinion will be issued will be met at
the time of such issuance and will continue to exist.
(g) The accountants who have certified or shall certify the
financial statements filed and to be filed with the SEC as part of the
Registration Statement and the Prospectus are independent certified public
accountants, as required by the Act and the rules and regulations thereunder.
(h) Subsequent to the respective dates as of which
information is given in the Prospectus and up to and including the
Termination Date, and except as contemplated by or reflected in the
Prospectus or an amendment or supplement to the Prospectus, (i) neither the
Managing Member nor the Fund have incurred or will have incurred any
liabilities or obligations, direct or contingent, not in the ordinary course
of business, or entered into any transaction not in the ordinary course of
business, (ii) neither the Managing Member nor the Fund has become or will
have become a party to any legal or governmental proceedings which may result
in any material adverse change in condition (financial or other) of the
Managing Member or the Fund, and (iii) there has not been any material
adverse change in the condition,
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financial or otherwise, of the Managing Member or the Fund, or in the
earnings, affairs or business prospects of the Managing Member or the Fund,
whether or not arising in the ordinary course of business.
(i) The balance sheets (including the related notes) of the
Fund and Managing Member set forth in the Prospectus fairly present the
respective financial positions of the Fund and Managing Member at the
respective dates thereof. Each of the balance sheets has been prepared in
accordance with generally accepted accounting principles.
(j) There are no contracts or other documents required to be
filed by the Act or the rules and regulations thereunder as exhibits to the
Registration Statement which have not been so filed.
(k) The sale of the Units has been duly and validly
authorized by the Fund, and when subscriptions for the Units have been
accepted by the Managing Member as contemplated in the Prospectus, the Units
will represent valid membership interests in the Fund and will conform to the
description thereof contained in the Prospectus.
(l) The liability of each member of the Fund will be limited
to the amount actually paid by each such member to the Fund, and each such
member will not be subject to personal liability for the debts, obligations
or liabilities of the Fund, by reason of being such a member, beyond such
amount except in the event of the member's participation in tortious conduct
or the member's agreement to be personally liable for the debts, obligations
or liabilities of the Fund.
(m) The person or persons who have signed this Agreement on
behalf of the Fund and the Managing Member and the person or persons who have
signed the Operating Agreement on behalf of the Managing Member are duly
authorized to so sign, and this Agreement and the Operating Agreement are
valid, legal, and binding agreements of the Fund and the Managing Member
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the rights of creditors generally.
(n) The Managing Member is a limited liability company
organized under the laws of the State of California and is validly existing
as a limited liability company under such laws. The Managing Member has power
and authority to conduct business as described in the Prospectus under the
laws of the State of California, and every other jurisdiction in which it
conducts business or owns or leases property.
(o) At all times subsequent to the date of this Agreement and
up to and including the Termination Date, the representations and warranties
made in this Section l will be true and correct with the same effect as if
they had been made on and as of such time, except as may subsequently be
disclosed in writing to the Dealer Manager.
(p) The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not violate, or
constitute a breach of, or default under, any instrument by which either the
Managing Member or the Fund is bound, or any law, order, rule or regulation
applicable to the Managing Member or the Fund of any court or any
governmental body or administrative agency having jurisdiction over the
Managing Member or the Fund.
(q) No closing will take place unless and until funds in
respect of subscriptions for an aggregate of at least 6,000 Units, acceptable
to the Managing Member, have been received by the Fund and payment for such
Units has been deposited in the Escrow Account and classified as "cleared
funds" by the Escrow Agent.
(r) Prior to accepting any subscription for Units, the
Managing Member will review the file memoranda or other records maintained by
Dealer Manager substantiating the suitability of the subscribers to purchase
Units, and will have reasonable grounds to believe and will in fact believe
that the
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subscribers meet the suitability standards as set forth in the Prospectus or
as required by law and will reject the subscriptions of any subscribers whom
the Managing Member does not have reasonable grounds to believe or does not
in fact believe meet said suitability standards.
2. SALE OF THE UNITS.
A subscription agreement ("Subscription Agreement") must be
completed by each person desiring to purchase Units, or, at Dealer Manager's
or Participating Broker's option, by Dealer Manager or Participating Broker
on behalf of each such person, and returned by Dealer Manager or
Participating Broker together with any other documents that may be required
under state securities laws or by the Managing Member, to the Managing Member
at 0000 XxxXxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxx X. Xxxxxxx. The Dealer Manager or Participating Broker shall
ascertain that the Subscription Agreement has been properly completed in full
and signed by the prospective purchaser prior to its return.
All subscription checks shall be made payable to the order of
USB ESCROW NO. 12563-GG FOR CORNERSTONE REALTY FUND until the Minimum
Subscription Date (as hereinafter defined) and thereafter all subscription
checks shall be made payable to CORNERSTONE REALTY FUND, LLC. If Dealer
Manager or Participating Broker receives a check not conforming to the
foregoing instructions, Dealer Manager and/or Participating Broker must
return such check directly to the subscriber not later than the end of the
next business day following its receipt. On or before the Minimum
Subscription Date, checks conforming to the foregoing instructions shall be
transmitted by Dealer Manager or Participating Broker for deposit directly to
U.S. Bank, National Association ("Escrow Agent"), at 0000 Xxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 by the end of the next business
day following receipt by Dealer Manager or Participating Broker. Following
the Minimum Subscription Date, checks conforming to the foregoing
instructions shall be transmitted by Dealer Manager or Participating Broker
for deposit directly to the Fund, at 0000 XxxXxxxxx Xxxx., Xxxxx 000, Xxxxxxx
Xxxxx, XX 00000 by the end of the next business day following receipt by
Dealer Manager or Participating Broker. In the event Dealer Manager's or
Participating Broker's final internal supervisory review is conducted at a
different location, then checks must be transmitted to Dealer Manager's or
Participating Broker's final review office by the end of the next business
day following receipt by Dealer Manager or Participating Broker and Dealer
Manager's or Participating Broker's final review office must in turn by the
end of the next business day following receipt by it, transmit the check for
deposit directly to the Escrow Agent on or before the Minimum Subscription
Date or to the Fund after the Minimum Subscription Date.
Upon receipt of the Subscription Agreement, the Managing
Member, on behalf of the Fund, will determine promptly (and in any event
within ten (10) days after such receipt) whether it wishes to accept the
proposed purchaser as a member in the Fund, it being understood that the
Managing Member reserves the right to reject the tender of any Subscription
Agreement and to reject all tenders after the Termination Date. Should the
Managing Member determine to accept the tender of the Subscription Agreement,
the Managing Member will promptly advise Dealer Manager or Participating
Broker of such action. Should the Managing Member determine to reject the
tender it will promptly notify in writing the prospective purchaser, Dealer
Manager and Participating Broker, if any, of such determination and will
promptly return the tendered Subscription Agreement and instruct the Escrow
Agent to return the purchase price of the Units directly to the prospective
purchaser if the determination is made on or before the Minimum Subscription
Date or the Fund will return the purchase price of the Units directly to the
prospective purchaser is the determination is made after the Minimum
Subscription Date.
All payments received on or prior to the Minimum Subscription
Date, except as hereinafter provided, from purchasers of Units shall be
transmitted directly to the Escrow Agent and deposited in an escrow account
(the "Escrow Account") with Escrow Agent. Such funds may be temporarily
invested in bank savings accounts, bank or money market accounts, bank
short-term certificates of deposit of U.S.
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banks having a net worth of $100 million, or short-term U.S. government
issued or guaranteed obligations. Prior to the Minimum Subscription Date, the
Fund will have no right to obtain any funds from the Escrow Agent. Funds for
Units purchased on or before the Minimum Subscription Date shall be made
available to the Fund, or its order, by the Escrow Agent, on the Minimum
Subscription Date.
Except as set forth in Section 1(r), nothing contained in this
Section 2 shall be construed to impose upon the Managing Member the
responsibility of assuring that prospective purchasers meet the suitability
standards contained in the Prospectus and the Subscription Agreement or to
relieve Dealer Manager and Participating Brokers of the responsibility of
complying with the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD").
3. TERMINATION DATE AND MINIMUM SUBSCRIPTION CLOSING DATE.
As used herein, the term "Termination Date" shall mean the
earliest to occur of (i) the date upon which subscriptions for the maximum
number of Units offered have been accepted by the Managing Member which date
the Managing Member shall designate by notice to Dealer Manager in writing;
or (ii) _____________, 2002. The Managing Member may terminate the offering
of Units at any time for any reason by written notice to the Dealer Manager
at least two (2) business days prior to the date of termination.
As used herein, the term "Minimum Subscription Date" shall
mean the earlier of the date on which the Managing Member shall mail or
otherwise furnish to Dealer Manager notification that subscriptions and
payments for an aggregate of at least 6,000 Units have been received and
accepted by the Managing Member and deposited with the Escrow Agent. In the
event that subscriptions and payments for an aggregate of at least 6,000
Units shall not have been received and accepted by the Managing Member on or
prior to ____________, 2001, subject to Section 9, this Agreement will
terminate and neither the Fund nor the Managing Member shall have any further
obligation or liability hereunder to Dealer Manager or Participating Brokers.
In the event of such termination, all purchase payments deposited with the
Escrow Agent shall be returned to the subscribers and no selling commissions
(as described below) will be payable.
4. COMPENSATION.
Except in such cases where the Dealer Manager grants a Volume
Discount (as defined in the Prospectus), for your services as Dealer Manager
in soliciting and obtaining purchasers of the Units, the Fund agrees to pay a
selling commission of eight percent (8%) of the first $3,000,000 of gross
offering proceeds realized from the sale of Units and seven percent (7%) of
the gross offering proceeds realized from the sale of each Unit sold
thereafter. All or a portion of these selling commissions may be reallowed by
Dealer Manager to Participating Brokers, as compensation for their services
in soliciting and obtaining subscribers for the purchase of Units. An
additional two percent (2%) of the gross offering proceeds less $30,000, all
or a portion of which may be reallowed to Participating Brokers, will be paid
to the Dealer Manager as a marketing support fee for marketing services,
wholesaling fees, expense reimbursements, bonuses and incentive compensation.
An additional one percent (1%) of the gross offering proceeds, all or a
portion of which may be reallowed to Participating Brokers, will be paid to
the Dealer Manager as a non-accountable expense reimbursement allowance. An
additional one-half percent (1/2%) of the gross offering proceeds, all or a
portion of which may be reallowed to Participating Brokers, will be paid to
the Dealer Manager as a due diligence expense allowance. No compensation will
be paid with respect to Units purchased by the Managing Member or its
affiliates. The selling commissions, marketing support fee, non-accountable
expenses allowance and due diligence expense allowance will be paid as
follows: (i) on or promptly following the Minimum Subscription Date, the Fund
will pay the selling commissions, marketing support fees, non-accountable
expense allowance and due diligence expense allowance payable with respect to
the Units purchased on or before the Minimum Subscription Date, and (ii)
after the Minimum Subscription Date, the Fund will pay the selling
commissions, marketing support fees, non-
5
accountable expense allowance and due diligence expense allowance payable
with respect to Units purchased during the period commencing with the first
business day following the Minimum Subscription Date and ending on the
Termination Date unless otherwise agreed, no later than the 15th day of the
month with respect to purchases made through the end of the prior month.
Subject to the provisions of Section 8 below, in the event the offer and sale
of Units is terminated prior to the Minimum Subscription Date, you shall not
be entitled to any reimbursement for your due diligence expenses incurred in
connection with the offering of Units.
In the event the Managing Member gives you any advances of any
portion of the marketing support fee, non-accountable expense allowance or
due diligence expense allowance, the amount of the advance shall be deducted
by the Fund from amounts owed to Dealer Manager for selling commissions,
marketing support fees, non-accountable expense allowance or due diligence
expense allowance and such amount shall be promptly reimbursed to the
Managing Member by the Fund.
No person will be entitled to a selling commission, marketing
support fee, non-accountable expense allowance or due diligence expense
allowance in any case in which it is determined that the solicitation or
obtaining of purchasers by such person was made in violation of the
securities laws of the United States or any state or other jurisdiction.
5. FURTHER AGREEMENTS OF THE FUND AND THE MANAGING MEMBER.
(a) The Fund and the Managing Member, jointly and severally,
covenant and agree that they will pay or cause to be paid (i) all expenses
and fees in connection with the preparation, printing, filing, delivery and
shipping of the Registration Statement (including this Agreement and all
other exhibits to the Registration Statement), the Prospectus and any
amendments or supplements thereto and the Supplemental Material, (ii) filing
fees, Fund counsel's fees and expenses paid and incurred in connection with
the registration and qualification of the Units for offer and sale by Dealer
Manager and Participating Brokers under the Act and the securities or Blue
Sky laws of the states in which offers are to be made, and (iii) filing fees,
Fund counsel's fees and expenses paid and incurred in connection with the
review by the NASD of the terms of the offering of the Units.
(b) The Fund will advise Dealer Manager and Participating
Brokers promptly of the issuance of any stop order withdrawing the
qualification for the offer and sale of the Units or of the institution of
any proceedings for that purpose, and will use its best efforts to prevent
the issuance of any such stop order and to obtain as soon as possible the
lifting thereof, if issued.
(c) If at any time when a Prospectus relating to the Units is
required to be delivered under the Act any event shall have occurred as a
result of which, in the opinion of counsel for the Fund, the Prospectus as
amended or supplemented includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Act, the Fund promptly will prepare and
file with the SEC an appropriate amendment or supplement.
(d) The Fund will deliver to Dealer Manager and Participating
Brokers from time to time without charge as many copies of the Prospectus
(and, in the event of an amendment or supplement to the Prospectus pursuant
to the provisions of this Agreement, of such amended or supplemented
Prospectus) and the Supplemental Material as Dealer Manager or Participating
Brokers may reasonably request, which Prospectus(s), as from time to time
amended or supplemented, and Supplemental Material the Fund authorizes Dealer
Manager and Participating Brokers to use in connection with the sale of the
Units.
(e) The Fund will use its best efforts to register and
qualify the Units for sale under the laws of those states and other
jurisdictions where it is intended that offers and sales will be made and
will
6
comply to the best of its ability with the laws of those states so as to
permit the continuance of sales of the Units thereunder. The Fund and the
Managing Member, jointly and severally, covenant and agree that neither the
Fund nor the Managing Member, nor any officer, manager or employee of either
of them will make any offer or sale of the Units unless such offer or sale is
made in compliance with the Act and the rules and regulations thereunder.
(f) The Managing Member and the Fund, jointly and severally,
agree to execute or cause to be executed all such certificates and other
documents required by and conforming to the Operating Agreement and to do or
cause to be done all such filing, recording, publishing and other acts as may
be appropriate to comply with the requirements of law for the operation of a
foreign limited liability company in all jurisdictions, other than
California, where the Fund shall desire to conduct business or own properties
as the case may be.
6. AGREEMENTS OF DEALER MANAGER.
(a) Dealer Manager covenants and agrees to comply, and to use
commercially reasonable efforts to cause the Participating Brokers to comply,
with any applicable requirements of the Act, and of the l934 Act, and the
published rules and regulations thereunder, and the Conduct Rules of the NASD
and, in particular, the Conduct Rules which require Dealer Manager (i) to
recommend the purchase of Units only when Dealer Manager has reasonable
grounds to believe that the investment is suitable for the investor, and that
the investor is in a financial position to sustain the risks inherent in the
investment including loss of investment and lack of liquidity, (ii) to
maintain certain files concerning the basis for Dealer Manager's
determination of the suitability of the investor, (iii) to determine the
adequacy and accuracy of the disclosure in the Prospectus, and (iv) to inform
the prospective investor of all pertinent facts relating to the liquidity and
marketability of the investment during the term of the investment. Dealer
Manager also agrees not to deliver the Supplemental Material to any person
unless the Supplemental Material is accompanied or preceded by the
Prospectus. Dealer Manager confirms that Dealer Manager is registered as a
broker-dealer and is in good standing under the l934 Act. Dealer Manager also
confirms that Dealer Manager is a member in good standing of the NASD. Dealer
Manager agrees that Dealer Manager will reallow commissions only to other
broker-dealers who are members of the NASD or not subject to registration
pursuant to the Securities Exchange Act of l934.
(b) Dealer Manager will not give any information or make any
representation in connection with the offering of the Units other than those
contained in the Prospectus and Supplemental Material furnished by the
Managing Member and the Fund. Dealer Manager agrees not to publish, circulate
or otherwise use any other advertisement or solicitation material. Dealer
Manager is not authorized to act as agent of the Fund or the Managing Member
in any connection or transaction, and Dealer Manager agrees not to act as
such agent and not to purport to do so without the prior written approval of
the Managing Member. Dealer Manager agrees that if and when the Managing
Member supplies Dealer Manager with copies of any supplement to the
Prospectus, Dealer Manager will affix such copies of such supplement to
copies of the Prospectus already in Dealer Manager's possession, and that
thereafter Dealer Manager will only distribute Prospectuses containing such
supplement and that Dealer Manager will accept subscriptions only from
investors who have received a copy of the Prospectus containing such
supplement. Dealer Manager further agrees to comply with all instructions
from the Managing Member concerning the destruction of out-dated Prospectuses
and the use of supplemented or amended Prospectuses.
(c) Dealer Manager agrees to solicit purchases of Units only
in the States and other jurisdictions in which the Managing Member indicates
that such solicitation can be made and in which Dealer Manager has determined
that such solicitation can be made by Dealer Manager and in which Dealer
Manager is qualified to so act.
7
(d) Dealer Manager will not sell the Units pursuant to this
Agreement unless the Prospectus is furnished to the purchaser at least five
(5) business days prior to the execution of the Subscription Agreement and
Power of Attorney, or is sent to such person under circumstances that it
would be received by him five (5) business days prior to his execution of the
Subscription Agreement and Power of Attorney.
(e) Dealer Manager will use reasonable efforts to select
investors who Dealer Manager reasonably believes meet the investor
suitability requirements which are set forth in the Prospectus and
Subscription Agreement (Exhibit "C" to the Prospectus) and such additional
individual state requirements as are specified in the Subscription Agreement
and which are confirmed by the investors by payment of the purchase price for
the Units including that each investor be of legal age in the state of his or
her residence. Dealer Manager will, for a period of six years, maintain in
Dealer Manager's files a copy of the Subscription Agreement for each investor
for whom Dealer Manager acts as Dealer Manager.
(f) To the extent that information is provided to Dealer
Manager marked "For Broker-Dealer Use Only," Dealer Manager covenants and
agrees not to provide such information to prospective investors.
7. INDEMNIFICATION.
(a) Dealer Manager agrees to indemnify, defend and hold
harmless the Fund and the Managing Member from all losses, claims, demands,
liabilities and expenses, including reasonable legal and other expenses
incurred in defending such claims or liabilities, whether or not resulting in
any liability to the Fund or the Managing Member, which the Fund or the
Managing Member may incur in connection with the offer or sale of any Units
by Dealer Manager pursuant to this Agreement which arise out of or are based
upon (i) an untrue statement or alleged untrue statement of a material fact,
or any omission or alleged omission of a material fact, other than a
statement or omission contained in the Prospectus, the Registration
Statement, or any state securities filing which was not based on written
information supplied to the Fund or the Managing Member by Dealer Manager, or
(ii) the breach by Dealer Manager of any of the terms and conditions of this
Agreement, including, but not limited to, alleged violations of the
Securities Act of 1933, as amended; or (iii) the violation by Dealer Manager
of the NASD Conduct Rules.
(b) The Fund and the Managing Member, jointly and severally,
will indemnify, defend, and hold harmless the Dealer Manager, its affiliates,
and each of its officers, directors and employees, and each person, if any,
who "controls" the Dealer Manager (within the meaning of the 0000 Xxx) from
and against any and all losses, claims, demands, damages, liabilities, costs
and expenses (including reasonable attorney's fees and other expenses
incurred in defending such claims or liabilities, whether or not resulting in
any liability to the Dealer Manager or any Participating Broker), to which
the Dealer Manager, its affiliates, or any such officer or employee or such
controlling person may become subject, under the 1933 Act or any other
federal or state securities law or otherwise, insofar as such losses, claims,
demands, damages, liabilities, costs and expenses (or actions or proceedings
in respect thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of a material fact contained in any Prospectus or
Supplemental Material or in information furnished pursuant to this Agreement
or otherwise by the Fund, the Managing Member or their respective
representatives, or in any "blue sky" application or other document filed
under state securities laws or regulations (collectively, "Blue Sky
Documents"); (ii) the omission or alleged omission from the Prospectus or
Supplemental Material, or from information furnished pursuant to this
Agreement or otherwise by the Fund, the Managing Member or their respective
representatives, or from any Blue Sky Documents, of any statement or
information which is required to be stated therein or is necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; (iii) the making of an offer by the Fund, the Managing
Member or their respective affiliates, or anyone acting on behalf of them,
other than the Dealer Manager, of any interests or securities; (iv)
violations by the Fund or the Managing Member of any of
8
their respective representations, warranties, covenants and agreements
contained in this Agreement; or (v) the failure of the offer and sale of the
Units to be registered or qualified for exemption from registration under any
state securities or "blue sky" laws other than as a result of the
non-compliance by the Dealer Manager with its obligations hereunder; and the
Fund and the Managing Member, jointly and severally, will reimburse the
Dealer Manager for any legal or other expenses reasonably incurred by it, its
affiliates, or any such officer, director or employee or any such controlling
person in connection with investigating, defending or preparing to defend any
such loss, claim, damage, liability or action. The indemnity agreement in
this Section 7(b) shall be in addition to any liability which the Fund or the
Managing Member may otherwise have to the Dealer Manager, its affiliates, or
any such officer or employee or any such controlling person.
8. EFFECTIVE DATE AND TERMINATION.
Provided that at least one counterpart of this Agreement shall
then have been executed and delivered, this Agreement shall become effective
at 12:00 noon, California time, of the first full business day following the
effective date of the Registration Statement or at such later time after the
Registration Statement becomes effective as the Managing Member shall first
release the Units for sale to the public. For the purpose of this section the
Units shall be deemed to have been released for sale to the public upon
release by the Managing Member of correspondence or other notification to
Dealer Manager indicating the effectiveness of the Registration Statement,
whichever shall first occur.
Until the Minimum Subscription Closing Date, this Agreement may be
terminated by Dealer Manager at Dealer Manager's option by giving written
notice to the Fund and the Managing Manager if: (a) the Fund or the Managing
Member shall have become a defendant in any litigation which, in Dealer
Manager's opinion, may reasonably be expected to result in a judgment having
materially adverse consequences for the Fund or the Managing Member or there
shall have been, since the respective dates as of which information is given
in the Registration Statement or the Prospectus, any material adverse change
in the condition, financial or otherwise, of the Fund or the Managing Member,
which change in Dealer Manager's judgment shall render it inadvisable to
proceed with the delivery of the Units, or (b) there shall have been any
important change in market levels, major catastrophe, substantial change in
national, international or world affairs, national calamity, postal strike,
act of God, or other event or occurrence which, in Dealer Manager's judgment
will materially disrupt the financial markets of the United States, or (c)
trading in securities generally on the New York Stock Exchange shall have
been suspended or minimum prices shall have been established on such Exchange
by the Commission or by such Exchange, or (d) a general banking moratorium
shall have been declared by federal or state authorities, or (e) the Managing
Member has terminated the offering of Units as provided in Section 2 hereof,
or (f) the Fund or the Managing Member is in breach of this Dealer Manager
Agreement and has failed to cure such breach within 30 days notice from
Dealer Manager to the Fund or the Managing Member of such breach.
Following the Minimum Subscription Date, this Agreement may be
terminated by Dealer Manager at Dealer Manager's option by giving notice to
the Fund and the Managing Member. In any case, his Agreement will terminate
at the close of business on the Termination Date; provided, however, that all
fees payable to Dealer Manager under the terms and conditions hereof shall be
paid when due although this Agreement shall have theretofore been terminated.
Except as otherwise provided in Section 9, any termination of
this Agreement pursuant to this Section 8 shall be without liability of the
Fund and the Managing Member to Dealer Manager and without liability on
Dealer Manager's part to the Fund or the Managing Member.
9. SURVIVAL OF INDEMNITIES, WARRANTIES AND REPRESENTATIONS.
9
The indemnity agreements contained in Section 7 hereof, and
the representations and warranties of the Fund and the Managing Member set
forth in Sections l and 5(f) hereof, shall remain operative and in full force
and effect, regardless of any termination or cancellation of this Agreement
or any investigation made by or on behalf of the Fund, the Managing Member,
Dealer Manager or any controlling person referred to in Section 7, and shall
survive the delivery of and payment for the Units, and any successor of
Dealer Manager or the Fund or the Managing Member or of any such controlling
person or any legal representative of any such controlling person, as the
case may be, shall be entitled to the benefit of the respective indemnity
agreements and representations and warranties.
l0. NOTICES.
Except as in this Agreement otherwise provided, (a) whenever
notice is required by the provisions of this Agreement or otherwise to be
given to the Fund, or the Managing Member, such notice shall be in writing
addressed to the Fund or the Managing Member at 0000 XxxXxxxxx Xxxx., Xxxxx
000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxxx, and (b)
whenever notice is required by the provisions of this Agreement or otherwise
to be given to Dealer Manager, such notice shall be in writing addressed to
Dealer Manager at 0000 XxxXxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000. Any notice referred to herein may be given in writing or by facsimile
or telephone and if by facsimile or telephone shall be immediately confirmed
in writing. Notice (unless actual) shall be effective upon mailing or
facsimile transmission with confirmation of receipt, as the case may be.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT.
Except as provided in the next sentence, this Agreement is
made solely for the benefit of Dealer Manager, Participating Brokers, the
Fund and the Managing Member or controlling persons thereof, and their
respective successors and assigns, and no other person shall acquire or have
any right by virtue of this Agreement, and the term "successors and assigns,"
as used in this Agreement, shall not include any purchaser, as such
purchaser, of any of the Units. The agreements of the Fund and the Managing
Member specified in Section 7(b) are made also for the benefit of the
purchasers of the Units and such purchasers and their successors and assigns
shall be entitled to the indemnification therein provided.
12. NOT A SEPARATE ENTITY.
Nothing contained herein shall constitute the Dealer Manager
and Participating Brokers, or any of them, as an association, partnership,
unincorporated business or other separate entity.
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Please confirm your agreement to become Dealer Manager under the terms
and conditions herein set forth by signing and returning the enclosed
duplicate copy of this Agreement at once to the Managing Member at the
address specified in Section 10 above.
Very truly yours,
CORNERSTONE REALTY FUND, LLC,
a California limited liability company
By: CORNERSTONE INDUSTRIAL PROPERTIES, LLC
a California limited liability company
By: CORNERSTONE VENTURES, INC.,
its Operating Member
By:
--------------------------------
CORNERSTONE INDUSTRIAL PROPERTIES, LLC.,
a California limited liability company
By: CORNERSTONE VENTURES, INC.,
its Operating Member
By:
--------------------------------
Xxxxx X. Xxxxxxx, President
AGREED AND ACCEPTED:
PACIFIC CORNERSTONE CAPITAL, INCORPORATED,
a California corporation
By
--------------------------------
Xxxxx X. Xxxxxxx, President
Dated: , 2000
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