187,500,000 Units of Limited Liability Company Interests ($1 per Unit) REDWOOD MORTGAGE INVESTORS IX, LLC ADVISORY AGREEMENT
Exhibit
1.2
187,500,000
Units of Limited Liability Company Interests
($1
per Unit)
______________________________________
______________________________________
______________________________________
______________________________________
Redwood
Mortgage Corp., a California corporation, and Gymno Corporation, a California
corporation, are the Managers of Redwood Mortgage Investor IX, LLC, a Delaware
limited liability company (the “Company”) engaged in business as a mortgage
lender. The Managers, on behalf of the Company, propose to offer and
sell to qualified investors, upon the terms and subject to the conditions set
forth in the Prospectus dated ___________, 2008 (the “Prospectus”), units of
limited liability company interests (“Units”) of the Company at an offering
price of $1 per Unit, with a minimum investment of two thousand (2,000) Units
per purchaser for initial investments and one thousand (1,000) Units for
additional investments by existing members. The offering is for a
maximum of 187,500,000 Units ($187,500,000), including 37,500,000 Units
($37,500,000) issuable pursuant to the Company’s Distribution Reinvestment
Plan.
1. Advisory
Relationship. You are in the business of advising clients with
respect to certain investments including investments in the Company (the
“Advisor”). As an Advisor you do not receive any sales commissions or
other compensation from the Company, but instead receive your fees directly from
your client. You do not act as a broker dealer and investments in the
Company are made directly by your client.
2. Eligible Purchasers of
Units. You agree not to advise any client to invest in Units
who does not meet the suitability standards set forth in the
Prospectus. You agree that you will deliver and cause each
prospective purchaser to complete and execute a Subscription Agreement, and
return it to the undersigned together with such other documents, instruments or
information as the Managers may request together with a check in the full amount
of the purchase price for the number of Units subscribed for.
Until
such time as the Company has received and accepted subscriptions for at least
$1,000,000 of Units (the “Minimum Offering”) and released the proceeds from such
subscriptions from escrow (or such greater amount as may be applicable in
respect of any greater escrow in respect of subscribers from any state), you
agree to inform prospective purchasers to deliver a completed and signed copy of
the Subscription Agreement together with a check payable to the order of “California
Bank & Trust – Escrow Holder for Redwood Mortgage Investors IX,
LLC.” Following the
receipt and acceptance by the Company of the Minimum Offering, you agree to
inform purchasers that their check shall be made payable to “Redwood Mortgage Investors IX,
LLC” and remitted directly to Redwood Mortgage Investors IX, LLC, 000
Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxx, Xxxxxxxxxx 00000, Attention: Manager,
together with the Subscription Agreement and other above referenced
documents. You shall ascertain that each Subscription Agreement
submitted by a prospective purchaser of Units has been fully completed and
properly executed by such prospective purchaser.
3. No Compensation. As
an Advisor to the investor you will receive no compensation from the Company in
connection with any Units purchased by a client who you have advised to invest
in the Company.
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4. Further
Agreements of Advisor.
(a) In
connection with your advisory activity, you covenant and agree to comply with
all applicable requirements under the Securities Act of 1933, as amended (the
“Securities Act”), the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), the applicable rules and regulations of the Securities and
Exchange Commission (the “Regulations”), the laws of the state in which you are
advising clients, and any other applicable agency. Furthermore, you
specifically covenant and agree not to deliver the Company’s sales literature,
if any, to any person unless such sales literature is accompanied or preceded by
a copy of the Prospectus.
(b) You
will not give any information or make any representations or warranties in
connection with the offering of Units other than, or inconsistent with, those
contained in the Prospectus and any sales material approved in writing by the
Managers of the Company. You will deliver a copy of the Prospectus
and all supplements thereto and any amended Prospectus to each client whom you
are advising regarding an investment in the Company. You will not
deliver the approved sales material to any person unless such sales material is
accompanied or preceded by a copy of the Prospectus. You expressly
agree not to prepare or use any sales literature, advertisements or other
materials in connection with your advisory services. You agree that
to the extent information is provided to you marked “For Broker-Dealer and/or
Advisor Use Only”, you will not provide such information to your
clients.
(c) You
will only advise eligible purchasers of Units to invest in the Company as
described in the Prospectus under “INVESTOR SUITABILITY STANDARDS” and will
advise clients only in the jurisdictions in which you are legally qualified to
so act.
(d) You
agree to make diligent inquiries and maintain a record thereof for a period of
at least six years of all clients who you advise to purchase Units, in order to
ascertain whether the purchase of Units represents a suitable investment for
such client, and whether the client is otherwise eligible to purchase Units in
accordance with the terms of the offering. Accordingly, you shall
satisfy the following requirements:
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(i)
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In
recommending to a client an investment in the Units, you shall have
reasonable grounds to believe, on the basis of information obtained from
the client concerning his investment objectives, other investments,
financial situation and needs, and any other information known by you or
your representatives, that the client (or, if the client is acting as
trustee or custodian of a trust or other entity, that such other trust or
entity) is or will be in a financial position to realize to a significant
extent the benefits described in the Prospectus, that such client has a
fair market net worth sufficient to sustain the risks inherent in the
purchase of Units, including loss of investment and lack of liquidity, and
that Units are otherwise suitable as an
investment.
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(ii) You
shall also maintain in your files documents disclosing the basis upon which your
determination of suitability was reached as to each client.
(e) We
have no due diligence obligation to you.
(f) You
agree to diligently make inquiries as required by law of all clients who you
recommend to purchase Units in order to ascertain whether an investment in Units
is suitable for each such client, and not rely solely on information supplied by
each client. You shall retain all records relating to investor
suitability as to each client for a period of six years. Upon
reasonable notice to you, the Managers, or their designated agents, shall have
the right to inspect such records.
(g) By
executing this Agreement, you represent and warrant that you have reasonable
grounds to believe (based on information made available to you by the Managers
of the Company through the Prospectus and other materials, or otherwise obtained
as a result of inquiries conducted by you) that all material facts concerning
the Company are adequately and accurately disclosed and provide a basis for
evaluating the Company, including facts relating to items of compensation,
physical properties, tax aspects, financial stability and experience of the
sponsor, conflicts of interest and risk factors, and appraisals or other
reports.
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5. Termination. Either
party may terminate this Agreement at any time, effective immediately, by giving
written notice to other party.
6. Expenses. You shall
bear all your own expenses incurred in connection with your advisory activities
and shall not be entitled to any reimbursement.
7. Indemnification.
(a) The
Company and the Managers agree to indemnify against losses, claims, damages or
liabilities (including reasonable attorneys’ fees) to which you or such other
persons may become subject, under federal or state securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement of a material fact
contained in the Prospectus or the omission to state therein, material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under which they were made not
misleading. The foregoing indemnity shall include reimbursement of
any legal or other expenses reasonably incurred in connection with investigation
or defending any such loss, claim, damage, liability or action, and shall be
paid by you as such expenses are incurred.
(b) You
agree to indemnify and hold harmless the Company, its Managers, their affiliated
mortgage company (Redwood Mortgage), against any losses, claims, damages or
liabilities (including reasonable attorneys’ fees) to which any of such persons
may become subject, under federal or state securities laws or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any statements, actions or omissions by you or
any person controlled by you or acting on your behalf, which statement, action
or omission is untrue or is inconsistent with or in violation of any provision
of federal or state securities laws, the rules and regulations of the Securities
and Exchange Commission, or other applicable agency. The foregoing
indemnity shall include reimbursement of any legal or other expenses reasonably
incurred in connection with investigation or defending any such loss, claim,
damage, liability or action, and shall be paid by you as such expenses are
incurred.
8. Arbitration.
(a) As
between the parties hereto, all questions as to rights and obligations arising
under the terms of this Agreement are subject to arbitration, including any
question concerning any right or duty under the Securities Act, the Exchange
Act, and the securities laws of any state in which Units are offered, and such
arbitration shall be governed by the rules of the American Arbitration
Association.
(b) If
a dispute should arise under this Agreement, any party may within 60 days
make a demand for arbitration by filing a demand in writing for the
other.
(c) The
parties may agree upon one arbitrator, but in the event that they cannot agree,
there shall be three, one named in writing by each of the parties within five
(5) days after demand for arbitration is given and a third chosen by the two
appointed. Should either party refuse or neglect to join in the
appointment of the arbitrator(s) or to furnish the arbitrator(s) with any papers
or information demanded, the arbitrator(s) are empowered by both parties to
proceed ex parte.
(d) Arbitration
shall take place in the County of San Mateo, California, and the hearing before
the arbitrator(s) of the matter to be arbitrated shall be at the time and place
within said city as is selected by the arbitrator(s). The
arbitrator(s) shall select such time and place promptly after his (or their)
appointment and shall give written notice thereof to each party at least sixty
(60) days prior to the date so fixed. At the hearing any relevant
evidence may be presented by either party, and the formal rules of evidence
applicable to judicial proceedings shall not govern. Evidence may be
admitted or excluded in the sole discretion of the
arbitrator(s). Said arbitrator(s) shall hear and determine the matter
and shall execute and acknowledge their award in writing and cause a copy
thereof to be delivered to each of the parties.
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(e) If
there is only one arbitrator, his decision shall be binding and conclusive on
the parties, and if there are three arbitrators the decision of any two shall be
binding and conclusive. The submission of a dispute to the
arbitrator(s) and the rendering of his (or their) decision shall be a condition
precedent to any right of legal action on the dispute. A judgment
confirming the award of the arbitrator(s) may be rendered by any Court having
jurisdiction; or such Court may vacate, modify, or correct the award in
accordance with the prevailing sections of California state law.
(f) If
three arbitrators are selected under the foregoing procedure but two of the
three fail to reach an agreement in the determination of the matter in question,
the matter shall be decided by three new arbitrators who shall be appointed and
shall proceed in the same manner, and the process shall be repeated until a
decision is finally reached by two of the three arbitrators
selected.
(g) The
costs of such arbitration shall be borne by the losing party or in such
proportions as the arbitrator(s) shall determine.
9.
Authority. It
is understood that your relationship with the Company is as an independent
contractor and that nothing herein shall be construed and creating a
relationship of partnership, joint ventures, employer and employee or any other
agency relationship between you and the Company.
10. Survival of Indemnities, Warranties
and Representations. The indemnity agreements and the
representations and warranties of the parties as set forth herein shall remain
operative and in full force and effect, regardless of any termination or
cancellation of this Agreement, and shall survive the delivery of any payment
for Units.
11. Notices. All
communications hereunder shall be in writing and shall be mailed, hand delivered
or telegraphed, all charges prepaid, to the respective parties at the addresses
set forth herein. The address of the Company and its Managers is 000
Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxx Xxxx, Xxxxxxxxxx 00000 (telephone: (000)
000-0000), until changed by written notice.
12. Successors and
Assigns. This Agreement and the terms and provisions hereof
shall inure to the benefit of and shall be binding upon the successors and
assigns of the parties hereto; provided, however, that in no in event shall the
term “successors and assigns” as used herein include any purchaser, as such, of
any Units. In addition, and without limiting the generality of the
foregoing, the indemnity agreements contained herein shall inure to the benefit
of the successors and assigns of the parties hereto, and shall be valid
irrespective of any investigation made or not made by or on behalf of any party
hereto.
13. Applicable
Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware and the appropriate courts in
the County of San Mateo, California should be the forum for any litigation
arising hereunder.
Please
confirm your Agreement with the Managers to the terms contained herein and
return a fully executed copy of this Advisory Agreement to us.
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REDWOOD
MORTGAGE CORP.
By:
_______________________________
Xxxxxxx
X. Xxxxxxx, President
ADVISOR
ACCEPTANCE
ACCEPTED
this ____ day of ___________, 20___
By:
______________________________
(Print Name)
__________________________________
(Signature)
__________________________________
Title
__________________________________
Taxpayer
I.D. No.
__________________________________
(Telephone
Number)
__________________________________
Type of
Entity:
(corporation,
partnership or proprietorship)
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