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. 13778-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.
4
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)
_____________, 2003. 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
____________, 2002, 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 nine percent (9%) 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 $60,000, 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.
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(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
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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: , 2001
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