Exhibit 1

 

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.


270,000,000

SHARES OF COMMON STOCK

$.001 PAR VALUE PER SHARE

DEALER MANAGER AGREEMENT

April 30, 2004

Inland Securities Corporation
2901 Butterfield Road
Oak Brook, Illinois  60521

 

Ladies/Gentlemen:

 

Inland Western Retail Real Estate Trust, Inc. (the “Company”), a Maryland corporation, is qualified as a real estate investment trust (a “REIT”) under federal income tax laws.  The Company was formed on March 5, 2003, and is governed by the Bylaws (as may be amended from time to time, the “Bylaws”) and the Articles of Incorporation (as may be amended from time to time, the “Articles”) in the form incorporated by reference into the Registration Statement, as described in Section 1(a) hereof (such Bylaws and Articles being hereinafter referred to as the “Organizational Documents”).  The advisor to the Company is Inland Western Retail Real Estate Advisory Services, Inc., an Illinois corporation (the “Advisor”).

 

The Company is offering (i) on a “best efforts” basis up to 250,000,000 shares of common stock, $.00l par value per share (the “Shares”) for a purchase price of $10.00 per Share with a minimum initial investment of $3,000 ($1,000 in the case of tax-exempt investors, except for residents of the State of Iowa where Individual Retirement Accounts must have a minimum investment of $3,000, and for residents of the State of Minnesota where Individual Retirement Accounts and qualified plan accounts must have a minimum investment of $2,000), (ii) and up to 20,000,000 Shares for a purchase price of $9.50 per Share for issuance through the Company’s distribution reinvestment program, all upon the other terms and conditions set forth in the Prospectus, as described in Section 1(a) hereof (the “Offering”).  The subscribers, each of whom will be required to enter into a subscription agreement substantially similar to the form of the Subscription Agreement attached as Appendix C to the Prospectus (the “Subscription Agreement”), will, upon acceptance of their subscriptions by and in the discretion of the Company, become stockholders of the Company (the “Stockholders”).

 

1.             Representation and Warranties of the Company.  The Company hereby represents, warrants and agrees with you that:

 

 

1.1          Registration Statement and Prospectus.  A registration statement (File 333-103799) on Form S-11 with respect to an aggregate of 250,000,000 Shares and 20,000,000 Shares issuable pursuant to the Company’s distribution reinvestment program, has been prepared by the Company pursuant to the Securities Act of 1933, as amended (the “Act”), and the rules and regulations (the “Rules and Regulations”) of the Securities and Exchange Commission (the “Commission”) thereunder and has been filed with the Commission under the Act; one or more amendments to such registration statement have been or may be so prepared and filed.  As used in this Agreement, the term “Registration Statement” means such registration statement in the form in which it becomes effective, the term “Effective Date” means the date upon which the Registration Statement is or was first declared effective by the Commission and the term “Prospectus” means the prospectus in the form constituting a part of the Registration Statement as well as in the form first filed with the Commission pursuant to its Rule 424 after the Registration Statement becomes effective.  The Commission has not issued any stop order suspending the effectiveness of the Registration Statement and no proceedings for that purpose have been instituted or are pending before or threatened by the Commission under the Act.

 

1.2          Compliance with the Act.  From the time the Registration Statement becomes effective and at all times subsequent thereto up to and including the Termination Date (as defined in Section 2(c) hereof):

 

the Registration Statement, the Prospectus and any amendments or supplements thereto will contain all statements which are required to be stated therein by the Act and the Rules and Regulations and will comply in all material respects with the Act and the Rules and Regulations; and

 

neither the Registration Statement nor the Prospectus nor any amendment or supplement thereto will at any such time include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

1.3          No Subsequent Material Events.  Subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus and prior to the Termination Date, except as contemplated in the Prospectus or as disclosed in a supplement or amendment thereto or in the periodic financial statements of the Company, the Company has not and will not have:

 

incurred any material liabilities or obligations, direct or contingent; or

 

entered into any material transaction, not in the ordinary course of  business and, except as so disclosed, there has not been and will not be any material adverse change in the financial position or results of operations of the Company.

 

1.4          Corporation Status.  The Company is a corporation duly formed and validly existing under the General Corporation Law of Maryland.

 

1.5          Authorization of Agreement.  This Agreement has been duly and validly authorized, executed and delivered by or on behalf of the Company and constitutes the

 

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valid and binding agreement of the Company enforceable in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of the United States, any state or any political subdivision thereof which affect creditors’ rights generally or by equitable principles relating to the availability of remedies).  The performance of this Agreement, the consummation of the transactions contemplated herein and the fulfillment of the terms hereof, do not and will not result in a breach of any of the terms and provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, voting trust agreement, note, lease or other agreement or instrument to which the Company is a party or by which the Company or its property is bound, or under any rule or regulation or order of any court or other governmental agency or body with jurisdiction over the Company or any of its properties; and no consent, approval, authorization or order of any court or governmental agency or body has been or is required for the performance of this Agreement or for the consummation of the transactions contemplated hereby (except as have been obtained under the Act, from the National Association of Securities Dealers, Inc. (the “NASD”) or as may be required under state securities or blue sky laws in connection with the offer and sale of the Shares or under the laws of states in which the Company may own real properties in connection with its qualification to transact business in such states or as may be required by subsequent events which may occur).

 

1.6          Pending Actions.  There is no material action, suit or proceeding pending or, to the knowledge of the Company, threatened, to which the Company is a party, before or by any court or governmental agency or body which adversely affects the Offering of the Shares.

 

1.7          Required Filings.  There are no contracts or other documents required to be filed by the Act or the Rules and Regulations of the Commission thereunder as exhibits to the Registration Statement which have not been so filed.

 

1.8          Federal Income Tax Laws.  The Corporation has obtained an opinion of Duane Morris LLP, Philadelphia, Pennsylvania, stating that, under existing federal income tax laws and regulations, assuming the Company acts as described in the “Federal Income Tax Considerations” section of the Prospectus and timely files the requisite elections, counsel is of the opinion that the Company has been organized in conformity with the requirements for qualification as a REIT beginning with its taxable year ending December 31, 2003, and that its prior, current and anticipated methods of operation (as described in the Prospectus and represented by management) has enabled and should enable it to satisfy the REIT Requirements (as defined in the Prospectus).

 

1.9          Independent Public Accountants.  To the best of the Company’s knowledge, the accountants who have certified certain financial statements appearing in the Prospectus are independent public accountants within the meaning of the Act and the Rules and Regulations.

 

1.10        Escrow Agreement.  The Company has entered into an escrow agreement (the “Escrow Agreement”) with Inland Securities Corporation, Oak Brook, Illinois (the “Dealer Manager”), and LaSalle Bank National Association, Chicago, Illinois

 

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(the “Escrow Agent”), in the form included as an exhibit to the Registration Statement, which provides for the establishment of an escrow account (the “Escrow Account”).  During the period commencing with the Effective Date and ending on the Termination Date, the Company will deposit subscribers funds in the Escrow Account as described in Section 2 below.

 

1.11        Sales Literature.  In addition to and apart from the Prospectus, the Company may use certain supplemental sales material in connection with the Offering of the Shares.  This material, prepared by the Advisor, would consist of a brochure describing the Advisor and its Affiliates and the objectives of the Company and may also contain pictures and summary descriptions of properties similar to those to be acquired by the Company that Affiliates of the Company have previously acquired.  This material may also include pictures and summary descriptions of properties similar to those to be acquired by the Company, as well as a brochure, audiovisual materials and tape presentations highlighting and explaining various features of the Offering, properties of prior real estate programs and real estate investments in general; and articles and publications concerning real estate.  Business reply cards, introductory letters and seminar invitation forms may be sent to Soliciting Dealers (as hereinafter defined) and prospective investors.  These materials shall be hereinafter referred to collectively as the “sales literature.”  No person has been authorized to prepare for, or furnish to, a prospective investor, any sales literature other than:  (i) that described herein; and (ii) so-called “tombstone” newspaper advertisements/solicitations of interest, limited to identifying the Offering and the location of sources of further information.  Use of any sales literature is conditioned upon filing with and, if required, clearance by appropriate regulatory agencies (including, without limitation, the NASD and any state securities regulator or commissioner).  Such clearance (if provided), however, does not indicate that the regulatory agency allowing the use of the materials has passed on the merits of the Offering or the adequacy or accuracy of the sales materials.  Except as described herein, the Company has not authorized the use of other supplemental literature or sales material in connection with this Offering.  Although it is believed that the information contained in the sales literature or sales material will not conflict with any of the information set forth in the Prospectus, the sales literature will not purport to be complete, and should not be considered as a part of the Prospectus, or as incorporated in the Prospectus by reference, or as forming the basis of the Offering.

 

1.12        Authorization of the Shares.  The Company has an authorized and outstanding capitalization as set forth in the Registration Statement and Prospectus.  The sale of the Shares has been duly and validly authorized by the Company, and when subscriptions for the Shares have been accepted by the Company as contemplated in the Prospectus and the Shares have been issued to the respective subscribers, the Shares will represent ownership in the Company and will conform to the description thereof contained in the Prospectus.  Stockholders have no preemptive rights to purchase or subscribe for securities of the Company, and the Shares are not convertible or subject to redemption at the option of the Company.  The Shares are entitled to one vote per Share and do not have cumulative voting rights.  Subject to the rights of the holders of any class of capital stock of the Company having any preference or priority over the Shares, the Stockholders are entitled to distributions in such amounts as may be declared by the

 

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Board of Directors from time to time out of funds legally available for such payments and, in the event of liquidation, to share ratably in any assets of the Company remaining after payment in full of all creditors and provisions for any liquidation preferences on any outstanding preferred stock ranking prior to the Shares.

 

2.         Offering and Sale of the Shares.  On the basis of the representations, warranties and agreements herein contained, and subject to the terms and conditions herein set forth, the Company hereby appoints you as its exclusive Dealer Manager to solicit and to cause other dealers (as described in Section 2 (a) hereof) to solicit subscriptions for the Shares at the subscription price to be paid and otherwise upon the other terms and conditions set forth in the Prospectus and in the Subscription Agreement, and you agree to use your best efforts as such Dealer Manager to procure subscribers for the Shares, during the period commencing with the Effective Date and ending on the Termination Date (the “Offering Period”).  The number of Shares, if any, to be reserved for sale by each Soliciting Dealer may be decided by the mutual agreement, from time to time, of you and the Company.  In the absence of such mutual agreement, the Company shall, subject to the provisions of Section 2(b) hereof accept Subscription Agreements based upon a first come, first accepted reservation or other similar method.

 

2.1          Soliciting Dealers.  The Shares offered and sold through you under this Agreement shall be offered and sold only by you and, at your sole option, any other securities dealers whom you may retain (collectively the “Soliciting Dealers”), each of whom are members of the NASD, executing agreements with you substantially in the form of the Soliciting Dealers Agreement attached hereto as Exhibit A.

 

2.2          Subscription Agreements and Subscribers’ Funds.  Each person desiring to purchase Shares through you or any other Soliciting Dealer will be required to complete and execute the Subscription Agreement and to deliver such document to you or such Soliciting Dealer, together with a check payable to the order of “LBNA/Escrow Agent for IWRRET” in the amount of $10.00 per Share.

 

Each Soliciting Dealer shall forward any such Subscription Agreement and check to you not later than noon of the next business day after receipt of such Subscription Agreement, if the Soliciting Dealer conducts its internal supervisory procedures at the location where the Subscription Agreement and check were initially received.  When such internal supervisory procedures are to be performed at a different location (the “Final Review Office”), the Subscription Agreement and check must be transmitted to the Final Review Office by the end of the next business day following receipt of the Subscription Agreement and check by the Soliciting Dealer.  The Final Review Office will, by the next business day following receipt of the Subscription Agreement and check, forward both the Subscription Agreement and check to you as processing broker-dealer in order that you may complete your review of the documentation and process the Subscription Agreement and check.  The Company will have representatives available to review the Subscription Agreement at your location in order to determine whether it wishes to accept the proposed purchaser as a Stockholder, it being understood that the Company reserves the unconditional right to reject the tender of any Subscription Agreement and check (exclusive of the Company’s distribution reinvestment program).

 

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Any check received by you directly or as processing broker-dealer from the Soliciting Dealers will, in all cases, be forwarded to the Escrow Agent as soon as practicable, but in any event by the end of the second business day following receipt by you of the Subscription Agreement and check.  The Company will promptly notify you or the Soliciting Dealer, as appropriate,  of any rejection, and you shall send the check and the Subscription Agreement to the Escrow Agent with directions to promptly return the check and the Subscription Agreement to the rejected subscriber.  All subscription funds may be deposited directly with the Company.

 

Nothing contained in this Section 2 shall be construed to impose upon the Company the responsibility of assuring that prospective purchasers meet the suitability standards contained in the Prospectus or to relieve you or any of the Soliciting Dealers of the responsibility of complying with the Rules of the NASD.

 

2.3          Termination of the Offering.  The Offering Period will terminate on a date on or before one year from the date of the Prospectus (subject to requalification in certain states, the Company may extend the Offering Period from time to time, but in no event for longer than two years from the date of the Prospectus), subject in any event to the Company’s right to terminate the Offering at any time (the “Termination Date”) and the proceeds will be applied as set forth in the Prospectus.

 

2.4          Dealer-Manager Compensation.

 

The Company agrees to pay to you a selling commission of 7.5%, of which 7% may be reallowed by you to the Soliciting Dealers, of the sales price for each Share sold (except for Special Sales) from the 250,000,000 Shares offered on a “best efforts” basis, as set forth in the Prospectus under the caption “Plan of Distribution,” subject to the limitations described below.  In lieu of reimbursement of specific expenses, you will also receive, subject to the limitations described herein and in the Prospectus, a marketing contribution (equal to 2.5%) and due diligence expense allowance (equal to 0.5%), both aggregating 3% of the sale price from the 250,000,000 Shares offered on a “best efforts” basis (except for certain Special Sales), some portion of which may be reallowed by you to the Soliciting Dealers.

 

Subject to certain conditions and exceptions explained below, investors making an initial cash investment of at least $3,000 through the same Soliciting Dealer will receive a reduction of the 7% reallowable selling commission payable in connection with the purchase of those Shares in accordance with the following schedule:

 

Amount of Selling Volume Discount		Amount of Purchaser’s Investment				Maximum Commission Per Share
		From		To
1%		$250,010		$500,000		6%
2%		$500,010		$1,000,000		5%
3%		$1,000,010		$2,500,000		4%
4%		$2,500,010		$5,000,000		3%
5%		$5,000,010		$10,000,000		2%
6%		$10,000,010		more than $10,000,010		1%

 

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Any reduction in the amount of the selling commissions in respect of volume discounts received will be credited to the investor in the form of additional whole shares or fractional shares.  Selling commissions will not be paid on any such whole shares or fractional shares issued for a volume discount.

 

To the extent reasonably practicable, purchases will be combined for the purpose of qualifying for a volume discount and crediting a purchaser or purchasers with additional Shares for the above described volume discount, and for determining commissions payable to you and reallowable to Soliciting Dealers, so long as all such combined purchases are made through the same Soliciting Dealer and approved by the Company.  The Company will combine subscriptions made in the Offering by a purchaser with other subscriptions in the Offering for the purpose of computing amounts invested.  Purchases by spouses will also be combined and purchases by any investor may be combined with other purchases of Shares to be held as a joint tenant or a tenant in common by such investor with others for purposes of computing amounts invested.  Purchases by Tax-Exempt Entities will only be combined with purchases by other Tax-Exempt Entities for purposes of computing amounts invested if investment decisions are made by the same Person, provided that if the investment decisions are made by an independent investment adviser, that investment adviser may not have any direct or indirect beneficial interest in any of the Tax-Exempt Entities whose purchases are sought to be combined.  The investor must mark the “Additional Investment” space on the Subscription Agreement Signature Page in order for purchases to be combined.  The Company is not responsible for failing to combine purchases, where the investor fails to mark the “Additional Investment” space.

 

If the Subscription Agreements for the purchases to be combined are submitted at the same time, then the additional Shares to be credited to the purchasers as a result of such combined purchases will be credited on a pro rata basis.  If the Subscription Agreements for the purchases to be combined are not submitted at the same time, then any additional Shares to be credited as a result of such combined purchases will be credited to the last component purchase, unless the Company is otherwise directed in writing at the time of such submission; except however, the additional Shares to be credited to any Tax-Exempt Entities whose purchases are combined for purposes of the volume discount will be credited only on a pro rata basis based on the amount of the investment of each Tax-Exempt Entity and their combined purchases.

 

Notwithstanding the preceding paragraphs, in no event shall any investor receive a discount greater than 5% on any purchase of Shares if such investor already owns, or may be deemed to already own, any Shares.  This restriction may limit the amount of the volume discount available to a purchaser after the purchaser’s initial purchase and the amount of additional Shares that may be credited to a purchaser as a result of the combination of purchases.

 

In the event the dollar amount of commissions paid for such combined purchases exceeds the maximum commissions for such combined purchases (taking the volume discount into effect), you will be obligated to forthwith return to the Company any excess

 

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commissions received.  The Company may adjust any future commissions due to you for any such excess commissions that have not been returned.

 

Notwithstanding the foregoing, it is understood and agreed that no commission shall be payable with respect to particular Shares if the Company rejects a proposed subscriber’s Subscription Agreement, which it may do for any reason or for no reason, as set forth in the form of Subscription Agreement.  In addition, no selling commission, Marketing Contribution or Due Diligence Expense Allowance shall be payable in connection with the sale of Shares directly by the Company, in connection with the performance of services, to employees and associates of the Company and its Affiliates, the Advisor, Affiliates of the Advisor, the Dealer Manager or their respective officers and employees and certain of their affiliates who request and are entitled to such discount.

 

All selling commissions payable to you will be paid on a weekly basis, substantially concurrently with the acceptance of a subscriber as a Stockholder by the Company, in an amount equal to the selling commissions payable with respect to such Shares; provided however, the Company reserves the right, at its sole discretion, to change the frequency of the payment of such commissions to a monthly basis.

 

Certain other Special Sales shall be effected directly by the Company and not pursuant to this Agreement, and no selling commission shall be payable in connection with such Special Sales, including sales to one or more Soliciting Dealers and their respective officers and employees and certain of their respective affiliates who request and are entitled to purchase Shares net of selling commissions.  Furthermore, no selling commission shall be payable on the Shares credited to an investor as a result of a volume discount or on sales of Shares to certain investors whose contracts for investment advisory and related brokerage services include a fixed or “wrap” fee feature.  The term “Special Sales” shall have the meaning ascribed to it in the Prospectus.  The Marketing Contribution and Due Diligence Expense Allowance will, however, be allowed and paid with respect to those sales which are “Special Sales” solely by virtue of (a) the presence of a contract for investment advisory and related brokerage services with the proposed investor/subscriber which includes a fixed or “wrap” fee feature, (b) being sales to the Soliciting Dealers and their respective officers and employees and certain of their respective affiliates who request and are entitled to purchase Shares net of selling commissions, and (c) being sales of Shares which are entitled to a volume discount, including the Shares credited to an investor as a result of a volume discount.  Any subsequent purchases of Shares by investors who initially purchased Shares net of the 7.5% selling commission are limited to a maximum discount of 5% of the public offering price per Share.

 

Certain subscribers to the Company’s Shares may agree with their participating Soliciting Dealer and the Dealer Manager to have selling commissions due with respect to the purchase of their Shares paid over a period of up to six years pursuant to a deferred commission option arrangement (the “Deferred Commission Option”), as more fully explained, and subject to the conditions set forth, under the section “Plan of Distribution-Deferred Commission Option” in the Company’s Prospectus, which section is incorporated by reference herein.  Stockholders electing the Deferred Commission

 

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Option will be required to pay a total of $9.40 per Share purchased upon subscription, rather than $10.00 per Share, with respect to which $0.15 per Share will be payable by the Company to the Dealer Manager as selling commissions due upon subscription, of which $0.10 per share may be reallowed to the participating Soliciting Dealer by the Dealer Manager.  For each of the six years following such subscription on a date or dates to be determined by the Dealer Manager, $0.10 per Share will be paid by the Company to the Dealer Manager as deferred selling commissions with respect to Shares sold pursuant to the Deferred Commission Option, which amounts will be deducted from and paid out of cash distributions otherwise payable to such stockholders holding such Shares, and may be reallowed to the participating Soliciting Dealer by the Dealer Manager.  The net proceeds to the Company will not be affected by the election of the Deferred Commission Option.  Under this arrangement and based on a $10.00 per Share deemed value for each Share issued,  a stockholder electing the Deferred Commission Option will pay a 1.5% selling commission, of which 1% will be reallowed, upon subscription, rather than a 7.5% selling commission, of which 7% will be reallowed, and an amount equal to up to a 1% selling commission per year thereafter for up to the next six years which will be deducted from and paid by the Company out of cash distributions otherwise payable to such stockholder.

 

As in any volume discount situation, selling commissions are not paid on any Shares issued for a volume discount. Therefore, when the deferred commission option is used, no deductions will be made for deferred commission obligations from cash distributions payable on the Shares issued for a  volume discount, because there will not be any deferred commission obligation as to those particular Shares.  The number of Shares issued, if any, for a volume discount, will be determined as described above in Section 2.4 of the Agreement.

 

At such time, if any, that the Company’s Shares are listed on a national securities exchange or included for quotation on a national market system, or such listing or inclusion is reasonably anticipated to occur at any time prior to the satisfaction of the remaining deferred commission obligations, the Company shall accelerate all outstanding payment obligations under the Deferred Commission Option.  The amount of the remaining selling commissions due shall be deducted and paid by the Company out of cash distributions otherwise payable to such Stockholders during the time period prior to any such listing of the Shares for trading on a national securities exchange or inclusion for quotation on a national market system; provided that, in no event may the Company withhold in excess of $.60 per Share in the aggregate during the six-year period following the subscription.  The maximum amount that may be withheld and the maximum number of years for which selling commissions may be deferred will be lower when the volume discount provisions are also applicable and less than 6% of the selling commissions are deferred.  To the extent that the cash distributions during such time period are insufficient to satisfy the remaining deferred selling commissions due, the obligations of the Company and the Company’s Stockholders to make any further payments of deferred selling commissions under the Deferred Commission Option shall terminate and the Dealer Manager (and participating Soliciting Dealers if the deferred selling commissions are reallowed to them by the Dealer Manager) will not be entitled to receive any further

 

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portion of the unpaid deferred selling commissions following any such listing for trading or inclusion for quotation of the Shares.

 

3.             Covenants of the Company.  The Company covenants and agrees with you as follows:

 

3.1          Registration Statement.  The Company will use its best efforts to cause the Registration Statement and any subsequent amendments thereto to become effective as promptly as possible and will not, at any time after the Effective Date, file any amendment to the Registration Statement or supplement to the Prospectus of which you shall not previously have been advised and furnished a copy at a reasonable time prior to the proposed filing or to which you shall have reasonably objected or which is not, to the best of the Company’s knowledge in compliance with the Act and the Rules and Regulations.  The Company will prepare and file with the Commission and will use its best efforts to cause to become effective as promptly as possible:

 

any amendments to the Registration Statement or supplements to the Prospectus which may be required pursuant to the undertakings in the Registration Statement; and

 

upon your reasonable request any amendments to the Registration Statement or supplements to the Prospectus which, in the opinion of you or your counsel, may be necessary or advisable in view of the requirements of the Act and the Rules and Regulations in connection with the offer and sale of the Shares during the Offering Period.

 

3.2          SEC Orders.  As soon as the Company is advised or obtains knowledge thereof, it will advise you of any request made by the Commission for amending the Registration Statement, supplementing the Prospectus or for additional information, or of the issuance by the Commission of any stop order or of any other order preventing or suspending the use of the Prospectus or the institution of any proceedings for that purpose, and will use its best efforts to prevent the issuance of any such order and, if any such order is issued, to obtain the removal thereof as promptly as possible.

 

3.3          Blue Sky Qualifications.  The Company will use its best efforts to qualify the Shares for offering and sale under the securities or blue sky laws of such jurisdictions as you may reasonably request and to make such applications, file such documents and furnish such information as may be reasonably required for that purpose.  The Company will, at your request, furnish you copies of all material documents and correspondence sent to or received from such jurisdictions (including, but not limited to, summaries of telephone calls and copies of telegrams) and will promptly advise you as soon as the Company obtains knowledge thereof to the effect that the Shares are qualified for offering and sale in each such jurisdiction.  The Company will promptly advise you of any request made by the securities administrators of each such jurisdiction for revising the Registration Statement or the Prospectus or for additional information or of the issuance by such securities administrators of any stop order preventing or suspending the use of the Prospectus or of the institution of any proceedings for that purpose, and will use its best efforts to prevent the issuance of any such order and if any such order is issued, to obtain the removal thereof as promptly as possible.  The Company will furnish

 

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you with a Blue Sky Survey dated as of the Effective Date, which will be supplemented to reflect changes or additions to the information disclosed in such survey.

 

3.4          Amendments and Supplements.  If at any time when a Prospectus relating to the Shares is required to be delivered under the Act, any event shall have occurred to the knowledge of the Company as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein not misleading in light of the circumstances existing at the time it is so required to be delivered to a subscriber, or if it is necessary at any time to amend the Registration Statement or supplement the Prospectus relating to the Shares to comply with the Act, the Company will promptly notify you thereof and will prepare and file with the Commission an amendment or supplement which will correct such statement or effect such compliance.

 

3.5          Copies of Registration Statement.  The Company will furnish you copies of the Registration Statement (only one of which need be signed and need include all exhibits), the Prospectus and all amendments and supplements thereto, including any amendment or supplement prepared after the Effective Date, and such other information with respect to the Company as you may from time to time reasonably request, in each case as soon as available and in such quantities as you may reasonably request.

 

3.6          Qualification to Transact Business.  The Company will take all steps necessary to ensure that at all times the Company will be validly existing as a Maryland corporation and will be qualified to do business in all jurisdictions in which the conduct of its business requires such qualification and where such qualification is required under local law.

 

3.7          Authority to Perform Agreements.  The Company undertakes to obtain all consents, approvals, authorizations or orders of any court or governmental agency or body which are required for the performance of this Agreement and under the Organizational Documents or the consummation of the transactions contemplated hereby and thereby, respectively, or the conducting by the Company of the business described in the Prospectus.

 

3.8          Copies of Reports.  The Company will use its best efforts to furnish to you as promptly as shall be practicable the following:

 

a copy of each report or general communication (whether financial or otherwise) sent to the Stockholders;

 

a copy of each report (whether financial or otherwise) filed with the Commission; and

 

such other information as you may from time to time reasonably request regarding the financial condition and operations of the Company including, but not limited to, copies of operating statements of properties acquired by the Company.

 

3.9          Use of Proceeds.  The Company will apply the proceeds from the sale of the Shares as stated in the Prospectus or, if for any reason whatsoever all or a portion of

 

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the proceeds of the Offering are not applied or committed for use as stated within 12 months of the Termination Date, the Company shall promptly return those proceeds from the sale of the Shares not so applied or committed as stated in the Prospectus, with interest, to the subscribers, each subscriber sharing in the return in the ratio that the number of the Shares owned by such subscriber bears to the total number of the Shares owned by all subscribers.

 

3.10        Organization and Offering Expenses.  In no event shall the total of the organizational expenses and expenses of the Offering to be paid directly by the Company exceed 15% of the gross proceeds of the Offering.

 

4.             Covenants of the Dealer Manager.  You covenant and agree with the Company on your behalf and on behalf of the Soliciting Dealers as follows:

 

4.1          Compliance with Laws.  With respect to your participation and the participation by each Soliciting Dealer in the offer and sale of the Shares (including, without limitation any resales and transfers of Shares), you agree, and each Soliciting Dealer agrees, to comply and shall comply with any applicable requirements of the Act, the Securities Exchange Act of 1934, as amended, and the published rules and regulations of the Commission thereunder, and the applicable state securities or blue sky laws, and the Rules of the NASD, specifically including, but not in any way limited to, Rules 2440, 2710, 2730, 2740, 2750 and 2810 therein.  In particular, you agree not to deliver the sales literature (as defined above) to any person prior to the Effective Date and, after the Effective Date, not to deliver the sales literature to any person unless the sales literature is accompanied or preceded by the Prospectus.  In addition, you shall, in accordance with applicable law or as prescribed by any state securities administrator, provide or cause Soliciting Dealers to provide to any prospective investor copies of any prescribed document which is part of the Registration Statement.  If you intend to use electronic delivery means in the distribution of the Prospectus to any person, you represent and agree that you will comply with all appropriate procedures in compliance with requirements of the Commission.

 

With respect to your and each Soliciting Dealer’s participation in any resales or transfers of the Shares, you agree, and each Soliciting Dealer agrees, to comply and shall comply with any applicable requirements as set forth above.

 

4.2          No Additional Information.  In offering the Shares for sale, you and each Soliciting Dealer shall not give or provide any information or make any representation other than those contained in the Prospectus, the sales literature or any other document provided to you for such purpose by the Company.

 

4.3          Sales of Shares.  You and each Soliciting Dealer shall solicit purchases of the Shares only in the jurisdictions in which you and such Soliciting Dealer are legally qualified to so act and in which you and each Soliciting Dealer have been advised by the Company that such solicitations can be made.

 

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4.4          Subscription Agreement.  Subscriptions will be submitted by you and each Soliciting Dealer to the Company only on the form which is included as Appendix C to the Prospectus or as such form of Subscription Agreement may be revised by the Company.  You and each Soliciting Dealer understand and acknowledge that the Subscription Agreement must be executed by the subscriber.  In addition, you and each Soliciting Dealer shall ensure that no Subscription Agreement is presented to the Company for acceptance until at least five (5) business days after the date on which the subscriber received the Prospectus.

 

4.5          Suitability.  In offering the Shares to any person, you and each Soliciting Dealer shall have reasonable grounds to believe (based on such information as the investment objectives, other investments, financial situation and needs of the person or any other information known by you after due inquiry) that:  (i) such person has the capability of understanding the fundamental aspects of the Company, which capacity may be evidenced by the following: (A) the nature of employment experience; (B) educational level achieved; (C) access to advice from qualified sources, such as attorneys, accountants and tax advisors; and (D) prior experience with investments of a similar nature; (ii) such person has apparent understanding of:  (A) the fundamental risks and possible financial hazards of this type of investment; (B) the lack of liquidity of this investment; (C) the Advisor’s role in directing or managing the investment; and (D) the tax consequences of the investment; (iii) such person has the financial capability to invest in the Company and you or each Soliciting Dealer (as the case may be) shall maintain records disclosing the basis upon which you and each Soliciting Dealer determined the suitability of any persons offered Shares; and (iv) such other information as we may reasonably request.  Notwithstanding the foregoing, you and each Soliciting Dealer shall have reasonable grounds to believe that such person has either:  (a) a minimum annual gross income of $45,000 and a minimum net worth (exclusive of home, home furnishing and automobiles) of $45,000; or (b) a minimum net worth (determined with the foregoing exclusions) of $150,000.  Suitability standards are higher in certain states as set forth in the Subscription Agreement and the Prospectus.  You and/or the Soliciting Dealers shall maintain, for at least six years, a record of the information obtained to determine that an investor meets the suitability standards imposed on the offer and sale of the Shares (both at the time of the initial subscription and at the time of any additional subscriptions) and a representation of the investor that the investor is investing for the investor’s own account or, in lieu of such representation, information indicating that the investor for whose account the investment was made met the suitability standards.

 

4.6          Due Diligence.  Prior to offering the Shares for sale, you and each Soliciting Dealer shall have conducted an inquiry such that you have reasonable grounds to believe, based on information made available to you by the Company through the Prospectus or other materials, that all material facts are adequately and accurately disclosed and provide a basis for evaluating the purchase of the Shares.  In determining the adequacy of disclosed facts pursuant to the foregoing, you and each Soliciting Dealer may obtain, upon request, information on material fac