GRUBB & ELLIS
APARTMENT REIT, INC.
UP TO 105,000,000 SHARES OF COMMON STOCK
DEALER MANAGER AGREEMENT
June 22, 2009
Grubb & Ellis Securities, Inc.
4 Hutton Centre Drive, Suite 700
Santa Ana, CA 92707
Ladies and Gentlemen:
Grubb & Ellis Apartment REIT,
Inc., a Maryland corporation (the “ Company ”),
is registering $1,047,500,000 in shares of its common stock, $.01
par value per share (the “ Shares ”), for sale
to the public (the “ Offering ”), of which
(i) $1,000,000,000 in Shares are intended to be offered
pursuant to the primary offering and (ii) $47,500,000 in
Shares are intended to be offered pursuant to the Company’s
distribution reinvestment plan (the “ DRIP ”).
The Company reserves the right to reallocate the Shares being
offered between the primary offering and the DRIP. Except as
described in the Prospectus (as defined below) or in
Section 5.1 hereof, the Shares are to be sold pursuant to the
primary offering for a cash price of $10.00 per Share and the
Shares are to be sold pursuant to the DRIP for $9.50 per Share.
The Company hereby appoints Grubb
& Ellis Securities, Inc., a California corporation (the “
Dealer Manager ”), as its exclusive agent and
principal distributor during the Offering Period (as defined below)
for the purpose of selling for cash, on a best efforts basis, the
Shares through such securities dealers that the Dealer Manager may
retain (individually, a “ Dealer ” and
collectively, the “ Dealers ”), all of whom
shall be members of the Financial Industrial
Regulation Authority, Inc. (“FINRA”), pursuant to
a Participating Broker-Dealer Agreement in the form attached to
this Agreement as Exhibit A (the “ Participating
Broker-Dealer Agreement ”). The Dealer Manager may also
sell Shares for cash directly to its own clients and customers
subject to the terms and conditions stated in the Prospectus. The
Dealer Manager hereby accepts such agency and distributorship and
agrees to use its best efforts to sell the Shares on said terms and
conditions, commencing promptly following the Effective Date (as
defined in Section 1.1) in jurisdictions in which the Shares
are registered or qualified for sale or in which such offering is
otherwise permitted.
The term “ Offering
Period ” shall mean that period during which Shares may
be offered for sale, commencing on the date the Registration
Statement (as defined below) was filed with the Securities Exchange
Commission (“SEC”), during which period offers and
sales of the Shares shall occur continuously unless and until the
Offering is terminated as provided in Section 11 hereof,
except that the Dealer Manager and the Dealers shall immediately
suspend or terminate the offering of the Shares, in total or in any
state or states, upon request of the Company at any time and shall
resume offering the Shares upon subsequent request of the Company.
The Offering Period shall in all events terminate upon the sale of
all of the Shares. Upon termination of the Offering Period, the
Dealer Manager’s agency and this Agreement shall terminate
without obligation on the part of the Dealer Manager or the Company
except as set forth in this Agreement.
In connection with the sale of
Shares, the Company hereby agrees with you, the Dealer Manager, as
follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .
As an inducement to the Dealer Manager to enter into this
Agreement, the Company represents and warrants to the Dealer
Manager that:
1.1 The Company has prepared and
filed with the SEC a registration statement on Form S-11 for the
registration of the Shares under the Securities Act of 1933, as
amended (the “ Securities Act ”), and the
applicable rules and regulations of the SEC promulgated thereunder
(the “ Securities Act Rules and Regulations ”).
Copies of such registration statement as initially filed and each
amendment thereto have been or will be delivered to the Dealer
Manager. The registration statement on Form S-11 and the prospectus
contained therein, as finally amended at the effective date of the
registration statement (the “ Effective Date ”),
are respectively hereinafter referred to as the “
Registration Statement ” and the “
Prospectus ,” except that if the Company files a
prospectus or prospectus supplement pursuant to Rule
424(b) under the Securities Act, or if the Company files a
post-effective amendment to the Registration Statement, the term
“Prospectus” includes the prospectus filed pursuant to
Rule 424(b) and any prospectus included in such post-effective
amendment. The term “ Preliminary Prospectus ”
as used herein shall mean a preliminary prospectus related to the
Shares as contemplated by Rule 430 or Rule 430A of the
Securities Act Rules and Regulations included at any time as part
of the Registration Statement.
1.2 On the date that any Preliminary
Prospectus was filed with the SEC, on the Effective Date, on the
date of the Prospectus, on the date the Minimum Offering (as
defined in Section 5.1 hereof) is obtained and when any
post-effective amendment to the Registration Statement becomes
effective or any amendment or supplement to the Prospectus is filed
with the SEC, the Registration Statement and the Prospectus,
including the financial statements contained therein, complied or
will comply with the Securities Act and the Securities Act Rules
and Regulations. On the Effective Date, the Registration Statement
did not or will not, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading. On the date of the Prospectus, as
amended or supplemented, as applicable, and on the date the Minimum
Offering is obtained, the Prospectus did not or will not, as the
case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
provided, however, that the foregoing provisions of this
Section 1.2 will not extend to such statements contained in or
omitted from the Registration Statement or the Prospectus, as
amended or supplemented, as are primarily within the knowledge of
the Dealer Manager or any of the Dealers or are based upon
information furnished by the Dealer Manager in writing to the
Company specifically for inclusion therein.
1.3 No order preventing or suspending
the use of the Prospectus has been issued and no proceedings for
that purpose are pending, threatened, or, to the knowledge of the
Company, contemplated by the SEC; and to the knowledge of the
Company, no order suspending the offering of the Shares in any
jurisdiction has been issued and no proceedings for that purpose
have been instituted or threatened or are contemplated.
1.4 The Company intends to use the
funds received from the sale of the Shares as set forth in the
Prospectus.
1.5 The Company has been duly
organized and is validly existing as a corporation under the laws
of the state of Maryland, with the full power and authority to
conduct its business as described in the Prospectus, and has full
legal right, power and authority to enter into this Agreement and
to perform the transactions contemplated hereby, except to the
extent that the enforceability of the indemnity and contribution
provisions contained in Section 6 of this Agreement may be
limited under applicable securities laws.
1.6 The execution and delivery of
this Agreement, the consummation of the transactions herein
contemplated and the compliance with the terms of this Agreement by
the Company will not conflict with or constitute a default or
violation under any charter, by-law, indenture, mortgage, deed of
trust, lease, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company, except to the extent
that the enforceability of the indemnity and contribution
provisions contained in Section 6 of this Agreement may be
limited under applicable securities laws.
1.7 No consent, approval,
authorization or other order of any governmental authority is
required in connection with the execution or delivery by the
Company of this Agreement or the issuance and sale by the Company
of the Shares, except such as may be required under the Securities
Act or the securities laws of certain states, if any, that the
Company identifies to the Dealer Manager.
1.8 The Shares have been duly
authorized and validly issued and upon payment therefore will be
fully paid and nonassessable and will conform to the description
thereof contained in the Prospectus.
1.9 There are no actions, suits or
proceedings pending or to the knowledge of the Company, threatened
against the Company at law or in equity or before or by any federal
or state commission, regulatory body or administrative agency or
other governmental body, domestic or foreign, which will have a
material adverse effect on the business or property of the
Company.
2. REPRESENTATIONS AND WARRANTIES OF THE DEALER
MANAGER .
As an inducement to the Company to
enter into this Agreement, the Dealer Manager represents and
warrants to the Company that:
The Dealer Manager is, and during the
term of this Agreement will be, a member of FINRA in good standing
and a broker-dealer registered as such under the Securities
Exchange Act of 1934, as amended (the “ Exchange Act
”) and under the securities laws of the states in which the
Shares are to be offered and sold. The Dealer Manager and its
employees and representatives possess all required licenses and
registrations to act under this Agreement. The Dealer Manager will
comply with all applicable laws, rules, regulations and
requirements of the Securities Act, the Exchange Act, other federal
securities laws, state securities laws and the rules of FINRA,
specifically including, but not in any way limited to, FINRA
Conduct Rules 2340, 2420, 2730, 2740 and 2750. Each Dealer and
each salesperson acting on behalf of the Dealer Manager or a Dealer
will be registered with FINRA and duly licensed by each state
regulatory authority in each jurisdiction in which it or he will
offer and sell Shares.
The Dealer Manager was duly organized
and is validly existing as a corporation in good standing under the
laws of the State of California, and has full legal right, power
and authority to enter into this Agreement and to perform the
transactions contemplated hereby, and the Dealer Manager has duly
authorized, executed and delivered this Agreement.
2.1 This Agreement, when executed by
the Dealer Manager, will have been duly authorized and will be a
valid and binding agreement of the Dealer Manager, enforceable in
accordance with its terms, except to the extent that the
enforceability of the indemnity and contribution provisions
contained in Section 6 of this Agreement may be limited under
applicable securities laws.
2.2 The execution and delivery of
this Agreement, the consummation of the transactions herein
contemplated and the compliance with the terms of this Agreement by
the Dealer Manager will not conflict with or constitute a default
or violation under any charter, by-law, contract, indenture,
mortgage, deed of trust, lease, rule, regulation, writ, injunction
or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over the Dealer
Manager.
2.3 No consent, approval,
authorization or other order of any governmental authority is
required in connection with the execution, delivery or performance
by the Dealer Manager of this Agreement.
2.4 The Dealer Manager represents and
warrants to the Company and each person that signs the Registration
Statement that the information under the caption “Plan of
Distribution” in the Prospectus and all other information
furnished to the Company by the Dealer Manager in writing expressly
for use in the Registration Statement, any Preliminary Prospectus,
or the Prospectus, does not contain 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 not
misleading.
2.5 The Dealer Manager has reasonable
grounds to believe, based on information made available to it by
the Company, that the Prospectus discloses all material facts
adequately and accurately and provides an adequate basis for
evaluating an investment in the Shares.
3. COVENANTS OF THE COMPANY
The Company covenants and agrees with
the Dealer Manager that:
3.1 It will, at no expense to the
Dealer Manager, furnish the Dealer Manager with such number of
printed copies of the Registration Statement, including all
amendments and exhibits thereto, as the Dealer Manager may
reasonably request. It will similarly furnish to the Dealer Manager
and others designated by the Dealer Manager as many copies as the
Dealer Manager may reasonably request in connection with the
offering of the Shares of: (a) the Prospectus; (b) this
Agreement; and (c) any other printed sales literature or other
materials (provided that the use of said sales literature and other
materials have been first approved for use by the Company and all
appropriate regulatory agencies). It also will furnish to the
Dealer Manager and its designees copies of any material deemed
necessary by the Dealer Manager and commercially reasonable for the
Company to furnish, for due diligence purposes in connection with
the Offering.
3.2 It will furnish such information
and execute and file such documents as may be necessary for the
Company to qualify the Shares for offer and sale under the
securities laws of such jurisdictions as the Dealer Manager may
reasonably designate and will file and make in each year such
statements and reports as may be required. The Company will furnish
to the Dealer Manager a copy of such papers filed by the Company in
connection with any such qualification.
3.3 It will: (a) furnish copies
of any proposed amendment or supplement of the Registration
Statement or the Prospectus to the Dealer Manager; (b) file
every amendment or supplement to the Registration Statement or the
Prospectus that may be required by the SEC or any state securities
administration; and (c) if at any time the SEC shall issue any
stop order suspending the effectiveness of the Registration
Statement or any state securities administration shall issue any
order or take other action to suspend or enjoin the sale of the
Shares, it will promptly notify the Dealer Manager and will use its
best efforts to obtain the lifting of such order or to prevent such
other action at the earliest possible time.
3.4 If at any time when a Prospectus
is required to be delivered under the Securities Act any event
occurs as a result of which, in the opinion of either the Company
or the Dealer Manager, the Prospectus would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the
Company will promptly notify the Dealer Manager thereof (unless the
information shall have been received from the Dealer Manager) and
will effect the preparation of an amendment or supplement to the
Prospectus that will correct such statement or omission.
3.5 It will comply with all
requirements imposed upon it by the Securities Act, the Securities
Act Rules and Regulations, the Exchange Act and the applicable
rules and regulations of the SEC promulgated thereunder (the
“ Exchange Act Rules and Regulations ” and
collectively with the Securities Act Rules and Regulations, the
“ Rules and Regulations ”), and by all state
securities laws and regulations of those states in which an
exemption has been obtained or qualification of the Shares has been
effected, to permit the continuance of offers and sales of the
Shares in accordance with the provisions hereof and of the
Prospectus. It will not allow its officers, directors or employees
to be involved in the securities distribution activities of the
Dealer Manager, including but not limited to written, oral or
electronic communication with Dealers or associated persons of
Dealers without the express consent, invitation or instruction of
the Dealer Manager, which will not be unreasonably withheld. All
securities distribution activities and the relationships with
Dealers and associated persons of Dealers are the exclusive
property and dominion of the Dealer Manager. The Company
acknowledges that the identity and contact information of the
Dealers and associated persons of Dealers are the exclusive
property of the Dealer Manager and that upon the expiration or
termination of this Agreement the Company shall return to the
Dealer Manager and delete from all of its Stockholder and other
systems any information, including but not limited to identity or
contact information, about Dealers or associated persons of
Dealers.
3.6 All expenses incident to the
performance of the Company’s obligations under this
Agreement, including (a) the preparation, filing and printing
of the Registration Statement as originally filed and of each
amendment thereto, (b) the preparation, printing and delivery
to the Dealer Manager of this Agreement, the Participating
Broker-Dealer Agreement and such other documents as may be required
in connection with the offering, sale, issuance and delivery of the
Shares, (c) the fees and disbursements of the Company’s
counsel, accountants and other advisers, (d) the fees and
expenses related to the review of the terms and fairness of the
Offering by FINRA, (e) the fees and expenses related to the
qualification of the Shares under the securities laws in accordance
with the provisions of Section 3.2 hereof, including the fees
and disbursements of counsel in connection with the preparation of
any “blue sky” survey and any supplement thereto,
(f) the printing and delivery to the Dealer Manager of copies
of the Prospectus, (g) the fees and expenses of any registrar,
transfer agent or paying agent in connection with the Shares and
(h) the costs and expenses of the Company relating to investor
presentations undertaken in connection with the marketing of the
offering of the Shares, including, without limitation, expenses
associated with the production of slides and graphics, fees and
expenses of any consultants engaged in connection with
presentations with the prior approval of the Company, and travel
and lodging expenses of the representatives of the Company and any
such consultants, will be paid for by the Company or, to the extent
such expenses exceed 1.0% of the gross offering proceeds received
by the Company in the primary offering, by Grubb & Ellis
Apartment REIT Advisor, LLC, a Delaware limited liability company
and the Company’s advisor (the “ Advisor
”).
3.7 It will deliver to the Dealer
Manager copies of each written communication delivered to the
holders of Shares (“ Stockholders ”), including
but not limited to reports as described in the Prospectus under
“Reports to Stockholders,” at the time that such
communications are furnished to the Stockholders, and such other
information concerning the Company as the Dealer Manager may
reasonably request from time to time.
4. COVENANTS OF THE DEALER MANAGER . The Dealer
Manager covenants and agrees with the Company that:
4.1 In connection with the offer and
sale of the Shares, the Dealer Manager will comply with all
requirements imposed upon it by the Securities Act, the Exchange
Act, the Rules and Regulations or other federal regulations
applicable to the Offering, the sale of Shares or its activities
and by all applicable state securities laws and regulations and the
rules of FINRA, as from time to time in effect, and by this
Agreement, including the obligation to deliver a copy of the
Prospectus as required by the Securities Act, the Exchange Act or
the Rules and Regulations. The Dealer Manager will not make any
sales of the Shares in any jurisdiction unless and until it has
been advised that the Shares are either registered in accordance
with, or exempt from, the securities and other laws applicable
thereto.
4.2 The Dealer Manager will make no
representations concerning the Offering except as set forth in the
Prospectus.
4.3 The Dealer Manager will provide
the Company with such information relating to the offer and sale of
the Shares by it as may be requested to enable the Company to
prepare such reports of sale as may be required to be filed under
applicable federal or state securities laws.
4.4 All engagements of the Dealers
will be evidenced by a Participating Broker-Dealer Agreement,
except when the Dealer Manager obtains the prior written consent of
the Company. When Dealers are used in this Offering, the Dealer
Manager will use commercially reasonable efforts to cause such
Dealers to comply with all their respective obligations pursuant to
the Participating Broker-Dealer Agreement.
4.5 The Dealer Manager will provide
each prospective investor with a copy of the Prospectus and any
supplements thereto during the course of the Offering and prior to
the sale. The Company may also provide the Dealer Manager with
certain supplemental sales material to be used by the Dealer
Manager and the Dealers in connection with the solicitation of
purchasers of the Shares. In the event the Dealer Manager elects to
use such supplemental sales material, the Dealer Manager agrees
that such material shall not be used in connection with the
solicitation of purchasers of the Shares unless accompanied or
preceded by the Prospectus, as then currently in effect, and as it
may be amended or supplemented in the future. The Dealer Manager
agrees that it will not use any sales materials in conjunction with
the offer and sale of the Shares other than those either provided
to the Dealer Manager by the Company or approved by the Company for
use in the Offering. The use of any other sales material is
expressly prohibited.
4.6 The Dealer Manager will comply in
all material respects with the subscription procedures and
“Plan of Distribution” set forth in the Prospectus.
5. COMPENSATION OF DEALER MANAGER .
5.1 Except as may be provided in the
“Plan of Distribution” section of the Prospectus, as
compensation for the services rendered by the Dealer Manager, the
Company agrees that it will pay to the Dealer Manager a selling
commission equal to 7.0% of the $10.00 per Share cash price for
Shares sold in the primary offering plus a dealer manager fee of
3.0% of the $10.00 per Share cash price for Shares sold in the
primary offering; provided however, that the Company, the Dealer
Manager and/or a Dealer may agree to reduce or eliminate selling
commissions and/or dealer manager fees, as applicable, generally or
with respect to a particular investment to accommodate a
prospective investor or a Dealer.
No selling commissions will be paid,
and the per Share cash price shall be reduced to $9.30, in
connection with Shares sold in the primary offering in the event
that the investor has engaged the services of a registered
investment adviser or other financial advisor, paid on a
fee-for-service or assets under management basis by the
investor.
No selling commissions will be paid,
and the per Share cash price shall be reduced to $9.30, in
connection with Shares sold to (i) retirement plans of
participating Dealers, (ii) participating Dealers in their
individual capacities, or (iii) IRAs and qualified plans of
their registered representatives or any one of their registered
representatives in their individual capacities.
Selling commissions or dealer manager
fee will be reduced, and the per Share cash price shall be adjusted
accordingly to no lower than $9.00, where the Dealer Manager and/or
a participating Dealer agree to reduce or eliminate selling
commissions and/or dealer manager fees, as applicable, generally or
with respect to a particular investment to accommodate a
prospective investor or participating Dealer.
No selling commissions, dealer
manager fees or other organizational and offering expenses will be
paid in connection with Shares sold under the DRIP.
The Company will not be liable or
responsible to any Dealer for direct payment of commissions to such
Dealer, it being the sole and exclusive responsibility of the
Dealer Manager for payment of commissions to Dealers.
5.2 Notwithstanding anything to the
contrary contained herein, in the event that the Company pays any
commission to the Dealer Manager for sale by a Dealer of one or
more Shares and the subscription is rescinded as to one or more of
the Shares covered by such subscription, the Company shall decrease
the next payment of commissions or other compensation otherwise
payable to the Dealer Manager by the Company under this Agreement
by an amount equal to the commission rate established in
Section 5.1 of this Agreement, multiplied by the number of
Shares as to which the subscription is rescinded. In the event that
no payment of commissions or other compensation is due to the
Dealer Manager after such withdrawal occurs, the Dealer Manager
shall pay the amount specified in the preceding sentence to the
Company within ten (10) days following receipt of notice by
the Dealer Manager from the Company stating the amount owed as a
result of rescinded subscriptions.
5.3 In no event shall the total
aggregate underwriting compensation payable to the Dealer Manager
and any Dealers participating in the Offering, including, but not
limited to, selling commissions and the dealer manager fee, exceed
10.0% of gross offering proceeds in the aggregate.
6. INDEMNIFICATION .
6.1 The Company will indemnify and
hold harmless (to the extent permitted by the Company’s
charter) the Dealers and the Dealer Manager, their officers and
directors and each person, if any, who controls such Dealer or
Dealer Manager within the meaning of Section 15 of the
Securities Act (the “ Indemnified Persons ”)
from and against any losses, claims, damages or liabilities
(“ Losses ”), joint or several, to which such
Indemnified Persons may become subject, under the Securities Act or
otherwise, insofar as such Losses (or actions in respect thereof)
arise out of or are based upon (a) any untrue statement or
alleged untrue statement of a material fact contained (i) in
the Registration Statement or any post-effective amendment thereto
or in the Prospectus or (ii) in any blue sky application or
other document executed by the Company or on its behalf
specifically for the purpose of qualifying any or all of the Shares
for sale under the securities laws of any jurisdiction or based
upon written information furnished by the Company under the
securities laws thereof (any such application, document or
information being hereinafter called a “ Blue Sky
Application ”), or (b) the omission or alleged
omission to state in the Registration Statement (including the
Prospectus as a part thereof) or any post-effective amendment
thereto or in any Blue Sky Application a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or (c) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary
Prospectus, if used prior to the Effective Date, or in the
Prospectus or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company will reimburse
each Indemnified Person for any legal or other expenses reasonably
incurred by such Indemnified Person, in connection with
investigating or defending such Loss. Notwithstanding the foregoing
provisions of this Section 6.1, the Company will not be liable
in any such case to the extent that any such Loss or expense arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and
in conformity with written information furnished (x) to the
Company by the Dealer Manager or (y) to the Company or the
Dealer Manager by or on behalf of any Dealer specifically for use
in the preparation of the Registration Statement or any such
post-effective amendment thereto, any such Blue Sky Application or
any such Preliminary Prospectus or the Prospectus, and, further,
the Company will not be liable in any such case if it is determined
that such Dealer or the Dealer Manager was at fault in connection
with the Loss, expense or action. Notwithstanding the foregoing,
the Company shall not indemnify or hold harmless an Indemnified
Person for any Losses or expenses arising from or out of an alleged
violation of federal or state securities laws by such party unless
one or more of the following conditions are met: (a) there has
been a successful adjudication on the
