EXHIBIT 1.1
DEALER-MANAGER AGREEMENT
NNN APARTMENT REIT, INC.
1551 N. TUSTIN AVENUE, SUITE 200
SANTA ANA, CALIFORNIA 92705
______, 2006
NNN Capital Corp.
1551 N. Tustin Avenue, Suite 200
Santa Ana, California 92705
RE: DEALER-MANAGER AGREEMENT
Gentlemen:
This letter confirms and comprises the agreement (the "Agreement") between
NNN Apartment REIT, Inc., a Maryland corporation (the "Company"), and NNN
Capital Corp., a California corporation (the "Agent"), regarding the offering
and sale by the Company (the "Offering") of up to 100,000,000 shares (the
"Shares") of the Company's common stock at an offering price of $10.00 per Share
through the Agent and other broker-dealers for whom the Agent will serve as
manager (the "Soliciting Dealers").
l. Appointment of the Agent.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions set forth
herein, the Agent is hereby appointed and agrees to sell the Shares on a "best
efforts" basis. The Agent is authorized to enlist other members of the National
Association of Securities Dealers, Inc. ("NASD") acceptable to the Company to
sell the Shares as Soliciting Dealers.
(b) It is understood and agreed that no sale of the Shares shall be
regarded as effective unless and until accepted by the Company. The Company
reserves the right in its sole discretion to refuse to sell any of the Shares to
any person. The Offering will terminate on the first to occur of (i) the sale of
an aggregate of 100,000,000 Shares (excluding any Shares sold pursuant to the
Company's Distribution Reinvestment Plan) or (ii) _________, 2008 (the "Offering
Termination Date"). If subscriptions for at least 300,000 Shares (the "Minimum
Offering") have not been received and accepted by the Company by ________, 2007,
none of the Shares will be sold and all funds tendered will be refunded in full
to each subscriber (plus interest and without deducting for escrow expenses) in
accordance with the Prospectus (as defined in Section 2(c)).
(c) Subject to the performance by the Company of all the obligations to be
performed hereunder, and to the completeness and accuracy of all the
representations and warranties contained herein, the Agent hereby accepts such
agency and agrees on the terms and conditions herein set forth to use its best
efforts during the offering period to find qualified subscribers for the Shares
on the terms set forth in this Agreement and the Prospectus (as defined in
Section 2(c)).
(d) The Agent further understands and agrees that the compensation to the
Agent for a sale of Shares described herein is conditional upon the sale of at
least the Minimum Offering and acceptance of said sales by the Company and that
the failure to sell at least the Minimum Offering by that date shall relieve the
Company or any other party of any obligation to pay the Agent for any services
rendered by the Agent in connection with the sale of the Shares under this
Agreement or otherwise.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Agent that:
(a) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland, has all
requisite authority to enter into this Agreement and has all requisite authority
to conduct its business as described in the Prospectus (as defined below).
(b) No defaults exist in the due performance and observance of any
material obligation, term, covenant or condition of any agreement or instrument
to which the Company is a party or by which it is bound.
(c) A registration statement with respect to the Offering has been
prepared by the Company in accordance with applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the applicable
rules and regulations of the Securities and Exchange Commission (the "SEC")
promulgated thereunder, covering the Shares. Said registration statement, which
includes a preliminary prospectus, was initially filed with the SEC on ________,
2006. Copies of such registration statement and each amendment thereto have been
or will be delivered to the Agent. (The registration statement and prospectus
contained therein, as finally amended and revised at the effective date of the
registration statement are respectively hereinafter referred to as the
"Registration Statement" and the "Prospectus," except that if the prospectus
first filed by the Company pursuant to Rule 424(b) under the Securities Act
shall differ from the Prospectus, the term "Prospectus" shall also include the
prospectus filed pursuant to Rule 424(b).)
(d) The Registration Statement and Prospectus comply with the Securities
Act and the rules and regulations promulgated thereunder and do not contain any
untrue statements of material facts or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; provided, however, that the foregoing provisions of this Section
2(d) will not extend to such statements contained in or omitted from the
Registration Statement or Prospectus as are primarily within the knowledge of
the Agent or any of the Soliciting Dealers and are based upon information
furnished by the Agent in writing to the Company specifically for inclusion
therein.
(e) 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, rules of the NASD or
applicable state securities laws.
(f) 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.
(g) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms of this Agreement
by the Company shall not conflict with or constitute a default under any
charter, bylaw, 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 provisions contained in Section
10 of this Agreement may be limited under applicable securities laws.
(h) The Company 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 provisions contained in
Section 10 of this Agreement may be limited under applicable securities laws.
(i) At the time of the issuance of the Shares, the Shares will have been
duly authorized and validly issued, and upon payment therefor, will be fully
paid and nonassessable and will conform to the description thereof contained in
the Prospectus.
3. Covenants of the Company. The Company agrees that:
(a) It will deliver to the Agent such numbers of copies of the Prospectus
and all amendments and supplements thereto, as the Agent may reasonably request.
(b) It will comply with all requirements of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), other federal
securities laws, applicable state securities laws and the rules and regulations
promulgated thereunder to permit the continuance of offers and sales of the
Shares in accordance with the provisions hereof and as set forth in the
Prospectus and will amend or supplement the Prospectus as may be required in
order for the Prospectus to comply with the requirements of federal and state
securities laws and regulations prior to the Offering Termination Date.
(c) If at any time when the Prospectus is required to be delivered, any
event occurs as a result of which the Prospectus would include an untrue
statement of material fact or, in view of the circumstances under which they
were made, omit to state any material fact necessary to make the statements
therein not misleading, it will promptly notify the Agent thereof, affect the
preparation of an amended or supplemental Prospectus, as the case may be, which
will correct such statement or omission and deliver to the Agent as many copies
of such amended or supplemental Prospectus as the Agent may reasonably request.
(d) The Company will furnish the holders of Shares ("Stockholders") with
certain reports described in the Prospectus under "Reports to Stockholders," and
will deliver to the Agent copies of each such report at the time that such
reports are furnished to the Stockholders, and such other information concerning
the Company, as the Agent may reasonably request from time to time before and
after the Offering Termination Date.
(e) The Company will apply the net proceeds from the Offering received by
it in the manner set forth in the "Estimated Use of Proceeds of This Offering"
section of the Prospectus.
(f) Subject to the Agent's actions and the actions of others in connection
with the Offering, the Company will comply with all requirements imposed upon it
by federal and state securities laws.
4. Duties and Obligations of the Agent.
(a) The Agent will serve in a "best efforts" capacity in the offering,
sale and distribution of the Shares. The Agent may offer the Shares as an agent,
but all sales shall be made by the Company acting through the Agent as an agent,
and not by the Agent as a principal. The Agent shall have no authority to
appoint any person or other entity as an agent or sub-agent of the Agent or the
Company, except to appoint Soliciting Dealers acceptable to the Company.
(b) Neither Agent nor any other person is authorized to give any
information or make any representation other than those contained in the
Prospectus, including any supplement thereto, or in any supplemental sales
literature furnished or approved by the Company for use in making solicitations
in connection with the offer and sale of the Shares.
(c) The Agent will limit the offering of the Shares to persons whom the
Agent has reasonable grounds to believe, and in fact believes, meet the investor
suitability standards set forth in the Prospectus and associated Subscription
Agreement.
(d) The Agent 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 Agent with certain
supplemental sales material to be used by Agent and the Soliciting Dealers in
connection with the solicitation of purchasers of the Shares. Agent will keep a
written record of all persons to whom Agent and each Soliciting Dealer provide a
copy of the Prospectus, including any supplements thereto, and/or supplemental
sales materials and provide such log to the Company upon its request. In the
event Agent elects to use such supplemental sales material, Agent 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. Agent agrees that it will not use any sales materials other than those
either provided to Agent by the
Company or approved by the Company for use in the Offering, as set forth in
writing by the Company. The use of any other sales material is expressly
prohibited.
(e) Prior to making any sale of the Shares, the Agent will inform the
prospective investor and his purchaser representatives, if any, of all pertinent
facts relating to the liquidity and marketability of the Shares during the term
of the investment.
(f) In recommending the purchase or sale of the Shares, the Agent or any
person associated the Agent shall:
(1) have reasonable grounds to believe, on the basis of information
obtained from the prospective investor concerning his investment objectives,
other investments, financial situation and needs, and any other information
known by the Agent or an associated person, that:
(i) the prospective investor meets the investor suitability
requirements set forth in the Prospectus;
(ii) the prospective investor has a fair market net worth sufficient
to sustain the risks inherent in an investment in the Company, including,
but not limited to a total loss of his investment, lack of liquidity and
other risks described in the Prospectus; and
(iii) an investment in the Company is otherwise suitable for the
prospective investor.
(2) maintain in the Agent's files, for a period of six (6) years
following the Offering Termination Date, documents disclosing the basis upon
which the above determination of suitability was reached as to each investor.
(g) The Agent shall not authorize any transaction in which an investor
invests in the Shares in a discretionary account without prior written approval
of the transaction by the investor.
(h) The Agent will comply in all respects with the subscription procedures
and plan of distribution set forth in the Prospectus.
(i) All funds received by the Agent for the sale of Shares shall be
deposited in an interest bearing escrow account denominated "ESCROW ACCOUNT FOR
THE BENEFIT OF SUBSCRIBERS FOR COMMON STOCK OF NNN APARTMENT REIT, INC.,"
established by the Company at Wachovia Bank, N.A. (the "Escrow Agent") by 12:00
p.m. (noon) of the next business day following receipt of such funds by the
Agent to be held in accordance with the terms of the Escrow Agreement, dated
________, 2006, between the Company and the Escrow Agent (the "Escrow
Agreement"). The Agent acknowledges receiving a copy of the Escrow Agreement and
agrees to be bound by the terms thereof. Until such time (if any) as the funds
held in escrow are deliverable to the Company pursuant to the Escrow Agreement,
the Agent shall, and shall cause Soliciting Dealers to, instruct subscribers to
make checks for subscriptions payable to the order of "Wachovia Bank, N.A., as
escrow agent for NNN Apartment REIT, Inc." and shall return checks made payable
to another party to the Soliciting Dealer or subscriber who submitted the check.
Thereafter, checks may be made payable to either the Escrow Agent or the
Company.
(j) The Agent will furnish to the Company upon request a complete list of
all persons who have been offered the Shares and such persons' places of
residence and such other information reasonably requested by the Company.
(k) The Agent will immediately bring to the attention of the Company any
circumstance or fact which causes the Agent to believe the Prospectus, any
supplements thereto, or any other literature distributed in accordance with the
Prospectus, or any information supplied by prospective investors in their
subscription materials, may be inaccurate or misleading.
(1) The Agent shall thoroughly review all pertinent organizational
documents of the Company, receipt of which is hereby acknowledged by the Agent.
(m) When Soliciting Dealers are used in the Offering, the Agent agrees to
use its best efforts to cause such Soliciting Dealers to comply with all the
foregoing obligations.
(n) The Agent shall be solely responsible and liable for any commissions
or other payments due to any Soliciting Dealers.
(o) The Agent shall offer and sell Shares only in those jurisdictions
specified in writing by the Company as jurisdictions in which all necessary
approvals have been obtained. No offers or sales shall be made in any other
states or jurisdictions.
(p) The Agent, each Soliciting Dealer and each salesperson acting on
behalf of the Agent or a Soliciting Dealer shall be duly registered or licensed
in each jurisdiction in which it or he offers or sells the Shares.
5. Representations and Warranties of the Agent. The Agent represents and
warrants to the Company:
(a) The Agent has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of California, has all
requisite authority to enter into this Agreement and has all requisite authority
to conduct its business as described in the Prospectus.
(b) This Agreement, when executed by the Agent, will have been duly
authorized and will be a valid and binding agreement of the Agent, enforceable
in accordance with its terms.
(c) The consummation of the transactions contemplated herein and those
contemplated by the Prospectus will not result in a breach or violation of any
order, rule or regulation directed to the Agent by any court or any federal or
state regulatory body or administrative agency having jurisdiction over the
Agent or its affiliates.
(d) The Agent is, and during the term of this Agreement will be, duly
registered as a broker-dealer pursuant to the provisions of the Exchange Act, a
broker-dealer duly registered as such in California, a member in good standing
of the NASD and a broker-dealer duly registered as such in any and all other
states or jurisdictions where offers are made by the Agent. The Agent is a
member of the NASD and 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 the NASD, specifically
including, but not in any way limited to, NASD Rules 2420, 2730, 2740 and 2750.
Each Soliciting Dealer and each salesperson acting on behalf of the Agent or a
Soliciting Dealer will be registered with the NASD and duly licensed by each
state regulatory authority in each jurisdiction in which it or he will offer and
sell shares.
(e) The Agent 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.
(f) This Agreement, or any supplement or amendment hereto, may be filed by
the Company with the SEC and the NASD, if such should be required, and may be
filed with, and may be subject to the approval of, any federal or state
securities regulatory agencies if required.
(g) All engagements of the Soliciting Dealers will be evidenced by written
agreement in substantially the form of Exhibit A hereto.
6. Compensation. As compensation for services rendered by the Agent under
this Agreement, the Company agrees that it will pay to the Agent selling
commissions in an amount equal to 7.0% of the gross proceeds of the Shares, as
the case may be, sold by the Agent or the Soliciting Dealers; provided, however,
that a "purchaser," as defined below, who purchases more than 50,000 shares at
any one time through Agent or a single Soliciting Dealers will receive a
mandatory discount on the purchase price of the shares
above 50,000. The selling commissions payable to the Agent or such Soliciting
Dealers, as applicable, will be commensurately reduced. The following table
shows the discounted price per share and reduced selling commissions payable for
volume discounts:
Price
Commission Per
Shares Purchased in the Transaction Rate Share
- ----------------------------------- ---------- -----
1 to 50,000...................................................... 7.0% $10.00
50,001 to 100,000................................................ 6.0% $9.90
100,001 to 200,000............................................... 5.0% $9.80
200,001 to 500,000............................................... 4.0% $9.70
500,001 to 750,000............................................... 3.0% $9.60
750,001 to 1,000,000............................................. 2.0% $9.50
1,000,001 and up................................................. 1.0% $9.40
For the purposes of such volume discounts, the term "purchaser" includes:
- an individual, his or her spouse and their children under the age of 21
who purchase the shares for his, her or their own accounts;
- a corporation, partnership, association, joint-stock company, trust
fund or any organized group of persons, whether incorporated or not;
- an employees' trust, pension, profit sharing or other employee benefit
plan qualified under the federal income tax laws; and
- all commingled trust funds maintained by a given bank.
The Agent solely will be liable and responsible for all compensation payable
to Soliciting Dealers. Notwithstanding the foregoing, the Company reserves the
right, in its sole discretion, to refuse to accept any or all subscriptions for
the Shares tendered by the Agent or its Soliciting Dealers and/or to terminate
the Offering at any time prior to the Offering Termination Date. In the event
that the Offering is terminated for any reason prior to the Company's acceptance
of subscription proceeds for the Minimum Offering, the Agent will be entitled to
no commission, payments or amounts whatsoever in connection with its offering or
sale of the Shares. No compensation shall be paid or issued with respect to
Shares issued pursuant to the Distribution Reinvestment Plan or the 2006
Incentive Award Plan as described in the Prospectus.
7. Completed Sale. A sale of a Share shall be deemed to be completed under
Paragraph 6 if and only if (i) the Company has received a properly completed and
executed subscription agreement, together with payment of the full purchase
price of each purchased Share, from or on behalf of an investor who satisfies
the applicable suitability standards and minimum purchase requirements set forth
in the Registration Statement as determined by the Agent in accordance with the
provisions of this Agreement, (ii) the Company has accepted such subscription
and (iii) such investor has been admitted as a Stockholder of the Company.
8. Expense Allowances and Reimbursements. In addition to the compensation
described in Section 6 above, the Company will pay the Agent an amount equal to
3.0% of the gross proceeds of the Shares sold by the Agent or the Agent's
Soliciting Dealers as a non-accountable marketing allowance (2.5%) to pay
expenses associated with marketing fees, wholesaling fees, expense
reimbursements, sales seminars and volume discounts to be incurred by the Agent
and accountable due diligence expense reimbursements (0.5%) to reimburse for due
diligence costs to be incurred by the Agent. No allowance shall be paid with
respect to Shares issued pursuant to the Distribution Reinvestment Plan or the
2006 Incentive Award Plan, as described in the Prospectus.
9. Offering. The Offering of the Shares shall be at the offering price and
upon all the terms and conditions set forth in the Prospectus and the exhibits,
appendices and any supplements thereto and proceeds received from subscriptions
to purchase the Shares will be subject to the Escrow Agreement. The Agent and
the Soliciting Dealers will suspend or terminate the Offering upon notice from
the Company at
any time and will resume offering the Shares upon subsequent request of the
Company.
10. Indemnification.
(a) The Company will indemnify and hold harmless the Agent, Soliciting
Dealers, their officers and directors and each person, if any, who controls the
Agent or the Soliciting Dealers ("Agent Indemnified Parties") within the meaning
of Section 15 of the Securities Act from and against any losses, claims, damages
or liabilities, joint or several, to which the Agent Indemnified Parties may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (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 any Registration Statement (including the
Prospectus as a part thereof) or any post-effective amendment thereto or in the
Prospectus or any amendment or supplement to 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 thereof 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 of the Registration Statement, or in the Prospectus or any amendment or
supplement to 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, and will reimburse the Agent Indemnified Parties for any
legal or other expenses reasonably incurred by the Agent Indemnified Parties in
connection with investigating or defending such loss, claim, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability 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 to the Company or Agent by or on behalf of the Agent or
any Soliciting Dealer specifically for use with reference to such Agent or such
Soliciting Dealer in the preparation of the Registration Statement or any such
post-effective amendment thereof, any such Blue Sky Application or any such
preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto; and provided, further, that the Company will not be liable
in any such case if it is determined that the Agent or Soliciting Dealer was at
fault in connection with the loss, claim, damage, liability or action; and,
provided, further still, that an Agent Indemnified Party shall not be
indemnified by the Company for any losses, liabilities 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 merits of each count involving alleged securities
law violations as to the particular indemnitee; (b) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the particular indemnitee; or (c) a court of competent jurisdiction approves
a settlement of the claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should be made, and the
court considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the published position
of any state securities regulatory authority in which securities of the Company
were offered or sold as to indemnification for violations of securities laws.
(b) The Agent will indemnify and hold harmless the Company and each person
who has signed the Registration Statement and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act (the "Company
Indemnified Parties"), from and against any losses, claims, damages or
liabilities to which any of the aforesaid parties may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (a)
any untrue statement of a material fact contained (i) in the Registration
Statement (including the Prospectus as a part thereof) or any post-effective
amendment thereof or (ii) any Blue Sky Application, or (b) the omission to state
in the Registration Statement (including the Prospectus as a part thereof) or
any post-effective amendment thereof 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 of the Registration Statement,
or in the Prospectus, or in any amendment or supplement to the Prospectus or the
omission to state therein 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 in each case to the
extent, but only to the extent, that such untrue statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Agent specifically for use with reference to the
Agent in the preparation of the Registration Statement or any such
post-effective amendments thereof or any such Blue Sky Application or any such
preliminary prospectus or the Prospectus or any such amendment thereof or
supplement thereto or (d) any unauthorized use of sales materials or use of
unauthorized verbal representations concerning the Shares or the Offering by the
Agent and will reimburse the Company Indemnified Parties, in connection with
investigating or defending such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability which the Agent may
otherwise have.
(c) Each Soliciting Dealer severally will indemnify and hold harmless the
Company, Agent and each of their directors, and each of their officers who has
signed any of the Registration Statements and each person, if any, who controls
the Company and the Agent within the meaning of Section 15 of the Securities Act
from and against any losses, claims, damages or liabilities to which the
Company, the Agent, any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (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 (including the Prospectus as a part
thereof) or any post-effective amendment thereof or (ii) in any Blue Sky
Application, or (b) the omission or alleged omission to state in a Registration
Statement (including the Prospectus as a part thereof) or any post-effective
amendment thereof or in any Blue Sky Application a material fact required to be
stated therein 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 of the
Registration Statement, or in the Prospectus, or in any amendment or supplement
to 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 the light of the circumstances under which they were
made, not misleading in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company or the Agent by or on behalf of such Soliciting Dealer
specifically for use with reference to such Soliciting Dealer in the preparation
of the Registration Statement or any such post-effective amendments thereof or
any such Blue Sky Application or any such preliminary prospectus or the
Prospectus or any such amendment thereof or supplement thereto, or (d) any
unauthorized use of sales materials or use of unauthorized verbal
representations concerning the Shares or the Offering by such Soliciting Dealer
and will reimburse the Company and the Agent and any such directors or officers,
or controlling person, in connection with investigating or defending any such
loss, claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which such Soliciting Dealer may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section 10
of notice of a commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 10, notify in writing the indemnifying party of the commencement
thereof. The failure to so notify the indemnifying party will relieve it from
any liability under this Section 10 as to the particular item for which
indemnification is then being sought, but not from any other liability which it
may have to any indemnified party. In case any such action is brought against
any indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses (subject to Section 10(e)) incurred by such
indemnified party in defending itself, except for such expenses incurred after
the indemnifying party has deposited funds sufficient to effect the settlement,
with prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
(e) The indemnifying party shall pay all legal fees and expenses of the
indemnified party in the defense of such claims or actions; provided, however,
that the indemnifying party shall not be obliged to pay legal expenses and fees
to more than one law firm in connection with the defense of similar claims
arising out of the same alleged acts or omissions giving rise to such claims
notwithstanding that such actions or claims are alleged or brought by one or
more parties against more than one indemnified party. If such claims or actions
are alleged or brought against more than one indemnified party, then the
indemnifying party shall only be obliged to reimburse the expenses and fees of
the one law firm that has been selected by a majority of the indemnified parties
against which such action is finally brought; and in the event a majority of
such indemnified parties is unable to agree on which law firm for which expenses
or fees will be reimbursable by the indemnifying party, then payment shall be
made to the first law firm of record representing an indemnified party against
the action or claim. Such law firm shall be paid only to the extent of services
performed by such law firm and no reimbursement shall be payable to such law
firm on account of legal services performed by another law firm.
(f) The indemnity agreements contained in this Section 10 shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of any Soliciting Dealer, or any person controlling any
Soliciting Dealer or by or on behalf of the Company, the Agent or any officer or
director thereof, or by or on behalf of the Company or the Agent, (b) delivery
of any Shares and payment therefor and (c) any termination of this Agreement. A
successor of any Soliciting Dealer or of any of the parties to this Agreement,
as the case may be, shall be entitled to the benefits of the indemnity
agreements contained in this Section 10.
11. Compliance. All actions, direct or indirect, by the Agent, its agents,
employees, Soliciting Dealers and affiliates, shall conform to (i) requirements
applicable to broker/dealers under federal and applicable state securities laws,
rules and regulations and (ii) applicable requirements and rules of the NASD.
12. Representations and Agreements to Survive Sale and Payment. Except as the
context otherwise requires, all representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements at and as of the Offering Termination Date,
and such representations, warranties and agreements by the Agent or the Company,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Soliciting Dealer, or any person
controlling any Soliciting Dealer or by or on behalf of the Company, the Agent
or any officer or director thereof, or by or on behalf of the Company or the
Agent, and shall survive the sale of, and payment for, the Shares.
13. Costs of Offering. Except for the compensation payable to the Agent
described in Section 6 and the allowances and reimbursements described in
Section 8, which are the sole obligations of the Company, the Agent will pay all
of its own costs and expenses, including, but not limited to, all expenses
necessary for the Agent to remain in compliance with any applicable federal,
state or NASD laws, rules or regulations in order to participate in the Offering
as a broker-dealer, and the fees and costs of the Agent's counsel. The Company
agrees to pay all other expenses incident to the performance of its obligations
hereunder, including all escrow fees, expenses incident to filings with federal
and state regulatory authorities and to the registration of the Shares under
federal and state securities laws, including fees and disbursements of the
Company's counsel and accountants, and all costs of reproduction and
distribution of the Prospectus and any amendment or supplement thereto.
14. Termination. This Agreement is terminable by either party at any time
upon written notice to the other. Such termination shall not affect the
indemnification agreement set forth in Section 10.
15. Construction. This Agreement shall be governed by, subject to and
construed in accordance with, the laws of the State of California without regard
to conflict of law provisions.
16. Severability. If any portion of this Agreement shall be held invalid or
inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be considered valid and operative and effect shall be given the
intent manifested by the portion held invalid or inoperative.
17. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and together shall constitute one and
the same instrument.
18. Modification or Amendment. This Agreement may not be modified or amended
except by written agreement executed by the parties hereto.
19. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be sufficiently given or made if sent by United
States mail, first-class, postage prepaid, addressed or sent by facsimile as
follows:
IF TO THE AGENT:
NNN Capital Corp.
1551 N. Tustin Avenue
Suite 200
Santa Ana, California 92705
Facsimile: (714) 667-6843
Attn: President
IF TO THE COMPANY:
NNN Apartment REIT, Inc.
1551 N. Tustin Avenue
Suite 200
Santa Ana, California 92705
Facsimile: (714) 667-8252
Attn: President
The notice shall be deemed to be received on the date of its actual receipt by
the party entitled thereto.
20. Parties. This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto, the controlling persons referred to in Section 10
hereof and their respective successors, legal representative, heirs and assigns,
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under, in respect of, or by virtue of, this Agreement or
any provision herein contained.
21. Delay. Except as expressly provided otherwise in this Agreement, neither
the failure nor any delay on the part of any party to this Agreement to exercise
any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall a waiver of any right remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power,
or privilege with respect to any subsequent occurrence.
22. Recovery of Costs. If any legal action or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the substantially prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
(and any additional proceeding for the enforcement of a judgment) in addition to
any other relief to which it or they may be entitled.
23. No Partnership. Nothing in this Agreement shall be construed or
interpreted to constitute the Agent as in association with or in partnership
with the Company, and instead, this Agreement only shall constitute the Agent as
a broker-dealer authorized by the Company to sell and to manage the sale by
others of the Shares according to the terms set forth in the Registration
Statement, the Prospectus or this Agreement.
24. No Third Party Beneficiaries. Except as expressly provided otherwise in
this Agreement, no provision of this Agreement is intended to be for the benefit
of any person or entity not a party to this Agreement, and no third party shall
be deemed to be a beneficiary of any provision of this Agreement.
Further, no third party shall, by virtue of any provision of this Agreement,
have a right of action or an enforceable remedy against either party to this
Agreement.
25. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto and supersedes any prior understandings or written or
oral agreements between them respecting the subject matter hereof.
If the foregoing correctly sets forth the understanding between the Agent and
the Company, as issuer, please so indicate in the space provided below for that
purpose, and return one of the signed copies of this Agreement to the Company in
the envelope provided for this purpose, hereupon this Agreement shall constitute
a binding agreement among us.
Very truly yours,
NNN Apartment REIT, INC.,
a Maryland corporation
By:
-------------------------------------
Louis J. Rogers, President
AGREED AND ACCEPTED:
NNN Capital Corp., a California corporation
By:
---------------------------------
Name: Kevin K. Hull
Title: President and Chief Executive Officer