EXHIBIT 1.1
DISTRIBUTION AGREEMENT
_________________, 1996
Between:
FEDERAL MORTGAGE MANAGEMENT II, INC.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
and
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Gentlemen:
FEDERAL MORTGAGE MANAGEMENT II, INC. (herein the "Company") is a Florida
corporation having its principal place of business in Sarasota, Florida. The
Company has or is expected to soon file with the United States Securities and
Exchange Commission its Registration Statement on Form SB-2 covering what has
been designated by the Company as its Promissory Notes, Series 1996A-I, II and
III to be offered pursuant to such Registration Statement and Prospectus
contained therein to the public in aggregate principal amount of $5 million. As
used in this Agreement, such Promissory Notes Series 1996A are referred to as
the "Notes". As used in this Agreement, the term "Registration Statement"
includes the entire Registration Statement and the Prospectus which contains the
offer of the Notes intended to be made by the Company to the public. The Note
Series are being offered to the public with the following maturities and
allocated principal amounts, which principal amounts are not subject to
alteration by way of increase or decrease from one maturity to another maturity:
PRINCIPAL AMOUNT ANNUAL
SERIES AVAILABLE MATURITY NOTE RATE
----------- --------- -------- ---------
1996 A-I $ 500,000 _________, 2000 8.00%
1996 A-II 1,000,000 _________, 2001 9.00%
1996 A-III 3,500,000 _________, 2002 10.00%
The Registration Statement has also been duly filed in the State of Florida
pursuant to the Florida Securities and Investor Protection Act. Such
Registration Statement may also be filed in other states in order to effect the
qualification of the Notes for public offer in such states. The Company desires
to appoint EXECUTIVE WEALTH MANAGEMENT SERVICES, INC. of Sarasota, Florida as
its exclusive distribution agent with respect to the public offer and sale of
the Notes in Florida and in such other states where the Notes may be qualified
for offer and sale to the public. Accordingly, the Company hereby appoints
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC., a duly registered securities
broker-dealer under the Securities Exchange Act of 1934, as amended, and
applicable state law, and a member of the National Association of Securities
Dealers, Inc. (the "NASD"), as the Company's exclusive Distri-
bution Agent (the "Agent") with respect to the best efforts offer and sale of
the Notes as described and in accordance with the terms of this Agreement and
the Registration Statement covering such Notes.
Therefore, the parties hereby agree as follows:
1. APPOINTMENT AND SOLICITATION. Upon the terms contained herein, the
Agent is appointed as the exclusive Distribution Agent to solicit written
Subscriptions of suitable investors to subscribe to the Notes and thereby become
holders thereof upon Subscription acceptance by the Company. It is the intention
of the Company to accept Subscriptions in the form included with the
Registration Statement from qualified investors who meet the suitability
standards set forth in the Registration Statement. The foregoing intention
notwithstanding, the Company has reserved the right to refuse any Subscriptions
for Notes for any reason, to reduce Subscriptions to an amount less than
otherwise subscribed for, and to terminate the offering at any time. The
privilege of soliciting Subscriptions for the Notes is extended to the Agent
only if the Notes may be lawfully offered and sold in states in which the Agent,
or any appointed Selected Dealer, is a registered securities broker-dealer or is
exempt from registration. The Agent also understands and agrees that such
Subscription activity may only occur in those states with respect to which such
subscription authority may be lawfully conducted.
2. TRANSMITTAL OF SUBSCRIPTION AND PROCEEDS. The Company and the Agent
acknowledge that, in accordance with the terms of the Note offering as set forth
in the Registration Statement, the Company is required to sell a minimum
principal amount of Notes of $1,500,000 (of any maturity or combination thereof)
on or before midnight [_____________], 1997 in order for the Note offering to
continue until the entire $5 million principal of Notes are sold or the offering
is earlier terminated and that pending the accumulation of Note Subscription
proceeds in the amount of $1,500,000 or more, all Note Subscription proceeds
will be held and accumulated pursuant to escrow arrangements established by an
Escrow Agreement existing between the Company, the Agent and SouthTrust Asset
Management Company of Florida, Sarasota, Florida (herein the "Escrow Agent"). In
accordance with the terms of the Note offering as set forth in the Registration
Statement, the Agent shall transmit promptly (not later than noon of the next
business day following receipt), and only to such Escrow Agent, all funds
received from the subscribers to Notes in the public offering (without deduction
for any commission or concession) in compliance with Rule 15c2-4 as promulgated
by the United States Securities and Exchange Commission under the Securities
Exchange Act of 1934, and a confirmation or record of each Note sale shall also
accompany such funds, which confirmation or record (which may be in the form of
the Subscription Agreement to Notes) shall set forth the name, residential
address and social security number of each individual Note purchaser, the number
of Notes purchased and instructions with respect to the issuance of the
certificates to evidence the ownership of Notes. The Agent acknowledges that the
Company may refuse Note subscriptions for the reasons stated above and that in
such event, the Escrow Agent shall return to the Note purchaser all funds paid
by the Note purchaser which have been received by the Escrow Agent, together
with interest thereon as provided in the Registration Statement.
3. COMPENSATION. For its services rendered pursuant to this Agreement, the
Agent will be paid selling commissions ranging from 3% to 7.5%, depending upon
the particular maturity of Series 1993A Notes sold as set forth below:
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SERIES AND NOTE MATURITY SELLING COMMISSION
------------------------ ------------------
1996A-I - ________, 2000 3.0%
1996A-II - ________, 2001 4.5%
1996A-III - ________, 2002 7.0%
Additionally, the Agent shall be entitled to receive a 3% Note offering
management fee to be charged against gross Note offering proceeds on and
subsequent to the time that the minimum accumulation requirement of $1,500,000
has been successfully attained, as well as a non-accountable expense allowance
equal to 2% of gross Note offering proceeds. Such commissions and fees shall not
be paid unless and until the $1,500,000 minimum requirement is successfully
attained. Thereafter, such commissions and fees may be paid on a weekly basis.
In connection with the public offering of Notes, the Company shall be solely
responsible for all expenses incurred by it in connection with such Note
offering, including, but not limited to, legal and accounting fees, filing fees
with the United States Securities and Exchange Commission and state securities
regulatory authorities, printing and engraving costs, filing fees with the
National Association of Securities Dealers, Inc., transfer agent fees, if any,
and any miscellaneous fees. The Company shall be solely responsible for the fee
of Xxxxxxx Xxxxxxxx Securities Corporation, which has acted as qualified
independent underwriter with respect to the Note offering and in accordance with
Schedule E to the Bylaws of the National Association of Securities Dealers,
Inc., as well as the fees of counsel to Xxxxxxx Davidson in connection with its
activities related to this matter. The Company and the Agent acknowledge that
certain of those fees and costs have been paid on the Company's behalf by
Capital Management Group, Inc. ("Capital Management") and Capital Management is
expected to be reimbursed by the Company on account of such payment.
4. REPRESENTATIONS AND WARRANTIES OF THE AGENT. The Agent hereby
represents and warrants to the Company as follows:
(a) It is a member in good standing of the NASD, and will maintain such
registration throughout the term of this Agreement. It is also duly registered
as a securities broker-dealer in accordance with the requirements of the
Securities Exchange Act of 1934, as amended and the rules and regulations
promulgated under such act, as well as under the laws of such states, including
Florida, where its activities hereunder require such registration and it will
maintain such registrations in good standing during the course of its service as
Distribution Agent to the Company.
(b) It will comply with the restrictions, conditions and limitations of
all applicable laws and regulations including, without limitation, the
applicable provisions of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, the rules of the NASD, as well
as applicable state law.
(c) It will not offer or sell the Notes unless such offer or sale is
preceded or accompanied by the Prospectus which is included in the Registration
Statement, together with any amendment or supplement thereto.
5. COMPLIANCE WITH SCHEDULE E. The Agent and the Company acknowledge that
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because of the affiliation between the Agent and the Company, the fairness of
the terms of the offering of the Notes and the terms of issuance of the Notes
with respect to Note maturity and rates of interest are subject to review as to
fairness by a securities broker-dealer which meets the definition of a qualified
independent underwriter as that term is defined in Schedule E to the Bylaws of
the NASD. The Agent and the Company acknowledge that compliance with the
provisions of Schedule E shall be accomplished prior to the time that the Notes
are offered to the public pursuant to the Registration Statement. The Agent will
cooperate in every respect with the Company and Xxxxxxx Xxxxxxxx Securities
Corporation, the broker-dealer acting as the qualified independent underwriter
with respect to the Note offering in accomplishing compliance with Schedule E to
the Bylaws of the NASD. Additionally, the Agent shall comply in every respect
with the provisions of Section 11 of Schedule E. The Agent shall not effect any
transaction with respect to the Notes in any discretionary account.
6. INDEMNIFICATION.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Agent and each person, if any, who controls the
Agent, within the meaning of Section 15 of the Act, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all expense whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or any claim
whatsoever) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (as from
time to time amended and supplemented), prepared by the Company or based upon
written information provided by or on behalf of the Company and used in the
offer of the Notes; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading; unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect to
the Agent or by or on behalf of the Agent for use in the Registration Statement
or any amendment or supplement thereto; or the failure of the Company to comply
with any of the applicable provisions of the Act or the Rules and Regulations
thereunder; or any unauthorized verbal or written representations in connection
with the offering and sale of the Notes made by the Company, or the agents
(other than by the Agent or its agents, employees or affiliates), employees or
affiliates of such persons; or any actions, direct or indirect, in connection
with the offering and sale of the Notes by the Company, or the agents (other
than by the Agent or its agents, employees or affiliates), employees or
affiliates of such persons in violation of the Act and rules and regulations
thereunder.
If any action is brought against the Agent or a controlling person in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, the Agent shall promptly notify the Company in writing of
the institution of such action, and the Company shall assume the defense of such
action, including the employment of counsel to be chosen by the Company to be
reasonably satisfactory to the Agent or such controlling persons. The Agent or
such controlling person shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at the Agent's
expense or the expense of such controlling person, unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action, or the Company shall not have employed counsel to
have charge of the defense of such action or such indemnified party
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or parties shall have reasonably concluded that there may be defenses available
to it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the Company. Anything in
this paragraph to the contrary notwithstanding, the Company shall not be liable
for any settlement of, or any expenses incurred with respect to, any such claim
or action effected without its written consent, which consent shall not be
unreasonably withheld. The Company agrees to promptly notify the Agent of the
commencement of any litigation or proceedings against the Company, or any of its
officers, directors, employees or agents in connection with the issue and sale
of the Notes or in connection with the Registration Statement.
(b) The Agent agrees to indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of Section 15
of the Act, to the same extent as the foregoing indemnity from the Company to
the Agent; but only with respect to statements or omissions, if any, made in the
Registration Statement or any amendment or supplement thereto in reliance upon,
and in conformity with, written information furnished to them with respect to
the Agent by the Agent or on the Agent's behalf expressly for use in such
Registration Statement or any amendment or supplement thereto. The Agent further
agrees to indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, against any
and all loss, liability, claim, damage and expense whatsoever (including but not
limited to any and all expense whatsoever reasonably incurred in investigation,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) arising out of or based upon any unauthorized verbal or
written representations in connection with the offering and sale of the Notes
made by the Agent, the Agent's agents, employees or affiliates; or any actions,
direct or indirect, in connection with the offering and sale of the Notes by the
Agent, the Agent's agents, employees or affiliates in violation of the Act, the
Rules and Regulations thereunder, or any applicable state securities laws and
regulations. In the event any action shall be brought against the Company or any
other person so indemnified based on the Registration Statement or any amendment
thereof or supplement thereto and in respect of which indemnity may be sought
against the Agent, the Agent shall have the rights and duties given to the
Company, and each other person so indemnified shall have the rights and duties
given to the Agent by the provisions of Subsection (a) above.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Subsections (a) or
(b) of this Section 6 is for any reason held by a court of competent
jurisdiction to be unenforceable as to the Company or the Agent, the Company and
the Agent shall contribute to the aggregate losses, claims, damages and
liabilities (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted) to which the Company and the Agent may be
subject in such proportion so that the Agent is responsible for that portion
represented by the percentage that the aggregate fees received by the Agent
pursuant to this Agreement bear to the aggregate price of the Notes, and the
Company shall be responsible for the balance. No person guilty of fraudulent
misrepresentation or guilty of misstating or misrepresenting a material fact or
failing to state a material fact shall be entitled to contribution, as to any
liability arising from such fraudulent misrepresentation, from any person who
was not guilty of such fraudulent or other misrepresentation. For purposes of
this Section 6, each person, if any, who controls the Agent within the meaning
of the Act shall have the same
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rights to contribution as the Company. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Subsection (c), notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Subsection (c).
(d) Such indemnification by the Company shall extend to any
Participating Dealer appointed by the Agent to assist in the sale of the Notes,
which appointment shall occur only by virtue of the Selected Dealer Agreement,
the form and content of which has been approved by the Company.
7. TERMINATION. This Agreement may be terminated at any time by either
party if there shall have occurred any material change in applicable law which,
in the reasonable judgment of such party, renders it inadvisable to proceed with
the offering. In any event, this Agreement shall terminate upon completion of
the offering and the final receipt of all fees.
8. NOTICES. All notices required or permitted pursuant to this Agreement
shall be in writing and delivered in person or by registered or certified mail
with return receipts requested. Such notices shall be sent to the parties'
respective addresses as set forth herein.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
The Agent hereby agrees to participate in procuring subscriptions to Notes
with the foregoing correctly setting forth our understanding and agreement as
confirmed by execution of a duplicate copy of this letter and returning such
executed copy to the Company, whereupon this letter shall constitute a binding
contract.
FEDERAL MORTGAGE MANAGEMENT II, INC.
By__________________________________
Guy S. Xxxxx Xxxxx, President
Accepted and agreed as of the date first above written.
EXECUTIVE WEALTH MANAGEMENT
SERVICES, INC.
By__________________________________
Guy S. Xxxxx Xxxxx, President
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