$20,000,000
SOVEREIGN CREDIT FINANCE I, INC., COMPANY
11% NOTES DUE FEBRUARY 15, 2001
--------------------
BROKER-DEALER SELLING AGREEMENT
February 4, 1997
American Investment Services, Inc.
000 Xxxx Xxxxx Xxxx, Xxxxx X
Xxxx Xxxxxx, XX 00000
Dear Sirs:
Sovereign Credit Finance I, Inc., a Texas corporation (the "Company"),
has duly authorized the issuance of $20,000,000 aggregate principal amount of
its 11% Notes due February 15, 2001 (the "Notes"). The Notes are to be
issued pursuant to an Indenture (the "Indenture") dated as of January 31,
1997, between the Company, Sterling Trust Company, as Trustee (the
"Trustee"), and Sovereign Associates, Inc., a Texas corporation ("SAI"). A
pool of used motor vehicle retail installment sale contracts secured by the
vehicles financed thereby (the "Receivables") will be purchased with the net
proceeds from sales of the Notes and collections on Receivables. The
Receivables will be purchased by the Company through the purchasing services
provided by SAI, pursuant to the Master Contract Purchase Agreement dated as
of January 31, 1997 (the "Purchase Agreement") by and between the Company and
SAI, and will be serviced on behalf of the Company by SAI pursuant to the
Servicing Agreement dated as of January 31, 1997 (the "Servicing Agreement")
by and between the Company and SAI.
The Company has prepared a Registration Statement (as defined below)
with respect to the Notes and intends to sell the Notes to certain investors
(each, a "Purchaser") pursuant to subscription agreements to be executed and
delivered by each such investor, substantially in the form set forth in
EXHIBIT 10.5 to the Registration Statement (each, a "Subscription Agreement").
The Company has requested that you assist the Company as a broker-dealer
in the public offering of the Notes, and you have indicated your willingness
to do so, subject to the terms and conditions set forth below.
1. APPOINTMENT OF BROKER-DEALER; SALE OF NOTES
(a) The Company hereby appoints you (the "Broker-Dealer") as a
broker-dealer in connection with the public offering of the Notes for the
period (the "Offering Period") commencing on the date hereof and terminating
on the Offering Termination Date (as defined below), unless sooner terminated
pursuant to the terms hereof. Subject to the performance by the Company of
its obligations to be performed hereunder, and to the completeness and
accuracy of all of the representations and warranties of the Company
contained or incorporated herein, you hereby accept such appointment and
agree on the terms and conditions herein set forth to use your best efforts
during the Offering Period to identify Purchasers of the Notes. By
acceptance of such appointment, you also agree to comply with the provisions
of Section 24 of Article III of the Rules of Fair Practice of the NASD.
(b) To be effective and binding on the Company, any Subscription Agreement
submitted by a Purchaser must be accepted by the Company. The Subscription
Agreement may be executed on the Purchaser's behalf by the Purchaser's
registered representative, in which event the registered representative must
confirm the accuracy, completeness and binding effect of the information,
representations, warranties and agreements set forth in the
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Subscription Agreement with respect to the Purchaser. The Company reserves
the right to reject subscriptions from any Purchasers for any reason;
provided, however, the Company shall have no right to reject subscriptions
and later accept new subscriptions directly from the same Purchasers in order
to circumvent any payment of fee to the Broker-Dealer. With respect to any
outstanding, unaccepted Subscription Agreements on or about the Offering
Termination Date, the Company may limit the principal amount of the Notes to
be purchased under such Subscription Agreements to the extent necessary to
limit the aggregate principal amount of the Notes to be sold by the Company
in the offering to $20,000,000. The Company shall also have the right to
limit the dollar amount of Subscription Agreements that it is willing to
accept during any month of the Offering in the manner set forth in the
Prospectus under the caption "Plan of Distribution".
(c) Except as otherwise provided herein, your appointment hereunder shall
terminate at the close of business on the earlier of (i) January 31, 1998
(unless sooner terminated by the Company in accordance with and for any of the
reasons set forth in the Prospectus under the caption Plan of Distribution) or
(ii) the day that the Company has received subscriptions in an amount necessary
to satisfy the sale of $20,000,000 in aggregate principal amount of the Notes.
The date on which such appointment is terminated is herein referred to as the
"Offering Termination Date".
(d) The Broker-Dealer shall not, in fulfilling its obligations hereunder,
act as underwriter for the Notes and in no way is obligated, directly or
indirectly, to advance its own funds to purchase any Notes.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with the Broker-Dealer as follows:
(a) A registration statement on Form S-1 (No. 333-4072) under the
Securities Act of 1933, as amended (the Act"), with respect to the Notes,
including a form of prospectus subject to completion, has been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations of the Securities and Exchange Commission (the "SEC") thereunder
(the "Rules and Regulations"). Such registration statement has been filed with
the SEC under the Act, and one or more amendments to such registration statement
may also have been so filed. As used in this Agreement, the term "Registration
Statement" means such registration statement, as amended at the time when it was
or is declared effective, including all financial schedules and exhibits
thereto; the Registration Statement shall be deemed to include any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Preliminary Prospectus" means
each prospectus subject to completion contained in such registration statement
or any amendment thereto (including the prospectus subject to completion, if
any, included in the Registration Statement or any amendment thereto or filed
pursuant to Rule 424(a) under the Act at the time it was or is declared
effective); and the term "Prospectus" means the prospectus first filed with the
SEC pursuant to Rule 424(b) under the Act or, if no prospectus is required to be
filed pursuant to said Rule 424(b), such term means the prospectus included in
the Registration Statement. Reference made herein to any Preliminary Prospectus
or the Prospectus shall be deemed to include all documents and information
incorporated by reference therein.
(b) The SEC has not issued any order preventing or suspending the use of
any Preliminary Prospectus and has not instituted or threatened to institute any
proceedings with respect to such an order. When any Preliminary Prospectus was
filed with the SEC it (A) complied in all material respects with the
requirements of the Act and the Rules and Regulations and (B) did not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. When the Registration
Statement or any amendment thereto was or is declared effective, it (A) complied
or will comply in all material respects with the requirements of the Act and the
Rules and Regulations and (B) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus and when any amendment
or supplement thereto is filed with the SEC pursuant to Rule 424(b) (or, if the
Prospectus or such amendment or supplement is not required to be so filed, when
the Registration Statement and when any amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective) and at
all times subsequent thereto up to and including the Offering Termination Date,
the Prospectus, as amended or supplemented at any such time, (A) complied or
will comply in all material respects with the requirements of the Act and the
Rules and Regulations and (B) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the
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circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph shall not apply to statements or omissions made
in any Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in reliance
upon, and in conformity with, information furnished in writing to the Company
by the Broker-Dealer expressly for use therein.
(c) The Company is a duly incorporated and validly existing corporation in
good standing under the laws of its jurisdiction of incorporation, with full
power and authority (corporate and other) to execute, deliver and perform its
obligations under each of the Basic Documents to which it is a party. "Basic
Documents" means, collectively, this Agreement, the Purchase Agreement, the
Servicing Agreement, the Indenture, the Notes, and the Subscription Escrow
Agreement dated as of January 31, 1997 (the "Escrow Agreement") by and between
the Company and River Oaks Trust Company.
(d) This Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equity principles and to the proviso that rights to indemnification and
contribution under this Agreement may be limited by public policy under federal
or state securities laws; and each of the Basic Documents other than this
Agreement to which the Company is a party, when duly executed and delivered by
the parties thereto, will constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equity
principles.
(e) None of the Company's execution or delivery of the Basic Documents to
which it is or will be a party, its performance thereunder, or its consummation
of the transactions contemplated therein, conflicts or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, causes or will
cause (or permits or will permit) the maturation or acceleration of any
liability or obligation or the termination of any right under, or result in the
creation or imposition of any lien, charge, or encumbrance upon, any of its
properties or assets pursuant to the terms of (A) its charter or by-laws, (B)
any indenture, mortgage, deed of trust, voting trust agreement, shareholders'
agreement, note agreement or other agreement or instrument to which it is a
party or by which it is or may be bound or to which its property is or may be
subject or (C) any statute, judgment, decree, order, rule or regulation
applicable to it of any government, arbitrator, court, regulatory body or
administrative agency or other governmental agency or body, domestic or foreign,
having jurisdiction over it or any of its activities or properties.
(f) Except as disclosed in the Registration Statement, there has not been
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the financial position, stockholder's equity or
results of operations of the Company.
(g) The Company is not an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(h) The financial statements and the related notes thereto included in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present the financial
condition of the Company at the dates and for the periods specified therein.
Such financial statements and the related notes thereto have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise noted therein) and such
financial statements as are audited have been examined by Kinder & Xxxxx, P.C.,
who are independent public accountants within the meaning of the Act and the
Rules and Regulations, as indicated in their reports filed therewith.
(i) The Indenture has been duly qualified under the Trust Indenture Act of
1939, as amended.
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(j) The Notes have been duly authorized, and when the Indenture has been
duly executed and delivered by the Company, SAI and the Trustee, and the Notes
have been duly executed by the Company and authenticated by the Trustee and the
purchase price paid therefor, (i) the Notes will constitute valid and legally
binding obligations of the Company enforceable against the Company in accordance
with their terms and (ii) the Notes will conform to the description thereof
contained in the Prospectus.
(k) Neither the Company nor any of its director, officers or controlling
persons has taken, directly or indirectly, any action intended, or which might
reasonably be expected, to cause or result, under the Act or otherwise, in, or
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Notes.
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees with the Broker-Dealer as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto, to become effective as promptly as practicable. If
required, the Company will file the Prospectus and any amendment or supplement
thereto with the SEC in the manner and within the time period required by Rule
424(b) under the Act. During any time when a prospectus relating to the Notes
is required to be delivered under the Act, the Company will comply with all
requirements imposed upon it by the Act and the Rules and Regulations to the
extent necessary to permit the continuance of sales of or dealings in the Notes
in accordance with the provisions hereof and of the Prospectus, as then amended
or supplemented.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Broker-Dealer (A) when the Registration Statement, as
amended, has become effective; if the provisions of Rule 430A promulgated under
the Act will be relied upon, when the Prospectus has been filed in accordance
with said Rule 430A and when any post-effective amendment to the Registration
Statement becomes effective; (B) of any request made by the SEC for amending the
Registration Statement, for supplementing any Preliminary Prospectus or the
Prospectus or for additional information; or (C) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or any order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or the institution or threat of any investigation or proceeding for that
purpose, and will use its best efforts to prevent the issuance of any such order
and, if issued, to obtain the lifting thereof as soon as possible.
(c) The Company will (A) take or cause to be taken all such actions and
furnish all such information as may be reasonably required in order to qualify,
where practicable, the Notes for offer and sale under the state securities or
blue sky laws of such jurisdictions as the Company may agree, (B) continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Notes, (C) cause its counsel to provide a blue sky
memorandum and regular supplements thereto ("Blue Sky Memorandum"), and (D) make
such applications, file such documents and furnish such information as may be
required for the purposes set forth in clauses (A) and (B); PROVIDED, HOWEVER,
that the Company shall not be required to qualify as a foreign corporation or
file a general or unlimited consent to service of process in any such
jurisdiction. The Broker-Dealer acknowledges and agrees that the Company may
impose special minimum suitability standards on Purchasers in some jurisdictions
in order to obtain qualifications therein and that Broker-Dealer must comply
therewith in soliciting subscriptions from Purchasers. The Company agrees to
promptly notify the Broker-Dealer of any such special standards.
(d) The Company consents to the use of the Prospectus (and any amendment
or supplement thereto) by the Broker-Dealer, in connection with the offering or
sale of the Notes and for such period of time thereafter as the Prospectus is
required by law to be delivered in connection therewith. If, at any time when a
prospectus relating to the Notes is required to be delivered under the Act, any
event occurs 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,
or if it becomes necessary at any time to amend or supplement the Prospectus to
comply with the Act or the Rules and Regulations, the Company promptly will so
notify the Broker-Dealer and, subject
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to Section 3(a) hereof, will prepare and file with the SEC an amendment to
the Registration Statement or an amendment or supplement to the Prospectus
which will correct such statement or omission or effect such compliance.
(e) The Company will furnish, without charge, to the Broker-Dealer or on
such Broker-Dealer's order, at such places as such Broker-Dealer may designate,
copies of each Preliminary Prospectus, the Registration Statement and any
pre-effective or post-effective amendments thereto and the Prospectus, and all
amendments and supplements thereto, in each case as soon as available and in
such quantities as the Broker-Dealer may reasonably request.
(f) Neither the Company nor any of its officers or directors, nor its
affiliates (within the meaning of the Rules and Regulations), will take,
directly or indirectly, any action designed to, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities of the Company.
(g) The Company shall furnish, or cause to be furnished, or make
available, or cause to be made available, to the Broker-Dealer during the
Offering Period such additional documents and information regarding the Company
and its affairs as the Broker-Dealer may from time to time reasonably request,
including any and all documentation reasonably requested regarding information
in the Registration Statement and the Prospectus and in order to evidence the
accuracy or completeness of any of the conditions contained in this Agreement.
4. COMPENSATION: PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay to the Broker-Dealer a fee (the
"Sales Fee") in an amount equal to 8.0% of the principal amount of each Note
sold by the Company during the Offering Period to a Purchaser who has
executed a Subscription Agreement furnished to it by or on behalf of the
Broker-Dealer or who has otherwise been identified to the Company by or on
behalf of the Broker-Dealer (each, an "Identified Purchaser"). The Sales Fee
with respect to any Note shall be payable to the Broker-Dealer within five
(5) days after the date such Note is sold to an Identified Purchaser.
Payment by the Company of the Sales Fee shall be made via wire transfer in
same day funds to an account previously designated by the Broker-Dealer, or
as otherwise agreed by the Broker-Dealer and the Company. For purposes of
this Section 4(a), a "sale" shall be deemed to occur, initially, on the date
that subscriptions for the minimum amount of the offering of the Notes set
forth on the cover page of the Prospectus are released from escrow to the
Company in accordance with the terms of the Escrow Agreement (the "Escrow
Release Date") and, thereafter, on each date that the Company receives
available funds from subscriptions for Notes. Notwithstanding the foregoing,
the Broker-Dealer acknowledges that the Company has entered into agreements
with broker-dealers other than the Broker-Dealer with respect to the payment
by the Company of a Sales Fee in connection with the sale of the Notes by
such broker-dealers and that the Company shall only be obligated to pay one
Sales Fee to a single broker-dealer with respect to the sale of any Note.
(b) The Company will pay or cause to be paid all fees and expenses
incident to the performance of the obligations of the Company under this
Agreement, including without limitation: (i) the fees, disbursement and
expenses of the Company's counsel and accountants and all other expenses in
connection with the preparation, duplication, printing, filing, delivery and
shipping of copies of the Registration Statement and any pre-effective or
post-effective amendments thereto, any Prospectus and any amendments or
supplements thereto; (ii) the Company's cost of printing, producing or
reproducing each of the Basic Documents and any other documents in connection
with the offering, purchase, sale and delivery of the Notes; (iii) all fees
and expenses in connection with the qualification of the Notes for offering
and sale under state securities and blue sky laws, including the cost of
preparing and mailing the blue sky memorandum and all supplement thereto and
filing fees and disbursements and fees of the Company's counsel and other
related expenses, if any, in connection therewith; (iv) filing fees of the
SEC and the National Association of Securities Dealers, Inc.; (v) all legal
and other costs in connection with the preparation of all filings with the
National Association of Securities Dealers, Inc.; (vi) the fees and expenses
of the Trustee and any agent of the Trustee in connection with the Indenture
and the Notes; and (vii) all other costs and expenses of the Company incident
to the performance of the Company's obligations under the Basic Documents
which are not otherwise specifically provided for in this Section 4 except to
the extent provided in this Section 4 and in Section 5. In no event shall
the Broker-Dealer have any obligation with respect to any of the fees or
expenses of the Company or the Trustee.
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(c) The Broker-Dealer agrees to bear the cost of its own expenses incurred
in the performance of its obligations under this Agreement.
5. UNAUTHORIZED INFORMATION AND REPRESENTATIONS. Neither you nor any
other person is authorized by the Company to give any information or make any
representations in connection with the public offering of the Notes other than
those contained in the Prospectus (on or after the effective date of the
Registration Statement) or any Preliminary Prospectus (before the effective date
of the Registration Statement) and other authorized solicitation material
furnished by the Company. Without limiting the generality of the foregoing, you
agree not to publish, circulate or otherwise use any other advertisement or
solicitation material without the prior approval of the Company. In soliciting
purchases of the Notes, you agree to comply with any applicable requirements of
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the rules and regulations under both such Acts, and all applicable state laws,
rules and regulations.
6. BLUE SKY AND SECURITIES LAWS. In effecting offers or sales of the
Notes in any jurisdiction, you will comply with all special conditions and
limitations imposed by (a) such jurisdiction in connection with the Offering and
(b) any Blue Sky Memorandum furnished by the Company to you. Under no
circumstances will you engage in any activities in connection with the public
offering of the Notes in any jurisdiction in which you may not lawfully so
engage.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the Broker-Dealer,
its affiliates and each person (if any) who controls the Broker-Dealer within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, liabilities,
claims, damages and expenses (including but not limited to attorneys' fees and
any and all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), to which the Broker-Dealer or any such control person may become
subject, under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon (i) any of the transactions contemplated by the
Registration Statement or the Prospectus or any Preliminary Prospectus, or any
amendment or supplement thereto, or any blue sky application or other document
executed by the Company specially for the purpose of qualifying, or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Notes under the Securities
or blue sky laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application") or any act or omission by the
Broker-Dealer in connection with its acceptance or performance or
non-performance of its obligations hereunder; or (ii) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus or any Preliminary Prospectus, or any amendment
or supplement thereto, or any Blue Sky Application, or arising out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that (A) the Company will not be liable for
any indemnification obligation pursuant to clause (i) of this Section 7(a) to
the extent but only to the extent that any portion of such loss, liability,
claim, damage or expense is found in a final judgment by a court of competent
jurisdiction from which no appeal can be or is taken to have resulted solely
from the gross negligence or willful misconduct of the Broker-Dealer (it
being understood, however, that the Broker-Dealer shall be responsible for
and shall pay any attorneys' fees and any expenses incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever resulting from or based upon the gross negligence or
willful conduct of the Broker-Dealer) and (B) the Company will not be liable
for any indemnification obligation pursuant to clause (ii) of this Section
7(a) to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement or the Prospectus or any Preliminary Prospectus, or
any such amendment or supplement thereto, or any Blue Sky Application, in
reliance upon and in conformity with written information furnished to the
Company by the Broker-Dealer expressly for use therein and such indemnity
with respect to any Preliminary Prospectus shall not inure to the benefit of
the Broker-Dealer or any person controlling the Broker-Dealer from whom the
person asserting any such loss, claim, damage or liability purchased the
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Notes which are the subject thereof if such person did not receive a copy of
the Prospectus (or, in the event it is amended or supplemented, such
Prospectus as amended or supplemented) at or prior to the confirmation of the
sale of such Note to such person and the untrue statement or omission of a
material fact contained in any Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented). This indemnity
will be in addition to any liability which the Company may otherwise have,
including under this Agreement.
(b) If a registered representative of the Broker-Dealer executed a
Subscription Agreement on behalf of a purchaser, the Broker-Dealer 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 or Section 20(a) of the
Exchange Act against any loses, liabilities, claims, damages or expenses
(including but not limited to reasonable attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), to which the Company
or any such control person may become subject, under the Act, the Exchange Act
or otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon (i) the failure
or alleged failure by Broker-Dealer to perform fully and to act in compliance
with, or the inaccuracy of any statements or representations of Broker-Dealer
contained in, the provisions of this Agreement; (ii) an untrue statement or
alleged untrue statement of a material fact in connection with the public
offering of the Notes or the omission or alleged omission to state in connection
with the public offering of the Notes a material fact required to be stated or
necessary to make the statements otherwise made not misleading where such untrue
statement or alleged untrue statement, or such omission or alleged omission,
resulted from facts or information furnished or omitted, as the case may be, by
Broker-Dealer; or (iii) any misrepresentation or untrue statement contained in
the Subscription Agreement with respect to the identity, address or other
information furnished for the Purchaser, the Purchaser's satisfaction of the
applicable minimum suitability standards, or any representations, warranties,
acknowledgments or agreements made on behalf of the Purchaser.
(c) Promptly after receipt by an indemnified party under subsections
(a) or (b) above of notice of the commencement of any action or the assertion of
any claim, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof (but the failure so to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may have
otherwise). In case any such action shall be brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defense available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties 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
indemnifying parties. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; PROVIDED, HOWEVER,
that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in which
the indemnification provided for in Section 7(a) hereof is for any reason held
to be unavailable from the Company in a final judgment by a court of competent
jurisdiction from which no appeal can be or is taken, the Company, on the one
hand, and the Broker-Dealer, on the other hand, shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and
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any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company any contribution received by
the Company from persons, other than the Broker-Dealer, who may also be
liable for contribution) in such proportions as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Broker-Dealer on the other from the offering of the Notes. The relative
benefits received by the Company on the one hand and the Broker-Dealer on the
other shall be deemed to be in the same proportion as (x) the total proceeds
from the offering (before deducting expenses) received by the Company and (y)
the fees received by the Broker-Dealer pursuant to Section 4(a) hereof. The
Company and the Broker-Dealer agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account
the equitable considerations referred to above. Notwithstanding the
provisions of this Section 7(d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7(d), each
affiliate of the Broker-Dealer and each person, if any, who controls the
Broker-Dealer within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act shall have the same rights to contribution as the
Broker-Dealer, and each person, if any, who controls the Company, within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, shall
have the same rights to contribution, subject in each case to this Section
7(d). 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 Section 7(d), notify such party or parties from
whom contribution may be sought, but the omission to so notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this Section 7(d) or
otherwise. No party shall be liable for contribution with respect to any
action or claim settled without its consent; PROVIDED, HOWEVER, that such
consent was not unreasonably withheld.
8. TERMINATION BY PARTIES.
(a) Notwithstanding anything herein to the contrary, the Broker-Dealer may
terminate this Agreement and all of its obligations hereunder for any reason
upon giving ten (10) days' prior notice thereof to the Company; PROVIDED,
HOWEVER, that, in the event the Company does not perform any obligation under
this Agreement or any representation and warranty hereunder is incomplete or
inaccurate, the Broker-Dealer may immediately terminate all of its obligations
hereunder by notice thereof to the Company. Any termination of this Agreement
or of the Broker-Dealer's obligations hereunder shall be without liability of
the Broker-Dealer to any other party.
(b) Notwithstanding anything herein to the contrary, the Company may
terminate this Agreement by giving five (5) days prior written notice to the
Broker-Dealer, in which event the Company shall be relieved of all obligations
hereunder.
(c) The obligations the Company under Section 4 for Notes sold by the
Company pursuant to Subscription Agreements received prior to the date of
termination and the obligations of each of the parties hereto under Section 7,
shall survive any termination of the Agreement pursuant to this Section 8.
9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained or incorporated in this
Agreement shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Broker-Dealer or any controlling
person, or by or on behalf of the Company or any controlling person, director or
officer of the Company, and shall survive delivery of the Notes to the
Purchasers.
10. SUBSCRIPTION ESCROW. Until the minimum subscription amount (as
specified in the Prospectus) is reached, Purchasers' checks shall be made
payable to the Company's escrow agent, River Oaks Trust Company (the "Escrow
Agent"), and shall be transmitted directly to the Escrow Agent by noon of the
business day following their receipt by the Broker-Dealer. After reaching the
minimum subscription amount, Purchaser monies thereafter received shall be
transmitted together with the Subscription Agreement directly to the Company.
The Company shall be responsible for depositing Purchaser funds received by it
by noon of the business day following its receipt thereof.
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11. NOTICES. All statement, requests, notices and agreements hereunder
shall be in writing, and if to the Broker-Dealer shall be delivered or sent by
mail, telex or facsimile transmission to American Investment Services, Inc. at
its address at 000 Xxxx Xxxxx Xxxx, Xxx X, Xxxx Xxxxxx, XX 00000, Attention:
Xxxxx Xxxxxxx and if to SAI or the Company shall be delivered or sent by mail,
telex or facsimile transmission to the Company at 0000 Xxxxxxxx Xxxx, Xxxxxxxx
X, Xxxxxx, Xxxxx 00000, Attention: X. Xxxxxx Xxxxxx, III, President. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
12. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Broker-Dealer, the Company and their respective successors and
legal representatives. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person other than the persons
referred to in the preceding sentence any legal or equitable right, remedy or
claim under or in respect of this Agreement. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of
the parties hereto and their respective successors and for the benefit of no
other person. No Purchaser of Notes from the Company shall be deemed to be a
successor by reason merely of such purchase.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding of the parties hereto with respect to the matters and
transactions contemplated hereby and supersedes all prior agreements and
understandings whatsoever relating to such matters and transactions.
14. AMENDMENT. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
15. HEADINGS. The headings in this Agreement are for the purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
16. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute an original, but all of which shall together constitute
one instrument.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to the conflict of
laws or provisions thereof.
If the foregoing is in accordance with your understanding, kindly sign and
return to us in the enclosed duplicate hereof, whereupon it will become a
binding agreement between the undersigned in accordance with its terms.
Very truly yours,
SOVEREIGN CREDIT FINANCE I, INC.
By: /s/ X. XXXXXX XXXXXX, III
------------------------------------
X. Xxxxxx Xxxxxx, III, President
Accepted as of the date first above written:
AMERICAN INVESTMENT SERVICES, INC.
(Name of Broker-Dealer)
By: /s/ XXXXX XXXXXXX
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Operating Officer
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