$10,000,000
SOVEREIGN CREDIT FINANCE II, INC., Company
11% NOTES DUE FEBRUARY 15, 2002
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BROKER-DEALER SELLING AGREEMENT
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Dear Sirs:
Sovereign Credit Finance II, Inc., a Texas corporation (the
"Company"), has duly authorized the issuance of $10,000,000 aggregate
principal amount of its 11% Notes due February 15, 2002 (the "Notes"). The
Notes are to be issued pursuant to an Indenture (the "Indenture") dated as of
January 31, 1998, 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, 1998 (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, 1998 (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
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 $10,000,000. 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 $10,000,000 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 SB-2 (No. 333-________) 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
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(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 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
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Agreement, the Servicing Agreement, the Indenture, the Notes, and the
Subscription Escrow Agreement dated as of January 31, 1998 (the "Escrow
Agreement") by and between the Company and Xxxxxxx Bank and Trust, N.A..
(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
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have been examined by Xxxxx Xxxxxxx LLP, 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.
(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.
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(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 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.
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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.
(c) The Broker-Dealer agrees to bear the cost of its own expenses
incurred in the performance of its obligations under this Agreement.
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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,
8
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
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
9
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 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
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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, Xxxxxxx Bank and Trust, N.A. (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
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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.
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___________________ at its address
at _______________________________ , Attention: ______________ 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,
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SOVEREIGN CREDIT FINANCE II, INC.
By:
-----------------------------------
X. Xxxxxx Xxxxxx, III, President
Accepted as of the date first above written:
-----------------------------
(Name of Broker-Dealer)
By:
--------------------------
Name:
Title:
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