EXHIBIT 1(b)
DISTRIBUTION AGREEMENT
Distribution Agreement ("Agreement") made this ___ day of September,
1998, by and between 1st Atlantic Guaranty Corporation, a Maryland corporation
(the "Company"), and Summit Brokerage Services, Inc., a Florida corporation
("Distributor") (collectively, the "Parties").
WHEREAS, the Company is organized and intends to operate as a
face-amount certificate company and is so registered under the Investment
Company Act of 1940, as amended, (the "Act"), and has registered or will
register the face-amount certificates it issues under the Securities Act of
1933 ("1933 Act"), to the extent required thereby, on Form S-1 ("Registration
Statement"); and
WHEREAS, the Board of Directors of the Company ("Board") has established
and authorized the issuance of those types of face-amount certificates listed
on Schedule A hereto (each, a "Certificate" and collectively, the
"Certificates"), as the same may be amended from time to time by mutual
written agreement of the Parties ("Schedule A"); and
WHEREAS, Distributor desires to act as a principal underwriter and a
distributor of the Certificates; and
WHEREAS, Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934 ("1934 Act") and a member of the National Association of
Securities Dealers, Inc. ("NASD"); and
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Parties agree as follows:
1. APPOINTMENT AND OBLIGATION OF UNDERWRITER.
The Company hereby appoints Distributor as a principal underwriter and a
distributor for the sale of the Certificates and Distributor hereby accepts
such appointment. Distributor shall be obligated to perform the services for
the Company as described in this Agreement. By accepting this appointment,
Distributor represents and warrants that it is a business corporation duly
organized, validly existing, and in good standing under the laws of the State
of Florida and has full corporate power, authority and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement. Distributor further represents and warrants that it is and at all
times will be qualified to serve as a principal underwriter
for an investment company registered under the Act, and that none of its
directors, officers or employees are or will be subject to disqualification
under the Act if Distributor serves as principal underwriter of the Company.
2. SALE OF CERTIFICATES.
2.1 AVAILABILITY OF CERTIFICATES. The Company agrees to issue such
Certificates as Distributor may sell in accordance with the terms and
conditions set forth herein and the disclosure in the Company's Registration
Statement.
2.2 BEST EFFORTS. Distributor agrees to use its best efforts to
promote the sale of Certificates, but is not obligated to sell any specific
number of Certificates.
2.3 REJECTION OR SUSPENSION OF SALES; CORPORATE ACTIONS.
Notwithstanding anything herein to the contrary:
(a) Distributor may temporarily suspend its efforts to
effectuate sales of Certificates at any time when in its opinion no
sales should be made because of market or other economic considerations
or abnormal circumstances of any kind; and
(b) the Company may, at any time, reject for any reason any
order to purchase any Certificate. In addition, the Board may suspend or
terminate the offering of any Certificate, if such action is required by
law, judicial order, or by regulatory authorities having jurisdiction,
or if the Board, in its sole discretion, acting in good faith and in
light of its fiduciary duties under applicable law, determines that such
action is in the best interests of the Company's shareholders. Further,
the Company reserves the right at all times to take any corporate
actions, including, but not limited to, the dissolution, merger, and
sale of its assets, solely upon the authorization of its Board.
2.4 PURCHASE PAYMENTS. Distributor shall accept purchase payments for
Certificates as described in the Company's then effective prospectus relating
to the Certificates as it may be amended or supplemented from time to time
("Prospectus," unless the context otherwise requires).
2.5 MANNER OF OFFERING. Distributor shall offer the Certificates for
sale in the manner described in the Company's Prospectus, and only in those
jurisdictions where Distributor is legally able to offer or sell such
Certificates.
2.6 COMPENSATION. As compensation for services rendered hereunder,
Distributor shall be entitled to payment of compensation on the sale of
Certificates in accordance with Schedule A.
2.7 ORDER AND PAYMENT PROCESSING. Distributor shall immediately
transmit to the Company any order to purchase Certificates. Such order shall
consist of a completed application
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to purchase a Certificate, accompanied by a check made payable to the Company,
or any other form of payment deemed acceptable by the Company. The Company, in
its sole discretion, reserves the right to reject, for any reason, any
application for the purchase of a Certificate.
2.8 PURCHASES FOR OWN ACCOUNT. Distributor shall not purchase
Certificates for its own account for purposes of resale to the public.
Distributor, to the extent disclosed in the Prospectus, may purchase such
Certificates for its own investment account upon its written assurance to the
Company that the purchase is for investment purposes only and that such
Certificates will not be resold.
2.9 SELLING GROUP AGREEMENTS. Distributor may, from time to time,
effect offers and sales of the Certificates through unaffiliated
broker-dealers that are registered under the 1934 Act, that are members of the
NASD, and that have entered into an appropriate selling group agreement with
Distributor, each of which shall be approved by the Company prior to its
implementation. Distributor may allow these broker-dealers such commissions or
discounts as are authorized and approved by the Company.
2.10 NON-EXCLUSIVITY. Notwithstanding anything herein to the contrary,
the Company may appoint other entities in addition to Distributor to serve as
a principal underwriter and/or a distributor of the Company's Certificates.
3. WITHDRAWAL, SURRENDER, AND EXCHANGE REQUESTS.
Distributor shall immediately forward any withdrawal or surrender
request, or a request to exchange one type of Certificate for another, that it
receives to the Company. All such requests shall be provided in a manner
deemed acceptable by the Company. Payments of withdrawal and surrender
proceeds will be made by the Company directly to the Certificate holder.
4. ALLOCATION OF EXPENSES.
Except as set forth herein, each Party shall bear all expenses of
fulfilling its duties and obligations under this Agreement. However, the
Company may bear some of Distributor's initial costs in selling the
Certificates, as the Parties may mutually agree from time to time.
5. MARKETING MATERIALS.
5.1 PREPARATION, PRINTING, AND DISTRIBUTION. Distributor, at its sole
cost, shall be responsible for preparing, printing, and distributing, or
causing the same to be done, all marketing materials to be used in connection
with its offer and sale of Certificates, including but not limited to, all
such materials used in connection with Distributor's efforts to effect offers
and sales of Certificates directly or through unaffiliated broker-dealers. As
used herein, "marketing materials"
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shall include any "advertisement" or "sales literature," as those terms are
defined in Section 2210(a) of the NASD's Conduct Rules, as amended from time
to time, and shall include any so-called "dealer only" materials, as well as
any Prospectuses, periodic reports to shareholders ("Reports"), and other
materials sent to persons other than the then current Certificate holders
(except that the Company shall bear the cost of preparing, printing, and
distributing any Prospectuses, Reports, and other materials specified in
paragraph 6.3, below). All marketing materials created by Distributor in
connection with the sale of the Certificates shall be the sole property of the
Company, and the Company is entitled to use such marketing materials at any
time in its sole discretion without consent of Distributor.
5.2 COMPANY APPROVAL. Distributor shall submit definitive copies of
all marketing materials to the Company for its approval, which shall not be
unreasonably withheld, at least ten (10) business days prior to their first
use. The Company shall be deemed to have granted its approval of such
marketing materials unless it objects within such ten (10) business day
period.
5.3 REGULATORY APPROVALS. Distributor shall, to the extent required,
file in a timely manner all marketing materials with the NASD, the Securities
and Exchange Commission ("SEC"), or any other regulatory body, as appropriate,
and shall obtain any necessary approval of these regulatory bodies of any
marketing materials.
6. NON-MARKETING MATERIALS.
6.1 SHAREHOLDER CORRESPONDENCE. Distributor, at its sole cost, shall
be responsible for preparing, printing, and distributing, or causing the same
to be done, all correspondence with Certificate holders in its capacity as a
principal underwriter or a distributor, except for correspondence prepared,
printed, and distributed by Distributor at the Company's request. Distributor
shall, from time to time, make such correspondence available to the Company
for review upon request.
6.2 CONFIRMATIONS. Distributor, at its sole cost, shall be responsible
for preparing, printing, and distributing in a timely manner, or causing the
same to be done, confirmations of Certificate holder transactions required to
be delivered pursuant to applicable law.
6.3 PROSPECTUSES, REPORTS, ETC. The Company, at its sole cost, shall
be responsible for preparing, printing, and distributing, or causing the same
to be done, all Prospectuses, Reports, proxy materials, and other documents
required by applicable law to be provided to Certificate holders of each
Portfolio, and for filing such materials with the NASD, SEC or any other
regulatory body, as appropriate, and shall obtain any necessary approval of
these regulatory bodies of these materials.
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7. CONDUCT OF BUSINESS.
7.1 GENERAL. Distributor shall be subject to the direction and control
of the Company in the sale of the Certificates. In selling Certificates,
Distributor shall comply in all respects with the requirements of all federal
and state laws and regulations and the regulations of the NASD, relating to
the sale of the Certificates. Neither Distributor nor any other person is
authorized by the Company to give any information or to make any
representations, other than those contained in the Company's Registration
Statement or Prospectus, and any marketing materials authorized by responsible
officers of the Company.
7.2 INDEPENDENT CONTRACTOR. Distributor shall undertake and discharge
its obligations hereunder as an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Company in any way and shall not be deemed to be an employee of
the Company. Distributor shall be responsible for its own conduct and the
employment, control and conduct of its agents and employees, and for injury to
such agents or employees or to others through its agents or employees.
Distributor shall assume full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes thereunder.
7.3 NON-EXCLUSIVE SERVICES. Distributor's services pursuant to this
Agreement shall not be deemed to be exclusive, and Distributor may render
similar services and act as an underwriter, distributor or dealer for other
face-amount certificate companies in the offering of their face-amount
certificates, consistent with its best efforts obligations set forth herein.
7.4 RECORDS. Distributor shall maintain and preserve such records as
are necessary or appropriate to record its transactions with the Company, as
required by applicable law. Distributor shall promptly return to the Company
all records relating to the Company, free from any claim or retention of
rights by Distributor and without charge by Distributor except for its direct
expense. Distributor shall also maintain and preserve records listing each
unaffiliated broker-dealer or any individuals contacted by Distributor with
respect to the Certificates, including all lists of potential contacts
purchased from others in this regard. All such records and lists shall be
deemed property of the Company, and made available for inspection and copying
upon request.
7.5 NOTICE. Distributor shall promptly provide notice to the Company
of any inquiry or investigation with respect to Distributor's activities
initiated or conducted by the NASD, Securities and Exchange Commission, or any
other federal or state regulatory entity.
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8. INDEMNIFICATION.
8.1 GENERAL. Distributor shall indemnify and hold harmless the Company
and each of its Directors and officers (or former Directors and officers) and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act (collectively, "Indemnitees") against any loss, liability,
claim, damage, or expense (including the reasonable cost of investigating and
defending against the same and any counsel fees reasonably incurred in
connection therewith) incurred by any Indemnitee under the 1933 Act or under
common law or otherwise, which arise out of or are based upon:
(a) any untrue or alleged untrue statement of a material fact
contained in information furnished to the Company by Distributor for use
in the Company's Registration Statement, Prospectus, Reports or other
documents sent to its Certificate holders,
(b) any omission or alleged omission to state a material fact in
connection with information furnished to the Company by Distributor for
use in the Company's Registration Statement, Prospectus, Reports or
other documents sent to its Certificate holders, which fact is required
to be stated in any of such documents or necessary to make such
information not misleading,
(c) any misrepresentation or omission or alleged
misrepresentation or omission to state a material fact on the part of
Distributor or any agent or employee of Distributor or any other person
for whose acts Distributor is responsible, unless such misrepresentation
or omission or alleged misrepresentation or omission was made in
reliance on written information furnished by the Company, or
(d) the willful misconduct or failure to exercise reasonable
care and diligence on the part of Distributor or any agent or employee
of Distributor or any other person for whose acts Distributor is
responsible with respect to services rendered under this Agreement. This
indemnity provision, however, shall not operate to protect any officer
or Director of the Company from any liability to the Company or any
Certificate holder by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his or her duties.
8.2 LIMITATIONS; NOTICE OF CLAIM; ASSUMPTION OF DEFENSE. In case any
action shall be brought against any Indemnitee, Distributor shall not be
liable under its indemnity agreement contained in paragraph 8.1, above, with
respect to any claim made against any Indemnitee, unless the Indemnitee shall
have notified Distributor in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Indemnitee (or after the Indemnitee
shall have received notice of such service on any designated agent), but
failure to notify Distributor of any such claim shall not relieve it from
liability to the Indemnitees against whom such action is brought otherwise
than on account of paragraph 8.1, above. Distributor shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if
Distributor elects to assume the defense, such defense shall be conducted by
counsel chosen by it
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and satisfactory to the Indemnitees that are defendants in the suit. In the
event Distributor elects to assume the defense of any such suit and retain
such counsel, the Indemnitees that are defendants in the suit shall bear the
fees and expenses of any additional counsel retained by them, but, in case
Distributor does not elect to assume the defense of any such suit, Distributor
will reimburse the Indemnitees that are defendants in the suit for the
reasonable fees and expenses of any counsel retained by them. Distributor
shall promptly notify the Company of the commencement of any litigation or
proceedings in connection with the issuance or sales of the Certificates.
9. TERM AND TERMINATION.
9.1 TERM. This Agreement shall become effective upon the date first
written above and shall remain in force for one year from such date, and shall
continue annually thereafter but only so long as such continuance is
specifically approved by a majority of the Board who are not parties to this
Agreement, or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
9.2 TERMINATION. This Agreement may be terminated at any time without
the payment of any penalty, by the Company or by Distributor, on sixty days'
written notice to the other party.
10. DEFINITIONS.
As used herein the terms "investment company," "face-amount certificate
company," "principal underwriter," "interested person," and "affiliated
person" shall have the meanings set forth in the 1933 Act or the Act, and the
rules and regulations thereunder. Nothing herein contained shall require the
Company to take any action contrary to any provision of its Articles of
Incorporation, By-Laws, or any applicable statute or regulation.
11. NOTICES.
Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage prepaid, to the other party at such address as
the other party may designate for the receipt of notices. Until further notice
to the other party, it is agreed that the address of the Company shall be 0000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000, and the address for
Distributor shall be 000 X. Xxxxxx Xxxx., Xxxxx 000, Xxxxxxxxx, Xxxxxxx 00000.
12. SEVERABILITY.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby.
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13. CONFIDENTIALITY.
Distributor shall not disclose or use any records or information
obtained pursuant to this Agreement, pursuant to its relationship with the
Company, or in the course of discharging its obligations hereunder, in any
manner whatsoever except as expressly authorized by this Agreement or in a
writing by the Company, or as expressly required by applicable federal or
state regulatory authorities.
14. APPLICABLE LAW.
This Agreement shall be governed by the laws of the State of Maryland,
notwithstanding any conflict of laws provisions thereof, and shall be
construed to promote the operation of the Company as a face-amount certificate
company.
15. PARTIES TO COOPERATE.
The Company and Distributor agree to fully cooperate with each other in
assuring compliance under this Agreement with all federal and state laws and
regulations.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as
of the date first written above.
1st ATLANTIC GUARANTY COMPANY
By: ________________________
Xxxx X. Xxxxxxxx
President
Attest: ________________________
SUMMIT BROKERAGE SERVICES, INC.
By: __________________________
Attest: ________________________
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SCHEDULE A
This Schedule A is an integral part of the Agreement to which it is
attached. Capitalized terms used herein have the same meaning as given to them
in the Agreement, except as otherwise noted. This Schedule A sets out the
names of the types of Certificates covered by the Agreement and the
compensation of Distributor for the services rendered with respect thereto.
NAMES OF CERTIFICATES
Accumulator Certificates Cornerstone Certificates Growth Certificates
Premier Certificates Reserve Certificates
COMPENSATION
For its services rendered pursuant to the Agreement, Distributor shall
be entitled to receive, as full compensation therefor, the following sales
commissions (subject to any scheduled variations or eliminations of commission
as set forth in the Company's Prospectus):
COMMISSION SCHEDULE
All commissions due upon the sale of any Certificate are calculated as a
percentage of the initial purchase payment for such Certificate, EXCEPT that
with respect to the sale of the Accumulator Certificate, the commission
payable shall be calculated as a percentage of the total purchase payments
scheduled to be paid during the first year of any such Accumulator
Certificate. Commissions rates are as follows:
A. For direct sales by Distributor
* applicable to Certificates with guarantee periods of one (1) to
five (5) years.....................____ %
* applicable to Certificates with guarantee periods of ten (10)
years..............................____ %
B. For sales by Distributor through Selling Group Agreements
* applicable to Certificates with guarantee periods of one (1) to
five (5) years.....................0.25 %
* applicable to Certificates with guarantee periods of ten (10)
years..............................0.25 %
A commission becomes payable only upon acceptance, by the Company, of
the application to purchase a Certificate, and after payment for such
Certificate is made. The Company will make payment of all commissions then
payable on the 15th and last day of each calendar month.
In the event an Accumulator Certificate is surrendered prior to the end
of the first Certificate year, Distributor shall immediately return to the
Company any commission paid with respect to scheduled purchase payments that
the Certificate holder failed to pay.
If any Certificate is tendered to the Company for surrender within seven
(7) business days after the Company's acceptance of the original purchase
order for such Certificate, Distributor shall immediately return to the
Company the full sales commission paid to Distributor on the original sale.
The Company shall notify Distributor, or cause Distributor to be notified, of
such surrender within 10 days of the day on which the Company receives notice
of such surrender.
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