EXHIBIT 1.1
YOSEMITE MORTGAGE FUND II, LLC
UP TO
$50,000,000
(UNITS OF LIMITED LIABILITY COMPANY INTEREST)
SELLING AGENCY AGREEMENT
_____________, 2002
Mr. Xxxxx Xxxx, Vice-President
Rice Xxxxxx Capital, Inc.
0000 Xxx Xxxxx Xxxxxx Xxxx.
Xxxxx X000
Xxx Xxxxx, XX 00000
Dear Xx. Xxxx:
MFP Management LLC, a California limited liability company, as the Manager (the
"Manager") of Yosemite Mortgage Fund II, LLC, a California limited liability
company (the "Company"), proposes that the Company issue and sell up to
$50,000,000 aggregate principal amount of units of limited liability company
interest ("Units") in the Company in a public offering (the "Offering"). Such
Units are to be sold for cash for $10.00 each; the minimum purchase by any one
person shall be 1,000 Units (except as otherwise indicated in the Prospectus or
in any letter or memorandum from the Manager to you). Terms not defined herein
shall have the same meaning as in the Prospectus. In connection therewith, the
Company and the Manager hereby enter into this Selling Agency Agreement
("Agreement") with you (the "Selling Agent") as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Selling Agent that:
1.1 A registration statement on Form SB-2 of the Company has been
prepared by the Company in accordance with applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the applicable
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "SEC"), covering the 5,000,000 Units. Said registration
statement, which includes a preliminary prospectus, was filed with the SEC on or
about August 19, 2002. Copies of such registration statement and each amendment
thereto have been or will be delivered to the Selling Agent. (The registration
statement and prospectus, as finally amended and revised, are hereinafter
referred to as the "Registration Statement" and the "Prospectus."
1.2 The Company has been duly and validly organized and formed as a
limited liability company under the California Xxxxxxx-Xxxxxx Limited Liability
Company Act with the power and authority to conduct its business as described in
the Prospectus.
1.3 The Registration Statement and Prospectus comply with the
Securities Act and the Rule and Regulations and do not contain any untrue
statements of material facts or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; provided, however, that the foregoing provisions of this Section 1.3
will not extend to such statements contained in or omitted from the Registration
Statement or Prospectus as are primarily within the knowledge of the Selling
Agent and are based upon information furnished by the Selling Agent in writing
to the Company specifically for inclusion therein.
1.4 The Company intends to use the funds received from the sale of the
Units as set forth in the Prospectus.
1.5 No consent, approval, authorization or other order of any
governmental authority is required in connection with the execution or delivery
by the Company of this Agreement, the issuance and sale by the Company of the
Units, or the conduct by the Company of its business as described in the
Prospectus, except such as may be required under the Securities Act or
applicable state securities laws.
1.6 There are no actions, suits or proceedings pending or to the
knowledge of the Company, threatened against the Company or its Manager, at law
or equity or before or by any federal or state commission, regulatory body or
administrative agency or other governmental body, domestic or foreign, which
will have a material adverse effect on the business or property of the Company,
except as are described on Attachment 1.6 to this Agreement.
Ex. 1.1-1
1.7 The execution and delivery of this Agreement, the consummation of
the transactions herein contemplated and compliance with the terms of this
Agreement by the Company will not conflict with or constitute a default under
the Company's Articles of Organization, Operating Agreement, or any charter,
bylaw, indenture, mortgage, deed of trust, lease, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over the Company or the Manager, except
to the extent that the enforceability of the indemnity and/or contribution
provisions contained in Section 4 of this Agreement may be limited under
applicable securities laws.
1.8 The Company has full legal right, power and authority to enter into
this Agreement and to perform the transactions contemplated hereby, except to
the extent that the enforceability of the indemnity and/or contribution
provisions contained in Section 4 of this Agreement may be limited under
applicable securities laws.
1.9 At time of issuance of the Units, the Units will have been duly
authorized and validly issued, and upon payment therefore, will be fully paid
and non-assessable and will conform to the description thereof contained in the
Prospectus.
1.10 The financial statements contained in the Registration Statement
and the Prospectus fairly present the respective financial conditions of the
Company and Manager and the results of their respective operations as of the
dates and for the periods therein specified; and such financial statements have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved; and the accountants who
have certified such financial statements are independent public accountants as
required by the Securities Act and the Rules and Regulations.
2. COVENANTS OF THE COMPANY
The Company covenants and agrees with the Selling Agent that:
2.1 It will, at no expense to the Selling Agent, furnish the Selling
Agent with such number of printed copies of the Registration Statement,
including all amendments and exhibits thereto, as the Selling Agent may
reasonably request. It will similarly furnish to the Selling Agent and others
designated by the Selling Agent as many copies as the Selling Agent may
reasonably request in connection with the offering of the Units of: (a) the
Prospectus in preliminary and final form and every form of supplemental or
amended prospectus; (b) this Agreement; and (c) any other printed sales
literature or other materials (provided that the use of said sales literature
and other materials has been approved for use by the Company and all appropriate
regulatory agencies).
2.2 It will furnish such proper information and execute and file such
documents as may be necessary for the Company to register or qualify the Units
for offer and sale under the securities laws of such jurisdictions as the
Company and Selling Agent agree upon, and will file and make in each year such
filings as may be required. The Company will furnish to the Selling Agent a copy
of such papers filed by the Company in connection with any such registration or
qualification.
2.3 It will: (a) use its best efforts to cause the Registration
Statement to become effective; (b) file for review and use its best efforts to
obtain approval by the NASD Corporate Financing Department of the offering under
Rule 2810 of the NASD Conduct Rules and applicable Guidelines; (c) furnish
copies of any proposed amendment or supplement of the Registration Statement or
Prospectus to the Selling Agent; (d) file every amendment or supplement to the
Registration Statement or the Prospectus that may be required by the SEC;(e) if
at any time the SEC shall issue any stop order suspending the effectiveness of
the Registration Statement, it will use its best efforts to obtain the lifting
of such order at the earliest possible time; and (f) the Manager will disclose
in each annual report of the Company distributed to its investors pursuant to
Section 13(a) of the Securities Act a per Unit estimated value of the Units, the
method by which this value was developed and the date used for such estimated
value.
2.4 If at any time when a Prospectus is required to be delivered under
the Securities Act any event occurs as a result of which, in the opinion of
either the Company or the Selling Agent, the Prospectus or any other prospectus
then in effect would include an untrue statement of a material fact or, in view
of the circumstances under which they were made, omit to state any material fact
necessary to make the statements therein not misleading, the Company will
promptly notify the Selling Agent thereof (unless the information shall have
been received from the Selling Agent) and will effect the preparation of an
amended or supplemental prospectus which will correct such statement or
omission. The Company will then promptly prepare such amended or supplemental
prospectus or prospectuses as may be necessary to comply with the requirements
of Section 10 of the Securities Act.
3. APPOINTMENT, REPRESENTATIONS, OBLIGATIONS AND COMPENSATION OF
SELLING AGENT
3.1 The Company hereby appoints the Selling Agent as its agent and
distributor for the purpose of offering and selling for cash up to a maximum of
5,000,000 Units. The Selling Agent will use its best efforts to offer and sell
Units for cash, at the public offering price and subject to the terms and
conditions stated in the Prospectus. The Selling Agent hereby accepts such
agency and distributorship and agrees to use its best efforts to sell the Units
on said terms and conditions. The Selling Agent represents to the Company that
it is a member in good standing of the NASD and that it and its employees and
representatives have all required licenses and registrations to act under this
Agreement.
Ex. 1.1-2
The Selling Agent agrees to be a party to and be bound by the terms of
the Escrow Agreement executed as of ____________ ___, 2002 ("Escrow Agreement")
by Capitol City Escrow, Inc. ("Escrow Agent"), the Selling Agent and the
Company, pursuant to which an Escrow Account will be created by the Escrow
Agent, a signed copy of which Escrow Agreement the Selling Agent acknowledges
has been furnished to it by the Manager, and a conformed copy of which is
attached to this Agreement and incorporated herein by this reference.
3.2 Promptly after the effective date of the Registration Statement,
the Selling Agent shall commence the offering of the Units for cash to the
public in jurisdictions in which the Units are registered or qualified for sale
or in which such offering is otherwise permitted. The Selling Agent will suspend
or terminate offering of the Units upon request of the Company at any time and
will resume offering the Units upon subsequent request of the Company.
3.3 Xxxxxx Financial Group, Ltd., an affiliate of the Manager, will pay
the Selling Agent a commission in cash equal initially to two percent(2%) of the
aggregate gross proceeds generated from its sale of Units to purchasers obtained
solely by its sales efforts, plus an annual commission in cash of 1/4th of 1% of
those same gross proceeds (the "Annual Commission"), for each year during the
term of the Company or over the twenty (20) years starting the date that the
Company obtains funds from the Escrow Account, whichever ends first; but the
Annual Commission will be earned and paid only as to Units that were purchased
in the Offering, and only so long as the purchaser thereof in the Offering
continues to hold those Units as a Member of the Company. In order to be
entitled to the Annual Commission, the Selling Agent shall provide to the holder
or holders of such Units the following annual services: 1) establish and
maintain records for all Unit investor/clients of Selling Agent to correctly
reflect all transactions in the Units from year to year; and 2) maintain
securities dealer registration in all states where Unit investor/clients reside
and assist said persons with respect to their holdings of Units and their
participation (if any) in the Company's Distribution Reinvestment Program.
No other payment will be made to the Selling Agent in connection,
direct or indirect, with the offer and sale of the Units.
3.4 Without in any way intending to limit the foregoing, no commissions
will be paid to the Selling Agent in excess of the maximum permitted by NASD
Rules of Conduct and applicable Guidelines pertaining to sales compensation in
offerings of this kind. No commissions whatsoever will be paid to the Selling
Agent under Section 3.3 unless or until 500,000 Units have been sold by the
Selling Agent and the Company (the "Minimum Offering") and the gross proceeds
therefrom of $5,000,000 (the "Minimum Proceeds") have been placed in the Escrow
Account in accordance with the terms of the Escrow Agreement. Until the Minimum
Proceeds have been so obtained and placed in the Escrow Account, investments
will be held by the Escrow Agent in or for the benefit of the Escrow Account,
and if the Minimum Proceeds are not so obtained, investors' funds will be
returned to the investors in accordance with the Prospectus and Escrow
Agreement. If the Minimum Proceeds are so obtained in accordance with the
Prospectus and the Escrow Agreement, the Company will so advise the Selling
Agent and the Selling Agent will continue to offer and sell the remainder of the
5,000,000 registered Units in accordance with the Prospectus and this Agreement.
3.5 The Selling Agent represents and warrants to the Company, the
Manager and each person and firm that signs the Registration Statement that the
information under the caption "Plan of Distribution" in the Prospectus and all
other information furnished to the Company by the Selling Agent expressly for
use in the Registration Statement, any preliminary prospectus, the Prospectus,
or any amendment or supplement thereto does not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Selling Agent
represents and warrants to the Company that Selling Agent is not an affiliate of
or affiliated with, directly or indirectly, the Company or the Manager, as the
terms "affiliate" or "affiliated" are defined in Rule 405 of the SEC under the
Securities Act.
3.6 The Selling Agent represents and warrants to the Company and the
Manager that it will not represent or imply that the Escrow Agent, under the
Escrow Agreement, has investigated the desirability or advisability of
investment in the Units, or has approved, endorsed or passed upon the merits of
the Units or the Company, nor will it use the name of said Escrow Agent in any
manner whatsoever in connection with the offer or sale of the Units other than
by acknowledgment that it has agreed to serve as escrow agent.
4. INDEMNIFICATION
4.1 The Manager will indemnify and hold harmless the Selling Agent, its
officers and directors and each person, if any, who controls such selling Agent
within the meaning of Section 15 of the Securities Act from and against any
losses, claims, damages or liabilities, joint or several, to which such Selling
Agent, its officers and directors, or such controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (a) any untrue statement or alleged untrue statement of a material fact
contained (i) in the Registration Statement (including the Prospectus as a part
thereof) or any post-effective amendment thereto or in the Prospectus or any
amendment or supplement to the Prospectus or (ii) in any application or other
document executed by the Company or on its behalf specifically for the purposes
of registering or qualifying any or all of the Units for sale under the
securities laws of any state or based upon written information furnished by the
Company under the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), or (b) the
omission or alleged omission to state in the Registration Statement (including
the Prospectus as a part thereof) or any post-effective amendment thereof or in
any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (c) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, if used prior to the effective date of the Registration
Ex. 1.1-3
Statement, or in the Prospectus or any amendment or supplement to the Prospectus
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and will
reimburse the Selling Agent, its officers and directors and each such
controlling person for any legal or other expenses reasonably incurred by the
Selling Agent, its officers and directors, or such controlling persons in
connection with investigating or defending such loss, claim, damage, liability
or action; provided that the Company and Manager will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of,
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company or Manager by or on behalf of the Selling
Agent specifically for use with reference to the Selling Agent in the
preparation of the Registration Statement or any such post-effective amendment
thereof, any such Blue Sky Application or any such preliminary prospectus or the
Prospectus or any such amendment thereof or supplement thereto; and further
provided that the Company will not be liable in any such case if it is
determined that the Selling Agent was at fault in connection with the loss,
claim, damage, liability or action.
4.2 The Selling Agent will indemnify and hold harmless the Company, the
Manager and each person or firm which has signed the Registration Statement and
each person, if any, who controls the Company and Manager within the meaning of
Section 15 of the Securities Act, from and against any losses, claims, damages
or liabilities to which any of the aforesaid parties may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (a)
any untrue statement of a material fact contained (i) in the Registration
Statement (including the Prospectus as a part thereof) or any post-effective
amendment thereof or (ii) any Blue Sky Application, or (b) the omission to state
in the Registration Statement (including the Prospectus as a part thereof) or
any post-effective amendment thereof or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (c) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, if used prior to the
effective date of the Registration Statement, or in the Prospectus, or in any
amendment or supplement to the Prospectus or the omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein in the light of the circumstances under which they were made
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in reliance upon and in conformity with
written information furnished to the Company or Manager by or on behalf of the
Selling Agent specifically for use with reference to the selling Agent in the
preparation of the Registration Statement or any such post-effective amendments
thereof or any such Blue Sky Application or any such preliminary prospectus or
the Prospectus or any such amendment thereof or supplement thereto, or (d) any
unauthorized use of sales materials or use of unauthorized oral representations
concerning the Units by the Selling Agent and will reimburse the aforesaid
parties, in connection with investigation or defending such loss, claim, damage,
liability or action. This indemnity agreement will be in addition to any
liability which the Selling Agent may otherwise have.
4.3 Promptly after receipt by an indemnified party under this Section 4
of notice of the commencements of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under the
Section 4, notify in writing the indemnifying party of the commencement thereof
and the omission so as to notify the indemnifying party will relieve it from any
liability under this Section 4 as to the particular item for which
indemnification is then being sought, but not from any other liability which it
may have to any indemnified party. In case any such action is brought against
any indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses (subject to Section 4.4) incurred by such
indemnified party in defending itself, except for such expenses incurred after
the indemnifying party has deposited funds sufficient to effect the settlement,
with prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim effected without the consent of such indemnifying
party.
4.4 The indemnifying party shall pay all legal fees and expenses of the
indemnified party in the defense of such claims or actions; provided, however,
the indemnifying party shall not be obliged to pay legal expenses and fees to
more than one law firm in connection with the defense of similar claims arising
out of the same alleged acts or omissions giving rise to such claims
notwithstanding that such actions or claims are alleged or brought by one or
more parties against more than one indemnified party. If such claims or actions
are alleged or brought against more than one indemnified party, then the
indemnifying party shall only be obliged to reimburse the expenses and fees of
the one law firm that has been selected by a majority of the indemnified parties
against which such action is finally brought; and in the event a majority of
such indemnified parties is unable to agree on which law firm for which expenses
or fees will be reimbursable by the indemnifying party, then payment shall be
made to the first law firm of record representing an indemnified party against
the action or claim. Such law firm shall be paid only to the extent of services
performed by such law firm and no reimbursement shall be payable to such law
firm on account of legal services performed by another law firm.
4.5 The indemnity agreements contained in this Section 4 shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of the Company, the Selling Agent or the Manager or any officer
or director thereof, (b) delivery of any Units and payment therefore, and (c)
any termination of this Agreement. A successor of any the parties to this
Agreement shall be entitled to the benefits of the indemnity agreements
contained in this Section 4.
Ex. 1.1-4
5. SURVIVAL OF PROVISIONS
The respective agreements, representations and warranties of the
Company and the Selling Agent set forth in this Agreement shall remain operative
and in full force and effect regardless of (a) any termination of this
Agreement, (b) any investigation made by or on behalf of the Selling Agent or
any person controlling the Selling Agent or by or on behalf of the Company, its
partners or any person controlling the Company, and (c) the acceptance of any
payment for the Units.
6. APPLICABLE LAW
This Agreement was executed and delivered in, and its validity,
interpretation and construction shall be governed by the laws of, the State of
California.
7. COUNTERPARTS
This Agreement may be executed in any number of counterparts. Each
counterpart, when executed and delivered, shall be an original contract, but all
counterparts, when taken together, shall constitute one and the same Agreement.
8. SUCCESSORS AND AMENDMENT
8.1 This Agreement shall inure to the benefit of any be binding upon
the Selling Agent; the Manager; Xxxxxx Financial Group, Ltd., only as to the
obligation in Section 3.3 to pay commissions to the Selling Agent; the Company;
and their respective successors. Nothing in this Agreement is intended or shall
be construed to give to any other person any right, remedy or claim, except as
otherwise specifically provided herein.
8.2 This Agreement may be amended by the unanimous written agreement of
the Selling Agent, the Company and the Manager.
9. TERM
Any party to this Agreement shall have the right to terminate this
Agreement on 30 days' written notice to the other parties.
10. CONFIRMATION
The Manager hereby agrees and assumes the duty to send an
acknowledgement to each investor whose subscription for Units is accepted in
whole or in part by the Manager.
11. SUITABILITY OF INVESTORS
The Selling Agent will offer Units only to persons who meet the
financial qualifications set forth in the Prospectus and the Subscription
Agreement in the form that is attached to the Prospectus as Exhibit B thereto
(or to those it reasonably believes to meet suitability standards in states that
deviate from those standards set forth in the Prospectus and Subscription
Agreement), and will only make offers to persons in the states in which it is
advised in writing that the Units are qualified for sale or that such
qualification is not required. In offering Units, the Selling Agent will comply
with the provisions of Rule 2310 of the Conduct Rules set forth in the NASD
Manual, as well as all other applicable rules and regulations relating to
suitability of investors, including without limitation, the provisions of
Article III.B. and C. of the Statement of Policy Regarding Mortgage Programs of
the North American Securities Administration Association, Inc.
12. SUBMISSION OF ORDERS
12.1 Those persons who purchase Units will be instructed by the Selling
Agent to make their checks payable to the Escrow Agent during the course of the
Minimum Offering, and to the Company after the Minimum Offering has been
achieved. The Selling Agent receiving an Instrument of Payment (as defined in
the Escrow Agreement) not conforming to the foregoing instructions shall return
such Instrument of Payment directly to such subscriber not later than the end of
the next business day following its receipt. Instruments of Payment received by
the Selling Agent which conform to the foregoing instructions shall be
transmitted for deposit pursuant to one of the methods described in this Section
12. Transmittal of received investor funds will be made in accordance with the
following procedures.
Ex. 1.1-5
12.2 Instruments of Payment will be transmitted by the Selling Agent
for deposit to the Escrow Agent, during the course of the Minimum Offering and
to the Company after the Minimum Offering has been achieved, as soon as
practicable, but in any event by the end of the second business day following
receipt by the Selling Agent. Instruments of Payment of rejected subscribers
will be promptly returned to such subscribers.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter and your acceptance shall constitute a binding agreement
between us as of the date first above written.
Very truly yours,
YOSEMITE MORTGAGE FUND II, LLC,
a California limited liability company
By: MFP Management LLC (Manager),
a California limited liability
company
By: /s/Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
Title: General Manager
MFP MANAGEMENT LLC
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: General Manager
Accepted and agreed as of the date
first above-written.
RICE XXXXXX CAPITAL, INC., a California corporation
By: /s/ Xxxxx Xxxx
--------------------------
Xxxxx Xxxx, Vice-President
Accepted and agreed to as of the date first
above-written, solely as to Section 3.3,
payment of commission to Selling Agent.
XXXXXX FINANCIAL GROUP, LTD., a California corporation
By: /s/Xxxxxx X. Xxxxxx
--------------------------
Xxxxxx X. Xxxxxx, President
Ex. 1.1-6
ATTACHMENT 1.6 TO THE SELLING AGENCY AGREEMENT
Response to Section 1.6 - Material Litigation NONE
Ex. 1.1-7
