EXHIBIT 1.2
AMERICAN EQUITIES INCOME FUND II, INC.
$9,950,000 In
12% Promissory Notes
Minimum Purchase: $5,000
(IRA's $2,000)
FORM OF SELECTED DEALER'S AGREEMENT
THIS AGREEMENT is entered into as of the ____ day of _______________ by
and among AMERICAN EQUITIES GROUP, INC., a New York corporation ("AEG"),
AMERICAN EQUITIES INCOME FUND II, INC., a Delaware corporation (the "Company"),
STRATEGIC ASSETS INC., a New York corporation (the "Dealer") and you, the
undersigned, as Selected Dealer (the "Agent").
Background
A. The Dealer has entered into an agreement dated as of ___________,
_____ to offer 12% promissory notes (the "Notes") in the Company for a maximum
aggregate offering price of $9,950,000. The Notes are to be offered in $1,000
denominations, or any integral multiples thereof, with a minimum subscription of
$5,000, or $2,000 if invested by means of an ▇▇▇.
B. The Agent desires on a "best-efforts basis" to act as a
non-exclusive agent in the offer and sale of the Notes (the "Offering") subject
to the terms of this Agreement and the Company's prospectus, as filed with the
Securities and Exchange Commission, pursuant to which the Offering is to be
conducted (the "Prospectus").
C. In consideration of the mutual promises and covenants set forth
herein, the parties agree as follows:
1. Non-Exclusive Appointment of Agent.
(a) Subject to the terms and conditions set forth herein, the
Dealer hereby appoints the Agent on a non-exclusive basis as a Selected Dealer
to solicit written subscriptions from prospective investors to purchase the
Notes. The Agent hereby accepts said appointment and agrees to use its best
efforts from the date hereof through _________, 200_, to secure offers from
qualified investors to acquire Notes pursuant to the terms of this Agreement.
Prior to such time, either party shall have the right, by giving notice as
provided in section 13 of this Agreement, to terminate this Agreement
immediately. In the event of such termination, all of the obligations of the
parties hereto which are required to be performed pursuant to this Agreement
shall be performed with respect to any sales which are made pursuant to this
Agreement, at the option of Dealer. Except with the written consent of the
Dealer the Agent will not employ any person or other entity as its agent or
subagent or utilize the services of any other broker/dealer in connection with
the Offering.
-1-
(b) Upon the delivery of a subscription agreement, each
subscriber will be required to deliver a check in the amount of the total
subscription price.
(c) It is understood and agreed that Agent's relationship with
the Dealer and the Company is that of an independent contractor and that nothing
herein shall be construed as creating a relationship of partners, joint venture,
or employer and employees, between the Agent and the Dealer or the Company. The
Agent is not authorized to make any placement of the Notes to any person unless
and until that person complies with the suitability standards contained in the
Prospectus, nor is the Agent authorized to deliver a Prospectus or any other
information or documents, or make any representations to any person concerning
the Offering except as provided in this Agreement. No additional material,
documents or information may be delivered to any person unless expressly
authorized in writing by the Dealer or the Company.
2. Representations and Warranties of AEG and the Company.
AEG and the Company represent and warrant to the Agent as
follows:
(a) The Prospectus does not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they are
made, not misleading; provided, however, that this representation and warranty
shall not apply to statements in or omissions from the Prospectus made in
reliance upon and in conformity with information furnished in writing to the
Company by the Agent or on its behalf for use in connection with the Prospectus;
(b) The Company has been duly formed under the laws of the
State of Delaware, with the power to enter into this Agreement and to own
properties and conduct the business as described in the Prospectus;
(c) The Company is authorized to issue up to an aggregate of
$9,950,000 principal amount of Notes requiring capital contributions as
described herein. Following the completion of the Offering, each person whose
subscription for a Note is accepted in writing by the Company will be duly
admitted as a note holder;
-2-
(d) This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes the valid and binding obligation
thereof; and
(e) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, the Certificate of Incorporation or By-laws, or any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company is a party
or by which it may be bound.
3. Representations and Warranties of the Agent. The Agent represents
and warrants to the Dealer as follows:
(a) The Agent is a corporation duly organized and validly
existing in good standing under its state of incorporation and all states in
which it does business, with power and authority to enter into this Agreement
and to carry out its obligations hereunder;
(b) The Agent is duly registered pursuant to the provisions of
the Securities Exchange Act of 1934, as amended (the "1934 Act") as a
broker-dealer and is a member of good standing of the NASD and is duly
registered as a broker-dealer in those states in which it is required to be so
registered in order to carry out the Offering pursuant to this Agreement;
(c) Neither the Agent nor any director or officer thereof
falls within any of the "bad boy" provisions of Rule 262(a), (b), or (c), as
applicable, of SEC Regulation A.
(d) This Agreement has been duly authorized, executed and
delivered by the Agent and constitutes a valid and binding obligation thereof.
4. Manner of Offering Notes. The Agent covenants and agrees with the
Company as follows:
(a) Agent will offer the Notes pursuant to the Prospectus and
only in such a manner as to assure that the offer and sale thereof complies with
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "1933 Act"), and will be exempt from or comply with any
registration requirements applicable for qualifying the Notes for offering and
sale under the laws of any state in which they may be offered. Moreover, Agent
agrees to indemnify the Dealer, the Company and the directors, officers and
agents of the Dealer, and the Company against any liability, damage, cost, loss
or expense to any of them arising out of its failure to so offer the Notes;
(b) Immediately prior to making any offer of any Note to any
offeree, Agent shall have reasonable grounds to believe and shall believe that
the offeree is a person who is able to bear the economic risk of the investment
and who otherwise meets the applicable suitability standards set forth in the
Prospectus and the subscription documents in the form prescribed by the Company;
-3-
(c) Agent will deliver to each offeree, prior to any
submission by him of a written subscription to buy any Note, a copy of the
Prospectus, together with any supplements or amendments thereto, and will keep
records of to whom, by what manner, and on what date Agent delivered each such
copy;
(d) Agent will not offer the Notes by means of any letter,
circular, notice or written communication other than the Prospectus, and other
written communications expressly approved in writing by the Company;
(e) Agent will make reasonable inquiry to determine whether a
prospective purchaser is acquiring the Notes for his own account or on behalf of
other persons;
(f) Agent will abide by, and take reasonable precautions to
ensure that others comply with all provisions contained in this Agreement or
Prospectus regulating the terms and manner of offering the Notes;
(g) Agent will take other action or refrain from taking action
in accordance with the reasonable requests of the Company, in order to comply
with all applicable laws, including, among other things, requiring offerees and
purchasers to execute and deliver such documents and instruments as the Company
may require;
(h) All funds will immediately be placed in an escrow account
to be maintained by the Company pursuant to an Escrow Agreement with Republic
National Bank of New York, NY. Upon the closing or other termination of the
Offering, the proceeds therefrom shall be distributed to the Company or returned
to subscribers as provided in such Escrow Agreement; and
(i) The Notes shall be offered only in such states in which
the Agent has been advised by the Dealer that the offer and sale of Notes has
been approved. Agent shall advise the Company in advance and in writing of the
states in which it desires to offer the Notes, and shall conduct the Offering in
any such state only after the Company, upon consultation with legal counsel, has
had an opportunity to review the applicable securities laws of such state and to
effect any required pre-sale filings. Agent shall immediately advise the Company
in writing of the receipt of all checks or subscriptions for Notes in order to
permit the Company, upon consultation with legal counsel, to effect any required
post-sale filings on a timely basis.
-4-
5. Further Agreements of the Company. The Company covenants and agrees
with the Agent as follows:
(a) If at any time any event shall occur as a result of which
it becomes necessary to supplement the Prospectus so that it does not include
any untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements made not misleading, the Company will
promptly notify Agent and will supply it with amendments or supplements
correcting such statement or omission;
(b) The Company will make such filings with the Securities and
Exchange Commission and state and other governmental agencies as may be
necessary to assure or confirm that the offer in and sale of the Notes complies
with the registration requirements of the 1933 Act, and of the securities laws
of any state or other jurisdiction in which the Notes may be offered, provided
that the Company shall not be required in any event to register as a
broker/dealer in any jurisdiction; and
(c) The Company will pay all expenses in connection with the
preparation and duplication of the Prospectus and any amendments or supplements
thereto, legal fees related thereto, and all other fees and expenses of the
offering of the Notes except wages, salaries and commissions of the Agent's
employees engaged in the Offering and related administrative and overhead costs.
-5-
6. Compensation.
(a) In consideration of Agent's services as the Company's
agent hereunder, the Company hereby agrees to compensate the Agent as set forth
in section 6(b) below. All sales commissions and other compensation shall be
payable in full upon acceptance by the Company of subscriptions for Notes and
release of subscription proceeds from escrow. The Agent shall be entitled to no
compensation with respect to subscriptions rejected by the Company or if the
Company terminates the Offering and refunds subscription payments to investors.
At the discretion of the Dealer, the Notes may be sold for an amount less than
the Note price; provided, Agent waives its commissions to the extent of the
price reduction.
(b) The Agent shall be entitled to (i) sales commissions of
__% of the gross proceeds from the sale of each Note and (ii) __% of the gross
proceeds of the sale of each Note as a due diligence fee and non-accountable
expense allowance. Fees will only be payable upon receipt by the Company of the
full price for Notes sold or financed in accordance with the Prospectus.
7. Non-Circumvention Covenants.
(a) In the course of business between the Agent and the
Dealer, the Agent will learn the identity of and gain access to certain
clientele, agents and sources of projects of the Dealer, and the Dealer will
likewise learn the identity of and gain access to certain clientele, agents and
contacts of the Agent. In consideration of the agreement of each party to make
certain business opportunities and contacts available to the other party and to
work together in evaluating and carrying out business opportunities, the Agent
agrees to preserve the integrity of the proprietary relationship between the
Dealer and each of its respective clientele, agents, employees, project sources,
or contacts in general that may become known to the Agent, and the Dealer agrees
to preserve the integrity of the proprietary relationship between the Agent and
each of its respective clientele, agents, employees, project sources, or
contacts in general that may become known to the Dealer.
(b) The Agent agrees not to contact or otherwise communicate
with any clients or contacts of the Dealer (including but not limited to banks,
financing sources, broker-dealers, marketing or sales entities, developers or
others) with whom the Agent does not have a pre-existing relationship, without
the prior knowledge and approval of the Dealer as appropriate, nor shall any
business transactions be conducted by the Agent with any clients or contacts of
the Dealer without appropriate compensation arrangements to the Dealer being
agreed upon in advance. The Agent further agrees that the non-circumvention
covenants set out herein shall apply equally to its agents, employees,
directors, officers and affiliates. The Dealer agrees not to contact or
otherwise communicate with any clients or contacts of the Agent, with whom the
Dealer did not have a pre-existing relationship, without the prior knowledge and
approval of the Agent as appropriate, nor shall any business transactions be
conducted by the Dealer with any clients or contacts of the Agent without
appropriate compensation arrangements to the Agent being agreed upon in advance.
The Dealer further agrees that the non-circumvention covenants set out herein
shall apply equally to its agents, employees, directors, officers and
affiliates.
-6-
(c) All parties agree that they will not utilize any third
party to make any contacts or disclosures that would violate the intent of this
provision. The non-circumvention covenants set forth herein shall apply to past
and any future business dealings between the parties hereto and is not limited
to dealings with the Company. The covenants shall stand for a period of three
years from the date of execution of this contract and are to be applied to any
and all transactions/proposals submitted to the Agent by the Dealer or to the
Dealer by the Agent, and regardless of the success of any such project.
8. Indemnification.
(a) AEG and the Company shall jointly and severally indemnify
and hold harmless the Agent, each of its directors, officers, employees, agents
and each person, if any, who controls (within the meaning of the 1933 Act or the
▇▇▇▇ ▇▇▇) the Agent from and against any loss, claim, damage or liability, joint
or several, and any action in respect thereof, to which the Agent or such
director, officer, employee, agent or controlling person may become subject,
under the 1933 Act, 1934 Act, any state securities laws or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement of a material fact contained in
the Prospectus as amended or supplemented, or any Federal or state securities
filing, or arises out of, or is based upon, the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse the Agent and each
director, officer, or controlling person for any legal and other expenses
reasonably incurred by such persons in investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action; provided,
however, that the Dealer, the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or omission
or alleged omission made in the Prospectus, as amended or supplemented,
regarding the Agent or in conformity with information furnished by the Agent or
its agent for inclusion therein or in conformity with any direction of the Agent
or its agents.
(b) The Agent shall indemnify and hold harmless the Dealer,
the Company and its directors, officers, employees, agents and each person, if
any, who controls (within the meaning of the 1933 Act or the ▇▇▇▇ ▇▇▇) them from
and against any loss, claim, damage or liability, joint or several, and any
action in respect thereof, to which the Company and/or the Dealer or any of
their directors, officers, employees, agents or controlling persons who may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus, as amended or supplemented, or any federal or state securities
filing, or arises out of, or is based upon, the omission or alleged
-7-
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission regards the Agent or its agents or was in conformity with information
provided by the Agent or its agents for inclusion therein or was in conformity
with any direction of the Agent or its agents, and shall reimburse the Dealer,
the Company and each of their directors, officers or controlling persons for any
legal and other expenses reasonably incurred by such persons in investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action.
(c) The provisions of this Section 8 are in addition to any
and all remedies or rights any of the parties hereto may have, including the
right to ▇▇▇ and recover damages for any breach of any representation, warranty
or covenant made or given by one party to the other party.
9. Miscellaneous. This Agreement is made for the benefit of the parties
hereto, their successors and assigns and any director, officer or controlling
person of the parties, but not for the benefit of any other person, including
any offeree or purchaser of the Notes, except that the provisions of Section
5(c) hereof shall be for the benefit of and enforceable by each offeree and
purchaser representative. This Agreement is formed under and shall be construed
in accordance with the laws of the State of New York and may not be amended
except in writing signed by the parties hereto.
10. Rights Cumulative. All rights and remedies with respect to the
subject matter hereof, whether evidenced hereby or by any other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.
11. Entire Agreement. The parties have not made any representations,
warranties, or covenants not set forth herein with respect to the subject matter
hereof, and this Agreement constitutes the entire Agreement between them with
respect to the subject matter.
12. Further Instruments. The parties agree to execute any and all such
other and further instruments and documents, and to take any and all such
further actions reasonably required to effectuate this Agreement and the intent
and purpose hereof.
-8-
13. Notice. All notices or other communications required or permitted
hereunder shall be in writing and shall be mailed by First Class, Registered or
Certified Mail, Return Receipt Requested, postage prepaid, as follows:
To Dealer:
Strategic Assets Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To the Agent:
To the Principal
at the address shown on the last page hereof;
To the Company or AEG:
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or in each case to such other address as shall have last been
furnished by like notice. If mailing by Registered or Certified Mail is
impossible due to an absence of postal service, notice shall be in writing and
personally delivered to the aforesaid address. Each notice or communication
shall be deemed to have been given as of the date so mailed or delivered, as the
case may be.
14. Jurisdiction and Venue. This Agreement was negotiated in New York
and the parties agree that with respect to any legal or equitable action, suit,
or other proceeding arising under, or in any way connected with, this Agreement,
the parties hereto consent to the in personam jurisdiction of the Federal and
State courts in New York, waive any forum non convenience and any venue
objections they might otherwise have, and agreed to accept service of process
upon them by certified mail, return receipt requested.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all together shall
constitute one and the same Agreement.
16. Captions. The descriptive headings in this Agreement are for
convenience of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
17. Further Dealings. Any dealing by or between the parties after the
date of expiration or prior termination of this Agreement shall not constitute a
renewal of this Agreement or the creation of a new agreement, but shall
nevertheless be controlled by the terms hereof.
-9-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first set forth above.
DEALER: THE AGENT:
STRATEGIC ASSETS INC. _______________________________________
(NAME OF AGENT)
By:____________________________ By:____________________________________
Its:___________________________ Title:_________________________________
Address:_______________________________
_______________________________________
Telephone Number:( )
----------------------
Dealer Firm CRD Number:________________
States in which Firm is Registered:
_______________________________________
_______________________________________
AEG: THE COMPANY:
AMERICAN EQUITIES GROUP, INC. AMERICAN EQUITIES INCOME FUND II, INC.
By:_____________________________ By:____________________________________
Its:____________________________ Title:_________________________________
-10-