Exhibit 1.1
AMERICAN EQUITIES INCOME FUND II, INC.
$9,950,000 In
12% Promissory Notes
Minimum Purchase: $5,000
FORM OF DEALER MANAGER 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")
and STRATEGIC ASSETS INC., a New York corporation (the "Dealer Manager").
Background
A. The Company is currently offering and selling up to a
Maximum of $9,950,000 aggregate principal amount of its 12% Notes in $1,000
denominations, or any integral multiple thereof (the "Notes"). The minimum
subscription is for $5,000, or $2,000 for investors subscribing through an XXX.
B. The Dealer Manager 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 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 Dealer Manager.
(a) Subject to the terms and conditions set forth herein, the
Company hereby appoints the Dealer Manager on a non-exclusive basis as its agent
to solicit written subscriptions from prospective investors to purchase the
Notes. The Dealer Manager hereby accepts said appointment and agrees to use its
best efforts from the date hereof through _______________ (the "Termination
Date"), as the Company shall determine in its sole discretion, 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. The Dealer Manager may in its sole discretion utilize the services of
other securities dealers who are members of the National Association of
Securities Dealers, Inc. (the "Selected Dealers") in connection with the
offering and sale of the Notes under an Agreement with each of the other
Selected Dealers substantially in the form as attached hereto as Exhibit A.
(b) The Company and the Dealer Manager jointly may determine
to reduce the capital contribution required of investors; provided, that any
such reduction shall only be reflected in the sales commission payable with
respect to such Notes, and shall not reduce the net proceeds to the Company from
the sale of such Notes.
(c) Upon the delivery of a subscription agreement, each
subscriber will be required to provide a check in the amount of the total
subscription price of Notes subscribed. The minimum purchase is $5,000, $2,000
for investors subscribing through an XXX. However, the Company reserves the
right, in its sole discretion, to offer and sell less than $5,000 of Notes to
any investor.
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(d) It is understood and agreed that Dealer Manager's
relationship with 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 Dealer Manager and the Company.
The Dealer Manager 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 Dealer Manager 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 Company.
2. Representations and Warranties of AEG and the Company.
The Company and AEG represents and warrants to the Dealer
Manager as follows:
(a) Organization and Qualification of the Company and AEG.
Each of the Company and AEG is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with full power and authority to own or lease its properties and conduct the
business heretofore conducted by it in the manner and in the places where such
properties are owned or leased or such business is conducted by it. Each of
AEG's and the Company's corporate charter and By-laws, as amended to date, are
complete and correct. AEG is duly registered or qualified to do business as a
foreign corporation in the State of New Jersey and neither the character or
location of the properties owned or leased by AEG or the Company nor the nature
of the business transacted by AEG or the Company makes registration or
qualification in any other jurisdiction necessary, except where the failure to
so qualify would not have a material adverse effect on AEG or the Company.
(b) Authority of AEG and the Company; No Conflicts
(i) Each of AEG and the Company, as applicable, has full
power and authority to enter into this Agreement; issue and sell the Notes and
consummate the transactions contemplated hereby. All necessary action, corporate
or otherwise, has been taken by each of AEG and the Company to authorize the
execution, delivery, and performance of this Agreement, and the Agreement is a
valid and binding obligation of each of AEG and the Company enforceable in
accordance with its terms.
(ii) The execution and delivery of this Agreement by each
of AEG and the Company does not, and the issuance of the Notes and the
performance of the terms hereof by AEG and the Company will not, constitute a
default or event of default under, or violate, conflict with, or result in any
breach of the terms, conditions, or provisions of: (1) the corporate charter of
By-laws of AEG or the Company, (2) the laws or regulations of any jurisdiction
or any other governmental requirements; or (3) any material mortgage, lien,
lease, agreement, contract, instrument, order, arbitration award, injunction,
judgment or decision to which AEG or the Company is a party or by which it or
its property is bound or materially affected. Except for filings with the
Securities and Exchange Commission (the "Commission") and applicable state
securities administrators, no approval, authorization, license, permit or other
action by, or filing with, any federal, state or municipal commission, board,
agency or other governmental authority is required in connection with the
execution and delivery by AEG and the Company of this Agreement, the issuance of
the Notes, or the consummation of the transaction contemplated hereby.
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(c) Title to Properties; Liens; Conditions of Properties.
(i) Each of AEG and the Company has good and marketable
title to all of its material assets and properties, and all of its leases of
real or personal property are valid and subsisting, and no default exists under
any provision thereof, the existence of which gives rise to a right of
termination by the lessor; and none of AEG's material assets and property is
subject to any title restriction; none of AEG's material assets and property is
subject to any mortgage, pledge, lien, conditional sale agreement, security
interest, encumbrance or other charge.
(ii) To the best of their knowledge, neither AEG's nor the
Company's use of the properties occupied by AEG or the Company, respectively, is
in material violation of any law, and no notice from any governmental body has
been served upon AEG or the Company or upon any property occupied by AEG or the
Company claiming any violation of any such law, ordinance, code or regulation or
requiring, or calling attention to the need for, any work, repairs,
construction, alterations, or installation on or in connection with said
properties which has not been complied with. To their knowledge, each of AEG and
the Company has the right to use such properties occupied by it for the
operations presently therein conducted.
(d) Payment of Taxes. Each of AEG and the Company has filed,
or obtained extension of the time to file all federal, state and to the best of
their knowledge, all local income, withholding, exercise or franchise tax
returns, real estate and personal property tax returns, sales and use tax
returns and other tax returns required to be filed by it, has accrued or paid
all taxes owing by it, except taxes which have not yet accrued or otherwise
become due.
(e) Absence of Undisclosed Liabilities. As of the date hereof,
neither AEG or the Company has any material liabilities of any nature, whether
accrued, absolute, contingent or otherwise (including without limitation
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due) except liabilities
fully disclosed in the Registration Statement or in such documentation as may
otherwise delivered to Dealer. To the best of their knowledge, there is no
threatened material claim, debt, liability or obligation (including unpaid
federal, state, or local
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taxes) of any nature or in any amount not fully reserved against in the AEG's or
the Company's balance sheet or not fully reflected in the Registration
Statement.
Except as disclosed in the Registration Statement, neither AEG
or the Company has any notes or accounts payable to any person, firm, or
corporation which is affiliated with AEG or the Company or to any director,
officer, or principal stockholder of AEG or the Company.
(f) Contracts. Except as set forth in the Registration
Statement, neither AEG or the Company is in material default under any contract,
commitment, plan, agreement, instrument, license or lease or under any purchase
order or sales order, which default would have a materially adverse effect on
the business or financial condition of AEG or the Company.
(g) Litigation. Except as set forth in the Registration
Statement, there is no suit, action, or legal, administrative or other
proceeding or governmental investigation pending, or, to the best of AEG's or
the Company's knowledge, threatened, anticipated or contemplated against AEG or
the Company or any or their respective properties, which, in any single case or
in the aggregate, challenges or questions in any respect, the validity of, or
would prevent or hinder the consummation of, the transactions contemplated by
this Agreement or which, if adversely determined, would have a material adverse
effect on the properties, assets, condition (financial or otherwise) and
business of AEG or the Company, and there are no unsatisfied or outstanding
judgments, orders, decrees or stipulations which would prevent or hinder the
consummation of the transactions contemplated by this Agreement. Neither AEG or
the Company knows or has grounds to know of any basis for any action or of any
governmental investigation relating to or affecting the properties, assets,
condition (financial or otherwise) and business of AEG or the Company.
There are no claims or proceedings against AEG or the Company
pending, or to the best of AEG's or the Company's knowledge, threatened,
anticipated or contemplated which, if valid, would constitute or result in a
breach of any representation, warranty or agreement set forth herein.
(h) Compliance with Laws. Each of AEG and the Company is in
compliance in all material respects with all laws, ordinances, rules,
regulations and other governmental requirements which apply to the conduct of
its business, including, without limitation, all laws and regulations relating
to (1) employment and labor relations (including all provisions thereof relating
to wages, hours, equal opportunity, discrimination, collective bargaining, and
the withholding and payment of social security and all other taxes and (2)
government contracts.
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(i) Licenses and Permits. Each of AEG and the Company holds in
good standing, or has applied for, all licenses, permits, authorizations,
franchises, consents and orders of all federal, state, local, and foreign
governmental bodies necessary to carry on its business and each of AEG and the
Company has no reason to believe that any such licenses, permits,
authorizations, franchises, consents and orders will be revoked, terminated or
suspended.
(j) Burdensome Agreements. Neither AEG nor the Company is
subject to or bound by any consent decree, agreement, judgment, decree or order,
and does not know of or have grounds to know of any basis for any action or
governmental proceedings, which may materially and adversely affect the
properties, assets, business, prospects or condition, financial or otherwise, of
AEG or the Company, or result in the revocation or limitation of any license,
permit or franchise held by AEG or the Company.
(k) Misstatements and Omissions. Neither AEG or the Company
has made any material misstatement of fact or omitted to state any material fact
necessary or desirable to make complete, accurate and not misleading every
representation, warranty and agreement set forth herein
(l) Securities Law Disqualification. Neither the Company, nor
any officer, director or beneficial owner of ten percent or more of any class of
the equity securities of the Company falls within any of the "bad boy"
provisions of Rule 262(a) or (b), as applicable, of SEC Regulation A.
3. Representations and Warranties of the Dealer Manager. The
Dealer Manager represents and warrants to the Company as follows:
(a) The Dealer Manager is a corporation duly organized and
validly existing in good standing under the laws of the State of New York, with
power and authority to enter into this Agreement and to carry out its
obligations hereunder.
(b) The Dealer Manager 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
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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 Dealer Manager 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 Dealer Manager and constitutes a valid and binding obligation
thereof.
4. Manner of Offering Notes. The Dealer Manager covenants and
agrees with the Company as follows:
(a) Dealer Manager will offer the Notes pursuant to the
Prospectus and only in such a manner as to assure that the offer and sale
thereof will meet 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,
Dealer Manager agrees to indemnify the Company and the directors, officers and
agents of 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, Dealer Manager 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;
(c) Dealer Manager 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 Dealer Manager delivered
each such copy;
(d) Dealer Manager 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;
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(e) Dealer Manager 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) Dealer Manager 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) Dealer Manager 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, New York. 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 Dealer Manager has been advised by the Company that the offer and sale of
Notes has been approved. Dealer Manager 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 filings.
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5. Further Agreements of the Company. The Company covenants
and agrees with the Dealer Manager 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 Dealer Manager in writing and will promptly 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 comply 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 Dealer
Manager's employees engaged in the Offering and related administrative and
overhead costs.
6. Compensation.
(a) Subject to adjustment as provided in section 1(c) hereof,
in consideration of Dealer Manager's services as the Company's agent hereunder,
the Company hereby agrees to compensate the Dealer Manager 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 Dealer Manager 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.
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(b) The Dealer Manager shall be entitled to (i) sales
commissions of 7% of the gross proceeds from the sale of each Note; (ii) 1% of
the gross proceeds of the sale of each Note as a due diligence and
non-accountable expense allowance; and (iii) .50% of the gross proceeds of the
sale of each Note as a Dealer Manager fee. Fees will only be payable upon
receipt by the Company of the full price for Notes sold in accordance with the
Prospectus.
7. Non-Circumvention Covenants.
(a) In the course of business between the Dealer Manager and
the Company, the Dealer Manager will learn the identity of and gain access to
certain clientele, agents and sources of projects of the Company, and the
Company will likewise learn the identity of and gain access to certain
clientele, agents and contacts of the Dealer Manager. 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 Dealer Manager agrees to preserve the integrity of
the proprietary relationship between the Company and each of its respective
clientele, agents, employees, project sources, or contacts in general that may
become known to the Dealer Manager, and the Company agrees to preserve the
integrity of the proprietary relationship between the Dealer Manager and each of
its respective clientele, agents, employees, project sources, or contacts in
general that may become known to the Company.
(b) The Dealer Manager agrees not to contact or otherwise
communicate with any clients or contacts of the Company (including but not
limited to banks, financing sources, broker-dealers, marketing or sales
entities, developers or others) with whom the Dealer Manager does not have a
pre-existing relationship, without the prior knowledge and approval of the
Company as appropriate, nor shall any business transactions be conducted by the
Dealer Manager with any clients or contacts of the Company without appropriate
compensation arrangements to the Company being agreed upon in advance. The
Dealer Manager further agrees that the non-circumvention covenants set out
herein shall apply equally to its agents, employees, directors, officers and
affiliates. The Company agrees not to contact or otherwise communicate with any
clients or contacts of the Dealer Manager, without the prior knowledge and
approval of the Dealer Manager as appropriate, nor shall any business
transactions be conducted by the Company with any clients or contacts of the
Dealer Manager without appropriate compensation arrangements to the Dealer
Manager being agreed upon in advance. The Company further agrees that the
non-circumvention covenants set out herein shall apply equally to its agents,
employees, directors, officers and affiliates.
(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
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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 Dealer Manager by
the Company or to the Company by the Dealer Manager, and regardless of the
success of any such project.
8. Indemnification.
(a) Each of AEG and the Company shall jointly and severally
indemnify and hold harmless the Dealer Manager and the Selected Dealers, each of
their directors, officers, employees, agents and each person, if any, who
controls (within the meaning of the 1933 Act or the 0000 Xxx) the Dealer Manager
and the Selected Dealers from and against any loss, claim, damage or liability,
joint or several, and any action in respect thereof, to which the Dealer Manager
and the Selected Dealers 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 Dealer Manager and Selected Dealers 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; provided,
however, that AEG and 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 Dealer Manager or in conformity with information furnished by the Dealer
Manager or its agent for inclusion therein or in conformity with any direction
of the Dealer Manager or its agents.
(b) The Dealer Manager shall indemnify and hold harmless the
Company, and each of its directors, officers, employees, agents and each person,
if any, who controls (within the meaning of the 1933 Act or the 0000 Xxx) the
from and against any loss, claim, damage or liability, joint or several, and any
action in respect thereof, to which the Company or any of its directors,
officers, employees, agents or controlling persons 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 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 Dealer
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Manager, the Selected Dealers or their agents or was in conformity with
information provided by the Dealer Manager, the Selected Dealers or their agents
for inclusion therein or was in conformity with any direction of the Dealer
Manager or its agents, and shall reimburse the Company and its 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 xxx 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.
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.
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:
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To the Company:
American Equities Income Fund II, Inc.
00 Xxxx Xxxxx 0, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
To the Dealer Manager:
Strategic Assets Inc.
000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
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.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first set forth above.
THE COMPANY: THE DEALER MANAGER:
AMERICAN EQUITIES INCOME STRATEGIC ASSETS INC.
FUND II, INC.
By:_____________________________ By:__________________________________
Title:__________________________ Title:_______________________________
Dealer Firm CRD Number:
AEG:
States in which Firm is Registered: ______
AMERICAN EQUITIES GROUP, INC.
By:_____________________________
Title:__________________________
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EXHIBIT A
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