FORM OF
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
This agreement made as of the day of _____________, by and
between Summit Securities, Inc., an Idaho corporation ("Summit"),
Metropolitan Investment Securities, Inc., a Washington corporation ("MIS"),
and Welco Securities, Inc., a Nevada Corporation ("Welco").
WITNESSETH:
WHEREAS Summit intends to offer 150,000 shares of Preferred Stock,
designated as "Variable Rate Cumulative Preferred Stock, Series S-2,"
(hereinafter referred to as the "Preferred Stock"), which will be offered in
reliance on a registration statement filed on Form S-2, bearing SEC file
number 33- ; and,
WHEREAS, MIS, a wholly-owned broker/dealer an affiliate of Summit and a
member of the National Association of Securities Dealers ("NASD"), will be
engaged as the sole selling agent for its affiliate, Summit; and,
WHEREAS, pursuant to subparagraph (c) of Rule 2720 of the Bylaws of the
NASD, MIS, as a NASD member, may participate in such underwriting only if
the price at which the Preferred Stock is offered to the public is no higher
than the price recommended by a "Qualified Independent Underwriter" as that
term is defined in subparagraph (b)(15) of Rule 2720 to the Bylaws of the
NASD, and who participates in the preparation of the registration statement
and prospectus relating to the offering and exercises customary standards of
due diligence, with respect thereto; and,
WHEREAS, this agreement ("Agreement") describes the terms on which
Summit is retaining Welco to serve as such a "Qualified Independent
Underwriter" in connection with this offering of Preferred Stock; and,
NOW, THEREFORE, in consideration of the recitations set forth above,
and the terms, promises, conditions, and covenants herein contained, the
parties hereby contract and agree as follows:
DEFINITIONS
As hereinafter used, except as the context may otherwise require, the
term "Registration Statement" means the registration statement on Form S-2
(including the related preliminary prospectus, financial statements,
exhibits and all other documents to be filed as a part thereof or
incorporated therein) for the registration of the offer and sale of the
preferred stock under the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Act") filed with the Securities and
Exchange Commission (the "Commission"), and any amendment thereto, and the
term "Prospectus" means the prospectus including any preliminary or final
prospectus (including the form of prospectus to be filed with the Commission
pursuant to Rule 424(b) under the Act) and any amendment or supplement
thereto, to be used in connection with the offering.
1. RULE 2720. Welco hereby confirms its agreement as set forth in
subparagraph 15(g) of Rule 2720 of the Bylaws of the NASD and represents
that, as appropriate, Welco satisfies or at the times designated in such
paragraph (l) satisfies the other requirements set forth therein or will
receive an exemption from such requirements from the NASD.
2. CONSENT. Welco hereby consents to be named in the Registration
Statement and Prospectus as having acted as a "Qualified Independent
Underwriter" solely for the purposes of Rule 2720 referenced herein. Except
as permitted by the immediately preceding sentence or to the extent required
by law, all references to Welco in the Registration Statement or Prospectus
or in any other filing, report, document, release or other communication
prepared, issued or transmitted in connection with the offering by Summit or
any corporation controlling, controlled by or under common control with
Summit, or by any director, officer, employee, representative or agent of
any thereof, shall be subject to Welco's prior written consent with respect
to form and substance.
3. PRICING FORMULA AND OPINION. Welco agrees to render a written
opinion as to the price above which Summit's Preferred Stock may not be
offered based on the computation of dividends to be declared on those shares
that is set forth in Schedule "A," a copy of which is attached hereto, and
incorporated herein by reference. It is understood and agreed by Welco that
the securities to which this Agreement relates will be offered on a best
efforts basis by MIS, as the sole selling agent of Summit pursuant to the
selling agreement to be entered into between MIS and Summit which is filed
as exhibit to the Registration Statement referred to above. Summit, through
MIS, will continue to offer the preferred stock according to the terms and
conditions of said agreement, in accordance with this Agreement. Welco
reserves the right to review and amend its opinion upon the filing of any
post-effective amendment to this Registration Statement or upon occurrence
of any material event which may or may not require such an amendment to be
filed, or at such time as the offering under this registration shall
terminate or otherwise lapse under operation of law.
4. FEES AND EXPENSE. It is understood that Summit shall reimburse
Welco for its expenses on a nonaccountable basis in the amount of $5,000 of
which $2,500 has been paid to date, and the balance to be paid at closing.
It is further agreed that Welco shall be paid an additional amount of
$15,000 at the time the pricing opinion is rendered, concurrent with the
closing. Welco agrees to pay all fees and expenses to any legal counsel
whom it may employ to represent it separately in connection with or on
account of its actions contemplated herein. All mailing, telephone, travel,
hotel, meals, clerical, or other office costs incurred or to be incurred by
Welco in conjunction with Summit's proposed offering which is the subject of
this Agreement shall be reimbursed to Welco by Summit at closing on an
accountable basis upon receipt of an itemization of said expenses.
5. MATERIAL FACTS. Summit represents and warrants to Welco that at
the time the Registration Statement and, at the time the Prospectus is filed
with the Commission (including any preliminary prospectus and the form of
prospectus filed with the Commission pursuant to Rule 424(b)) and at all
times subsequent thereto, to and including the date on which payment for,
and delivery of, the Preferred Stock to be sold in the Offering is made by
the underwriter or underwriters, as the case may be, participating in the
Offering and by Summit (such date being referred to herein as the "Closing
Date"), the Prospectus (as amended or supplemented if it shall have been so
amended or supplemented) will contain all material statements which are
required to be stated therein in accordance with the Act and will conform to
all other requirements of the federal securities laws, and will not, on such
date include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and that all contracts and documents
required by the Act to be filed or required as exhibits to said registration
statement have been filed. Summit further represents and warrants that any
further filing, report, document, release or communication which in any way
refers to Welco or to the services to be performed by Welco pursuant to this
Agreement will not contain any untrue or misleading statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Summit further warrants and represents that:
(a) All leases, contracts and agreements referred to in or filed as
exhibits to the Registration Statement to which Summit or its subsidiaries
is a party or by which it is bound are in full force and effect.
(b) Summit has good and marketable title, except as otherwise
indicated in the Registration Statement and Prospectus, to all of their
assets and properties described therein as being owned by them, free and
clear of all liens, encumbrances and defects except such encumbrances and
defects which do not, in the aggregate, materially affect or interfere with
the use made and proposed to be made of such properties as described in the
Registration Statement and Prospectus; and Summit has no material leased
properties except as disclosed in the Prospectus.
(c) Summit is duly organized under the laws of the State of Idaho and,
as of the effective date of the Registration Statement and at Closing Summit
will be validly existing and in good standing under the laws of the State of
Idaho with full corporate power and authority to own its properties and
conduct its business to the extent described in the Registration Statement
and Prospectus; Summit is duly qualified to do business as foreign
corporations and in good standing in all jurisdictions in which the nature
of the business transacted by them or their ownership of properties or
assets makes their qualification necessary; the authorized and outstanding
capitalization of Summit is as set forth in the Prospectus and the
description in the Prospectus of the capital stock of Summit conforms with
and accurately describes the rights set forth in the instruments defining
the same;
(d) Summit is not in violation of their respective certificates of
incorporation or Bylaws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
bond, debenture, note, or other evidence of indebtedness, contract or lease
or in any indenture or loan agreement to which any of them is a party or by
which any of them is bound.
(e) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary corporate action on the part of Summit and
MIS and performance of the foregoing agreement and the consummation of the
transactions contemplated thereby, will not conflict with or result in a
breach of any of the terms or constitute a violation of the respective
certificates of incorporation or Bylaws of Summit or MIS, or any deed of
trust, lease, sublease, indenture, mortgage, or other agreement or
instrument to which Summit or MIS is a party or by which any of them or
their property is bound, or any applicable law, rule, regulation, judgment,
order or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over Summit or MIS or their
properties or obligations; and no consent, approval, authorization or order
of any court or governmental agency or body is required for the consummation
of the transactions contemplated herein and in the other agreements
previously referred to in this paragraph except as may be required under the
Act or under any state securities or Blue Sky Laws.
(f) Any certificate signed by an officer of Summit and delivered to
Welco pursuant to this Agreement shall be deemed a representation and
warranty by Summit to Welco, to have the same force and effect as stated
herein, as to the matters covered thereby.
(g) If any event relating to or affecting Summit or any of its
subsidiaries shall occur as a result of which it is necessary, in Welco's
opinion, to amend or supplement the Prospectus in order to make the
Prospectus not misleading in the light of the circumstances existing at the
time it is delivered to a purchaser, Summit undertakes to inform Welco of
such events within a reasonable time thereafter, and will forthwith prepare
and furnish to Welco, without expense to them, a reasonable number of copies
of an amendment or amendments or a supplement or supplements to the
Prospectus (in form and substance satisfactory to Welco) which will amend or
supplement the Prospectus so that as amended or supplemented it will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein in light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not
misleading.
(h) Summit hereby warrants and represents that it will offer the
preferred stock in accordance with the pricing formula set forth in Schedule
"A" which is incorporated by reference herein.
(i) All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of Summit submitted
pursuant hereto, shall remain operative and in full force and effect,
surviving the date of this Agreement.
6. AVAILABILITY OF INFORMATION. Summit hereby agrees to provide
Welco, at its expense, with all information and documentation with respect
to its business, financial condition and other matters as Welco may deem
relevant based on the standards of reasonableness and good faith and shall
request in connection with Welco's performance under this Agreement,
including, without limitation, copies of all correspondence with the
Commission, certificates of its officers, opinions of its counsel and
comfort letters from its auditors. The above-mentioned certificates,
opinions of counsel and comfort letters shall be provided to Welco as Welco
may request on the effective date of the Registration Statement and on the
Closing Date. Summit will make reasonably available to Welco, its auditors,
counsel, and officers and directors to discuss with Welco any aspect of
Summit which Welco may deem relevant. In addition, Summit, at Welco's
request, will cause to be delivered to Welco copies of all certificates,
opinions, letters and reports to be delivered to the underwriter or
underwriters, as the case may be, pursuant to any underwriting agreement
executed in connection with the Offering or otherwise, and shall cause the
person issuing such certificate, opinion, letter or report to authorize
Welco to rely thereon to the same extent as if addressed directly to Welco.
Summit represents and warrants to Welco that all such information and
documentation provided pursuant to this paragraph 6 will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statement therein not misleading. In addition, Summit
will promptly advise Welco of all telephone conversations with the
Commission which relate to or may affect the Offering.
7. INDEMNIFICATION.
(a) Subject to the conditions set forth below, and in addition to
any rights of indemnification and contribution to which Welco may be
entitled pursuant to any agreement among underwriters, underwriting
agreement or otherwise, and to the extent allowed by law, Summit hereby
agrees that it will indemnify and hold Welco and each person controlling,
controlled by or under common control with Welco within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or the rules and regulations thereunder
(individually, an "Indemnified Person") harmless from and against any and
all loss, claim, damage, liability, cost or expense whatsoever to which such
Indemnified Person may become subject under the Act, the Exchange Act, or
other federal or state statutory law or regulation, at common law or
otherwise, arising out of, based upon, or in any way related or attributed
to (i) this Agreement, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or Prospectus or
any other filing, report, document, release or communication, whether oral
or written, referred to in paragraph 5 hereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) any
application or other document executed by Summit or based upon written
information furnished by Summit filed in any jurisdiction in order to
qualify the Debentures under the securities or Blue Sky laws thereof, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or (iv) the breach of any representation or warranty made by Summit in this
Agreement. Summit further agrees that upon demand by an Indemnified Person
at any time or from time to time, it will promptly reimburse such
Indemnified Person for, or pay, any loss, claim, damage, liability, cost or
expense as to which Summit has indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this paragraph 7, any such
payment or reimbursement by Summit of fees, expenses or disbursement
incurred by an Indemnified Person in any proceeding in which a final
judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against such Indemnified Person as
a direct result of such person's negligence, bad faith or willful
misfeasance will be promptly repaid to Summit. In addition, anything in
this paragraph 7 to the contrary notwithstanding, Summit shall not be liable
for any settlement of any action or proceeding effected without its written
consent.
(b) Promptly after receipt by an Indemnified Person under
paragraph (a) above of notice of the commencement of any action, such
Indemnified Person will, if a claim in respect thereof is to be made against
Summit under paragraph (a), notify Summit in writing of the commencement
thereof; but the omission to so notify Summit will not relieve Summit from
any liability which it may have to any Indemnified Person otherwise than
under this paragraph 7 if such omission shall not have materially prejudiced
Summit's ability to investigate or to defend against such claim. In case
any such action is brought against any Indemnified Person, and such
Indemnified Person notifies Summit of the commencement thereof, Summit will
be entitled to participate therein and, to the extent that it may elect by
written notice delivered to the Indemnified Person promptly after receiving
the aforesaid notice from such Indemnified Person, to assume the defense
thereof with counsel reasonably satisfactory to such Indemnified Person;
provided, however, that if the defendants in any such action include both
the Indemnified Person and Summit or any corporation controlling, controlled
by or under common control with Summit, or any director, officer, employee,
representative or agent of any thereof, or any other "Qualified Independent
Underwriter" retained by Summit in connection with the Offering and the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to such other defendant, the Indemnified Person shall have the
right to select separate counsel to represent it. Upon receipt of notice
from Summit to such Indemnified Person of its election so to assume the
defense of such action and approval by the Indemnified Person of counsel,
Summit will not be liable to such Indemnified Person under this paragraph 7
for any fees of counsel subsequently incurred by such Indemnified Person in
connection with the defense thereof (other than the reasonable costs of
investigation subsequently incurred by such Indemnified Person) unless (i)
the Indemnified Person shall have employed separate counsel in accordance
with the provision of the next preceding sentence (it being understood,
however, that Summit shall not be liable for the expenses of more than one
separate counsel in any one jurisdiction representing the Indemnified
Person, which counsel shall be approved by Welco), (ii) Summit, within a
reasonable time after notice of commencement of the action, shall not have
employed counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person, or (iii) Summit shall have authorized in
writing the employment of counsel for the Indemnified Person at the expense
of Summit, and except that, if clause (i) or (iii) is applicable, such
liability shall be only in respect of the counsel referred to in such clause
(i) or (iii).
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph 7 is
due in accordance with its terms but is for any reason held by a court to be
unavailable from Summit to Welco on grounds of policy or otherwise, Summit
and Welco shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) to which Summit and Welco
may be subject in such proportion so that Welco is responsible for that
portion represented by the percentage that its fee under this Agreement
bears to the public offering price appearing on the cover page of the
Prospectus and Summit is responsible for the balance, except as Summit may
otherwise agree to reallocate a portion of such liability with respect to
such balance with any other person, including, without limitation, any other
"Qualified Independent Underwriter"; provided, however, that (i) in no case
shall Welco be responsible for any amount in excess of the fee set forth in
paragraph 4 above and (ii) no person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the Act shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (c), any person
controlling, controlled by or under common control with Welco, or any
partner, director, officer, employee, representative or any agent of any
thereof, shall have the same rights to contribution as Welco and each person
who controls Summit within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, each officer of Summit who shall have signed the
Registration Statement and each director of Summit shall have the same
rights to contribution as Summit, subject in each case to clause (i) of this
paragraph (c). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim for contribution may be made against
the other party under this paragraph (c), notify such party from whom
contribution may be sought, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any other
obligation it or they may have hereunder or otherwise than under this
paragraph (c). The indemnity and contribution agreements contained in this
paragraph 7 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Indemnified Person or
termination of this Agreement.
8. AUTHORIZATION BY SUMMIT. Summit represents and warrants to Welco
that this Agreement has been duly authorized, executed and delivered by
Summit and constitutes a valid and binding obligation of Summit.
9. AUTHORIZATION BY MIS. MIS represents and warrants to Welco that
this Agreement has been duly authorized, executed and delivered by MIS and
constitutes a valid and binding obligation of MIS.
10. AUTHORIZATION BY WELCO. Welco represents and warrants to Summit
that this Agreement has been duly authorized, executed and delivered by
Welco and constitutes a valid and binding obligation of Welco.
11. NOTICE. Whenever notice is required to be given pursuant to this
Agreement, such notice shall be in writing and shall be mailed by first
class mail, postage prepaid, addressed (a) if to Welco, at X.X. Xxx 000, Xxx
Xxxxxxx Xxxxxx, Xxxx Cynwyd, PA 19004-3207, Attention: Xxxxxxx X. Xxxxxxx,
and (b) if to Summit or Metropolitan Investment Securities, Inc., at West
000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxxx,
Assistant Corporate Counsel.
12. GOVERNING LAW. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with and governed by
the laws of the State of Washington applicable to agreements made and to be
performed wholly within such jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above mentioned.
SUMMIT SECURITIES, INC.
By:__________________________________________
Xxx Xxxxxx, President
METROPOLITAN INVESTMENT SECURITIES, INC.
By:__________________________________________
Xxxxx Xxxxxxx, Secretary
WELCO SECURITIES, INC.
By:__________________________________________
Xxxxxxx X. Xxxxxxx, President
SCHEDULE A
The opinion of Welco is conditioned upon Summit's undertaking to
maintain the distribution rate of the Preferred Stock in accordance with the
formula set forth below:
Notwithstanding anything to the contrary herein the Applicable Rate for
any monthly distribution period shall not, in any event, be less than 6% or
greater than 14% per annum. The Board of Directors may, however, by
resolution, authorized distributions in excess of the Applicable Rate. The
Applicable Rate for any monthly distribution period shall be the highest of
the Treasury Xxxx Rate, the Ten Year Constant Maturity Rate and the Twenty
Year Constant Maturity Rate (each as hereinafter defined) plus one half of
one percentage point for such dividend period. In the event that the
Company determines in good faith that for any reason one or more of such
rates cannot be determined for any distribution period, then the Applicable
Rate for such period shall be the higher of whichever of such rates can be
so determined.
EXHIBIT B
VARIABLE RATE, CUMULATIVE
PREFERRED STOCK, SERIES S-2
PRICING
For Distributions Payable On: _____________________________________
Distributions Record Date: ________________________________________
Effective
Date Date Average Rate
3 Mo. Treasury Xxxx _____________________________ +1.5%
10 Yr Constant Rate _____________________________ +1.5%
20 Year _____________________________ +1.5%
HIGHEST EFFECTIVE RATE: _______________________________
MONTHLY DISTRIBUTION PER SHARE: _______________________
As resolved by the Board of Directors, distribution will be deemed declared
on the 1st day of each month, payable on the 20th of each month to the
holders of record on the 5th of each month.
_______________________________________________________
Authorized Signature
