FORM OF
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
This agreement made as of the , 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 $40,000,000 of Investment
Certificates Series A (hereinafter referred to as "Certificates"),
which will be offered in reliance on registration statement filed on
Form S-2, bearing SEC file number ; and,
WHEREAS, MIS, an affiliate of Summit and a member of the National
Association of Securities Dealers ("NASD"), will be engaged as the
managing sales agent for 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 yield at which the Certificates offered to
the public is not lower than the yield 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
Certificates; 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 Certificates 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) will satisfy 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 yields below which Summit's Certificates may
not be offered based on the pricing formula that is set forth in
Exhibits "A" and "B," attached hereto and incorporated herein by
reference. It is understood and agreed that the securities to which
this Agreement relates will be offered on a continuous, best efforts
basis by MIS, as the managing sales agent of Summit pursuant to the
Selling Agreement in effect between MIS and Summit which is filed as
an exhibit to the Registration Statement referred to above. Summit,
will continue to offer the Certificates according to the terms and
conditions of said Selling Agreement in accordance with this
Agreement, including, without limitation, Exhibits "A" and "B". Welco
reserves the right to review and amend its opinion upon the filing of
any post-effective amendment to the 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 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 the receipt of which is hereby acknowledged. It is
further agreed that Welco shall be paid an additional amount of
$30,000 at the time the pricing opinion and pricing formula are
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 or any amendment thereto
becomes effective, 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, 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 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 its
assets and properties described therein as being owned by it, 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 that
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,
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 a foreign corporation and is in good standing in all
jurisdictions in which the nature of the business transacted by it or
its ownership of properties or assets makes 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 its certificate 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 it is
a party or by which it 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 either 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 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 MIS of such
events within a reasonable time thereafter, and will forthwith prepare
and furnish to MIS, 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
Certificates described herein in accordance with the pricing formula
set forth in Exhibits "A" and "B" hereto.
(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. 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 Certificates
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
sub- 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 W. 000 Xxxxxxx Xxx., Xxxxxxx, XX 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 Idaho 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
EXHIBIT A
The opinion of Welco is conditioned upon Summit's undertaking to
maintain the rates on its Certificates at least equal to an "assumed
floor." Based upon the pricing formula described below:
1. The interest rate to be paid on the Certificates shall be
fixed by Summit from time to time. However, the rate shall
not be lower than the computation made per the worksheet on
Exhibit B, which is attached and incorporated by reference
herein.
2. The "assumed floor" for 6 to 11 month Certificates shall be
at least 1.0% above the lesser of the interest rate on the 6
month U.S. Treasury Bills, on a discount basis, based upon
the auction average (which is published widely in newspapers
throughout the country, normally on the day following the
auction) and a composite average of the offering rates on 6
month certificates of deposit currently being offered by
banks and savings institutions in the northwestern section
of the United States. For purposes of this composite
average of certificate of deposit rates, the rates being
offered by the following institutions shall be considered
initially:
a. First Interstate Bank of Washington
b. Great American Bank
c. U.S. Bank of Washington
d. Security Pacific Bank of Washington
e. Seattle First National Bank
x. Xxxxxxxxxx Mutual Savings Bank
x. Xxxxxxxxxx Trust Bank
Welco and Summit agree to review on an ongoing basis the
group which comprises the composite average, and may
substitute another institution in the composite group from
time-to-time by mutual agreement, as the case may be.
3. The "assumed floor" for 60 to 120 month Certificates shall
be computed in like manner as that described in paragraph
"2" above, except that the latest auction average on 5 year
U.S. Treasury Notes shall be considered in place of the 6
month U.S. Treasury Bills, and 5 year certificates of
deposit currently offered in the composite group shall be
considered in lieu of the 6 month rate.
4. Rates on 12 to 23 month, 24 to 35 month, 36 to 47 month and
48 to 59 month Certificates shall be at least equal to the
interpolated differences between the computation of the
"assumed floor" of 6 to 11 month Certificates and 60 to 120
month Certificates, based upon the computation set forth in
Exhibit B.
5. Rates on Certificates payable in installments of principal
and interest shall be no lower than .25% below the "assumed
floor" for 60 to 120 month Certificates.
6. The computation of the "assumed floor" shall be made
monthly, as of the first Tuesday of each month, or at such
other times during any month that Summit causes the offering
rates to change from those in effect on the first Tuesday of
each month ("the computation date"). Summit agrees to
furnish Welco with a computation of the "assumed floor" by
completing the worksheet on Exhibit B. Should the offering
rates at that time on Summit's Certificates be less than the
"assumed floor" as computed, Summit agrees to raise the
rates on its Certificates to at least the "assumed floor"
within 10 calendar days of the computation date. Should
Summit fail to raise its offering rates within the 10 day
period referred to above, Welco reserves the right, in its
uncontrolled discretion, to withdraw its opinion regarding
the offering rates on the Certificates.
EXHIBIT B
Summit Securities
PRICING FORMULA
C.D. RATE GOVERNMENT RATE
Average rate between a composite of 8 selected Most current of 8 selected auction rate
Banks and Savings and Loans as of the 1st Tuesday available on the 1st Tuesday of each month.
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
CERTIFICATE OF DEPOSIT GOVERNMENT RATE ENTER LESSER SUMMIT'S
(CD) CALCULATION CALCULATION OF COLUMN A OR B ASSUMED FLOOR CURRENT RATE
5 yr CD rate = ________ 5 yr Govt Rate = ________
6 mo CD Rate = ________ 6 mo Govt Rate = ________
DIFFERENCE = ________ DIFFERENCE = ________
x .20 x .20
________ ________
Differential = ________ Differential = ________
(enter in (a) (enter in (a)
below) below)
6 mo (actual) 6 mo (actual)
rate = ________ rate = ________ ____________________ + 1% ________________
_________
(a) + (a) + 6-11 mos.
________ ________
1 year rate = ________ 1 year rate = ________ ____________________ + 1% ________________
__________
(a) + (a) + 12-23
mos.
________ ________
2 year rate = ________ 2 year rate = ________ ____________________ + 1% ________________
_________
(a) + (a) + 24-35
mos.
________ ________
3 year rate = ________ 3 year rate = ________ ____________________ + 1% ________________
_________
(a) + (a) + 36-47
mos.
________ ________
4 year rate = ________ 4 year rate = ________ ____________________ + 1% ________________
_________
(a) + (a) + 48-59
mos.
________ ________
5 - 10 year 5 year
(actual) rate ________ (actual) rate ________ ____________________ + 1% ________________
__________
60-120
mos.
- .25
________________
INSTALLMENT PAYMENTS (Floor equal to Five Yr. rate MINUS .25).........................
________________ _________*
Install.
* The rate for installment payment bonds is .5% less than those specified for comparable terms.
