FORM OF AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
SUMMIT SECURITIES, INC.
Preferred Stock, Series S-3
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-3,"
(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 ___________________; and,
WHEREAS, MIS, a wholly owned broker/dealer of Summit and a member of the
National Association of Securities Dealers ("NASD"), will be engaged as the
managing agent for Summit and MIS may enter into Selected Dealer Agreements
with other qualified broker/dealers; 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:
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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 sub-paragraph
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 (l5) 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 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 Schedules
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"A" and "B" 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
continuous, best efforts basis by MIS, as the managing agent,
pursuant to the Selling Agreement in effect between MIS and Summit
which is an 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 Selling
Agreement, and in accordance with this Agreement, including,
without limitation, Schedules "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 an accountable basis in the maximum amount of $5,000.
Such expenses shall not include payment for salaries, supplies, or
similar expenses of WELCO incurred in the normal conduct of
business. It is further agreed that WELCO shall be paid a fee in
the amount of $15,000 payable as follows:
1) $7,500 payable at the time the pricing opinion is rendered,
at closing on the effective date of the registration, and
2) $750 payable monthly for ten consecutive months on the first
day of each month beginning March 1, 1998 provided that Welco
continues to serve as the "Qualified Independent Underwriter"
on each date a monthly payment is due.
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
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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 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
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
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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 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
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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 WELCO of such events within a
reasonable time thereafter, and will forthwith prepare and
furnish to WELCO, without expense to it, a reasonable
number of copies of any 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
that is set forth in Schedules "A" and B which are
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. Summit will make
reasonably available to WELCO, its auditors, counsel,
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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
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other document executed by Summit or based upon written
information furnished by Summit filed in any jurisdiction
in order to qualify the Preferred Stock 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
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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
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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.
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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
SECURITIES, INC., Attention: Xxxxxxx X. Xxxxxxx, Xxx Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxx Xxxxxx, XX 00000-0000 and (b) if to Summit
or Metropolitan Investment Securities, Inc., at 000 X. 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
SCHEDULE A
Summit Securities, Inc.
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 defined in the Preferred Stock
Authorizing Resolution) 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.
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SCHEDULE B
Summit Securities, Inc.
VARIABLE RATE, CUMULATIVE PREFERRED STOCK, SERIES S-3
PRICING
For Distributions Payable On: _________________________________
Distributions Record Date: ____________________________________
Applicable Effective Resultant
Date Date Average Rate Rate* Rate
3 Mo Treasury Xxxx _____________________ +.5% +2% _________
10 Yr Constant Rate _____________________ +.5% +2% _________
20 Yr Constant Rate _____________________ +.5% +2% _________
HIGHEST RESULTANT RATE: ___________________________
MONTHLY DISTRIBUTION PER SHARE: ____________________
(Highest applicable rate divided by 12)
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.
* Includes any distribution authorized by the Board in excess of the
Applicable Rate.
_______________________________________________________
Authorized Signature
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