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-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 333- ; 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
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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.
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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;
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(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.
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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
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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,
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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.
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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 ▇.▇. ▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Cynwyd, PA 19004-3207, Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, and (b) if to Summit or Metropolitan Investment Securities, Inc.,
at West ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, 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:__________________________________________
▇▇▇ ▇▇▇▇▇▇, President
METROPOLITAN INVESTMENT SECURITIES, INC.
By:__________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Secretary
WELCO SECURITIES, INC.
By:__________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
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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 ▇▇▇▇ 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.
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EXHIBIT B
VARIABLE RATE, CUMULATIVE
PREFERRED STOCK, SERIES S-3
PRICING
For Distributions Payable On:
_____________________________________
Distributions Record Date: ________________________________________
Applicable
Effective
Date Date Average Rate Rate*
3 Mo. Treasury ▇▇▇▇ ________________________ +.5%
+1%
10 Yr Constant Rate ________________________ +.5%
+1%
20 Year ________________________ +.5%
+1%
HIGHEST APPLICABLE 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.
* Includes any distribution authorized by the Board in excess of
the Applicable Rate.
_______________________________________________________
Authorized Signature