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This agreement made as of the day of August xx, 1996, by and between Walnut
Equipment Leasing Co., Inc., a Delaware corporation ("Walnut"), Welco
Securities, Inc., a Nevada corporation ("Welco"), and J.E. Liss & Company, Inc.,
a Wisconsin Corporation ("Liss").
WITNESSETH:
WHEREAS, Walnut intends to offer up to $40,000,000 in Certificates
(hereinafter referred to as "Debentures"), which will be offered in reliance on
a registration statement filed as Form S-2, bearing file number 333-xxxxx; and,
WHEREAS, Welco, a member of the National Association of Securities Dealers
("NASD"), will be engaged as the managing selling agent for its affiliate,
Walnut; and,
WHEREAS, pursuant to Section 3 of Schedule E of the By-Laws of the NASD,
Welco, as a NASD member, may participate in such underwriting only if the yield
at which the Debentures offered to the public is not lower than the yield
recommended by a "Qualified Independent Underwriter" as that term is defined in
Section 2(1) (1) through 2(1) (7) of Schedule E to the By-Laws 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 Walnut
is retaining Liss to serve as such a "Qualified Independent Underwriter" in
connection with this offering of Debentures;
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 debentures 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. SCHEDULE E REQUIREMENT. Liss hereby confirms its agreement as set
forth in clause (6) of paragraph (1) of Section 2 of Schedule E of the By-Laws
of the NASD and represents that, as appropriate, Liss satisfies or at the times
designated in such paragraph (1) the other requirements set forth therein or
will receive an exemption from such requirements from the NASD.
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2. CONSENT. Liss hereby consents to be named in the Registration
Statement and Prospectus as having acted as a "Qualified Independent
Underwriter" solely for the purposes of Schedule E referenced herein. Except
as permitted by the immediately preceding sentence or to the extent required by
law, all references to Liss 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 Walnut or any
corporation controlling, controlled by or under common control with Walnut, or
by any director, officer, employee, representative or agent of any thereof,
shall be subject to Liss' prior written consent with respect to form and
substance.
3. PRICING FORMULA AND OPINION. Liss agrees to render a written opinion
as to the yields below which Walnut's Debentures may not be offered based on
the pricing formula that is set forth in Schedule "A", copies of which are
attached hereto, and incorporated herein by reference. Attached hereto as
Exhibit B are the rates offered on these securities as of the date first
written above. It is understood and agreed by Liss that the securities to
which this Agreement relates will be offered on a continuous, best efforts
basis by Welco, as the managing selling agent of Walnut pursuant to the selling
agreement in effect between Welco and Walnut which are filed as exhibits to the
Registration Statement referred to above. Walnut, through Welco, will continue
to offer the debt securities according to the terms and conditions of said
agreement, including, without limitation, Schedule "A" in accordance with this
Agreement. Liss 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, including without limitation an event which in the opinion of Liss
results in the pricing formula in Schedule A being rendered a less than
accurate prediction of reasonable market rates for the Certificates 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 agreed that Liss shall be paid an amount of
Twenty-Five Thousand Dollars ($25,000.00) at the time the pricing opinion and
pricing formula are rendered, concurrent with the closing. Liss 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 Liss in conjunction with Walnut's proposed
offering which is the subject of this Agreement shall be reimbursed to Liss by
Walnut at closing on an accountable basis upon receipt of an itemization of
said expenses. Any fees to be paid as a result of an amendment or restatement
of the pricing formula shall be separately negotiated.
5. MATERIAL FACTS. Walnut represents and warrants to Liss 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, to and including the date on which payment for, and delivery of, the
Debentures to be sold in the Offering is made by the underwriter or
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underwriters, as the case may be, participating in the Offering and by Walnut
(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. Walnut further
represents and warrants that any future filing, report, document, release or
communication which in any way refers to Liss or to the services to be
performed by Liss 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.
Walnut further warrants and represents that:
(a) All leases, contracts and agreements referred to in or filed as
exhibits to the Registration Statement to which Walnut or its subsidiaries is a
party or by which any of them is bound are in full force and effect.
(b) Walnut 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 the Company and its subsidiaries have no material
leased properties except as disclosed in the Prospectus.
(c) Walnut is duly organized under the laws of the State of Delaware
and, as of the effective date of the Registration Statement and at Closing
Walnut will be validly existing and in good standing under the laws of the
State of Delaware with full corporate power and authority to own its properties
and conduct its business to the extent described in the Registration Statement
and Prospectus; Walnut and its subsidiaries are 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 Walnut is as set forth in the Prospectus and the description
in the Prospectus of the capital stock of Walnut conforms with and accurately
describes the rights set forth in the instruments defining the same;
(d) Walnut is not in violation of its respective certificates of
incorporation or By-Laws 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 party or by which any of
them is bound.
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(e) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary corporate action on the part of Walnut
and Welco 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 By-Laws of Walnut or Welco, or any deed or
trust, lease, sublease, indenture, mortgage, or other agreement or instrument
to which Walnut or Welco 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 Walnut or Welco 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 Walnut and delivered to
Liss pursuant to this Agreement shall be deemed a representation and warranty
by Walnut to Liss, to have the same force and effect as stated herein, as to
the matters covered thereby.
(g) If any event relating to or affecting Walnut or any of its
subsidiaries shall occur as a result of which it is necessary, in Liss'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, Walnut undertakes to inform Liss of such events
within a reasonable time thereafter, and will forthwith prepare and furnish to
Liss, 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 Liss) 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 not misleading in light of the circumstances existing at the
time the Prospectus is delivered to a purchaser.
(h) Walnut hereby warrants and represents that it will offer the debt
securities described herein in accordance with the pricing formula set forth in
Schedule "A" which is incorporated by reference herein.
(i) All representations, warrantees and agreements contained in this
Agreement, or contained in certificates of officers of Walnut submitted
pursuant hereto, shall remain operative and in full force and effect, surviving
the date of this Agreement.
6. AVAILABILITY OF INFORMATION. Walnut hereby agrees to provide Liss, at
their 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 Liss'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 Liss as Liss may request on the effective date of the
Registration Statement and on the Closing Date. Walnut will make reasonably
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available to Liss, its auditors, counsel, and officers and directors to discuss
with Liss any aspect of Walnut which Liss may deem relevant. In addition,
Walnut, at Liss' request, will cause to be delivered to Liss 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 Liss to
rely thereon to the same extent as if addressed directly to Liss. Walnut
represents and warrants to Liss 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 misleading. In addition, Walnut will promptly advise Liss 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 Liss may be entitled
pursuant to any agreement among underwriters, underwriting agreement or
otherwise, and to the extent allowed by law, Walnut hereby agrees that it will
indemnify and hold Liss and each person controlling, controlled by or under
common control with Liss within the meaning of Section 15 of the Act or Section
20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
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 material fact required to be
stated therein or necessary to make the statements therein not misleading,
(iii) any application or other document executed by Walnut or based upon
written information furnished by Walnut 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 Walnut in this
Agreement. Walnut 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 Walnut has indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this paragraph 7, any such payment or reimbursement by
Walnut 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 Walnut. In addition, anything
in this paragraph 7 to the contrary notwithstanding, Walnut shall not be liable
for any settlement of any action or proceeding effected without its written
consent.
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(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 Walnut under
paragraph (a), notify Walnut in writing of the commencement thereof; but the
omission to so notify Walnut will not relieve Walnut 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 Walnut'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
Walnut of the commencement thereof, Walnut 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 reasonable
satisfactory to such Indemnified Person; provided,_however, that if the
defendants in any such action include both the Indemnified Person and Walnut or
any corporation controlling, controlled by or under common control with Walnut,
or any director, officer, employee, representative or agent of any thereof, or
any other "Qualified Independent Underwriter" retained by Walnut 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 Walnut to such Indemnified Person of its election so to assume
the defense of such action and approval by the Indemnified Person of counsel,
Walnut 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
Walnut 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 Liss), (ii) Walnut, 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) Walnut shall have authorized in writing the employment of counsel for the
Indemnified Person at the expense of Walnut, 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 Walnut to Liss on grounds of policy or otherwise, Walnut and
Liss 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 Walnut and Liss may be subject in
such proportion so that Liss 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 Walnut is responsible
for the balance, except as Walnut 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 Liss be responsible for any
amount
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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 Liss, or any partner,
director, officer, employee, representative or agent thereof, shall have the
same rights to contribution as Liss and each person who controls Walnut within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
officer of Walnut who shall have signed the Registration Statement and each
director of Walnut shall have the same rights to contribution as Walnut,
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 Walnut. Walnut represents and warrants to Liss that
this Agreement has been duly authorized, executed and delivered by Walnut and
constitutes a valid and binding obligation of Walnut.
9. AUTHORIZATION BY WELCO. Welco represents and warrants to Liss that
this Agreement has been duly authorized, executed and delivered by Welco and
constitutes a valid and binding obligation of Welco.
10. AUTHORIZATION BY LISS. Liss represents and warrants to Walnut that
this Agreement has been duly authorized, executed and delivered by Liss and
constitutes a valid and binding obligation of Liss.
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 One Belmont Avenue, Suite
105, Bala Cynwyd, PA 19004-9967, Attention: Kenneth S. Shapiro, and (b) if to
Liss, at Pfister Hotel, 424 E. Wisconsin Avenue, Milwaukee, WI 53202,
Attention: Jerome E. Liss.
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 Commonwealth of Pennsylvania applicable to agreements made and to be
performed wholly within such jurisdiction.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above mentioned.
WALNUT EQUIPMENT LEASING CO., INC.
By:
----------------------------------------
William Shapiro, President
By:
----------------------------------------
Deljean Shapiro, Secretary
WELCO SECURITIES, INC.
By:
----------------------------------------
Kenneth S. Shapiro, President
By:
----------------------------------------
William Shapiro, Secretary
J.E. LISS & COMPANY, INC.
By:
----------------------------------------
Jerome E. Liss, President
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EXHIBIT_A
The opinion of Liss is conditioned upon Walnut'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 Walnut
from time to time in accordance with the Prospectus.
2. The "assumed floor" for 6 to 24 month Certificates shall be at least 1%
above 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.)
3. The "assumed floor" for 25 to 60 month Certificates shall be at least 2%
above the 6-month U.S. Treasury Bill rate.
4. The "assumed floor" for Certificates over 60 months shall be at least 3%
above the U.S. Treasury Bill rates.
5. The "assumed floor" for Demand Certificates shall be at least 1% above the
interest rate on 6 month U.S. Treasury Bills.
6. The manner in which the 6-month U.S. Treasury Bill rate is to be
determined is to be disclosed in the "DESCRIPTION OF SECURITIES" section
of the Prospectus.