EXHIBIT 1.02
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
SUMMIT SECURITIES, INC.
Preferred Stock, Series S-3
This agreement made as of the 30th day of December, 1999, among Summit
Securities, Inc., a Idaho corporation ("Summit"), Metropolitan Investment
Securities, Inc., a Washington corporation ("MIS"), and Cruttenden Xxxx
Incorporated, a California corporation ("Cruttenden").
WITNESSETH:
WHEREAS, Summit intends to offer 200,000 shares of it Preferred Stock,
designated as "Variable Rate Cumulative Preferred Stock, Series S-3,"
(hereinafter referred to as "Preferred Stock"), which will be offered in
reliance on a registration statement filed on Form S-2 with the Securities and
Exchange Commission; and,
WHEREAS, MIS, a broker/dealer and subsidiary of Summit and a member of the
National Association of Securities Dealers ("NASD"), will be engaged as the sole
managing agent for Summit; and,
WHEREAS, pursuant to subparagraph (c) of Rule 2720 of the NASD Conduct
Rules, MIS, as a NASD member, may participate in such underwriting only if the
yield at which the Preferred Stock offered to the public is not lower than the
yield recommended by a "Qualified Independent Underwriter" as that term is
defined in Rule 2720, subparagraph (b)(15), of the NASD Conduct Rules, 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 Cruttenden to serve as such a "Qualified Independent Underwriter"
in connection with this offering of Preferred Stock;
NOW, THEREFORE, in consideration of the recitations set forth above, and
the terms, promises, conditions, and covenants herein contained, the parties
hereby contract and agree as follows:
Definitions
As hereinafter used, except as the context may otherwise require, the term
"Registration Statement" means the registration statement on Form S-2 (including
the related preliminary prospectus, financial statements, exhibits and all other
documents to be filed as a part thereof or incorporated therein) for the
registration of the offer and sale of the Preferred Stock under the Securities
Act of 1933, as amended, and the rules and regulations thereunder (the "Act")
filed with the Securities and Exchange Commission (the "Commission"), and any
amendment thereto, and the term "Prospectus" means the prospectus including any
preliminary or final prospectus and any materials incorporated by reference into
and attached to the 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.
Section 1. Rule 2720 Requirement. Cruttenden hereby confirms its agreement
as set forth in subparagraph (b)(15)(F) of Rule 2720 of the NASD Conduct Rules
and represents that, as appropriate, Cruttenden satisfies or at the times
designated in such subparagraph (l5) will satisfy the other requirements set
forth therein or will receive an exemption from such requirements from the NASD.
Section 2. Consent. Cruttenden hereby consents to being 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 Cruttenden 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 Cruttenden's prior written consent with respect
to form and substance.
Section 3. Pricing Formula and Recommendation Letter. Cruttenden agrees to
render a written letter of recommendation 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 "A" and "B," copies of
which are attached hereto, and incorporated herein by reference (the "Pricing
Recommendation Letter"). It is understood and agreed by Cruttenden 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 filed as an exhibit to the
Registration Statement referred to above. Summit, through MIS, will continue to
offer the securities according to the terms and conditions of said agreement,
including, without limitation, Schedules "A" and "B" in accordance with this
Agreement. Cruttenden reserves the right to review and amend its Pricing
Recommendation Letter 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 under
this registration shall terminate or otherwise lapse under operation of law.
Section 4. Fees and Expense. It is agreed that Cruttenden shall be paid a
fee in the amount of $13,333 payable upon delivery of the Pricing Recommendation
Letter referred to in paragraph 3 above.
Section 5. Material Facts. Summit represents and warrants to Cruttenden 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,
2
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 the 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 Cruttenden or to
the services to be performed by Cruttenden 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, except as
may otherwise be disclosed in the Registration Statement.
(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 the
Closing Date 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.
3
(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 laws.
(f) Any certificate signed by an officer of Summit and delivered to
Cruttenden pursuant to this Agreement shall be deemed a representation and
warranty by Summit to Cruttenden, 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 Cruttenden'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 Cruttenden of such events within a
reasonable time thereafter, and will forthwith prepare and furnish to
Cruttenden, 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 Cruttenden) 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.
Section 6. Availability of Information. Summit hereby agrees to provide
Cruttenden, at its expense, with all information and documentation with respect
to its business, financial condition and other matters as Cruttenden may deem
relevant based
4
on the standards of reasonableness and good faith and shall request in
connection with Cruttenden'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 Cruttenden as Cruttenden may request on the
effective date of the Registration Statement and on the Closing Date. Summit
will make reasonably available to Cruttenden, its auditors, counsel, and
officers and directors to discuss with Cruttenden any aspect of Summit which
Cruttenden may deem relevant. In addition, Summit, at Cruttenden's request, will
cause to be delivered to Cruttenden 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 Cruttenden to rely thereon to the same
extent as if addressed directly to Cruttenden. Summit represents and warrants to
Cruttenden 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 Cruttenden of all telephone conversations
with the Commission which relate to or may affect the Offering.
Section 7. Indemnification.
(a) Subject to the conditions set forth below, and in addition to any
rights of indemnification and contribution to which Cruttenden 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 Cruttenden and each person
controlling, controlled by or under common control with Cruttenden 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 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
5
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 Cruttenden), (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
6
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) Subject to the conditions set forth below, and in addition to any
rights of indemnification and contribution to which Summit may be entitled
pursuant to any agreement among underwriters, underwriting agreement or
otherwise, and to the extent allowed by law, Cruttenden hereby agrees that
it will indemnify and hold Summit and each person controlling, controlled
by or under common control with Summit 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 the failure of Cruttenden to be a "qualified independent underwriter" as
contemplated by this Agreement. Cruttenden 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 Cruttenden has indemnified such
person pursuant hereto. Notwithstanding the foregoing provisions of this
paragraph 7, any such payment or reimbursement by Cruttenden 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 Cruttenden. In
addition, anything in this paragraph 7 to the contrary notwithstanding,
Cruttenden shall not be liable for any settlement of any action or
proceeding effected without its written consent. Cruttenden and Summit
agree that they shall each follow the procedures set forth in paragraph
7(b) with respect to any claim against Cruttenden hereunder.
(d) 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 Cruttenden on grounds of policy or otherwise,
Summit and Cruttenden 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 Cruttenden may be subject in such proportion so that Cruttenden
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 Cruttenden be responsible for
any amount in
7
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 Cruttenden,
or any partner, director, officer, employee, representative or any agent of
any thereof, shall have the same rights to contribution as Cruttenden 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.
Section 8. Authorization by Summit. Summit represents and warrants to
Cruttenden that this Agreement has been duly authorized, executed and delivered
by Summit and constitutes a valid and binding obligation of Summit.
Section 9. Authorization by MIS. MIS represents and warrants to
Cruttenden that this Agreement has been duly authorized, executed and delivered
by MIS and constitutes a valid and binding obligation of MIS.
Section 10. Authorization by Cruttenden. Cruttenden represents and
warrants to Summit that this Agreement has been duly authorized, executed and
delivered by Cruttenden and constitutes a valid and binding obligation of
Cruttenden.
Section 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 Cruttenden Xxxx Incorporated,
at 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000, Attention: Xxxxxx X.
Xxxxxxxxxx and (b) if to Summit, at 000 X. 0xx. Xxxxxx - Department 115000,
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxx, Assistant Corporate
Counsel.
Section 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.
8
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: /s/ Xxx Xxxxxx
--------------
Xxx Xxxxxx, President
METROPOLITAN INVESTMENT SECURITIES, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------
Xxxxx Xxxxxxx, Secretary
CRUTTENDEN XXXX INCORPORATED
By: /s/ Xxxxxx Xxxxxxx
------------------
Xxxxxx Xxxxxxx, Executive Vice President
9
SCHEDULE A
Summit Securities, Inc.
The Pricing Recommendation Letter of CRUTTENDEN 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.
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
