April 11, 2003 EXHIBIT 2
Antares Capital Fund III Limited Partnership
0000 Xxxxx Xxxxx Xxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxx 00000
Attn: Xx. Xxxxxxxx Xxxxxx
Re: Purchase of 4,000,000 shares of common stock of Summit Brokerage
Services, Inc.
Gentlemen:
This letter supplements that certain Stock Purchase Agreement by and
between Summit Brokerage Services, Inc., a Florida corporation (the "Company"),
and Antares Capital Fund III Limited Partnership, a Delaware limited partnership
(the "Purchaser"), dated as of April 11, 2003 (the "Stock Purchase Agreement"),
and that certain Co-Sale and Voting Rights Agreement between the Company and
Xxxxxxxx X. Xxxxx ("Leeds"), dated as of April 11, 2003 (the "Co-Sale
Agreement"). Capitalized terms used herein and not otherwise defined shall have
the same meanings ascribed to them in the Stock Purchase Agreement.
1. Compensation - Leeds. The Company and the Purchaser agree that, if
there are proposed changes to the amended and restated employment agreement
dated May 22, 2002 between the Company and Leeds with respect to an increase in
salary and/or bonus compensation (i.e., in cash and/or Securities) in excess of
a Threshold Amount (as defined below), then such proposed change will require
the unanimous consent of (i) all Independent Directors comprising all of the
members of the Company's compensation committee of the Board of Directors, and
(ii) until the Purchaser's designee becomes a member of such committee, the
consent of the Purchaser. The foregoing consent requirements shall be triggered
in each instance if such changes provide for compensation that exceeds the
following amounts: with respect to base salary - $75,000 in 2003, $100,000 in
2004, and $125,000 in 2005; and with respect to an annual bonus - 10% of the
Company's earnings before interest, taxes, depreciation and amortization for
each of 2003, 2004 and 2005 (all such salary and bonus amounts shall be referred
to individually as a "Threshold Amount" and collectively as the "Threshold
Amounts"); provided, however, for purposes of calculating any of the foregoing
Threshold Amounts, no value will be placed on salary or bonus compensation in
the form of Securities where the purchase price for such Securities (or the
exercise price, if an option, warrant or other form of derivative security) is
no less than the greater of (i) $.25 per share (as such price may be adjusted
from time to time pursuant to any split, subdivision, combination,
recapitalization or other similar transaction), and (ii) the fair market value
per share.
2. Compensation - Xxxxxx. Purchaser acknowledges that Xxxxxx X. Xxxxxx
("Xxxxxx"), a director of the Company and its Executive Vice President, will be
paid an initial salary of $100,000 per year, together with such other
compensation or bonuses as the Chief Executive Officer of the Company may
decide. Xxxxxx will also be granted options to purchase shares of the Company's
common stock at an exercise price not below the greater of (i) $.25 per share
(as such price may be adjusted from time to time pursuant to any split,
subdivision, combination, recapitalization or other similar transaction), and
(ii) the fair market price of the
Antares Capital Fund III Limited Partnership
April 11, 2002
Page -2-
Company's Common Stock. The options granted shall vest according to the
following schedule; provided, however, that some or all of the options may vest
upon a change of control:
Date Number Vested
---- -------------
Upon Issuance 150,000
One Year Anniversary 200,000
Two Year Anniversary 125,000
Three Year Anniversary 125,000
3. Holding Company Reorganization. Purchaser hereby acknowledges that the
Company may reorganize into a holding company structure (the "Reorganization")
pursuant to which the Company will be seeking approval of shareholders holding a
majority of the issued and outstanding Common Stock under a combined
prospectus/proxy statement pursuant to a registration statement filed with the
Commission on a Form S-4. If shareholders approve such a Reorganization, the
Company's holders of Common Stock will receive one share of common stock of the
holding company (the "Parent') for each share of Common Stock of the Company,
and holders of the Company's Series A Preferred Stock will receive one share of
Series A Preferred Stock in the Parent for each share of Series A Preferred
Stock in the Company. The Parent will become the reporting company under the
Exchange Act and its Articles of Incorporation and Bylaws will be the same as
the Company's; further, the Parent will become the Company's successor to its
outstanding option plans, options agreements and warrants. The Company will
continue the same business as it is now conducting, as will its subsidiaries;
however, the Company will conduct such business as a wholly-owned subsidiary of
the Parent. In the event the Company's shareholders are asked to approve a
Reorganization to be effectuated in accordance with the immediately preceding
description of the terms and conditions thereof, Purchaser hereby agrees to vote
in favor of such Reorganization so long as Xxxxxxxx X. Xxxxx also votes all of
the Common Stock he directly or indirectly has power to vote in favor of such
Reorganization.
Each of the Purchaser, Leeds and the Company hereby agrees and
acknowledges that: (i) any and all references made to the Common Stock and to
the Common Stock Shares in the Stock Purchase Agreement, the Registration Rights
Agreement and/or the Co-Sale Agreement, including, without limitation, any and
all amendments thereto (collectively, the "Transaction Documents" and each a
"Transaction Document"), shall be deemed to include, without limitation, each
and all shares of capital stock of the Company or any successor in interest or
assign of the Company (whether by merger, consolidation, Reorganization or
otherwise) that may be issued in respect of, in exchange for, or in substitution
for the Common Stock and/or the Common Stock Shares, as applicable, including,
but not limited to, shares of the capital stock of the Parent in a
Reorganization; (ii) in the event of the consummation of a Reorganization, any
and all references made in each and any Transaction Documents to the agreements,
covenants and/or obligations of the Company or Summit shall thereafter be deemed
to be references to the Parent; and (iii) the Company will cause the Parent to
(A) execute an agreement whereby the Parent shall agree to be bound to the same
extent as the Company under each of the Transaction Documents (including,
without limitation, performing all agreements,
Antares Capital Fund III Limited Partnership
April 11, 2002
Page -3-
covenants and obligations of the Company thereunder) and (B) perform all
agreements, covenants and obligations of the Company under the Transaction
Documents. Notwithstanding the foregoing, if the Parent subsequently sells all
or substantially all of its assets or business, by merger, consolidation, sale
of assets or otherwise (a "Sale") pursuant to which all of the following
conditions are met: (i) the holders of capital stock of the Parent immediately
prior to such Sale do not continue to hold immediately following such Sale
greater than 50% of the voting power of the capital stock of the surviving or
acquiring entity, (ii) the surviving or acquiring entity is a reporting company
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(iii) Leeds does not have beneficial ownership (whether through direct or
indirect share ownership, by contract or otherwise) of more than twenty-five
percent (25%) of the issued and outstanding voting stock of the surviving or
acquiring entity, and (iv) Leeds does not have the right (by agreement or
otherwise) to designate a majority of the members of the board of directors of
the surviving or acquiring entity, then upon the consummation of such Sale, all
rights of the Purchaser (or as applicable, its partner(s) or any Affiliates of
Purchaser or any of its partners), and all obligations of the Company and Leeds,
as applicable, under the first sentence of Section 8(a) and all of Section 8(b)
of the Stock Purchase Agreement, under Article 4 of the Co-Sale Agreement, and
under Section 1 of this supplemental letter shall terminate.
4. Possible Changes in Management. Purchaser does herein acknowledge that
subsequent to the execution of the Stock Purchase Agreement, the Company may
make changes with respect to certain management positions (other than Xxxxxxxx
X. Xxxxx) which may involve the replacement of certain executives, the
re-allocation of certain management responsibilities and/or the elimination of
some management positions. Purchaser also herein acknowledges that the Company
may close its Indialantic office, including terminating the employment of some
or all of the employees currently located there.
All provisions of the Stock Purchase Agreement, as supplemented herein,
shall be in full force and effect. By signing below, both the Company and
Purchaser agree to be bound by the terms of this supplemental letter as though
fully set forth in the Stock Purchase Agreement and the Co-Sale Agreement, as
the case may be.
[SIGNATURES LOCATED ON NEXT PAGE]
Antares Capital Fund III Limited Partnership
April 11, 2002
Page -4-
SUMMIT BROKERAGE SERVICES, INC.
By: /s/ Xxxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxxx X. Xxxxx
Chief Executive Officer
ACCEPTED AND AGREED:
ANTARES CAPITAL FUND III LIMITED PARTNERSHIP,
a Delaware limited partnership
By: ANTARES CAPITAL PARTNERS III, L.L.C.,
a Florida limited liability company,
its General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxxx X. Xxxxxx,
Class A Member
ACCEPTED AND AGREED AS TO PARAGRAPHS NUMBERED 1 AND 3 ABOVE.
/s/ Xxxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxxx X. Xxxxx, individually
