FORM OF AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
SUMMIT SECURITIES, INC.
Investment Certificates, Series B
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 South Coast
Financial Securities, Inc., a California corporation ("South Coast").
WITNESSETH:
WHEREAS, Summit intends to offer $40,000,000 of Investment Certificates,
Series B (hereinafter referred to as "Certificates"), which will be offered in
reliance on 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
yield at which the Certificates offered to the public is not lower than the
yield 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 South Coast to serve as such a "Qualified Independent
Underwriter" in connection with this offering of Certificates; 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.
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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 Certificates 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.
South Coast 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, South Coast 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.
South Coast 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 South Coast 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 South Coast's prior written consent
with respect to form and substance.
3. PRICING FORMULA AND OPINION.
South Coast agrees to render a written opinion as to the yields
below which Summit's Certificates may not be offered based on the
pricing formula that is set forth in Schedules "A" and "B,"
attached hereto and incorporated herein by reference. It is
understood and agreed by South Coast that the securities to which
this Agreement relates will be offered on a continuous, best
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efforts basis by MIS, as the managing sales agent of Summit
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
Certificates according to the terms and conditions of said Selling
Agreement and in accordance with this Agreement, including,
without limitation, Schedules "A" and "B". South Coast 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 South Coast 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 South Coast incurred in the normal conduct of
business. It is further agreed that South Coast shall be paid an
additional amount of $20,000 at the time the pricing opinion is
rendered, concurrent with the closing. South Coast 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.
5. MATERIAL FACTS.
Summit represents and warrants to South Coast 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 Certificates 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
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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 South Coast or
to the services to be performed by South Coast 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 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
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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 South Coast pursuant to this Agreement shall
be deemed a representation and warranty by Summit to South
Coast, 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 South Coast'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 South Coast
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of such events within a reasonable time thereafter, and will
forthwith prepare and furnish to South Coast, 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 South
Coast) 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 Certificates 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 South Coast, at its expense, with
all information and documentation with respect to its business,
financial condition and other matters as South Coast may deem
relevant based on the standards of reasonableness and good faith
and shall request in connection with South Coast'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 South Coast as South Coast may
request on the effective date of the Registration Statement.
Summit will make reasonably available to South Coast, its
auditors, counsel, and officers and directors to discuss with
South Coast any aspect of Summit which South Coast may deem
relevant. In addition, Summit, at South Coast's request, will
cause to be delivered to South Coast 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,
49
and shall cause the person issuing such certificate, opinion,
letter or report to authorize South Coast to rely thereon to the
same extent as if addressed directly to South Coast. Summit
represents and warrants to South Coast 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 South Coast
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
South Coast 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 South Coast and each person
controlling, controlled by or under common control with
South Coast 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 Certificates 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
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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 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
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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 South Coast), (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
South Coast on grounds of policy or otherwise, Summit and
South Coast 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 South
Coast may be subject in such proportion so that South Coast
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
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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 South Coast 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 South Coast, or any partner,
director, officer, employee, representative or any agent of
any thereof, shall have the same rights to contribution as
South Coast 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.
Summit represents and warrants to South Coast 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 South Coast that this Agreement has
been duly authorized, executed and
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delivered by MIS and constitutes a valid and binding obligation
of MIS.
10. AUTHORIZATION BY SOUTH COAST.
South Coast represents and warrants to Summit that this Agreement
has been duly authorized, executed and delivered by South Coast
and constitutes a valid and binding obligation of South Coast.
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 South Coast
Financial Securities, Inc., at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, XX 00000-0000, Attention: Xxxxxx X. Xxxx, Chairman and
CEO, 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
SOUTH COAST FINANCIAL SECURITIES, INC.
By: _____________________________________________
Xxxxxx X. Xxxx, Chairman and CEO
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SCHEDULE A
Summit Securities, Inc.
The opinion of South Coast is conditioned upon Summit'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
Summit from time to time. However, the rate shall not be lower than the
computation made per the worksheet on Schedule B, which is attached and
incorporated by reference herein.
2. The "assumed floor" for 6 to 11 month Certificates shall be at least
1.0% above the lesser of 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) and a composite average of the offering rates
on 6 month certificates of deposit currently being offered by banks and
savings institutions in the northwestern section of the United States.
For purposes of this composite average of certificate of deposit rates,
the rates being offered by the following institutions shall be
considered initially:
a. Seattle First National Bank
b. Security State Bank
c. U.S. Bank of Washington
x. Xxxxx Fargo Bank
x. Xxxxxxxxxx Trust Bank
x. Xxxxxxxxxx Mutual Savings Bank
South Coast and Summit agree to review on an ongoing basis the group
which comprises the composite average, and may substitute another
institution in the composite group from time-to-time by mutual
agreement, as the case may be.
3. The "assumed floor" for 60 to 120 month Certificates shall be computed
in like manner as that described in paragraph "2" above, except that the
latest auction average on 5 year U.S. Treasury Notes shall be considered
in place of the 6 month U.S. Treasury Bills, and 5 year certificates of
deposit currently offered in the composite group shall be considered in
lieu of the 6 month rate.
4. Rates on 12 to 23 month, 24 to 35 month, 36 to 47 month and 48 to 59
month Certificates shall be at least equal to the interpolated
differences between the computation of the "assumed floor" of 6 to 11
month Certificates and 60 to 120 month Certificates, based upon the
computation set forth in Schedule B.
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5. Rates on Certificates payable in installments of principal and interest
shall be no lower than .25% below the "assumed floor" for 60 to 120
month Certificates.
6. The computation of the "assumed floor" shall be made monthly, as of the
first Tuesday of each month, or at such other times during any month
that Summit causes the offering rates to change from those in effect on
the first Tuesday of each month ("the computation date"). Summit agrees
to furnish South Coast with a computation of the "assumed floor" by
completing the worksheet on Schedule B. Should the offering rates at
that time on Summit's Certificates be less than the "assumed floor" as
computed, Summit agrees to raise the rates on its Certificates to at
least the "assumed floor" within 10 calendar days of the computation
date. Should Summit fail to raise its offering rates within the 10 day
period referred to above, South Coast reserves the right, in its
uncontrolled discretion, to withdraw its opinion regarding the offering
rates on the Certificates.
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SCHEDULE B
Summit Securities, Inc.
PRICING FORMULA
C.D. RATE
Average rate between a composite of 8 selected Banks and Savings and Loans as of
the 1st Tuesday of each month.
GOVERNMENT RATE
Most current of 8 selected auction rates available on the 1st Tuesday of each
month.
Column A Column B Column C Column D Column E
Certificate of
Deposit (CD) Government Rate Enter Lesser of Summit's
Calculation Calculation Column A or B Assumed Floor Current Rate
____________________ _______________________ _______________ _____________ ____________
5 yr CD rate = _____ 5 yr Gov't Rate = _____
6 mo CD rate = _____ 6 mo Gov't Rate = _____
DIFFERENCE = _____ DIFFERENCE = _____
x .20 X .20
_____ _____
Differential = _____ Differential = _____
(enter in (a) below) (enter in (a) below)
6 mo (actual) 6 mo (actual)
rate = _____ rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 6-11 months
_____ _____
1 yr rate = _____ 1 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 12-23 months
_____ _____
2 yr rate = _____ 2 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 24-35 months
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_____ _____
3 yr rate = _____ 3 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 36-47 months
_____ _____
4 yr rate = _____ 4 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 48-59 months
_____ _____
5 yr (actual) 5 yr (actual)
rate = _____ rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 60-120 months
_____ _____
INSTALLMENT PAYMENTS (Floor equal to yearly _______ _______ ____________
rate MINUS .50) (yearly -.50
rate)
