AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
SUMMIT SECURITIES, INC.
PREFERRED STOCK, SERIES R
PREFERRED STOCK, SERIES T
This agreement (the "Agreement") made as of the 28th day of February, 2001,
among Summit Securities, Inc., an Idaho corporation ("Summit"), Metropolitan
Investment Securities, Inc., a Washington corporation ("MIS"), and Xxxx Capital
Partners, LLC., a California corporation ("Xxxx").
WITNESSETH:
WHEREAS, Summit intends to offer up to 200,000 shares of its Preferred
Stock, designated as "Variable Rate Cumulative Preferred Stock, Series T" and up
to 300,000 shares of its Preferred Stock, designated as "Variable Rate
Cumulative Preferred Stock, Series R," (hereinafter referred to collectively 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 an 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 describes the terms on which Summit is retaining
Xxxx 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. Xxxx 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, Xxxx 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. Xxxx 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 Xxxx 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 Xxxx'x prior written consent with respect to form and
substance.
SECTION 3. PRICING FORMULA AND RECOMMENDATION LETTER. Xxxx 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 Xxxx 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.
Xxxx 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 Xxxx shall be paid a fee in
the amount of $20,000 payable upon delivery of the Pricing Recommendation Letter
referred to in paragraph 3 above. Xxxx shall also be reimbursed for actual
expenses incurred in connection with its duties hereunder in an amount not to
exceed $7,000.
SECTION 5. MATERIAL FACTS. Summit represents and warrants to Xxxx that at
the time the Registration Statement is declared effective 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
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subsequent thereto, to and including the date on which payment for, and
delivery of, the Preferred Stock to be sold in the Offering is made by the
underwriter or underwriters, as the case may be, participating in the
Offering and by Summit (such date being referred to herein as the "Closing
Date"), the Prospectus (as amended or supplemented if it shall have been so
amended or supplemented) will contain all material statements which are
required to be stated therein in accordance with the Act and will conform to
all other requirements of the federal securities laws, and will not, on such
date include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and that all contracts and documents
required by the Act to be filed or required as exhibits to 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 Xxxx or to the services to be performed by Xxxx 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
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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 laws.
(f) Any certificate signed by an officer of Summit and delivered to
Xxxx pursuant to this Agreement shall be deemed a representation and
warranty by Summit to Xxxx, 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 Xxxx'x 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 Xxxx of such events within a reasonable time
thereafter, and will forthwith prepare and furnish to Xxxx, 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 Xxxx) 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.
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SECTION 6. AVAILABILITY OF INFORMATION. Summit hereby agrees to provide
Xxxx, at its expense, with all information and documentation with respect to its
business, financial condition and other matters as Xxxx may deem relevant based
on the standards of reasonableness and good faith and shall request in
connection with Xxxx'x 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 Xxxx as Xxxx may request on the effective date of the Registration
Statement and on the Closing Date. Summit will make reasonably available to
Xxxx, its auditors, counsel, and officers and directors to discuss with Xxxx any
aspect of Summit which Xxxx may deem relevant. In addition, Summit, at Xxxx'x
request, will cause to be delivered to Xxxx 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 Xxxx to
rely thereon to the same extent as if addressed directly to Xxxx. Summit
represents and warrants to Xxxx 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 Xxxx 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 Xxxx 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 Xxxx and each person controlling,
controlled by or under common control with Xxxx 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
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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 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 Xxxx), (ii)
Summit, within a reasonable time after notice of commencement of the
action, shall not
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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) 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, Xxxx 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 Xxxx to be a
"qualified independent underwriter" as contemplated by this Agreement.
Xxxx 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 Xxxx has indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this paragraph 7, any such
payment or reimbursement by Xxxx 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 Xxxx. In addition, anything in
this paragraph 7 to the contrary notwithstanding, Xxxx shall not be
liable for any settlement of any action or proceeding effected without
its written consent. Xxxx and Summit agree that they shall each follow
the procedures set forth in paragraph 7(b) with respect to any claim
against Xxxx 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 Xxxx on grounds of policy or
otherwise, Summit and Xxxx 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 Xxxx may be subject in such proportion so that Xxxx
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
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"Qualified Independent Underwriter"; PROVIDED, HOWEVER, that (i) in no
case shall Xxxx 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 Xxxx, or
any partner, director, officer, employee, representative or any agent of
any thereof, shall have the same rights to contribution as Xxxx 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 Xxxx
and MIS 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 Xxxx and
Summit 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 XXXX. Xxxx represents and warrants to Summit
and MIS that this Agreement has been duly authorized, executed and delivered by
Xxxx and constitutes a valid and binding obligation of Xxxx.
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 Xxxx Capital Partners, LLC., at
00 Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, XX 00000, Attention: Xxxxx Xxxxxxxx, (b) if
to Summit, at 000 X. 0xx. Xxxxxx - Department 115000, Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq., General Counsel, and (c) if to MIS, at
000 X. 0xx Xxxxxx - Department 141000, Xxxxxxx, Xxxxxxxxxx, 00000, Attention:
Xxx Xxxxxx.
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.
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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.
SUMMIT SECURITIES, INC.
By: /s/ Xxx Xxxxxx
--------------------------------------
Xxx Xxxxxx, President
METROPOLITAN INVESTMENT SECURITIES, INC.
By: /s/ Xxxxx Xxxxxxx
--------------------------------------
Xxxxx Xxxxxxx, Secretary
XXXX CAPITAL PARTNERS, LLC.
By: /s/ Xxxxx Xxxxxxxx
--------------------------------------
Xxxxx Xxxxxxxx,
Managing Director, Corporate Finance
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SCHEDULE A
SUMMIT SECURITIES, INC.
The Pricing Recommendation Letter of Xxxx 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 distribution 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 distribution rate. The annualized
distribution 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 ______ 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
distribution 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 R AND SERIES T
PRICING
For Distributions Payable On: _________________________________
Distributions Record Date: ____________________________________
Distribution Resultant
Date Date Average Rate Rate
---- ---- ------- ---- ----
3 Mo Treasury Xxxx _____________________ +.5% _________
10 Yr Constant Rate _____________________ +.5% _________
20 Yr Constant Rate _____________________ +.5% _________
HIGHEST RESULTANT RATE: ___________________________
MONTHLY DISTRIBUTION PER SHARE: ____________________
(Highest distribution 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.
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Authorized Signature
