FORM OF
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
This agreement made as of the day of
__________________, by and between Metropolitan Mortgage & Securities
Co., Inc., a Washington corporation ("Metropolitan"), Metropolitan
Investment Securities, Inc., a Washington corporation ("MIS"), and
Welco Securities, Inc., a Nevada Corporation ("Welco").
WITNESSETH:
WHEREAS, Metropolitan intends to offer 250,000 shares of
Preferred Stock, designated as "Variable Rate Cumulative Preferred
Stock, Series E-6," (hereinafter referred to as the "Preferred
Stock"), which will be offered in reliance on a post-effective
amendment to a registration statement filed on Form S-2, bearing SEC
file number 33- ;and,
WHEREAS, MIS, a broker/dealer and a member of the National
Association of Securities Dealers ("NASD"), will be engaged as the
sole selling agent for Metropolitan; and,
WHEREAS, pursuant to subparagraph (c) of Rule 2720 of the
NASD, MIS, as a NASD member, may participate in such underwriting only
if the price at which the Preferred Stock is offered to the public is
no higher than the price recommended by a "Qualified Independent
Underwriter" as that term is defined in subparagraph (b)(15) of Rule
2720 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 Metropolitan is retaining Welco 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 (including
the form of prospectus to be filed with the Commission pursuant to
Rule 424(b) under the Act) and any amendment or supplement thereto, to
be used in connection with the offering.
1. SCHEDULE E REQUIREMENT. Welco hereby confirms its agreement
as set forth in subparagraph 15(g)of Schedule E of the Bylaws of the
NASD and represents that, as appropriate, Welco satisfies or at the
times designated in such paragraph (l) satisfies the other
requirements set forth therein or will receive an exemption from such
requirements from the NASD.
2. CONSENT. Welco 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 Welco 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 Metropolitan or any
corporation controlling, controlled by or under common control with
Metropolitan, or by any director, officer, employee, representative or
agent of any thereof, shall be subject to Welco's prior written
consent with respect to form and substance.
3. PRICING FORMULA AND OPINION. Welco agrees to render a
written opinion as to the price above which Metropolitan's Preferred
Stock may not be offered based on the computation of dividends to be
declared on those shares that is set forth in Schedule "A," a copy of
which is attached hereto, and incorporated herein by reference. It is
understood and agreed by Welco that the securities to which this
Agreement relates will be offered on a best efforts basis by MIS, as
the sole selling agent of Metropolitan pursuant to the selling
agreement to be entered into between MIS and Metropolitan which is
filed as exhibit to the Registration Statement referred to above.
Metropolitan, through MIS, will continue to offer the preferred stock
according to the terms and conditions of said agreement, in accordance
with this Agreement. Welco reserves the right to review and amend its
opinion upon the filing of any post-effective amendment to this
Registration Statement or upon occurrence of any material event which
may or may not require such an amendment to be filed, or at such time
as the offering under this registration shall terminate or otherwise
lapse under operation of law.
4. FEES AND EXPENSE. It is understood that Metropolitan shall
reimburse Welco for its expenses on a nonaccountable basis in the
amount of $5,000 of which $2,500 has been paid to date, and the
balance to be paid at closing. It is further agreed that Welco shall
be paid an additional amount of $15,000 at the time the pricing
opinion is rendered, concurrent with the closing. Welco agrees to pay
all fees and expenses to any legal counsel whom it may employ to
represent it separately in connection with or on account of its
actions contemplated herein. All mailing, telephone, travel, hotel,
meals, clerical, or other office costs incurred or to be incurred by
Welco in conjunction with Metropolitan's proposed offering which is
the subject of this Agreement shall be reimbursed to Welco by
Metropolitan at closing on an accountable basis upon receipt of an
itemization of said expenses.
5. MATERIAL FACTS. Metropolitan represents and warrants to
Welco 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, participating in the Offering and
by Metropolitan (such date being referred to herein as the "Closing
Date"), the Prospectus (as amended or supplemented if it shall have
been so amended or supplemented) will contain all material statements
which are required to be stated therein in accordance with the Act and
will conform to all other requirements of the federal securities laws,
and will not, on such date include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and that all
contracts and documents required by the Act to be filed or required as
exhibits to said registration statement have been filed. Metropolitan
further represents and warrants that any further filing, report,
document, release or communication which in any way refers to Welco or
to the services to be performed by Welco 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.
Metropolitan further warrants and represents that:
(a) All leases, contracts and agreements referred to in or filed
as exhibits to the Registration Statement to which Metropolitan or its
subsidiaries is a party or by which any of them is bound are in full
force and effect.
(b) Metropolitan and it subsidiaries have good and marketable
title, except as otherwise indicated in the Registration Statement and
Prospectus, to all of their assets and properties described therein as
being owned by them, free and clear of all liens, encumbrances and
defects except such encumbrances and defects which do not, in the
aggregate, materially affect or interfere with the use made and
proposed to be made of such properties as described in the
Registration Statement and Prospectus; and the Company and its
subsidiaries have no material leased properties except as disclosed in
the Prospectus.
(c) Metropolitan is duly organized under the laws of the State
of Washington and, as of the effective date of the Registration
Statement and at Closing Metropolitan will be validly existing and in
good standing under the laws of the State of Washington with full
corporate power and authority to own its properties and conduct its
business to the extent described in the Registration Statement and
Prospectus; Metropolitan and its subsidiaries are duly qualified to do
business as foreign corporations and in good standing in all
jurisdictions in which the nature of the business transacted by them
or their ownership of properties or assets makes their qualification
necessary; the authorized and outstanding capitalization of
Metropolitan is as set forth in the Prospectus and the description in
the Prospectus of the capital stock of Metropolitan conforms with and
accurately describes the rights set forth in the instruments defining
the same;
(d) Metropolitan and its subsidiaries are not in violation of
their respective certificates 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 any of them is a party or by
which any of them is bound.
(e) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary corporate action on the part
of Metropolitan 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 Metropolitan or MIS, or any deed of trust, lease, sublease,
indenture, mortgage, or other agreement or instrument to which
Metropolitan or MIS is a party or by which any of them or their
property is bound, or any applicable law, rule, regulation, judgment,
order or decree of any government, governmental instrumentality or
court, domestic or foreign, having jurisdiction over Metropolitan 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 Blue Sky Laws.
(f) Any certificate signed by an officer of Metropolitan and
delivered to Welco pursuant to this Agreement shall be deemed a
representation and warranty by Metropolitan to Welco, to have the same
force and effect as stated herein, as to the matters covered thereby.
(g) If any event relating to or affecting Metropolitan or any of
its subsidiaries shall occur as a result of which it is necessary, in
Welco'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, Metropolitan
undertakes to inform Welco of such events within a reasonable time
thereafter, and will forthwith prepare and furnish to Welco, 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 Welco) 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) Metropolitan hereby warrants and represents that it will
offer the preferred stock in accordance with the pricing formula set
forth in Schedule "A" which is incorporated by reference herein.
(i) All representations, warranties and agreements contained in
this Agreement, or contained in certificates of officers of
Metropolitan submitted pursuant hereto, shall remain operative and in
full force and effect, surviving the date of this Agreement.
6. AVAILABILITY OF INFORMATION. Metropolitan hereby agrees to
provide Welco, at its expense, with all information and documentation
with respect to its business, financial condition and other matters as
Welco may deem relevant based on the standards of reasonableness and
good faith and shall request in connection with Welco'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 Welco as Welco may request on the effective date
of the Registration Statement and on the Closing Date. Metropolitan
will make reasonably available to Welco, its auditors, counsel, and
officers and directors to discuss with Welco any aspect of
Metropolitan which Welco may deem relevant. In addition,
Metropolitan, at Welco's request, will cause to be delivered to Welco
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 Welco to rely
thereon to the same extent as if addressed directly to Welco.
Metropolitan represents and warrants to Welco 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, Metropolitan will promptly advise Welco 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
Welco may be entitled pursuant to any agreement among underwriters,
underwriting agreement or otherwise, and to the extent allowed by law,
Metropolitan hereby agrees that it will indemnify and hold Welco and
each person controlling, controlled by or under common control with
Welco 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 Metropolitan or based upon written information furnished
by Metropolitan filed in any jurisdiction in order to qualify the
Debentures under the securities or Blue Sky laws thereof, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or (iv) the breach of any representation or warranty made
by Metropolitan in this Agreement. Metropolitan 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
Metropolitan has indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this paragraph 7, any such
payment or reimbursement by Metropolitan 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 Metropolitan.
In addition, anything in this paragraph 7 to the contrary
notwithstanding, Metropolitan 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
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 Metropolitan under paragraph (a), notify Metropolitan in
writing of the commencement thereof; but the omission to so notify
Metropolitan will not relieve Metropolitan 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 Metropolitan'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 Metropolitan of the commencement thereof,
Metropolitan 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 Metropolitan or any corporation controlling, controlled by
or under common control with Metropolitan, or any director, officer,
employee, representative or agent of any thereof, or any other
"Qualified Independent Underwriter" retained by Metropolitan 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
Metropolitan to such Indemnified Person of its election so to assume
the defense of such action and approval by the Indemnified Person of
counsel, Metropolitan 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
Metropolitan 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 Welco), (ii) Metropolitan,
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)
Metropolitan shall have authorized in writing the employment of
counsel for the Indemnified Person at the expense of Metropolitan, 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 Metropolitan to Welco on
grounds of policy or otherwise, Metropolitan and Welco 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 Metropolitan and Welco
may be subject in such proportion so that Welco 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 Metropolitan is responsible for the
balance, except as Metropolitan 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
Welco 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 Welco,
or any partner, director, officer, employee, representative or any
agent of any thereof, shall have the same rights to contribution as
Welco and each person who controls Metropolitan within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each officer
of Metropolitan who shall have signed the Registration Statement and
each director of Metropolitan shall have the same rights to
contribution as Metropolitan, 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 METROPOLITAN. Metropolitan represents and
warrants to Welco that this Agreement has been duly authorized,
executed and delivered by Metropolitan and constitutes a valid and
binding obligation of Metropolitan.
9. AUTHORIZATION BY MIS. MIS represents and warrants to Welco
that this Agreement has been duly authorized, executed and delivered
by MIS and constitutes a valid and binding obligation of MIS.
10. AUTHORIZATION BY WELCO. Welco represents and warrants to
Metropolitan that this Agreement has been duly authorized, executed
and delivered by Welco and constitutes a valid and binding obligation
of Welco.
11. NOTICE. Whenever notice is required to be given pursuant to
this Agreement, such notice shall be in writing and shall be mailed by
first class mail, postage prepaid, addressed (a) if to Welco, at P.O.
Box 688, Xxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxxxx, XX 00000-0000,
Attention: Xxxxxxx X. Xxxxxxx, and (b) if to Metropolitan, at West
000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attention: C. Xxxx
Xxxxxxxx, Xx.
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 Washington 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.
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
By:__________________________________________
C. Xxxx Xxxxxxxx, Xx., President
By:__________________________________________
Xxxxx Xxxxxxx, Secretary
METROPOLITAN INVESTMENT SECURITIES, INC.
By:__________________________________________
C. Xxxx Xxxxxxxx, Xx., President
By:__________________________________________
Xxxxx Xxxxxxx, Secretary
WELCO SECURITIES, INC
By:________________________________________
Xxxxxxx X. Xxxxxxx, President
SCHEDULE A
The opinion of Welco is conditioned upon Metropolitan'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 hereinafter
defined) 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.
Exhibit B
VARIABLE RATE, CUMULATIVE
PREFERRED STOCK, SERIES E-2, E-3, E-4, E-5 and E-6
PRICING
For Distributions Payable
On:________________________________________
Distributions Record Date:________________________________________
Effective
Date Date Average Rate
3 Mo. Treasury Bill_____________________________ +.5%
10 Yr Constant Rate_____________________________ +.5%
20 Year _____________________________ +.5%
HIGHEST EFFECTIVE RATE: _______________________________
Add any additional Distribution
authorized by Metropolitan's
Board.
_________________
MONTHLY DISTRIBUTION PER SHARE:
_______________________
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.
_______________________________________________________
Authorized Signature
