EXHIBIT 1.02
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
Preferred Stock, Series E-7
This agreement made as of the 30th day of December, 1999, among
Metropolitan Mortgage & Securities Co., Inc., a Washington corporation
("Metropolitan"), Metropolitan Investment Securities, Inc., a Washington
corporation ("MIS"), and Cruttenden Xxxx Incorporated, a California corporation
("Cruttenden").
WITNESSETH:
WHEREAS, Metropolitan intends to offer 100,000 shares of its Preferred
Stock designated "Variable Rate Cumulative Preferred Stock, Series E-7"
(hereinafter referred to as "Preferred Stock"), which will be offered in
reliance on a registration statement filed on Form S-2 with the Securities and
Exchange Commission; and,
WHEREAS, MIS, a broker/dealer and affiliate of Metropolitan and a member of
the National Association of Securities Dealers ("NASD"), will be engaged as the
sole managing agent for Metropolitan; and,
WHEREAS, pursuant to subparagraph (c) of Rule 2720 of the NASD Conduct
Rules, MIS, as a NASD member, may participate in such underwriting only if the
yield at which the Preferred Stock offered to the public is not lower than the
yield recommended by a "Qualified Independent Underwriter" as that term is
defined in Rule 2720, subparagraph (b)(15), of the NASD Conduct Rules, and who
participates in the preparation of the registration statement and prospectus
relating to the offering and exercises customary standards of due diligence,
with respect thereto; and,
WHEREAS, this agreement ("Agreement") describes the terms on which
Metropolitan is retaining Cruttenden to serve as such a "Qualified Independent
Underwriter" in connection with this offering of Preferred Stock;
NOW, THEREFORE, in consideration of the recitations set forth above, and
the terms, promises, conditions, and covenants herein contained, the parties
hereby contract and agree as follows:
Definitions
As hereinafter used, except as the context may otherwise require, the term
"Registration Statement" means the registration statement on Form S-2 (including
the related preliminary prospectus, financial statements, exhibits and all other
documents to be filed as a part thereof or incorporated therein) for the
registration of the offer and sale of the debentures under the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "Act") filed
with the Securities and Exchange Commission (the "Commission"), and any
amendment thereto, and the term "Prospectus" means the prospectus including any
preliminary or final prospectus and any materials incorporated by reference into
and attached to the Prospectus (including the form of prospectus to be filed
with the Commission pursuant to Rule 424(b) under the Act) and any amendment or
supplement thereto, to be used in connection with the offering.
Section 1. Rule 2720 Requirement. Cruttenden hereby confirms its agreement
as set forth in subparagraph (b)(15)(F) of Rule 2720 of the NASD Conduct Rules
and represents that, as appropriate, Cruttenden satisfies or at the times
designated in such subparagraph (l5) will satisfy the other requirements set
forth therein or will receive an exemption from such requirements from the NASD.
Section 2. Consent. Cruttenden hereby consents to being named in the
Registration Statement and Prospectus as having acted as a "Qualified
Independent Underwriter" solely for the purposes of Rule 2720 referenced herein.
Except as permitted by the immediately preceding sentence or to the extent
required by law, all references to Cruttenden in the Registration Statement or
Prospectus or in any other filing, report, document, release or other
communication prepared, issued or transmitted in connection with the offering by
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 Cruttenden's prior written consent
with respect to form and substance.
Section 3. Pricing Formula and Recommendation Letter. Cruttenden agrees to
render a written letter of recommendation as to the price above which
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 Schedules "A" and
"B," copies of which are attached hereto, and incorporated herein by reference
(the "Pricing Recommendation Letter"). It is understood and agreed by Cruttenden
that the securities to which this Agreement relates will be offered on a
continuous, best efforts basis by MIS, as the managing agent, pursuant to the
Selling Agreement in effect between MIS and Metropolitan which is filed as an
exhibit to the Registration Statement referred to above. Metropolitan, through
MIS, will continue to offer the securities according to the terms and conditions
of said agreement, including, without limitation, Schedules "A" and "B" in
accordance with this Agreement. Cruttenden reserves the right to review and
amend its Pricing Recommendation Letter upon the filing of any post- effective
amendment to the Registration Statement or upon occurrence of any material event
which may or may not require such an amendment to be filed, or at such time as
the offering under this registration shall terminate or otherwise lapse under
operation of law.
Section 4. Fees and Expense. It is agreed that Cruttenden shall be paid a
fee in the amount of $6,666 payable upon delivery of the Pricing Recommendation
Letter referred to in paragraph 3 above.
Section 5. Material Facts. Metropolitan represents and warrants to
Cruttenden that at the time the Registration Statement and, at the time the
Prospectus is filed with the Commission (including any preliminary prospectus
and the form of prospectus filed with the Commission pursuant to Rule 424(b))
and at all times subsequent thereto, to and including the date on which payment
for, and delivery of, the Preferred Stock to be sold in the Offering is made by
the underwriter or underwriters, as the case may be, 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 the 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 Cruttenden or to the services to be
performed by Cruttenden pursuant to this Agreement will not contain any untrue
or misleading statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
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 it is bound are in full force and
effect, except as may otherwise be disclosed in the Registration Statement.
(b) Metropolitan 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 Metropolitan has 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 the Closing Date 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
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
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 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
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
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
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 laws.
(f) Any certificate signed by an officer of Metropolitan and delivered
to Cruttenden pursuant to this Agreement shall be deemed a representation
and warranty by Metropolitan to Cruttenden, to have the same force and
effect as stated herein, as to the matters covered thereby.
(g) If any event relating to or affecting Metropolitan shall occur as
a result of which it is necessary, in Cruttenden's opinion, to amend or
supplement the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered to a
purchaser, Metropolitan undertakes to inform Cruttenden of such events
within a reasonable time thereafter, and will forthwith prepare and furnish
to Cruttenden, without expense to them, a reasonable number of copies of an
amendment or amendments or a supplement or supplements to the Prospectus
(in form and substance satisfactory to Cruttenden) which will amend or
supplement the Prospectus so that as amended or supplemented it will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein in light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not
misleading.
(h) Metropolitan 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 Metropolitan
submitted pursuant hereto, shall remain operative and in full force and
effect, surviving the date of this Agreement.
Section 6. Availability of Information. Metropolitan hereby agrees to
provide Cruttenden, at its expense, with all information and documentation with
respect to its business, financial condition and other matters as Cruttenden may
deem relevant based on the standards of reasonableness and good faith and shall
request in connection with Cruttenden's performance under this Agreement,
including, without limitation, copies of all correspondence with the Commission,
certificates of its officers, opinions of its counsel and comfort letters from
its auditors. The above-mentioned certificates, opinions of counsel and comfort
letters shall be provided to Cruttenden as Cruttenden may request on the
effective date of the Registration Statement and on the Closing Date.
Metropolitan will make reasonably available to Cruttenden, its auditors,
counsel, and officers and directors to discuss with Cruttenden any aspect of
Metropolitan which Cruttenden may deem relevant. In addition, Metropolitan, at
Cruttenden's
request, will cause to be delivered to Cruttenden copies of all certificates,
opinions, letters and reports to be delivered to the underwriter or
underwriters, as the case may be, pursuant to any underwriting agreement
executed in connection with the Offering or otherwise, and shall cause the
person issuing such certificate, opinion, letter or report to authorize
Cruttenden to rely thereon to the same extent as if addressed directly to
Cruttenden. Metropolitan represents and warrants to Cruttenden that all such
information and documentation provided pursuant to this paragraph 6 will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statement therein not misleading. In addition,
Metropolitan will promptly advise Cruttenden of all telephone conversations with
the Commission which relate to or may affect the Offering.
Section 7. Indemnification.
(a) Subject to the conditions set forth below, and in addition to
any rights of indemnification and contribution to which Cruttenden may
be entitled pursuant to any agreement among underwriters, underwriting
agreement or otherwise, and to the extent allowed by law, Metropolitan
hereby agrees that it will indemnify and hold Cruttenden and each
person controlling, controlled by or under common control with
Cruttenden within the meaning of Section 15 of the Act or Section 20
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules and regulations thereunder (individually, an
"Indemnified Person") harmless from and against any and all loss,
claim, damage, liability, cost or expense whatsoever to which such
Indemnified Person may become subject under the Act, the Exchange Act,
or other federal or state statutory law or regulation, at common law
or otherwise, arising out of, based upon, or in any way related or
attributed to (i) this Agreement, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement or Prospectus or any other filing, report, document, release
or communication, whether oral or written, referred to in paragraph 5
hereof or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any application or other document
executed by Metropolitan or based upon written information furnished
by Metropolitan 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 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 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 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 Cruttenden), (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) Subject to the conditions set forth below, and in addition to any
rights of indemnification and contribution to which Metropolitan may be entitled
pursuant to any agreement among underwriters, underwriting agreement or
otherwise, and to the extent allowed by law, Cruttenden hereby agrees that it
will indemnify and hold Metropolitan and each person controlling, controlled by
or under common control with Metropolitan within the meaning of Section 15 of
the Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the rules and regulations thereunder (individually, an
"Indemnified Person") harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever to which such Indemnified Person may
become subject under the Act, the Exchange Act, or other federal or state
statutory
law or regulation, at common law or otherwise, arising out of, based upon, or in
any way related or attributed to the failure of Cruttenden to be a "qualified
independent underwriter" as contemplated by this Agreement. Cruttenden further
agrees that upon demand by an Indemnified Person at any time or from time to
time, it will promptly reimburse such Indemnified Person for, or pay, any loss,
claim, damage, liability, cost or expense as to which Cruttenden has indemnified
such person pursuant hereto. Notwithstanding the foregoing provisions of this
paragraph 7, any such payment or reimbursement by Cruttenden of fees, expenses
or disbursement incurred by an Indemnified Person in any proceeding in which a
final judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against such Indemnified Person as a
direct result of such person's negligence, bad faith or willful misfeasance will
be promptly repaid to Cruttenden. In addition, anything in this paragraph 7 to
the contrary notwithstanding, Cruttenden shall not be liable for any settlement
of any action or proceeding effected without its written consent. Cruttenden and
Metropolitan agree that they shall each follow the procedures set forth in
paragraph 7(b) with respect to any claim against Cruttenden hereunder.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph 7 is due in
accordance with its terms but is for any reason held by a court to be
unavailable from Metropolitan to Cruttenden on grounds of policy or otherwise,
Metropolitan and Cruttenden shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) to which Metropolitan and
Cruttenden may be subject in such proportion so that Cruttenden is responsible
for that portion represented by the percentage that its fee under this Agreement
bears to the public offering price appearing on the cover page of the Prospectus
and 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 Cruttenden 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 Cruttenden, or any partner, director, officer, employee,
representative or any agent of any thereof, shall have the same rights to
contribution as Cruttenden and each person who controls 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.
Section 8. Authorization by Metropolitan. Metropolitan represents and
warrants to Cruttenden that this Agreement has been duly authorized, executed
and delivered by Metropolitan and constitutes a valid and binding obligation of
Metropolitan.
Section 9. Authorization by MIS. MIS represents and warrants to Cruttenden
that this Agreement has been duly authorized, executed and delivered by MIS and
constitutes a valid and binding obligation of MIS.
Section 10. Authorization by Cruttenden. Cruttenden represents and warrants
to Metropolitan that this Agreement has been duly authorized, executed and
delivered by Cruttenden and constitutes a valid and binding obligation of
Cruttenden.
Section 11. Notice. Whenever notice is required to be given pursuant to
this Agreement, such notice shall be in writing and shall be mailed by first
class mail, postage prepaid, addressed (a) if to Cruttenden Xxxx Incorporated,
at 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000, Attention: Xxxxxx X.
Xxxxxxxxxx and (b) if to Metropolitan, at 000 X. 0xx. Xxxxxx - Department
115000, Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxx, Assistant Corporate
Counsel.
Section 12. Governing Law. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with and governed by the
laws of the State of 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: /s/ C. Xxxx Xxxxxxxx, Xx.
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C. Xxxx Xxxxxxxx, Xx., President
METROPOLITAN INVESTMENT SECURITIES, INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, Secretary
CRUTTENDEN XXXX INCORPORATED
By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx, Executive Vice President
SCHEDULE A
Metropolitan Mortgage & Securities Co., Inc.
The Pricing Recommendation Letter of CRUTTENDEN 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 defined in the Preferred Stock Authorizing Resolution) plus one
half of one percentage point for such dividend period. In the event that the
Company determines in good faith that for any reason one or more of such rates
cannot be determined for any distribution period, then the Applicable Rate for
such period shall be the higher of whichever of such rates can be so determined.
SCHEDULE B
Metropolitan Mortgage & Securities Co., Inc.
VARIABLE RATE, CUMULATIVE PREFERRED STOCK,
SERIES E-7 PRICING
For Distributions Payable On: _________________________________
Distributions Record Date: ____________________________________
Date Date Average Applicable Rate Effective Resultant
Rate* Rate* Rate
3 Mo Treasury Xxxx _____________________ +.5% +2% _________
10 Yr Constant Rate _____________________ +.5% +2% _________
20 Yr Constant Rate _____________________ +.5% +2% _________
HIGHEST RESULTANT RATE: ___________________________
MONTHLY DISTRIBUTION PER SHARE: ___________________
(Highest applicable rate divided by 12)
As resolved by the Board of Directors, distribution will be deemed
declared on the 1st day of each month, payable on the 20th of each month to the
holders of record on the 5th of each month.
* Includes any distribution authorized by the Board in excess of the
Applicable Rate.
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Authorized Signature
