FORM OF AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
Preferred Stock, Series E-7
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.
WITNESSETH:
WHEREAS, Metropolitan intends to offer 250,000 shares of Preferred
Stock, designated as "Variable Rate Cumulative Preferred Stock, Series E-7,"
(hereinafter referred to as the "Preferred Stock"), which will be offered in
reliance on a registration statement filed on Form S-2, bearing SEC file
number __________________;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 managing agent for Metropolitan, 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
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 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
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
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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. RULE 2720.
WELCO 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, WELCO 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.
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
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not be offered based on the computation of dividends to be
declared on those shares that is set forth in 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 continuous, best efforts basis by MIS, as the
managing agent, pursuant to the Selling Agreement in effect
between MIS and Metropolitan which is an 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 Selling Agreement and in accordance
with this Agreement, including, without limitation, Schedules "A"
and "B". WELCO 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 Metropolitan shall reimburse WELCO 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 WELCO incurred in the normal conduct of
business. It is further agreed that WELCO shall be paid a fee in
the amount of $25,000 payable as follows:
1) $12,500 payable at the time the pricing opinion is rendered,
at closing on the effective date of the registration, and
2) $1,250 payable monthly for ten consecutive months on the
first day of each month beginning March 1, 1998 provided that
Welco continues to serve as the "Qualified Independent
Underwriter" on each date a monthly payment is due.
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,
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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 it
is bound are in full force and effect.
(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 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
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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 or laws.
(f) Any certificate signed by an officer of Metropolitan and
delivered to WELCO pursuant to this Agreement shall be
deemed a representation
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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 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
it, a reasonable number of copies of any 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 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.
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
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shall be provided to WELCO as WELCO may request on the effective
date of the Registration Statement. 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
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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
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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).
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(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
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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
SECURITIES, INC.,Attention: Xxxxxxx X. Xxxxxxx, Xxx Xxxxxxx
Xxxxxx, Xxxxx 000 Xxxx Xxxxxx, XX 00000-0000 and (b) if to
Metropolitan Investment Securities, Inc, at 000 X. Xxxxxxx Xxx.,
Xxxxxxx, XX 00000, Attention: Xxxxx 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 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.
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METROPOLITAN MORTGAGE & SECURITIES CO., INC.
By: ______________________________________________
C. Xxxx Xxxxxxxx, Xx., President
METROPOLITAN INVESTMENT SECURITIES, INC.
By: ______________________________________________
Xxxxx Xxxxxxx, Secretary
WELCO SECURITIES, INC.
By: _____________________________________________
Xxxxxxx X. Xxxxxxx, President
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SCHEDULE A
Metropolitan Mortgage & Securities Co., Inc.
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 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.
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SCHEDULE B
Metropolitan Mortgage & Securities Co., Inc.
VARIABLE RATE, CUMULATIVE PREFERRED STOCK,
SERIES E-2, E-3, E-4, E-5, E-6 and E-7 PRICING
For Distributions Payable On: _________________________________
Distributions Record Date: ____________________________________
Applicable Effective Resultant
Date Date Average 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.
_______________________________________________________
Authorized Signature
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