EXHIBIT 1.2
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
INVESTMENT DEBENTURES SERIES III AND SERIES III-A
This agreement (the "Agreement") made as of the 15th day of March,
2002, among Metropolitan Mortgage & Securities Co., Inc., a Washington
corporation ("Metropolitan"), Metropolitan Investment Securities, Inc., a
Washington corporation ("MIS"), and Xxxx Capital Partners, LLC, a California
limited liability company ("Xxxx").
WITNESSETH:
WHEREAS, Metropolitan intends to offer up to $150,000,000 in aggregate
principal amount of its Investment Debentures, Series III and Series III-A
(collectively, the "Debentures"), 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 an NASD member, may participate in such underwriting only if the
yield at which the Debentures offered to the public is no 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 Metropolitan is
retaining Xxxx to serve as such a "Qualified Independent Underwriter" in
connection with this offering of Debentures.
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. 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
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 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 yields below which
Metropolitan's Debentures may not be offered based on the pricing formula 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
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. 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 $60,000 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 $10,000.
SECTION 5. MATERIAL FACTS. Metropolitan 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 subsequent thereto, to and including the date on which
payment for, and delivery of, the Debentures to be sold in the Offering is made
by the underwriter or underwriters, as the
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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 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.
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,
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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 Xxxx pursuant to this Agreement shall be deemed a
representation and warranty by Metropolitan 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 Metropolitan 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, Metropolitan 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) Metropolitan hereby warrants and represents that it will
offer the Debentures 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.
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SECTION 6. AVAILABILITY OF INFORMATION. Metropolitan 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. Metropolitan will make
reasonably available to Xxxx, its auditors, counsel, and officers and directors
to discuss with Xxxx any aspect of Metropolitan which Xxxx may deem relevant. In
addition, Metropolitan, 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.
Metropolitan 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, Metropolitan 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, Metropolitan
and MIS hereby agree that they 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 Metropolitan or MIS
or based upon written information furnished by Metropolitan or MIS
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
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the statements therein not misleading, or (iv) the breach of any
representation or warranty made by Metropolitan or MIS in this
Agreement. Metropolitan and MIS further agree that upon demand by an
Indemnified Person at any time or from time to time, they will promptly
reimburse such Indemnified Person for, or pay, any loss, claim, damage,
liability, cost or expense as to which Metropolitan and MIS have
indemnified such person pursuant hereto. Notwithstanding the foregoing
provisions of this paragraph 7, any such payment or reimbursement by
Metropolitan and MIS of fees, expenses or disbursements 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 and MIS. In addition, anything
in this paragraph 7 to the contrary notwithstanding, neither
Metropolitan or MIS shall be liable for any settlement of any action or
proceeding effected without their 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 and MIS under paragraph (a), notify
Metropolitan and MIS in writing of the commencement thereof; but the
omission to so notify Metropolitan and MIS will not relieve
Metropolitan and MIS from any liability which they may have to any
Indemnified Person otherwise than under this paragraph 7 if such
omission shall not have materially prejudiced Metropolitan's or MIS'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 and MIS of the commencement
thereof, Metropolitan and MIS 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 MIS or any corporation controlling,
controlled by or under common control with Metropolitan or MIS, 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 and MIS to such Indemnified Person of its election so to
assume the defense of such action and approval by the Indemnified
Person of counsel, neither Metropolitan nor MIS will 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
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the next preceding sentence (it being understood, however, that
Metropolitan and MIS 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)
Metropolitan and MIS, 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 and MIS shall have authorized in writing
the employment of counsel for the Indemnified Person at the expense of
Metropolitan and MIS, 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)
(i) 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, Xxxx 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 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
Metropolitan agree that they shall each follow the procedures
set forth in paragraph 7(b) with respect to any claim against
Xxxx hereunder.
(ii) Subject to the conditions set forth below, and
in addition to any rights of indemnification and contribution
to which MIS may be entitled pursuant to any agreement among
underwriters, underwriting
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agreement or otherwise, and to the extent allowed by law, Xxxx
hereby agrees that it will indemnify and hold MIS and each
person controlling, controlled by or under common control with
MIS 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 MIS 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 Metropolitan and MIS to Xxxx on grounds of
policy or otherwise, Metropolitan, MIS 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 Metropolitan, MIS 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 Metropolitan and MIS are responsible for the balance,
except as Metropolitan and MIS 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 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
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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 Metropolitan or MIS within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act,
each officer of Metropolitan and MIS who shall have signed the
Registration Statement and each director of Metropolitan and MIS shall
have the same rights to contribution as Metropolitan, subject in each
case to clause (i) of this paragraph (d). 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 (d), 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 (d). 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 Xxxx and MIS 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 Xxxx
and Metropolitan 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
Metropolitan 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, at 00 Xxxxxxxxx Xxxxx,
Xxxxxxx Xxxxx, XX 00000, Attention: Xxxxx Xxxxxxxx; (b) if to Metropolitan, 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 Washington 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.
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
By: /s/ C. Xxxx Xxxxxxxx, Xx.
----------------------------------------------
C. Xxxx Xxxxxxxx, Xx., President
METROPOLITAN INVESTMENT SECURITIES, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------------------------
Xxxxx Xxxxxxx, Secretary
XXXX CAPITAL PARTNERS, LLC
By: /s/ Xxxxx Xxxxxxx
----------------------------------------------
Xxxxx Xxxxxxx,
Managing Director, Corporate Finance
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SCHEDULE A
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
The Pricing Recommendation Letter of Xxxx is conditioned upon
Metropolitan's undertaking to maintain the rates on its Debentures at least
equal to an "assumed floor." Based upon the pricing formula described below:
1. The interest rate to be paid on the Debentures shall be fixed by
Metropolitan from time to time. However, the rate shall not be lower
than the computation made per the worksheet on Schedule B, which is
attached and incorporated by reference herein.
2. The "assumed floor" for 6 to 11 month Debentures shall be at least 1.0%
above the lesser of the interest rate on the 6 month U.S. Treasury
Bills, on a discounted basis, based upon the auction average (which is
published widely in newspapers throughout the country, normally on the
day following the auction) and a composite average of the offering
rates on 6 month certificates of deposit currently being offered by
banks and savings institutions in the northwestern section of the
United States. For purposes of this composite average of certificate of
deposit rates, the rates being offered by the following institutions
shall be considered initially:
a. Seattle First National Bank
b. Security State Bank
c. U.S. Bank of Washington
x. Xxxxx Fargo Bank
x. Xxxxxxxxxx Trust Bank
x. Xxxxxxxxxx Mutual Savings Bank
Xxxx and Metropolitan agree to review on an ongoing basis the group
which comprises the composite average, and may substitute another
institution in the composite group from time-to-time by mutual
agreement, as the case may be.
3. The "assumed floor" for 60 to 120 month Debentures shall be computed in
like manner as that described in paragraph "2" above, except that the
latest auction average on 5 year U.S. Treasury Notes shall be
considered in place of the 6 month U.S. Treasury Bills, and 5 year
certificates of deposit currently offered in the composite group shall
be considered in lieu of the 6 month rate.
4. Rates on 12 to 23 month, 24 to 35 month, 36 to 47 month and 48 to 59
month Debentures shall be at least equal to the interpolated
differences between the computation of the "assumed floor" of 6 to 11
month Debentures and 60 to 120 month Debentures, based upon the
computation set forth in Schedule B.
5. Rates on Debentures payable in installments of principal and interest
shall be no lower than .25% below the "assumed floor" for 60 to 120
month Debentures.
6. The computation of the "assumed floor" shall be made monthly, as of the
first Tuesday of each month, or at such other times during any month
that
Metropolitan causes the offering rates to change from those in effect
on the first Tuesday of each month ("the computation date").
Metropolitan agrees to furnish Xxxx with a computation of the "assumed
floor" by completing the worksheet on Schedule B. Should the offering
rates at that time on Metropolitan's Debentures be less than the
"assumed floor" as computed, Metropolitan agrees to raise the rates on
its Debentures to at least the "assumed floor" within 10 calendar days
of the computation date. Should Metropolitan fail to raise its offering
rates within the 10 day period referred to above, Xxxx reserves the
right, in its uncontrolled discretion, to withdraw its Pricing
Recommendation Letter regarding the offering rates on the Debentures.
SCHEDULE B
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
PRICING FORMULA
C.D. RATE
Average rate among a composite of 6 selected Banks and Savings and Loans as of
the 1st Tuesday of each month.
GOVERNMENT RATE
Most current of 8 selected auction rates available on the 1st Tuesday of each
month.
Column A Column B Column C Column D Column E
Certificate of Government
Deposit (CD) Rate Enter Lesser of Metropolitan's
Calculation Calculation Column A or B Assumed Floor Current Rate
-------------- ----------- --------------- ------------- --------------
5 yr CD rate = 5 yr Gov't Rate =
------- -------
6 mo CD rate = 6 mo Gov't Rate
=
------- ------
DIFFERENCE DIFFERENCE
= =
------- ------
x .20 X.20
------- ------
Differential = Differential =
------- ------
(enter in (a) below) (enter in (a) below)
6 mo (actual) 6 mo (actual)
rate = rate = + 1%
----- ----- --------------- ----------- ---------------
(a) + (a) + 6-11 months
----- -----
1 yr rate = 1 yr rate = + 1%
----- ----- --------------- ----------- ---------------
(a) + (a) + 12-23 months
----- -----
2 yr rate = 2 yr rate = + 1%
----- ----- --------------- ----------- ---------------
(a) + (a) + 24-35 months
----- -----
3 yr rate = 3 yr rate = + 1%
----- ----- --------------- ----------- ---------------
(a) + (a) + 36-47 months
----- -----
4 yr rate = 4 yr rate = + 1%
----- ----- --------------- ----------- ---------------
(a) + (a) + 48-59 months
----- -----
5 yr (actual) 5 yr (actual)
rate = rate = + 1%
----- ----- --------------- ----------- ---------------
(a) + (a) + 60-120 months
----- -----
INSTALLMENT PAYMENTS
(Floor equal to yearly _______ _______ ____________ rate MINUS .50)
(yearly -.50 rate)
