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-7," (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 333-19755;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
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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
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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
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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
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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
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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.
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(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).
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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 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.
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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
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By:________________________________________
Xxxxxxx X. Xxxxxxx, President
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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.
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Exhibit B
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
Date Date Average Rate Rate*
3 Mo. Treasury Xxxx ________________________ +.5% +1%
10 Yr Constant Rate ________________________ +.5% +1%
20 Year ________________________ +.5% +1%
HIGHEST APPLICABLE RATE:____________________________
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.
* Includes any distribution authorized by the Board in excess of
the Applicable Rate.
_______________________________________________________
Authorized Signature
