EXHIBIT 1(b)
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 January 1999 by and between
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 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 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
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 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 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 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.
1. RULE 2720.
CRUTTENDEN 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, CRUTTENDEN 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.
CRUTTENDEN 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 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.
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 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 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". 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 shall terminate or otherwise lapse under operation of
law.
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.
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 or 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 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 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.
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. 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.
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) 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.
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.
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.
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.
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: Xxxxx Xxxx 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.
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
By:_____________________________________________
C. Xxxx Xxxxxxxx, Xx., President
METROPOLITAN INVESTMENT SECURITIES, INC.
By:_____________________________________________
Xxxxx Xxxxxxx, Secretary
CRUTTENDEN XXXX INCORPORATED
By:_____________________________________________
Xxxxx Xxxx, Vice President, Corporate Finance
SCHEDULE A
Metropolitan Mortgage & Securities Co., Inc.
The opinion 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
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
