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 South Coast Financial Securities, Inc., a California
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 selling 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 South Coast 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:
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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.
South Coast 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, South Coast satisfies or at the
times designated in such paragraph (l5) satisfies the other
requirements set forth therein or will receive an exemption from
such requirements from the NASD.
2. CONSENT.
South Coast 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 South Coast 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 South Coast's prior written consent
with respect to form and substance.
3. PRICING FORMULA AND OPINION.
South Coast 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
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forth in Schedule "A," a copy of which is attached hereto, and
incorporated herein by reference. It is understood and agreed by
South Coast that the securities to which this Agreement relates
will be offered on a continuous best efforts basis by MIS, as the
managing selling agent of Metropolitan 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 agreement, and
in accordance with this Agreement. South Coast 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 South Coast for
its actual 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 South Coast incurred in the
normal conduct of business. It is further agreed that South Coast
shall be paid an additional amount of $25,000 at the time the
pricing opinion is rendered, concurrent with the closing. South
Coast 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.
5. MATERIAL FACTS.
Metropolitan represents and warrants to South Coast 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
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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
South Coast or to the services to be performed by South Coast
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 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
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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 South Coast pursuant to this Agreement shall
be deemed a representation and warranty by Metropolitan to
South Coast, 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 South
Coast's opinion, to amend or supplement
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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
South Coast of such events within a reasonable time
thereafter, and will forthwith prepare and furnish to South
Coast, 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 South Coast) 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 South Coast, at its expense,
with all information and documentation with respect to its
business, financial condition and other matters as South Coast may
deem relevant based on the standards of reasonableness and good
faith and shall request in connection with South Coast'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 South Coast as South
Coast may request on the effective date of the Registration
Statement and on the Closing Date. Metropolitan will make
reasonably available to South Coast, its auditors, counsel, and
officers and directors to discuss with South Coast any aspect of
Metropolitan which South Coast may deem relevant. In addition,
Metropolitan, at South Coast's request, will
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cause to be delivered to South Coast 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 South Coast to rely thereon to the
same extent as if addressed directly to South Coast. Metropolitan
represents and warrants to South Coast 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 South
Coast 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
South Coast 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 South Coast and each person
controlling, controlled by or under common control with
South Coast 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
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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
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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 South Coast), (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 South Coast on grounds of policy or
otherwise, Metropolitan and South Coast shall contribute to
the aggregate losses, claims, damages and liabilities
(including legal or other
57
expenses reasonably incurred in connection with investigating or
defending same) to which Metropolitan and South Coast may
be subject in such proportion so that South Coast 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 South Coast 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 South Coast, or
any partner, director, officer, employee, representative or
any agent of any thereof, shall have the same rights to
contribution as South Coast 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.
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Metropolitan represents and warrants to South Coast 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 South Coast that this Agreement has
been duly authorized, executed and delivered by MIS and
constitutes a valid and binding obligation of MIS.
10. AUTHORIZATION BY SOUTH COAST.
South Coast represents and warrants to Metropolitan that this
Agreement has been duly authorized, executed and delivered by
South Coast and constitutes a valid and binding obligation of
South Coast.
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 South Coast
Financial Securities, Inc., at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, XX 00000-0000, and (b) if to Metropolitan, at 000 Xxxx
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
METROPOLITAN INVESTMENT SECURITIES, INC.
By: ______________________________________________
Xxxxx Xxxxxxx, Secretary
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SOUTH COAST FINANCIAL SECURITIES, INC.
By: _____________________________________________
Xxxxxx X. Xxxx, Chairman and CEO
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SCHEDULE A
Metropolitan Mortgage & Securities Co., Inc.
The opinion of South Coast 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
