<PAGE>
As filed with the Securities and Exchange Commission on November 19, 1999.
Registration No. 333-88605
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
(Exact Name of Registrant as Specified in its Charter)
Washington 601 West 1st Avenue 91-0609840
(State or other Spokane, Washington 99201- (I.R.S. Employer
jurisdiction of 5015 Identification No.)
incorporation or (509) 838-3111
organization)
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
C. Paul Sandifur, Jr., President
Metropolitan Mortgage & Securities Co., Inc.
601 West 1st Avenue
Spokane, WA 99201-5015
(509) 838-3111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
Susan Thomson, Esq. Robert J. Ahrenholz, Esq.
Associate General Counsel Kutak Rock
601 West 1st Avenue 717 Seventeenth Street, Suite 2900
Spokane, Washington 99201 Denver, Colorado 80202
(509) 838-3111 (303) 297-2400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Commission
acting pursuant to said Section 8(a) may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold nor may offers to buy be accepted before the time +
+this prospectus is delivered in final form. This prospectus is not an offer +
+to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated November 19, 1999
PROSPECTUS
$25,000,000
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
9% Notes due 2004
-----------
The notes will mature on December 15, 2004. Interest on the notes is payable
monthly as of the 15th day of each month, beginning with the 15th day of the
month following the month that the offering closes. The notes are unsecured and
rank equally with all of our other unsecured indebtedness. We will only issue
the notes in book-entry form in denominations of $1,000, and will only sell or
exchange them in increments of $5,000 in principal amount. We intend to list
the notes for trading on the Pacific Stock Exchange under the symbol "MMS04".
If you currently hold our Investment Debentures Series II or III, or our
Installment Debentures Series I, you may exchange your debentures for an equal
principal amount of notes, subject to the limitations and conditions contained
in this prospectus. See "THE EXCHANGE OFFER."
-----------
Investing in the notes involves risks. You should carefully consider the risk
factors beginning on page 11 in this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
-----------
<TABLE>
<CAPTION>
Per Note Total
------------ -------------------
<S> <C> <C>
Public offering price 100% $25,000,000
Underwriting discounts and commissions(/1/) 2.5% to 5.50% $625,000-$1,375,000
Maximum proceeds to Metropolitan (before
expenses)(/2/) 94.5% $23,625,000
</TABLE>
- -----
(1) You will not incur a direct sales charge. Notes earn interest, without
deduction for underwriting discounts or commissions. We will reimburse our
underwriters between 2.5% to 5.50% for commissions, depending on whether
they are sales for cash or exchanges of debentures. See "THE EXCHANGE
OFFER" and "PLAN OF DISTRIBUTION."
(2) The maximum proceeds to Metropolitan is based upon sales of $25,000,000 in
new notes, and no exchanges. We will not receive any new proceeds for notes
that are exchanged for debentures.
-----------
The notes are obligations of Metropolitan and they are not insured or
guaranteed by any governmental agency, any insurance company, any affiliate of
our company or any other person or entity.
We are offering the notes on a best efforts basis with conditions. If the
conditions to the offering are not satisfied by December 15, 1999, the offering
will terminate unless we extend the offering period.
-----------
METROPOLITAN INVESTMENT SECURITIES, INC.
November , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FORWARD-LOOKING STATEMENTS................................................. 2
PROSPECTUS SUMMARY......................................................... 3
RISK FACTORS............................................................... 11
USE OF PROCEEDS............................................................ 11
CONDITIONS TO THE OFFERING AND ALLOCATION OF NOTES......................... 12
DESCRIPTION OF THE NOTES................................................... 13
THE EXCHANGE OFFER......................................................... 18
COMPARISON OF NOTES AND DEBENTURES......................................... 23
FEDERAL INCOME TAX CONSIDERATIONS.......................................... 24
PLAN OF DISTRIBUTION....................................................... 26
LEGAL MATTERS.............................................................. 27
EXPERTS.................................................................... 27
AVAILABLE INFORMATION...................................................... 27
INCORPORATION OF DOCUMENTS BY REFERENCE.................................... 28
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We based these forward-
looking statements on our current expectations and projections about future
events. These forward-looking statements are subject to risks, uncertainties,
and assumptions about Metropolitan, including:
. Our anticipated growth strategies,
. Anticipated trends in our businesses, including trends in the markets
for insurance, mortgages, annuities and real estate,
. Future interest rate trends, movements and fluctuations,
. Future expenditures for purchasing receivables, and
. Our ability to continue to control costs and accurately price the risk
of default on the payment of receivables.
----------------
You should only rely on the information contained in this prospectus. We
have not, and the placement agent has not, authorized any person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
placement agent is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider before investing in the notes. You should read both the
prospectus and the attached Annual Report on Form 10-K of the Metropolitan
consolidated group for the fiscal year ended September 30, 1998, and Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1999, carefully
before making your investment decision.
The Metropolitan Consolidated Group Of Companies
General
Metropolitan was incorporated in the State of Washington in January 1953.
Its principal executive offices are located at 601 West 1st Avenue, Spokane,
Washington 99201-5015. Its mailing address is P.O. Box 2162, Spokane,
Washington 99210-2162 and its telephone number is (509) 838-3111. Metropolitan
and its subsidiaries are collectively referred to in this prospectus as the
consolidated group, while the terms "Metropolitan," "we," and "our" refer
solely to the parent company, Metropolitan Mortgage & Securities Co., Inc.
History
Metropolitan's controlling shareholder is C. Paul Sandifur, Jr. Mr. Sandifur
has control through his voting power over a family trust and through his direct
ownership of common stock. See "Item 12" in Metropolitan's Annual Report on
Form 10-K for the year ended September 30, 1998, which is attached to this
prospectus. As a result of Mr. Sandifur's common control, we have several other
affiliates, including Summit Securities, Inc., Old Standard Life Insurance
Company and Old West Annuity & Life Insurance Company. Collectively, these
affiliated companies are referred to as "affiliated companies." The chart on
the next page depicts the relationship of some of the significant companies in
the Metropolitan consolidated group, which excludes affiliated companies that
are not subsidiaries of Metropolitan.
Business
The consolidated group is engaged in a nationwide business of acquiring,
holding, selling and securitizing receivables. These receivables include real
estate contracts and promissory notes that are secured by first position liens
on real estate. The consolidated group also invests in receivables consisting
of real estate contracts and promissory notes secured by second and lower
position liens, structured settlements, annuities, lottery prizes, and other
investments. The receivables secured by real estate are typically non-
conventional because they were either financed by the sellers of the properties
involved or they were originated by institutional lenders who originate loans
for borrowers with impaired credit or for non-conventional properties. In
addition to receivables, the consolidated group invests in other assets,
including U.S. Treasury obligations, corporate bonds and other securities.
The consolidated group's capital to invest in these receivables comes from
several sources. The consolidated group uses funds generated from the sale and
securitization of receivables, collateralized borrowings, receivable cash
flows, the sale of annuities, the sale of debentures, notes and preferred
stock, the sale of real estate, and securities portfolio earnings.
The consolidated group provides services to the affiliated companies for a
fee and engages in various business transactions with the affiliated companies.
Metropolitan provides receivable acquisition services to the affiliated
companies and to our insurance subsidiary, Western United Life Assurance
Company. Metropolitan's wholly owned subsidiary, Metwest Mortgage Services,
Inc., conducts receivable collection and servicing activities for the
affiliated companies, Metropolitan and Western United.
3
<PAGE>
The consolidated group owns various properties acquired through repossession
and other sources. These properties are held for sale and/or development. For a
more detailed discussion of the business of the consolidated group, see "Item
I" in Metropolitan's Annual Report filed on Form 10-K for the year ended
September 30, 1998, which is attached to this prospectus.
Organizational Chart
(as of September 30, 1999)
The chart below lists the consolidated group's principal operating
subsidiaries and their ownership.
[CHART APPEARS HERE]
- --------
* The remaining 3.5% of Consumers Group Holding Co., Inc. is owned by an
affiliated company, Summit Securities, Inc.
Metropolitan Mortgage & Securities Co., Inc.: Parent organization; invests
in receivables and other investments, including real estate development, which
are principally funded by proceeds from receivable investments, other
investments, and securities offerings.
Consumers Group Holding Co., Inc.: A holding company; its sole business
activity is being a shareholder of Consumers Insurance Co., Inc.
Consumers Insurance Company: Inactive property and casualty insurer; its
principal business activity is being a shareholder of Western United Life
Assurance Company.
Western United Life Assurance Company: Metropolitan's largest subsidiary and
largest company within the consolidated group; is engaged in investing in
receivables and other investments principally funded by annuity contract sales
and premiums from the sale of life insurance policies.
4
<PAGE>
Metwest Mortgage Services, Inc.: Performs loan origination, collection and
servicing functions. It is an FHA/HUD licensed servicer and lender and is
licensed as a Fannie Mae seller/servicer.
Summary of the Note Offering
Notes offered We are offering up to $25,000,000 in principal amount
of the 9% notes due 2004. The offering will only be
completed if we sell notes for cash and/or exchange
notes for debentures, as described on the following
page, in a total amount of at least $20,000,000 in
principal amount. For a description of the other
conditions to the offering, see "CONDITIONS TO THE
OFFERING".
Issue price We will sell the notes for 100% of their aggregate
principal amount.
Minimum purchase You may only purchase notes in increments of $5,000
in aggregate principal amount, or exchange debentures
in increments of $5,000 for an equivalent principal
amount of notes as described on the following page.
Maturity
The notes will mature on December 15, 2004.
Interest
We will pay interest on the notes at an annual rate
of 9%, and will make interest only payments monthly
as of the 15th day of each month. Interest on the
notes will begin to accrue on the later of December
15, 1999, or the closing date of the offering. We
will make the first interest payment as of the 15th
day of the month following the month that the
offering closes.
Optional redemption
We may, at our option, redeem any or all of the notes
at any time on or after December 15, 2001, by giving
you notice 60 days before the date of redemption. If
we do redeem your notes, we will redeem them for
their face value in minimum amounts of $1,000, or in
any integral multiple of $1,000, plus interest
accrued to the date of redemption.
Market for the notes
The notes are newly issued, and therefore there is
not a current trading market for the notes. We intend
to list the notes for trading on Tier I of the
Pacific Exchange, Inc. under the symbol "MMS04".
However, we cannot assure you that an active public
trading market for the notes will develop. If the
notes are not approved for listing, we may choose to
not close the offering.
Ranking of the notes The notes are unsecured debt instruments of
Metropolitan, and will rank equal to our debentures
and our other unsecured debt. The notes will rank
junior to any secured debt that we have now, or any
that we issue in the future. At June 30, 1999, we had
outstanding approximately $197,956,000 including
principal and compounded and accrued interest, of
unsecured debenture debt and $156,485,000, including
principal and accrued interest, of collateralized
debt and similar obligations. See "CAPITALIZATION".
Use of proceeds We will use the proceeds from the sales of these
notes to invest in receivables and to make other
investments, which may include investments in
existing subsidiaries, new business ventures or to
acquire
5
<PAGE>
other companies. We may also use the proceeds to
retire maturing debentures, pay preferred stock
dividends, for property development and for general
corporate purposes. We will not receive any proceeds
for notes that are exchanged for debentures. See "USE
OF PROCEEDS".
Risk factors
Your investment in the notes involves some risk. You
should invest in the notes only after reviewing the
risks described in this prospectus. See "RISK
FACTORS" for a discussion of the risks associated
with investing in the notes.
Summary of the Exchange Offer
Exchange offer If you are currently a holder of our debentures,
Investment Debentures Series II or III, or
Installment Debentures Series I, you will have the
option to exchange your debentures for the notes we
are offering through this prospectus. Subject to the
limitations and conditions described under the
heading "THE EXCHANGE OFFER," you will receive an
equal principal amount of notes for all debentures
that you validly tender and we accept. To exchange
your debentures, you must properly tender them to us
and we must accept them. There is a limited amount of
debentures that we will accept. See "THE EXCHANGE
OFFER". The notes will be issued on the terms
described in this prospectus, and may not have the
same terms and interest rates as your debentures. See
"COMPARISON OF NOTES AND DEBENTURES".
Expiration date
The exchange offer will expire at 5:00 p.m., New York
City time, December 15, 1999, unless we decide to
extend the expiration date.
Conditions and priority
of allocation The minimum amount of notes we will issue is
$20,000,000 and the maximum amount of notes that we
will issue in this offering is $25,000,000. If
purchases of notes by investors, together with
investors who desire to exchange their debentures for
notes, exceeds $25,000,000, we intend to sell or
exchange notes in the following order of priority:
(1) first to investors who are purchasing notes and
not exchanging debentures, then (2) to existing
investors who desire to exchange their debentures for
notes, subject to our discretion to accept or reject
any tender for any reason. For a more detailed
description of our intended priority of allocation,
see "CONDITIONS TO THE OFFERING".
Special procedures for
beneficial owners If you are the beneficial owner of debentures and you
registered your debentures in the name of a broker or
other institution, and you wish to participate in the
exchange, you should promptly contact the person in
whose name you registered your debentures and
instruct that person to tender your debentures on
your behalf. If you wish to tender on your own
behalf, you must, before completing and executing the
letter of transmittal and delivering your outstanding
debentures, either make appropriate arrangements to
register ownership of the outstanding debentures in
your name or obtain a properly completed bond power
6
<PAGE>
from the registered holder. The transfer of record
ownership may take considerable time.
Guaranteed delivery
procedure If you wish to tender your debentures and time will
not permit your required documents to reach the
exchange agent by the expiration date, or you cannot
complete the procedure for book-entry transfer on
time or you cannot deliver your certificates for
registered debentures on time, you may tender your
debentures in compliance with the procedures
described in this prospectus under the heading "THE
EXCHANGE OFFER -- How to Use the Guaranteed Delivery
Procedures if You Will Not Have Enough Time to Send
all Documents to us."
Exchange agent Metropolitan Investment Securities, Inc. will act as
the exchange agent for the exchange offer. For
questions relating to the exchange offer, you can
reach them at (509) 835-2210.
Risk factors
Exchanging notes for your debentures involves some
risk. You should exchange notes for your debentures
only after reviewing the risks described in this
prospectus. See "RISK FACTORS" for a discussion of
the risks associated with exchanging notes for your
debentures.
7
<PAGE>
Capitalization
The following table sets forth the capitalization of the consolidated group
at June 30, 1999.
<TABLE>
<CAPTION>
Amount
Class Outstanding
----- ------------
<S> <C>
Debt Payable:
Advances under funding facility with NationsBanc Mortgage
Capital Corp., interest at 5.964% per annum; due on March 24,
2000; collateralized by $113,568,000 in real estate contracts
and mortgage notes............................................ $107,889,322
Reverse repurchase agreements with Donaldson, Lufkin &
Jenrette; interest at 4.93% per annum; due on July 12, 1999;
collateralized by $15,000,000 in U.S. Treasury Bonds.......... 15,168,750
Reverse repurchase agreements with Bear Stearns; interest at 6%
per annum; due July 1, 1999; collateralized by $10,000,000 in
collateralized mortgage obligation (CMO) bonds................ 9,575,000
Note payable to Old Standard Life Insurance Company; interest
at 10.50% per annum; due May 3, 2004; collateralized by Beach
House Restaurant.............................................. 2,542,500
Note payable to U.S. Bank; interest at 6.938% per annum; due
September 30, 1999; collateralized by Metropolitan Financial
Center Building............................................... 10,000,000
Note payable to Summit Securities, Inc., interest at 11.0% per
annum; due on June 30, 2000; collateralized by $11,250,000 in
structured settlement agreements.............................. 9,000,000
Real estate contracts and mortgage notes payable, interest
rates ranging from 3% to 11.6% per annum, due through 2016;
collateralized by senior liens on certain of the Company's
real estate contracts, mortgage notes and real estate held for
sale.......................................................... 1,894,963
Accrued interest payable....................................... 414,307
------------
Total Debt Payable........................................... 156,484,842
------------
Debenture Bonds:
Investment Debentures, Series III maturing in 1999 to 2009, at
5.5% to 11%................................................... 54,159,319
Investment Debentures, Series II maturing in 1999 to 2002, at
5.5% to 11%................................................... 119,485,253
Installment Debentures Series I, maturing in 1999 to 2007 at
7.5% to 10.25%................................................ 173,276
Compound and accrued interest.................................. 24,138,487
------------
Total Debenture Bonds........................................ 197,956,335
------------
Stockholders' Equity:
Preferred Stock................................................ 19,480,420
Common Stock................................................... 293,417
Additional paid-in capital..................................... 20,482,170
Accumulated comprehensive loss................................. (3,459,303)
Retained earnings.............................................. 34,321,749
------------
Total Stockholders' Equity................................... 71,118,453
------------
Total Capitalization......................................... $425,559,630
============
</TABLE>
8
<PAGE>
Summary Consolidated Financial Data
The summary consolidated financial data shown below as of and for the nine
months ended June 30, 1999 and 1998, other than the ratio of earnings to fixed
charges and preferred stock dividends, have been derived from the unaudited
financial statements appearing in Metropolitan's Form 10-Q for the quarter
ended June 30, 1999, which is incorporated in this prospectus by reference and
is attached to this prospectus. The summary consolidated financial data shown
below as of September 30, 1998 and 1997 and for the years ended September 30,
1998, 1997 and 1996, other than the ratio of earnings to fixed charges and
preferred stock dividends, have been derived from, and should be read in
conjunction with, the consolidated financial statements, related notes, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations appearing in Metropolitan's Form 10-K for the year ended September
30, 1998, which is incorporated herein by reference and attached to this
prospectus. The summary consolidated financial data shown below as of September
30, 1996, 1995 and 1994 and for the years ended September 30, 1995 and 1994,
other than the ratio of earning, to fixed charges and preferred stock
dividends, have been derived from the consolidated financial statement not
included elsewhere herein.
<TABLE>
<CAPTION>
Nine Months Ended
June 30, Year Ended September 30,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Revenues................ $ 121,076 $ 118,510 $ 155,955 $ 155,135 $ 156,672 $ 138,107 $ 138,186
========== ========== ========== ========== ========== ========== ==========
Income before minority
interest............... $ 16,391 $ 10,759 $ 10,453 $ 9,791 $ 8,146 $ 6,376 $ 5,702
Income allocated to
minority interests..... (305) (99) (126) (123) (108) (73) (224)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. 16,086 10,660 10,327 9,668 8,038 6,303 5,478
Preferred stock
dividends.............. (2,639) (2,849) (3,732) (4,113) (3,868) (4,038) (3,423)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income applicable to
common stockholders.... $ 13,447 $ 7,811 $ 6,595 $ 5,555 $ 4,170 $ 2,265 $ 2,055
========== ========== ========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges.......... 1.16 2.08 1.75 1.77 1.46 1.35 1.29
Ratio of earnings to
fixed charges and
preferred stock
dividends(1)........... 1.00 1.61 1.37 1.31 1.14 1.03 1.04
PER COMMON SHARE
DATA(2):
Basic and diluted income
per share applicable to
common
stockholders(3)........ $ 103,436 $ 60,085 $ 50,728 $ 42,733 $ 32,073 $ 17,288 $ 14,996
========== ========== ========== ========== ========== ========== ==========
Weighted average number
of common shares
outstanding(2)......... 130 130 130 130 130 131 137
========== ========== ========== ========== ========== ========== ==========
Cash dividends per
common share........... $ 1,800 $ 600 $ 1,200 $ -- $ -- $ 3,800 $ 675
========== ========== ========== ========== ========== ========== ==========
CONSOLIDATED BALANCE
SHEET DATA:
Total assets............ $1,265,056 $1,155,568 $1,226,665 $1,112,389 $1,282,659 $1,078,468 $1,063,290
Debentures, line of
credit advances, other
debt payable and
securities sold, not
owned.................. 354,441 232,059 323,908 190,131 363,427 226,864 261,500
Stockholders' equity.... 71,118 60,942 58,757 54,113 46,343 40,570 32,625
</TABLE>
9
<PAGE>
- --------
(1) The consolidated ratio of earnings to fixed charges and preferred stock
dividends was 1.00, 1.61, 1.37, 1.31, 1.14, 1.03, and 1.04 for the nine
months ended June 30, 1999 and 1998 and the years ended September 30, 1998,
1997, 1996, 1995 and 1994, respectively. Assuming no benefit from the
earnings of its subsidiaries with the exception of direct dividend
payments, the ratio of earnings to fixed charges and preferred dividends
for Metropolitan alone was 1.01, 1.28, 1.10, 1.01, 1.11, 1.05, and 1.34 for
the nine months ended June 30, 1999 and 1998, and the years ended September
30, 1998, 1997, 1996, 1995 and 1994, respectively. The consolidated ratio
of earnings to fixed charges excluding preferred stock dividends was 1.16
and 2.08 for the nine months ended June 30, 1999 and 1998, respectively;
and 1.75, 1.77, 1.46, 1.35, and 1.29 for the years ended September 30,
1998, 1997, 1996, 1995 and 1994, respectively. The ratio of earnings to
fixed charges excluding preferred stock dividends for Metropolitan,
assuming no benefit from the earnings of its subsidiaries with the
exception of direct dividend payments was 1.16, 1.64, 1.40, 1.36, 1.48,
1.40, and 1.36 for the nine months ended June 30, 1999 and 1998, and the
years ended September 30, 1998, 1997, 1996, 1995 and 1994, respectively.
(2) All information retroactively reflects the reverse common stock split of
2,250:1 which occurred during the fiscal year ended September 30, 1994.
(3) Earnings per common share, basic and diluted, are computed by deducting
preferred stock dividends from net income and dividing the result by the
weighted average number of shares of common stock outstanding. There were
no common stock equivalents or potentially dilutive securities outstanding
during any period presented.
10
<PAGE>
RISK FACTORS
When deciding whether or not to purchase the notes or exchange your
debentures for notes, you should carefully consider the risks contained in the
section entitled "BUSINESS OVERVIEW--Factors Affecting Future Operating
Results" of Metropolitan's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998, incorporated into and attached to this prospectus. You
should also consider the following risks associated with an investment in the
notes:
The indenture does not Metropolitan's and your rights and obligations
restrict our ability in the notes are defined in an indenture dated
to incur additional as of October 6, 1999. The indenture does not
debt restrict our ability to issue additional notes
or to incur other debt. We are not required to
maintain any specified financial ratios,
minimum net worth, minimum working capital or a
sinking fund.
The notes are not The notes offered in this prospectus are
insured against the unsecured obligations of Metropolitan and they
risk of loss are not insured or guaranteed by any bank, any
governmental agency, any insurance company, any
affiliate of Metropolitan or any other person
or entity. Thus, the notes have greater risk
than investments that are insured against the
risk of loss.
There is no There is currently no trading market for the
established trading notes. Although we intend to list the notes for
market for the notes trading on Tier I of the Pacific Exchange, we
can not assure you that an active public market
for the notes will develop. You should consider
your needs for liquidity before investing in
the notes.
Possible inability to
continue selling The State of Washington regulates the amount of
securities securities that we can sell under the Debenture
Company Act. Under that act, the amount of
securities that can be sold can be, and has
previously been, limited by the State of
Washington. Because of this limitation, we may
be restricted in the amount of securities that
we are able to offer in this offering or in
future offerings. As a result of this offering,
if successfully completed and upon the listing
of the notes for trading on Tier I of the
Pacific Exchange, we anticipate that we may no
longer be subject to some of these regulations
by the State of Washington.
USE OF PROCEEDS
If all the notes offered are sold as new sales and none are exchanged, we
expect the maximum proceeds from the offering to total $25,000,000 before
deducting sales commissions and other expenses. We will not receive any new
proceeds for notes exchanged for debentures. Commissions will range from two
and one-half percent (2.5%) to five and one-half percent (5.5%) depending on
whether notes are exchanged for debentures or sold for cash. This will result
in commissions of between $625,000 and $1,375,000, depending on the amount of
debentures exchanged and the amount of notes purchased. Other expenses are
estimated to be $139,000. We can not assure you that the conditions to the
offering will be satisfied and that the notes will be sold or exchanged.
In conjunction with the other funds available to us through operations
and/or borrowings, we currently plan to utilize the new proceeds of this
offering for the following purposes: priority will be given first to (1)
funding investments in receivables and other investments, which may include
investments in existing subsidiaries, the commencement of new business ventures
or the acquisition of other companies, and then to (2) the development of real
estate we currently hold or acquire in the future. We do not have any
commitments or
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agreements for material acquisitions. However, the consolidated group continues
to evaluate possible acquisition candidates. To the extent internally generated
funds are insufficient or unavailable for the retirement of maturing
debentures, new proceeds of this offering may be used for retiring maturing
debentures, preferred stock dividends and for general corporate purposes,
including debt service and other general operating expenses. Approximately
$51.4 million in principal amount of debt securities will mature between
November 15, 1999 and January 31, 2001 with interest rates ranging from 5.6% to
9.75% and averaging approximately 8.0% per annum. See "BUSINESS OVERVIEW--
Factors Affecting Future Operating Results" under Item 1 in our Annual Report
on Form 10-K for the year ended September 30, 1998.
We anticipate that some of the new proceeds from this offering will be
invested in money market funds, bank repurchase agreements, commercial paper,
U.S. Treasury Bills and similar securities investments while awaiting use as
described above. Since we won't receive any new proceeds for exchanges of
debentures, and because we do not know how many notes will be sold for cash, we
are unable to accurately forecast the total new proceeds generated by this
offering. Therefore, we have not allocated specific amounts for any of the
foregoing purposes.
CONDITIONS TO THE OFFERING AND ALLOCATION OF NOTES
Conditions to the Offering
This offering is conditional upon debenture holders tendering, and us
accepting, together with sales of new notes, at least $20,000,000 in aggregate
amount of debentures, including principal and interest, and new sales of notes.
The maximum amount of notes we will sell for cash or exchange for debentures in
this offering is $25,000,000. We will only sell notes or exchange debentures
for notes in increments of $5,000 in principal amount.
We are making the offering of the notes on the basis that if we do not
receive subscriptions for at least $20 million of notes by December 15, 1999,
unless we extend that period from time to time, which we may do in our sole
discretion, then we will promptly return to you any exchange documents received
or any funds received without interest. While we wait for these conditions to
be satisfied, we will promptly deposit any funds we receive from you in an
escrow account with U.S. Bank Trust National Association, as escrow agent.
If we receive subscriptions for at least $20 million during the period of
our offering described in the prior paragraph, then we may continue to offer
the notes until the end of our offering period or until the end of any
extension period. If the notes are not approved for listing on the Pacific
Exchange, we have the option, in our sole discretion, not to close the offering
Priority of Allocation
If more investors desire to exchange their debentures for the notes or if
more new investors desire to purchase the notes for cash than there are notes
available for us to sell, then we have the discretion to determine in which
order we will sell you our notes or exchange your debentures for notes. If
there is an over subscription, we intend to allocate the notes in the following
order of priority:
. First, to investors making new purchases of notes,
. Then, to investors who are both exchanging debentures and are also
making new purchases of notes in an amount equal to or greater than the
principal and interest on the debentures they are exchanging,
. Then, equally to investors that are only exchanging debentures for notes
and investors who are both exchanging debentures for notes and
purchasing new notes in an amount less than the principal and interest
on the debentures they are exchanging.
We may, in our sole discretion and without notice to you, change the overall
priority we intend to allocate the notes or elect not to follow the above
priority on a case by case basis. For the orders we receive to exchange or
purchase our notes that we do not accept, following our determination of non-
acceptance, we will promptly return to you any exchange documents received or
any funds received without interest. If we do not
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accept your offer to exchange your debentures for the new notes that we are
offering, then you will continue to be a holder of your debentures and entitled
to receive interest payments as though you had not tendered your debentures for
exchange.
DESCRIPTION OF THE NOTES
General
The notes will be issued under an indenture dated as of October 6, 1999,
between Metropolitan and U.S. Bank Trust National Association. The following
statements relating to the notes and the indenture are summaries and are not
complete. These summaries are subject to the detailed provisions of the
indenture and are qualified in their entirety by reference to the indenture, a
copy of which is filed as an exhibit to the registration statement that
includes this prospectus and is also available for inspection at the office of
the trustee at 601 Union Street, Suite 2120, Seattle, Washington 98101.
The notes represent unsecured general obligations of our company and will be
issued as global securities in fully registered book-entry form without
coupons. The notes will be sold to the public at 100% of their principal
amount. The notes are not convertible into our capital stock or other
securities.
The notes will not be guaranteed or insured by any governmental agency or by
any other person or entity. The State of Washington regulates the amount of
debt securities we may issue, our debt to equity ratio, some of our investments
and various other aspects of our business. At June 30, 1999, we had outstanding
approximately $197,956,000, including principal and compounded and accrued
interest, of unsecured debenture debt and $156,485,000, including principal and
accrued interest, of collateralized debt and similar obligations. If this
offering is successfully completed and the notes are successfully listed for
trading on Tier I of the Pacific Exchange, we anticipate that we may no longer
be subject to some of these regulations by the State.
Interest and Maturity
The notes will bear interest at an annual rate of 9% commencing on the later
of December 15, 1999, or the closing date of the offering, until they mature or
until we redeem them. Interest payments will be made monthly, as of the 15th
day of each month, beginning with the 15th day of the month following the month
that the offering closes, to the person in whose name a note is registered at
the close of business on the first day of that month. The notes will mature on
December 15, 2004. The notes are not subject to any sinking fund provision.
Optional Redemption
We can redeem the notes, at our option, in whole or in part at any time on
or after December 15, 2001, upon at least 60 days prior written notice. The
redemption price will be equal to 100% of the principal amount of the notes
being redeemed plus accrued interest to the date set for redemption.
If we make a partial redemption of the notes, selection of the notes for
redemption will be made by the trustee on a pro rata basis, by lot or by other
methods as the trustee in its sole discretion shall deem to be fair and
appropriate. No note of less than $1,000 in principal amount will be redeemed
in part. If any note is to be redeemed in part only, the notice of redemption
relating to that note will state the portion of the principal amount of that
note that will be redeemed. In this case, a new note in a principal amount
equal to the unredeemed portion will be issued in the holders name upon
cancellation of the original note.
The Indenture
General. The notes will be issued under the indenture between Metropolitan
and U.S. Bank Trust National Association, as trustee. The indenture does not
restrict our ability to issue additional notes or to incur other debt. The
indenture does not require us to maintain any specified financial ratios,
minimum net worth or minimum working capital. The notes that we are offering
are senior in liquidation only to our outstanding equity securities. They are
subordinate to our collateralized debt and rank equal to our debentures, our
unsecured debt and our unsecured accounts payable and accrued liabilities. You
should not rely on the terms of the indenture for protection of your
investment, but should look rather to our creditworthiness and ability to
satisfy our obligations.
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Merger, Consolidation or Sale of Assets. The indenture provides that we may,
with or without your consent, consolidate with, or sell, lease or convey all or
substantially all of our assets to, or merge with or into, any other entity,
provided that (1) either Metropolitan is the continuing entity, or the
successor entity formed by or resulting from any consolidation or merger or the
entity that received the transfer of the assets shall be an entity organized
and existing under the laws of the United States or a state thereof and the
successor entity shall expressly assume our obligation to pay the principal and
interest on the notes and shall also assume the due and punctual performance
and observance of all the covenants and conditions contained in the indenture;
(2) immediately after giving effect to this transaction and treating any
indebtedness that becomes an obligation of the successor entity, no event of
default under the indenture, and no event that, after notice or the lapse of
time, or both, would become an event of default, shall have occurred and be
continuing; and (3) an officers' certificate and legal opinion covering these
conditions shall be delivered to the trustee.
Existence. The indenture requires us to do or cause to be done all things
necessary to preserve and keep in full force and effect our corporate
existence, material rights and material franchises; provided, however, that we
are not required to preserve any right or franchise if our Board of Directors
determines that the preservation is no longer desirable in the conduct of our
business.
Maintenance of Properties. The indenture requires us to cause all of our
material properties used or useful in our business or the business of any
subsidiary to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment. It also requires us to cause
all necessary repairs, renewals, replacements, betterments and improvements to
be made, all as in our judgment may be necessary so that our business may be
properly and advantageously conducted at all times; provided, however, that we
and our subsidiaries are not prevented from selling or otherwise disposing of
our properties for value in the ordinary course of business.
Insurance. The indenture will require us and our subsidiaries to keep in
force upon all of our properties and operations policies of insurance carried
with responsible companies in amounts and covering all risks as are customary
in the industry and customary with prevailing market conditions and
availability.
Payment of Taxes and Other Claims. The indenture requires us to pay or
discharge or cause to be paid or discharged, before delinquent, (1) all taxes,
assessments and governmental charges levied or imposed on us or any of our
subsidiaries or on our income, profits or property and (2) all lawful claims
for labor, materials and supplies that, if unpaid, might by law become a lien
upon our or our subsidiaries' property; provided, however, that the we are not
required to pay or discharge any tax, assessment, charge or claim where the
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings.
Provision of Financial Information. The indenture requires us, within 15
days after each of the respective dates by which we are required to file annual
reports, quarterly reports and other documents with the SEC, (1) to transmit by
mail to all note holders, as their names and addresses appear in the applicable
register, without cost to the note holders, summaries of the annual reports,
quarterly reports and other documents that we file with the SEC under Section
13 or 15(d) of the Securities Exchange Act of 1934, (2) to file with the
trustee copies of the annual reports, quarterly reports and other documents
that we file with the SEC under Section 13 or 15(d) of the Securities Exchange
Act, and (3) to supply, promptly upon written request and payment of the
reasonable cost of duplication and delivery, copies of these documents to any
prospective note holder.
Modification of the Indenture. Note holders' rights may be modified with the
consent of the holders of a majority in aggregate principal amount outstanding
of the notes. In general, no adverse modification of the terms of payment and
no modifications reducing the percentage of notes required for modification can
be made without the consent of each note holder affected by that amendment.
Events of Default, Notice and Waiver. The following events will be an "event
of default" under the indenture:
. A default for 30 days in the payment of any installment of interest;
. A default in the payment of the principal at maturity;
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. A default in the performance or breach of selected covenants or
warranties of Metropolitan contained in the indenture which continues
for 60 days after written notice;
. A default under any bond, debenture, note, mortgage, indenture or other
instrument or other evidence of indebtedness for money borrowed by
Metropolitan or any of its subsidiaries, in an aggregate principal
amount in excess of $10 million, whether this indebtedness currently
exists or is subsequently created; or
. In some events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of Metropolitan or any
of its significant subsidiaries.
If an event of default under the indenture occurs and is continuing, then
the trustee or the holders of not less than 25% in principal amount of the
outstanding notes may declare the principal amount of all the notes to be due
and payable immediately by written notice to Metropolitan and the trustee.
However, at any time after a declaration of acceleration with respect to the
notes has been made, but before a judgment or decree for payment of the money
due has been obtained by the trustee, the holders of not less than a majority
of the principal amount of the outstanding notes may rescind and annul the
declaration and its consequences if (1) Metropolitan deposits with the trustee
all required payments of principal and overdue interest on the notes, plus any
applicable fees, expenses, disbursements and advances of the trustee, and (2)
all events of default, other than the nonpayment of accelerated principal, or
specified portion of principal, has been cured or waived as provided in the
indenture. The indenture also provides that the holders of not less than a
majority in principal amount of the outstanding notes may waive any past
default and its consequences, except a default (a) in the payment of the
principal or interest on the notes or (b) in respect of a covenant or provision
contained in the indenture that cannot be modified or amended without the
consent of the holder of each outstanding note.
The indenture requires the trustee to give notice to the note holders within
90 days of a default under the indenture unless the default is cured or waived;
provided, however, that the trustee may withhold notice to the note holders if
specified responsible officers of the trustee consider the withholding of
notice to be in the note holders' interest, except for a default in the payment
of the principal or interest on any note.
The indenture provides that no note holders may institute any proceedings,
judicial or otherwise, with respect to the indenture or for any remedy in the
indenture, except in the case of failure of the trustee, for 60 days, to act
after (1) it has received a written request to institute proceedings in respect
of an event of default from the holders of not less than 25% in principal
amount of the outstanding notes, (2) it has received an offer of indemnity
reasonably satisfactory to the trustee, and (3) no contrary directions from the
holders of more than 50% of the outstanding notes have been received by the
trustee. This provision will not prevent, however, any note holder from
instituting suit for the enforcement of payment of the principal and interest
on the notes at the respective due dates.
The indenture provides that the trustee is under no obligation to exercise
any of its rights or powers under the indenture at the request or direction of
any note holders, unless these holders offer to the trustee reasonable security
or indemnity. The holders of not less than a majority in principal amount of
the outstanding notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or of
exercising any trust or power conferred upon the trustee. The trustee may,
however, refuse to follow any direction that is in conflict with any law or the
indenture or that may involve the trustee in personal liability or that may be
unduly prejudicial to the note holders not joining therein.
Book-Entry System
The notes will be issued in the form of a global security, which is a single
fully registered note in book-entry form, which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the name of
DTC or its nominee. Unless and until it is exchanged in whole or in part for
the individual notes represented thereby, a global security may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another nominee of DTC or by DTC or any nominee to a successor
depository or any nominee of the successor.
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So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by a global security for all purposes under the
indenture and the beneficial owners of the notes will be entitled only to those
rights and benefits afforded to them in compliance with DTC's regular operating
procedures. Except as provided below, owners of a beneficial interest in a
global security will not be entitled to have any of the individual notes
registered in their names, will not receive or be entitled to receive physical
delivery of any of these notes in definitive form and will not be considered
the owners or holders of these notes under the Indenture. The laws of some
states require that some purchasers of securities take physical delivery of
those securities in definitive form. These laws may impair the ability to
transfer beneficial interests in a global security.
If any of the following occur, we will issue individual notes in
certificated form in exchange for a global security:
. DTC is at any time unwilling or unable to continue as depository or if
at any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act, and we do not appoint a successor depository
within 90 days;
. an event of default under the indenture with respect to the notes has
occurred and is continuing and the beneficial owners representing a
majority in principal amount of the notes represented by a global
security advise DTC to cease acting as depository; or
. we, in our sole discretion, determine at any time that the notes shall
no longer be represented by a global security.
In any of these instances, an owner of a beneficial interest in a global
security will be entitled to physical delivery of individual notes in
certificated form of like tenor, equal in principal amount to the beneficial
interest and to have the notes in certificated form registered in its name.
Notes so issued in certificated form will be issued in denominations of $1,000
or any integral multiple of $1,000, and will be issued in registered form only,
without coupons.
DTC has advised us of the following information regarding DTC:
DTC is:
. a limited-purpose trust company organized under the New York Banking
Law;
. a "banking organization" within the meaning of the New York Banking Law;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
. a "clearing agency" registered under the provisions of Section 17A of
the Securities Exchange Act.
DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among its participants of securities transactions,
like transfers and pledges, in deposited securities through electronic
computerized book-entry changes in its participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations. DTC is owned by
a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others like
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
Purchases of notes under the DTC system must be made by or through direct
participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual purchaser of each note, or a beneficial
owner, is in turn recorded on the direct and indirect participants' records. A
beneficial owner does not receive written confirmation from DTC of its
purchase, but the beneficial owner is expected to receive a written
confirmation providing details of the transaction, as well as periodic
statements of its holdings, from the direct or indirect participant through
which the beneficial owner entered into the transaction.
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Transfers of ownership interests in the notes are accomplished by entries
made on the books of participants acting on behalf of beneficial owners.
Beneficial owners do not receive certificates representing their ownership
interests in notes, unless use of the book-entry system for the notes is
discontinued.
To facilitate subsequent transfers, the notes are registered in the name of
DTC's partnership nominee, Cede & Co. The deposit of the notes with DTC and
their registration in the name of Cede & Co. effects no change in beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the notes.
DTC records reflect only the identity of the direct participants to whose
accounts notes are credited, which may or may not be the beneficial owners. The
participants remain responsible for keeping account of their holdings on behalf
of their customers.
Delivery of notices and other communications by DTC to direct participants,
by direct participants to indirect participants, and by direct participants and
indirect participants to beneficial owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the notes
represented by a global security are to be redeemed, DTC's practice is to
determine by lot the amount of the interest of each direct participant to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the notes.
Under its usual procedures, DTC mails a proxy (an "omnibus proxy") to the
issuer as soon as possible after the record date. The omnibus proxy assigns
Cede & Co.'s consenting or voting rights to those direct participants to whose
accounts the notes are credited on the record date, which are identified on a
list attached to the omnibus proxy.
Metropolitan will provide the funds for the payment of principal and
interest payments on the notes to the trustee, who will also act as the paying
agent, and the trustee will pay principal and interest on the notes to DTC.
DTC's practice is to credit direct participant's accounts on the payable date
in proportion to their respective holdings as shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payable date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of that participant and not of DTC, the trustee or
Metropolitan, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of Metropolitan or the trustee. Disbursement of payments to
direct participants is the responsibility of DTC, and disbursement of the
payments to the beneficial owners is the responsibility of direct and indirect
participants.
DTC may discontinue providing its services as securities depository with
respect to the notes at any time by giving reasonable notice to Metropolitan or
the trustee. Under these circumstances, if a successor securities depository is
not appointed, note certificates are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC, or a successor securities depository. In that event, note
certificates will be printed and delivered.
None of Metropolitan, the trustee, any paying agent, the security registrar
or the underwriters will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in a global security for any notes or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests or for any
other aspect of the relationship between DTC and its participants or the
relationship between the participants and the owners of beneficial interests in
a global security owned through those participants.
Interest, Registration and Transfer
The principal and interest on the notes will be payable at the trustee's
corporate trust office at 601 Union Street, Suite 2120, Seattle, Washington
98101; provided, however, that, at our option, payment of interest may be made
by check mailed to the address of the person entitled thereto as it appears in
the applicable register for the notes or by wire transfer of funds to that
person at an account maintained within the United States.
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Subject to limitations imposed on the notes in the indenture, and if the
notes are no longer a global security, the notes will be exchangeable for any
authorized denomination of notes of the same series and of a like aggregate
principal amount and tender upon surrender of a note or notes at the trustee's
corporate trust office or at the applicable office of any designated agent of
Metropolitan. In addition, subject to limitations imposed on the notes in the
indenture, the notes may be surrendered for registration of transfer at the
trustee's corporate trust office or at the applicable office of any designated
agent of Metropolitan. Every note surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer and evidence of title and identity satisfactory to the trustee,
Metropolitan, or its transfer agent, as applicable. No service charge will be
made for any registration of transfer or exchange of any note. However, with
some exceptions, we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with the transfer.
Neither Metropolitan nor the trustee shall be required to (1) issue,
register the transfer of or exchange any notes during a period beginning at the
opening of business 15 days before the day of mailing of notice of redemption
of any note selected for redemption and ending at the close of business on the
day of mailing the relevant notice of redemption; or (2) register the transfer
of or exchange any note, or portion of a note, selected for redemption, in
whole or in part, except the unredeemed portion of any note being redeemed in
part.
THE EXCHANGE OFFER
How to Determine if You Are Eligible to Participate in the Exchange Offer
We are offering to exchange, upon the terms and subject to the conditions
contained in this prospectus and in the letter of transmittal accompanying it,
$1,000 in principal amount of notes for each $1,000 in principal amount and
interest of our debentures, Investment Debentures Series II and III, or
Installment Debentures Series I, that you hold. You must exchange at least
$5,000 in aggregate amounts of principal and interest of debentures to
participate in the exchange offer. You may tender cash in addition to your
debentures to meet the $5,000 minimum, or additional $5,000 increment. We will
only exchange debentures in increments of $5,000 in principal amount. The terms
of the notes are not the same as the terms of the debentures you may exchange
in this exchange offer. For a description of the terms of the notes you may
receive, see "DESCRIPTION OF THE NOTES". For a description of some of the
differences between the notes and your debentures, see "COMPARISON OF NOTES AND
DEBENTURES".
We are not making the exchange offer to, nor will we accept surrenders for
exchange from, holders of outstanding debentures in any jurisdiction in which
this exchange offer or the acceptance of a debenture for exchange would not be
in compliance with the securities or blue sky laws of that jurisdiction.
If you are a broker-dealer that resells notes that you received for your own
account in the exchange offer, and if you participate in a distribution of the
notes, you may be an "underwriter" within the meaning of the Securities Act and
any profit on any resale of notes and any commissions or concessions you
receive may be underwriting compensation under the Securities Act. If you are a
broker-dealer who acquires debentures as a result of market-making or other
trading activities, you may use this prospectus, as supplemented or amended, in
connection with resales of the notes. We have agreed that, for a period of one
year after we consummate the exchange offer, we will make this prospectus
available to any broker-dealer for use in connection with any resale. If you
tender debentures in the exchange offer for the purpose of participating in a
distribution of the notes, or if you cannot rely upon these interpretations,
you must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction to sell
your notes.
If you are tendering debentures, we will not require you to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes with respect to the exchange of the debentures in
the exchange offer.
Maturing Debentures and Partial Tenders
If you are the holder of a debenture that matures between the date of this
prospectus and the expiration date of the offering, and wish to purchase new
notes instead of receiving the principal amount due on maturity
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of your debenture, you will, for purposes of the priority of allocation in the
offering, be deemed to be exchanging your debenture for notes. If there is an
over subscription of the offering, you will be placed on even priority as other
investors who wish to exchange their debentures as described above. If you do
elect to exchange your maturing debentures for notes, you will not earn any
interest on the matured debenture for the period beginning immediately after
the maturity date of your debenture and before the date when interest begins to
accrue on the notes, unless you invest those funds in a transaction independent
of this offering.
You may elect to exchange part of a debenture for notes. You must exchange
debentures in increments of $5,000 in aggregate amounts of principal and
interest. If you elect to exchange only part of a debenture, a new debenture
will be issued for the portion of the old debenture that is not being
exchanged. No new debentures will be issued in denominations of less than $100.
Information About the Expiration Date of the Exchange Offer and Changes to It
The exchange offer expires on the expiration date, which is 5:00 p.m., New
York City time, on December 15, 1999, unless we, in our sole discretion, extend
from time to time the period the exchange offer is open. If we extend the
period for the exchange offer, the term "expiration date" means the latest time
and date the exchange offer, as so extended, expires. We reserve the right to
extend the exchange offer at any time and from time to time before the
expiration date by giving written notice to Metropolitan Investment Securities,
Inc., which is the exchange agent, and by timely public announcement
communicated by no later than 5:00 p.m. on the next business day following the
expiration date, unless applicable law or regulation requires otherwise, by
making a release to the Dow Jones News Service. During any extension of the
exchange offer, all debentures previously tendered in the exchange offer will
remain subject to the exchange offer.
The exchange date will be the first business day following the expiration
date of the offering. We expressly reserve the right to terminate the exchange
offer and not accept for exchange any debentures for any reason, including if
any of the events listed below under "--We may modify or terminate the exchange
offer under some circumstances" have occurred and we have not waived them. We
also reserve the right to amend the terms of the exchange offer in any manner,
whether before or after any tender of the debentures. If we terminate or amend
the exchange offer, we will notify the exchange agent in writing and will
either issue a press release or give written notice to you as a holder of the
debentures as promptly as practicable. Unless we terminate the exchange offer
before 5:00 p.m., New York City time, on the expiration date, we will exchange
the notes for debentures on the exchange date if the conditions to the offering
are satisfied.
We will mail this prospectus and the related letter of transmittal and other
relevant materials to you as a record holder of debentures and we will furnish
these items to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the lists of holders for subsequent transmittal to
beneficial owners of debentures.
How to Tender Your Debentures
If you tender any of your debentures to us by complying with one of the
procedures below, that tender will constitute an agreement between you and us
under the terms and subject to the conditions that we describe below and in the
letter of transmittal for the exchange offer.
You may tender debentures by properly completing and signing the letter of
transmittal or a facsimile of it. All references in this prospectus to the
"letter of transmittal" include a facsimile of the letter. You must deliver it,
together with the certificate or certificates representing the debentures that
you are tendering and any required signature guarantees, or a timely
confirmation of a book-entry transfer in compliance with the procedure that we
describe below, to the exchange agent at Metropolitan Investment Securities,
Inc., 601 West First Avenue, Department 141000, Spokane, Washington 99201, on
or before the expiration date. You may also tender debentures by complying with
the guaranteed delivery procedures that we describe below.
Your signature does not need to be guaranteed if you registered your
debentures in your name, you will register the notes in your name and you sign
the letter of transmittal. In any other case, the registered holder of
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<PAGE>
your debentures must endorse them or send them with duly executed written
instruments of transfer in form satisfactory to us. Also, we may, in our
discretion, require an "eligible institution," like a bank, broker, dealer,
credit union, savings association, clearing agency or other institution that is
a member of a recognized signature guarantee medallion program within the
meaning of Rule 17Ad-15 under the Securities Exchange Act, to guarantee the
signature on the endorsement or instrument of transfer.
If your debentures are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender
debentures, you should contact the registered holder promptly and instruct the
holder to tender debentures on your behalf. If you wish to tender your
debentures yourself, you must, before completing and executing the letter of
transmittal and delivering your debentures, either make appropriate
arrangements to register ownership of the debentures in your name or follow the
procedures described in the immediately preceding paragraph. Transferring
record ownership from someone else's name to your name may take considerable
time.
How to Tender if You Hold Your Debentures Through a Broker or Other Institution
and You Do Not Have the Actual Debentures
If you will not be able to send all the exchange documents on time, you can
still tender your debentures by using the guaranteed delivery procedures
described below.
You assume the risk of choosing the method of delivery of your debentures
and all other documents. If you send your debentures and your documents by
mail, we recommend that you use registered mail, return receipt requested, you
obtain proper insurance, and you mail these items sufficiently in advance of
the expiration date to permit delivery to the exchange agent on or before the
expiration date.
If you do not provide your taxpayer identification number, which is your
social security number or employer identification number, as applicable, and
certify that the number is correct, the exchange agent will withhold 31% of the
gross proceeds otherwise payable to you in the exchange offer, unless an
exemption applies under the applicable law and regulations concerning "backup
withholding" of federal income tax. You should complete and sign the main
signature form and the Substitute Form W-9 included as part of the letter of
transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and you prove
it in a manner satisfactory to us and the exchange agent.
How to Use the Guaranteed Delivery Procedures if You Will Not Have Enough Time
to Send All Documents to Us
If you desire to tender your debentures, and time will not permit a letter
of transmittal, a book-entry transfer or debentures to reach the exchange agent
before the expiration date, you may tender your debentures if the exchange
agent has received at its office listed on the letter of transmittal on or
before the expiration date a letter, telegram or facsimile transmission from an
eligible institution setting forth: your name and address, the principal amount
of the debentures that you are tendering, the names in which you registered the
debentures and, if possible, the certificate numbers of the debentures that you
are tendering.
The eligible institution's correspondence to the exchange agent must state
that the correspondence constitutes the tender and guarantee that within three
New York Stock Exchange trading days after the date that the eligible
institution executes the correspondence, the eligible institution will deliver
the debentures, or a book-entry transfer, in proper form for transfer, together
with a properly completed and duly executed letter of transmittal and any other
required documents. We may, at our option and in our discretion, reject the
tender if you do not tender your debentures and accompanying documents by
either the above-described method or by a timely book-entry confirmation, and
if you do not deposit your debentures and tender documents with the exchange
agent within the time period stated above. Copies of a notice of guaranteed
delivery that eligible institutions may use for the purposes described in this
paragraph are available from the exchange agent.
Valid receipt of your tender will occur as of the date when the exchange
agent receives your properly completed letter of transmittal, accompanied by
either the debentures or a timely book-entry confirmation, and any additional
cash that you may tender. We will issue notes in exchange for debentures that
you tendered with a
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<PAGE>
notice of guaranteed delivery or correspondence to similar effect as described
above by an eligible institution only against deposit of the letter of
transmittal, any other required documents and either the tendered debentures or
a timely book-entry confirmation.
We Reserve the Right to Determine Validity of All Tenders
We will be the sole judge of all questions as to the validity, form,
eligibility, including time of receipt, and acceptance for exchange of your
tender of debentures and our judgment will be final and binding. We reserve the
absolute right to reject any or all of your tenders that are not in proper form
or the acceptances for exchange of which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any of the conditions of
the exchange offer or any defect or irregularities in tenders of any particular
holder whether or not we waive similar defects or irregularities in your case.
Neither we, the exchange agent nor any other person will be under any duty to
give you notification of any defects or irregularities in tenders nor shall any
of us incur any liability for failure to give you any notification. Our
interpretation of the terms and conditions of the exchange offer, including the
letter of transmittal and its instructions, will be final and binding.
To Participate, You Must Complete the Letter of Transmittal Certifying
Information About Yourself
By tendering debentures and executing the letter of transmittal, you certify
the following:
. you are not our "affiliate";
. you are not a broker-dealer that owns debentures you acquired directly
from us or our affiliate; and
. you are acquiring the notes we are offering in this prospectus in the
ordinary course of your business and that you have no arrangement with
any person to participate in the distribution of the notes.
If you cannot certify the foregoing, you may certify that you are an affiliate
of us or of the initial purchasers of the debentures, and you will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable to you.
By tendering debentures for exchange, you will exchange, assign and transfer
the debentures to us and irrevocably appoint the exchange agent as your agent
and attorney-in-fact to assign, transfer and exchange the debentures. You will
also represent and warrant that you have full power and authority to tender,
exchange, assign and transfer the debentures and to acquire notes issuable upon
the exchange of your tendered debentures. The letter of transmittal requires
you to agree that, when we accept your debentures for exchange, we will acquire
good and unencumbered title to them, free and clear of all liens, restrictions,
charges and encumbrances and that they are not subject to any adverse claim.
You will also warrant that you will, upon our request, execute and deliver
any additional documents that we believe are necessary or desirable to complete
the exchange, assignment and transfer of your tendered debentures. All
authority conferred by you will survive your death or incapacity and every
obligation of you shall be binding upon your heirs, legal representatives,
successors, assigns, executors and administrators.
How We Will Either Exchange Your Debentures for Notes or Return Them to You
On the exchange date, we will determine which debentures the holders validly
tendered and we will issue notes in exchange for the validly tendered
debentures that we accept for exchange. The exchange agent will act as your
agent for the purpose of receiving notes from us and registering the notes in
your name promptly after acceptance of the tendered debentures. If we do not
accept your debentures for exchange, we will return them without expense to you
promptly following the expiration of the exchange offer. If we do not accept
your debentures and return them to you, they will retain the same terms as they
had immediately before your tender. Interest will continue to accrue on your
debentures while they are being held in escrow by the escrow agent.
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<PAGE>
We May Modify or Terminate the Exchange Offer Under Some Circumstances
We are not required to issue notes in respect of any properly tendered
debentures that we have not previously accepted. We may terminate the exchange
offer or, at our option, we may modify or otherwise amend the exchange offer.
If we terminate the exchange offer, it will be by oral or written notice to the
exchange agent and by timely public announcement communicated no later than
5:00 p.m. on the next business day following the expiration date, unless
applicable law or regulation requires otherwise, by making a release to the Dow
Jones News Service. We may terminate the exchange offer in the following
circumstances:
. Any court or governmental agency brings a legal action seeking to
prohibit the exchange offer or assessing or seeking any damages as a
result of the exchange offer, or resulting in a material delay in our
ability to accept any of the debentures for exchange; or
. Any government or governmental authority, domestic or foreign brings or
threatens any law or legal action that in our sole judgment, might
directly or indirectly result in any of the consequences referred to
above; or, if in our sole judgment, this activity might result in the
holders of notes having obligations with respect to resales and
transfers of notes that are greater than those we described above in the
interpretations of the staff of the SEC or would otherwise make it
inadvisable to proceed with the exchange offer; or
. A material adverse change has occurred in our business, condition,
financial or otherwise, operations or prospects.
The foregoing conditions are for our sole benefit and we may assert them
with respect to all or any portion of the exchange offer regardless of the
circumstances giving rise to the condition. We also reserve the right to waive
these conditions in whole or in part at any time or from time to time in our
discretion. Our failure at any time to exercise any of the foregoing rights
will not be a waiver of any right, and each right will be an ongoing right that
we may assert at any time or from time to time. In addition, we may in our sole
discretion, even if the above conditions are satisfied, terminate or amend the
exchange offer.
Any determination by us concerning the fulfillment or nonfulfillment of any
conditions will be final and binding upon all parties.
In addition, we will not accept for exchange any tendered debentures, and we
will not issue notes in exchange for any debentures, if at that time there is,
or the SEC has threatened, any stop order with respect to the registration
statement that this prospectus is a part of, or if qualification of the
indenture is required under the Trust Indenture Act of 1939, and has not been
so qualified.
Where to Send Your Documents For the Exchange Offer
We have appointed Metropolitan Investment Securities, Inc. as the exchange
agent for the exchange offer. You must send your letter of transmittal to the
exchange agent at:
Metropolitan Investment Securities, Inc.
601 West First Avenue
Spokane, Washington 99201-5041
Telephone: (509) 835-2210
Facsimile: (509) 835-2767
Attention: Exchange Agent
If you send your documents to any other address or fax number, you will not
have validly delivered them and you will not receive notes in exchange for your
debentures. We will return your debentures to you.
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<PAGE>
We Are Paying Our Costs For the Exchange Offer
We have retained Metropolitan Investment Securities, Inc., one of our
affiliates, to act as a dealer-manager and the exchange agent in connection
with the exchange offer and will pay them a commission of 2.5% to 2.75% of the
principal amount of debentures exchanged, plus reimbursement of reasonable out-
of-pocket expenses. We will also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses that they incur
in forwarding tenders for their customers. We will pay the expenses incurred in
connection with the exchange offer, including the fees and expenses of the
exchange agent, the escrow agent and printing, accounting, investment banking
and legal fees. We estimate that these fees are approximately $139,000. See
"PLAN OF DISTRIBUTION".
No person has been authorized to give you any information or to make any
representations to you in connection with the exchange offer other than those
that this prospectus contains. If anyone else gives you information or
representations about the exchange offer, you should not rely upon that
information or representation or assume that we have authorized it. Neither the
delivery of this prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in our
affairs since the respective dates as of which this prospectus gives
information.
We are not making the exchange offer to, nor will we accept tenders from or
on behalf of, holders of debentures in any jurisdiction in which it is unlawful
to make the exchange offer or to accept it. However, we may, at our discretion,
take action as we may deem necessary to make the exchange offer in any
jurisdiction and extend the exchange offer to holders of debentures in those
jurisdictions. In any jurisdiction where the securities laws or blue sky laws
require a licensed broker or dealer to make the exchange offer one or more
registered brokers or dealers that are licensed under the laws of that
jurisdiction is making the exchange offer on our behalf.
Holders of debentures will not have dissenters' rights or appraisal rights
in connection with the exchange offer.
COMPARISON OF NOTES AND DEBENTURES
The following is a brief summary of some of the differences and similarities
between the notes we are offering in this prospectus and the debentures that
you may currently own. For a more detailed description of the notes, see
"DESCRIPTION OF THE NOTES". The table below lists some of the provisions of our
outstanding debentures in general. For a more detailed description of the terms
of your debentures, see the provisions of your debentures as they are described
in the physical certificates representing your debentures.
<TABLE>
<CAPTION>
Notes Debentures
------------------------ ------------------------------------
<C> <S> <C>
Maturity dates............... The notes will mature on The debentures have a maturity
December 15, 2004. date between 1999 and 2009,
depending on the series and type
of debentures and the date
originally purchased.
Interest rates and payments.. Interest only payments Interest payments on the
will be made monthly at debentures range from monthly,
an annual rate of 9%. quarterly, annually, to only
payable at maturity. The Installment
Debentures also make amortizing
payments of principal and interest.
Interest rates on the debentures
range from 5.5% to 11%.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Notes Debentures
------------------------ ----------------------------------------
<C> <S> <C>
Conversion......................... The notes are not The debentures are not convertible
convertible into any into any other security of Metropolitan.
other security of
Metropolitan.
Optional redemption by the issuer.. We may redeem the notes The debentures are not
at any time on or after redeemable by Metropolitan.
December 15, 2001.
Ranking............................ The notes will rank The debentures rank equally with
equally with our the notes and our other unsecured debt.
debentures and our other
unsecured debt.
Listing and trading................ Intended to be listed Not listed for trading on a
for trading on Tier I of securities exchange.
the Pacific Exchange.
Voting Rights...................... Amendments to the Amendments to the indenture that
indenture or the terms relate to the debentures or the terms
of the notes may be made of any series of debentures may be
in most cases with the made in most cases with the consent
consent of the holders of the holders of 66 2/3% in
of a majority in principal amount outstanding
principal amount of the series affected by the amendment.
outstanding.
</TABLE>
FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of some of the federal income tax
consequences to persons exchanging their debentures for notes or making new
purchases of notes for cash in this offering. The discussion contains some of
the tax consequences to investors in this offering, but does not deal with all
aspects of federal taxation, or with any aspect of state, local or foreign
taxation that may be relevant to investors in light of their personal
investment and tax circumstances. Some investors, including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations, persons who are not citizens or residents of the United
States and qualified employee benefit plans under the Employee Retirement
Income Security Act of 1974, or tax-qualified retirement plans and individual
retirement accounts under the Internal Revenue Code of 1986 (the "Code"), may
be subject to special rules not discussed below. Debenture holders desiring to
tender their debentures for notes are advised to consult with their own tax
advisors regarding the federal, state, local and foreign tax consequences which
could result therefrom. Furthermore, all potential holders of notes should
consult with their own tax advisors regarding the federal, state, local and
foreign tax consequences of acquiring, holding and disposing of the notes.
Metropolitan believes that the notes should be characterized as debt for
federal income tax purposes. The following discussion makes the same
assumption.
Exchange of Debentures
Generally, the amount of gain or loss that will be recognized upon the
exchange of debentures for notes will be equal to the difference between (1)
the fair market value of the notes received and (2) the adjusted basis of the
debentures surrendered increased by any original issue discount or market
discount previously included in income by the holder. See discussions of
Original Issue Discount and Market Discount below. Therefore, assuming a
debenture holder's basis in his debentures is equal to the fair market value of
the notes he receives, the holder should not recognize gain as a result of the
exchange. In the event a debenture holder acquired them at a market discount
that has not been previously taken into income, or his basis therein is
otherwise less than the fair market value of the notes received, the holder
likely will recognize gain upon the exchange.
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<PAGE>
Stated Interest
Under general federal income tax principles, holders of notes must include
stated interest in income in accordance with their method of tax accounting.
Accordingly, holders of notes using the accrual method of tax accounting must
include stated interest in income as it accrues and holders of notes using the
cash method of tax accounting must include stated interest in income as it is
actually or constructively received.
Payments of interest to taxable holders of notes will constitute portfolio
income for purposes of Section 469 of the Code and not passive activity income.
Accordingly, this income will not be subject to reduction by losses from
passive activities (e.g., any interest in a trade or business held as a limited
partner or other arrangements in which the holders of notes do not materially
participate) of holders of notes who are subject to the passive activity loss
rules. However, income attributable to interest payments may be offset by
investment expense deductions, subject to the limitation that individual
investors may only deduct miscellaneous itemized deductions, including
investment expenses, to the extent these deductions exceed two percent of the
investor's adjusted gross income.
Holding Period of Notes
For purposes of determining whether gain or loss on the disposition of the
note is long term or short term capital gain or loss, the holding period of the
notes begins with the date the notes are issued in connection with the
offering.
Disposition of the Notes
On the sale, redemption or other disposition of the notes, the holder will
recognize gain or loss measured by the difference between (1) the amount of
cash and the fair market value of the property received and (2) the holder's
tax basis in the notes sold, exchanged or otherwise disposed of, increased by
any original issue discount or market discount previously included income by
the holder. See discussions of Original Issue Discount and Market Discount
below. Provided that the notes are issued for cash at par or are exchanged for
debentures at par, a holder's basis in the notes will be equal to the original
principal amount of the notes received. Subject to the market discount and bond
premium rules discussed below, the gain or loss from disposition of the notes
will be a capital gain or loss, provided the notes were held as a capital
asset, and will be long term gain or loss if the notes were held for more than
one year.
Original Issue Discount
Original issue discount is generally defined as the excess of a debt
instrument's stated redemption price at maturity over its issue price, subject
to a statutorily-defined de minimis exception, generally one-quarter of 1% of
the debt instrument's stated redemption price at maturity multiplied by the
number of complete years to maturity from its issue date. The "stated
redemption price at maturity" of a debt instrument is generally the sum of the
debt instrument's stated principal amount plus all other payments required
thereunder, other than payments of "qualified stated interest," generally,
stated interest that is unconditionally payable in cash at least annually at a
single fixed rate that equals or exceeds a published federal rate. The "issue
price" of a debt instrument that is not part of an issue of which a substantial
part is sold for money and is traded on an established securities market is its
fair market value when issued. Metropolitan believes that (1) the interest paid
on the note will be qualified stated interest and (2) the issue price and
stated redemption price at maturity will equal each other. Therefore,
Metropolitan expects that the notes will not be issued with original issue
discount.
In the event notes were deemed to be issued with more than a de minimis
discount, the original issue discount will be included in income by the
acquiring holder as it accrues under a constant yield method which would
generally require the recognition of taxable income associated with such
discount prior to the receipt of cash by such holder.
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<PAGE>
Bond Premium
Metropolitan believes that the notes will be issued without premium.
However, in the event a note holder's initial adjusted basis in the notes or
their fair market value immediately after the issuance, whichever is lower,
exceeds the amount payable at maturity of the notes, or in some cases, on an
earlier call date, the holders of notes may be able to elect to deduct the
excess using a constant yield method over the remaining term of the notes as
amortizable bond premium under Section 171 of the Code provided the notes are
held as a capital asset. Except as provided in the Treasury Regulations
relating thereto, the amortizable bond premium will be treated as an offset to
interest income on the notes rather than as a separate deduction item. An
election under Section 171 of the Code generally is binding once made and
applies to all obligations owned or subsequently acquired by the taxpayer.
Market Discount
With respect to notes acquired subsequent to the date of issuance, the
market discount provisions of the Code generally provide that, subject to a
statutorily defined de minimis exception, if a note is acquired at a market
discount and the holder thereof thereafter recognizes gain on a disposition of
such note, including a gift, the lesser of the gain or the portion of the
market discount that accrued while the note was held by the holder will be
treated as ordinary interest income at the time of the disposition. For this
purpose, in the case of a note not issued with original issue discount, an
acquisition at a market discount includes an acquisition, other than an
acquisition at original issuance, resulting in a basis in the note below the
note's stated redemption price at maturity. The market discount rules also
provide that a holder who acquires a note at a market discount, and who does
not elect to include the market discount in income on a current basis, may be
required to defer the deduction of a portion of any interest incurred or
maintained to purchase or carry the debt instrument until the holder disposes
of the debt instrument in a taxable transaction.
The notes provide that they may be redeemed, in whole or in part, before
maturity. If some or all of the notes are redeemed, each holder of a note
acquired at a market discount would be required to treat the principal payment
as ordinary interest income to the extent of any accrued market discount on the
notes.
A holder of a debt instrument may elect to have market discount currently
included in income. The current inclusion election, once made, applies to all
market discount obligations acquired by the holder on or after the fist day of
the first taxable year to which the election applies and may not be revoked
without the consent of the Service. If a note holder elects to include market
discount in income in accordance with the preceding sentence, the foregoing
rules with respect to the recognition of ordinary income on a sale or other
dispositions of a note and the deferral of interest deduction on indebtedness
related to the note will not apply.
Backup Withholding
Under the backup withholding rules, a holder of a debenture or note may be
subject to backup withholding at the rate of 31% with respect to interest paid
on, and the cash proceeds of the sale, redemption or other disposition of, the
debentures or notes unless the holder (1) is a corporation or comes within
other exempt categories and, when required, demonstrates that fact, or (2)
provides a taxpayer identification number, certifies as to no loss of exemption
from backup withholding, and otherwise complies with applicable requirements of
the backup withholding rules. Backup withholding may be required for the amount
of notes received.
PLAN OF DISTRIBUTION
The notes are being offered directly to the public on a best efforts basis,
with conditions, through Metropolitan Investment Securities, Inc. ("MIS"),
which is affiliated with Metropolitan through the common control by C. Paul
Sandifur Jr. Accordingly, the offering has not received the independent selling
agent review customarily made when an unaffiliated selling agent offers
securities. No commission or other expense of the
26
<PAGE>
offering will be paid by the purchasers of the notes. A commission of between
2.5% and 5.5% of the principal amount purchased or exchanged will, however, be
paid by Metropolitan, depending on whether purchases of notes are for cash or
for exchange for outstanding debentures. Commissions of 2.5% to 2.75% will be
paid on exchanges, and commissions up to 5.5% will be paid on new purchases of
notes for cash. The notes are being offered only for cash or cash equivalents,
or for exchange on the terms described under the section entitled "THE EXCHANGE
OFFER." If you are not tendering through an account set up with FiServ or an
approved selected dealer, then checks tendered should be made payable to "U.S.
Bank Trust National Association -- Metropolitan Mortgage & Securities Co.,
Inc.," as escrow agent. The offering will only be completed if we sell notes
for cash and/or exchange notes for debentures in a total amount of at least
$20,000,000 in principal amount. In addition, if the notes are not approved for
listing on the Pacific Exchange, we have the option not to close the offering.
MIS will promptly deposit funds it receives for new purchases in an escrow
account with U.S. Bank Trust National Association as escrow agent, to be
transmitted directly to Metropolitan pending the satisfaction of the conditions
to the offering. During the three fiscal years ended September 30, 1998, MIS
has received commissions of $3,698,362 from Metropolitan on sales of
approximately $112,685,000 of Metropolitan's debentures.
MIS is a member of the National Association of Securities Dealers, Inc. Due
to the affiliation of Metropolitan and MIS, Rule 2720 of the NASD Conduct Rules
requires, in part, that a qualified independent underwriter be engaged to make
a recommendation regarding the interest rates to be paid on the notes offered
by this prospectus. Accordingly, MIS has obtained a letter from Cruttenden Roth
Incorporated, a NASD member, stating that the interest rate on the notes is
consistent with Cruttenden's recommendations which were based on conditions and
circumstances existing as of the date of the prospectus. Cruttenden has assumed
the responsibilities of acting as the qualified independent underwriter in
pricing the offering and conducting due diligence. For performing its functions
as a qualified independent underwriter with respect to the notes offered,
Cruttenden will receive $25,000.00 in fees. Cruttenden will also be reimbursed
by Metropolitan for its actual out-of-pocket expenses.
We have agreed to indemnify Cruttenden against, or make contributions to
Cruttenden with respect to, some liabilities under the Securities Act of 1933
and the Securities Exchange Act.
MIS does not intend to make a market for the notes. MIS may enter into
selected dealer agreements with and reallow to some dealers, who are members of
the NASD, and some foreign dealers who are not eligible for membership in the
NASD, a commission of up to 5.5% of the principal amount of notes sold by those
dealers.
LEGAL MATTERS
The legality of the notes to be issued in connection with this offering is
being passed upon for Metropolitan by the law firm of Kutak Rock, Denver,
Colorado.
EXPERTS
The consolidated balance sheets of Metropolitan Mortgage & Securities Co.,
Inc. and its subsidiaries as of September 30, 1998 and 1997, and the
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended September 30, 1998, incorporated by
reference in this prospectus, have been incorporated in reliance upon the
report, which includes an explanatory paragraph describing changes in the
methods of accounting for the transfer and servicing of financial assets in
1997 and impaired loans in 1996, of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in auditing and
accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act, and, in compliance with the act, file periodic reports and other
information with the SEC. These reports and the other information that
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<PAGE>
we file with the SEC can be inspected and copied at the public reference
facilities maintained by the SEC in Washington, D.C. at 450 Fifth Street, N.W.,
Washington, DC 20549 and at some of its regional offices which are located in
the New York Regional Office, Seven World Trade Center, Suite 1300, New York,
NY 10048, and the Chicago Regional Office, CitiCorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. In addition, the SEC maintains a
World Wide Web site that contains reports, proxy statements and other
information regarding registrants like Metropolitan, that file electronically
with the SEC at the following Internet address: (http://www.sec.gov).
We have filed with the SEC in Washington, D.C., a registration statement on
Form S-2 under the Securities Act with respect to the notes offered by this
prospectus. This prospectus does not contain all of the information contained
in the registration statement, as permitted by the rules and regulations of the
SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this
prospectus by reference:
Annual Report on Form 10-K of Metropolitan for the fiscal year ended
September 30, 1998, filed January 13, 1999.
Quarterly Report on Form 10-Q of Metropolitan for the fiscal quarter ended
June 30, 1999, filed August 13, 1999.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
Metropolitan will provide without charge to each person, including to whom a
prospectus is delivered, upon written or oral request of that person, a copy of
any and all of the information that has been referenced in this prospectus
other than exhibits to these documents. Requests for these copies should be
directed to Corporate Secretary, Metropolitan Mortgage & Securities Co., Inc.,
PO Box 2162, Spokane, Washington 99210-2162, telephone number (509) 838-3111.
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Metropolitan Mortgage & Securities Co., Inc.
$25,000,000
9% Notes due 2004
----------------
PROSPECTUS
----------------
November , 1999
Metropolitan Investment Securities, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
Information Not Required in Prospectus
Item 14: Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 6,950
NASD Filing Fee................................................. 3,000
Independent Underwriter Fee and Expenses........................ 25,000
Accounting Fees and Expenses(/1/)............................... 20,000
Legal Fees and Disbursements(/1/)............................... 42,000
Trustee's Fees and Expenses(/1/)................................ 10,000
Printing Expenses(/1/).......................................... 30,000
Miscellaneous Expenses(/1/)..................................... 2,050
--------
Total Expenses(1)............................................. $139,000
========
</TABLE>
- --------
(1) Estimated
Item 15: Indemnification of Directors and Officers
Metropolitan has no contractual or other arrangement with its controlling
persons, directors or officers regarding indemnification, other than as set
forth in its Articles of Incorporation. Metropolitan's Articles of
Incorporation permits indemnification of a director, officer or employee up to
the indemnification limits permitted by Washington state law which permits
indemnification for judgments, fines and amounts paid in settlement actually
and reasonably incurred in connection with an action, suit or proceeding if
the indemnified person acted in good faith and in a manner reasonably believed
to be in and not opposed to the best interests of the corporation.
Item 16. Exhibits
(a) Exhibits
<TABLE>
<C> <S>
1.01 (1) Selling Agreement between Metropolitan and Metropolitan
Investment Securities, Inc.
1.02 (2) Form of Agreement to Act as "Qualified Independent Underwriter,"
between Metropolitan, Metropolitan Investment Securities, Inc.
and Cruttenden Roth Incorporated with respect to the note to be
registered.
1.03 (2) Form of Pricing Recommendation Letter of Cruttenden Roth
Incorporated with respect to the notes to be registered.
4.01 (2) Indenture, dated as of October 6, 1999, between Metropolitan and
U.S. Bank Trust National Association, trustee.
5.01 (2) Opinion of Kutak Rock as to the validity of the notes.
10.01 Employment Agreement between Metropolitan and Bruce Blohowiak
(incorporated by reference to Exhibit 10(a) to Metropolitan's
Form 10-K filed January 8, 1998).
10.02 Employment Agreement between Metropolitan and Michael Kirk
(incorporated by reference to Exhibit 10(b) to Metropolitan's
Form 10-K filed January 8, 1998).
10.03 Employment Agreement between Metropolitan and Jon McCreary
(incorporated by reference to Exhibit 10(c) to Metropolitan's
Form 10-K filed January 8, 1998).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.04 Reinsurance Agreement between Western United Life Assurance
Company and Old Standard Life Insurance Company (incorporated by
reference to Exhibit 10(d) to Metropolitan's Form 10-K filed
January 8, 1998).
10.05 Employment Agreement between Metropolitan and William D. Snider
(incorporated by reference to Exhibit 10(c) to Metropolitan's
Form 10-Q filed May 20, 1999).
11.01 (2) Statement indicating computation of earnings per common share.
12.01 (2) Statement of computation of ratio of earnings to fixed charges
and preferred stock dividends.
13.01 Quarterly Report of Metropolitan on Form 10-Q for the fiscal
quarter ended June 30, 1999 (incorporated by reference to
Metropolitan's Form 10-Q filed August 13, 1999).
23.01 (1) Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.02 Consent of Kutak Rock (included in Exhibit 5).
24.01 The Power of attorney, included on Page II-4 of the Registration
Statement filed on October 7, 1999, is incorporated herein by
reference.
25.01 (2) Statement of eligibility of trustee.
99.01 (1) Form of Letter of Transmittal
99.02 (2) Form of Notice of Guaranteed Delivery
</TABLE>
- --------
(1) Filed herewith
(2) Previously filed
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
II-2
<PAGE>
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling persons of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Act, the
information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall
be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Pre-Effective
Amendment No. 1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Spokane, State of
Washington, on this 19th day of November, 1999.
Metropolitan Mortgage & Securities
Co., Inc.
/s/ C. Paul Sandifur, Jr.
By: _________________________________
C. Paul Sandifur, Jr., President,
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ C. Paul Sandifur, Jr. President, Chief Executive November 19, 1999
______________________________________ Officer and Chairman of
C. Paul Sandifur, Jr. the Board (Principal
Executive Officer)
*** Executive Vice President, November 19, 1999
______________________________________ Chief Operating Officer
Bruce J. Blohowiak and Director
*** Chief Financial Officer November 19, 1999
______________________________________ (Principal Accounting
William Snider Officer)
*** Secretary and Director November 19, 1999
______________________________________
Reuel Swanson
*** Director November 19, 1999
______________________________________
Charles Stolz
*** Director November 19, 1999
______________________________________
Irv Marcus
*** Director November 19, 1999
______________________________________
John T. Trimble
*** Director November 19, 1999
______________________________________
Harold Erfurth
*** By: /s/ C. Paul Sandifur, Jr
______________________________________
C. Paul Sandifur, Jr.,
as attorney-in-fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.01(1) Selling Agreement between Metropolitan and Metropolitan Investment
Securities, Inc.
1.02(2) Form of Agreement to Act as "Qualified Independent Underwriter,"
between Metropolitan, Metropolitan Investment Securities, Inc. and
Cruttenden Roth Incorporated with respect to the note to be
registered.
1.03(2) Form of Pricing Recommendation Letter of Cruttenden Roth
Incorporated with respect to the notes to be registered.
4.01(2) Indenture, dated as of October 6, 1999, between Metropolitan and
U.S. Bank Trust National Association, trustee.
5.01(2) Opinion of Kutak Rock as to the validity of the notes.
10.01 Employment Agreement between Metropolitan and Bruce Blohowiak
(incorporated by reference to Exhibit 10(a) to Metropolitan's Form
10-K filed January 8, 1998).
10.02 Employment Agreement between Metropolitan and Michael Kirk
(incorporated by reference to Exhibit 10(b) to Metropolitan's Form
10-K filed January 8, 1998).
10.03 Employment Agreement between Metropolitan and Jon McCreary
(incorporated by reference to Exhibit 10(c) to Metropolitan's Form
10-K filed January 8, 1998).
10.04 Reinsurance Agreement between Western United Life Assurance
Company and Old Standard Life Insurance Company (incorporated by
reference to Exhibit 10(d) to Metropolitan's Form 10-K filed
January 8, 1998).
10.05 Employment Agreement between Metropolitan and William D. Snider
(incorporated by reference to Exhibit 10(c) to Metropolitan's Form
10-Q filed May 20, 1999).
11.01(2) Statement indicating computation of earnings per common share.
12.01(2) Statement of computation of ratio of earnings to fixed charges and
preferred stock dividends.
13.01 Quarterly Report of Metropolitan on Form 10-Q for the fiscal
quarter ended June 30, 1999 (incorporated by reference to
Metropolitan's Form 10-Q filed August 13, 1999).
23.01(1) Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.02 Consent of Kutak Rock (included in Exhibit 5).
24.01 The Power of attorney, included on Page II-5 of the Registration
Statement, is incorporated herein by reference.
25.01(2) Statement of eligibility of trustee.
99.01(1) Form of Letter of Transmittal
99.02(2) Form of Notice of Guaranteed Delivery
</TABLE>
- --------
(1) Filed herewith
(2) Previously filed.
<PAGE>
Exhibit 1.01
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
AND
METROPOLITAN INVESTMENT SECURITIES, INC.
SELLING AGREEMENT
This Agreement made as of the 6th day of October, 1999, by and between
METROPOLITAN MORTGAGE & SECURITIES CO., INC., a Washington corporation
("Metropolitan") and METROPOLITAN INVESTMENT SECURITIES, INC., a Washington
corporation (the "Selling Agent").
WITNESSETH:
WHEREAS, Metropolitan proposes to issue and sell or exchange for
outstanding debentures (the "Offering") up to $25,000,000 principal amount of
its 9% Notes due 2004 (the "Notes") pursuant to a Registration Statement on Form
S-2 (the "Registration Statement") to be filed with the U.S. Securities and
Exchange Commission (the "SEC") and a Prospectus (the "Prospectus") which is a
part of the Registration Statement, all filed under the Securities Act of 1933,
as amended; and
WHEREAS, the Selling Agent, an affiliate of Metropolitan, for good and
valuable consideration the receipt of which is hereby acknowledged, desires to
assist in the sale or exchange of the Notes upon the terms and in reliance upon
the representations, warranties and agreements set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment of Selling Agent. Metropolitan hereby appoints the Selling
Agent as its managing agent to offer and sell the Notes or exchange the Notes
for Metropolitan's Investment Debentures Series II or III, or Installment
Debentures Series I (collectively the "Debentures") at the price and in the
manner described in the Registration Statement and the Prospectus and in
compliance with the terms and conditions thereof. Metropolitan agrees to
provide the Selling Agent with such number of Registration Statements and
Prospectuses as it reasonably requests to enable it to offer the Notes and
authorizes the Selling Agent to distribute the Registration Statements and
Prospectuses.
2. Undertaking of Selling Agent. The Selling Agent agrees to use its best
efforts to sell the Notes on the terms stated herein and in the Registration
Statement and Prospectus and to notify Metropolitan of the number of Notes with
respect to which subscription agreements have been executed by subscribers. It
is understood that the Selling Agent has no commitment to sell the Notes other
than to use its best efforts. The Selling Agent will deposit, by noon of the
next business day after receipt, all cash and checks received from the
subscribers in a trust account (the "Trust Account"), in compliance with the
rules and regulations of the SEC applicable to a
<PAGE>
best efforts or other contingent offering, to be held in the Trust Account until
the conditions to the Offering have been satisfied. The offering will not be
completed unless at least $20,000,000 in aggregate principle amount of Notes are
sold and/or exchanged for debentures. Upon satisfaction of the conditions to the
Offering, the Selling Agent will cause the delivery all funds in the Trust
Account to Metropolitan by noon of the next business day. If the Offering is
terminated without having satisfied the conditions to the Offering, the Selling
Agent will cause the funds in the Trust Account to be returned promptly to their
rightful owners in compliance with the rules and regulations of the SEC and the
National Association of Securities Dealers, Inc. All checks received by the
Selling Agent from subscribers shall be made payable to Bank of America, as
escrow agent. The Selling Agent will not maintain discretionary customer
accounts and undertakes that it will not, in any event make discretionary
purchases for the accounts of customers.
The Selling Agent will also act as the exchange agent for the Offering. The
Selling Agent will cause all certificates and other documents, that are tendered
by a holder of Debentures, to be held in escrow until the end of the Offering.
The Selling Agent will inform Metropolitan of the certificate number and
principal amount of each Debenture tendered, and supply copies of all documents
tendered to Metropolitan promptly after each Debenture is tendered. If the
conditions to the Offering set forth in the Registration Statement are met,
Selling Agent and Metropolitan agree that Metropolitan will decide and instruct
the Selling Agent on which Debenture certificates to accept as validly tendered
for exchange, if any, and Metropolitan will instruct the Selling Agent on which
Debenture certificates to promptly return, or cause to be returned, to their
respective holders. If the Offering is terminated, Selling Agent will promptly
return, or cause to be returned, all Debenture certificates promptly to their
respective holders.
3. Amendment of the Registration Statement and Prospectus. Metropolitan
agrees, at its expense, to amend or supplement the Registration Statement or the
Prospectus and to provide the Selling Agent with sufficient copies thereof for
distribution as contemplated in the Registration Statement or the Prospectus or
otherwise for purposes contemplated by federal and state securities laws, if (i)
the Selling Agent advises Metropolitan that in its opinion and that of its
counsel, such amendment or supplement is necessary or advisable, or (ii) such
amendment or supplement is necessary to comply with federal or state securities
laws or the rules or regulations promulgated thereunder or is necessary to
correct any untrue statement therein or eliminate any material omissions therein
or any omissions therein which make any of the statements therein misleading.
The representations, warranties and obligations to indemnify all parties hereto
contained herein relating to the Registration Statement or the Prospectus shall
attach to any such amendment or supplement.
4. Undertakings of Metropolitan. Metropolitan will promptly notify the
Selling Agent in the event of the issuance by the SEC of any stop order or other
order suspending the registration of the Notes, or in the event of the
institution or intended institution of any action or proceeding for that
purpose. In the event that the SEC shall enter a stop order suspending or
otherwise suspend the registration of the Notes, Metropolitan will make every
reasonable effort to obtain as promptly as possible the entry of an appropriate
order setting aside such stop order or otherwise reinstating the registration of
the Notes.
2
<PAGE>
5. Representations and Warranties. Metropolitan represents and warrants to
the Selling Agent that:
(i) The Registration Statement and the Prospectus comply as to form in
all material respects with the Securities Act of 1933 and the
rules and regulations of the SEC thereunder, accurately describe
the operations of Metropolitan and do not contain any misleading
or untrue statements of a material fact or omit to state a
material fact which is necessary to prevent the statements therein
from being misleading.
(ii) Metropolitan is a corporation duly organized and validly existing
under the laws of the State of Washington with full corporate
power to perform its obligations as described in the Registration
Statement and the Prospectus.
(iii) The Notes, when issued and sold pursuant to the terms hereof and
of the Registration Statement, Prospectus and subscription
agreements, will constitute valid, binding and legal outstanding
obligations of Metropolitan, in accordance with their terms.
(iv) This Agreement has been duly and validly authorized, executed and
delivered on behalf of Metropolitan and is a valid and binding
agreement in accordance with its terms.
6. Indemnification. Metropolitan and the Selling Agent each (a) agree to
indemnify and hold harmless the other (and each person, if any, who controls the
other) against any loss, claim, damage, charge or liability to which the other
(or such controlling persons) may become subject, insofar as such loss, claim,
damage, charge or liability (or actions in respect thereof) (i) arises out of or
is based upon any misrepresentation or breach of warranty of such party herein
or any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or the Prospectus (or any amendment or
supplement thereto) which relates to or was supplied by such party, or (ii)
arises out of or is based upon the omission or alleged omission to state therein
a material fact relating to such party required to be stated therein or
necessary to make the statements therein not misleading, including liabilities
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, and (b) agree to reimburse such other party (and any
controlling persons) for any legal or other fees or expenses reasonably incurred
in connection with investigating or defending any action or claim arising out of
or based upon any of the foregoing.
7. Fees and Expenses. Metropolitan will pay all expenses incurred in
connection with the Offering and sale of the Notes, including without
limitation, fees and expenses of counsel, blue sky fees and expenses (including
legal fees), printing expenses, exchange listing fees, accounting fees and
expenses, and fees and expenses of U.S. Bank Trust National Association, as
Trustee. In the event of termination of the Offering, Selling Agent will be
reimbursed only for its actual accountable out-of-pocket expenses, and no
commissions will be paid. The commission payable upon sale of the Notes to an
investor who is not exchanging Metropolitan's debentures for Notes shall be a
maximum of 5.50% of the investment amount. The commission payable upon the
exchange of Metropolitan's debentures for Notes shall be a maximum of 2.75% of
the
3
<PAGE>
principal amount exchanged. Exchange commissions will only be payable with
respect to validly tendered debentures that are validly accepted for exchange by
Metropolitan, on the terms described in the Registration Statement.
8. Governing Law. This Agreement shall be deemed to be made under and
governed by the laws of the State of Washington.
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. Paul Sandifur, Jr.
----------------------------------
C. Paul Sandifur, Jr., President
METROPOLITAN INVESTMENT SECURITIES, INC.
By /s/ Reuel Swanson
----------------------------------
Reuel Swanson, Secretary
4
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-2 of our report dated November 20, 1998 relating to the
financial statements, which appears in the Annual Report to Shareholders of
Metropolitan Mortgage & Securities Co., Inc. for the year ended September 30,
1998 and our report dated November 20, 1998 relating to the financial statement
schedules, which appears in Metropolitan Mortgage & Securities Co., Inc.'s
Annual Report on Form 10-K for the year ended September 30, 1998. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
Spokane, Washington
November 19, 1999
<PAGE>
The exchange offer will expire at 5:00 p.m., New York City time, on
December 15, 1999, unless extended (the "expiration date").
Metropolitan Mortgage & Securities Co., Inc.
601 West 1st Avenue
Spokane, Washington 99201-5015
LETTER OF TRANSMITTAL
To: Exchange outstanding Investment Debentures Series II and III, and
outstanding Installment Debentures Series I
Exchange Agent: Metropolitan Investment Securities, Inc.
To: Metropolitan Investment Securities, Inc.
FACSIMILE TRANSMISSION: (509) 835-2767
CONFIRM BY TELEPHONE TO: (509) 835-2210
VIA MAIL/HAND DELIVERY/OVERNIGHT DELIVERY:
Metropolitan Investment Securities, Inc.
Attn: Exchange Agent, Department 14100
601 West 1st Avenue
Spokane, Washington 99201-5041
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SHOWN ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated November ,
1999 (the "Prospectus") of Metropolitan Mortgage & Securities Co., Inc., a
Washington corporation (the "Issuer"), and this letter of transmittal for
Investment Debentures Series II and III, and Installment Debentures Series I,
which may be amended from time to time (this "letter"), which together
constitute the Issuer's offer (the "Exchange Offer") to exchange $1,000
principal amount and accrued interest of its 9% Notes due 2004 (the "Exchange
Notes") for each $1,000 in principal amount of its outstanding Investment
Debentures Series II and III, or Installment Debentures Series I (collectively,
the "debentures"), that were issued and sold in various transactions registered
under the Securities Act of 1933 (the "Securities Act").
The undersigned has completed, executed and delivered this letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of debentures who wish to tender their debentures must, prior to
the expiration date: (1) complete, sign, date and deliver this letter, or a
facsimile thereof, to the exchange agent, in person or to the address set forth
above; and (2) tender his or her debentures, or if a tender of debentures is to
be made by a book-entry transfer, confirm the book entry transfer, in each case
in accordance with the procedures for tendering described in the Instructions
to this letter. Holders of debentures who wish to tender their debentures and
whose certificates are not immediately available with all other documents
required by this letter to be delivered to the exchange agent on or prior to
the expiration date, must tender their debentures according to the guaranteed
delivery procedures listed under the caption "THE EXCHANGE OFFER--How to Tender
Your Debentures" in the Prospectus. See Instruction 1.
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of debentures validly tendered and the issuance of the
Exchange Notes will be made on the exchange date, which is the first business
day following the expiration date of the offering. For the purposes of the
Exchange Offer, the Issuer shall be deemed to have accepted for exchange
validly tendered debentures only when the Issuer has given written notice
thereof to the exchange agent.
The Instructions included with this letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this letter may be directed to the exchange agent, at the address
listed above.
<PAGE>
Please read the entire letter of transmittal, including the instructions to
this letter, carefully before checking any box below.
List in Box 1 below the debentures you own. If the space provided in Box 1 is
inadequate, list the certificate numbers and principal amount of debentures on
a separate signed schedule and attach that schedule to this letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) (Please fill in if blank)(1)
----------------------------------------------------------------------------
<S> <C> <C>
________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) (Please fill in if blank)(1)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Compounded
Certificate/Indemnity Principal Amount of Interest Total Amount of Additional
Agreement Certificate/Receipt Debentures on Debentures Cash
Enclosed(2) Number(s)(3) (excluding interest) Debenture Tendered(4) Tendered(5)
--------------------- ------------------- -------------------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
YES/NO _____________________________________ _________________________________________________
YES/NO _____________________________________ _________________________________________________
YES/NO _____________________________________ _________________________________________________
YES/NO _____________________________________ _________________________________________________
YES/NO _____________________________________ _________________________________________________
YES/NO _____________________________________ _________________________________________________
Totals: ______________________________________________________________
<CAPTION>
Certificate/Indemnity
Agreement Total cash and
Enclosed(2) debentures tendered(6)
--------------------- ----------------------
<S> <C>
YES/NO _______________________________________________________________________________________________________
YES/NO _______________________________________________________________________________________________________
YES/NO _______________________________________________________________________________________________________
YES/NO _______________________________________________________________________________________________________
YES/NO _______________________________________________________________________________________________________
YES/NO _______________________________________________________________________________________________________
_______________________________________________________________________________________________________
(total amount
must be an in-
crement of
$5,000)
</TABLE>
[_] CHECK HERE IF YOU WISH TO TENDER THE INTEREST THAT ACCRUES ON YOUR
DEBENTURES TO THE DATE OF EXCHANGE.
[_] Check here if debentures are being delivered pursuant to a notice of
guaranteed delivery previously sent to the exchange agent.
------
(1) If you are tendering debentures that are owned by you in different
capacities (e.g.: individual, joint tenancy, tenants in common, etc.),
you must complete a separate transmittal letter for each separate
ownership category.
(2) If your Certificate or indemnity agreement is enclosed, circle "YES."
If your Certificate is not enclosed because you are delivering your
debenture by book-entry transfer, or if your certificate is held by
Metropolitan as your IRA custodian, circle "No."
(3) If debentures are being tendered by book-entry transfer, provide the
receipt number instead of the certificate number.
(4) Unless otherwise indicated, the entire principal amount and compounded
interest of debentures represented by a certificate delivered to the
exchange agent will be deemed to have been tendered. If you tender a
portion of a debenture, a new debenture will be issued to you for the
amount not tendered. If the amount not tendered is less than $100, you
will receive cash in amount equal to the un-tendered portion instead of
a new debenture.
(5) You may tender cash in addition to your debentures to meet the $5,000
increments for exchange. If you also tender accrued interest, any
excess additional cash will be returned to you.
(6) If you tender a total amount of cash, debentures and accrued interest
that is not an equal increment of $5,000, the excess amount tendered
will be returned to you.
2
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount and accrued interest of
debentures indicated above. Subject to, and effective upon, the acceptance for
exchange of the debentures tendered with this letter, the undersigned
exchanges, assigns and transfers to, or upon the order of, the Issuer all
right, title and interest in and to the debentures tendered.
The undersigned constitutes and appoints the exchange agent as his or her
agent and attorney-in-fact (with full knowledge that the exchange agent also
acts as the agent of the Issuer) with respect to the tendered debentures, with
full power of substitution, to: (a) deliver certificates for such debentures;
(b) deliver all accompanying evidence of transfer and authenticity to or upon
the order of the Issuer upon receipt by the exchange agent, as the
undersigned's agent, of the Exchange Notes to which the undersigned is entitled
upon the acceptance by the Issuer of the debentures tendered under the Exchange
Offer; and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of the debentures, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the debentures tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the debentures tendered.
By tendering debentures, the undersigned certifies (a) that it is not an
"affiliate" of the Issuer within the meaning of the Securities Act (an
"Affiliate"), that it is not a broker-dealer that owns debentures acquired
directly from the Issuer or an Affiliate, that it is acquiring the Exchange
Notes directly from the Issuer or an Affiliate, that it is acquiring the
Exchange Notes offered hereby in the ordinary course of the undersigned's
business and that the undersigned has no arrangement with any person to
participate in the distribution of such Exchange Notes; (b) that it is an
Affiliate of the Issuer or of any of the initial purchasers of the debentures
in the debentures Offering and that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable
to it; or (c) that it is a participating broker-dealer and that it will deliver
a prospectus in connection with any resale of the Exchange Notes.
If the undersigned is a broker-dealer that will receive Exchange Notes for
its own account, it will deliver a prospectus in connection with any resale of
such Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The Issuer may accept the undersigned's tender by delivering written notice
of acceptance to the exchange agent. The Issuer may, in its sole discretion,
accept or reject any tender for any reason, and will have no liability to any
party as a result thereof.
All authority conferred or agreed to be conferred by this letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns.
Unless otherwise indicated under "Special Delivery Instructions" below, the
exchange agent will deliver Exchange Notes (and, if applicable, a new
certificate for any debenture amounts not tendered, but represented by a
certificate also encompassing debentures which are tendered) to the undersigned
at the address set forth in Box 1.
The Exchange Offer is subject to the more detailed terms set forth in the
Prospectus and, in case of any conflict between the terms of the Prospectus and
this letter, the Prospectus shall prevail.
3
<PAGE>
Please read the accompanying instructions carefully
BOX 2
TO BE SIGNED BY ALL
TENDERING HOLDERS
This box must be signed by registered holder(s) of debentures as their
name(s) appear(s) on certificate(s) for debentures, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below. (See Instruction 3)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Signature(s) of Owner(s) or Authorized Signatory
Date ________________________________________________________________, 1999
Name(s) ___________________________________________________________________
(Please Print)
Capacity __________________________________________________________________
Address ___________________________________________________________________
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. _______________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
IF WE REQUEST YOUR SIGNATURES TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION, WE
WILL PROVIDE A SEPARATE FORM
4
<PAGE>
BOX 3
TO BE COMPLETED BY ALL TENDERING HOLDERS
PAYOR'S NAME:
Part 1--Please provide your Social Security
SUBSTITUTE Taxpayer Identification Number or Employer
Form W-9 Number in the box at right Identification
Department of the Treasuryand certify by signing and Number
Internal Revenue Service dating below. --------------------
- --------------------------------------------------------------------------------
-----------------------------------------------------
Payor's Request for Taxpayer
Part 3 [_]
Part 2 [_]
Identification Number (TIN)
Check if awaiting TIN
Check the box if you are NOT subject to back-up
withholding under the provisions of Section
2406(a)(1)(C) of the Internal Revenue Code because
(a) you have not been notified that you are
subject to back-up withholding as a result of
failure to report all interest or dividends or (b)
the Internal Revenue Service has notified you that
you are no longer subject to back-up withholding.
- --------------------------------------------------------------------------------
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE
Signature ___________________________________________
Date ________________________________________________
Name ________________________________________________
(Please Print)
5
<PAGE>
BOX 4
SPECIAL ISSUANCE INSTRUCTIONS FOR NAME CHANGE
(See Instructions 3 and 4)
To be completed ONLY if debentures (certificated or book-entry) in a
principal amount not exchanged, or Exchange Notes, are to be issued in the
name of someone other than the person whose signatures appear in Box 2. If
the principal amount of the debenture not being tendered is less than
$100.00, cash will be returned instead of a new debenture.
Issue and deliver: (check appropriate boxes)
[_] Amount of debentures not tendered
[_] Exchange Notes, to:
Name: _______________________________________________________________________
(Please print or type)
Address _____________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Please complete the Substitute Form W-9 at Box 3. Tax I.D. or Social
Security Number:
_____________________________________________________________________________
BOX 5
SPECIAL DELIVERY INSTRUCTIONS FOR ADDRESS CHANGE
(See Instructions 3 and 4)
To be completed ONLY if debentures (certificated or book-entry) in a
principal amount not exchanged, or Exchange Notes, are to be sent to someone
other than the person whose signature appears in Box 2 or to an address
other than that shown in Box 1. If the principal amount of the debenture not
being tendered is less than $100, cash will be returned instead of a new
debenture.
Deliver: (check appropriate boxes)
[_] Amount of debentures not tendered
[_] Exchange Notes, to:
Name: _______________________________________________________________________
(Please print or type)
Address _____________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Please complete the Substitute Form W-9 at Box 3. Tax I.D. or Social
Security Number:
_____________________________________________________________________________
6
<PAGE>
Indemnity Agreement
Complete and sign this page only if you wish to tender your debentures and
the certificates for your debentures have been lost, stolen or destroyed.
Certificate Number(s):_____________________________________________
Registered in the name of:_________________________________________
____________________________________________________________________
____________________________________________________________________
The above referenced certificate(s) is(are) hereby represented and warranted
to have been lost, stolen or destroyed. The undersigned hereby requests
Metropolitan Mortgage & Securities Co., Inc. (the "Issuer") to issue a new
certificate(s) representing the one lost, stolen or destroyed for purposes of
tendering the certificate in the exchange offer without requiring surrender of
the certificate(s) for cancellation.
In consideration of the Issuer's complying with this request, the
undersigned, his/her/their legal representative, successors, and assigns,
agree(s) jointly and severally, to indemnify and hold harmless the Issuer, its
successors, assigns and affiliates, and each of them (the "Obligee"), from and
against any and all liabilities, losses, damages, costs, charges, counsel fees
and other expenses of every nature and character, which the Obligee at any time
shall or may sustain or incur by reason of any claim or demand which may be
made as a result of the redemption of, or by reason of any payment, transfer,
exchange or other act which the Obligee may do or cause to be done with respect
to, the certificate represented and warranted to have been lost, stolen or
destroyed or by reason of any refusal to issue a new certificate to any person
offering to surrender that certificate, whether or not such liabilities,
losses, costs, damages, counsel fees or other expenses arise or occur through
accident, oversight, inadvertence or neglect on the part of the Obligee, its
respective officers, agents, clerks or employees.
<TABLE>
<S> <C> <C>
(Signature of all registered owners (Capacity of relationship to owner) (Date)
is required unless waived by the
Issuer)
</TABLE>
<TABLE>
<S> <C> <C>
(Signature of all registered owners (Capacity of relationship to owner) (Date)
is required unless waived by the
Issuer)
</TABLE>
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this letter and Certificates. Certificates for debentures, or
a book-entry transfer, as the case may be, as well as a properly completed and
duly executed copy of this letter and any other documents required by this
letter, must be received by the exchange agent at its address contained herein
on or before the expiration date. The method of delivery of this letter,
certificates for debentures and any other required documents is at the election
and risk of the tendering holder, but except as otherwise provided below, the
delivery will be deemed made when actually received by the exchange agent. If
delivery is by mail, the use of registered mail with return receipt requested,
properly insured, is suggested.
We may require the tendered debentures to be endorsed or accompanied by
written instruments of transfer in a form satisfactory to the Issuer and duly
executed by the registered holder and the signature on the endorsement or
instrument of transfer guaranteed by a bank, broker, dealer, credit union,
savings association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act.
Any beneficial owner whose debentures are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender debentures should contact the holder promptly and instruct the holder
to tender debentures on the beneficial owner's behalf. If the beneficial owner
wishes to tender the debentures himself, the beneficial owner must, prior to
completing and executing the letter of transmittal and delivering the
debentures, either make appropriate arrangements to register ownership of the
debentures in the beneficial owner's name or follow the procedures described in
the immediately preceding paragraph. The transfer of record ownership may take
considerable time.
Holders whose debentures are not immediately available or who cannot deliver
their debentures, or a book-entry transfer, as the case may be, and all other
required documents to the exchange agent on or before the expiration date may
tender their debentures pursuant to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedure: (a) tender must be made by
or through an Eligible Institution; (b) prior to the expiration date, the
exchange agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by telegram, telex,
facsimile transmission, mail or hand delivery) (1) setting forth the name and
address of the holder, the description of the debentures and the principal
amount of debentures tendered, (2) stating that the tender is being made
thereby and (3) guaranteeing that, within five New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, this
letter together with the certificates representing the debentures, or a book-
entry transfer, as the case may be, and any other documents required by this
letter will be deposited by the Eligible Institution with the exchange agent;
and (c) the certificates for all tendered debentures, or a book-entry transfer,
as the case may be, as well as all other documents required by this letter,
must be received by the exchange agent within five New York Stock Exchange
trading days after the date of execution of such Notice of Guaranteed Delivery,
all as provided in the Prospectus under the caption "THE EXCHANGE OFFER--How to
Tender."
The method of delivery of debentures and all other documents is at the
election and risk of the holder. If sent by mail, it is recommended that
registered mail, return receipt requested, be used, proper insurance be
obtained, and the mailing be made sufficiently in advance of the expiration
date to permit delivery to the exchange agent on or before the expiration date.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the exchange agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide his or her
8
<PAGE>
taxpayer identification number (social security number or employer
identification number) and certify that such number is correct. Each tendering
holder should complete and sign the main signature form and the Substitute Form
W-9 included as part of the letter of transmittal, so as to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to the
Issuer and the exchange agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed letter of transmittal
accompanied either by the debentures or by a timely book-entry transfer, is
received by the exchange agent. Issuances of Exchange Notes in exchange for
debentures tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the letter of
transmittal (and any other required documents) and the tendered debentures, or
by a timely book-entry transfer.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance (including the decision of which debentures to accept
for exchange in the case of an over subscription of the offering as described
in the Prospectus) of tendered debentures will be determined by the Issuer,
whose determination will be final and binding. The Issuer reserves the absolute
right to reject any or all tenders for any reason. The Issuer also reserves the
right to waive any irregularities or conditions of tender as to particular
debentures. All tendering holders, by execution of this letter, waive any right
to receive notice of acceptance of their debentures. The Issuer's
interpretation of the terms and conditions of the Exchange Offer (including the
letter of transmittal and the instructions thereto) will be final and binding.
Neither the Issuer, the exchange agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. Partial Tenders. If less than the entire principal amount and compounded
interest of any debenture evidenced by a submitted certificate, or by a timely
book-entry transfer, is tendered, the tendering holder must fill in the total
amount tendered in the fifth column of Box 1 above. All principal and
compounded interest of the debentures represented by a certificate delivered to
the exchange agent, or by a timely book-entry transfer, will be deemed to have
been tendered unless otherwise indicated. If you wish to tender the accrued but
unpaid interest on your debenture, you must check the appropriate box in Box 1.
A new certificate for debentures not tendered will be sent to the holder,
unless otherwise provided in Box 5, as soon as practicable after the expiration
date, in the event that less than the entire principal amount of debentures
represented by a submitted certificate is tendered. In the case of debentures
tendered by book-entry transfer, the non-exchanged amount of debenture will be
credited to the holder in book-entry form. If the amount of debentures not
being tendered is less than $100, cash will be returned instead of a new
debenture. You may tender cash in addition to the principal and accrued
interest of your debentures to meet the $5,000 increment requirement for the
offering. If you are tendering cash, indicate the total amount of cash being
tendered in Box 1.
3. Signatures On This letter; Assignments; Guarantee Of Signatures. If this
letter is signed by the holder(s) of debentures tendered hereby, the signature
must correspond with the name(s) as written on the face of the certificate(s)
for such debentures, without alteration, enlargement or any change whatsoever.
If any of the debentures tendered hereby are owned by two or more joint
owners, all owners must sign this letter. If any tendered debentures are held
in different names on several certificates, it will be necessary to complete,
sign and submit as many separate copies of this letter as there are names in
which certificates are held.
If this letter is signed by the holder of record and (a) the entire
principal amount of the holder's debentures are tendered; and/or (b) untendered
debentures, if any, are to be issued to the holder of record, then the holder
of record need not endorse any certificates for tendered debentures, nor
provide a separate bond power. In any other case, the holder of record must
transmit a separate bond power with this letter.
9
<PAGE>
If this letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this letter may be required to be guaranteed. In the event
that the signatures in this letter are required to be guaranteed, such
guarantees must be by an eligible guarantor institution which is a member of
The Securities Transfer Agents Medallion Program ("STAMP"), The New York Stock
Exchanges Medallion Signature Program ("MSP") or The Stock Exchanges Medallion
Program ("SEMP"). If debentures are registered in the name of a person other
than the signer of this letter, the debentures surrendered for exchange must be
endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Issuer, in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for debentures not exchanged are to be issued or
sent, if different from the name and address of the person signing this letter.
In the case of issuance in a different name, the tax identification number of
the person named must also be indicated. Holders tendering debentures by book-
entry transfer may request debentures not exchanged be credited as the holder
may designate.
5. Tax Identification Number. Federal income tax law requires that a holder
whose tendered debentures are accepted for exchange must provide the exchange
agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the exchange agent is not provided with the correct
TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to the holder of the Exchange Notes pursuant to
the Exchange Offer may be subject to back-up withholding. (If withholding
results in overpayment of taxes, a refund may be obtained.) Exempt holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these back-up withholding and reporting requirements. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (a) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; (b) the Internal Revenue Service has notified the holder that he or
she is no longer subject to back-up withholding; or (c) in accordance with the
Guidelines, such holder is exempt from back-up withholding. If the debentures
are in more than one name or are not in the name of the actual owner, consult
the enclosed Guidelines for information on which TIN to report.
6. Transfer Taxes. The Issuer will pay all state and local transfer taxes,
if any, applicable to the transfer of debentures to it or its order pursuant to
the Exchange Offer. If, however, the Exchange Notes or certificates for
debentures not exchanged are to be delivered to, or are to be issued in the
name of, any person other than the record holder, or if tendered certificates
are recorded in the name of any person other than the person signing this
letter, or if a transfer tax is imposed by any reason other than the transfer
of debentures to the Issuer or its order pursuant to the Exchange Offer, then
the amount of such transfer taxes (whether imposed on the record holder or any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of taxes or exemption from taxes is not submitted with this letter,
the amount of transfer taxes will be billed directly to the tendering holder.
10
<PAGE>
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this letter.
7. Waiver of Conditions. The Issuer reserves the absolute right to amend or
waive any of the specified conditions in the Exchange Offer in the case of any
debentures tendered.
8. Mutilated, Lost, Stolen or Destroyed Certificates. Any holder whose
certificates for debentures have been mutilated, lost, stolen or destroyed
should contact the exchange agent at the address indicated above, for further
instructions.
9. Requests For Assistance or Additional Copies. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this letter, may be directed to the exchange agent.
IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED
DEBENTURES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR BEFORE THE EXPIRATION DATE OF THE OFFERING, AS STATED IN THE
PROSPECTUS.
11
