<PAGE>
As filed with the Securities and Exchange Commission on January 25, 1999.
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
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)
--------------
<TABLE>
<S> <C>
Washington 91-0609840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
601 West First Avenue
Spokane, Washington 99201-5015
(509) 838-3111
(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 First 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 First 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. [X]
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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Amount maximum Aggregate Amount of
Title of Each Class of to be Offering price Offering Registration
Securities to be Registered Registered per unit Price(1)(2) fee(3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Stock Series E-7 .................... 100,000 $100 $10,000,000 $2,780
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(a).
(2) Constitutes $10,000,000 of Preferred Stock that remains unsold and is
being carried forward from Registration Statement No. 333-43891 pursuant
to Rule 429 of the Securities Act of 1933, for which a filing fee of
$3,030 was previously paid.
(3) A filing fee of $3,030 was previously paid for the $10,000,000 of
Preferred Stock carried forward from Registration Statement No. 333-43891
pursuant to Rule 429.
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.
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
included in this Registration Statement also relates to securities registered
and remaining unissued under Registration Statement No. 333-43891 previously
filed by the Registrant.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. 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 JANUARY 25, 1999.
PROSPECTUS
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
100,000 Preferred Shares, Series E-7
- --------------------------------------------------------------------------------
You should consider carefully the risk factors beginning on page 9 in this
prospectus.
The preferred shares are securities of our company 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.
- --------------------------------------------------------------------------------
Metropolitan is offering Variable Rate Cumulative Preferred Stock with the
following terms:
. The Preferred Stock is subordinate to all debts of Metropolitan including
Metropolitan's debentures.
. Preferred Stock distributions are cumulative and will be declared monthly
according to a variable rate formula described in this prospectus.
. The Preferred Stock has a liquidation preference of $100 per share.
. The Preferred Stock may be redeemed by us at a price of $100 per share plus
the amount of any declared but unpaid distributions.
<TABLE>
<CAPTION>
Per Preferred Share Total
------------------- -----
<S> <C> <C>
Public Offering Price.................... $100 $10,000,000
Maximum Underwriting Commissions......... 6% $ 600,000
Proceeds, before expenses, to Issuer..... $ 94 $ 9,400,000
</TABLE>
You will not incur a direct sales charge. Preferred Stock distributions will be
based on their full offering price, without deduction for underwriting
discounts or commissions. We will reimburse our underwriters for commissions
paid to licensed securities sales representatives. Sales commission rates on
the sale of Preferred Stock depend upon the terms of the sale. See "PLAN OF
DISTRIBUTION."
. Currently there is no trading market for the Preferred Shares and you should
not expect one to be established in the future.
. The Preferred Stock is being issued only in book-entry form.
. The underwriter maintains a list of persons willing to sell or purchase our
issued and outstanding shares of Preferred Stock.
. We are offering the Preferred Stock on a continuous, best efforts basis.
. There is no minimum amount of Preferred Stock that must be sold.
. You may not purchase the Preferred Stock pursuant to this prospectus after
January 31, 2000.
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.
METROPOLITAN INVESTMENT SECURITIES, INC.
The date of this prospectus is January , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FORWARD-LOOKING STATEMENTS................................................. 2
PROSPECTUS SUMMARY......................................................... 3
RISK FACTORS............................................................... 9
USE OF PROCEEDS............................................................ 11
DESCRIPTION OF SECURITIES.................................................. 11
PLAN OF DISTRIBUTION....................................................... 16
LEGAL MATTERS.............................................................. 17
EXPERTS.................................................................... 17
AVAILABLE INFORMATION...................................................... 17
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 18
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have 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, among other
things:
. 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 rely only on the information contained in this prospectus. We
have not, and the underwriters have 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
underwriters are 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 Preferred Stock. You should read
both the prospectus and the accompanying Annual Report of Metropolitan on
Form 10-K for the fiscal year ended September 30, 1998, 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 First 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 references solely to the parent company will be to
"Metropolitan."
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 certain significant companies in the
Consolidated Group.
Business
The Consolidated Group is engaged in a nationwide business of acquiring,
holding and selling 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. These assets are collectively referred to in this prospectus as
"Receivables." 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 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 ("Western United"). Metropolitan's wholly owned subsidiary, Metwest
Mortgage Services, Inc., conducts Receivable collection and servicing
activities for the Affiliated Companies and services Receivables for
Metropolitan and for 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
1" 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, 1998)
[CHART APPEARS HERE]
METROPOLITAN MORTGAGE
& SECURITIES CO., INC.
|
|
_______________________________________________________________
| | |
100%| | 96.5%|
METWEST | CONSUMERS
MORTGAGE | GROUP HOLDING
SERVICES, INC. | CO., INC.
| |
| 100%|
| CONSUMERS
| INSURANCE
| CO., INC.
| |
| 75.5%|
| 24.5% WESTERN UNITED
|_______________________ LIFE ASSURANCE
COMPANY
The above chart lists the Consolidated Group's principal operating
subsidiaries and their ownership.
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 currently being that of a shareholder of Consumers Insurance Co., Inc.
Consumers Insurance Co., Inc.: Inactive property and casualty insurer, its
principal business activity currently being that of 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 sales of life insurance policies.
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.
- --------
* The remaining 3.5% of Consumers Group Holding Co., Inc. is owned by Summit
Securities, Inc.
4
<PAGE>
Offering Summary
Preferred Stock Offering We are offering 100,000 shares of Variable Rate
Cumulative Preferred Stock, Series E-7 (the
"Preferred Stock") at $100 per share. The
Preferred Stock will be sold in whole and
fractional shares. There is no minimum amount
of Preferred Stock that must be sold. The
Preferred Stock will be issued only in book-
entry form.
Distributions We will pay distributions on the Preferred
Stock on a cumulative basis from the date the
shares are issued. When we make distributions,
they will be paid monthly at the applicable
annual rates described in "DESCRIPTION OF
SECURITIES--Distributions."
Liquidation Rights If we liquidate Metropolitan, you would have a
right to receive a liquidation preference of
$100 per share, plus declared and unpaid
distributions. Your liquidation rights would
not be paid until after all of our debts,
including our outstanding debentures, were
paid. Your liquidation rights would be paid
before any liquidating distributions to the
common stockholders.
Redemption Upon Request of We may consider a written shareholder request
Holder you make to redeem your shares. We will
generally not consider a request to redeem
shares unless they have been listed for sale on
Metropolitan Investment Securities, Inc.'s
trading list for at least 60 days. We are under
no obligation to redeem your shares of
Preferred Stock. Our decision whether or not to
redeem your shares will depend, in part, on our
financial condition and our liquidity position
at the time. Any shares that we do redeem will
be redeemed at a price per share that is at the
discretion of our board of directors, and will
include any declared but unpaid distributions.
See "DESCRIPTION OF SECURITIES--Redemption of
Shares" and "RISK FACTORS."
Redemption Upon Call by We can redeem any or all shares of your
Metropolitan Preferred Stock if we provide you with notice
at least 30 but not more than 60 days prior to
redemption by mail. If we decide to redeem your
shares, you will be paid $100 per share plus
the amount of any declared but unpaid
distributions as of the date that is fixed for
redemption. See "DESCRIPTION OF SECURITIES--
Redemption of Shares."
Voting Rights Your voting rights will be limited to two
situations. First, you will have those voting
rights expressly granted by the laws of the
State of Washington. Second, you will have
voting rights at such time as distributions
payable to you on your Preferred Stock remain
unpaid for a period of time that equals twenty-
four monthly distributions. See "DESCRIPTION OF
SECURITIES--Voting Rights."
5
<PAGE>
Federal Income Tax If we earn a profit during any future year, any
Considerations earnings or profits that we distribute to you
will be taxable. We cannot predict whether we
will have future distributions, or whether
those distributions will be taxable to you. You
are encouraged to consult your own tax advisors
about whether the distributions you will
receive will be taxable income. See
"DESCRIPTION OF SECURITIES--Federal Income Tax
Consequences of Distributions."
Use of Proceeds We will use the proceeds of this Preferred
Stock offering to invest in Receivables and to
make other investments which may include
investments in existing subsidiaries, new
business ventures, to acquire other companies
or for other investment purposes. The proceeds
may also be used to retire maturing debentures,
for property development, to pay preferred
stock distributions and for general corporate
purposes. See "USE OF PROCEEDS."
Risk Factors Your investment in the Preferred Stock involves
a certain degree of risk. You should invest in
the Preferred Stock only after reviewing the
risks described in this prospectus. See "RISK
FACTORS" for a complete discussion of the risks
associated with investing in the Preferred
Stock.
6
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Consolidated Group
at September 30, 1998.
<TABLE>
<CAPTION>
Amount
Class Outstanding
----- ------------
<S> <C>
Debt Payable:
Advances under funding facility with NationsBanc Mortgage
Capital Corp., interest at 6.625% per annum; due on March 24,
1999; collateralized by $122,129,000 in real estate contracts
and mortgage notes............................................ $118,342,972
Reverse repurchase agreements with Seattle Northwest; interest
at 5.57% per annum; due on October 1, 1998; collateralized by
$2,900,000 in U.S. Treasury Bonds............................. 2,892,750
Note payable to Summit Securities, Inc., interest at 11.0% per
annum; due on June 30, 1999; collateralized by $3,200,000 in
structured settlement agreements.............................. 2,560,000
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.......................................................... 1,802,680
Accrued interest payable....................................... 103,909
------------
Total Debt Payable........................................... 125,702,311
============
Debenture Bonds:
Investment Debentures, Series II, maturing in 1998 to 2002, at
5.5% to 11%................................................... 174,540,100
Investment Debentures Series I, maturing in 1998 to 2007 at
7.5% to 10.25%................................................ 732,900
Compound and accrued interest.................................. 22,932,294
------------
Total Debenture Bonds........................................ 198,205,294
============
Stockholders' Equity:
Preferred Stock................................................ 19,454,071
Common Stock................................................... 293,417
Additional paid-in capital..................................... 18,580,051
Net unrealized losses on investments........................... (680,619)
Retained earnings.............................................. 21,109,849
------------
Total Stockholders' Equity................................... 58,756,769
------------
Total Capitalization......................................... $382,664,374
============
</TABLE>
7
<PAGE>
Summary Consolidated Financial Data
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, which is incorporated herein by reference and attached to this
prospectus. The 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 earnings to fixed charges and preferred stock dividends) have
been derived from the consolidated financial statements not included elsewhere
herein.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Revenues................ $ 155,955 $ 155,135 $ 156,672 $ 138,107 $ 138,186
========== ========== ========== ========== ==========
Income before minority
interest............... $ 10,453 $ 9,791 $ 8,146 $ 6,376 $ 5,702
Income allocated to
minority interests..... (126) (123) (108) (73) (224)
---------- ---------- ---------- ---------- ----------
Net income.............. 10,327 9,668 8,038 6,303 5,478
Preferred stock
dividends.............. (3,732) (4,113) (3,868) (4,038) (3,423)
---------- ---------- ---------- ---------- ----------
Income applicable to
common stockholders.... $ 6,595 $ 5,555 $ 4,170 $ 2,265 $ 2,055
========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges.......... 1.75 1.77 1.46 1.35 1.29
Ratio of earnings to
fixed charges and
preferred stock
dividends(1)........... 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)........ $ 50,728 $ 42,733 $ 32,073 $ 17,288 $ 14,996
========== ========== ========== ========== ==========
Weighted average number
of common shares
outstanding(2)......... 130 130 130 131 137
========== ========== ========== ========== ==========
Cash dividends per
common share........... $ 1,200 $ -- $ -- $ 3,800 $ 675
========== ========== ========== ========== ==========
CONSOLIDATED BALANCE
SHEET DATA:
Total assets............ $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.................. 323,908 190,131 363,427 226,864 261,500
Stockholders' equity.... 58,757 54,113 46,343 40,570 32,625
</TABLE>
- --------
(1) The consolidated ratio of earnings to fixed charges and preferred stock
dividends was 1.37, 1.31, 1.14, 1.03, and 1.04 for 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 1.10, 1.01,
1.11, 1.05, and 1.34 for 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 as follows for the years ended September 30, 1998--
1.75; 1997--1.77; 1996--1.46; 1995--1.35; and 1994--1.29. 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 1.40, 1.36, 1.48, 1.40,
and 1.36 for the years ended September 30, 1998, 1997, 1996, 1995 and 1994,
respectively.
(2) All information is displayed in whole dollars and 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 year presented.
8
<PAGE>
RISK FACTORS
When deciding whether or not to purchase the Preferred Stock, you should
carefully consider the risks set forth in the section entitled "INTRODUCTION--
Factors Affecting Future Operating Results" of Metropolitan's Annual Report on
Form 10-K for the 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 Preferred Stock:
We can issue more stock Metropolitan's and your rights and
obligations in the Preferred Stock are
defined in the Statement of Rights,
Designations and Preferences of Variable Rate
Cumulative Preferred Stock Series E-7. This
statement does not restrict our ability to
issue additional preferred stock or other
equity in our company.
Preferred Stock is not insured The Preferred Stock is not insured or
against the risk of loss guaranteed by any bank, any governmental
agency, any insurance company, any affiliate
of our company or any other person or entity.
Thus, the Preferred Stock has greater risk
than investments that are insured by such
entities against the risk of loss.
There is no established market The Preferred Stock is not listed on any
to trade the Preferred Stock national or regional stock exchange. We do
not anticipate that we will apply to have the
Preferred Stock listed on any national or
regional stock exchange or that an
independent public market for the Preferred
Stock will develop.
Trading list does not The broker/dealer for the offering maintains
guarantee a market for the a trading list of persons willing to sell or
Preferred Stock purchase outstanding shares of our preferred
stock. We do not guarantee that this list
will continue to operate or that it will
provide you with a means to sell your shares.
Our discretionary redemption Under our discretionary redemption option, we
option does not guarantee the are under no obligation to redeem your
ability to sell securities to shares. You should not rely on this option as
Metropolitan a guarantee that you will be able to have us
reacquire your shares. See "DESCRIPTION OF
SECURITIES--Redemption of Shares."
Limitations on redemption and If we have not paid cumulative distributions
restrictions on distributions to all preferred shareholders, we cannot
purchase or offer to exchange your shares
unless we make the same offer to all
preferred shareholders. See "DESCRIPTION OF
SECURITIES--Redemption of Shares." We will
not make distributions to you unless
distributions can be made to all other
holders of preferred stock. See "DESCRIPTION
OF SECURITIES--Distributions."
Liquidation rights junior to If we liquidate, we must pay all of our
Metropolitan's outstanding outstanding debt before we can make any
debt distributions to you. If there is not enough
money to distribute to all preferred
shareholders their entire respective
liquidation rights, you will share the
shortfall with other preferred shareholders
in proportion to your respective liquidation
rights.
9
<PAGE>
Extraordinary corporate events Your preferences in liquidation could be
could eliminate the adversely effected if we have an asset sale,
liquidation rights of the a capital restructuring, a merger, a
holders of Preferred Stock reorganization or a bankruptcy. If one of
these events occurs, your rights may be
compromised by a negotiation between all
interested parties or by a court
determination.
Lack of voting control of the You will have very few voting rights as an
company owner of Preferred Stock. The only class of
stock carrying full voting rights is the
common stock. See "DESCRIPTION OF
SECURITIES--Voting Rights."
Metropolitan can redeem or We have the option of calling or redeeming
call Preferred Shares at its your shares at any time for $100 per share
own discretion plus any declared and unpaid distributions.
See "DESCRIPTION OF SECURITIES--Redemption of
Shares."
Possible inability to continue The State of Washington regulates the amount
selling securities of securities that Metropolitan can sell
under the Debenture Company Act. Under that
Act, the amount of securities that can be
sold can be, and has been previously, 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.
10
<PAGE>
USE OF PROCEEDS
If all of the Preferred Stock offered is sold, we expect net proceeds to
total $10,000,000 before deducting sales commissions and other expenses.
Offering expenses are estimated at $111,000 and sales commissions will be a
maximum of six percent (6%) of the offering proceeds. There can be no
assurance, however, that any of the Preferred Stock can or will be sold.
In conjunction with the other funds available to us through operations
and/or borrowings, we currently plan to utilize the proceeds of the Preferred
Stock offering for the following purposes: priority will be given first to (i)
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 investments in government
and corporate securities and then to (ii) the development of real estate
currently held by Metropolitan or acquired in the future. Presently there are
no commitments or 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 through the period ending January 31, 2000,
proceeds of this offering may be used for retiring maturing debentures,
preferred stock distributions and for general corporate purposes, including
debt service and other general operating expenses. Approximately $48.0 million
in principal amount of debt securities will mature between February 1, 1999
and January 31, 2000 with interest rates ranging from 6.1% to 10.25% and
averaging approximately 7.9% per annum. See "BUSINESS--Factors Affecting
Future Operating Results" under Item 1 in our Annual Report on Form 10-K for
the year ended September 30, 1998.
Management anticipates that some of the 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. Due to our inability to accurately forecast the total amount
of Preferred Stock to be sold in this offering, no specific amounts have been
allocated for any of the foregoing purposes.
In the event substantially less than the maximum proceeds are obtained, we
do not anticipate any material changes to our planned use of proceeds from
those described above.
DESCRIPTION OF SECURITIES
Description of Capital Stock
The authorized capital stock of Metropolitan consists of 222 shares of
Class A Common Stock, $2,250 par value ("Common A"), 222 shares of Class B
Common Stock, $2,250 par value ("Common B"), 750,000 shares of Preferred
Stock, Series A, $1 par value ("Preferred A"), 200,000 shares of Preferred
Stock, Series B, $10 par value ("Preferred B"), 1,000,000 shares of Preferred
Stock, Series C, $10 par value ("Preferred C"), 1,375,000 of Preferred Stock,
Series D, $10 par value ("Preferred D"), 5,000,000 shares of Preferred Stock,
Series E, $10 par value ("Preferred E") and 1,000,000 shares of Subordinate
Preferred Stock, no par value ("Preferred Subordinated"). Of the shares
authorized, 130 shares of Common A, 389,885 shares of Preferred C, 574,307
shares of Preferred D and 981,215 shares of Preferred E were issued and
outstanding as of September 30, 1998.
Description of Preferred Stock
This offering consists of 100,000 shares of Variable Rate Cumulative
Preferred Stock, Series E-7. All of the outstanding shares of preferred stock
and the shares of Preferred Stock offered by Metropolitan hereby, when issued
and sold, will be validly issued, fully paid and nonassessable. The relative
rights and preferences of Preferred Stock have been fixed and determined by
the Board of Directors of Metropolitan and are set forth in the Statement of
Rights, Designations and Preferences of Preferred Stock (the "Statement of
Rights") duly approved by the Board of Directors of Metropolitan. The
Preferred Stock is issued in book-entry form only.
11
<PAGE>
The following statements relating to the Preferred Stock are summaries, do
not purport to be complete and are qualified in their entirety by reference to
the Statement of Rights a copy of which is filed as an exhibit to the
Registration Statement of which this prospectus is a part, and is also
available for inspection at the principal office of Metropolitan.
Distributions
Distributions on Preferred Stock are cumulative and are to be declared
monthly on the first business day of the month payable to the shareholders of
record as of the fifth calendar day of each month. Distributions are to be
paid in cash on the twentieth calendar day of each month in an amount equal to
the offering price of $100 per share multiplied by the distribution rate
divided by twelve. The distribution rate will be the "Applicable Rate" as
defined herein subject to the authority of Metropolitan's Board of Directors
to authorize, by resolution, a higher rate.
The Applicable Rate for any monthly distribution period cannot be less than
6% or greater than 14% per annum. The Applicable Rate for any monthly
distribution period shall be (a) the highest of the Three-Month U.S. Treasury
Bill Rate, the Ten-Year Constant Maturity Rate or the Twenty-Year Constant
Maturity Rate (each as more fully described below), plus (b) one half of one
percentage point (0.5%).
The three-month Treasury Bill Rate for each distribution period is based on
the weekly per annum market discount rate for three-month U.S. Treasury bills.
The Ten Year Constant Maturity Rate for each distribution period is based on
the weekly per annum average yield to maturity for actively traded marketable
U.S. treasury fixed interest rate securities adjusted to constant maturities
of ten years. The Twenty Year Constant Maturity Rate for each distribution
period is based on the weekly per annum average yield to maturity for actively
traded marketable U.S. treasury fixed interest rate securities adjusted to
constant maturities of twenty years.
Each of the above three rates shall be calculated as the arithmetic average
of the two most recent weekly per annum yields as published weekly by the
Federal Reserve Board, the Federal Reserve Bank or any U.S. Government
department or agency selected by Metropolitan, during the period of 14
calendar days immediately prior to the 10 calendar days immediately preceding
the first day of the distribution period for which the distribution rate on
Preferred Stock is being determined.
If any or all of these methods are unavailable, the Statement of Rights
includes other methods to determine the distribution rate. Should Metropolitan
determine in good faith that one or more of such rates cannot be determined
for any distribution period, then the Applicable Rate of such period shall be
the higher of whichever of such rates can be so determined, plus one half of
one percentage point. Should Metropolitan determine in good faith that none of
such rates can be determined for any distribution period, then the Applicable
Rate in effect for the preceding distribution period shall be continued for
such distribution period. The distribution rate for each monthly distribution
period shall be calculated as promptly as practicable by Metropolitan.
Metropolitan will enclose notice of the distribution rate with the next mailed
distribution payment check. In making such calculation, the Three-Month U.S.
Treasury Bill Rate, Ten-Year Constant Maturity Rate and Twenty-Year Constant
Maturity Rate shall each be rounded to the nearest five hundredths of a
percentage point.
Prior to the effective date of this prospectus, Metropolitan's Board of
Directors adopted a resolution authorizing a distribution rate on the
Preferred Stock at one percentage point higher than the Applicable Rate. Such
higher distribution rate will continue from month to month until the Board
elects to terminate it. The Board may increase, decrease or eliminate the
additional percentage rate at any time, in its sole discretion.
Restrictions on Distributions
Metropolitan may not declare or pay a distribution on any share of
Preferred Stock offered herein for any distribution period unless, at the same
time, a like distribution shall be declared or paid on all shares of preferred
stock previously issued and outstanding and entitled to receive distributions.
See "CAPITALIZATION." Distributions may be paid only from legally available
funds.
12
<PAGE>
So long as any shares of Preferred Stock are outstanding, and unless the
full cumulative distributions on all previously outstanding preferred stock,
including the Preferred Stock offered by this prospectus, shall have been paid
or declared and set apart for all past distribution periods, Metropolitan may
not: (a) declare, pay or set aside for payment any distribution, except as
provided below; (b) declare or pay any other distribution upon common stock or
upon any other stock ranking junior to or on a parity with Preferred Stock as
to distributions or upon liquidation; or (c) redeem, purchase or otherwise
acquire common stock or any other stock of Metropolitan ranking junior to or
on a parity with Preferred Stock as to distributions or upon liquidation for
any consideration, or pay or make available any funds for a sinking fund for
the redemption of any shares of any such stock, except by conversion into or
exchange for stock of Metropolitan ranking junior to Preferred Stock as to
distributions and upon liquidation.
Notwithstanding the foregoing, Metropolitan may declare, pay or set aside
payment for (i) distributions in common stock; (ii) distributions in any other
stock ranking junior to Preferred Stock as to distributions; (iii) liquidation
rights; and (iv) distributions where a like distribution shall be declared or
paid on all shares of preferred stock then issued and outstanding and entitled
to receive distributions.
Metropolitan may make distributions ratably on the shares of Preferred
Stock and shares of any stock of Metropolitan ranking on a parity therewith
with regard to the payment of distributions, in accordance with the sums which
would be payable on such shares if all distributions, including accumulations,
if any, were declared and paid in full. As of the date hereof, no
distributions on Metropolitan's preferred stock are in arrears. No interest
will be paid for or on account of any unpaid distributions.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Metropolitan, the holders of shares of Preferred Stock will be
entitled to receive out of the assets of Metropolitan available for
distribution to shareholders, before any distribution of assets is made to
holders of common stock or any stock of Metropolitan ranking, upon
liquidation, junior to Preferred Stock, liquidating distributions in the
amount of $100 per share plus declared and unpaid regular monthly
distributions. Preferred Stock is junior in liquidation to outstanding debt of
Metropolitan and on parity with all other issued and outstanding preferred
stock to the extent of its liquidation preference of $100 per share. As of
September 30, 1998, the total consolidated liabilities of Metropolitan ranking
senior in liquidation preference to Preferred Stock were approximately
$1,167,908,000. Obligations ranking on a parity with Preferred Stock upon
liquidation (i.e., the total liquidation preference of the outstanding shares
of all previous series of preferred stock) as of September 30, 1998 were
approximately $49,201,000. The amount of additional unsecured indebtedness
that Metropolitan may incur is regulated by Washington state law. There are no
limitations on Metropolitan's ability to incur additional secured
indebtedness. See "CAPITALIZATION" and "RISK FACTORS."
The Statement of Rights provides that, without limitation, the voluntary
sale, lease or conveyance of all or substantially all of Metropolitan's
property or assets to, or its consolidation or merger with, any other
corporation shall not be deemed to be a liquidation, dissolution or winding up
of Metropolitan. If upon any voluntary or involuntary liquidation, dissolution
or winding up of Metropolitan, the aggregate liquidation preference payable
with respect to Preferred Stock and any other shares of stock of Metropolitan
ranking as to any such distribution on a parity with Preferred Stock are not
paid in full, the holders of Preferred Stock and of such other shares will
share ratably in any such distribution of assets of Metropolitan in proportion
to the full respective preferential amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of shares of Preferred Stock will not be entitled to any
further participation in any distribution of assets by Metropolitan.
Redemption of Shares
Upon call by Metropolitan. Subject to regulatory restrictions affecting
redemptions during an offering, the shares of Preferred Stock are redeemable,
in whole or in part, only at the option of Metropolitan at a redemption
13
<PAGE>
price of $100 per share plus declared and unpaid distributions to the date
fixed for redemption. In the event that fewer than all of the outstanding
shares of Preferred Stock are to be redeemed, the number of shares to be
redeemed shall be determined by Metropolitan and the shares to be redeemed
shall be determined by such method as Metropolitan in its sole discretion
deems to be equitable.
Discretionary Redemption Upon Request of the Holder. Preferred Stock is not
redeemable at the option of the holder. If, however, Metropolitan receives an
unsolicited written request for redemption of shares from any holder,
Metropolitan may, in its sole discretion, subject to regulatory restrictions
affecting redemptions during an offering, and subject to the limitations
described below, consider such shares for redemption. Such redemption
requests, when received, are reviewed in the order received. Any shares so
tendered, which Metropolitan in its discretion allows for redemption, shall be
redeemed by Metropolitan directly, and not from or through a broker/dealer, at
a price established by the Board of Directors, from time to time, in its sole
discretion.
There can be no assurance that Metropolitan's financial condition will
allow it to exercise its discretion to accept any particular request for
redemption of Preferred Stock. Metropolitan will not redeem any such shares
tendered for redemption if to do so would, in the opinion of Metropolitan's
management, be unsafe or unsound in light of Metropolitan's financial
condition, including its liquidity position; if payment of interest or
principal on any outstanding instrument of indebtedness is in arrears or in
default; or if payment of any distribution on Preferred Stock or share of any
stock of Metropolitan ranking at least on a parity therewith is in arrears as
to distributions. In the event that cumulative distributions on Preferred
Stock have not been paid in full, Metropolitan may not purchase or acquire any
shares of Preferred Stock otherwise than pursuant to a purchase or exchange
offer made on the same terms to all holders of Preferred Stock.
As provided in the Statement of Rights, for a period of three years from
the date of initial sale of each share of Preferred Stock, any redemption of
such share, at the sole discretion of Metropolitan, shall occur only upon the
death or major medical emergency, as demonstrated to the satisfaction of
Metropolitan's management, of the holder or any joint holder of the share
requested to be redeemed. As further provided in the Statement of Rights, any
optional redemption of a share in any calendar year after the third year from
the date of sale of the share, not arising from the death or medical emergency
of the holder or any joint holder shall occur only when the sum of all
optional redemptions, including those arising out of the death or medical
emergency of the holder or any joint holder, of shares of Preferred Stock
during that calendar year shall not exceed ten percent of the number of shares
of Preferred Stock outstanding at the end of the preceding calendar year. In
the event the ten percent limit is reached in any calendar year, the only
redemptions which may be considered during that calendar year shall be those
arising from the death or medical emergency of the holder or any joint holder;
provided, however, that to the extent that total optional redemptions in any
calendar year do not reach the ten percent limit, the amount by which such
optional redemptions shall fall short of the ten percent limit may be carried
over into ensuing years; and provided further that to the extent that all
redemptions, including those involving the death or medical emergency of the
holder or any joint holder, exceed the ten percent limit in any year, the
amount by which such redemptions exceed the ten percent limit shall reduce the
limit in the succeeding year for limiting redemptions not involving the death
or medical emergency of a holder or any joint holder. In no event shall such
optional redemptions of all types in any single calendar year exceed 20% of
the number of shares of Preferred Stock outstanding at the end of the
preceding calendar year.
Absence of Trading Market
The Preferred Stock is not expected to be traded on any national or
regional stock exchange and no independent public market for Preferred Stock
is anticipated to develop. Management does not anticipate applying for a
listing for such public trading. The broker-dealer for this offering,
Metropolitan Investment Securities, Inc.("MIS") maintains a trading list to
match buyers and sellers of preferred stock. With limited exceptions,
Metropolitan has established a policy that all preferred shareholders,
including holders of the Preferred Stock offered herein, must place their
shares for sale on the trading list for 60 consecutive days before
Metropolitan will entertain a request for redemption. See "RISK FACTORS."
14
<PAGE>
Voting Rights
The Preferred Stock has no voting rights except as provided in the
Statement of Rights and except as required by Washington State law regarding
amendments to Metropolitan's Articles of Incorporation that adversely affect
holders of such shares as a class and requires approval of 66 2/3% of the
outstanding shares entitled to vote.
The Statement of Rights provides that holders of Preferred Stock, together
with the holders of Metropolitan's other outstanding preferred stock and any
other preferred stock previously authorized, voting separately and as a single
class, shall be entitled to elect a majority of the Board of Directors of
Metropolitan in the event that distributions payable on any shares of
Preferred Stock shall be in arrears in an amount equal to twenty-four or more
full monthly distributions per share. Such right will continue until all
distributions in arrears have been paid in full.
Federal Income Tax Consequences of Distributions
The following discussion of the federal income tax consequences of
distributions paid is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), existing Treasury Department regulations, current published
administrative positions of the Internal Revenue Service (the "Service")
contained in revenue rulings, revenue procedures and notes and existing
judicial decisions. No assurance can be given that legislative or
administrative changes or court decisions may not be forthcoming that could
significantly modify the statements in this discussion. Any such changes may
or may not be retroactive with respect to transactions effected prior to the
date of such changes.
Distributions paid to the holders of Preferred Stock will either be taxable
or not depending, in part, on the extent to which they are made out of current
or accumulated earnings and profits of Metropolitan as calculated for federal
income tax purposes. To the extent, if any, that distributions paid by
Metropolitan to the holders of Preferred Stock exceed current and accumulated
earnings and profits of Metropolitan, such distributions will be treated first
as a tax-free return of capital, reducing the holder's basis in Preferred
Stock (not below zero), and thereafter, as capital gains (or ordinary gains if
the Preferred Stock is not held by the holder as a capital asset).
Metropolitan believes that distributions with respect to Metropolitan's
preferred stock paid during the calendar years 1984 through 1992 and in 1994
were a return of capital under Section 301 of the Code. Metropolitan has filed
a Report of Nontaxable Distributions for the years 1984 through 1992 and in
1994 with the Service. Metropolitan believes that distributions paid during
1993 and 1995 through 1998 were taxable. Metropolitan is currently unable to
predict the character of its distributions for future years, but as required
by the Code, will report annually to shareholders regarding the tax character
of the prior year's distributions.
Each preferred shareholder's individual tax circumstances is unique;
accordingly, preferred shareholders are advised to consult their own tax
advisor with respect to the income tax treatment or any distribution made with
respect to the Preferred Stock.
Distributions paid with respect to Preferred Stock, whether deemed to be
dividends, return of capital, or capital gains for federal income tax
purposes, will result in the same federal income tax consequences to
Metropolitan as other payments of distributions. These distributions are not
deductible by Metropolitan under current tax law. Additionally, distributions
to foreign taxpayers are subject to special rules not discussed herein.
Transfer Agent and Registrar
Metropolitan acts as its own transfer agent and registrar of Metropolitan's
common and preferred stock.
15
<PAGE>
Summary of Preferred Stock Attributes
The following table sets forth several of the primary differences and
relative rights of the various series of outstanding preferred stock of
Metropolitan as of the date of this prospectus including the Preferred Stock,
Series E-7 offered herein:
<TABLE>
<CAPTION>
Offering Liquidation Redemption
Series Price Preference Price(1) Distribution Rate(4)
------ -------- ----------- ---------- -----------------------
<S> <C> <C> <C> <C>
C $ 10 $ 10 $ 9.90 Applicable Rate
D $ 10 $ 10 $ 9.90 Applicable Rate
E-1 $ 10 $ 10 $ 9.90 Applicable Rate
E-2 $100 $ 10(2) $99.00 Applicable Rate plus .5%
E-3 $100 $ 10(2) $99.00 Applicable Rate plus .5%
E-4 $100 $100 $99.00(3) Applicable Rate plus .5%
E-5 $100 $100 $99.00(3) Applicable Rate plus .5%
E-6 $100 $100 (3) Applicable Rate plus .5%
E-7 $100 $100 (3) Applicable Rate plus .5%
</TABLE>
- --------
(1) The redemption price shown is for redemptions at the request of the
shareholder. For Series E-7, the redemption price for redemptions at the
request of the holder is at the discretion of Metropolitan. The decision
to redeem shares is also at the sole discretion of Metropolitan. In the
event of a redemption at the request of Metropolitan, the redemption price
per share for authorized shares of Series C, D, and E-1 preferred stock is
$10 and for Series E-2 through E-7 preferred stock is $100.
(2) The liquidation preference for classes E-2 and E-3 is $10. In addition,
Metropolitan's Articles of Incorporation, as amended, provide that the E-2
and E-3 shareholders will receive liquidation distributions of up to $90
per share prior to any distribution to the common shareholders.
(3) E-4, E-5, E-6 and E-7 stock are not redeemable during the first three
years after their respective issuance except for instances of death or
medical emergency. See "DESCRIPTION OF SECURITIES--Redemption of Shares."
(4) The Board has authorized, for an indefinite period, a distribution payment
on all series of Preferred Stock of an additional one percentage point
above the Applicable Rate. The Board of Directors may at its sole
discretion eliminate the additional percentage point above the Applicable
Rate.
PLAN OF DISTRIBUTION
The Preferred Stock is offered directly to the public on a continuing best
efforts basis through MIS, which is affiliated with Metropolitan through the
common control of 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 offering will be paid by the purchasers of the Preferred Stock. A
commission in the maximum amount of 6% of the offering price will be paid by
Metropolitan on most Preferred Stock sales. Preferred Stock is offered for
cash or other consideration, tangible or intangible property, which is
acceptable to Metropolitan as determined in good faith by the Board of
Directors. MIS will transmit such funds or other consideration directly to
Metropolitan by noon of the next business day after receipt. During the three
fiscal years ended September 30, 1998, MIS has received commissions of $8,216
from Metropolitan on sales of approximately $6,386,000 of Metropolitan's
preferred stock through an in-house trading list.
MIS is a member of the National Association of Securities Dealers, Inc.
(the "NASD"). As such, NASD Rule 2720 applies and requires, in part, that a
qualified independent underwriter be engaged to render a recommendation
regarding the pricing of the Preferred Stock offered through this prospectus.
Accordingly, MIS has obtained a letter from Cruttenden Roth Incorporated, a
NASD member ("Cruttenden"), that the offering
16
<PAGE>
price of the Preferred Stock is consistent with Cruttenden's recommendations
which were based on conditions and circumstances existing as of the date of
the prospectus. Accordingly, the price offered for the Preferred Stock will be
no higher than Cruttenden would have independently recommended. 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 Preferred Stock offered hereunder, Cruttenden is to be paid $6,666.00
in fees.
Metropolitan has agreed to indemnify Cruttenden against, or make
contributions to Cruttenden with respect to, certain liabilities under the
Securities Act of 1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
There is not now and Metropolitan does not expect that there will be a
public trading market for the Preferred Stock in the future. MIS does not
intend to make a market for the Preferred Stock. Metropolitan, through MIS,
undertakes to maintain a list of persons willing to sell or purchase
outstanding shares of preferred stock. See "RISK FACTORS" and "DESCRIPTION OF
SECURITIES--Redemption of Shares."
MIS may enter into selected dealer agreements with and reallow to certain
dealers, who are members of the NASD, and certain foreign dealers who are not
eligible for membership in the NASD, a commission of up to 6% of the principal
amount of Preferred Stock sold by such dealers.
LEGAL MATTERS
Certain legal matters relating to the Preferred Stock to be offered hereby
will be 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 herein in reliance on
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 accounting and
auditing.
AVAILABLE INFORMATION
Metropolitan is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files periodic reports and other information
with the Securities and Exchange Commission (the "Commission"). Such reports
and other information filed by Metropolitan with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission in Washington, D.C. at 450 Fifth Street, N.W., Washington, DC 20549
and at certain 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 Commission maintains a World
Wide Web site that contains reports, proxy statements and other information
regarding registrants such as Metropolitan, that filed electronically with the
Commission at the following Internet address: (http://www.sec.gov).
Metropolitan has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-2 under the Securities Act of 1933, as
amended, with respect to the Preferred Stock offered hereby. This prospectus
does not contain all of the information set forth in the Registration
Statement, as permitted by the rules and regulations of the Commission.
17
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document filed with the Commission is incorporated herein by
reference in this prospectus:
Annual Report on Form 10-K for the fiscal year ended September 30, 1998
(filed January 13, 1999).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such 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 such person, a copy of
any and all of the information that has been referenced in this prospectus
other than exhibits to such documents. Requests for such copies should be
directed to Corporate Secretary, Metropolitan Mortgage & Securities Co., Inc.,
P.O. Box 2162, Spokane, Washington 99210-2162, telephone number (509) 838-3111.
18
<PAGE>
Metropolitan Mortgage & Securities Co., Inc.
[LOGO OF METROPOLITAN MORTGAGE & SECURITIES CO., INC.]
$10,000,000 Preferred Shares, Series E-7
----------------
PROSPECTUS
----------------
January , 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(1)............................................ $ 2,780
NASD Filing Fee.................................................... 600
Independent Underwriter Fee and Expenses........................... 6,666
Blue Sky Qualification Fees and Expenses(2)........................ 3,000
Accounting Fees and Expenses(2).................................... 50,000
Legal Fees and Disbursements(2).................................... 20,000
Printing Expenses(2)............................................... 26,500
Miscellaneous Expenses(2).......................................... 1,454
--------
Total Expenses................................................... $111,000
========
</TABLE>
- --------
(1) This fee was previously paid with Registration Statement No. 333-43891
(2) 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(a). Form of Selling Agreement between Metropolitan and Metropolitan
Investment Securities, Inc. with respect to Preferred Stock, Series
E-7 (incorporated by reference to Exhibit 1(f)(ii) to Amendment 1 to
Registration No. 333-19755).
*1(b). Form of Agreement to Act as Qualified Independent Underwriter,
between Metropolitan, Metropolitan Investment Securities, Inc. and
Cruttenden Roth Incorporated with respect to Preferred Stock,
Series E-7.
*1(c). Form of Pricing Recommendation Letter Cruttenden Roth Incorporated
with respect to Preferred Stock, Series E-7.
4. Statement of Rights, Designations and Preferences of variable rate
cumulative Preferred Stock, Series E-7 (incorporated by reference to
Exhibit 4(d) to Amendment 1 to Registration No. 333-19755).
*5. Opinion of Kutak Rock as to validity of Preferred Stock.
9. Irrevocable Trust Agreement (incorporated by reference to Exhibit
9(b) to Registration No. 2- 81359).
10(a). Employment Agreement between Metropolitan Mortgage & Securities Co.,
Inc. and Bruce Blohowiak (incorporated by reference to Exhibit 10(a)
to Form 10-K filed January 8, 1998).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10(b). Employment Agreement between Metropolitan Mortgage & Securities Co.,
Inc. and Michael Kirk (incorporated by reference to Exhibit 10(b) to
Form 10-K filed January 8, 1998).
10(c). Employment Agreement between Metropolitan Mortgage & Securities Co.,
Inc. and Jon McCreary (incorporated by reference to Exhibit 10(c) to
Form 10-K filed January 8, 1998).
10(d). Reinsurance Agreement between Western United Life Assurance Company
and Old Standard Life Insurance Company (incorporated by reference to
Exhibit 10(d) to Form 10-K filed January 8, 1998).
11. Statement indicating computation of earnings per common share
(incorporated by reference to Exhibit 11 to Form 10-K filed January
13, 1999).
12. Statement of computation of ratio of earnings to fixed charges
(incorporated by reference to Exhibit 12 to Form 10-K filed January
13, 1999).
*23(a). Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23(b). Consent of Kutak Rock (included in Exhibit 5).
24. Power of attorney (included on page II-5 of the Registration
Statement).
27. Financial Data Schedule (incorporated by reference to Exhibit 27 to
Form 10-K filed January 13, 1999.)
</TABLE>
- --------
* Filed herewith
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 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
II-2
<PAGE>
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) 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 Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Spokane, State of Washington, on this 25th day of
January, 1999.
Metropolitan Mortgage & Securities Co., Inc.
/s/ C. Paul Sandifur, Jr.
____________________________________________
C. Paul Sandifur, Jr.
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, whose signatures
appear below, hereby constitute and appoint C. Paul Sandifur, Jr. their true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for them and in their name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as full and to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
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 January 25, 1999
____________________________________ Officer and Chairman of the
C. Paul Sandifur, Jr. Board (Principal Executive
Officer)
/s/ Bruce J. Blohowiak Executive Vice President, January 25, 1999
____________________________________ Chief Operating Officer and
Bruce J. Blohowiak Director
/s/ Steven Crooks Vice President, Principal January 25, 1999
____________________________________ Financial Officer and
Steven Crooks Principal Accounting
Officer
/s/ Reuel Swanson Secretary and Director January 25, 1999
____________________________________
Reuel Swanson
/s/ Charles Stolz Director January 25, 1999
____________________________________
Charles Stolz
/s/ Irv Marcus Director January 25, 1999
____________________________________
Irv Marcus
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John T. Trimble Director January 25, 1999
____________________________________
John T. Trimble
/s/ Harold Erfurth Director January 25, 1999
____________________________________
Harold Erfurth
</TABLE>
II-5
<PAGE>
EXHIBIT 1(b)
FORM OF AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
Preferred Stock, Series E-7
This agreement made as of the ____ day of January 1999 by and between
Metropolitan Mortgage & Securities Co., Inc., a Washington corporation
("Metropolitan"), Metropolitan Investment Securities, Inc., a Washington
corporation ("MIS"), and CRUTTENDEN ROTH INCORPORATED, a California corporation
("CRUTTENDEN").
WITNESSETH:
WHEREAS, Metropolitan intends to offer 100,000 shares of Preferred Stock,
designated as "Variable Rate Cumulative Preferred Stock, Series E-7,"
(hereinafter referred to as the "Preferred Stock"), which will be offered in
reliance on a registration statement filed on Form S-2 with the Securities and
Exchange Commission; and,
WHEREAS, MIS, a broker/dealer and affiliate of Metropolitan and a member of
the National Association of Securities Dealers ("NASD"), will be engaged as the
managing agent for Metropolitan, and MIS may enter into Selected Dealer
Agreements with other qualified broker/dealers; and,
WHEREAS, pursuant to subparagraph (c) of Rule 2720 of the Bylaws of the
NASD, MIS, as a NASD member, may participate in such underwriting only if the
price at which the Preferred Stock is offered to the public is no higher than
the price recommended by a "Qualified Independent Underwriter" as that term is
defined in subparagraph (b)(15) of Rule 2720 to the Bylaws of the NASD, and who
participates in the preparation of the registration statement and prospectus
relating to the offering and exercises customary standards of due diligence,
with respect thereto; and,
WHEREAS, this agreement ("Agreement") describes the terms on which
Metropolitan is retaining CRUTTENDEN to serve as such a "Qualified Independent
Underwriter" in connection with this offering of Preferred Stock;
NOW, THEREFORE, in consideration of the recitations set forth above, and
the terms, promises, conditions, and covenants herein contained, the parties
hereby contract and agree as follows:
DEFINITIONS
As hereinafter used, except as the context may otherwise require, the term
"Registration Statement" means the registration statement on Form S-2 (including
the related preliminary prospectus, financial statements, exhibits and all other
documents to be filed as a part thereof or incorporated therein) for the
registration of the offer and sale of the Preferred Stock under the Securities
Act of 1933, as amended, and the rules and regulations thereunder (the "Act")
filed with the Securities and Exchange Commission (the "Commission"), and any
amendment thereto, and the term "Prospectus" means the prospectus including any
preliminary or final prospectus and any materials incorporated by reference into
and attached to the Prospectus (including the form of prospectus to be filed
with the Commission pursuant to Rule 424(b) under the Act) and any amendment or
supplement thereto, to be used in connection with the offering.
1. RULE 2720.
CRUTTENDEN hereby confirms its agreement as set forth in sub-paragraph
15(g) of Rule 2720 of the Bylaws of the NASD and represents that, as
appropriate, CRUTTENDEN satisfies or at the times designated in such
paragraph (l5) will satisfy the other requirements set forth therein
or will receive an exemption from such requirements from the NASD.
2. CONSENT.
CRUTTENDEN hereby consents to be named in the Registration Statement
and Prospectus as having acted as a "Qualified Independent
Underwriter" solely for the purposes of Rule 2720 referenced
<PAGE>
herein. Except as permitted by the immediately preceding sentence or
to the extent required by law, all references to CRUTTENDEN in the
Registration Statement or Prospectus or in any other filing, report,
document, release or other communication prepared, issued or
transmitted in connection with the offering by Metropolitan or any
corporation controlling, controlled by or under common control with
Metropolitan, or by any director, officer, employee, representative or
agent of any thereof, shall be subject to CRUTTENDEN's prior written
consent with respect to form and substance.
3. PRICING FORMULA AND RECOMMENDATION LETTER.
CRUTTENDEN agrees to render a written letter of recommendation as to
the price above which Metropolitan's Preferred Stock may not be
offered based on the computation of dividends to be declared on those
shares that is set forth in attached hereto, and incorporated herein
by reference (the "Pricing Recommendation Letter"). It is understood
and agreed by CRUTTENDEN that the securities to which this Agreement
relates will be offered on a continuous, best efforts basis by MIS, as
the managing agent, pursuant to the Selling Agreement in effect
between MIS and Metropolitan which is an exhibit to the Registration
Statement referred to above. Metropolitan, through MIS, will continue
to offer the Preferred Stock according to the terms and conditions of
said Selling Agreement and in accordance with this Agreement,
including, without limitation, Schedules "A" and "B". CRUTTENDEN
reserves the right to review and amend its Pricing Recommendation
Letter upon the filing of any post-effective amendment to the
Registration Statement or upon occurrence of any material event which
may or may not require such an amendment to be filed, or at such time
as the offering shall terminate or otherwise lapse under operation of
law.
4. FEES AND EXPENSE.
It is agreed that CRUTTENDEN shall be paid a fee in the amount of
$6,666 payable upon delivery of the Pricing Recommendation Letter
referred to in paragraph 3 above.
5. MATERIAL FACTS.
Metropolitan represents and warrants to CRUTTENDEN that at the time
the Registration Statement and, at the time the Prospectus is filed
with the Commission (including any preliminary prospectus and the form
of prospectus filed with the Commission pursuant to Rule 424(b)) and
at all times subsequent thereto, to and including the date on which
payment for, and delivery of, the Preferred Stock to be sold in the
Offering is made by the underwriter or underwriters, as the case may
be, participating in the Offering and by Metropolitan (such date being
referred to herein as the "Closing Date"), the Prospectus (as amended
or supplemented if it shall have been so amended or supplemented) will
contain all material statements which are required to be stated
therein in accordance with the Act and will conform to all other
requirements of the federal securities laws, and will not, on such
date include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and that all contracts and documents
required by the Act to be filed or required as exhibits to the
Registration Statement have been filed. Metropolitan further
represents and warrants that any further filing, report, document,
release or communication which in any way refers to CRUTTENDEN or to
the services to be performed by CRUTTENDEN pursuant to this Agreement
will not contain any untrue or misleading statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Metropolitan further warrants and represents that:
(a) All leases, contracts and agreements referred to in or filed as
exhibits to the Registration Statement to which Metropolitan or
its subsidiaries is a party or by which it is bound are in full
force and effect, except as may otherwise be disclosed in the
Registration Statement.
(b) Metropolitan has good and marketable title, except as otherwise
indicated in the Registration Statement and Prospectus, to all
of its assets and properties described therein as being owned by
it, free and clear of all liens, encumbrances and defects except
such encumbrances and defects which do not, in the aggregate,
materially affect or interfere with the use made and proposed to
be made of such properties as described in the Registration
<PAGE>
Statement and Prospectus; and Metropolitan has no material
leased properties except as disclosed in the Prospectus.
(c) Metropolitan is duly organized under the laws of the State of
Washington and, as of the effective date of the Registration
Statement and at the Closing Date Metropolitan will be validly
existing and in good standing under the laws of the State of
Washington with full corporate power and authority to own its
properties and conduct its business to the extent described in
the Registration Statement and Prospectus; Metropolitan is duly
qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the nature of the
business transacted by it or its ownership of properties or
assets makes qualification necessary; the authorized and
outstanding capitalization of Metropolitan is as set forth in
the Prospectus and the description in the Prospectus of the
capital stock of Metropolitan conforms with and accurately
describes the rights set forth in the instruments defining the
same;
(d) Metropolitan is not in violation of its Certificate of
Incorporation or Bylaws or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any bond, debenture, note, or other
evidence of indebtedness, contract or lease or in any indenture
or loan agreement to which it is a party or by which it is
bound.
(e) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary corporate action on the
part of Metropolitan and MIS and performance of the foregoing
agreement and the consummation of the transactions contemplated
thereby, will not conflict with or result in a breach of any of
the terms or constitute a violation of the respective
Certificates of Incorporation or Bylaws of Metropolitan or MIS,
or any deed of trust, lease, sublease, indenture, mortgage, or
other agreement or instrument to which Metropolitan or MIS is a
party or by which either of them or their property is bound, or
any applicable law, rule, regulation, judgment, order or decree
of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over Metropolitan or
MIS or their properties or obligations; and no consent,
approval, authorization or order of any court or governmental
agency or body is required for the consummation of the
transactions contemplated herein and in the other agreements
previously referred to in this paragraph except as may be
required under the Act or under any state securities or laws.
(f) Any certificate signed by an officer of Metropolitan and
delivered to CRUTTENDEN pursuant to this Agreement shall be
deemed a representation and warranty by Metropolitan to
CRUTTENDEN, to have the same force and effect as stated herein,
as to the matters covered thereby.
(g) If any event relating to or affecting Metropolitan shall occur
as a result of which it is necessary, in CRUTTENDEN's opinion,
to amend or supplement the Prospectus in order to make the
Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser,
Metropolitan undertakes to inform CRUTTENDEN of such events
within a reasonable time thereafter, and will forthwith prepare
and furnish to CRUTTENDEN, without expense to it, a reasonable
number of copies of any amendment or amendments or a supplement
or supplements to the Prospectus (in form and substance
satisfactory to CRUTTENDEN) which will amend or supplement the
Prospectus so that as amended or supplemented it will not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein in
light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading.
(h) Metropolitan hereby warrants and represents that it will offer
the Preferred Stock in accordance with the pricing formula that
is set forth in Schedules "A" and "B" which are incorporated by
reference herein.
<PAGE>
(i) All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of
Metropolitan submitted pursuant hereto, shall remain operative
and in full force and effect, surviving the date of this
Agreement.
6. AVAILABILITY OF INFORMATION.
Metropolitan hereby agrees to provide CRUTTENDEN, at its expense, with
all information and documentation with respect to its business,
financial condition and other matters as CRUTTENDEN may deem relevant
based on the standards of reasonableness and good faith and shall
request in connection with CRUTTENDEN's performance under this
Agreement, including, without limitation, copies of all correspondence
with the Commission, certificates of its officers, opinions of its
counsel and comfort letters from its auditors. The above-mentioned
certificates, opinions of counsel and comfort letters shall be
provided to CRUTTENDEN as CRUTTENDEN may request on the effective date
of the Registration Statement. Metropolitan will make reasonably
available to CRUTTENDEN, its auditors, counsel, and officers and
directors to discuss with CRUTTENDEN any aspect of Metropolitan which
CRUTTENDEN may deem relevant. In addition, Metropolitan, at
CRUTTENDEN's request, will cause to be delivered to CRUTTENDEN copies
of all certificates, opinions, letters and reports to be delivered to
the underwriter or underwriters, as the case may be, pursuant to any
underwriting agreement executed in connection with the Offering or
otherwise, and shall cause the person issuing such certificate,
opinion, letter or report to authorize CRUTTENDEN to rely thereon to
the same extent as if addressed directly to CRUTTENDEN. Metropolitan
represents and warrants to CRUTTENDEN that all such information and
documentation provided pursuant to this paragraph 6 will not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statement therein not misleading. In
addition, Metropolitan will promptly advise CRUTTENDEN of all
telephone conversations with the Commission which relate to or may
affect the Offering.
7. INDEMNIFICATION.
(a) Subject to the conditions set forth below, and in addition to
any rights of indemnification and contribution to which
CRUTTENDEN may be entitled pursuant to any agreement among
underwriters, underwriting agreement or otherwise, and to the
extent allowed by law, Metropolitan hereby agrees that it will
indemnify and hold CRUTTENDEN and each person controlling,
controlled by or under common control with CRUTTENDEN within the
meaning of Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the
rules and regulations thereunder (individually, an "Indemnified
Person") harmless from and against any and all loss, claim,
damage, liability, cost or expense whatsoever to which such
Indemnified Person may become subject under the Act, the
Exchange Act, or other federal or state statutory law or
regulation, at common law or otherwise, arising out of, based
upon, or in any way related or attributed to (i) this Agreement,
(ii) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or
Prospectus or any other filing, report, document, release or
communication, whether oral or written, referred to in paragraph
5 hereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, (iii) any application or
other document executed by Metropolitan or based upon written
information furnished by Metropolitan filed in any jurisdiction
in order to qualify the Preferred Stock under the securities or
Blue Sky laws thereof, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iv)
the breach of any representation or warranty made by
Metropolitan in this Agreement. Metropolitan further agrees
that upon demand by an Indemnified Person at any time or from
time to time, it will promptly reimburse such Indemnified Person
for, or pay, any loss, claim, damage, liability, cost or expense
as to which Metropolitan has indemnified such person pursuant
hereto. Notwithstanding the foregoing provisions of this
paragraph 7, any such payment or reimbursement by Metropolitan
of fees, expenses or disbursement incurred by an Indemnified
Person in any proceeding in which a final judgment by a court of
competent jurisdiction (after all appeals or the expiration of
time to appeal) is entered against such Indemnified Person as a
direct result of such person's
<PAGE>
negligence, bad faith or willful misfeasance will be promptly
repaid to Metropolitan. In addition, anything in this paragraph
7 to the contrary notwithstanding, Metropolitan shall not be
liable for any settlement of any action or proceeding effected
without its written consent.
(b) Promptly after receipt by an Indemnified Person under sub-
paragraph (a) above of notice of the commencement of any action,
such Indemnified Person will, if a claim in respect thereof is
to be made against Metropolitan under paragraph (a), notify
Metropolitan in writing of the commencement thereof; but the
omission to so notify Metropolitan will not relieve Metropolitan
from any liability which it may have to any Indemnified Person
otherwise than under this paragraph 7 if such omission shall not
have materially prejudiced Metropolitan's ability to investigate
or to defend against such claim. In case any such action is
brought against any Indemnified Person, and such Indemnified
Person notifies Metropolitan of the commencement thereof,
Metropolitan will be entitled to participate therein and, to the
extent that it may elect by written notice delivered to the
Indemnified Person promptly after receiving the aforesaid notice
from such Indemnified Person, to assume the defense thereof with
counsel reasonably satisfactory to such Indemnified Person;
PROVIDED, HOWEVER, that if the defendants in any such action
include both the Indemnified Person and Metropolitan or any
corporation controlling, controlled by or under common control
with Metropolitan, or any director, officer, employee,
representative or agent of any thereof, or any other "Qualified
Independent Underwriter" retained by Metropolitan in connection
with the Offering and the Indemnified Person shall have
reasonably concluded that there may be legal defenses available
to it which are different from or additional to those available
to such other defendant, the Indemnified Person shall have the
right to select separate counsel to represent it. Upon receipt
of notice from Metropolitan to such Indemnified Person of its
election so to assume the defense of such action and approval by
the Indemnified Person of counsel, Metropolitan will not be
liable to such Indemnified Person under this paragraph 7 for any
fees of counsel subsequently incurred by such Indemnified Person
in connection with the defense thereof (other than the
reasonable costs of investigation subsequently incurred by such
Indemnified Person) unless (i) the Indemnified Person shall have
employed separate counsel in accordance with the provision of
the next preceding sentence (it being understood, however, that
Metropolitan shall not be liable for the expenses of more than
one separate counsel in any one jurisdiction representing the
Indemnified Person, which counsel shall be approved by
CRUTTENDEN), (ii) Metropolitan, within a reasonable time after
notice of commencement of the action, shall not have employed
counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person, or (iii) Metropolitan shall
have authorized in writing the employment of counsel for the
Indemnified Person at the expense of Metropolitan, and except
that, if clause (i) or (iii) is applicable, such liability shall
be only in respect of the counsel referred to in such clause (i)
or (iii).
<PAGE>
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in
paragraph 7 is due in accordance with its terms but is for any
reason held by a court to be unavailable from Metropolitan to
CRUTTENDEN on grounds of policy or otherwise, Metropolitan and
CRUTTENDEN shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or
defending same) to which Metropolitan and CRUTTENDEN may be
subject in such proportion so that CRUTTENDEN is responsible for
that portion represented by the percentage that its fee under
this Agreement bears to the public offering price appearing on
the cover page of the Prospectus and Metropolitan is responsible
for the balance, except as Metropolitan may otherwise agree to
reallocate a portion of such liability with respect to such
balance with any other person, including, without limitation,
any other "Qualified Independent Underwriter"; PROVIDED,
HOWEVER, that (i) in no case shall CRUTTENDEN be responsible for
any amount in excess of the fee set forth in paragraph 4 above
and (ii) no person guilty of fraudulent misrepresentation within
the meaning of Section 11(f) of the Act shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph
(c), any person controlling, controlled by or under common
control with CRUTTENDEN, or any partner, director, officer,
employee, representative or any agent of any thereof, shall have
the same rights to contribution as CRUTTENDEN and each person
who controls Metropolitan within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, each officer of
Metropolitan who shall have signed the Registration Statement
and each director of Metropolitan shall have the same rights to
contribution as Metropolitan, subject in each case to clause (i)
of this paragraph (c). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action,
suit or proceeding against such party in respect of which a
claim for contribution may be made against the other party under
this paragraph (c), notify such party from whom contribution may
be sought, but the omission to so notify such party shall not
relieve the party from whom contribution may be sought from any
other obligation it or they may have hereunder or otherwise than
under this paragraph (c). The indemnity and contribution
agreements contained in this paragraph 7 shall remain operative
and in full force and effect regardless of any investigation
made by or on behalf of any Indemnified Person or termination of
this Agreement.
8. AUTHORIZATION BY METROPOLITAN.
Metropolitan represents and warrants to CRUTTENDEN that this Agreement
has been duly authorized, executed and delivered by Metropolitan and
constitutes a valid and binding obligation of Metropolitan.
9. AUTHORIZATION BY MIS.
MIS represents and warrants to CRUTTENDEN that this Agreement has been
duly authorized, executed and delivered by MIS and constitutes a valid
and binding obligation of MIS.
10. AUTHORIZATION BY CRUTTENDEN.
CRUTTENDEN represents and warrants to Metropolitan that this Agreement
has been duly authorized, executed and delivered by CRUTTENDEN and
constitutes a valid and binding obligation of CRUTTENDEN.
<PAGE>
11. NOTICE.
Whenever notice is required to be given pursuant to this Agreement,
such notice shall be in writing and shall be mailed by first class
mail, postage prepaid, addressed (a) if to CRUTTENDEN ROTH
INCORPORATED, at 18301 Von Karman, Suite 100, Irvine, CA 92612,
Attention: Byron Roth and (b) if to Metropolitan Investment
Securities, Inc, at 929 W. Sprague Ave., Spokane, WA 99201, Attention:
Susan Thomson, Assistant Corporate Counsel.
12. GOVERNING LAW.
This Agreement shall be construed (both as to validity and
performance) and enforced in accordance with and governed by the laws
of the State of Washington applicable to agreements made and to be
performed wholly within such jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above mentioned.
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
By:_____________________________________________
C. Paul Sandifur, Jr., President
METROPOLITAN INVESTMENT SECURITIES, INC.
By:_____________________________________________
Reuel Swanson, Secretary
CRUTTENDEN ROTH INCORPORATED
By:_____________________________________________
Monte Brem, Vice President, Corporate Finance
<PAGE>
SCHEDULE A
Metropolitan Mortgage & Securities Co., Inc.
The opinion of CRUTTENDEN is conditioned upon Metropolitan's undertaking to
maintain the distribution rate of the Preferred Stock in accordance with the
formula set forth below:
Notwithstanding anything to the contrary herein the Applicable Rate for any
monthly distribution period shall not, in any event, be less than 6% or greater
than 14% per annum. The Board of Directors may, however, by resolution,
authorized distributions in excess of the Applicable Rate. The Applicable Rate
for any monthly distribution period shall be the highest of the Treasury Bill
Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant Maturity
Rate (each as defined in the Preferred Stock Authorizing Resolution) plus one
half of one percentage point for such dividend period. In the event that the
Company determines in good faith that for any reason one or more of such rates
cannot be determined for any distribution period, then the Applicable Rate for
such period shall be the higher of whichever of such rates can be so determined.
<PAGE>
SCHEDULE B
Metropolitan Mortgage & Securities Co., Inc.
VARIABLE RATE, CUMULATIVE PREFERRED STOCK,
SERIES E-7 PRICING
For Distributions Payable On: _________________________________
Distributions Record Date: ____________________________________
<TABLE>
<CAPTION>
Date Date Average Applicable Rate Effective Resultant
Rate* Rate
<S> <C> <C> <C> <C> <C> <C>
3 Mo Treasury Bill _____________________ +.5% +2% _________
10 Yr Constant Rate _____________________ +.5% +2% _________
20 Yr Constant Rate _____________________ +.5% +2% _________
</TABLE>
HIGHEST RESULTANT RATE: ___________________________
MONTHLY DISTRIBUTION PER SHARE: ____________________
(Highest applicable rate divided by 12)
As resolved by the Board of Directors, distribution will be deemed declared
on the 1st day of each month, payable on the 20th of each month to the holders
of record on the 5th of each month.
* Includes any distribution authorized by the Board in excess of the
Applicable Rate.
-------------------------------------------
Authorized Signature
<PAGE>
EXHIBIT 1(c)
FORM OF PRICING RECOMMENDATION LETTER
Date: January __, 1999
C. Paul Sandifur, Jr., President
Metropolitan Investment Securities, Inc.
917 W. Sprague Avenue
Spokane, Washington 99201
Re: Pricing of Metropolitan Mortgage & Securities Co., Inc. Offering of
$10,000,000 Variable Rate Cumulative Preferred Stock, Series E-7
Dear Mr. Sandifur:
This letter will serve to confirm our engagement as a "qualified
independent underwriter" as that term is defined in subparagraph (b)(15)of Rule
2720 to the NASD bylaws, as amended ("Rule 2720").
Based upon our review of the registration statement, and the performance of
"due diligence" as required in subparagraph (c)(3)to Rule 2720, it appears that
the price of $100.00 per share on the Variable Rate Cumulative Preferred Stock,
Series E-7 (provided that the manner in which the computation of dividends are
those set forth in Schedules A and B to the Agreement to Act as "Qualified
Independent Underwriter" dated January __, 1999, which is filed as Exhibit 1(c)
to the registration statement), is no higher than that which we would recommend.
We hereby consent to the use of our name as a "qualified independent
underwriter," to the Registration Statement filed by Metropolitan Mortgage &
Securities Co., Inc. with respect to the above-referenced matter.
Very truly yours,
CRUTTENDEN ROTH INCORPORATED
By:__________________________________
<PAGE>
EXHIBIT 5
OPINION OF KUTAK ROCK
<PAGE>
<TABLE>
<S> <C> <C>
KUTAK ROCK
SUITE 2900 ATLANTA
KANSAS CITY
717 SEVENTEENTH STREET LITTLE ROCK
NEW YORK
DENVER, COLORADO 80202-3329 NEWPORT BEACH
OKLAHOMA CITY
303-297-2400 OMAHA
PHOENIX
FACSIMILE 303-292-7799 PITTSBURGH
WASHINGTON
http://www.kutakrock.com
-------------------------
</TABLE>
January 25, 1999
Metropolitan Mortgage & Securities Co., Inc.
601 West First Avenue
Spokane, WA 99201-5015
Re: Metropolitan Mortgage & Securities Co., Inc.
Variable Rate Cumulative Preferred Stock, Series E-7
Ladies and Gentlemen:
We have acted as counsel to Metropolitan Mortgage & Securities Co., Inc.
(the "Company") in connection with the filing of a registration statement to
which this opinion is filed as an exhibit on Form S-2, under the Securities Act
of 1933, as amended (the "Act"). The registration statement covers a proposed
offering by the Company of up to 100,000 shares of Variable Rate Cumulative
Preferred Stock, Series E-7 at $100 per share (the "Preferred Stock"). Such
registration statement, as amended, on file with the Securities and Exchange
Commission (the "Commission") at the time such registration statement becomes
effective (including financial statements and schedules, exhibits and all other
documents filed as a part thereof or incorporated therein) are herein referred
to as the "Registration Statement."
In connection with this opinion, we have made such investigations and
examined such records, including the Company's Certificate of Incorporation,
Bylaws and corporate minutes as we deemed necessary to the performance of our
services and to give this opinion. We have also examined and are familiar with
the originals or copies, certified or otherwise identified to our satisfaction,
of such other documents, corporate records and other instruments as we have
deemed necessary for the preparation of this opinion. In expressing this
opinion, we have relied, as to any questions of fact upon which our opinion is
predicated, upon representations and certificates of the officers of the
Company.
In giving this opinion we assumed:
(a) the genuineness of all signatures and the authenticity and
completeness of all documents submitted to us as originals;
(b) the conformity to originals and the authenticity of all documents
supplied to us as certified, photocopied, conformed or facsimile copies and
the authenticity and completeness of the originals of any such documents;
and
(c) the proper, genuine and due execution and delivery of all
documents by all parties to them and that there has been no breach of the
terms thereof.
Based upon the foregoing and subject to the qualifications set forth above,
and assuming (i) that the Registration Statement has become effective under the
Act, (ii) that all required actions are taken and conditions satisfied with
respect to the issuance of the Company's Preferred Stock as specified in the
prospectus and (iii) consideration is
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Metropolitan Mortgage & Securities Co., Inc.
January 25, 1999
Page 2
received for the Preferred Stock: we are of the opinion that, when issued the
Preferred Stock will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the use of our name in the Registration Statement.
In giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Commission promulgated pursuant thereto.
Very truly yours,
/s/ Kutak Rock
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Kutak Rock
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EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
Metropolitan Mortgage & Securities Co., Inc.
Spokane, Washington
We consent to the incorporation by reference in this Registration Statement
on Form S-2 of our reports, which include an explanatory paragraph describing
changes in the methods of accounting for the transfer and servicing of financial
assets in 1997 and impaired loans in fiscal 1996, dated November 20, 1998, on
our audits of the consolidated financial statements and financial statement
schedules of Metropolitan Mortgage & Securities Co., Inc. and subsidiaries as of
September 30, 1998 and 1997, and for each of the three years in the period ended
September 30, 1998, which report is included in the Annual Report on Form 10-K.
We also consent to the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
Spokane, Washington
January 25, 1999
