<PAGE>
As filed with the Securities and Exchange Commission on January 5, 2000.
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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)
Washington 601 West First Avenue 91-0609840
(State or other Spokane, Washington (I.R.S. Employer
jurisdiction of 99201-5015 Identification No.)
incorporation or (509) 838-3111
organization)
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
C. Paul Sandifur, Jr., President
Metropolitan Mortgage & Securities Co., Inc.
601 West First Avenue
Spokane, Washington 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 LLP
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
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed maximum
Title of each class of Amount maximum aggregate Amount of
securities to be to be offering price Offering Registration
registered registered per unit Price(1)(2) Fee(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Debentures,
Series III............. $100,000,000 -- $100,000,000 $26,400
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(a).
(2) Includes $44,000,000 of debentures that remains unsold and is being carried
forward from Registration Statement No. 333-71087 pursuant to Rule 429 of
the Securities Act of 1933, for which a filing fee of $11,616 was
previously paid.
(3) A filing fee of $11,616 was previously paid for the $44,000,000 of
debentures carried forward from Registration Statement No. 333-71087
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. 333-71087 previously
filed by the Registrant. This Registration Statement also constitutes post-
effective amendment No. 1 to Registration Statement No. 333-71087.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. These +
+securities may not be sold nor may offers to buy be accepted before the time +
+this prospectus is delivered in final form. This prospectus is not an offer +
+to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion dated January 5, 2000.
PROSPECTUS
[LOGO OF METROPOLITAN MORTGAGE]
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
$100,000,000 Investment Debentures, Series III
Metropolitan is offering investment debentures with the following terms:
. The debentures are unsecured debt instruments, senior only to our outstanding
equity securities.
. The debentures rank equally with our unsecured debt and are subordinate to
all of our secured debt
<TABLE>
<CAPTION>
Minimum Term to Annual
Investment Maturity Interest Rate(1)
---------- -------- ----------------
<S> <C> <C>
%
%
%
%
%
%
%
%
%
%
%
%
---
%
</TABLE>
- -----
(1) You may elect one of three options to receive principal and interest
payments on the debentures: (1) to receive interest monthly, quarterly,
semi-annually or annually, without compounding, (2) to leave the interest
with Metropolitan and it will compound semi-annually, or (3) at the above
identified installment terms, to receive equal monthly installments of
principal and interest in accordance with an amortization schedule that you
select.
You should consider carefully the risk factors beginning on page 8 in this
prospectus.
<TABLE>
<CAPTION>
Per
Debenture Total
----------- ------------------------
<S> <C> <C>
Public offering price.................... 100% $100,000,000
Underwriting discounts and
commissions* ........................... 0% to 6% None-$6,000,000
Maximum proceeds to Metropolitan (before
expenses)............................... 100% to 94% $100,000,000-$94,000,000
</TABLE>
- -----
* You will not incur a direct sales charge. Debentures earn interest, 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 debentures depend upon
the terms of the sale and upon whether the sales are reinvestments or new
purchases. See "PLAN OF DISTRIBUTION."
. Currently, there is no trading market for the debentures and you should not
expect one to be established in the future.
. The debentures are being issued only in book-entry form.
. This offering of debentures is subject to withdrawal or cancellation by
Metropolitan without notice.
. We are offering the debentures on a continuous, best efforts basis, and there
is no minimum amount of debentures that must be sold.
. You may not purchase debentures pursuant to this prospectus after January 31,
2001.
The debentures are obligations 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.
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 , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FORWARD-LOOKING STATEMENTS................................................. 2
PROSPECTUS SUMMARY......................................................... 3
RISK FACTORS............................................................... 8
USE OF PROCEEDS............................................................ 9
DESCRIPTION OF DEBENTURES.................................................. 9
PLAN OF DISTRIBUTION....................................................... 12
LEGAL MATTERS.............................................................. 13
EXPERTS.................................................................... 13
AVAILABLE INFORMATION...................................................... 13
INCORPORATION OF DOCUMENTS BY REFERENCE.................................... 13
</TABLE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We based these forward-
looking statements on our current expectations and projections about future
events. These forward-looking statements are subject to risks, uncertainties,
and assumptions about Metropolitan, including:
. Our anticipated growth strategies,
. Anticipated trends in our businesses, including trends in the markets for
insurance, mortgages, annuities and real estate,
. Future interest rate trends, movements and fluctuations,
. Future expenditures for purchasing receivables, and
. Our ability to continue to control costs and accurately price the risk of
default on the payment of receivables.
----------------
You should only rely on the information contained in this prospectus. We
have not, and the 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 debentures. You should read both
this prospectus and the attached Annual Report on Form 10-K of Metropolitan for
the fiscal year ended September 30, 1999, carefully before you make 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 the terms "Metropolitan," "we" and "our" refer
solely to the parent company, Metropolitan Mortgage & Securities Co., Inc.
History
Metropolitan's controlling shareholder is C. Paul Sandifur, Jr. Mr. Sandifur
has control through his voting power over a family trust and through his direct
ownership of common stock. See "Item 12" in Metropolitan's Annual Report on
Form 10-K for the year ended September 30, 1999, which is attached to this
prospectus. As a result of Mr. Sandifur's common control, we have several other
affiliates, including Summit Securities, Inc., Old Standard Life Insurance
Company and Old West Annuity & Life Insurance Company. Collectively, these
affiliated companies are referred to as "affiliated companies." The chart on
the next page depicts the relationship of some of the significant companies in
the Metropolitan consolidated group, which excludes affiliated companies that
are not subsidiaries of Metropolitan.
Business
The consolidated group is engaged in a nationwide business of acquiring,
holding, selling and securitizing receivables. These receivables include real
estate contracts and promissory notes that are secured by first position liens
on real estate. The consolidated group also invests in receivables consisting
of real estate contracts and promissory notes secured by second and lower
position liens, structured settlements, annuities, lottery prizes, equipment
leases and other investments. The receivables secured by real estate are
typically non-conventional because they were either financed by the sellers of
the properties involved or they were originated by institutional lenders who
originate loans for borrowers with impaired credit or for non-conventional
properties. In addition to receivables, the consolidated group invests in other
assets, including U.S. Treasury obligations, corporate bonds and other
securities.
The consolidated group's capital to invest in these receivables comes from
several sources. The consolidated group uses funds generated from the sale and
securitization of receivables, collateralized borrowings, receivable cash
flows, the sale of annuities, the sale of debt and equity securities, the sale
of real estate and securities portfolio earnings.
The consolidated group provides services to the affiliated companies for a
fee and engages in various business transactions with the affiliated companies.
Metropolitan provides receivable acquisition services to the affiliated
companies and to our insurance subsidiary, Western United Life Assurance
Company. Metropolitan's wholly owned subsidiary, Metwest Mortgage Services,
Inc., conducts receivable collection and servicing activities for the
affiliated companies, Metropolitan and Western United.
3
<PAGE>
The consolidated group owns various properties acquired through repossession
and other sources. These properties are held for sale and/or development. For a
more detailed discussion of the business of the consolidated group, see "Item
1" in Metropolitan's Annual Report filed on Form 10-K for the year ended
September 30, 1999, which is attached to this prospectus.
Organizational Chart
(as of September 30, 1999)
The chart below lists the consolidated group's principal operating
subsidiaries and their ownership.
[CHART]
- --------
* The remaining 3.5% of Consumers Group Holding Co., Inc. is owned by Summit
Securities, Inc.
Metropolitan Mortgage & Securities Co., Inc.: Parent organization; invests
in receivables and other investments, including real estate development, which
are principally funded by proceeds from receivable investments, other
investments, and securities offerings.
Consumers Group Holding Co., Inc.: A holding company; its sole business
activity is being a shareholder of Consumers Insurance Co., Inc.
Consumers Insurance Company: Inactive property and casualty insurer; its
principal business activity is being a shareholder of Western United Life
Assurance Company.
Western United Life Assurance Company: Metropolitan's largest subsidiary and
largest company within the consolidated group; is engaged in investing in
receivables and other investments principally funded by annuity contract sales
and premiums from the sale of life insurance policies.
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.
4
<PAGE>
Summary of the Debenture Offering
Debenture offering............ We are offering $100,000,000 in principal
amount of investment debentures, series III.
They will be issued at the minimum investment
amounts, terms and rates listed on the cover
page of this prospectus. There is no minimum
amount of debentures that must be sold.
Debentures will be issued only in book-entry
form. See "DESCRIPTION OF DEBENTURES."
Debentures.................... The debentures are unsecured debt instruments
of Metropolitan. At September 30, 1999, we had
outstanding approximately $198,889,000,
including principal and compounded and accrued
interest, of debenture debt and $137,345,000,
including principal and accrued interest, of
collateralized debt and similar obligations.
See "CAPITALIZATION."
Principal and interest
payments...................... You may elect one of three options to receive
principal and interest payments on the
debentures: (1) to receive interest monthly,
quarterly, semi-annually or annually, without
compounding, (2) to leave the interest with
Metropolitan and it will compound semi-
annually, or (3) for the debentures purchased
under the installment option, equal monthly
installments of principal and interest in
accordance with an amortization schedule that
you select. We may change the minimum
investment amounts, terms and interest rates on
unissued debentures offered in this prospectus
from time to time by supplementing this
prospectus. The terms of debentures issued
prior to any change will not be affected by the
change. See "DESCRIPTION OF DEBENTURES--Payment
of Principal and Interest."
Use of proceeds............... We will use the proceeds from the sales of this
debenture offering to invest in receivables and
to make other investments, which may include
investments in existing subsidiaries, new
business ventures or to acquire other
companies. We may also use the proceeds to
retire maturing debentures, pay preferred stock
dividends, for property development and for
general corporate purposes. See "USE OF
PROCEEDS."
Risk factors.................. Your investment in the debentures involves
risk. You should review the risks described in
this prospectus and those described in the
attached Annual Report on Form 10-K of
Metropolitan, before you invest in the
debentures. See "RISK FACTORS" for a discussion
of the risks associated with investing in the
debentures.
5
<PAGE>
Capitalization
The following table shows the capitalization of the consolidated group at
September 30, 1999.
<TABLE>
<CAPTION>
Amount
Class Outstanding
----- ------------
<S> <C>
Debt Payable:
Advances under funding facility with Bank of America, interest
at 6.383% per annum; due on March 24, 2000; collateralized by
$65,505,000 in real estate contracts and mortgage notes........ $ 62,908,030
Reverse repurchase agreements with Seattle Northwest; interest
at 5.35% per annum; due on October 13, 1999; collateralized by
$5,000,000 in U.S. Treasury Bonds.............................. 4,962,500
Reverse repurchase agreements with Bear Stearns; interest at
5.33% per annum; due October 13, 1999; collateralized by
$10,000,000 in collateralized mortgage obligation ("CMO")
bonds.......................................................... 10,000,000
Note payable to Old Standard Life Insurance Company; interest at
10.50% per annum; due May 3, 2004; collateralized by Beach
House Restaurant............................................... 2,507,289
Note payable to Summit Securities, Inc., interest at 11.0% per
annum; due on June 30, 2000; collateralized by $12,500,000 in
structured settlement agreements............................... 10,000,000
Notes payable to Federal Home Loan Bank of Seattle, interest
rates ranging from 5.39% to 5.42% per annum; due October 25,
1999; collateralized by $41,250,000 in CMO bonds............... 33,000,000
Note payable to IDS Life Insurance Company, interest at 7.04%
per annum; due August 1, 2009; collateralized by Metropolitan
Financial Center located in Spokane, Washington................ 11,970,474
Real estate contracts and mortgage notes payable, interest rates
ranging from 3% to 11.6% per annum, due through 2026;
collateralized by senior liens on certain of the Company's real
estate contracts, mortgage notes and real estate held for
sale........................................................... 1,877,056
Accrued interest payable........................................ 119,281
------------
Total Debt Payable............................................. 137,344,630
------------
Debenture Bonds:
Investment Debentures, Series III maturing in 1999 to 2009, at
5.5% to 11%.................................................... 71,406,000
Investment Debentures, Series II maturing in 1999 to 2002, at
5.5% to 11%.................................................... 104,676,000
Installment Debentures Series I, maturing in 1999 to 2007 at
7.5% to 10.25%................................................. 157,000
Compound and accrued interest................................... 22,649,779
------------
Total Debenture Bonds.......................................... 198,888,779
------------
Stockholders' Equity:
Preferred Stock................................................. 19,099,294
Common Stock.................................................... 291,167
Additional paid-in capital...................................... 22,522,036
Accumulated comprehensive loss.................................. (3,638,723)
Retained earnings............................................... 33,430,689
------------
Total Stockholders' Equity..................................... 71,704,463
------------
Total Capitalization........................................... $407,937,872
============
</TABLE>
6
<PAGE>
Summary Consolidated Financial Data
The summary consolidated financial data shown below as of September 30, 1999
and 1998 and for the years ended September 30, 1999, 1998 and 1997, other than
the ratios of earnings to fixed charges and preferred stock dividends, have
been derived from, and should be read in conjunction with, the consolidated
financial statements, related notes, and Management's Discussion and Analysis
of Financial Condition and Results of Operations appearing in Metropolitan's
Form 10-K for the year ended September 30, 1999, which is incorporated in this
prospectus by reference and attached to this prospectus. The summary
consolidated financial data shown below as of September 30, 1997, 1996 and 1995
and for the years ended September 30, 1996 and 1995, other than the ratios of
earning, to fixed charges and preferred stock dividends, have been derived from
consolidated financial statement not included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Revenues................ $ 165,221 $ 155,955 $ 155,135 $ 156,672 $ 138,107
========== ========== ========== ========== ==========
Income before minority
interest............... $ 16,593 $ 10,453 $ 9,791 $ 8,146 $ 6,376
Income allocated to
minority interests..... (318) (126) (123) (108) (73)
---------- ---------- ---------- ---------- ----------
Net income.............. 16,275 10,327 9,668 8,038 6,303
Preferred stock
dividends.............. (3,642) (3,732) (4,113) (3,868) (4,038)
---------- ---------- ---------- ---------- ----------
Income applicable to
common stockholders.... $ 12,633 $ 6,595 $ 5,555 $ 4,170 $ 2,265
========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges.......... 1.12 1.75 1.77 1.46 1.35
Ratio of earnings to
fixed charges and
preferred stock
dividends.............. (1) 1.37 1.31 1.14 1.03
PER COMMON SHARE DATA:
Basic and diluted income
per share applicable to
common
stockholders(2)........ $ 97,933 $ 50,728 $ 42,733 $ 32,073 $ 17,288
========== ========== ========== ========== ==========
Weighted average number
of common shares
outstanding............ 129 130 130 130 131
========== ========== ========== ========== ==========
Cash dividends per
common share........... $ 2,400 $ 1,200 $ -- $ -- $ 3,800
========== ========== ========== ========== ==========
CONSOLIDATED BALANCE
SHEET DATA:
Total assets............ $1,230,957 $1,226,665 $1,112,389 $1,282,659 $1,078,468
Debentures, line of
credit advances, other
debt payable and
securities sold, not
owned.................. $ 336,233 $ 323,908 $ 190,131 $ 363,427 $ 226,864
Stockholders' equity.... $ 71,704 $ 58,757 $ 54,113 $ 46,343 $ 40,570
</TABLE>
- --------
(1) Earnings were insufficient to meet fixed charges and preferred stock
dividends by approximately $808,000 for the year ended September 30, 1999.
The consolidated ratio of earnings to fixed charges and preferred stock
dividends was 1.37, 1.31, 1.14 and 1.03 for the years ended September 30,
1998, 1997, 1996 and 1995, respectively. Assuming no benefit from the
earnings of its subsidiaries with the exception of direct dividend
payments, earnings were insufficient to meet fixed charges and preferred
stock dividends by approximately $390,000 for the year ended September 30,
1999. The ratio of earnings to fixed charges and preferred dividends for
Metropolitan alone was 1.10, 1.01, 1.11, and 1.05 for the years ended
September 30, 1998, 1997, 1996 and 1995, respectively. The consolidated
ratio of earnings to fixed charges excluding preferred stock dividends was
1.12, 1.75, 1.77, 1.46 and 1.35 for the years ended September 30, 1999,
1998, 1997, 1996 and 1995, respectively. The ratio of earnings to fixed
charges excluding preferred stock dividends for Metropolitan, assuming no
benefit from the earnings of its subsidiaries with the exception of direct
dividend payments was 1.13, 1.40, 1.36, 1.48 and 1.40 for the years ended
September 30, 1999, 1998, 1997, 1996 and 1995, respectively.
(2) Earnings per common share, basic and diluted, are computed by deducting
preferred stock dividends from net income and dividing the result by the
weighted average number of shares of common stock outstanding. There were
no common stock equivalents or potentially dilutive securities outstanding
during any period presented.
7
<PAGE>
RISK FACTORS
When deciding whether or not to purchase the debentures, you should
carefully consider the risks contained in the section entitled "BUSINESS
OVERVIEW--Factors Affecting Future Operating Results" of Metropolitan's Annual
Report on Form 10-K for the year ended September 30, 1999, incorporated into
and attached to this prospectus. You should also consider the following risks
associated with an investment in the debentures:
The indenture does not
restrict our ability to incur
additional debt................ Metropolitan's and your rights and
obligations in the debentures are defined in
an indenture dated as of July 6, 1979, and a
supplement to that indenture dated as of
December 31, 1997. The indenture does not
restrict our ability to issue additional
debentures or to incur other debt. We are not
required to maintain any specified financial
ratios, minimum net worth, minimum working
capital or a sinking fund.
Debentures are not insured
against the risk of loss....... The debentures offered in this prospectus are
unsecured obligations of our company and they
are not insured or guaranteed by any bank,
any governmental agency, any insurance
company, any affiliate of our company or any
other person or entity. Thus, the debentures
have greater risk than investments that are
insured against the risk of loss.
Debentures are not a liquid
investment due to the absence
of an established trading
market......................... There is no trading market for the debentures
and it is not anticipated that one will
develop. Generally, you cannot have your
debentures redeemed until they mature. There
are only limited situations in which
debentures will be redeemed early. These may
include situations where there is a mutual
agreement between you and Metropolitan, or
when the "prepayment on death" provision
applies. You should consider your needs for
liquidity before investing in the debentures
and you should be prepared to hold any
debentures purchased in this offering until
their maturity. See "DESCRIPTION OF
DEBENTURES."
Risk of holding book-entry
debentures because there are
no physical certificates to
transfer....................... Our use of book-entry debentures rather than
actual physical certificates in this offering
could limit the markets for these securities,
prevent a secondary market from forming and
could delay payments to you. The absence of
physical certificates for the debentures may
prevent a secondary market from developing
because investors may be unwilling to invest
in securities if they cannot obtain delivery
of physical certificates. The use of book-
entry certificates may delay payments to you
because distributions on the debentures would
be made first to the person in whose name the
certificates are registered.
8
<PAGE>
USE OF PROCEEDS
If all of the debentures we are offering are sold, we expect proceeds to
total $100,000,000 before deducting sales commissions and other expenses.
Offering expenses are estimated at $205,000 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 debentures 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 debenture
offering for the following purposes: priority will be given first to (1)
funding investments in receivables and other investments, which may include
investments in existing subsidiaries, the commencement of new business ventures
or the acquisition of other companies, and then to (2) the development of real
estate we currently hold or acquire in the future. We do not have any
commitments or 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, 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 $26.5 million in principal amount of debt securities will mature
between February 1, 2000 and January 31, 2001 with interest rates ranging from
5.57% to 9.75% and averaging approximately 7.7% per annum. See "BUSINESS
OVERVIEW--Factors Affecting Future Operating Results" under Item 1 in our
Annual Report on Form 10-K for the year ended September 30, 1999.
We anticipate 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. Since we do not know the total principal amount of debentures
that will be sold, we are unable to accurately forecast the total net proceeds
generated by this offering. Therefore, we have not allocated specific amounts
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 DEBENTURES
General
The debentures will be issued under an indenture dated as of July 6, 1979
and a supplement to the indenture dated as of December 31, 1997. We refer to
both of these documents together as the "indenture". The following statements
relating to the debentures and the indenture are summaries and are not
complete. These summaries are subject to the detailed provisions of the
indenture and are qualified in their entirety by reference to the indenture, a
copy of which is filed as an exhibit to the registration statement that
includes this prospectus and is also available for inspection at the office of
the trustee.
The debentures will represent unsecured general obligations of Metropolitan
and will be issued in book-entry form without coupons, in fractional
denominations of $0.01 or more subject to the stated minimum investment amount
requirements. The debentures will be sold to the public at 100% of their
principal amount. The debentures will be issued in accordance with the minimum
investment amounts, maturities and interest rates listed on the cover page of
this prospectus. We may change the stated interest rates, maturities, and
minimum investment amounts of any unissued debentures at any time by
supplementing this prospectus. Any change will have no effect on the terms of
the debentures sold prior to the change.
Debentures may be transferred or exchanged for other debentures of the same
series, of a like aggregate principal amount, subject to the limitations
contained in the indenture. No service charge will be made for any transfer or
exchange of debentures. We may require payment of taxes or other governmental
charges imposed in connection with any transfer or exchange. Interest will
accrue at the stated rate from the date of issue until maturity. The debentures
are not convertible into capital stock or any other securities of Metropolitan.
9
<PAGE>
The debentures are not subject to redemption prior to maturity, but may be
prepaid pursuant to the prepayment on death provision described below. Also, in
limited circumstances involving an investor's demonstrated financial hardship,
subject to regulatory restrictions affecting redemptions and exchanges of
securities during an offering, we may, in our sole discretion, consider a
request for an early payment of a debenture upon terms mutually agreed to by
the holder of the debenture and Metropolitan. Early payment requests are
reviewed in the order received and are subject to review by Metropolitan's
executive management.
Payment of Principal and Interest
Interest will be payable to debenture holders under one of several interest
payment plans. You may select an interest payment plan at the time you purchase
the debentures and can change this plan at any time by giving written notice to
Metropolitan. You may elect to have interest paid on a monthly, quarterly,
semi-annual or annual basis, without compounding. Or, you may elect to leave
the accrued interest with Metropolitan, in which case it will compound semi-
annually at the stated interest rate. Under this compounding option, upon
written notice to Metropolitan, you may withdraw the interest accumulated
during the last two completed semi-annual compounding periods as well as the
interest accrued from the end of the last compounding period to the date
Metropolitan receives the notice. Amounts compounded prior to the last two
semi-annual compounding periods are available only at maturity.
Alternatively, under the installment option, at your election, at the time
of investment and subject to the minimum term and investment requirements
listed on the cover page of this prospectus, level monthly installments
comprised of principal and interest will be paid to you commencing 30 days from
date of issue of the debenture until maturity. The amount of each installment
will be determined by the amortization term you designate at the time the
debenture is purchased.
Debenture holders are notified in writing between 15 and 45 days prior to
the date their debentures will mature. When a debenture matures, the amounts
due on maturity are placed in a separate bank trust account until paid to the
registered owner(s). Debentures do not earn interest after the maturity date.
Metropolitan will pay the principal and accumulated interest due on matured
debentures to the registered owner(s) in cash at Metropolitan's main office in
Spokane, Washington or by check mailed to the address designated by the
registered owner.
Prepayment on Death
In the event of the death of a debenture holder, any party entitled to
receive some or all of the proceeds from that debenture may elect to have his
or her portion of the principal and any accrued but unpaid interest prepaid in
full in five consecutive equal monthly installments. Interest will continue to
accrue on the declining principal balance of the portion of the debenture being
prepaid. No interest penalty will be assessed. Any request for prepayment shall
be made to Metropolitan in writing and shall be accompanied by evidence
satisfactory to Metropolitan of the death of the registered owner or joint
registered owner. Before prepayment, we may require the submission of
additional documents or other material which we consider necessary to determine
the portion of the proceeds the requesting party is entitled to receive, or
assurances which, in our discretion, we consider necessary to fulfill our
obligations.
Related Indebtedness
The indenture governing the debentures does not restrict our ability to
issue additional debentures or to incur other debt. The indenture does not
require us to maintain any specified financial ratios, minimum net worth or
minimum working capital. There is no sinking fund for the redemption of the
debentures. Debentures will not be guaranteed or insured by any governmental
agency.
At September 30, 1999, Metropolitan had outstanding approximately
$198,889,000, including principal and compounded and accrued interest, of
debenture debt and $137,345,000, including principal and accrued
10
<PAGE>
interest, of collateralized debt and similar obligations. The debentures
offered in this prospectus are senior in liquidation preference to all
outstanding equity securities of Metropolitan. They are subordinate to
Metropolitan's collateralized debt and are on a parity with unsecured accounts
payable and accrued liabilities. The debentures rank equally with our other
debentures that are outstanding and our outstanding notes. There are no
limitations on our ability to incur additional collateralized debt. You should
not rely on the terms of the indenture for protection of your investment, but
should look rather to the creditworthiness of Metropolitan and its ability to
satisfy its obligations.
Concerning the Trustee
Seattle First National Bank ("SFNB") was the trustee under the indenture
until March 8, 1996, when SFNB sold its trust activities to First Trust
National Association ("First Trust") which assumed all of the duties of the
trustee pursuant to the terms of the indenture. First Trust was acquired by US
Bank Trust National Association ("US Bank") in 1998. US Bank has assumed all of
the duties of the trustee in accordance with the terms of the indenture. The
trustee is obligated under the indenture to oversee and, if necessary, to take
action to enforce fulfillment of Metropolitan's obligations to debenture
holders. The trustee is a national banking association with a combined capital
and surplus in excess of $100 million. Metropolitan and some of its affiliates
may maintain deposit accounts with and may, from time to time, borrow money
from the trustee and conduct other banking transactions with it. At September
30, 1999, and as of the date of this prospectus, no loans from the trustee were
outstanding. In the event of default, the indenture permits the trustee to
become a creditor of Metropolitan and does not preclude the trustee from
enforcing its rights as a creditor, including rights as a holder of
collateralized indebtedness.
Rights and Procedures in the Event of Default
. Events of default include:
. the failure of Metropolitan to pay interest on any debenture for a period
of 30 days after it becomes due and payable;
. the failure to pay the principal or any required installment of any
debenture when due;
. the failure to perform any other covenant in the indenture for 60 days
after notice; and
. some events of bankruptcy, insolvency or reorganization with respect to
Metropolitan.
If an event of default occurs, either the trustee or the holders of 25% or
more in principal amount of debentures then outstanding may declare the
principal of all the debentures outstanding to be immediately due and payable.
The trustee must give the debenture holders notice by mail of any default
within 90 days after the occurrence of the default, unless it has been cured or
waived. The trustee may withhold the notice if it determines in good faith that
withholding the notice is in the best interests of the debenture holders,
unless the default is a failure to pay principal or interest on any debenture.
Subject to some conditions, any of these defaults, except for a failure to
pay principal or interest when due, may be waived by the holders of a majority
in aggregate principal amount of the debentures then outstanding. The holders
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee, or of exercising any power
conferred on the trustee, except as otherwise provided in the indenture. The
trustee may require reasonable indemnity from holders of debentures before
acting at their direction.
Within 120 days after the end of each fiscal year, Metropolitan must furnish
to the trustee a statement of some of the officers of Metropolitan concerning
their knowledge as to whether or not Metropolitan is in default under the
indenture.
11
<PAGE>
Modification of the Indenture
Debenture holders' rights may be modified with the consent of the holders of
66 2/3% of the outstanding principal amounts of debentures, and 66 2/3% of
those series specifically affected. In general, no adverse modification of the
terms of payment and no modifications reducing the percentage of debentures
required for modification is effective against any debenture holder without his
or her consent.
Restrictions on Consolidation, Merger and Other Fundamental Corporate Changes
Metropolitan may not consolidate with or merge into any other corporation or
transfer substantially all its assets unless either Metropolitan is the
continuing corporation after the consolidation or merger or the person
acquiring by conveyance or transfer of the assets is a corporation organized
and existing under the laws of the United States, or any state of the United
States, which assumes the performance of every covenant of Metropolitan under
the indenture and other conditions precedent are fulfilled.
Transfer Agent and Registrar
Metropolitan acts as its own transfer agent and registrar of the debentures.
PLAN OF DISTRIBUTION
The debentures are being offered to the public on a continuing best efforts
basis through Metropolitan Investment Securities, Inc. ("MIS"), which is
affiliated with Metropolitan through the common control by C. Paul Sandifur Jr.
Accordingly, the offering has not received the independent selling agent review
customarily made when an unaffiliated selling agent offers securities. No
commission or other expense of the offering will be paid by the purchasers of
the debentures. A commission will, however, be paid by Metropolitan on most
debenture purchases up to a maximum amount of 6% of the debenture price,
generally depending on the term of the debenture and whether or not the
transaction is a reinvestment or new purchase. Debentures are offered only for
cash or cash equivalents. MIS will transmit funds it receives directly to
Metropolitan by noon of the next business day after receipt. During the three
fiscal years ended September 30, 1999, MIS received commissions of $4,945,548
from Metropolitan on sales of approximately $149,959,000 of Metropolitan's debt
securities.
MIS is a member of the National Association of Securities Dealers, Inc. Due
to the affiliation of Metropolitan and MIS, Rule 2720 of the NASD Conduct Rules
requires, in part, that a qualified independent underwriter be engaged to make
a recommendation regarding the interest rates to be paid on the debentures
offered by this prospectus. Accordingly, MIS has obtained a letter from
Cruttenden Roth Incorporated ("Cruttenden"), a NASD member, stating that the
interest rates on the debentures, using a formula tied to corresponding
interest rates paid by the U.S. Treasury and regional financial institutions,
are consistent with Cruttenden's recommendations, which were based on
conditions and circumstances existing as of the date of this prospectus.
Metropolitan undertakes to maintain the interest rates on debentures no lower
than those recommended by Cruttenden based on the formula. Therefore, the yield
at which the debentures will be distributed will be no lower than that
recommended by Cruttenden. 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 debentures offered in this
prospectus, Cruttenden will receive $66,667 in fees.
We have agreed to indemnify Cruttenden against, or make contributions with
respect to some liabilities under the Securities Act of 1933 and the Securities
Exchange Act of 1934.
There is not now, and we do not expect that there will be in the future, a
public trading market for the debentures. MIS does not intend to make a market
for the debentures. See "RISK FACTORS."
12
<PAGE>
MIS may enter into selected dealer agreements with and reallow to dealers,
who are members of the NASD, and some foreign dealers who are not eligible for
membership in the NASD, a commission of up to 6% of the principal amount of
debentures sold by these dealers.
LEGAL MATTERS
The legality of the debentures being offered by this prospectus will be
passed upon for Metropolitan by the law firm of Kutak Rock LLP, Denver,
Colorado.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Metropolitan for the year ended
September 30, 1999 have been incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act and, in compliance with this act, file periodic reports and other
information with the SEC. These reports and the other information we file with
the SEC can be inspected and copied at the public reference facilities
maintained by the SEC in Washington, D.C. at 450 Fifth Street, N.W.,
Washington, DC 20549 and at some of its regional offices which are located in
the New York Regional Office, Seven World Trade Center, Suite 1300, New York,
NY 10048, and the Chicago Regional Office, CitiCorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. In addition, the SEC maintains a
World Wide Web site that contains reports, proxy statements and other
information regarding registrants like Metropolitan that file electronically
with the SEC at the following Internet address: (http://www.sec.gov).
We have filed with the SEC in Washington, D.C. a registration statement on
Form S-2 under the Securities Act with respect to the debentures offered by
this prospectus. This prospectus does not contain all of the information
contained in the registration statement, as permitted by the rules and
regulations of the SEC.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following document filed with the SEC is incorporated in this prospectus
by reference:
Annual Report on Form 10-K of Metropolitan for the fiscal year ended
September 30, 1999.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
Metropolitan will provide without charge to each person, including to whom a
prospectus is delivered, upon written or oral request of that person, a copy of
any and all of the information that has been referenced in this prospectus
other than exhibits to these documents. Requests for these copies should be
directed to Corporate Secretary, Metropolitan Mortgage & Securities Co., Inc.,
P.O. Box 2162, Spokane, Washington 99210-2162, telephone number (509) 838-3111.
13
<PAGE>
Metropolitan Mortgage & Securities Co., Inc.
[LOGO OF METROPOLITAN MORTGAGE]
$100,000,000 Investment Debentures, Series III
----------------
PROSPECTUS
----------------
, 2000
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................................................ $ 26,400
NASD Filing Fee..................................................... 10,500
Independent Underwriter Fee and Expenses............................ 66,667
Accounting Fees and Expenses(1)..................................... 50,000
Legal Fees and Disbursements(1)..................................... 20,000
Printing Expenses(1)................................................ 30,000
Miscellaneous Expenses(1)........................................... 1,433
--------
Total Expenses...................................................... $205,000
</TABLE>
--------
(1) Estimated
Item 15. Indemnification of Directors and Officers
Metropolitan has no contractual or other arrangement with its
controlling persons, directors or officers regarding indemnification, other
than as set forth in its Articles of Incorporation. Metropolitan's Articles
of Incorporation permits indemnification of a director, officer or employee
up to the indemnification limits permitted by Washington state law which
permits indemnification for judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with an action, suit or
proceeding if the indemnified person acted in good faith and in a manner
reasonably believed to be in and not opposed to the best interests of the
corporation.
Item 16. Exhibits
(a)Exhibits
<TABLE>
<C> <S>
1.01 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).
1.02* Agreement to Act as "Qualified Independent Underwriter," between
Metropolitan, Metropolitan Investment Securities, Inc. and
Cruttenden Roth Incorporated with respect to the debentures to
be registered.
1.03* Form of Pricing Opinion of Cruttenden Roth Incorporated with
respect to the debentures to be registered.
4.01 Indenture, dated as of July 6, 1979, between Metropolitan and
Seattle-First National Bank, Trustee (incorporated by reference
to Exhibit 3 to Metropolitan's Annual Report on Form 10-K for
fiscal 1979).
4.02 First Supplemental Indenture, dated as of October 3, 1980,
between Metropolitan and Seattle-First National Bank, Trustee
(incorporated by reference to Exhibit 4 to Metropolitan's Annual
Report on Form 10-K for fiscal 1980).
4.03 Second Supplemental Indenture, dated as of November 12, 1984,
between Metropolitan and Seattle-First National Bank, Trustee
(incorporated by reference to Exhibit 4(d) to Registration No.
2-95146).
4.04 Third Supplemental Indenture, dated as of December 31, 1997,
between Metropolitan and First Trust National Association,
successor Trustee (incorporated by reference to Exhibit 4(d) to
Metropolitan's Annual Report on Form 10-K filed January 8,
1998).
5.01* Opinion of Kutak Rock LLP as to the validity of the debentures.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.01 Employment Agreement between Metropolitan and Bruce Blohowiak
(incorporated by reference to Exhibit 10(a) to Metropolitan's
Annual Report on Form 10-K filed January 8, 1998).
10.02 Employment Agreement between Metropolitan and Michael Kirk
(incorporated by reference to Exhibit 10(b) to Metropolitan's
Annual Report on Form 10-K filed January 8, 1998).
10.03 Employment Agreement between Metropolitan and Jon McCreary
(incorporated by reference to Exhibit 10(c) to Metropolitan's
Annual Report on Form 10-K filed January 8, 1998).
10.04 Reinsurance Agreement between Western United Life Assurance
Company and Old Standard Life Insurance Company (incorporated by
reference to Exhibit 10(d) to Metropolitan's Annual Report on
Form 10-K filed January 8, 1998).
10.05 Employment Agreement between Metropolitan and William D. Snider
(incorporated by reference to Exhibit 10(c) to Metropolitan's
Quarterly Report on Form 10-Q filed May 20, 1999).
11.01 Statement indicating computation of earnings per common share
(incorporated by reference to Exhibit 11.01 to Metropolitan's
Annual Report on Form 10-K filed December 29, 1999).
12.01 Statement of computation of ratio of earnings to fixed charges
and preferred stock dividends (incorporated by reference to
Exhibit 12.01 to Metropolitan's Annual Report on Form 10-K filed
December 29, 1999).
23.01* Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.02 Consent of Kutak Rock LLP (included in Exhibit 5.01).
24.01 The Power of Attorney, included on Page II-4 of the Registration
Statement, is incorporated herein by reference.
25.01* Statement of eligibility of the trustee.
</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.
II-2
<PAGE>
(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 precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Spokane, State of Washington, on this 5th day of
January, 2000.
METROPOLITAN MORTGAGE & SECURITIES
CO., INC.
/s/ C. Paul Sandifur, Jr.
By: _________________________________
C. Paul Sandifur, Jr.,
President, Chief Executive Officer
and Chairman of the Board
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 5, 2000
____________________________________ Officer and Chairman of the
C. Paul Sandifur, Jr. Board (Principal Executive
Officer)
/s/ Bruce J. Blohowiak Executive Vice President, January 5, 2000
____________________________________ Chief Operating Officer and
Bruce J. Blohowiak Director
/s/ William Snider Chief Financial Officer January 5, 2000
____________________________________ (Principal Accounting
William Snider Officer)
/s/ Reuel Swanson Secretary and Director January 5, 2000
____________________________________
Reuel Swanson
/s/ Charles Stolz Director January 5, 2000
____________________________________
Charles Stolz
/s/ Irv Marcus Director January 5, 2000
____________________________________
Irv Marcus
/s/ John T. Trimble Director January 5, 2000
____________________________________
John T. Trimble
/s/ Harold Erfurth Director January 5, 2000
____________________________________
Harold Erfurth
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
1.01 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).
1.02* Agreement to Act as "Qualified Independent Underwriter," between
Metropolitan, Metropolitan Investment Securities, Inc. and
Cruttenden Roth Incorporated with respect to the debentures to
be registered.
1.03* Form of Pricing Opinion of Cruttenden Roth Incorporated with
respect to the debentures to be registered.
4.01 Indenture, dated as of July 6, 1979, between Metropolitan and
Seattle-First National Bank, Trustee (incorporated by reference
to Exhibit 3 to Metropolitan's Annual Report on Form 10-K for
fiscal 1979).
4.02 First Supplemental Indenture, dated as of October 3, 1980,
between Metropolitan and Seattle-First National Bank, Trustee
(incorporated by reference to Exhibit 4 to Metropolitan's Annual
Report on Form 10-K for fiscal 1980).
4.03 Second Supplemental Indenture, dated as of November 12, 1984,
between Metropolitan and Seattle-First National Bank, Trustee
(incorporated by reference to Exhibit 4(d) to Registration No.
2-95146).
4.04 Third Supplemental Indenture, dated as of December 31, 1997,
between Metropolitan and First Trust National Association,
successor Trustee (incorporated by reference to Exhibit 4(d) to
Metropolitan's Annual Report on Form 10-K filed January 8,
1998).
5.01* Opinion of Kutak Rock LLP as to the validity of the debentures.
10.01 Employment Agreement between Metropolitan and Bruce Blohowiak
(incorporated by reference to Exhibit 10(a) to Metropolitan's
Annual Report on Form 10-K filed January 8, 1998).
10.02 Employment Agreement between Metropolitan and Michael Kirk
(incorporated by reference to Exhibit 10(b) to Metropolitan's
Annual Report on Form 10-K filed January 8, 1998).
10.03 Employment Agreement between Metropolitan and Jon McCreary
(incorporated by reference to Exhibit 10(c) to Metropolitan's
Annual Report on Form 10-K filed January 8, 1998).
10.04 Reinsurance Agreement between Western United Life Assurance
Company and Old Standard Life Insurance Company (incorporated by
reference to Exhibit 10(d) to Metropolitan's Annual Report on
Form 10-K filed January 8, 1998).
10.05 Employment Agreement between Metropolitan and William D. Snider
(incorporated by reference to Exhibit 10(c) to Metropolitan's
Quarterly Report on Form 10-Q filed May 20, 1999).
11.01 Statement indicating computation of earnings per common share
(incorporated by reference to Exhibit 11.01 to Metropolitan's
Annual Report on Form 10-K filed December 29, 1999).
12.01 Statement of computation of ratio of earnings to fixed charges
and preferred stock dividends (incorporated by reference to
Exhibit 12.01 to Metropolitan's Annual Report on Form 10-K filed
December 29, 1999).
23.01* Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.02 Consent of Kutak Rock LLP (included in Exhibit 5.01).
24.01 The Power of Attorney, included on Page II-4 of the Registration
Statement, is incorporated herein by reference.
25.01* Statement of eligibility of the trustee.
</TABLE>
<PAGE>
EXHIBIT 1.02
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
Investment Debentures, Series III
This agreement made as of the 30th day of December, 1999, among
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 $100,000,000 in Investment
Debentures Series III (hereinafter referred to as "Debentures"), 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
sole managing agent for Metropolitan; and,
WHEREAS, pursuant to subparagraph (c) of Rule 2720 of the NASD Conduct
Rules, MIS, as a NASD member, may participate in such underwriting only if the
yield at which the Debentures offered to the public is not lower than the yield
recommended by a "Qualified Independent Underwriter" as that term is defined in
Rule 2720, subparagraph (b)(15), of the NASD Conduct Rules, 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 Debentures;
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 debentures 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.
<PAGE>
Section 1. Rule 2720 Requirement. Cruttenden hereby confirms its agreement
as set forth in subparagraph (b)(15)(F) of Rule 2720 of the NASD Conduct Rules
and represents that, as appropriate, Cruttenden satisfies or at the times
designated in such subparagraph (15) will satisfy the other requirements set
forth therein or will receive an exemption from such requirements from the NASD.
Section 2. Consent. Cruttenden hereby consents to being named in the
Registration Statement and Prospectus as having acted as a "Qualified
Independent Underwriter" solely for the purposes of Rule 2720 referenced herein.
Except as permitted by the immediately preceding sentence or to the extent
required by law, all references to Cruttenden in the Registration Statement or
Prospectus or in any other filing, report, document, release or other
communication prepared, issued or transmitted in connection with the offering by
Metropolitan or any corporation controlling, controlled by or under common
control with Metropolitan, or by any director, officer, employee, representative
or agent of any thereof, shall be subject to Cruttenden's prior written consent
with respect to form and substance.
Section 3. Pricing Formula and Recommendation Letter. Cruttenden agrees to
render a written letter of recommendation as to the yields below which
Metropolitan's Debentures may not be offered based on the pricing formula that
is set forth in Schedules "A" and "B," copies of which are 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 filed as an exhibit to the Registration Statement referred
to above. Metropolitan, through MIS, will continue to offer the debt securities
according to the terms and conditions of said agreement, including, without
limitation, Schedules "A" and "B" in accordance with this Agreement. 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 under this registration shall
terminate or otherwise lapse under operation of law.
Section 4. Fees and Expenses. It is agreed that Cruttenden shall be paid a
fee in the amount of $66,667 payable upon delivery of the Pricing Recommendation
Letter referred to in paragraph 3 above.
Section 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 Debentures 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
2
<PAGE>
securities laws, and will not, on such date include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and that all contracts
and documents required by the Act to be filed or required as exhibits to the
Registration Statement have been filed. Metropolitan further represents and
warrants that any further filing, report, document, release or communication
which in any way refers to Cruttenden or to the services to be performed by
Cruttenden pursuant to this Agreement will not contain any untrue or misleading
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Metropolitan further warrants and represents that:
(a) All leases, contracts and agreements referred to in or filed as
exhibits to the Registration Statement to which Metropolitan or its
subsidiaries is a party or by which it is bound are in full force and
effect, except as may otherwise be disclosed in the Registration Statement.
(b) Metropolitan has good and marketable title, except as otherwise
indicated in the Registration Statement and Prospectus, to all of its
assets and properties described therein as being owned by it, free and
clear of all liens, encumbrances and defects except such encumbrances and
defects which do not, in the aggregate, materially affect or interfere with
the use made and proposed to be made of such properties as described in the
Registration Statement and Prospectus; and Metropolitan has no material
leased properties except as disclosed in the Prospectus.
(c) Metropolitan is duly organized under the laws of the State of
Washington and, as of the effective date of the Registration Statement and
at the Closing Date Metropolitan will be validly existing and in good
standing under the laws of the State of Washington with full corporate
power and authority to own its properties and conduct its business to the
extent described in the Registration Statement and Prospectus; Metropolitan
is duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the nature of the business
transacted by it or its ownership or 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
3
<PAGE>
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 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 them, a reasonable number of copies of an
amendment or amendments or a supplement or supplements to the Prospectus
(in form and substance satisfactory to 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
Debentures in accordance with the pricing formula that is set forth in
Schedules "A" and "B" which are incorporated by reference herein.
(i) All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of Metropolitan
submitted pursuant hereto, shall remain operative and in full force and
effect, surviving the date of this Agreement.
Section 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
4
<PAGE>
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 and on the Closing Date. 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.
Section 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 Debentures under the
securities or Blue Sky laws thereof, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (iv) the breach of any
representation or warranty made by Metropolitan in this Agreement.
Metropolitan further agrees that upon demand by an Indemnified Person at
any time or from time to time, it will promptly reimburse such Indemnified
Person for, or pay, any loss, claim, damage, liability, cost or expense as
to which
5
<PAGE>
Metropolitan has indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this paragraph 7, any such payment or reimbursement by
Metropolitan of fees,expenses or disbursement incurred by an Indemnified Person
in any proceeding in which a final judgment by a court of competent jurisdiction
(after all appeals or the expiration of time to appeal) is entered against such
Indemnified Person as a direct result of such person's negligence, bad faith or
willful misfeasance will be promptly repaid to Metropolitan. In addition,
anything in this paragraph 7 to the contrary notwithstanding, Metropolitan shall
not be liable for any settlement of any action or proceeding effected without
its written consent.
(b) Promptly after receipt by an Indemnified Person under subparagraph
(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)
6
<PAGE>
Metropolitan shall have authorized in writing the employment of counsel for
the Indemnified Person at the expenses of Metropolitan, and except that, if
clause (i) or (iii) is applicable, such liability shall be only in respect
of the counsel referred to in such clause (i) or (iii).
(c) Subject to the conditions set forth below, and in addition to any
rights of indemnification and contribution to which Metropolitan may be
entitled pursuant to any agreement among underwriters, underwriting
agreement or otherwise, and to the extent allowed by law, Cruttenden hereby
agrees that it will indemnify and hold Metropolitan and each person
controlling, controlled by or under common control with Metropolitan 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 the failure of Cruttenden to be a
"qualified independent underwriter" as contemplated by this Agreement.
Cruttenden 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 Cruttenden has indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this paragraph 7, any such
payment or reimbursement by Cruttenden of fees, expenses or disbursement
incurred by an Indemnified Person in any proceeding in which a final
judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against such Indemnified Person as
a direct result of such person's negligence, bad faith or willful
misfeasance will be promptly repaid to Cruttenden. In addition, anything in
this paragraph 7 to the contrary notwithstanding, Cruttenden shall not be
liable for any settlement of any action or proceeding effected without its
written consent. Cruttenden and Metropolitan agree that they shall each
follow the procedures set forth in paragraph 7(b) with respect to any claim
against Cruttenden hereunder.
(d) 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
7
<PAGE>
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.
Section 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.
Section 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.
Section 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.
Section 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: Walter W.
Cruttenden and (b) if to Metropolitan, at 601 W. 1st. Avenue - Department
115000, Spokane, Washington 99201, Attention: Susan Thomson, Assistant
Corporate Counsel.
Section 12. Governing Law. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with and governed by laws
of the State of Washington applicable to agreements made and to be performed
wholly within such jurisdiction.
8
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above mentioned.
METROPOLITAN MORTGAGE &
SECURITIES CO., INC.
By:/s/ C. Paul Sandifur Jr.
----------------------------------
C. Paul Sandifur, Jr., President
METROPOLITAN INVESTMENT
SECURITIES, INC.
By:/s/ Reuel Swanson
----------------------------------
Reuel Swanson, Secretary
CRUTTENDEN ROTH INCORPORATED
By:/s/ Shelly Singhal
---------------------------------
Shelly Singhal, Executive Vice President
9
<PAGE>
SCHEDULE A
Metropolitan Mortgage & Securities Co., Inc.
The Pricing Recommendation Letter of Cruttenden is conditioned upon
Metropolitan's undertaking to maintain the rates on its Debentures at least
equal to an "assumed floor." Based upon the pricing formula described below:
1. The interest rate to be paid on the Debentures shall be fixed by
Metropolitan from time to time. However, the rate shall not be lower than the
computation made per the worksheet on Schedule B, which is attached and
incorporated by reference herein.
2. The "assumed floor" for 6 to 11 month Debentures shall be at least 1.0%
above the lesser of the interest rate on the 6 month U.S. Treasury Bills, on a
discounted basis, based upon the auction average (which is published widely in
newspapers throughout the country, normally on the day following the auction)
and a composite average of the offering rates on 6 month certificates of deposit
currently being offered by banks and savings institutions in the northwestern
section of the United States. For purposes of this composite average of
certificate of deposit rates, the rates being offered by the following
institutions shall be considered initially:
a. Seattle First National Bank
b. Security State Bank
c. U.S. Bank of Washington
d. Wells Fargo Bank
e. Washington Trust Bank
f. Washington Mutual Savings Bank
Cruttenden and Metropolitan agree to review on an ongoing basis the group
which comprises the composite average and may substitute another institution in
the composite group from time-to-time by mutual agreement, as the case may be.
3. The "assumed floor" for 60 to 120 month Debentures shall be computed in
like manner as that described in paragraph "2" above, except that the latest
auction average on 5 year U.S. Treasury Notes shall be considered in place of
the 6 month U.S. Treasury Bills, and 5 year certificates of deposit currently
offered in the composite group shall be considered in lieu of the 6 month rate.
4. Rates on 12 to 23 month, 24 to 35 month, 36 to 47 month and 48 to 59 month
Debentures shall be at least equal to the interpolated differences between the
computation of the "assumed floor" of 6 to 11 month Debentures and 60 to 120
month Debentures, based upon the computation set forth in Schedule B.
5. Rates on Debentures payable in installments of principal and interest shall
be no lower than 25% below the "assumed floor" for 60 to 120 month Debentures.
6. The computation of the "assumed floor" shall be made monthly, as of the
first Tuesday of each month, or at such other times during any month that
<PAGE>
Metropolitan causes the offering rates to change from those in effect on
the first Tuesday of each month ("the computation date"). Metropolitan
agrees to furnish Cruttenden with a computation of the "assumed floor" by
completing the worksheet on Schedule B. Should the offering rates at that
time on Metropolitan's Debentures be less than the "assumed floor" as
computed, Metropolitan agrees to raise the rates on its Debentures to at
least the "assumed floor" within 10 calendar days of the computation date.
Should Metropolitan fail to raise its offering rates within the 10 day
period referred to above, Cruttenden reserves the right, in its
uncontrolled discretion, to withdraw its Pricing Recommendation Letter
regarding the offering rates on the Debentures.
<PAGE>
SCHEDULE B
Metropolitan Mortgage & Securities Co., Inc.
PRICING FORMULA
C.D. RATE
Average rate among a composite of 6 selected Banks and Savings and Loans as of
the 1st Tuesday of each month.
GOVERNMENT RATE
Most current of 8 selected auction rates available on the 1st Tuesday of each
month.
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Certificate of Government
Deposit (CD) Rate Enter Lesser of Metropolitan's
Calculation Calculation Column A or B Assumed Floor Current Rate
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
5 yr Cd rate = 5 yr Gov't Rate
________ = _______
6 mo CD rate = 6 mo Gov't Rate
________ = ________
DIFFERENCE DIFFERENCE
= _______ = _______
X .20 X .20
________ ________
Differential = Differential =
________ ________
(enter in (a) (enter in (a)
below) below)
6 mo (actual) 6 mo (actual)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
rate = rate =
______ ______ ____________ + 1% ____________ ____________
(a) + (a) + 6-11 months
________ ________
1 yr rate = 1 yr rate =
______ ______ ____________ + 1% ____________ ____________
(a) + (a) + 12-23 months
________ ________
2 yr rate = 2 yr rate =
______ ______ ____________ + 1% ____________ ____________
(a) + (a) + 24-35 months
________ ________
3 yr rate = 3 yr rate =
______ ______ ____________ + 1% ____________ ____________
(a) + (a) + 36-47 months
________ ________
4 yr rate = 4 yr rate =
______ ______ ____________ + 1% ____________ ____________
(a) + (a) + 48-59 months
________ ________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
5 yr (actual) 5 yr (actual)
rate = rate =
_______ _______ _______________ + 1%____________ ____________
(a) + (a) + 60-120 months
_______ _______
INSTALLMENT PAYMENTS (Floor equal to yearly ________ _______
__________
rates MINUS .50) (yearly -.50
rate)
</TABLE>
<PAGE>
FORM OF PRICING RECOMMENDATION LETTER
Date: January __, 2000
C. Paul Sandifur, Jr., President
Metropolitan Investment Securities, Inc.
917 West Sprague Avenue
Spokane, Washington 99201
Re: Pricing Recommendation of Cruttenden Roth Incorporated
Metropolitan Mortgage & Securities Co., Inc. Offering of
$100,000,000 in Principal Amount of Investment Debentures,
Series III
Dear Mr. Sandifur:
This letter will serve to confirm our engagement as a "qualified
independent underwriter" as that term is defined subparagraph (b)(15)of Rule
2720 to the NASD Conduct Rules, 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 yields on the Investment Debentures, Series III (which are based upon the
computation set forth in Schedules A and B to the Agreement to Act as "Qualified
Independent Underwriter" dated December 30, 1999 which is filed as Exhibit 1.02
to the registration statement), are no lower than those 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:
--------------------------------
cc: National Association of Securities Dealers, Inc.
<PAGE>
KUTAK ROCK LLP
SUITE 2900
717 SEVENTEENTH STREET ATLANTA
KANSAS CITY
DENVER, COLORADO 80202-3329 LINCOLN
LITTLE ROCK
303-297-2400 NEW YORK
FACSIMILE 303-292-7799 NEWPORT BEACH
OKLAHOMA CITY
www.kutakrock.com OMAHA
PASADENA
PITTSBURGH
SCOTTSDALE
WASHINGTON
January 5, 2000
Metropolitan Mortgage & Securities Co., Inc.
601 West First Avenue
Spokane, WA 99201-5015
Re: Metropolitan Mortgage & Securities Co., Inc.
Investment Debentures Series III
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 $100,000,000 in principal amount of
Investment Debentures, Series III (the "Debentures"). 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
<PAGE>
KUTAK ROCK LLP
January 5, 2000
Page 2
(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 Debentures as specified in the
prospectus and (iii) consideration is received for the Debentures: we are of the
opinion that, when issued, the Debentures will be binding obligations of the
Company.
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 LLP
Kutak Rock LLP
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-2 of our report dated December 6, 1999 relating
to the financial statements and financial statement schedules, which appears in
Metropolitan Mortgage & Securities Co., Inc.'s Annual Report on Form 10-K for
the year ended September 30, 1999. We also consent to the references to us under
the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Spokane, Washington
January 5, 2000
<PAGE>
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
Statement of Eligibility Under
the Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
____________________
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
91-7587893
(I.R.S. Employer Identification No.)
601 Union Street, Suite 2120
Seattle, WA 98101
(Address of principal executive offices) (Zip code)
____________________
Metropolitan Mortgage & Securities Co., Inc.
(Exact name of obligor as specified in its charter)
Washington 91-0609840
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
601 West 1st Avenue
Spokane, Washington 99201
(Address of principal executive offices) (Zip code)
Investment Debentures Series III
(Title of the indenture securities)
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1. General Information. Furnish the following information as to the trustee--
(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency, Washington D.C. 20521
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor and Underwriters. If the obligor or any
underwriter for the obligor is an affiliate of the trustee, describe each such
affiliation.
No such affiliation exists with the Trustee, U.S. Bank Trust National
Association.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. List of Exhibits. List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. Articles of Association of U.S. Bank Trust National Association.(1)
2. Certificate of Authority of U.S. Bank Trust National Association to
Commence Business.(1)
3. Authorization of the trustee to exercise corporate trust powers.(1)
4. Bylaws of U.S. Bank Trust National Association.(1)
5. Not Applicable.
6. Consents of U.S. Bank Trust National Association required by Section
321(b) of the Act.(2)
7. Latest Report of Condition of U.S. Bank Trust National Association.(3)
_____________
(1) Incorporated by reference to the exhibit of the same number to the
Form T-1 filed with registration statement number 333-71087.
(2) Attached.
(3) Incorporated by reference to the exhibit of the same number to the
Form T-1 filed with registration statement number 333-88605.
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
U.S. Bank Trust National Association, a national banking association organized
under the laws of the United States, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Seattle, and State of Washington, on the 16th day
of December, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
By/s/ Sherrie L. Pantle
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Vice President
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Exhibit 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 in connection with the proposed issuance by Metropolitan Mortgage &
Securities Co., Inc. of Investment Debentures, Series III, we hereby consent
that reports of examinations by federal, state, territorial and district
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
U.S. BANK TRUST NATIONAL ASSOCIATION
By/s/ Sherrie L. Pantle
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Vice President
Dated: December 16, 1999
