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       STATEMENT OF RIGHTS, DESIGNATIONS AND PREFERENCES OF VARIABLE RATE
                      CUMULATIVE PREFERRED STOCK, SERIES H


      1.    Name of Corporation: Metropolitan Mortgage & Securities Co., Inc.

      2. Copy of resolution establishing and designating Variable Rate
Cumulative Preferred Stock, Series H, and determining the relative rights and
preferences thereof: Attached hereto.

      3. The undersigned does hereby certify that the attached resolution was
duly adopted by the Board of Directors of the corporation on November 30, 2000.

      Dated this 30th day of November, 2000.

                                       /s/ REUEL SWANSON
                                       ---------------------------------------
                                       Reuel Swanson, Secretary


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                  METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                PREFERRED STOCK, SERIES R, AUTHORIZING RESOLUTION

      Resolved, that pursuant to the authority expressly granted and vested in
the Board of Directors (the "Board") of this Corporation by its Articles of
Incorporation, as amended, a subseries of preferred stock, Series H of the
Corporation be, and is hereby, established which will have a par value of $10.00
per share, designated "Variable Rate Cumulative Preferred Stock, Series H"
(hereafter called "Series H Preferred Stock"), and which shall have rights,
preferences, qualifications and restrictions as follows:

      1.    DIVIDENDS.

            (a) Dividends (or other distributions deemed dividends for purposes
      of this resolution) on the issued and outstanding shares of Series H
      Preferred Stock shall be declared and paid monthly at a percentage rate
      per annum of the liquidation preference of $100.00 per share equal to the
      "Distribution Rate," as hereinafter defined, or such greater rate as may
      be determined by the Board. Notwithstanding the foregoing, the
      Distribution Rate for any monthly dividend period shall, in no event, be
      less than 6% per annum or greater than 14% per annum. Such dividends shall
      be cumulative from the date of original issue of each share and shall be
      payable, when and as declared by the board, on such dates as the Board
      deems advisable, but at least once a year, commencing March 1, 2001. Each
      such dividend shall be paid to the holders of record of shares of Series H
      Preferred Stock as they appear on the stock register of the Corporation on
      such record date as shall be fixed by the Board in advance of the payment
      date thereof. Dividends on account of arrears for any past Dividend
      Periods may be declared and paid at any time, without reference to any
      regular dividend payment date, to holders of record on such date as shall
      be fixed by the Board in advance of the payment date thereof.

            (b) Except as provided below in this section, the Distribution Rate
      for any monthly dividend period shall be the highest of the Treasury Bill
      Rate, the Ten Year Constant Maturity Rate and the Twenty Year Constant
      Maturity Rate (each as defined in Exhibit A attached hereto and
      incorporated by reference herein) plus ____%. In the event that the Board
      determines in good faith that for any reason one or more of such rates
      cannot be determined for any dividend period, then the Distribution Rate
      for such dividend period shall be the higher of whichever of such rates
      can be so determined. In the event that the Board determines in good faith
      that none of such rates can be determined for any dividend period, then
      the Distribution Rate in effect for the preceding dividend period shall be
      continued for such dividend period. The Treasury Bill Rate, the Ten Year
      Constant Maturity Rate and the Twenty Year Constant Maturity Rate shall
      each be rounded to the nearest five hundredths of a percentage point.

            (c) No dividend shall be paid upon, or declared or set apart for,
      any share of Series H Preferred Stock for any Dividend Period unless at
      the same time a like dividend shall be paid upon, or be declared and set
      apart for, all shares of Series H Preferred Stock then issued and
      outstanding. Holders of Series H Preferred Stock shall not be entitled to
      any dividend, whether payable in cash, property or stock, in excess of
      full cumulative dividends as herein provided. No interest, or sum of money
      in lieu of interest, shall be

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      payable in respect of any dividend payment or payments which may be in
      arrears on Series H Preferred Stock.

            (d) Dividends will be payable in additional whole or fractional
      shares of Series H Preferred Stock. The number of fractional shares of
      Series H Preferred Stock to be issued for each full monthly Dividend
      Period for each Series H share shall be equal to one share multiplied by
      the Distribution Rate for such monthly Dividend Period, divided by 12.
      Dividends payable for any period less than a full monthly Dividend Period
      shall be computed on the basis of 30-day months and a 360-day year. The
      Distribution Rate with respect to each monthly Dividend Period shall be
      calculated as promptly as practicable by the Corporation according to the
      method provided herein. The Corporation will cause notice of such
      Distribution Rate to be enclosed with the dividend notice mailed to the
      holders of shares of Series H Preferred Stock.

            (e) So long as any shares of Series H Preferred Stock are
      outstanding, (i) no dividend (other than a dividend in common stock or in
      any other stock ranking junior to Series H Preferred Stock as to dividends
      and upon liquidation and other than as provided in the foregoing section
      1(c)) shall be declared or paid or set aside for payment; (ii) no other
      distribution shall be declared or made upon common stock or upon any other
      stock ranking junior to or on a parity with Series H Preferred Stock as to
      dividends or upon liquidation; and (iii) no common stock or any other
      stock of the Corporation ranking junior to or on a parity with Series H
      Preferred Stock as to dividends or upon liquidation shall be redeemed,
      purchased or otherwise acquired by the Corporation for any consideration
      (or any monies paid to or made available for a sinking fund for the
      redemption of any shares of any such stock) except by conversion into or
      exchange for stock of the Corporation ranking junior to Series H Preferred
      Stock as to dividends and upon liquidation unless, in each case, the full
      cumulative dividends on all outstanding shares of Series H Preferred Stock
      shall have been paid or declared and set apart for all past dividend
      payment periods.

            (f) The holders of Series H Preferred Stock shall be entitled to
      receive, when and as declared by the Board, dividend distributions out of
      the authorized preferred stock of the Corporation legally available
      therefor. Any distribution made which may be deemed to have been made out
      of the capital surplus of Series H Preferred Stock shall not reduce either
      the redemption process or the liquidation rights as hereafter specified.

      2.    REDEMPTION.

      (a) REDEMPTION AT THE OPTION OF THE CORPORATION. The Corporation, at
its option, may redeem shares of Series H Preferred Stock, in whole or in
part, at any time or from time to time, at redemption prices hereafter set
forth plus accrued and unpaid dividends to the date fixed for redemption.

                  [(i) In the event of a redemption of shares pursuant to this
            subsection prior to _________, 20__ [or set number of years, like 3,
            from issuance], the redemption price shall be $102.00 per share; and
            the redemption price shall be $100.00 per share in the event of
            redemption anytime after ________, 20__.]

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                  (ii) In the event that fewer than all of the outstanding
            shares of Series H Preferred Stock are to be redeemed, the number of
            shares to be redeemed shall be determined by the Corporation and the
            shares to be redeemed shall be determined by lot, or pro rata, or by
            any other method, as may be determined by the Corporation in its
            sole discretion to be equitable.

                  (iii) In the event that the Corporation shall redeem shares
            hereunder, notice of such redemption shall be given by first class
            mail, postage prepaid, mailed not less than 30 days or more than 60
            days prior to the redemption date, to each holder of record of the
            shares to be redeemed, at such holder's address as it appears on the
            stock register of the Corporation. Each such notice shall state: (A)
            the redemption date; (B) the number of shares to be redeemed and, if
            fewer than all shares held by such holder are to be redeemed, the
            number of such shares to be redeemed from such holder; (C) the
            redemption price; (D) the place or places where certificates for
            such shares are to be surrendered for payment of the redemption
            price; and (E) that dividends on the shares to be redeemed will
            cease to accrue on such redemption date.

                  (iv) Notice having been mailed as aforesaid, from and after
            the redemption date (unless default shall be made by the Corporation
            in providing money for the payment of the redemption price),
            dividends on the shares so called for redemption shall no longer be
            deemed to be outstanding, and all rights of the holders thereof as
            stockholders of the Corporation (except the right to receive from
            the Corporation the redemption price) shall cease. Upon surrender in
            accordance with said notice of the certificates representing shares
            redeemed (properly endorsed or assigned for transfer, if the Board
            shall so require and the notice shall so state), such shares shall
            be redeemed by the Corporation at the redemption price aforesaid. In
            case fewer than all of the shares represented by any such
            certificate are redeemed, a new certificate shall be issued
            representing the unredeemed shares without cost to the holder
            thereof.

      (b) DISCRETIONARY REDEMPTION UPON REQUEST OF THE HOLDER. The shares of
Series H Preferred Stock are not redeemable at the option of the holder. If,
however, the Corporation receives an unsolicited written request for
redemption of shares from any holder, the Corporation may, in its sole
discretion and subject to the limitations described below, accept such shares
for redemption. Any shares so tendered, which the Corporation in its
discretion, allows for redemption, shall be redeemed by the Corporation
directly, and not from or through a broker or dealer, at a price established
from time to time by the Board in its sole discretion, plus any declared but
unpaid dividends.

      The Corporation may not redeem any such shares tendered for redemption
if to do so would be unsafe or unsound in light of the Corporation's
financial condition (including its liquidity position); if payment of
interest or principal on any outstanding instrument of indebtedness is in
arrears or in default; or if payment of any dividend on Series H Preferred
Stock or share of any stock of the Company ranking on parity with or senior
to the Series H Preferred Stock is in arrears as to dividends.

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            (c) Any shares of Series H Preferred Stock which shall at any time
      have been redeemed shall, after such redemption, have the status of
      authorized but unissued shares of preferred stock, without designation as
      to series until such shares are designated as part of a particular series
      by the Board.

            (d) Notwithstanding the foregoing provisions of this Section 2, if
      any dividends on Series H Preferred Stock are in arrears, no shares of
      Series H Preferred Stock shall be redeemed unless all outstanding shares
      of Series H Preferred Stock are simultaneously redeemed, and the
      Corporation shall not purchase or otherwise acquire any shares of Series H
      Preferred Stock; provided, however, that the foregoing shall not prevent
      the purchase or acquisition of shares of Series H Preferred Stock pursuant
      to a purchase or exchange offer made on the same terms to holders of all
      of the outstanding shares of Series H Preferred Stock.

      3. CONVERSION OR EXCHANGE. The holders of shares of Series H Preferred
Stock shall not have any rights to convert such shares into or exchange such
shares for shares of any other class or series of any class of securities of
the Corporation.

      4. VOTING. Except as required from time to time by law, the shares of
Series H Preferred Stock shall have no voting powers. Provided, however,
notwithstanding the foregoing, that whenever and as often as dividends
payable on any shares of Series H Preferred Stock shall be in arrears in an
amount equal to 24 full monthly dividends or more per share, the holders of
Series H Preferred Stock together with the holders of any other preferred
stock then outstanding, voting separately and as a single class shall be
entitled to elect a majority of the Board of Directors of the Corporation.
Such right shall continue until all dividends in arrears on preferred stock
have been paid in full.

      5.    LIQUIDATION RIGHTS.

            (a) Upon the dissolution, liquidation or winding up of the
      Corporation, the holders of the shares of Series H Preferred Stock shall
      be entitled to receive out of the assets of the Corporation, before any
      payment or distribution shall be made on the Common Stock, or on any other
      class of stock ranking junior to Series H Preferred Stock, upon
      liquidation, the amount of $100.00 per share, plus a sum equal to all
      dividends (whether or not earned or declared) on such shares accrued and
      unpaid thereon to the date of final distribution.

            (b) Neither the sale, lease or conveyance of all or substantially
      all the property or business of the Corporation, nor the merger or
      consolidation of the Corporation into or with any other corporation or the
      merger or consolidation of any other corporation into or with the
      Corporation, shall be deemed to be a dissolution, liquidation or winding
      up, voluntary or involuntary, for the purposes of this Section.

            (c) After the payment to the holders of the shares of Series H
      Preferred Stock of the full preferential amounts provided for in this
      Section, the holders of Series H Preferred Stock as such shall have no
      right or claim to any of the remaining assets of the Corporation.

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            (d) In the event the assets of the Corporation available for
      distribution to the holders of shares of Series H Preferred Stock upon any
      dissolution, liquidation or winding up of the Corporation, whether
      voluntary or involuntary, shall be insufficient to pay in full all amounts
      to which such holders are entitled pursuant to this Section, no such
      distribution shall be made on account of any shares or any other series of
      preferred stock ranking on parity with the Series H Preferred Stock or any
      other class of stock ranking on a parity with the shares of Series H
      Preferred Stock upon such dissolution, liquidation or winding up, unless
      proportionate distributive amounts shall be paid on account of the shares
      of Series H Preferred Stock, ratably in accordance with the sums which
      would be payable in such distribution if all sums payable in respect of
      the shares of all series of preferred stock and any such other class of
      stock, both as aforesaid, were discharged in full.

      6.    PRIORITIES.  For  purposes  of this  Resolution,  any stock of any
class or classes of the Corporation shall be deemed to rank:

            (a) Prior to the shares of Series H Preferred Stock, either as to
      dividends or upon liquidation if the holders of such class or classes
      shall be entitled to the receipt of dividends or of amounts distributable
      upon dissolution, liquidation or winding up of the Corporation, as the
      case may be, in preference or priority to the holders of shares of Series
      H Preferred Stock.

            (b) On a parity with shares of Series H Preferred Stock, either as
      to dividends or upon liquidation, whether or not the dividend rates,
      dividend payment dates or redemption or liquidation prices per share or
      sinking fund provisions, if any, are different from those of Series H
      Preferred Stock, if the holder of such stock shall be entitled to the
      receipt of dividends or of amounts distributable upon dissolution,
      liquidation or winding up of the Corporation, as the case may be, in
      proportion to their respective dividend rates or liquidation prices,
      without preference or priority, one over the other, as between the holder
      of such stock and the holders of Series H Preferred Stock; and

            (c) Junior to shares of Series H Preferred Stock, either as to
      dividends or upon liquidation, if the holders of shares of Series H
      Preferred Stock shall be entitled to receipt of dividends or of amounts
      distributable upon dissolution, liquidation or winding up of the
      Corporation, as the case may be, in preference or priority to the holders
      of shares of such class or classes.

      7. RANKING AND SUBORDINATION. The Series H Preferred Stock shall rank
on parity with the Series T Preferred Stock of the Corporation. The Series H
Preferred Stock shall be subordinate in right of payment for distributions
and upon liquidation of the Corporation to the Corporations Series C, D and E
Preferred Stock.

      8. SHARES NON-ASSESSABLE. Any and all shares of Series H Preferred
Stock issued, and for which the full consideration has been paid or
delivered, shall be deemed fully paid stock and the holder of such shares
shall not be liable for any further call or assessment or any other payment
thereon.

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      9. PRE-EMPTIVE RIGHTS. Holders of Series H Preferred Stock shall have
no pre-emptive rights to acquire additional shares of Series H Preferred
Stock.










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                                    EXHIBIT A

TREASURY BILL RATE

      Except as provided below in this paragraph, the "Treasury Bill Rate"
for each dividend period will be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period (as defined below)) for three-month U.S. Treasury
bills, as published weekly by the Federal Reserve Board during the Calendar
Period that begins 24 days prior to the first day of the dividend period for
which the dividend rate on Preferred Stock Series H, is being determined. In
the event that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during any such Calendar Period, then the Treasury
Bill Rate for the related dividend period shall be the arithmetic average of
the two most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate shall be published
during the relevant Calendar Period) for three-month U.S. Treasury bills, as
published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Company. In the
event that a per annum market discount rate for three-month U.S. Treasury
bills shall not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Treasury Bill Rate for such dividend period shall
be the arithmetic average of the two most recent weekly per annum market
discount rates (or the one weekly per annum market discount rate, if only one
such rate shall be published during the relevant Calendar Period) for all of
the U.S. Treasury bills then having maturities of not less than 80 nor more
than 100 days, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not publish such rates,
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Company. In the event that the Company determines in good
faith that for any reason no such U.S. Treasury bill rates are published as
provided above during such Calendar Period, then the Treasury Bill Rate for
such dividend period shall be the arithmetic average of the per annum market
discount rates based upon bids during such Calendar Period for each of the
issues of marketable non-interest bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the date of each
such quotation, as quoted daily for each business day in New York City (or
less frequently if daily quotations shall not be generally available) to the
Company by at least three recognized primary U.S. Government securities
dealers selected by the Company. In the event that the Company determines in
good faith that for any reason the Company cannot determine the Treasury Bill
Rate for any dividend period as provided above in this paragraph, the
Treasury Bill Rate for such dividend period shall be the arithmetic average
of the per annum market discount rates based upon the closing bids during
such Calendar Period for each of the issues of marketable interest-bearing
U.S. Treasury securities with a maturity of not less than 80 nor more than
100 days from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall
not be generally available) to the Company by at least three recognized
primary U.S. Government securities dealers selected by the Company.

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TEN YEAR CONSTANT MATURITY RATE

      Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each dividend period shall be the arithmetic average of
the two most recent weekly per annum Ten Year Average Yields (or the one
weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period that
begins 24 days prior to the first day of the dividend period for which the
dividend rate on Preferred Stock, Series H is being determined. In the event
that the Federal Reserve Board does not publish such a weekly per annum Ten
Year Average Yield during such Calendar Period, then the Ten Year Constant
Maturity Rate for such dividend period shall be the arithmetic average of the
two most recent weekly per annum Ten Year Average Yields (or the one weekly
per annum Ten Year Average Yield, if only one such Yield shall be published
during such Calendar Period), as published weekly during such Calendar Period
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Company. In the event that a per annum Ten Year Average Yield
shall not be published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar
Period, then the Ten Year Constant Maturity Rate for such dividend period
shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during the relevant Calendar Period)
for all of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities (as defined below)) then having
maturities of not less than eight nor more than 12 years, as published during
such Calendar Period by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such yields, by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the Company. In the event
that the Company determines in good faith that for any reason the Company
cannot determine the Ten Year Constant Maturity Rate for any dividend period
as provided above in this paragraph, then the Ten Year Constant Maturity Rate
for such dividend period shall be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special Securities) with a final
maturity date not less than eight nor more than 12 years from the date of
each such quotation, as quoted daily for each business day in New York City
(or less frequently if daily quotations shall not be generally available) to
the Company by at least three recognized primary U.S. Government securities
dealers selected by the Company.

TWENTY YEAR CONSTANT MATURITY RATE

      Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each dividend period shall be the arithmetic average of
the two most recent weekly per annum Twenty Year Average Yields (or the one
weekly per annum Twenty year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period that begins 24 days prior to
the first day of the dividend period for which the dividend rate on Preferred
Stock, Series H is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Twenty Year Average Yield
during such Calendar Period, then the Twenty Year Constant Maturity Rate for
such dividend period shall be the arithmetic average of the two most recent
weekly per annum Twenty Year Average Yields (or the one weekly per annum
Twenty Year Average Yield, if only one such Yield shall be published during
such Calendar Period), as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by the Company. In the event that a per annum Twenty Year Average Yield shall
not be published by the Federal Reserve Board or by any Federal Reserve Bank
or by any U.S. Government department or agency during such Calendar Period,
then the Twenty Year Constant Maturity Rate for such dividend period shall be
the arithmetic average of the two most recent

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weekly per annum average yields to maturity (or the one weekly average yield
to maturity, if only one such yield shall be published during such Calendar
Period) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having
maturities of not less than 18 nor more than 22 years, as published during
such Calendar Period by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such yields, by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the Company. In the event
that the Company determines in good faith that for any reason the Company
cannot determine the Twenty Year Constant Maturity Rate for any dividend
period as provided above in this paragraph, then the Twenty Year Constant
Maturity Rate for such dividend period shall be the arithmetic average of the
per annum average yields to maturity based upon the closing bids during such
Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with
a final maturity date not less than 18 nor more than 22 years from the date
of each such quotation, as quoted daily for each business day in New York
City (or less frequently if daily quotations shall not be generally
available) to the Company by at least three recognized primary U.S.
Government securities dealers selected by the Company.

      As used herein, the term "Calendar Period" means a period of 14
calendar days; the term "Special Securities" means securities which may, at
the option of the holder, be surrendered at face value in payment of any
federal estate tax or which provide tax benefits to the holder and are priced
to reflect such tax benefits or which were originally issued at a deep or
substantial discount; the term "Ten Year Average Yield" means the average
yield to maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of ten years); and the term
"Twenty Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of 20 years).


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