Document:

<PAGE>
                                                                   EXHIBIT 10.03

                       MANAGEMENT, RECEIVABLES ACQUISITION
                           AND UNDERWRITING AGREEMENT
                                   (MM&S/OWAL)

         Agreement effective this 1st day of January, 2001, by and between Old
West Annuity & Life Insurance Company (hereinafter "Investor"), an Arizona
corporation with principal offices at 8601 West Emerald, Suite 150, Boise, Idaho
83704, and Metropolitan Mortgage & Securities Co., Inc. (hereinafter
"METROPOLITAN"), a Washington corporation with its principal office at 601 W.
1st Avenue, Spokane, Washington 99201-5015, (also hereinafter referred to
jointly as the "Parties".)

                                   WITNESSETH

         WHEREAS, METROPOLITAN engages in the business of purchasing and selling
Receivables as defined in Paragraph I.1 below, and maintains subsidiaries,
internal staff, and operations to support such activities, and;

         WHEREAS, INVESTOR also engages in the business of investing in and
selling Receivables, but INVESTOR does not maintain internal staff or operations
to support such activities, and;

         WHEREAS, METROPOLITAN has the personnel, systems and expertise to
provide to INVESTOR general support, Receivables acquisition, underwriting and
sales services, and;

         WHEREAS, INVESTOR desires to obtain from METROPOLITAN general support
services, Receivables acquisition and underwriting services;

         NOW THEREFORE, for the foregoing reasons and in consideration of the
mutual promises, covenants and agreements set forth herein, the Parties promise,
covenant and agree as follows:

                  I. RECEIVABLE ACQUISITION AND SALES SERVICES

1. RECEIVABLES DEFINED

         "Receivables" means all types of investments that can be lawfully held
by an insurance company, including, but not limited to, mortgage loans,
lotteries, bonds, and annuities. Investments must be in compliance with the
State of Arizona insurance laws.

2. GENERAL DUTIES AND AUTHORITY

         METROPOLITAN shall provide services related to Receivables acquisition,
underwriting and sales services to INVESTOR which shall be performed
substantially in compliance with the following:

         a. METROPOLITAN shall secure opportunities for INVESTOR to purchase and
         sell Receivables through the use of METROPOLITAN'S acquisition system,
         industry contacts and the other methods developed by METROPOLITAN for
         its own Receivable purchases.

         b. In reviewing the Receivables offered for purchase to, or for sale
         from, INVESTOR, METROPOLITAN shall review, among other things, the
         Receivables loan to value ratio, collateral value, collateral
         condition, payment record, payor's credit, title reports and legal
         documents, taking into account the investment guidelines provided by
         INVESTOR.

         c. METROPOLITAN or its agent shall close the Receivables acquisition or
         sale in a manner that is consistent with industry standards for the
         type of Receivables and the location where the Receivables acquisition
         or sale is closed.

         d. METROPOLITAN shall originate all Receivables on behalf of and in the
         name of INVESTOR.

Management, Receivables Acquisition Agreement
METROPOLITAN / OWAL

                                      -1-
<PAGE>

         e. INVESTOR shall allow METROPOLITAN to use funds from INVESTOR's bank
         account solely for the purpose of acquiring Receivables under this
         Agreement. METROPOLITAN shall also place all funds received from the
         sale of INVESTOR Receivables into INVESTOR's bank account. INVESTOR and
         METROPOLITAN funds shall not be commingled. Only METROPOLITAN employees
         duly authorized in writing, by both METROPOLITAN and INVESTOR, shall
         have access to the INVESTOR bank account for purposes of this
         Agreement.

         f. METROPOLITAN shall prepare and maintain such books, records,
         computer systems and procedures as shall be necessary to pursue offers
         for the purchase or sale of Receivables and as necessary to execute the
         purchase or sale of Receivables.

         g. METROPOLITAN shall furnish to INVESTOR such periodic, special or
         other reports or information as requested by INVESTOR including reports
         of total Receivables purchased and sold, closing periods and closing
         costs. All such reports, documents or information shall be provided in
         accordance with all reasonable instructions and directions which
         INVESTOR may give.

         h. INVESTOR shall have ultimate control and responsibility of the
         functions it has delegated to METROPOLITAN under this Agreement.

3. INVESTMENT GUIDELINES AND PURCHASE/SALE YIELD REQUIREMENTS

         a. METROPOLITAN shall assist INVESTOR in acquiring Receivables which
         are consistent with INVESTOR'S then current investment guidelines and
         yield requirements. INVESTOR'S current investment guidelines and yield
         requirements are set forth in Exhibit B. INVESTOR may change its
         investment guidelines at any time by written notice to METROPOLITAN.
         Such changes will apply prospectively for all acquisition originations
         made subsequent to METROPOLITAN'S receipt of notice of the change.

         b. METROPOLITAN may propose the acquisition of Receivables which do not
         on an individual basis satisfy INVESTOR'S then current investment
         guidelines and yield requirements if METROPOLITAN believes such
         investments to be in INVESTOR'S best interest. Any such proposed
         acquisition must be approved by an appropriately designated officer of
         INVESTOR in advance of METROPOLITAN closing the acquisition or sale of
         such Receivables. Notwithstanding the foregoing, METROPOLITAN shall not
         propose the acquisition of any Receivables for INVESTOR which do not
         comply with applicable statutes and regulations regarding investments
         of an insurance company.

4. RECEIVABLES ACQUISITION, NO RIGHT OF FIRST REFUSAL

         INVESTOR acknowledges that METROPOLITAN provides Receivable acquisition
services to itself and to others. INVESTOR acknowledges that it has no priority
or right of first refusal to acquire any Receivable(s) from METROPOLITAN, and
METROPOLITAN may determine in its sole discretion, subject to INVESTOR'S
underwriting guidelines and yield requirements, which Receivables, if any, to
provide to INVESTOR for acquisition.

Management, Receivables Acquisition Agreement
METROPOLITAN / OWAL

                                      -2-
<PAGE>

                          II. GENERAL SUPPORT SERVICES

1. DESCRIPTION OF SERVICES

         METROPOLITAN shall provide INVESTOR administrative support services
including but not limited to receivable acquisition, accounting and finance,
portfolio management, human resources, information systems, legal and marketing.

2. FEES FOR GENERAL SUPPORT SERVICES

         INVESTOR will pay METROPOLITAN monthly fees for General Support
Services provided by METROPOLITAN to INVESTOR. Fees for General Support Services
shall be set forth in Exhibit A to this Agreement. The fees and Exhibits may be
supplemented, amended and modified from time to time by mutual written agreement
of the Parties, subject to the notice and approval requirements contained in
paragraph IV.8 below.

         Notwithstanding anything to the contrary in this Agreement, the fees
for services performed as set forth in Exhibit A will be fair and reasonable,
and expenses incurred and payments received will be allocated to INVESTOR in
accordance with statutory accounting principles. The fees will be charged
initially at an estimate of cost, which fees will be adjusted to reflect actual
cost, as determined on an annual basis. Accounts shall be rendered at quarterly
intervals or more often and shall be settled within 30 days thereafter. The
obligations of each party under this Agreement to transfer payments to another
party may be offset by reciprocal obligations of such other party so that only
the net amount of such servicing payments shall be required to be transferred.
Where the difference between estimates and actual costs is determined to be less
than 3%, no actual payment of the difference will be necessary. However, this
difference between the estimates and costs shall be an adjustment to the
calculation of the new estimate. Where the difference between the estimates and
actual costs is determined to be greater than 3%, the account shall be settled
within 30 days thereafter.

3. COSTS FOR GENERAL SUPPORT SERVICES

         METROPOLITAN has developed and shall continue to maintain a cost
allocation system designed to measure the activity of the general support
services departments used by both Parties, to provide a basis for allocation of
the costs generated by those departments. The cost allocation system shall be
expressed in terms of labor hours, machine hours, square footage and/or other
appropriate measures. The methodology used for determining the costs may be
reviewed by either party at any time, and is subject to change by mutual written
agreement of the Parties as the specific services may vary and/or other
applicable conditions warrant.

               III. REPRESENTATIONS AND WARRANTIES OF METROPOLITAN

METROPOLITAN REPRESENTS AND WARRANTS TO INVESTOR THAT:

1. METROPOLITAN is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington.

2. METROPOLITAN is licensed, or qualified, and in good standing in each of the
states where the laws require licensing or qualification in order to conduct
METROPOLITAN'S Receivable acquisition and management activities, or METROPOLITAN
is exempt under applicable law from such licensing or qualification.

3. The consummation of the transactions contemplated herein have been validly
authorized and all requisite corporate action has been taken by METROPOLITAN to
make this Agreement binding upon METROPOLITAN in accordance with its terms.

4. The consummation of the transactions contemplated by this Agreement are in
the ordinary course of business of METROPOLITAN.

Management, Receivables Acquisition Agreement
METROPOLITAN / OWAL

                                      -3-
<PAGE>

5. The execution and delivery of this Agreement, the acquisition and
underwriting of Receivables, the performance of the other services and
transactions contemplated hereby, and the fulfillment of and compliance with the
terms and conditions of this Agreement, will not conflict with or result in a
breach of any of the terms of METROPOLITAN'S articles of incorporation, bylaws
or any other agreement, instrument, law, regulation, rule, order, or judgment to
which METROPOLITAN is now a party or by which it is bound. METROPOLITAN is not
subject to any agreement, instrument, law, regulation, rule, order or judgment
which would impair INVESTOR'S ability to enforce any acquired Receivables
according to its terms, or which would impair the value of any Receivable
acquisitions by INVESTOR pursuant to this Agreement.

6. METROPOLITAN does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in this
Agreement.

7. There is no action, suit, proceeding or investigation pending or threatened
against METROPOLITAN which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations, financial
condition, properties or assets of METROPOLITAN, or in any material impairment
of the right or ability of METROPOLITAN to carry on its business substantially
as now conducted, or which would draw into question the validity of this
Agreement or of any action taken or to be taken in connection with the
obligations of METROPOLITAN contemplated herein, or which would be likely to
impair materially the ability of METROPOLITAN to perform under the terms of this
Agreement.

8. No consent, approval, authorization or order of any court or governmental
agency or body is required for METROPOLITAN'S execution, delivery and
performance of or compliance with this Agreement.

9. The services provided by METROPOLITAN hereunder shall each be conducted in
accordance with generally accepted business practices in all respects, as
applicable to each respective activity.

                 IV. REPRESENTATIONS AND WARRANTIES OF INVESTOR

INVESTOR REPRESENTS AND WARRANTS TO METROPOLITAN THAT:

1. INVESTOR is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona.

2. INVESTOR is licensed or qualified, and in good standing in each of the states
where the laws require licensing or qualification in order to hold and enforce
the terms of its Receivables and conduct its business, or INVESTOR is exempt
under applicable law from such licensing or qualification.

3. The consummation of the transactions contemplated herein have been validly
authorized and all requisite corporate action has been taken by INVESTOR to make
this Agreement binding upon INVESTOR in accordance with its terms.

4. The consummation of the transactions contemplated by this Agreement are in
the ordinary course of business of INVESTOR.

5. The execution and delivery of this Agreement, the fulfillment of and
compliance with the terms and conditions of this Agreement, will not conflict
with or result in a breach of any of the terms of INVESTORS articles of
incorporation, bylaws or any other agreement, instrument, law, regulation, rule,
order, or judgment to which INVESTOR is a party, by which it is bound or its
property is subject, which would impair the ability of METROPOLITAN to provides
services in accordance with the terms of this Agreement.

6. INVESTOR does not believe, nor does it have any reason or cause to believe,
that it cannot perform each and every covenant contained in this Agreement.

7. There is no action, suit or proceeding or investigation pending or threatened
against INVESTOR which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations, financial
condition, properties or assets of INVESTOR, or in any material impairment of
the right or ability of INVESTOR to carry on its business substantially as now
conducted, or which would draw

Management, Receivables Acquisition Agreement
METROPOLITAN / OWAL

                                      -4-
<PAGE>

into question the validity of this Agreement or of any action taken or to be
taken in connection with the obligations of INVESTOR contemplated herein, or
which would be likely to impair materially the ability of INVESTOR to perform
under the terms of this Agreement.

8. This Agreement and any amendments hereto, including any modification to the
fees payable hereunder, are subject to the prior notification and approval
requirements of A.R.S. Section 20-481.12 and may be required to be provided to,
and may be subject to review by, the Arizona Department of Insurance. Except as
noted above, no consent, approval, authorization or order of any court or
governmental agency or body is required for INVESTOR'S execution, delivery and
performance of or compliance with this Agreement.

                         V. GENERAL TERMS AND CONDITIONS

1. NON-EXCLUSIVITY OF AGREEMENT

         This Agreement is non-exclusive. INVESTOR reserves the right and
privilege to employ and engage, from time to time, any other entity or person to
perform any of the services which are the subject of this Agreement, or may
itself perform any such services. Such actions by INVESTOR shall not be
construed as an event of termination of this Agreement.

2. NON-ASSIGNMENT

         This Agreement shall not be assigned.

3. RIGHT TO EXAMINE METROPOLITAN'S RECORDS

         INVESTOR shall have the right to examine and audit any and all of the
books, records, or other information of METROPOLITAN, with respect to or
concerning this Agreement or the Receivables acquired under the terms of this
Agreement during business hours or at such other times as may be reasonable
under applicable circumstances.

4. EVENT OF DEFAULT

The following shall be construed as an event of default:

         a. The failure by INVESTOR to deliver any sums required to be paid to
         METROPOLITAN pursuant to the terms of this Agreement.

         b. The failure of either Party to perform in accordance with the terms
         and conditions of this Agreement to the extent that such failure to
         perform shall constitute a material breach of a term or condition of
         this Agreement.

5. TERMINATION

         a. Either Party may terminate this Agreement without cause by providing
         not less than thirty (30) days advance written notice of termination to
         the other Party, in which event this Agreement shall terminate at date
         provided in said notice.

         b. In the event of a default as defined in paragraph V.4. above, the
         non-defaulting Party may, in lieu of immediately terminating this
         Agreement, provide written notice of default to the defaulting Party,
         which notice shall set forth the time-period for cure, which shall be
         no less than ten (10) days from receipt of the notice by the defaulting
         Party. If the breaching Party does not cure the default within the time
         period set forth in the notice, this Agreement may be terminated by the
         non-defaulting Party upon expiration of said time period, or such later
         date as set forth in the non-defaulting Party's notice of default.

                                      -5-
<PAGE>

6. NOTICE

         Notice under this Agreement shall be in writing, and delivered by hand,
receipt acknowledged, or delivered by registered certified United States mail,
return receipt requested, and if refused, by regular United States mail,
addressed to the Parties as stated below:

                  ATTN: PRESIDENT
                  METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                  601 W. 1st Avenue
                  Spokane, WA 99201-5015

                  ATTN: PRESIDENT
                  OLD WEST ANNUITY & LIFE INSURANCE CO.
                  8601 W Emerald, Suite 150
                  Boise, ID 83704

7. BINDING EFFECT

         This Agreement sets forth the entire Agreement between the Parties, and
shall be binding upon all successors and assigns of both of the Parties hereto,
and shall be construed under the laws of the State of Washington. Investments
must be in compliance with state of Arizona insurance laws.

8. PRIOR AGREEMENTS

         This Agreement replaces and supersedes each and every prior Agreement
executed by the Parties related to the Management, Receivable Acquisition and
Underwriting Services provided by METROPOLITAN to INVESTOR.

         This Agreement is executed the day, month, and year first above written
by the duly authorized officers of each Party.

METROPOLITAN MORTGAGE &                    OLD WEST ANNUITY & LIFE INSURANCE CO.
SECURITIES CO., INC.

By: /s/ Reuel Swanson                      By: /s/ Anthony A Steffens
   ------------------------------------       ----------------------------------
Name: Reuel Swanson                        Name: Anthony A Steffens
Title: Secretary                           Title: Sr Vice President

Management, Receivables Acquisition Agreement
METROPOLITAN / OWAL

                                      -6-
<PAGE>

                                    EXHIBIT A
                 MANAGEMENT, ACQUISITION AND SERVICING AGREEMENT
                                  (MM&S / OWAL)

                                      FEES

<Table>
<Caption>
        SERVICE                                                         FEE
        -------                                                         ---
<S>                                                                     <C>
        General support services including but not                      $115,000.00 per month
        limited to receivable acquisition, accounting
        and finance, portfolio management, human
        resources, information systems, legal and
        marketing.
</Table>

Management, Receivables Acquisition Agreement
METROPOLITAN / OWAL

                                      -7-
<PAGE>

                                    EXHIBIT B
                 MANAGEMENT, ACQUISITION AND SERVICING AGREEMENT
                                  (MM&S / OWAL)

                  MANAGEMENT GUIDELINES AND YIELD REQUIREMENTS

<Table>
<Caption>
                               ACQUISITION YIELD                               APPRAISAL
INVESTMENT TYPE                  REQUIREMENTS             LOAN TO VALUE        REQUIRED?                 OTHER
---------------                -----------------          -------------        ---------                 -----
<S>                       <C>                           <C>                  <C>               <C>
Real estate loans,        9.5% over $50K residential    80% maximum first    Yes at time of    Second liens ok if combined
individual loan           9.75% under $50K residential  liens                acquisition       first and second does not
acquisition                                             (20-553)             (20-553)          exceed 80% LTV
                                +1% non SFR                                                    (20-557 & 20-536)
                                +2% non-1st pos.
                                                                                               Maximum 35 year amortization

                                                                                               Minimum annual payment
                                                                                               (20-553)

Commercial loans          Negotiated each transaction   80% maximum first    Yes               Same as Above
                                                        liens

Alternative Cash Flows    Negotiated each transaction   Negotiated each      N/A               Limited to aggregate of 10%
(lotteries, annuities,                                  transaction                            of assets and 2% in any one
etc.)                                                                                          category of investment
                                                                                               (20-549)

Real estate loans, bulk   Negotiated each transaction   Negotiated each      Yes
purchases                                               transaction

Bond Investments                                        N/A                  N/A               SVO rating no lower than,
                                                                                               and % of investment no
                                                                                               greater than permitted by
                                                                                               A.R.S. Sections 20-540, 20-544,
                                                                                               20-545 and Arizona
                                                                                               Department of Insurance
                                                                                               Order Docket No. 00A-123-INS.
</Table>

Other general underwriting guidelines include, but are not limited to the
followings:

o        All mortgages must be secured by improved unencumbered real property.
         (20-553)

o        Single issuer (or borrower) limitation is 10% of admitted assets of
         preceding yearend. (20-535)

Investments must be in compliance with State of Arizona insurance laws.

Management, Receivables Acquisition Agreement
METROPOLITAN / OWAL

                                      -8-<PAGE>
                                                                    EXHIBIT 4.02

                  METROPOLITAN MORTGAGE & SECURITIES CO., INC.

                                       AND

                          SEATTLE-FIRST NATIONAL BANK,
                                                    Trustee

                                   ----------

                                    INDENTURE

                            Dated as of July 6, 1979

                                   ----------

                              INVESTMENT DEBENTURES

<PAGE>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                              Page
<S>                                                                                                           <C>
RECITALS OF THE COMPANY..........................................................................................1

ARTICLE ONE                DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...............................1

         Section 1-1.          Definitions.......................................................................1
         Section 1-2.          Compliance Certificates and Opinions..............................................6
         Section 1-3.          Form of Documents Delivered to Trustee............................................6
         Section 1-4.          Acts of Debentureholders..........................................................7
         Section 1-5.          Notices, etc., to Trustee and Company.............................................7
         Section 1-6.          Notices to Debentureholders; Waiver...............................................8
         Section 1-7.          Conflict with Trust Indenture Act.................................................8
         Section 1-8.          Effect of Headings and Table of Contents..........................................8
         Section 1-9.          Successors and Assigns............................................................9
         Section 1-10.         Separability Clause...............................................................9
         Section 1-11.         Benefits of Indenture.............................................................9
         Section 1-12.         Governing Law.....................................................................9
         Section 1-13.         Legal Holidays....................................................................9
         Section 1-14.         Execution in Counterparts.........................................................9

ARTICLE TWO                DEBENTURE FORMS.......................................................................9

         Section 2-1.          Forms Generally...................................................................9
         Section 2-2.          Form of Investment Debentures, Series I..........................................10
         Section 2-3.          Form of Trustee's Certification of Authentication................................14

ARTICLE THREE              THE DEBENTURES.......................................................................14

         Section 3-1.          General Limitations..............................................................14
         Section 3-2.          Issuable in Series; General Title................................................14
         Section 3-3.          Terms of Particular Series.......................................................14
         Section 3-4.          Form and Denominations...........................................................15
         Section 3-5.          Execution, Authentication and Delivery and Dating................................16
         Section 3-6.          Temporary Debentures.............................................................16
         Section 3-7.          Registration, Transfer and Exchange..............................................16
         Section 3-8.          Mutilated, Destroyed, Lost and Stolen Debentures.................................17
         Section 3-9.          Payment of Interest; Interest Rights Preserved...................................18
         Section 3-10.         Persons Deemed Owners............................................................19
         Section 3-11.         Cancellation.....................................................................19
         Section 3-12.         Investment Debentures, Series I..................................................20
</Table>

<PAGE>

<Table>
<S>                                                                                                           <C>
ARTICLE FOUR               SATISFACTION AND DISCHARGE...........................................................20

         Section 4-1.          Satisfaction and Discharge of Indenture..........................................20
         Section 4-2.          Application of Trust Money.......................................................21

ARTICLE FIVE               REMEDIES.............................................................................22

         Section 5-1.          Events of Default................................................................22
         Section 5-2.          Acceleration of Maturity Rescission and Annulment................................23
         Section 5-3.          Collection of Indebtedness and Suits for Enforcement by Trustee..................24
         Section 5-4.          Trustee May File Proofs of Claim.................................................24
         Section 5-5.          Trustee May Enforce Claims Without Possession of Debentures......................25
         Section 5-6.          Application of Money Collected...................................................25
         Section 5-7.          Limitation on Suits..............................................................26
         Section 5-8.          Unconditional Right of Debentureholders to Receive Principal,
                                 Premium and Interest...........................................................26
         Section 5-9.          Restoration of Rights and Remedies...............................................27
         Section 5-10.         Rights and Remedies Cumulative...................................................27
         Section 5-11.         Delay or Omission Not Waiver.....................................................27
         Section 5-12.         Control by Debentureholders......................................................27
         Section 5-13.         Waiver of Past Defaults..........................................................27
         Section 5-14.         Undertaking for Costs............................................................28
         Section 5-15.         Waiver of Stay or Extension Laws.................................................28

ARTICLE SIX                THE TRUSTEE..........................................................................28

         Section 6-1.          Certain Duties and Responsibilities..............................................28
         Section 6-2.          Notice of Defaults...............................................................30
         Section 6-3.          Certain Rights of Trustee........................................................30
         Section 6-4.          Not Responsible for Recitals or Issuance of Debentures...........................31
         Section 6-5.          May Hold Debentures..............................................................31
         Section 6-6.          Money Held in Trust..............................................................31
         Section 6-7.          Compensation and Reimbursement...................................................31
         Section 6-8.          Disqualification; Conflicting Interests..........................................32
         Section 6-9.          Corporate Trustee Required; Eligibility..........................................37
         Section 6-10.         Resignation and Removal; Appointment of Successor................................37
         Section 6-11.         Acceptance of Appointment by Successor...........................................38
         Section 6-12.         Merger Conversion, Consolidation or Succession to Business.......................38
         Section 6-13.         Preferential Collection of Claims Against Company................................39
</Table>

                                       ii
<PAGE>

<Table>
<S>                                                                                                            <C>
ARTICLE SEVEN              DEBENTUREHOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY............................42

         Section 7-1.          Company to Furnish Trustee Names and Addresses of Debentureholders...............42
         Section 7-2.          Preservation of Information; Communications to Debentureholders..................42
         Section 7-3.          Reports by Trustee...............................................................44
         Section 7-4.          Reports by the Company...........................................................45

ARTICLE EIGHT              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.................................46

         Section 8-1.          Company May Consolidate, etc., only on Certain Terms.............................46
         Section 8-2.          Successor Corporation Substituted................................................46

ARTICLE NINE               SUPPLEMENTAL INDENTURES..............................................................47

         Section 9-1.          Supplemental Indentures Without Consent of Debentureholders......................47
         Section 9-2.          Supplemental Indentures With Consent of Debentureholders.........................47
         Section 9-3.          Execution of Supplemental Indentures.............................................48
         Section 9-4.          Effect of Supplemental Indentures................................................48
         Section 9-5.          Conformity with Trust Indenture Act..............................................49
         Section 9-6.          Reference in Debentures to Supplemental Indentures...............................49

ARTICLE TEN                COVENANTS............................................................................49

         Section 10-1.         Payment of Principal, Premium and Interest.......................................49
         Section 10-2.         Maintenance of Office or Agency..................................................49
         Section 10-3.         Money for Debenture Payments to be Held in Trust.................................49
         Section 10-4.         Payment of Taxes and Other Claims................................................51
         Section 10-5.         Maintenance of Properties........................................................51
         Section 10-6.         Statement as to Compliance.......................................................51
         Section 10-7.         Corporate Existence..............................................................51

ARTICLE ELEVEN             REDEMPTION OF DEBENTURES.............................................................52

         Section 11-1.         Right of Redemption..............................................................52
         Section 11-2.         Applicability of Article.........................................................52
         Section 11-3.         Election to Redeem; Notice to Trustee............................................52
         Section 11-4.         Selection by Trustee of Debentures to be Redeemed................................52
         Section 11-5.         Notice of Redemption.............................................................53
         Section 11-6.         Deposit of Redemption Price......................................................53
         Section 11-7.         Debentures Payable on Redemption Date............................................53
         Section 11-8.         Debentures Redeemed in Part......................................................54
</Table>

                                       iii
<PAGE>

                               CROSS REFERENCE TO
                           TRUST INDENTURE ACT OF 1939

<Table>
<Caption>
Trust Indenture Act Section                                                           Indenture Section
---------------------------                                                           -----------------
<S>                                                                                   <C>
Section 303(1) ...................................................................... Section 1-1(a)(4)
           (4) ...................................................................... Section 6-8(d)(1)
           (5) ...................................................................... Section 6-8(d)(2)
           (6) ...................................................................... Section 6-8(d)(6)
           (10) ..................................................................... Section 1-1
           (12) ..................................................................... Section 6-8(d)(5)
           (13) ..................................................................... Section 1-1
           (16) ..................................................................... Section 6-8(d)(4)
                                                                                      Section 6-8(e)(1)

Section 310(a)(1) ................................................................... Section 6-9
           (a)(2) ................................................................... Section 6-9
           (a)(3) ................................................................... Not Applicable
           (a)(4) ................................................................... Not Applicable
           (b) ...................................................................... Section 6-8

Section 311(a) ...................................................................... Section 6-13(a)
           (b) ...................................................................... Section 6-13(b)
           (b)(2) ................................................................... Section 7-3(a)(2)
                                                                                      Section 7-3(b)

Section 312(a) ...................................................................... Section 7-1
                                                                                      Section 7-2(a)
           (b) ...................................................................... Section 7-2(b)
           (c) ...................................................................... Section 7-2(c)

Section 313(a) ...................................................................... Section 7-3(a)
           (b) ...................................................................... Section 7-3(b)
           (c) ...................................................................... Section 7-3(a)
                                                                                      Section 7-3(b)
           (d) ...................................................................... Section 7-3(c)

Section 314(a) ...................................................................... Section 7-4
           (b) ...................................................................... Not Applicable
           (c)(1) ................................................................... Section 1-2
           (c)(2) ................................................................... Section 1-2
           (c)(3) ................................................................... Not Applicable
           (d) ...................................................................... Not Applicable
           (e) ...................................................................... Section 1-2
</Table>

<PAGE>

<Table>
<Caption>
Trust Indenture Act Section                                                           Indenture Section
---------------------------                                                           -----------------
<S>                                                                                   <C>
Section 315(a) ...................................................................... Section 6-1(a)
                                                                                      Section 6-1(c)
           (b) ...................................................................... Section 6-2
                                                                                      Section 7-3(a)(6)
           (c) ...................................................................... Section 6-1(b)
           (d) ...................................................................... Section 6-1
           (d)(1) ................................................................... Section 6-1(a)
           (d)(2) ................................................................... Section 6-1(c)(2)
           (d)(3) ................................................................... Section 6-1(c)(3)
           (e) ...................................................................... Section 5-14

Section 316(a) ...................................................................... Section 1-1
           (a)(1)(A) ................................................................ Section 5-2
                                                                                      Section 5-12
           (a)(1)(B) ................................................................ Section 5-13
           (a)(2) ................................................................... Not Applicable
           (b) ...................................................................... Section 5-8

Section 317(a)(1) ................................................................... Section 5-3
           (a)(2) ................................................................... Section 5-4
           (b) ...................................................................... Section 10-3

Section 318(a) ...................................................................... Section 1-7
</Table>

                                       ii
<PAGE>

         THIS INDENTURE is dated as of July 6, 1979, between Metropolitan
Mortgage & Securities Co., Inc., a Washington corporation (hereinafter called
the "Company"), having its principal office at West 929 Sprague Avenue, Spokane,
Washington 99204, and Seattle-First National Bank, a national banking
association (hereinafter called the "Trustee"), having its corporate trust
office at 821 - 2nd Avenue, Seattle, Washington 98104.

                             RECITALS OF THE COMPANY

         The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its Investment Debentures, to be issued
in one or more series (hereinafter called the "Debentures"), as in this
Indenture provided. The initial series of Debentures to be issued hereunder is
to be known as the Company's Investment Debentures, Series I, limited to the
aggregate principal amount of $20,000,000, the further terms and provisions of
which are set forth in Section 3-12.

         All things necessary to make the Debentures when executed by the
Company, authenticated by the Trustee, delivered as authorized by the Company
and duly issued by the Company, the valid obligations of the Company, and to
make this Indenture a valid agreement of the Company, in accordance with their
and its terms, have been done.

         NOW, THEREFORE, THIS INDENTURE WITNESSETH:

         For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Debentures, as follows:

                                   ARTICLE ONE

             Definitions and Other Provisions of General Application

         Section 1-1. Definitions.

                  (a) For all purposes of this Indenture, except as otherwise
         expressly provided or unless the context otherwise requires:

                           (1) "This Indenture" means this instrument as
                  originally executed or as it may from time to time be
                  supplemented or amended by one or more indentures supplemental
                  hereto entered into pursuant to the applicable provisions
                  hereof.

                           (2) All references in this instrument to designated
                  "articles," "sections" and other subdivisions are to the
                  designated Articles, Sections and other subdivisions of this
                  instrument as originally executed. The words "herein,"
                  "hereof," and "hereunder," and other words of similar import
                  refer to this Indenture as a whole and not to any particular
                  Article, Section or other subdivision.

                           (3) The terms defined include the plural as well as
                  the singular.

                                       1
<PAGE>

                           (4) All other terms used herein which are defined in
                  the Trust Indenture Act of 1939, either directly or by
                  reference therein, have the meanings assigned to them therein.

                           (5) All accounting terms not otherwise defined herein
                  have the meanings assigned to them in accordance with
                  generally accepted accounting principles.

                  (b) Certain terms, used principally in Article Six, are
         defined in that Article.

                  (c) Other definitions:

         "Act" when used with respect to any Debentureholder has the meaning
specified in Section 1-4.

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

         "Applicable Debentures" has the meaning set forth in Section 5-2.

         "Authorized Newspaper" means a newspaper of general circulation in the
relevant area, printed in the English language and customarily published on each
business day, whether or not published on Saturdays, Sundays or holidays.
Whenever successive weekly publications in an Authorized Newspaper are required
hereunder they may be made (unless otherwise expressly provided herein) on the
same or different days of the week and in the same or in different Authorized
Newspapers.

         "Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.

         "Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

         "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of Seattle,
Washington or the City of Spokane, Washington are authorized by law to close.

         "Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.

                                       2
<PAGE>

         "Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.

         "Company Request," "Company Order" and "Company Consent" mean,
respectively, a written request, order or consent signed in the name of the
Company by its Chairman of the Board, President or a Vice President, and by its
Treasurer, an Assistant Treasurer, Controller, an Assistant Controller,
Secretary or an Assistant Secretary, and delivered to the Trustee.

         "Debentureholder" means a Person in whose name a Debenture is
registered in the Debenture Register.

         "Debenture Register" and "Debenture Registrar" have the respective
meanings specified in Section 3-7.

         "Defaulted Interest" has the meaning specified in Section 3-9.

         "Event of Default" has the meaning specified in Article Five.

         "Holder" when used with respect to any Debenture means a
Debentureholder.

         "Independent" when used with respect to any specified Person means such
a Person who (1) is in fact independent, (2) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
other obligor upon the Debentures or in any Affiliate of the Company or of such
other obligor, and (3) is not connected with the Company or such other obligor
or any Affiliate of the Company or of such other obligor, as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions. Whenever it is herein provided that any Independent Person's
opinion or certificate shall be furnished to the Trustee, such Person shall be
appointed by a Company order and approved by the Trustee in the exercise of
reasonable, care, and such opinion or certificate shall state that the signer
has read this definition and that the signer is Independent within the meaning
hereof.

         "Interest Payment Date" means the Stated Maturity of an installment of
interest on the Debentures.

         "Investment Debentures of Series I," "Investment Debentures, Series I"
or "Series I Investment Debentures" means the Debentures established by Section
3-12 hereof.

         "Maturity" when used with respect to any Debenture means the date on
which the principal of such Debenture becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.

         "Notice of Default" has the meaning specified in Article Five.

         "Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee. Wherever this
Indenture requires that an Officers' Certificate be signed also by an

                                       3
<PAGE>

engineer or an accountant or other expert, such engineer, accountant or other
expert (except as otherwise expressly provided in this Indenture) may be in the
employ of the Company, and shall be acceptable to the Trustee.

         "Opinion of Counsel" means a written opinion of counsel, who may
(except as otherwise expressly provided in this Indenture) be counsel for the
Company, and shall be acceptable to the Trustee.

         "Outstanding" when used with respect to Debentures means, as of the
date of determination, all Debentures theretofore authenticated and delivered
under this Indenture, except:

                  (i) Debentures theretofore cancelled by the Company;

                  (ii) Debentures for whose payment or redemption money in the
         necessary amount has been theretofore deposited with the Trustee or any
         Paying Agent in trust for the Holders of such Debentures, provided
         that, if such Debentures are to be redeemed, notice of such redemption
         has been duly given pursuant to this Indenture or provision therefor
         satisfactory to the Trustee has been made; and

                  (iii) Debentures in exchange for or in lieu of which other
         Debentures have been authenticated and delivered pursuant to this
         Indenture;

provided, however, that in determining whether the Holders of the requisite
principal amount of Debentures Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Debentures owned
by the Company or any other obligor upon the Debentures or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Debentures which the Trustee knows to be so owned shall
be so disregarded. Debentures so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Debentures and that
the pledgee is not the Company or any other obligor upon the Debentures or any
Affiliate of the Company or such other obligor.

         When used with respect to Debentures of a given series, the foregoing
definition shall be applicable to Debentures of such series as though only the
Debentures of such series were referred to therein.

         "Paying Agent" means any Person authorized by the Company, including
Persons employed by or affiliated with the Company, to pay the principal of and
premium, if any, or interest on any Debentures on behalf of the Company.

         "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

                                       4
<PAGE>

         "Place of Payment" with respect to investment Debentures, Series I,
means the City of Spokane, State of Washington, and with respect to Debentures
of other series, the City of Spokane, State of Washington or such other place or
places as may be specified in the supplemental indenture creating such series.

         "Predecessor Debentures" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 3-8 in lieu
of a lost, destroyed or stolen Debenture shall be deemed to evidence the same
debt as the lost, destroyed or stolen Debenture.

         "Redemption Date" when used with respect to any Debenture to be
redeemed means the date fixed for such redemption by or pursuant to this
Indenture.

         "Redemption Price" when used with respect to any Debenture to be
redeemed means the price at which it is to be redeemed pursuant to this
Indenture.

         "Regular Record Date" for the interest payable on any Interest Payment
Date means, with respect to Investment Debentures, Series I, the 15th day
(whether or not a Business Day) of the calendar month next preceding the
Interest Payment Date as specified on each Investment Debenture, Series I, and
with respect to Debentures of other series, such date as shall be specified in
the supplemental indenture creating such series.

         "Responsible Officer" when used with respect to the Trustee means the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller and any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.

         "Special Record Date" for the payment of any Defaulted Interest (as
defined in Section 3-9) means a date fixed by the Trustee pursuant to Section
3-9.

         "Stated Maturity" when used with respect to any Debenture or any
installment of interest thereon means the date specified in such Debenture as
the fixed date on which the principal of such Debenture or such installment of
interest is due and payable.

         "Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this indenture, and thereafter
"Trustee" shall mean such successor Trustee.

         "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as in force at the date as of which this instrument was executed.

                                       5
<PAGE>

         "Vice President" when used with respect to the Company or the Trustee
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".

         Section 1-2. Compliance Certificates and Opinions.

         Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
Counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.

         Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include

                  (1) a statement that each individual signing such certificate
         or opinion has read such covenant or condition and the definitions
         herein relating thereto;.

                  (2) a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate or opinion are based;

                  (3) a statement that each such individual has made such
         examination or investigation as, in such individual's opinion, is
         necessary to enable such individual to express an informed opinion as
         to whether or not such covenant or condition has been complied with;
         and

                  (4) a statement as to whether, in the opinion of each such
         individual, such condition or covenant has been complied with.

         Section 1-3. Form of Documents Delivered to Trustee.

         In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.

         Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of

                                       6
<PAGE>

the Company stating that the information with respect to such factual matters is
in the possession of the Company, unless such Counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.

         Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

         Section 1-4. Acts of Debentureholders.

                  (a) Any request, demand, authorization, direction, notice,
         consent, waiver or other action provided by this Indenture to be given
         or taken by Debentureholders may be embodied in and evidenced by one or
         more instruments of substantially similar tenor signed by such
         Debentureholders in person or by agent duly appointed in writing; and,
         except as herein otherwise expressly provided, such action shall become
         effective when such instrument or instruments are delivered to the
         Trustee, and, where it is hereby expressly required, to the Company.
         Such instrument or instruments (and the action embodied therein and
         evidenced thereby) are herein sometimes referred to as the "Act" of the
         Debentureholders signing such instrument or instruments. Proof of
         execution of any such instrument or of a writing appointing any such
         agent shall be sufficient for any purpose of this Indenture and
         (subject to Section 6-1) conclusive in favor of the Trustee and the
         Company, if made in the manner provided in this Section.

                  (b) The fact and date of the execution by any Person of any
         such instrument or writing may be proved by the affidavit of a witness
         of such execution or by the certificate of any notary public or other
         officer authorized by law to take acknowledgments of deeds, certifying
         that the individual signing such instrument or writing acknowledged to
         him the execution thereof. Where such execution is by an officer of a
         corporation or a member of a partnership, on behalf of such corporation
         or partnership, such certificate or affidavit shall also constitute
         sufficient proof of his authority. The fact and date of the execution
         of any such instrument or writing, or the authority of the Person
         executing the same, may also be proved in any other manner which the
         Trustee deems sufficient.

                  (c) The ownership of Debentures shall be proved by the
         Debenture Register.

                  (d) Any request, demand, authorization, direction, notice,
         consent, waiver or other action by the Holder of any Debenture shall
         bind the Holder of every Debenture issued upon the transfer thereof or
         in exchange therefor or in lieu thereof, in respect of anything done or
         suffered to be done by the Trustee or the Company in reliance thereon,
         whether or not notation of such action is made upon such Debenture.

         Section 1-5. Notices, etc., to Trustee and Company.

         Any request, demand, authorization, direction, notice, consent, waiver
or Act of Debentureholders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,

                                       7
<PAGE>

                  (1) the Trustee by any Debentureholder or by the Company shall
         be sufficient for every purpose hereunder if made, given, furnished or
         filed in writing to or with the Trustee at its principal corporate
         trust office, located at 821 - 2d Avenue, Seattle, Washington 98104 or
         at such other address previously furnished in writing to the Company by
         the Trustee for such purpose, or

                  (2) the Company by the Trustee or by any Debentureholder shall
         be sufficient for every purpose hereunder if in writing and mailed,
         first-class postage prepaid, to the Company addressed to it at West 929
         Sprague Avenue, Spokane, Washington 99204, or at such other address
         previously furnished in writing to the Trustee by the Company for such
         purpose.

         Section 1-6. Notices to Debentureholders; Waiver.

         Where this Indenture provides for notice to Debentureholders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and deposited in the United States mail,
first-class postage prepaid, to each Debentureholder affected by such event, at
his address as it appears in the Debenture Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Debentureholders is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Debentureholder shall affect the sufficiency of such notice with
respect to other Debentureholders, and any notice which is mailed in the manner
herein provided shall be conclusively presumed to have been duly given. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Debentureholders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

         In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be impossible to make
publication of any notice in an Authorized Newspaper or Authorized Newspapers as
required by this Indenture, then (notwithstanding such provision) such method of
publication or notification as shall be made with the approval of the Trustee
shall constitute a sufficient publication of such notice.

         Section 1-7. Conflict with Trust Indenture Act.

         If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of TIA, such required provision shall control.

         Section 1-8. Effect of Headings and Table of Contents.

         The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.

                                       8
<PAGE>

         Section 1-9. Successors and Assigns.

         All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.

         Section 1-10. Separability Clause.

         In case any provision in this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         Section 1-11. Benefits of Indenture.

         Nothing in this Indenture or in the Debentures, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Debentureholders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.

         Section 1-12. Governing Law.

         This Indenture shall be construed in accordance with and be governed by
the laws of the State of Washington.

         Section 1-13. Legal Holidays.

         In any case where any Interest Payment Date, any Redemption Date, or
the Stated Maturity of any Debenture, or any date on which any Defaulted
Interest is proposed to be paid, shall not be a Business Day, then
(notwithstanding any other provision of this Indenture) payment of interest,
principal and premium, if any, need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date or at the Stated Maturity, or on
the date on which the Defaulted Interest is proposed to be paid, and no interest
shall accrue for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity or date for the payment of Defaulted
Interest, as the case may be.

         Section 1-14. Execution in Counterparts.

         This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

                                   ARTICLE TWO

                                 Debenture Forms

         Section 2-1. Forms Generally.

         The Debentures and the certificates of authentication thereon shall be
substantially in the forms set forth in this Article Two, with such appropriate
insertions, omissions, substitutions and

                                       9
<PAGE>

other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange, or as may, consistently herewith, be determined by the
officers executing such Debentures, as evidenced by their execution of the
Debentures. Any portion of the text of any Debenture may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the
Debenture.

         The definitive Debentures shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange, all as determined by
the officers executing such Debentures, as evidenced by their execution of such
Debentures.

         Section 2-2. Form of Investment Debentures, Series I.

                  METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                W. 929 Sprague Avenue, Spokane, Washington 99204
                         Investment Debenture, Series I

Issued To
          -----------------------------
Principal Amount
                 ----------------------
Issue Date
           ----------------------------
Maturity Date
              -------------------------
Interest Rate
              -------------------------
Certificate Number
                   --------------------
Interest Payable
                 ----------------------

         The Debenture

         This is a duly authorized Debenture of Metropolitan Mortgage &
Securities Co., Inc. ("Metropolitan"). This Debenture is issued under an
Indenture dated July 6, 1979 ("Indenture") between Metropolitan and
Seattle-First National Bank as Trustee ("Trustee"). The Indenture permits
Metropolitan to issue an unlimited amount of Debentures, the terms of which may
vary according to series. This Debenture is of the series stated above; that
series is limited in aggregate principal amount as stated in the Indenture (or
supplemental indentures). The Indenture (and supplemental indentures) contains
statements of the rights of the Debentureholders, Metropolitan and the Trustee
and provisions concerning authentication and delivery of the Debentures.
Definitions of certain terms used in this Debenture are also found in the
Indenture (and supplemental indentures).

         Payment of Principal

         For value received, Metropolitan promises to pay the principal amount
of this Debenture at the maturity date stated above. Payment will be made to the
Person to whom this Debenture is issued, or registered assigns.

                                       10
<PAGE>

         Payment of Interest

         Metropolitan promises to pay interest on the principal amount of this
Debenture from the issue date until the principal amount is paid or made
available for payment. Interest will be computed at the annual interest rate
stated above. Interest will be payable or compounded as stated above or as
otherwise elected by the Person entitled to payment of interest. Metropolitan
will pay interest to the Person in whose name this Debenture (or one or more
Predecessor Debentures) is registered at the close of business on the Regular
Record Date for the payment of interest. The Regular Record Date is the 15th day
of the calendar month immediately preceding an Interest Payment Date.

         Compounding of Interest

         If the Person entitled to payment of interest so elects, Metropolitan
will compound interest rather than pay interest in installments. Interest will
be compounded on a semiannual basis at the interest rate stated above from the
Interest Payment Date immediately preceding receipt by Metropolitan of the
compounding election. Interest will be compounded from the issue date of the
Debenture if Metropolitan receives the compounding election prior to the first
Interest Payment Date. Interest will be compounded until the maturity date
stated above and will be paid on such date. Prior to Maturity, however,
metropolitan will pay at the Debentureholder's request the interest accumulated
in the last two semiannual compounding periods before Metropolitan receives the
request, together with the interest accrued from the end of the last such
semiannual period. Interest compounded prior to the last two semiannual
compounding periods is payable only on the maturity date stated above.

         Prepayment on Death

         In the event of a Debentureholder's death, any Person entitled to
receive some or all of the proceeds of this Debenture may elect to have his or
her share of the principal and any unpaid interest prepaid in full in five
consecutive equal monthly installments. Interest on the declining principal
balance of that share will continue to accrue at the interest rate stated above.
Any request for prepayment must be made in writing to Metropolitan. The request
must be accompanied by the Debenture and evidence, satisfactory to Metropolitan,
of the Debentureholder's death. Before Metropolitan prepays the Debenture, it
may require additional documents or other material it considers necessary to
establish the Persons entitled to receive some or all of the proceeds of the
Debenture. Metropolitan may also require proof of other facts relevant to its
obligation to prepay the Debenture in the event of death.

         Miscellaneous

         The provisions on the reverse are part of this Debenture.

         This Debenture is not entitled to any benefit under the Indenture nor
is this Debenture valid or obligatory for any purpose unless the certificate of
authentication below has been executed by the Trustee by manual signature.

         This Debenture is not insured by the United States government, the
State of Washington nor any agency thereof.

                                       11
<PAGE>

         In witness whereof, Metropolitan has caused this Debenture to be duly
executed under its corporate seal.

                                            METROPOLITAN MORTGAGE & SECURITIES
                                            CO., INC.
(Corporate Seal)
                                            By
                                              ----------------------------------
                                              Chairman of the Board, President
Attest:                                       or Vice President
       --------------------------------
       Secretary or Assistant Secretary

                [INSERT TRUSTEE'S CERTIFICATE OF AUTHENTICATION]

               [FORM OF REVERSE OF INVESTMENT DEBENTURE, SERIES I]

         Transfer and Exchange

         Transfer and exchange of this Debenture are conditioned by certain
provisions in the Indenture. To effect a transfer, the Holder must surrender
this Debenture at Metropolitan's office or agency in Spokane, Washington. This
Debenture must be duly endorsed or accompanied by a written instrument of
transfer satisfactory to Metropolitan. Upon transfer, one or more new Debentures
of the same series, of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
Prior to due presentment for registration of transfer, Metropolitan, the Trustee
or any of their agents may treat any Person in whose name this Debenture is
registered as the owner of this Debenture, regardless of notice to the contrary
or whether this Debenture might be overdue.

         This Debenture is issuable only as a registered Debenture; it does not
bear coupons. As provided in the Indenture, this Debenture is exchangeable for
other Debentures of the same series of authorized denominations with the same
aggregate principal amount. To effect an exchange, the Holder must surrender
this Debenture at Metropolitan's office or agency in Spokane, Washington. The
Debenture must be duly endorsed or accompanied by a written instrument of
exchange satisfactory to Metropolitan.

         No service charge will be made for a transfer or exchange, but
Metropolitan may require payment of a sum sufficient to cover any governmental
charge payable in connection with such transaction.

         Amendment of the Indentures; Waiver of Rights

         With certain exceptions, the Indenture may be amended, the obligations
and rights of Metropolitan may be modified and the rights of the
Debentureholders may be modified by Metropolitan at any time with the consent of
the Holders of 66-2/3% in aggregate principal amount of the Debentures at the
time Outstanding. The Indenture allows the Holders of specified percentages in
aggregate principal amount of the Debentures of a particular series to waive
compliance by Metropolitan with certain Indenture provisions and to waive past
defaults and their consequences on behalf of all the Holders of Debentures of
that series. Any such consent or waiver by the Holder of this Debenture will be
binding upon that Holder. The consent

                                       12
<PAGE>

or waiver will also be binding upon all future Holders of this Debenture and of
any Debenture issued upon the transfer of, or in exchange for or in lieu
o(pound) this Debenture, whether or not that consent or waiver is noted upon the
Debenture.

         Failure to Pay Interest; Events of Default

         If interest is not punctually paid or duly provided for, it shall cease
to be payable to the registered Holder of this Debenture on the applicable
Regular Record Date. Instead, the Trustee will fix a Special Record Date for
payment of the Defaulted Interest. The Trustee will give the Debentureholders
notice of the Special Record Date at least 10 days prior to the Special Record
Date. The Person in whose name this Debenture (or one or more Predecessor
Debentures) is registered at the close of business on the Special Record Date
will be entitled to payment of the Defaulted Interest. If the Debentures are
listed on a securities exchange, however, the Defaulted Interest may be paid at
any time and in any lawful manner consistent with the requirements of the
exchange.

         If an Event of Default occurs, the principal of all the Debentures may
be declared due and payable as provided in the Indenture.

         Form of Payment

         Payment of principal and interest will be made at the office or agency
of Metropolitan maintained for that purpose in Spokane, Washington. Payment will
be made in coin or currency of the United States of America that is legal tender
for payment of public and private debts at the time of payment. At
Metropolitan's option, however, payment of interest may be made by check mailed
to the Person entitled to the interest at that Person's address as it appears in
the Debenture Register.

         Business Days

         Whenever any Interest Payment Date, the Stated Maturity of this
Debenture or any date on which any Defaulted Interest is proposed to be paid is
not a Business Day, the appropriate payment or compounding of interest or
principal may be made on the next succeeding Business Day without accrual of
additional interest.

         Certain Definitions

         Metropolitan is a Washington corporation. The term "Metropolitan"
includes any successor corporation under the Indenture. The term "Trustee"
includes any successor Trustee under the Indenture.

                                       13
<PAGE>

         Section 2-3. Form of Trustee's Certification of Authentication.

         This is one of the Debentures referred to in the within-mentioned
Indenture.

                                       SEATTLE-FIRST NATIONAL BANK, as Trustee

                                       By
                                         ---------------------------------------
                                         Authorized Officer

                                  ARTICLE THREE

                                 The Debentures

         Section 3-1. General Limitations.

         The aggregate principal amount of Debentures which may be authenticated
and delivered and Outstanding under this Indenture is not limited except as may
be limited by law.

         Section 3-2. Issuable in Series; General Title.

         The Debentures may be issued in series as from time to time shall be
authorized by the Board of Directors. The Debentures of all series shall be
entitled generally "Debentures." With respect to the Debentures of any
particular series, the Company may incorporate in or add to the general title of
such Debentures any words, letters or figures designed to distinguish that
series.

         Section 3-3. Terms of Particular Series.

         The Debentures of each series (other than Investment Debentures, Series
I as to which specific provision is made in Section 3-12) shall be payable at
such place or places, shall mature on such date or dates, shall bear interest at
such rate or rates payable in such installments and on such dates and at such
place or places and to Holders registered as such, and may be redeemable as such
price or prices and upon such terms, all as shall be provided for in the
supplemental indenture creating that series.

         The Company may at the time of the creation of any series of Debentures
or at any time thereafter make, and the Debentures of such series may contain,
provision for:

                  (1) the redemption of all, or of all or any part, of the
         Debentures of such series prior to maturity;

                  (2) a sinking, amortization improvement or other analogous
         fund;

                  (3) limiting the aggregate principal amount of the Debentures
         of such series;

                                       14
<PAGE>

                  (4) the exchange or conversion of the Debentures of that
         series, at the option of the Holders thereof, for or into new
         Debentures of a different series and/or shares of stock of the Company
         and/or other securities;

                  (5) exchanging Debentures of that series, at the option of the
         Holders thereof, for other Debentures of the same series of the same
         aggregate principal amount of a different authorized kind and/or
         authorized denomination or denominations; and/or

                  (6) the appointment by the Trustee of an Authenticating Agent
         in one or more places other than the location of the office of the
         Trustee with power to act on behalf of the Trustee and subject to its
         direction in the authentication and delivery of the Debentures of any
         one or more series in connection with such transactions as shall be
         specified in the provisions of this Indenture creating such series or
         in a supplemental indenture;

all upon such terms as the Board of Directors may determine. All Debentures of
the same series shall be substantially identical in tenor and effect.

         Each series of Debentures, except Investment Debentures, Series I,
shall be created by an indenture supplemental hereto authorized by a Board
Resolution.

         Section 3-4. Form and Denominations.

         The Debentures of each series shall be in registered form and
substantially in the form hereinbefore recited for the Investment Debentures,
Series I, with such omissions, variations and insertions as are permitted by
this indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements printed, lithographed or
engraved thereon, as may be required to comply with the rules of any securities
exchange or to conform to any usage in respect thereof, or as may, consistently
herewith, be prescribed by the Board of Directors or by the officers executing
such Debentures, such determination by said officers to be evidenced by their
signing the Debentures. The form of the Debentures of each series (except
Investment Debentures, Series I) shall be established by the supplemental
indenture creating such series. The Debentures of each series shall be
distinguished from the Debentures of other series in such manner as may be
prescribed in the supplemental indenture creating such series.

         The definitive Debentures of each series other than Investment
Debentures, Series I shall be as required by the applicable supplemental
indenture. The definitive Investment Debentures, Series I shall be printed or
prepared in a manner to be determined by the officers executing such Debentures,
as evidenced by their execution of such Debentures.

         The Debentures of each series shall be issued in such denominations as
shall be provided in the supplemental indenture creating such series or as the
Board of Directors may determine, except that the Investment Debentures, Series
I shall be issued in the denominations provided for in Section 3-12.

                                       15
<PAGE>

         Section 3-5. Execution, Authentication and Delivery and Dating.

         The Debentures shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents under its
corporate seal reproduced thereon and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Debentures
may be manual or facsimile.

         Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.

         At any time and from time to time after the execution and delivery of
this indenture, the Company may deliver Debentures executed by the Company to
the Trustee for authentication; and the Trustee shall authenticate such
Debentures as in this indenture provided and not otherwise, and shall deliver
such Debentures as authorized by the Company.

         No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated hereunder:

         Section 3-6. Temporary Debentures.

         Pending the preparation of definitive Debentures of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate (and
if so authorized deliver), temporary Debentures which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any denomination,
substantially of the tenor of the definitive Debentures in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Debentures may determine, as
evidenced by their execution of such Debentures.

         If temporary Debentures of any series are issued, the Company will
cause definitive Debentures of such series to be prepared without unreasonable
delay. After the preparation of definitive Debentures, the temporary Debentures
shall be exchangeable for definitive Debentures upon surrender of the temporary
Debentures at the office or agency of the Company in a Place of Payment, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Debentures the Company shall execute and the Trustee shall
authenticate in exchange therefor a like aggregate principal amount of
definitive Debentures of authorized denominations, which shall be delivered as
authorized by the Company. Until so exchanged the temporary Debentures shall in
all respects be entitled to the same benefits under this Indenture as definitive
Debentures.

         Section 3-7. Registration, Transfer and Exchange.

         The Company shall cause to be kept at its office in Spokane, Washington
a register (herein sometimes referred to as the "Debenture Register") in which,
subject to such reasonable

                                       16
<PAGE>

regulations as it may prescribe, the Company shall provide for the registration
of Debentures and for transfers of Debentures. The Company will act as
"Debenture Registrar" for the purpose of the registration of Debentures and
transfers of Debentures as herein provided.

         Upon surrender for transfer of any Debenture of any series at the
office or agency of the Company in a Place of Payment, the Company shall
execute, and the Trustee shall authenticate, in the name of the designated
transferee or transferees, one or more new Debentures of the same series of any
authorized denominations, of a like aggregate principal amount, which shall be
delivered as authorized by the Company.

         At the option of the Holder, Debentures may be exchanged for other
Debentures of the same series of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Debentures to be exchanged at
such office or agency. Whenever any Debentures are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate, the Debentures
the Debentureholder making the exchange is entitled to receive, which Debentures
shall be delivered as authorized by the Company.

         All Debentures issued upon any transfer or exchange of Debentures shall
be the valid obligations of the Company, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Debentures surrendered upon
such transfer or exchange.

         Every Debenture presented or surrendered for transfer or exchange shall
(if so required by the Company or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company, as the Debenture Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.

         No service charge shall be made for any transfer or exchange of
Debentures, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Debentures, other than exchanges pursuant to Section 3-6
or 9-6 not involving any transfer.

         The Company shall not be required (i) to issue, transfer or exchange
any Debenture of any series during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Debentures
selected for redemption under Section 11-4 and ending at the close of business
on the day of such mailing, or (ii) to transfer or exchange any Debenture so
selected for redemption in whole or in part.

         Section 3-8. Mutilated, Destroyed, Lost and Stolen Debentures.

         If (i) any mutilated Debenture is surrendered to the Company, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Debenture, and (ii) there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Debenture has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Debenture, a new Debenture of like tenor and principal amount, bearing a number
not contemporaneously outstanding, which shall be delivered as authorized by the
Company.

                                       17
<PAGE>

         In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Debenture, pay such Debenture.

         Upon the issuance of any new Debenture under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

         Every new Debenture issued pursuant to this Section in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder.

         The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures.

         Section 3-9. Payment of Interest; Interest Rights Preserved.

         Interest on any Debenture of any series which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Debentures of such series shall be paid to the Person in whose name that
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on the Regular Record Date for such interest in respect of Debentures
of such series (unless that Debenture, or one or more Predecessor Debentures, is
called for redemption on a date that is prior to such Interest Payment Date, in
which case interest shall be paid thereon as provided in Article Eleven or in
the provisions with respect to redemption or sinking fund contained in the
supplemental indenture creating the series of which that Debenture is a part).

         Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Debentures of such
series (herein called "Defaulted Interest") shall forthwith cease to be payable
to the registered Holder on the relevant Regular Record Date by virtue of having
been such Holder; and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or Clause (2) below:

                  (1) The Company may elect to make payment of any Defaulted
         interest to the Persons in whose names the Debentures (or their
         respective Predecessor Debentures) are registered at the close of
         business on a Special Record Date for the payment of such Defaulted
         Interest, which shall be fixed in the following manner. The Company
         shall notify the Trustee in writing of the amount of Defaulted Interest
         proposed to be paid on each Debenture and the date of the proposed
         payment, and at the same time the Company shall deposit with the
         Trustee an amount of money equal to the aggregate amount proposed to be
         paid in respect of such Defaulted Interest or shall make arrangements
         satisfactory to the Trustee for such deposit prior to the date of the
         proposed payment, such money when deposited to be held in trust for the
         benefit of the Persons entitled to

                                       18
<PAGE>

         such Defaulted Interest as in this Clause provided. Thereupon the
         Trustee shall fix a Special Record Date for the payment of such
         Defaulted Interest which shall be not more than 15 nor less than 10
         days prior to the date of the proposed payment and not less than 10
         days after the receipt by the Trustee of the notice of the proposed
         payment. The Trustee shall promptly notify the Company of such Special
         Record Date and, in the name and at the expense of the Company, shall
         cause notice of the proposed payment of such Defaulted Interest and the
         Special Record Date therefor to be mailed, first-class postage prepaid,
         to each Debentureholder at his address as it appears in the Debenture
         Register, not less than 10 days prior to such Special Record Date. The
         Trustee may, in its discretion, in the name and at the expense of the
         Company, cause a similar notice to be published at least once in an
         Authorized Newspaper in each Place of Payment for Debentures of such
         series, but such publication shall not be a condition precedent to the
         establishment of such Special Record Date. Notice of the proposed
         payment of such Defaulted Interest and the Special Record Date therefor
         having been mailed as aforesaid, such Defaulted Interest shall be paid
         to the Persons in whose names the Debentures of such series (or their
         respective Predecessor Debentures) are registered on such Special
         Record Date and shall no longer be payable pursuant to the following
         Clause (2).

                  (2) The Company may make payment of any Defaulted Interest in
         any other lawful manner not inconsistent with the requirements of any
         securities exchange on which the Debentures of the series in respect of
         which interest is in default may be listed, and upon such notice as may
         be required by such exchange, if, after notice given by the Company to
         the Trustee of the proposed payment pursuant to this Clause, such
         payment shall be deemed practicable by the Trustee.

         Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Debenture shall carry the rights to interest accrued and unpaid, and
to accrue, which were carried by such other Debenture.

         Section 3-10. Persons Deemed Owners.

         Prior to due presentment for transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat any Person in whose name any
Debenture is registered as the owner of such Debenture for the purpose of
receiving payment of principal of and premium, if any, and (subject to Section
3-9) interest on, such Debenture and for all other purposes whatsoever, whether
or not such Debenture be overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by notice to the contrary.

         Section 3-11. Cancellation.

         All Debentures surrendered for payment, redemption, transfer, exchange
or conversion shall be promptly cancelled by the Company. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures cancelled as provided
in this Section, except as expressly permitted by this Indenture.

                                       19
<PAGE>

         Section 3-12. Investment Debentures, Series I.

         There shall be an initial series of Debentures entitled "Investment
Debentures, Series I" and the form thereof shall be substantially as
hereinbefore recited. The aggregate principal amount of Investment Debentures,
Series I, at any one time Outstanding shall be limited to $20,000,000 exclusive
of Investment Debentures, Series I authenticated and delivered under Section
3-8. The initial Investment Debentures, Series I shall be issued in the
maturities and denominations with interest rates upon the unpaid principal
amounts thereof as follows:

<Table>
<Caption>
                                                                       MINIMUM                   INCREMENTS OVER
MATURITY                               INTEREST RATE                 DENOMINATION                    MINIMUM
<S>                                    <C>                           <C>                         <C>
7-10 years                                   9%                         $  100                         $1
5-6 years                                    8 1/2%                     $  100                         $1
1-4 years                                    8%                         $  100                         $1
6 months                                     7%                         $5,000                         $1
</Table>

The interest rates of Investment Debentures, Series I may be changed at any time
by the Company, but no such change will affect any Investment Debentures, Series
I issued prior to such change. Holders of Investment Debentures, Series I, may
select a monthly, quarterly, semiannual or annual Interest Payment Date or may
elect to allow interest to be compounded and paid as set forth in the form of
the investment Debenture, Series I in Section 2-2. Payment of the principal of
and interest on Investment Debentures, Series I will be made at the office or
agency of the Company maintained for that purpose in Spokane, Washington. All
such payments shall be made in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the address of the Person entitled
thereto as such address shall appear on the Debenture Register. In the event of
the death of any registered owner of an Investment Debenture, Series I, any
party entitled to receive some or all of the proceeds of such investment
Debenture, Series I may elect to have his share of such Investment Debenture,
Series I prepaid under the terms set out in the form of the Investment
Debenture, Series I in Section 2-2 hereof.

                                  ARTICLE FOUR

                           Satisfaction and Discharge

         Section 4-1. Satisfaction and Discharge of Indenture.

         This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion or transfer or exchange of Debentures herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when

                  (1) either

                           (A) all Debentures theretofore authenticated and
                  delivered (other than (i) Debentures which have been
                  destroyed, lost or stolen and which have been

                                       20
<PAGE>

                  replaced or paid as provided in Section 3-8, and (ii)
                  Debentures for whose payment money has theretofore been
                  deposited in trust or segregated and held in trust by the
                  Company and thereafter repaid to the Company or discharged
                  from such trust, as provided in Section 10-3) have been
                  delivered to the Trustee cancelled; or

                           (B) all such Debentures not theretofore delivered to
                  the Trustee cancelled

                                    (i) have become due and payable, or

                                    (ii) will become due and payable at their
                           Stated Maturity within 1 year, or

                                    (iii) are to be called for redemption within
                           1 year under arrangements satisfactory to the Trustee
                           for the giving of notice of redemption by the Trustee
                           in the name, and at the expense, of the Company,

                  and the Company, in the case of (i), (ii) or (iii) above, has
                  deposited or caused to be deposited with the Trustee as trust
                  funds in trust for the purpose an amount sufficient to pay and
                  discharge the entire indebtedness on such Debentures not
                  theretofore delivered to the Trustee cancelled, for principal
                  and premium, if any, and interest to the date of such deposit
                  (in the case of Debentures which have become due and payable),
                  or to the Stated Maturity or Redemption Date, as the case may
                  be;

                  (2) the Company has paid or caused to be paid all other sums
         payable hereunder by the Company;

                  (3) the Company has delivered to the Trustee an Officers'
         Certificate and an Opinion of Counsel each stating that all conditions
         precedent herein provided for relating to the satisfaction and
         discharge of this Indenture have been complied with; and

                  (4) the Company has delivered to the Trustee a statement that
         it does not intend to authorize any further series of Debentures under
         this Indenture.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6-7 shall survive.

         Section 4-2. Application of Trust Money.

         All money deposited with the Trustee pursuant to Section 4-1 shall be
held in trust and applied by it, in accordance with the provisions of the
Debentures and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Company may determine, to the Persons entitled thereto, of the principal and
premium, if any, and interest for whose payment such money has been deposited
with the

                                       21
<PAGE>

Trustee; but such money need not be segregated from other funds except to the
extent required by law.

                                  ARTICLE FIVE

                                    Remedies

         Section 5-1. Events of Default.

         "Event of Default," with respect to the Investment Debentures, Series
I, means any one of the events specified below in this Section 5-1 and "Event of
Default" with respect to each other series of Debentures shall mean such events
as are set forth in the supplemental indenture creating such series (in each
case whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law, or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

                  (1) default in the payment of any interest upon any Investment
         Debenture, Series I when such interest becomes due and payable, and
         continuance of such default for a period of 30 days; or

                  (2) default in the payment of the principal of (or premium, if
         any, on) any Investment Debenture, Series I at its Maturity; or

                  (3) default in the performance, or breach, of any covenant or
         warranty of the Company in this Indenture (other than a covenant or
         warranty a default in whose breach is elsewhere in this Section
         specifically dealt with), and continuance of such default or breach for
         a period of 60 days after there has been given, by registered or
         certified mail, to the Company by the Trustee or to the Company and the
         Trustee by the Holders of at least 10% in principal amount of the
         Outstanding Investment Debentures, Series I, a written notice
         specifying such default or breach and requiring it to be remedied and
         stating that such notice is a "Notice of Default" hereunder; or

                  (4) the entry of a decree or order by a court having
         jurisdiction in the premises adjudging the Company a bankrupt or
         insolvent, or approving as properly filed a petition seeking
         reorganization, arrangement, adjustment or composition of or in respect
         of the Company under the Federal Bankruptcy Act or any other applicable
         Federal or State law, or appointing a receiver, liquidator, assignee,
         trustee, sequestrator (or other similar official) of the Company or of
         any substantial part of its property, or ordering the winding up or
         liquidation of its affairs, and the continuance of any such decree or
         order unstayed and in effect for a period of 60 consecutive days; or

                  (5) the institution by the Company of proceedings to be
         adjudicated a bankrupt or insolvent, or the consent by it to the
         institution of bankruptcy or insolvency proceedings against it, or the
         filing by it of a petition or answer or consent seeking reorganization
         or relief under the Federal Bankruptcy Act or any other applicable
         Federal or State law, or the consent by it to the filing of any such
         petition or to the appointment of a receiver, liquidator, assignee,
         trustee, sequestrator (or other similar official) of the

                                       22
<PAGE>

         Company or of any substantial part of its property, or the making by it
         of an assignment for the benefit of creditors, or the admission by it
         in writing of its inability to pay its debts generally as they become
         due, or the taking of corporate action by the Company in furtherance of
         any such action.

         Section 5-2. Acceleration of Maturity Rescission and Annulment.

         If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding "Applicable Debentures" (as hereinafter defined) may declare the
Applicable Debentures to be due and payable immediately, by a notice in writing
to the Company (and to the Trustee if given by the Holders of the Applicable
Debentures), and upon any such declaration the principal of, premium, if any,
and accrued interest on the Applicable Debentures to the extent not then already
due and payable shall become immediately due and payable. The term "Applicable
Debentures" shall mean the Investment Debentures, Series I in the case of an
Event of Default set forth in Section 5-1 and the Debentures of each other
series in the case of an Event of Default with respect to such series as
provided in any supplemental indenture relating to the Debentures of such
series; but in no event shall the term "Applicable Debentures" include
Debentures of more than one series.

         At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of such Applicable Debentures Outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if

                  (1) the Company has paid or deposited with the Trustee a sum
         sufficient to pay

                           (A) all overdue installments of interest on such
                  Applicable Debentures,

                           (B) the principal of and premium, if any, on such
                  Applicable Debentures which have become due otherwise than by
                  such declaration of acceleration and interest thereon at the
                  respective rates borne by such Applicable Debentures,

                           (C) to the extent that payment of such interest is
                  lawful, interest upon overdue installments of interest at the
                  respective rates borne by such Applicable Debentures, and

                           (D) all sums paid or advanced by the Trustee
                  hereunder and the reasonable compensation, expenses,
                  disbursements and advances of the Trustee, its agents and
                  counsel, in each case, with respect to such Applicable
                  Debentures;

         and

                                       23
<PAGE>

                  (2) all Events of Default, other than the nonpayment of the
         principal of such Applicable Debentures which have become due solely by
         such acceleration, have been cured or waived as provided in Section
         5-13.

No such rescission shall affect any subsequent default or impair any right
consequent thereon.

         Section 5-3. Collection of Indebtedness and Suits for Enforcement by
                      Trustee.

         The Company covenants that if

                  (1) default is made in the payment of any installment of
         interest on any Applicable Debenture when such interest becomes due and
         payable and such default continues for a period of 30 days, or

                  (2) default is made in the payment of the principal of (or
         premium, if any, on) any Applicable Debenture at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Applicable Debentures, the whole amount then due and payable on
such Applicable Debentures for principal and premium, if any, and interest, with
interest upon the overdue principal and premium, if any, and, to the extent that
payment of such interest shall be legally enforceable, upon overdue installments
of interest, at the rate borne by the Applicable Debentures; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

         If the Company fails to pay such amount forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Applicable Debentures and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Applicable
Debentures, wherever situated.

         If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders of such Applicable Debentures by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.

         Section 5-4. Trustee May File Proofs of Claim.

         In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Debentures or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration or
otherwise and

                                       24
<PAGE>

irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,

                  (i) to file and prove a claim for the whole amount of
         principal and premium, if any, and interest owing and unpaid in respect
         of the Debentures and to file such other papers or documents as may be
         necessary or advisable in order to have the claims of the Trustee
         (including any claim for the reasonable compensation, expenses,
         disbursements and advances of the Trustee, its agents and counsel) and
         of the Debentureholders allowed in such judicial proceeding, and

                  (ii) to collect and receive any moneys or other property
         payable or deliverable on any such claims and to distribute the same;

and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each
Debentureholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Debentureholders, to pay the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6-7.

         Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Debentureholder any
plan or reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Debentureholder in any such proceeding.

         Section 5-5. Trustee May Enforce Claims Without Possession of
                      Debentures.

         All rights of action and claims under this Indenture or the Debentures
may be prosecuted and enforced by the Trustee without the possession of any of
the Debentures or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Debentures in respect of which such
judgment has been recovered.

         Section 5-6. Application of Money Collected.

         Any money collected or to be applied by the Trustee with respect to a
series of Debentures pursuant to this Article shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal or premium, if any, or
interest, upon presentation of the Outstanding Debentures of such series and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:

         First: To the payment of amounts due the Trustee under Section 6-7;

                                       25
<PAGE>

         Second: To the payment of the amounts then due and unpaid upon the
Debentures of such series for principal and premium, if any, and interest, in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Debentures of such series for principal and premium, if
any, and interest, respectively.

         Section 5-7. Limitation on Suits.

         No Holder of any Applicable Debenture shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless

                  (1) such Holder has previously given written notice to the
         Trustee of a continuing Event of Default with respect to Applicable
         Debentures of the same series;

                  (2) the Holders of not less than 25% in principal amount of
         the Outstanding Applicable Debentures shall have made written request
         to the Trustee to institute proceedings in respect of such Event of
         Default in its own name as Trustee hereunder;

                  (3) such Holder or Holders have offered to the Trustee
         reasonable indemnity against the costs, expenses and liabilities to be
         incurred in compliance with such request;

                  (4) the Trustee for 60 days after its receipt of such notice,
         request and offer of indemnity has failed to institute any such
         proceeding; and

                  (5) no direction inconsistent with such written request has
         been given to the Trustee during such 60-day period by the Holders of a
         majority in principal amount of the Outstanding Applicable Debentures;

it being understood and intended that no one or more Holders of Debentures shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Debentures, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all the Holders of Debentures.

         Section 5-8. Unconditional Right of Debentureholders to Receive
                      Principal, Premium and Interest.

         Notwithstanding any other provision in this Indenture, the Holder of
any Debenture shall have the right which is absolute and unconditional to
receive payment of the principal of and premium, if any, and (subject to Section
3-9) interest on such Debenture on the respective Stated Maturities expressed in
such Debenture (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.

                                       26
<PAGE>

         Section 5-9. Restoration of Rights and Remedies.

         If the Trustee or any Debentureholder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Debentureholder, then and in every such case the Company,
the Trustee and the Debentureholders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Debentureholders shall continue as though no such proceeding had been
instituted.

         Section 5-10. Rights and Remedies Cumulative.

         No right or remedy herein conferred upon or reserved to the Trustee or
to the Debentureholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

         Section 5-11. Delay or Omission Not Waiver.

         No delay or omission of the Trustee or of any Holder of any Debenture
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by the
law Trustee or to the Debentureholders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the Debentureholders,
as the case may be.

         Section 5-12. Control by Debentureholders.

         The Holders of a majority in principal amount of the Outstanding
Debentures of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Debentures of such series, provided that

                  (1) such direction shall not be in conflict with any rule of
         law or with this Indenture, and

                  (2) the Trustee may take any other action deemed proper by the
         Trustee which is not inconsistent with such direction.

         Section 5-13. Waiver of Past Defaults.

         The holders of not less than a majority in principal amount of the
Outstanding Debentures of any series may on behalf of the Holders of all the
Debentures of such series waive any past default hereunder and its consequences,
except a default

                                       27
<PAGE>

                  (1) in the payment of the principal of or premium, if any, or
         interest on any Debenture of such series, or

                  (2) in respect of a covenant or provision hereof which under
         Article Nine cannot be modified or amended without the consent of the
         Holder of each Outstanding Debenture affected.

         Upon any such waiver, such default shall cease to exist, and any Even
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.

         Section 5-14. Undertaking for Costs.

         All parties to this Indenture agree, and each Holder of any Debenture
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders, holding in the aggregate more than 10% in aggregate principal
amount of any series of Debentures, or to any suit instituted by any
Debentureholder for the enforcement of the payment of the principal of or
premium, if any, or interest on any Debenture on or after the respective Stated
Maturities expressed in such Debenture (or, in the case of redemption, on or
after the Redemption Date).

         Section 5-15. Waiver of Stay or Extension Laws.

         The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every power as though no such law had been enacted.

                                   ARTICLE SIX

                                   The Trustee

         Section 6-1. Certain Duties and Responsibilities.

                  (a) Except during the continuance of an Event of Default,

                                       28
<PAGE>

                           (1) the Trustee undertakes to perform such duties and
                  only such duties as are specifically set forth in this
                  Indenture, and no implied covenants or obligations shall be
                  read into this Indenture against the Trustee; and

                           (2) in the absence of bad faith on its part, the
                  Trustee may conclusively rely, as to the truth of the
                  statements and the correctness of the opinions expressed
                  therein, upon certificates or opinions furnished to the
                  Trustee and conforming to the requirements of this Indenture;
                  but in the case of any such certificates or opinions which by
                  any provision hereof are specifically required to be furnished
                  to the Trustee, the Trustee shall be under a duty to examine
                  the same to determine whether or not they conform to the
                  requirements of this Indenture.

                  (b) In case an Event of Default has occurred and is
         continuing, the Trustee shall exercise such of the rights and powers
         vested in it by this Indenture, and use the same degree of care and
         skill in their exercise, as a prudent man would exercise or use under
         the circumstances in the conduct of his own affairs.

                  (c) No provision of this Indenture shall be construed to
         relieve the Trustee from liability for its own negligent action, its
         own negligent failure to act, or its own willful misconduct, except
         that

                           (1) this Subsection shall not be construed to limit
                  the effect of Subsection (a) of this Section;

                           (2) the Trustee shall not be liable for any error of
                  judgment made in good faith by a Responsible Officer, unless
                  it shall be proved that the Trustee was negligent in
                  ascertaining the pertinent facts;

                           (3) the Trustee shall not be liable with respect to
                  any action taken or omitted to be taken by it in good faith in
                  accordance with the direction of the Holders of a majority in
                  principal amount of the Outstanding Debentures of any series
                  relating to the time, method and place of conducting any
                  proceeding for any remedy available to the Trustee, or
                  exercising any trust or power conferred upon the Trustee, with
                  respect to the Debentures of such series, under this
                  Indenture; and

                           (4) no provision of this Indenture shall require the
                  Trustee to expend or risk its own funds or otherwise incur any
                  financial liability in the performance of any of its duties
                  hereunder, or in the exercise of any of its rights or powers,
                  if it shall have reasonable grounds for believing that
                  repayment of such funds or adequate indemnity against such
                  risk or liability is not reasonably assured to it.

                  (d) Whether or not herein expressly so provided, every
         provision of this Indenture relating to the conduct or affecting the
         liability of or affording protection to the Trustee shall be subject to
         the provisions of this Section.

                                       29
<PAGE>

         Section 6-2. Notice of Defaults.

         Within 90 days after the occurrence of any default hereunder with
respect to a series of Debentures, the Trustee shall transmit by mail to all
Holders of Debentures of such series, as their names and addresses appear in the
Debenture Register, notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of or premium,
if any, or interest on any Debenture of such series or in the payment of any
sinking or purchase fund installment due on such Debenture, the Trustee shall be
protected in withholding such notice if and so long as the Board of Directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Holders of Debentures of such series; and
provided, further, that in the case of any default of the character specified in
Section 5-1(3) no such notice to such Holders shall be given until at least 30
days after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default with respect to Debentures of such series.

         Section 6-3. Certain Rights of Trustee.

         Except as otherwise provided in Section 6-1:

                  (a) the Trustee may rely and shall be protected in acting or
         refraining from acting upon any resolution, certificate, statement,
         instrument, opinion, report, notice, request, direction, consent,
         order, bond, debenture or other paper or document believed by it to be
         genuine and to have been signed or presented by the proper party or
         parties;

                  (b) any request or direction of the Company mentioned herein
         shall be sufficiently evidenced by a Company Request or Company Order
         and any resolution of the Board of Directors may be sufficiently
         evidenced by a Board Resolution;

                  (c) whenever in the administration of this Indenture the
         Trustee shall deem it desirable that a matter be proved or established
         prior to taking, suffering or omitting any action hereunder, the
         Trustee (unless other evidence be herein specifically prescribed) may,
         in the absence of bad faith on its part, rely upon an Officers'
         Certificate;

                  (d) the Trustee may consult with counsel and the written
         advice of such counsel or any Opinion of Counsel shall be full and
         complete authorization and protection in respect of any action taken,
         suffered or omitted by it hereunder in good faith and in reliance
         thereon;

                  (e) the Trustee shall be under no obligation to exercise any
         of the rights or powers vested in it by this Indenture at the request
         or direction of any of the Debentureholders pursuant to this Indenture,
         unless such Debentureholders shall have offered to the Trustee
         reasonable security or indemnity against the costs, expenses and
         liabilities which might be incurred by it in compliance with such
         request or direction;

                  (f) the Trustee shall not be bound to make any investigation
         into the facts or matters stated in any resolution, certificate,
         statement, instrument, opinion, report, notice,

                                       30
<PAGE>

         request, direction, consent, order, bond, debenture or other paper or
         document, but the Trustee, in its discretion, may make such further
         inquiry or investigation into such facts or matters as it may see fit,
         and, if the Trustee shall determine to make such further inquiry or
         investigation, it shall be entitled to examine the books, records and
         premises of the Company, personally or by agent or attorney; and

                  (g) the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents or attorneys and the Trustee shall not be responsible
         for any misconduct or negligence on the part of any agent or attorney
         appointed with due care by it hereunder.

         Section 6-4. Not Responsible for Recitals or Issuance of Debentures.

         The recitals contained herein and in the Debentures, except the
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Debentures. The Trustee shall not be accountable for the use or
application by the Company of Debentures or the proceeds thereof.

         Section 6-5. May Hold Debentures.

         The Trustee, any Paying Agent, Debenture Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner or
pledgee of Debentures and, subject to Sections 6-8 and 6-13 hereof in the case
of the Trustee, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Debenture Registrar or such
other agent.

         Section 6-6. Money Held in Trust.

         Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.

         Section 6-7. Compensation and Reimbursement.

         The Company agrees:

                  (1) to pay to the Trustee from time to time reasonable
         compensation for all services rendered by it hereunder (which
         compensation shall not be limited by any provision of law in regard to
         the compensation of a trustee of an express trust);

                  (2) except as otherwise expressly provided herein, to
         reimburse the Trustee upon its request for all reasonable expenses,
         disbursements and advances incurred or made by the Trustee in
         accordance with any provision of this Indenture (including the
         reasonable compensation and the expenses and disbursements of its
         agents and counsel), except any such expense, disbursement or advance
         as may be attributable to its negligence or bad faith; and

                                       31
<PAGE>

                  (3) to indemnify the Trustee for, and to hold it harmless
         against, any loss, liability or expense incurred without negligence or
         bad faith on its part, arising out of or in connection with the
         acceptance or administration of this trust, including the costs and
         expenses of defending itself against any claim or liability in
         connection with the exercise or performance of any of its powers or
         duties hereunder.

         As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Debentures upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of and premium, if any, or interest on
Debentures.

         Section 6-8. Disqualification; Conflicting Interests.

                  (a) If the Trustee has or shall acquire any conflicting
         interest, as defined in this Section, it shall, within 90 days after
         ascertaining that it has such conflicting interest, either eliminate
         such conflicting interest or resign in the manner and with the effect
         hereinafter specified in this Article.

                  (b) In the event that the Trustee shall fail to comply with
         the provisions of Subsection (a) of this Section the Trustee shall,
         within 10 days after the expiration of such 90-day period, transmit by
         mail to all Debentureholders, as their names and addresses appear in
         the Debenture Register, notice of such failure.

                  (c) For the purpose of this Section, the Trustee shall be
         deemed to have a conflicting interest if

                           (1) the Trustee is trustee under another indenture
                  under which any other securities, or certificates of interest
                  or participation in any other securities, of the Company are
                  outstanding, unless such other indenture is a collateral trust
                  indenture under which the only collateral consists of
                  Debentures issued under this Indenture, provided that there
                  shall be excluded from the operation of this paragraph any
                  indenture or indentures under which other securities, or
                  certificates of interest or participation in other securities,
                  of the Company are outstanding, if

                                    (i) this Indenture and such other indenture
                           or indentures are wholly unsecured and such other
                           indenture or indentures are hereafter qualified under
                           TIA, unless the Commission shall have found and
                           declared by order pursuant to Section 305(b) or
                           Section 307(c) of TIA that differences exist between
                           the provisions of this Indenture and the provisions
                           of such other indenture or indentures which are so
                           likely to involve a material conflict of interest as
                           to make it necessary in the public interest or for
                           the protection of investors to disqualify the Trustee
                           from acting as such under this Indenture and such
                           other indenture or indentures, or

                                    (ii) the Company shall have sustained the
                           burden of proving, on application to the Commission
                           and after opportunity for hearing thereon, that
                           trusteeship under this Indenture and such other
                           indenture or

                                       32
<PAGE>

                           indentures is not so likely to involve a material
                           conflict of interest as to make it necessary in the
                           public interest or for the protection of investors to
                           disqualify the Trustee from acting as such under one
                           of such indentures;

                           (2) the Trustee or any of its directors or executive
                  officers is an obligor upon the Debentures or an underwriter
                  for the Company;

                           (3) the Trustee directly or indirectly controls or is
                  directly or indirectly controlled by or is under direct or
                  indirect common control with the Company or an underwriter for
                  the Company;

                           (4) the Trustee or any of its directors or executive
                  officers is a director, officer, partner, employee, appointee
                  or representative of the Company, or of an underwriter (other
                  than the Trustee itself) for the Company who is currently
                  engaged in the business of underwriting, except that (i) one
                  individual may be a director or an executive officer, or both,
                  of the Trustee and a director or an executive officer, or
                  both, of the Company but may not be at the same time an
                  executive officer of both the Trustee and the Company; (ii) if
                  and so long as the number of directors of the Trustee in
                  office is more than nine, one additional individual may be a
                  director or an executive officer, or both, of the Trustee and
                  a director of the Company; and (iii) the Trustee may be
                  designated by the Company or by any underwriter for the
                  Company to act in the capacity of transfer agent, registrar,
                  custodian, paying agent, fiscal agent, escrow agent, or
                  depositary, or in any other similar capacity, or, subject to
                  the provisions of paragraph (1) of this Subsection, to act as
                  trustee, whether under an indenture or otherwise;

                           (5) 10% or more of the voting securities of the
                  Trustee is beneficially owned either by the Company or by any
                  director, partner, or executive officer thereof, or 20% or
                  more of such voting securities is beneficially owned,
                  collectively, by any two or more of such persons; or 10% or
                  more of the voting securities of the Trustee is beneficially
                  owned either by an underwriter for the Company or by any
                  director, partner or executive officer thereof, or is
                  beneficially owned, collectively, by any two or more such
                  persons;

                           (6) the Trustee is the beneficial owner of, or holds
                  as collateral security for an obligation which is in default
                  (as hereinafter in this Subsection defined), (i) 5% or more of
                  the voting securities, or 10% or more of any other class of
                  security, of the Company not including the Debentures issued
                  under this Indenture and securities issued under any other
                  indenture under which the Trustee is also trustee, or (ii) 10%
                  or more of any class of security of an underwriter for the
                  Company;

                           (7) the Trustee is the beneficial owner of, or holds
                  as collateral security for an obligation which is in default
                  (as hereinafter in this Subsection defined), 5% or more of the
                  voting securities of any person who, to the knowledge of the
                  Trustee, owns 10% or more of the voting securities of, or
                  controls directly or indirectly or is under direct or indirect
                  common control with, the Company;

                                       33
<PAGE>

                           (8) the Trustee is the beneficial owner of, or holds
                  as collateral security for an obligation which is in default
                  (as hereinafter in this Subsection defined), 10% or more of
                  any class of security of any person who, to the knowledge of
                  the Trustee, owns 50% or more of the voting securities of the
                  Company; or

                           (9) the Trustee owns, on May 15 in any calendar year,
                  in the capacity of executor, administrator, testamentary or
                  inter vivos trustee, guardian, committee or conservator, or in
                  any other similar capacity, an aggregate of 25% or more of the
                  voting securities, or of any class of security, of any person,
                  the beneficial ownership of a specified percentage of which
                  would have constituted a conflicting interest under paragraphs
                  (6), (7) or (8) of this Subsection. As to any such securities
                  of which the Trustee acquired ownership through becoming
                  executor, administrator, or testamentary trustee of an estate
                  which included them, the provisions of the preceding sentence
                  shall not apply, for a period of two years from the date of
                  such acquisition, to the extent that such securities included
                  in such estate do not exceed 25% of such voting securities or
                  25% of any such class of security. Promptly after May 15 in
                  each calendar year, the Trustee shall make a check of its
                  holdings of such securities in any of the above-mentioned
                  capacities as of such May 15. If the Company fails to make
                  payment in full of the principal of, or the premium, if any,
                  or interest on, any of the Debentures when and as the same
                  becomes due and payable, and such failure continues for 30
                  days thereafter, the Trustee shall make a prompt check of its
                  holdings of such securities in any of the above-mentioned
                  capacities as of the date of the expiration of such 30-day
                  period, and after such date, notwithstanding the foregoing
                  provisions of this paragraph, all such securities so held by
                  the Trustee, with sole or joint control over such securities
                  vested in it, shall, but only so long as such failure shall
                  continue, be considered as though beneficially owned by the
                  Trustee for the purposes of paragraphs (6), (7) and (8) of
                  this Subsection.

                  The specification of percentages in paragraphs (5) to (9)
         inclusive, of this Subsection, shall not be construed as indicating
         that the ownership of such percentages of the securities of a person is
         or is not necessary or sufficient to constitute direct or indirect
         control for the purposes of paragraph (3) or (7) of this Subsection.

                  For the purposes of paragraphs (6), (7), (8) and (9) of this
         Subsection only, (i) the terms "security" and "securities" shall
         include only such securities as are generally known as corporate
         securities, but shall not include any note or other evidence of
         indebtedness issued to evidence an obligation to repay moneys lent to a
         person by one or more banks, trust companies or banking firms, or any
         certificate of interest or participation in any such note or evidence
         of indebtedness; (ii) an obligation shall be deemed to be "in default"
         when a default in payment of principal shall have continued for 30 days
         or more and shall not have been cured; and (iii) the Trustee shall not
         be deemed to be the owner or holder of (A) any security which it holds
         as collateral security, as trustee or otherwise, for an obligation
         which is not in default as defined in clause (ii) above, or (B) any
         security which it holds as collateral security under this Indenture,
         irrespective of any default hereunder, or (C) any security which it
         holds as agent for

                                       34
<PAGE>

         collection, or as custodian, escrow agent, or depositary, or in any
         similar representative capacity.

                  (d) For the purposes of this Section:

                           (1) The term "underwriter" when used with reference
                  to the Company means every person who, within 3 years prior to
                  the time as of which the determination is made, has purchased
                  from the Company with a view to, or has offered or sold for
                  the Company in connection with, the distribution of any
                  security of the Company outstanding at such time, or has
                  participated or has had a direct or indirect participation in
                  any such undertaking, or has participated or has had a
                  participation in the direct or indirect underwriting of any
                  such undertaking, but such term shall not include a person
                  whose interest was limited to a commission from an underwriter
                  or dealer not in excess of the usual and customary
                  distributors' or sellers' commission.

                           (2) The term "director" means any director of a
                  corporation, or any individual performing similar functions
                  with respect to any organization whether incorporated or
                  unincorporated.

                           (3) The term "person" means an individual, a
                  corporation, a partnership, an association, a joint-stock
                  company, a trust, an unincorporated organization, or a
                  government or political subdivision thereof. As used in this
                  paragraph, the term "trust" shall include only a trust where
                  the interest or interests of the beneficiary or beneficiaries
                  are evidenced by a security.

                           (4) The term "voting security" means any security
                  presently entitling the owner or holder thereof to vote in the
                  direction or management of the affairs of a person, or any
                  security issued under or pursuant to any trust, agreement or
                  arrangement whereby a trustee or trustees or agent or agents
                  for the owner or holder of such security are presently
                  entitled to vote in the direction or management of the affairs
                  of a person.

                           (5) The term "Company" means any obligor upon the
                  Debentures.

                           (6) The term "executive officer" means the president,
                  every vice president, every trust officer, the cashier, the
                  secretary, and the treasurer of a corporation, and any
                  individual customarily performing similar functions with
                  respect to any organization whether incorporated or
                  unincorporated, and shall include the chairman of the board of
                  directors.

                  (e) The percentages of voting securities and other securities
         specified in this Section shall be calculated in accordance with the
         following provisions:

                           (1) A specified percentage of the voting securities
                  of the Trustee, the Company or any other person referred to in
                  this Section (each of whom is referred to as a "person" in
                  this paragraph) means such amount of the outstanding voting
                  securities of such person as entitles the holder or holders
                  thereof to cast such

                                       35
<PAGE>

                  specified percentage of the aggregate votes which the holders
                  of all the outstanding voting securities of such person are
                  entitled to cast in the direction or management of the affairs
                  of such person.

                           (2) A specified percentage of a class of securities
                  of a person means such percentage of the aggregate amount of
                  securities of the class outstanding.

                           (3) The term "amount," when used in regard to
                  securities, means the principal amount if relating to
                  evidences of indebtedness, the number of shares if relating to
                  capital shares, and the number of units if relating to any
                  other kind of security.

                           (4) The term "outstanding" means issued and not held
                  by or for the account of the issuer. The following securities
                  shall not be deemed outstanding within the meaning of this
                  definition:

                                    (i) securities of an issuer held in a
                           sinking fund relating to securities of the issuer of
                           the same class;

                                    (ii) securities of an issuer held in a
                           sinking fund relating to another class of securities
                           of the issuer, if the obligation evidenced by such
                           other class of securities is not in default as to
                           principal or interest or otherwise;

                                    (iii) securities pledged by the issuer
                           thereof as security for an obligation of the issuer
                           not in default as to principal or interest or
                           otherwise; and

                                    (iv) securities held in escrow if placed in
                           escrow by the issuer thereof;

                  provided, however, that any voting securities of an issuer
                  shall be deemed outstanding if any person other than the
                  issuer is entitled to exercise the voting rights thereof.

                           (5) A security shall be deemed to be of the same
                  class as another security if both securities confer upon the
                  holder or holders thereof substantially the same rights and
                  privileges; provided, however, that, in the case of secured
                  evidences of indebtedness, all of which are issued under a
                  single indenture, differences in the interest rates or
                  maturity dates of various series thereof shall not be deemed
                  sufficient to constitute such series different classes and
                  provided, further, that, in the case of unsecured evidences of
                  indebtedness, differences in the interest rates or maturity
                  dates thereof shall not be deemed sufficient to constitute
                  them securities of different classes, whether or not they are
                  issued under a single indenture.

                                       36
<PAGE>

         Section 6-9. Corporate Trustee Required; Eligibility.

         There shall at all times be a trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any State, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by Federal or State authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.

         Section 6-10. Resignation and Removal; Appointment of Successor.

                  (a) No resignation or removal of the Trustee and no
         appointment of a successor Trustee pursuant to this Article shall
         become effective until the acceptance of appointment by the successor
         Trustee under Section 6-11.

                  (b) The Trustee may resign at any time by giving written
         notice thereof to the Company. If an instrument of acceptance by a
         successor Trustee shall not have been delivered to the Trustee within
         30 days after the giving of such notice of resignation, the resigning
         Trustee may petition any court of competent jurisdiction for the
         appointment of a successor Trustee.

                  (c) The Trustee may be removed at any time by Act of the
         Holders of a majority in principal amount of the Outstanding
         Debentures, delivered to the Trustee and to the Company.

                  (d) If at any time:

                           (1) the Trustee shall fail to comply with Section 6-8
                  (a) after written request therefor by the Company or by any
                  Debentureholder who has been a bona fide Holder of a Debenture
                  for at least 6 months, or

                           (2) the Trustee shall cease to be eligible under
                  Section 6-9 and shall fail to resign after written request
                  therefor by the Company or by any such Debentureholder, or

                           (3) the Trustee shall become incapable of acting or
                  shall be adjudged a bankrupt or insolvent or a receiver of the
                  Trustee or of its property shall be appointed or any public
                  officer shall take charge or control of the Trustee or of its
                  property or affairs for the purpose of rehabilitation,
                  conservation or liquidation,

then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5-14, any Debentureholder who has been a
bona fide Holder of a Debenture for at least 6 months may, on behalf of himself
and all others similarly situated,

                                       37
<PAGE>

petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

                  (e) If the Trustee shall resign, be removed or become
         incapable of acting, or if a vacancy shall occur in the office of
         Trustee for any cause, the Company, by a Board Resolution, shall
         promptly appoint a successor Trustee. If, within 1 year after such
         resignation, removal or incapability, or the occurrence of such
         vacancy, a successor Trustee shall be appointed by Act of the Holders
         of a majority in principal amount of the Outstanding Debentures
         delivered to the Company and the retiring Trustee, the successor
         Trustee so appointed shall, forthwith upon its acceptance of such
         appointment, become the successor Trustee and supersede the successor
         Trustee appointed by the Company. If no successor Trustee shall have
         been so appointed by the Company or the Debentureholders and accepted
         appointment in the manner hereinafter provided, any Debentureholder who
         has been a bona fide Holder of a Debenture for at least 6 months may,
         on behalf of himself and all others similarly situated, petition any
         court of competent jurisdiction for the appointment of a successor
         Trustee.

                  (f) The Company shall give notice of each resignation and each
         removal of the Trustee and each appointment of a successor Trustee by
         mailing written notice of such event by first-class mail, postage
         prepaid, to the Holders of Debentures as their names and addresses
         appear in the Debenture Register. Each notice shall include the name of
         the successor Trustee and the address of its principal corporate trust
         office.

         Section 6-11. Acceptance of Appointment by Successor.

         Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder, subject nevertheless to its lien, if any,
provided for in Section 6-7. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.

         No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.

         Section 6-12. Merger Conversion, Consolidation or Succession to
Business.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,

                                       38
<PAGE>

provided such corporation shall be otherwise qualified and eligible under this
Article, to the extent operative, without the execution or filing of any paper
or any further act on the part of any of the parties hereto. In case any
Debentures shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Debentures
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Debentures.

         Section 6-13. Preferential Collection of Claims Against Company.

                  (a) Subject to Subsection (b) of this Section, if the Trustee
         shall be or shall become a creditor, directly or indirectly, secured or
         unsecured, of the Company within 4 months prior to a default, as
         defined in Subsection (c) of this Section, or subsequent to such a
         default, then, unless and until such default shall be cured, the
         Trustee shall set apart and hold in a special account for the benefit
         of the Trustee individually, the Holders of the Debentures and the
         holders of other indenture securities (as defined in Subsection (c) of
         this Section):

                           (1) an amount equal to any and all reductions in the
                  amount due and owing upon any claim, as such creditor in
                  respect of principal or interest, effected after the beginning
                  of such 4 months' period and valid as against the Company and
                  its other creditors, except any such reduction resulting from
                  the receipt or disposition of any property described in
                  paragraph (2) of this Subsection, or from the exercise of any
                  right of set-off which the Trustee could have exercised if a
                  petition in bankruptcy had been filed by or against the
                  Company upon the date of such default; and

                           (2) all property received by the Trustee in respect
                  of any claim as such creditor, either as security therefor, or
                  in satisfaction or composition thereof, or otherwise, after
                  the beginning of such 4 months' period or an amount equal to
                  the proceeds of any such property, if disposed of, subject,
                  however, to the rights, if any, of the Company and its other
                  creditors in such property or such proceeds.

Nothing herein contained, however, shall affect the right of the Trustee

                  (A) to retain for its own account (i) payments made on account
         of any such claim by any Person (other than the Company) who is liable
         thereon, and (ii) the proceeds of the bona fide sale of any such claim
         by the Trustee to a third person, and (iii) distributions made in cash,
         securities or other property in respect of claims filed against the
         Company in bankruptcy or receivership or in proceedings for
         reorganization pursuant to the Federal Bankruptcy Act or applicable
         State law;

                  (B) to realize, for its own account, upon any property held by
         it as security for any such claim, if such property was so held prior
         to the beginning of such 4 months' period;

                  (C) to realize, for its own account, but only to the extent of
         the claim hereinafter mentioned, upon any property held by it as
         security for any such claim, if

                                       39
<PAGE>

         such claim was created after the beginning of such 4 months' period and
         such property was received as security therefor simultaneously with the
         creation thereof, and if the Trustee shall sustain the burden of
         proving that at the time such property was so received the Trustee had
         no reasonable cause to believe that a default as defined in Subsection
         (c) of this Section would occur within 4 months; or

                  (D) to receive payment on any claim referred to in paragraph
         (B) or (C), against the release of any property held as security for
         such claim as provided in paragraph (B) or (C), as the case may be, to
         the extent of the fair value of such property.

         For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such 4 months' period for property held as security at
the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any pre-existing claim of the Trustee as such creditor, such claim shall have
the same status as such pre-existing claim.

         If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
between the Trustee, the Debentureholders and the holders of other indenture
securities in such manner that the Trustee, the Debentureholders and the holders
of other indenture securities realize, as a result of payments from such special
account and payments of dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable State law, the same percentage of their
respective claims, figured before crediting to the claim of the Trustee anything
on account of the receipt by it from the Company of the funds and property in
such special account and before crediting to the respective claims of the
Trustee and the Debentureholders and the holders of other indenture securities
dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, but after crediting thereon receipts on account of the
indebtedness represented by their respective claims from all sources other than
from such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim, in
bankruptcy or receivership or proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable State law, whether such distribution is
made in cash, securities, or other property, but shall not include any such
distribution with respect to the secured portion, if any, of such claim. The
court in which such bankruptcy, receivership or proceedings for reorganization
is pending shall have jurisdiction (i) to apportion between the Trustee and the
Debentureholders and the holders of other indenture securities, in accordance
with the provisions of this paragraph, the funds and property held in such
special account and proceeds thereof, or (ii) in lieu of such apportionment, in
whole or in part, to give to the provisions of this paragraph due consideration
in determining the fairness of the distributions to be made to the Trustee and
the Debentureholders and the holders of other indenture securities with respect
to their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property held in
such special account or as security for any such claim, or to make a specific
allocation of such distributions as between the secured and unsecured portions
of such claims, or otherwise to apply the provisions of this paragraph as a
mathematical formula.

                                       40
<PAGE>

         Any Trustee which has resigned or been removed after the beginning of
such 4 months' period shall be subject to the provisions of this Subsection as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such 4 months' period, it shall be
subject to the provisions of this Subsection if and only if the following
conditions exist:

                           (i) the receipt of property or reduction of claim,
                  which would have given rise to the obligation to account, if
                  such Trustee had continued as Trustee, occurred after the
                  beginning of such 4 months' period; and

                           (ii) such receipt of property or reduction of claim
                  occurred within 4 months after such resignation or removal.

                  (b) There shall be excluded from the operation of Subsection
         (a) of this Section a creditor relationship arising from

                           (1) the ownership or acquisition of securities issued
                  under any indenture, or any security or securities having a
                  maturity of one year or more at the time of acquisition by the
                  Trustee;

                           (2) advances authorized by a receivership or
                  bankruptcy court of competent jurisdiction, or by this
                  Indenture, for the purpose of preserving any property which
                  shall at any time be subject to the lien of this Indenture or
                  of discharging tax liens or other prior liens or encumbrances
                  thereon, if notice of such advances and of the circumstances
                  surrounding the making thereof is given to the
                  Debentureholders at the time and in the manner provided in
                  this Indenture;

                           (3) disbursements made in the ordinary course of
                  business in the capacity of trustee under an indenture,
                  transfer agent, registrar, custodian, paying agent, fiscal
                  agent or depositary, or other similar capacity;

                           (4) an indebtedness created as a result of services
                  rendered or premises rented; or an indebtedness created as a
                  result of goods or securities sold in a cash transaction as
                  defined in Subsection (c) of this Section;

                           (5) the ownership of stock or of other securities of
                  a corporation organized under the provisions of Section 15(a)
                  of the Federal Reserve Act, as amended, which is directly or
                  indirectly a creditor of the Company; or

                           (6) the acquisition, ownership, acceptance or
                  negotiation of any drafts, bills of exchange, acceptances or
                  obligations which fall within the classification of
                  self-liquidating paper as defined in Subsection (c) of this
                  Section.

                  (c) For the purposes of this Section only:

                           (1) The term "default" means any failure to make
                  payment in full of the principal of or interest on any of the
                  Debentures or upon the other indenture securities when and as
                  such principal or interest becomes due and payable.

                                       41
<PAGE>

                           (2) The term "other indenture securities" means
                  securities upon which the Company is an obligor outstanding
                  under any other indenture (i) under which the Trustee is also
                  trustee, (ii) which contains provisions substantially similar
                  to the provisions of this Section, and (iii) under which a
                  default exists at the time of the apportionment of the funds
                  and property held in such special account.

                           (3) The term "cash transaction" means any transaction
                  in which full payment for goods or securities sold is made
                  within 7 days after delivery of the goods or securities in
                  currency or in checks or other orders drawn upon banks or
                  bankers and payable upon demand.

                           (4) The term "self-liquidating paper" means any
                  draft, bill of exchange, acceptance or obligation which is
                  made, drawn, negotiated or incurred by the Company for the
                  purpose of financing the purchase, processing, manufacturing,
                  shipment, storage or sale of goods, wares or merchandise and
                  which is secured by documents evidencing title to, possession
                  of, or a lien upon, the goods, wares or merchandise or the
                  receivables or proceeds arising from the sale of the goods,
                  wares or merchandise previously constituting the security,
                  provided the security is received by the Trustee
                  simultaneously with the creation of the creditor relationship
                  with the Company arising from the making, drawing, negotiating
                  or incurring of the draft, bill of exchange, acceptance or
                  obligation.

                           (5) The term "Company" means any obligor upon the
                  Debentures.

                                  ARTICLE SEVEN

            Debentureholders Lists and Reports by Trustee and Company

         Section 7-1. Company to Furnish Trustee Names and Addresses of
                      Debentureholders.

         The Company will furnish or cause to be furnished to the Trustee

                  (a) semiannually, on or before each April 15 and October 15, a
         list, in such form as the Trustee may reasonably require, of the names
         and addresses of the Holders of Debentures as of the preceding March 31
         and September 30, respectively, and

                  (b) at such other times as the Trustee may request in writing,
         within 30 days after the receipt by the Company of any such request, a
         list of similar form and content as of a date not more than 15 days
         prior to the time such list is furnished.

         Section 7-2. Preservation of Information; Communications to
                      Debentureholders.

                  (a) The Trustee shall preserve, in as current a form as is
         reasonably practicable, the names and addresses of Holders of
         Debentures of each series received by the Trustee as provided in
         Section 7-1. The Trustee may destroy any list furnished to it as
         provided in Section 7-1 upon receipt of a new list so furnished.

                                       42
<PAGE>

                  (b) If 3 or more Holders of Debentures of a series
         (hereinafter referred to as "applicants") apply in writing to the
         Trustee, and furnish to the Trustee reasonable proof that each such
         applicant has owned a Debenture of the stated series for a period of at
         least 6 months preceding the date of such application, and such
         application states that the applicants desire to communicate with other
         Holders of Debentures of such series or of all series with respect to
         their rights under this Indenture or under the appropriate Debentures
         and is accompanied by a copy of the form of proxy or other
         communication which such applicants propose to transmit, then the
         Trustee shall, within 5 Business Days after the receipt of such
         application, at its election, either

                           (i) afford such applicants access to the information
                  preserved at the time by the Trustee in accordance with
                  Section 7-2(a), or

                           (ii) inform such applicants as to the approximate
                  number of Holders of Debentures whose names and addresses
                  appear in the information preserved at the time by the Trustee
                  in accordance with Section 7-2(a), and as to the approximate
                  cost of mailing to such Debentureholders the form of proxy or
                  other communication, if any, specified in such application.

                  If the Trustee shall elect not to afford such applicants
         access to such information, the Trustee shall, upon the written request
         of such applicants, mail to each Debentureholder whose name and address
         appear in the information preserved at the time by the Trustee in
         accordance with Section 7-2 (a) , a copy of the form of proxy or other
         communication which is specified in such request, with reasonable
         promptness after a tender to the Trustee of the material to be mailed
         and of payment, or provision for the payment, of the reasonable
         expenses of mailing, unless within 5 days after such tender, the
         Trustee shall mail to such applicants and file with the Commission,
         together with a copy of the material to be mailed, a written statement
         to the effect that, in the opinion of the Trustee, such mailing would
         be contrary to the best interests of the Holders of Debentures or would
         be in violation of applicable law. Such written statement shall specify
         the basis of such opinion. If the Commission, after opportunity for a
         hearing upon the objections specified in the written statement so
         filed, shall enter an order refusing to sustain any of such objections
         or if, after the entry of an order sustaining one or more of such
         objections, the Commission shall find, after notice and opportunity for
         hearing, that all the objections so sustained have been met and shall
         enter an order so declaring, the Trustee shall mail copies of such
         material to all such Debentureholders with reasonable promptness after
         the entry of such order and the renewal of such tender; otherwise the
         Trustee shall be relieved of any obligation or duty to such applicants
         respecting their application.

                  (c) Every Holder of Debentures, by receiving and holding the
         same, agrees with the Company and the Trustee that neither the Company
         nor the Trustee shall be held accountable by reason of the disclosure
         of any such information as to the names and addresses of the Holders of
         Debentures in accordance with Section 7-2 (b), regardless of the source
         from which such information was derived, and that the Trustee shall not
         be held accountable by reason of mailing any material pursuant to a
         request made under Section 7-2(b).

                                       43
<PAGE>

         Section 7-3. Reports by Trustee.

                  (a) The term "reporting date," as used in this Section, means
         the first day of the tenth calendar month following the date of this
         Indenture and the same day in every year thereafter so long as any
         Debentures of any series are Outstanding hereunder. Within 60 days
         after the reporting date in each year, the Trustee shall transmit by
         mail to all Holders of a given series of Debentures, as their names and
         addresses appear in the Debenture Register, a brief report dated as of
         such reporting date with respect to:

                           (1) its eligibility under Section 6-9 and its
                  qualifications under Section 6-8, or in lieu thereof, if to
                  the best of its knowledge it has continued to be eligible and
                  qualified under said Sections, a written statement to such
                  effect;

                           (2) the character and amount of any advances (and if
                  the Trustee elects so to state, the circumstances surrounding
                  the making thereof) made by the Trustee (as such) which remain
                  unpaid on the date of such report, and for the reimbursement
                  of which it claims or may claim a lien or charge, prior to
                  that of the Debentures of any series, on any property or funds
                  held or collected by it as Trustee, except that the Trustee
                  shall not be required (but may elect) to report such advances
                  if such advances so remaining unpaid aggregate not more than
                  1/2 of 1% of the principal amount of the Debentures of such
                  series Outstanding on the date of such report;

                           (3) the amount, interest rate and maturity date of
                  all other indebtedness owing by the Company (or by any other
                  obligor on the Debentures) to the Trustee in its individual
                  capacity, on the date of such report, with a brief description
                  of any property held as collateral security therefor, except
                  an indebtedness based upon a creditor relationship arising in
                  any manner described in Section 6-13(b) (2), (3), (4) or (6);

                           (4) the property and funds, if any, physically in the
                  possession of the Trustee (as such) on the date of such
                  report;

                           (5) any additional issue of Debentures of any series
                  which the Trustee has not previously reported; and

                           (6) any action taken by the Trustee in the
                  performance of its duties hereunder which it has not
                  previously reported and which in its opinion materially
                  affects the Debentures of any series, except action in respect
                  of a default, notice of which has been or is to be withheld by
                  the Trustee in accordance with Section 6-2.

                  (b) The Trustee shall transmit by mail to all
         Debentureholders, as their names and addresses appear in the Debenture
         Register, a brief report with respect to the character and amount of
         any advances (and if the Trustee elects so to state, the circumstances
         surrounding the making thereof) made by the Trustee (as such) since the
         date of the last report transmitted pursuant to Subsection (a) of this
         Section (or if no such report has yet been so transmitted, since the
         date of execution of this instrument) for the reimbursement of which it
         claims or may claim a lien or charge, prior to that of the

                                       44
<PAGE>

         Debentures of any series, on property or funds held or collected by it
         as Trustee, and which it has not previously reported pursuant to this
         Subsection, except that the Trustee shall not be required (but may
         elect) to report such advances if such advances remaining unpaid at any
         time aggregate 10% or less of the principal amount of the Debentures of
         any series Outstanding at such time, such report to be, transmitted
         within 90 days after such time.

                  (c) A copy of each such report shall, at the time of such
         transmission to Debentureholders, be filed by the Trustee with each
         stock exchange upon which the Debentures are listed, and also with the
         Commission. The Company will notify the Trustee when the Debentures are
         listed on any stock exchange.

         Section 7-4. Reports by the Company.

         The Company will

                           (1) file with the Trustee, within 15 days after the
                  Company is required to file the same with the Commission,
                  copies of the annual reports and of the information, documents
                  and other reports (or copies of such portions of any of the
                  foregoing as the Commission may from time to time by rules and
                  regulations prescribe) which the Company may be required to
                  file with the Commission pursuant to Section 13 or Section
                  15(d) of the Securities Exchange Act of 1934; or, if the
                  Company is not required to file information, documents or
                  reports pursuant to either of said Sections, then it will file
                  with the Trustee and the Commission, in accordance with rules
                  and regulations prescribed from time to time by the
                  Commission, such of the supplementary and periodic
                  information, documents and reports which may be required
                  pursuant to Section 13 of the Securities Exchange Act of 1934
                  in respect of a security listed and registered on a national
                  securities exchange as may be prescribed from time to time in
                  such rules and regulations;

                           (2) file with the Trustee and the Commission in
                  accordance with rules and regulations prescribed from time to
                  time by the Commission, such additional information, documents
                  and reports with respect to compliance by the Company with the
                  conditions and covenants of this Indenture as may be required
                  from time to time by such rules and regulations; and

                           (3) transmit by mail to all Debentureholders, as
                  their names and addresses appear in the Debenture Register,
                  within 30 days after the filing thereof with the Trustee, such
                  summaries of any information, documents and reports required
                  to be filed by the Company pursuant to paragraphs (1) and (2)
                  of this Section as may be required by rules and regulations
                  prescribed from time to time by the Commission.

                                       45
<PAGE>

                                  ARTICLE EIGHT

              Consolidation, Merger, Conveyance, Transfer or Lease

         Section 8-1. Company May Consolidate, etc., only on Certain Terms.

         The Company shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:

                  (1) the corporation formed by such consolidation or into which
         the Company is merged or the Person which acquires by conveyance or
         transfer the properties and assets of the Company substantially as an
         entirety shall be a corporation organized and existing under the laws
         of the United States of America or any State or the District of
         Columbia, and shall expressly assume, by an indenture supplemental
         hereto, executed and delivered to the Trustee, in form satisfactory to
         the Trustee, the due and punctual payment of the principal of and
         premium, if any, and interest on all the Debentures and the performance
         of every covenant of this Indenture on the part of the Company to be
         performed or observed;

                  (2) immediately after giving effect to such transaction, no
         Event of Default, and no event which, after notice or lapse of time, or
         both, would become an Event of Default, shall have happened and be
         continuing; and

                  (3) the Company has delivered to the Trustee an Officers'
         Certificate and an Opinion of Counsel each stating that such
         consolidation, merger, conveyance or transfer and such supplemental
         indenture comply with this Article and that all conditions precedent
         herein provided for relating to such transaction have been complied
         with.

         Section 8-2. Successor Corporation Substituted.

         Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Company substantially as an entirety in accordance
with Section 8-1, the successor corporation formed by such consolidation or into
which the Company is merged or to which such conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein; provided, however, that no
such conveyance or transfer shall have the effect of releasing the Person named
as the "Company" in the first paragraph of this Indenture or any successor
corporation which shall theretofore have become such in the manner prescribed in
this Article from its liability as obligor and maker on any of the Debentures.

                                       46
<PAGE>

                                  ARTICLE NINE

                             Supplemental Indentures

         Section 9-1. Supplemental Indentures Without Consent of
                      Debentureholders.

                  (a) Without the consent of the Holders of any Debentures, the
         Company, when authorized by a Board Resolution, and the Trustee, at any
         time and from time to time, may enter into one or more indentures
         supplemental hereto, in form satisfactory to the Trustee, for any of
         the following purposes:

                           (1) to evidence the succession of another corporation
                  to the Company, and the assumption by any such successor of
                  the covenants of the Company herein and in the Debentures
                  contained; or

                           (2) to add to the covenants of the Company, for the
                  benefit of the Holders of the Debentures or any series
                  thereof, or to surrender any right or power herein conferred
                  upon the Company; or

                           (3) to cure any ambiguity, to correct or supplement
                  any provision herein which may be inconsistent with any other
                  provision herein, or to make any other provisions with respect
                  to matters or questions arising under this Indenture which
                  shall not be inconsistent with the provisions of this
                  Indenture, provided such action shall not adversely affect the
                  interest of the Holders of the Debentures or any series
                  thereof; or

                           (4) to provide for the creation of any series of
                  Debentures (other than Investment Debentures of Series I) as
                  provided in Article Three.

                  (b) It shall not be necessary to obtain any consent from the
         Trustee with regard to any action taken pursuant to this Section, but
         the Trustee shall execute any instrument requested in a Company Request
         for the purpose of confirming such action, upon receipt by the Trustee
         of an Officers' Certificate and an Opinion of Counsel, each stating
         that the Company was authorized by this indenture to take the action
         taken by it and that the execution of such instrument is appropriate to
         confirm such action, provided, however, that the Trustee shall have no
         obligation to execute any supplemental indenture the purpose of which
         is to create a series of Debentures other than Investment Debentures,
         Series I unless all the terms and conditions applicable to such series
         of Debentures affecting the rights, compensation, and duties of the
         Trustee shall be satisfactory to the Trustee.

         Section 9-2. Supplemental Indentures With Consent of Debentureholders.

         With the consent of the Holders of not less than 66-2/3% in principal
amount of the Outstanding Debentures, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this indenture or of modifying in any manner the

                                       47
<PAGE>

rights of the Holders of the Debentures under this Indenture; provided, however,
if such additional, changed or eliminated provision applies only to a particular
series of Debentures, or the rights of the Holders of only a particular series
would be modified, the consent of 66-2/3% in principal amount of Outstanding
Debentures of only such series shall be required; and provided, further, that no
such supplemental indenture shall, without the consent of the Holder of each
Outstanding Debenture affected thereby,

                  (1) change the Stated Maturity of the principal of, or any
         installment of interest on, any Debenture, or reduce the principal
         amount thereof or the interest thereon or any premium payable upon the
         redemption thereof, or change any Place o(pound) Payment where, or the
         coin or currency in which, any Debenture or the interest thereon is
         payable, or impair the right to institute suit for the enforcement of
         any such payment on or after the Stated Maturity thereof (or, in the
         case of redemption, on or after the Redemption Date), or

                  (2) reduce the percentage in principal amount of the
         Outstanding Debentures, the consent of whose Holders is required for
         any such supplemental indenture, or the consent of whose Holders is
         required for any waiver (of compliance with certain provisions of
         this*Indenture or certain defaults hereunder and their consequences)
         provided for in this Indenture, or

                  (3) modify any of the provisions of this Section or Section
         5-13, except to increase any such percentage or to provide that certain
         other provisions of this Indenture cannot be modified or waived without
         the consent of the Holder of each Debenture affected thereby.

         It shall not be necessary for any Act o(pound) Debentureholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.

         Section 9-3. Execution of Supplemental Indentures.

         In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6-1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

         Section 9-4. Effect of Supplemental Indentures.

         Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Debentures theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

                                       48
<PAGE>

         Section 9-5. Conformity with Trust Indenture Act.

         Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of TIA as then in effect.

         Section 9-6. Reference in Debentures to Supplemental Indentures.

         Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Debentures so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such supplemental indenture may be prepared and
executed by the Company and authenticated by the Trustee in exchange for
Outstanding Debentures, and be delivered as authorized by the Company.

                                   ARTICLE TEN

                                    Covenants

         Section 10-1. Payment of Principal, Premium and Interest.

         The Company will duly and punctually pay the principal of and premium,
if any, and interest on each series of Debentures in accordance with the terms
of each such series and this Indenture.

         Section 10-2. Maintenance of Office or Agency.

         The Company will maintain an office or agency in the Place of Payment
for Debentures of each series where Debentures of such series may be presented
or surrendered for payment, where Debentures may be surrendered for transfer or
exchange and where notices and demands to or upon the Company in respect of such
Debentures and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and of any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain such office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the principal corporate trust office of the Trustee, and the
Company hereby appoints the Trustee its agent to receive all such presentations,
surrenders, notices and demands.

         Section 10-3. Money for Debenture Payments to be Held in Trust.

         If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of and premium, if any, or interest
on, any of the Debentures, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal, premium, if any,
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.

                                       49
<PAGE>

         Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of and premium, if any, or interest on,
any Debentures, deposit with a Paying Agent a sum sufficient to pay the
principal, premium, if any, or interest, so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.

         The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:

                  (1) hold all sums held by it for the payment of principal of,
         premium, if any, or interest on Debentures in trust for the benefit of
         the Persons entitled thereto until such sums shall be paid to such
         Persons or otherwise disposed of as herein provided;

                  (2) give the Trustee notice of any default by the Company (or
         any other obligor upon the Debentures) in the making of any such
         payment of principal, premium, if any, or interest; and

                  (3) at anytime during the continuance of any such default,
         upon the written request of the Trustee, forthwith pay to the Trustee
         all sums so held in trust by such Paying Agent.

         The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or any Paying Agent to
the Trustee, such Paying Agent shall be released from all farther liability with
respect to such money.

         Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Debenture and remaining unclaimed for 6 years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Debenture shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in an Authorized Newspaper in each Place of Payment of such
Debenture, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.

                                       50
<PAGE>

         Section 10-4. Payment of Taxes and Other Claims.

         The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon it or upon its income, profits or
property, and (2) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien upon its property; provided, however, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.

         Section 10-5. Maintenance of Properties.

         The Company will cause all its properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business and not disadvantageous in any material respect
to the Debentureholders.

         Section 10-6. Statement as to Compliance.

         The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, a written statement signed by the Chairman of the Board,
President or a Vice President and by the Treasurer, an Assistant Treasurer, the
Controller or an Assistant Controller of the Company, stating, as to each signer
thereof, that

                  (1) a review of the activities of the Company during such year
         and of performance under this Indenture has been made under his
         supervision, and

                  (2) to the best of his knowledge, based on such review, the
         Company has fulfilled all its obligations under this Indenture
         throughout such year, or, if there has been a default in the
         fulfillment of any such obligation, specifying each such default known
         to him and the nature and status thereof.

         Section 10-7. Corporate Existence.

         Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Debentureholders.

                                       51
<PAGE>

                                 ARTICLE ELEVEN

                            Redemption of Debentures

         Section 11-1. Right of Redemption.

         Notwithstanding anything to the contrary herein contained, the
Investment Debentures, Series I are not redeemable prior to Maturity; the
Company may, however, pay principal and premium, if any, and interest on such
Debentures either upon mutual agreement between the Holders of an Investment
Debenture, Series I and the Company or as provided in this Indenture in the
event of the death of any registered owner or any registered joint owner without
such payment constituting a redemption. The Debentures of each other series, if
redeemable, shall be redeemable on a pro rata basis or by lot or otherwise as
set forth in the supplemental indenture creating such series.

         Section 11-2. Applicability of Article.

         Redemption of Debentures at the election of the Company or otherwise as
permitted or required by any provision of this Indenture or any supplemental
indenture, shall be made in accordance with such provision and this Article.

         Section 11-3. Election to Redeem; Notice to Trustee.

         The election of the Company to redeem any Debentures shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of the Debentures of any series, the Company shall, at least 60 days prior to
the Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date, the Redemption Price and the principal amount of Debentures to be redeemed
and the series thereof.

         Section 11-4. Selection by Trustee of Debentures to be Redeemed.

         If less than all the Debentures of any series are to be redeemed,
otherwise than on a pro rata basis, the particular Debentures to be redeemed
shall be selected not more than 45 days prior to the Redemption Date by the
Trustee, from the Outstanding Debentures of such series not previously called
for redemption, by lot or by such other method as the Trustee shall deem fair
and appropriate and which may provide for the redemption of portions of the
principal of Debentures of a denomination larger than $1,000 or the smallest
authorized denomination of the Debentures, whichever is greater, or an integral
multiple thereof. If redemption is to be other than on a pro rata basis, the
Trustee shall promptly notify the Company in writing of the Debentures selected
for redemption and, in the case of any Debenture selected for partial
redemption, the principal amount thereof to be redeemed.

         For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debenture redeemed or to be redeemed only in part, to the
portion of the principal of such Debenture which has been or is to be redeemed.

                                       52
<PAGE>

         Section 11-5. Notice of Redemption.

         Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Debentures to be redeemed, at his address appearing in
the Debenture Register.

         All notices of redemption shall state:

                  (1) the Redemption Date,

                  (2) the Redemption Price,

                  (3) if less than all Outstanding Debentures of any series are
         to be redeemed, the identification (and, in the case of partial
         redemption, the respective principal amounts) of the Debentures to be
         redeemed,

                  (4) that on the Redemption Date the Redemption Price will
         become due and payable upon each such Debenture, and that interest
         thereon shall cease to accrue from and after said date, and

                  (5) the place where such Debentures are to be surrendered for
         payment of the Redemption Price, which shall be the office or agency of
         the Company in each Place of Payment for the Debentures of the series
         being redeemed.

         Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.

         Section 11-6. Deposit of Redemption Price.

         Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10-3) an amount of
money sufficient to pay the Redemption Price of all the Debentures which are to
be redeemed on that date.

         Section 11-7. Debentures Payable on Redemption Date.

         Notice of redemption having been given as aforesaid, the Debentures so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price) such Debentures
shall cease to bear interest. Upon surrender of such Debentures for redemption
in accordance with said notice, such Debentures shall be paid by the Company at
the Redemption Price. Installments of interest the Stated Maturity of which is
on or prior to the Redemption Date shall be payable to the Holders of such
Debentures registered as such on the relevant Record Dates according to the
terms of such Debentures and the provisions of Section 3-9.

                                       53
<PAGE>

         If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Debenture.

         Section 11-8. Debentures Redeemed in Part.

         Any Debenture of any series which is to be redeemed only in part shall
be surrendered at a Place of Payment for Debentures of such series (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing) and the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Debenture without service charge, a new Debenture or Debentures
of the same series, of any authorized denomination as requested by such Holder
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Debenture so surrendered.

         IN WITNESS WHEREOF, METROPOLITAN MORTGAGE & SECURITIES CO., INC. has
caused this Indenture to be signed in its corporate name by its Chairman of the
Board, its President or a Vice President and its corporate seal to be affixed
hereunto, and the same to be attested by the signature of its Secretary or an
Assistant Secretary; and SEATTLE-FIRST NATIONAL BANK, in evidence of its
acceptance of the trust hereby created, has caused this Indenture to be signed
in its corporate name by one of its Corporate Trust Officers, and its corporate
seal to be affixed hereunto, and the same to be attested by one of its Corporate
Trust Officers. Executed and delivered as of the date first above written.

                                            METROPOLITAN MORTGAGE & SECURITIES
                                            CO., INC.

                                            By /s/ C. Paul Sandifur
                                              ----------------------------------
                                              Chairman of the Board
Attest:

/s/ Reuel Swanson
----------------------------------
Secretary                                                  (Corporate Seal)

                                            SEATTLE-FIRST NATIONAL BANK

                                            By /s/ A Reed
                                              ----------------------------------
                                              Asst. Vice President & Manager
Attest:

/s/ N Thorpe
----------------------------------
Corporate Trust Officer                                    (Corporate Seal)

                                       54
<PAGE>

STATE OF WASHINGTON          )
                             ) ss.
COUNTY OF SPOKANE            )

         On this 12th day of July, 1979, before me personally appeared C. Paul
Sandifur to me known to be the Chairman of the Board of Metropolitan Mortgage &
Securities Co., Inc., the corporation that executed the within and foregoing
instrument, and acknowledged said instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes therein mentioned, and
on oath stated that he is authorized to execute said instrument and that the
seal affixed is the corporate seal of said corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.

                                            /s/ Mildred Manning
                                            ------------------------------------
                                            NOTARY PUBLIC in and for the State
                                            of Washington, residing at Spokane

STATE OF WASHINGTON          )
                             ) ss.
COUNTY OF KING               )

         On this 11th day of July, 1979, before me personally appeared A Reed to
me known to be the Assistant Vice President & Manager of Seattle-First National
Bank, the corporation that executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that he is authorized to execute said instrument and that the seal affixed is
the corporate seal of said corporation.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.

                                            /s/ Cynthia M. Brand
                                            ------------------------------------
                                            NOTARY PUBLIC in and for the State
                                            of Washington, residing at Seattle

                                       55

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