As filed with the Securities and Exchange Commission on February 1,
1996 Registration No. 333-00115
POST EFFECTIVE AMENDMENT TO FORM S-2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SUMMIT SECURITIES, INC.
(Exact name of registrant as specified
in governing instruments)
Idaho 6799
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
929 W. Sprague Avenue
Spokane, WA 99204
82-0438135 (509) 838-3111
(I.R.S. Employer (Address, including zip code,
Identification No.) and telephone number,
including area code, of
registrant's principal
executive offices)
Tom Turner
President
Summit Securities, Inc.
929 W. Sprague Ave.
Spokane, WA 99204
(509) 838-3111
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the Certificates, other than
selling commissions:
SEC Registration Fee ....................$ 8,413
NASD Filing Fee ......................... 6,000
Independent Underwriter Fee.............. 55,000
*Printing ............................... 10,000
*Legal Fees and Expenses ................ 10,000
*Accounting Fees and Expenses .......... 45,000
*Trustee's Fees and Expenses ............ 5,000
*Blue Sky Fees and Expenses ............. 30,000
*Miscellaneous .......................... 3,587
TOTAL ............................. $173,000
*Estimated
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Summit's Articles of Incorporation provide for indemnification of
Summit's directors, officers and employees for expenses and other
amounts reasonably required to be paid in connection with any civil or
criminal proceedings brought against such persons by reason of their
service of or position with Summit unless it is adjudged in such
proceedings that the person or persons are liable due to willful
malfeasance, bad faith, gross negligence or reckless disregard of his
duties in the conduct of his office. Such right of indemnification is
not exclusive of any other rights that may be provided by contract or
other agreement or provision of law.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a). Exhibits:
*1.a.i. Form of Selling Agreement between Summit and
Metropolitan Investment Securities, Inc. with respect
to Certificates.
*1.a.ii. Form of Selling Agreement between Summit and
Metropolitan Investment Securities, Inc. with respect
to Preferred Stock Series S-2.
*1.b.i. Form of Agreement to Act as Qualified Independent
Underwriter between Summit, Metropolitan Investment
Securities, Inc. and Welco Securities, Inc. with
respect to Certificates to be registered.
*1.b.ii. Form of Agreement to Act as Qualified Independent
Underwriter between Summit, Metropolitan Investment
Securities, Inc. and Welco Securities, Inc. with
respect to Preferred Stock to be registered.
*1.c.i. Form of Pricing Opinion of Welco Securities, Inc. with
respect to Certificates to be registered.
*1.c.ii. Form of Pricing Opinion of Welco Securities, Inc. with
respect to Preferred Stock to be registered.
*1.d. Form of Selected Dealer's Agreement.
4.a. Indenture dated as of November 15, 1990 between Summit
and West One Bank, Idaho, N.A., Trustee. (Exhibit
4(a) to Registration No. 33-36775).
4.b. Amendment to Indenture dated as of November 15, 1990
between Summit and West One Bank, Idaho, N.A.,
Trustee. (Exhibit 4(b) to Registration No. 33-36775).
*4.c Statement of Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series S-2.
*5.a. Form of Opinion of Susan A. Thomson, Attorney at Law,
as to validity of Investment Certificates.
*5.b. Form of Opinion of Susan A. Thomson, Attorney at Law,
as to validity of Preferred Stock.
7. Opinion Regarding Liquidation Preference. See Exhibit
5.b.
10.a. Management Receivable Acquisition and Servicing
Agreement between Summit Securities Inc. and
Metropolitan Mortgage & Securities Co., Inc. dated
September 9, 1994. (Exhibit 10.a. to Registraion No.
33-57619)
10.b. Stock Purchase Agreement between Summit and
Metropolitan regarding the purchase of
Metropolitan Investment Securities, dated January
31, 1995. (Exhibit 10.b to Registration No.
33-57619)
*10.c. Receivable Acquisition, Management and Services
Agreement between Summit Securities, Inc. and
Metropolitan Mortgage & Securities Co., Inc., dated
September 9, 1994.
*10.d. Receivable Acquisition, Management and Services
Agreement between Old Standard Life Insurance Company
and Metropolitan Mortgage & Securities Co., Inc., dated
December 31, 1994.
11. Computation of Earnings Per Common Share. (See
Financial Statements.)
*12. Computation of Ratio of Earnings to Fixed Charges.
*23.a.i. Consent of Coopers & Lybrand L.L.P., Independent
Certified Public Accountants.
23.a.ii. Consent of Susan Thomson, Attorney at Law. See Exhibit
5.b.
*25. Statement on Form T-1 of West One Bank. (The Exhibits
to this Exhibit have been filed in paper pursuant to
a continuing hardship exemption granted January 24,
1994.)
*27. Financial Data Schedule.
*Filed herewith
Item 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment
to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b)Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer,
or controlling persons of the registrant in the successful defense
of any action, suit, or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-2 and has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Spokane, State
of Washington, on January 9, 1996.
SUMMIT SECURITIES, INC.
/S/ TOM TURNER
By:
_________________________________________________
Tom Turner,
President/Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/S/TOM TURNER
_________________________ President/Director/ January 9, 1996
Tom Turner
/S/PHILIP SANDIFUR
_________________________ Vice President/Director January 9, 1996
Philip Sandifur
/S/ GREG GORDON
_________________________ Secretary/Treasurer January 9, 1996
Greg Gordon Director
/S/ERNEST JURDANA
_________________________Principal Accounting January 9, 1996
Ernest Jurdana Officer
/S/ ROBERT POTTER
________________________ Director January 9, 1996
Robert Potter
GRAPHS APPENDIX
1. A circular diagram with an arrow from one paragraph to the next,
depicting how the investor's proceeds are used. The graphic contains
the following introductory statement: "The following diagram depicts a
standard model for how an investor's money is used by the Company for
investment in Receivables. This model is for illustrative purposes,
and is not intended to be exhaustive. It is qualified in its entirety
and should be read in conjunction with the detailed information
provided elsewhere in the prospectus."
The graphic includes the following paragraphs within the circular
diagram. The diagram contains an arrow from one paragraph to the
next: Election is made to invest/reinvest in Preferred Stock. The
Company invests the money in Receivables secured by real estate. The
Receivable obligors make principal and interest payments to the
Company. Some of the money received as payment is used to finance the
cost of doing business. Dividend payments are paid or reinvested at
the direction of the investor.
The graphic contains the following statement in bold in the center of
the circular diagram: DIAGRAM SHOWING HOW INVESTORS' MONEY IS USED IN
THE PURCHASE OF RECEIVABLES.
2. Two graphs depicting how the Company earns a greater yield on a
Receivable through purchasing the Receivables at a discount from the
face amount. Both graphs have a vertical axis which show the
Company's investment in the receivable, the face value and the
interest earned. The horizontal axis shows years. A line is drawn
from each of the three points on the vertical axis, sloping down to
the 15 year mark on the horizontal axis. The areas between these
lines are identified as A, B and C.
The first graph contains the following explanatory heading: Receivable
Purchased at a Discount - Example of a $50,000 Receivable purchased at
a discount. Interest rate is 10%, term is 15 years. The Company pays
A and receives B and C as income.
The second graph contains the following explanatory heading:
Receivable Purchased without a Discount - Example of a $50,000
Receivable purchased without a discount. Interest rate if 10%, term
is 15 years. The Company pays A and B. The Company receives C as
income.
SELLING AGREEMENT
This Agreement made as of the , by and
between SUMMIT SECURITIES, INC., an Idaho corporation ("Summit") and
METROPOLITAN INVESTMENT SECURITIES, INC., a Washington corporation
(the "Selling Agent").
WITNESSETH:
WHEREAS, Summit proposes to issue and sell $40,000,000 principal
amount of its Investment Certificates, Series A (the "Certificates")
pursuant to a Registration Statement (or Registration Statements) and
a Prospectus (or Prospectuses) filed under the Securities Act of 1933;
and
WHEREAS, the Selling Agent, an affiliate of Summit, for good and
valuable consideration the receipt of which is hereby acknowledged,
desires to assist in the sale of the Certificates upon the terms and
in reliance upon the representations, warranties and agreements set
forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment of Selling Agent.
Summit hereby appoints the Selling Agent as its managing agent to
offer and sell the Certificates at the prices and in the manner
described in the Registration Statement and the Prospectus and in
compliance with the terms and conditions thereof. Summit agrees to
provide the Selling Agent with such number of Registration Statements
and Prospectuses as it reasonably requests to enable it to offer the
Certificates and authorizes the Selling Agent to distribute the
Registration Statements and Prospectuses.
2. Undertaking of Selling Agent.
The Selling Agent agrees to use its best efforts to sell the
Certificates on the terms stated herein and in the Registration
Statement and Prospectus and to notify Summit of the number of
Certificates with respect to which subscription agreements have been
executed by subscribers. It is understood that the Selling Agent has
no commitment to sell the Certificates other than to use its best
efforts. The Selling Agent will deliver all cash and checks received
from the subscribers to Summit by noon of the next business day. All
checks received by the Selling Agent from subscribers shall be made
payable to Summit. The Selling Agent will not maintain discretionary
customer accounts and undertakes that it will not, in any event make
discretionary purchases for the accounts of customers.
3. Amendment of the Registration Statement and Prospectus.
Summit agrees, at its expense, to amend or supplement the
Registration Statement or the Prospectus and to provide the Selling
Agent with sufficient copies thereof for distribution as contemplated
in the Registration Statement or the Prospectus or otherwise for
purposes contemplated by federal and state securities laws, if (i) the
Selling Agent advises Summit that in its opinion and that of its
counsel, such amendment or supplement is necessary or advisable, or
(ii) such amendment or supplement is necessary to comply with federal
or state securities laws or the rules or regulations promulgated
thereunder or is necessary to correct any untrue statement therein or
eliminate any material omissions therein or any omissions therein
which make any of the statements therein misleading. The
representations, warranties and obligations to indemnify all parties
hereto contained herein relating to the Registration Statement or the
Prospectus shall attach to any such amendment or supplement.
4. Undertakings of Summit.
Summit will promptly notify the Selling Agent in the event of the
issuance by the Securities and Exchange Commission ("SEC") of any stop
order or other order suspending the Registration of the Certificates,
or in the event of the institution or intended institution of any
action or proceeding for that purpose. In the event that the SEC
shall enter a stop order suspending or otherwise suspend the
Registration of the Certificates, Summit will make every reasonable
effort to obtain as promptly as possible the entry of an appropriate
order setting aside such stop order or otherwise reinstating the
Registration of the Certificates.
5. Representations and Warranties.
Summit represents and warrants to the Selling Agent that:
(i) The Registration Statement and the Prospectus comply as to
form in all material respects with the Securities Act of 1933 and the
rules and regulations of the SEC thereunder, accurately describe the
operations of Summit and do not contain any misleading or untrue
statements of a material fact or omit to state a material fact which
is necessary to prevent the statements therein from being misleading.
(ii) Summit is a corporation duly organized and validly existing
under the laws of the State of Idaho with full corporate power to
perform its obligations as described in the Registration Statement and
the Prospectus.
(iii) The Certificates, when issued and sold pursuant to the terms
hereof and of the Registration Statement, Prospectus and subscription
agreements, will constitute valid, binding and legal outstanding
obligations of Summit, in accordance with their terms.
(iv) This Agreement has been duly and validly authorized,
executed and delivered on behalf of Summit and is a valid and binding
agreement in accordance with its terms.
6. Indemnification.
Summit and the Selling Agent each (a) agree to indemnify and hold
harmless the other (and each person, if any, who controls the other)
against any loss, claim, damage, charge or liability to which the
other (or such controlling persons) may become subject, insofar as
such loss, claim, damage, charge or liability (or actions in respect
thereof) (i) arises out of or is based upon any misrepresentation or
breach of warranty of such party herein or any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto) which relates to or was supplied by such party, or
(ii) arises out of or is based upon the omission or alleged omission
to state therein a material fact relating to such party required to be
stated therein or necessary to make the statements therein not
misleading, including liabilities under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and (b)
agree to reimburse such other party (and any controlling persons) for
any legal or other fees or expenses reasonably incurred in connection
with investigating or defending any action or claim arising out of or
based upon any of the foregoing.
7. Fees and Expenses.
Summit will pay all expenses incurred in connection with the
offering and sale of the Certificates, including without limitation,
fees and expenses of counsel, blue sky fees and expenses (including
legal fees), printing expenses, accounting fees and expenses, and fees
and expenses of West One Bank, Idaho, N.A., as Trustee.
In the event of termination of the offering, Selling Agent will be
reimbursed only for its actual accountable out-of-pocket expenses.
The maximum commissions payable upon sale of the Certificates shall
be 6% of the investment amount.
8. Governing Law.
This Agreement shall be deemed to be made under and governed by the
laws of the State of Idaho.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above mentioned.
SUMMIT SECURITIES, INC.
By:___________________________________
Tom Turner, President
METROPOLITAN INVESTMENT SECURITIES, INC.
By_____________________________________
Susan A. Thomson, Vice President
FORM OF
VARIABLE RATE CUMULATIVE PREFERRED STOCK
SELLING AGREEMENT
This Agreement made as of , by and
between SUMMIT SECURITIES, INC., an Idaho corporation ("Summit") and
METROPOLITAN INVESTMENT SECURITIES, INC., a Washington corporation
(the "Selling Agent").
WHEREAS, Summit proposes to issue and sell 150,000 shares of
WITNESSETH:
Variable Rate Cumulative Preferred Stock, Series S-2 (par value $10.00
per share) ("Preferred Stock") pursuant to a Registration Statement
(or Registration Statements) and a Prospectus (or Prospectuses) filed
under the Securities Act of 1933; and
WHEREAS, the Selling Agent, an affiliate of Summit, for good and
valuable consideration the receipt of which is hereby acknowledged,
desires to assist in the sale of the Preferred Stock upon the terms
and in reliance upon the representations, warranties and agreements
set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT OF SELLING AGENT.
Summit hereby appoints the Selling Agent as its exclusive agent to
offer and sell the Preferred Stock at the prices and in the manner
described in the Registration Statement and the Prospectus and in
compliance with the terms and conditions thereof. Summit agrees to
provide the Selling Agent with such number of Registration Statements
and Prospectuses as it reasonably requests to enable it to offer the
Preferred Stock and authorizes the Selling Agent to distribute the
Registration Statements and Prospectuses.
2. UNDERTAKING OF SELLING AGENT.
The Selling Agent agrees to use its best efforts to sell the
Preferred Stock on the terms stated herein and in the Registration
Statement and Prospectus and to notify Summit of the number of shares
of Preferred Stock with respect to which subscription agreements have
been executed by subscribers. It is understood that the Selling Agent
has no commitment to sell the Preferred Stock other than to use its
best efforts. The Selling Agent will deliver all cash and checks
received from subscribers to Summit by noon of the next business day.
All checks received by the Selling Agent from subscribers shall be
made payable to Summit.
The Selling Agent will not maintain discretionary customer accounts
and undertakes that it will not in any event make discretionary
purchases of the Preferred Stock for the accounts of customers.
3. AMENDMENT OF THE REGISTRATION STATEMENT AND PROSPECTUS.
Summit agrees, at its expense, to amend or supplement that
Registration Statement or the Prospectus and to provide the Selling
Agent with sufficient copies thereof for distribution as contemplated
in the Registration Statement or the Prospectus or otherwise for
purposes contemplated by federal and state securities laws, it (i) the
Selling Agent advises Summit that in its opinion and that of its
counsel, such amendment or supplement is necessary or advisable, or
(ii) such amendment or supplement is necessary to comply with federal
or state securities laws or the rules or regulations promulgated
thereunder or is necessary to correct any untrue statement therein or
eliminate any material omissions therein which make any of the
statement s therein misleading. The representation, warranties, and
obligations to indemnify all parties thereto contained herein relating
to the Registration Statement or the Prospectus shall attach to any
such amendment or supplement.
4. UNDERTAKINGS OR SUMMIT.
Summit will promptly notify the Selling Agent in the event of the
issuance by the Securities and Exchange Commission ("SEC") of any stop
order or other orders us pending the Registration of the Preferred
Stock, or in the event of the institution or intended institution of
any action or preceding for that purpose. In the event that the SEC
shall enter a stop order suspending or otherwise suspend the
Registration of the Preferred Stock, Summit will make every reasonable
effort to obtain as promptly as possible the entry of an appropriate
order setting aside such stop order or otherwise reinstate the
Registration of the Preferred Stock.
5. REPRESENTATIONS AND WARRANTIES.
Summit represents and warrants to the Selling Agent that:
(i) The Registration Statement and the Prospectus comply as to
form in all material respects with the Securities Act of
1933; and the rules and regulations of the SEC thereunder,
accurately describe the operations of Summit and do not
contain any misleading or untrue statements of a material
fact or omit to state a material fact which is necessary
to prevent the statements therein from being misleading.
(ii) Summit is a corporation duly organized and validly existing
under the Washington Business Corporation Act with full
corporate power to perform its obligations as described
int he Registration Statement and the Prospectus.
(iii) The Preferred Stock, when issued and sold pursuant to the
terms hereof and of the Registration Statement, Prospectus
and subscription agreements, will be legally issued, fully
paid and nonassessable.
(iv) This Agreement has been duly and validly authorized,
executed, and delivered on behalf of Summit and is a valid
and binding agreement of Summit in accordance with its
terms.
6. INDEMNIFICATION.
Summit and the Selling Agent each (a) agree to indemnify and hold
harmless the other (and each person, if any, who controls the other)
against any loss, claim, damage, charge or liability to which the
other or such charge or liability (or actions in respect thereof) (i)
arises out of or is based upon any misrepresentation or breach of
warranty of such party herein or any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or the Prospectus (or any amendment or supplement thereto)
which relates to or was supplied by such party, or (i) arises out of
or is based upon the omission or alleged omission to state therein a
material fact relating to such party required to be stated therein or
necessary to make the statements therein not misleading, including
liabilities under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and (b) agree to
reimburse such other party (and any controlling persons) for any legal
or other fees or expenses reasonably incurred in connection with
investigating or defending any action or claim arising out of or based
upon any of the foregoing.
7. FEES AND EXPENSES.
Summit will pay all expenses incurred in connection with the
offering and sale of the Preferred Stock, including without
limitation, fees and expenses of counsel, blue sky fees and expenses
(including legal fees), printing expenses, and accounting fees and
expenses. Provided, however, that in the event of termination of the
offering, Selling Agent will only be reimbursed for its actual,
accountable, out-of-pocket expenses.
The maximum commissions payable upon sale of the Preferred Stock
shall be 6% of the investment amount.
8. This agreement shall not in any way affect, modify or change
the terms of that certain Selling Agreement, dated
between the parties hereto which provides
for the sale of Investment Certificates.
9. GOVERNING LAW.
This Agreement shall be deemed to be made under and governed by the
laws of the State of Washington.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above mentioned.
SUMMIT SECURITIES, INC.
By ______________________________________________
Tom Turner, President
METROPOLITAN INVESTMENT SECURITIES, INC.
By ______________________________________________
Susan A. Thomson, Vice President
FORM OF
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
This agreement made as of the , by and
between Summit Securities, Inc., an Idaho corporation ("Summit"),
Metropolitan Investment Securities, Inc., a Washington corporation
("MIS"), and Welco Securities, Inc., a Nevada Corporation ("Welco").
WITNESSETH:
WHEREAS, Summit intends to offer $40,000,000 of Investment
Certificates Series A (hereinafter referred to as "Certificates"),
which will be offered in reliance on registration statement filed on
Form S-2, bearing SEC file number ; and,
WHEREAS, MIS, an affiliate of Summit and a member of the National
Association of Securities Dealers ("NASD"), will be engaged as the
managing sales agent for Summit; and,
WHEREAS, pursuant to Section 3 of Schedule E of the Bylaws of the
NASD, MIS, as a NASD member, may participate in such underwriting only
if the yield at which the Certificates offered to the public is not
lower than the yield recommended by a "Qualified Independent
Underwriter" as that term is defined in Section 2(l) (1) through 2(l)
(7) of Schedule E to the Bylaws of the NASD, and who participates in
the preparation of the registration statement and prospectus relating
to the offering and exercises customary standards of due diligence,
with respect thereto; and,
WHEREAS, this agreement ("Agreement") describes the terms on which
Summit is retaining Welco to serve as such a "Qualified Independent
Underwriter" in connection with this offering of Certificates;
NOW, THEREFORE, in consideration of the recitations set forth above,
and the terms, promises, conditions, and covenants herein contained,
the parties hereby contract and agree as follows:
DEFINITIONS
As hereinafter used, except as the context may otherwise require,
the term "Registration Statement" means the registration statement on
Form S-2 (including the related preliminary prospectus, financial
statements, exhibits and all other documents to be filed as a part
thereof or incorporated therein) for the registration of the offer and
sale of the Certificates under the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Act") filed with the
Securities and Exchange Commission (the "Commission"), and any
amendment thereto, and the term "Prospectus" means the prospectus
including any preliminary or final prospectus (including the form of
prospectus to be filed with the Commission pursuant to Rule 424(b)
under the Act) and any amendment or supplement thereto, to be used in
connection with the offering.
1. SCHEDULE E REQUIREMENT. Welco hereby confirms its agreement as
set forth in clause (6) of paragraph (l) of Section 2 of Schedule E of
the Bylaws of the NASD and represents that, as appropriate, Welco
satisfies or at the times designated in such paragraph (l) will
satisfy the other requirements set forth therein or will receive an
exemption from such requirements from the NASD.
2. CONSENT. Welco hereby consents to be named in the Registration
Statement and Prospectus as having acted as a "Qualified Independent
Underwriter" solely for the purposes of Schedule E referenced herein.
Except as permitted by the immediately preceding sentence or to the
extent required by law, all references to Welco in the Registration
Statement or Prospectus or in any other filing, report, document,
release or other communication prepared, issued or transmitted in
connection with the offering by Summit or any corporation controlling,
controlled by or under common control with Summit, or by any director,
officer, employee, representative or agent of any thereof, shall be
subject to Welco's prior written consent with respect to form and
substance.
3. PRICING FORMULA AND OPINION. Welco agrees to render a written
opinion as to the yields below which Summit's Certificates may not be
offered based on the pricing formula that is set forth in Exhibits "A"
and "B," attached hereto and incorporated herein by reference. It is
understood and agreed that the securities to which this Agreement
relates will be offered on a continuous, best efforts basis by MIS, as
the managing sales agent of Summit pursuant to the Selling Agreement
in effect between MIS and Summit which is filed as an exhibit to the
Registration Statement referred to above. Summit, will continue to
offer the Certificates according to the terms and conditions of said
Selling Agreement in accordance with this Agreement, including,
without limitation, Exhibits "A" and "B". Welco reserves the right to
review and amend its opinion upon the filing of any post-effective
amendment to the Registration Statement or upon occurrence of any
material event which may or may not require such an amendment to be
filed, or at such time as the offering shall terminate or otherwise
lapse under operation of law.
4. FEES AND EXPENSE. It is understood that Summit shall reimburse
Welco for its expenses on a nonaccountable basis in the amount of
$5,000 the receipt of which is hereby acknowledged. It is further
agreed that Welco shall be paid an additional amount of $30,000 at the
time the pricing opinion and pricing formula are rendered, concurrent
with the closing. Welco agrees to pay all fees and expenses to any
legal counsel whom it may employ to represent it separately in
connection with or on account of its actions contemplated herein. All
mailing, telephone, travel, hotel, meals, clerical, or other office
costs incurred or to be incurred by Welco in conjunction with Summit's
proposed offering which is the subject of this Agreement shall be
reimbursed to Welco by Summit at closing on an accountable basis upon
receipt of an itemization of said expenses.
5. MATERIAL FACTS. Summit represents and warrants to Welco that
at the time the Registration Statement or any amendment thereto
becomes effective, the Registration Statement and, at the time the
Prospectus is filed with the Commission (including any preliminary
prospectus and the form of prospectus filed with the Commission
pursuant to Rule 424(b)) and at all times subsequent thereto, the
Prospectus (as amended or supplemented if it shall have been so
amended or supplemented) will contain all material statements which
are required to be stated therein in accordance with the Act and will
conform to all other requirements of the federal securities laws, and
will not, on such date include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and that all
contracts and documents required by the Act to be filed or required as
exhibits to said registration statement have been filed. Summit
further represents and warrants that any further filing, report,
document, release or communication which in any way refers to Welco or
to the services to be performed by Welco pursuant to this Agreement
will not contain any untrue or misleading statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Summit further warrants and represents that:
(a) All leases, contracts and agreements referred to in or filed as
exhibits to the Registration Statement to which Summit is a party or
by which it is bound are in full force and effect.
(b) Summit has good and marketable title, except as otherwise
indicated in the Registration Statement and Prospectus, to all of its
assets and properties described therein as being owned by it, free and
clear of all liens, encumbrances and defects except such encumbrances
and defects which do not, in the aggregate, materially affect or
interfere with the use made and proposed to be made of such properties
as described in the Registration Statement and Prospectus; and that
Summit has no material leased properties except as disclosed in the
Prospectus.
(c) Summit is duly organized under the laws of the State of Idaho
and, as of the effective date of the Registration Statement, Summit
will be validly existing and in good standing under the laws of the
State of Idaho with full corporate power and authority to own its
properties and conduct its business to the extent described in the
Registration Statement and Prospectus; Summit is duly qualified to do
business as a foreign corporation and is in good standing in all
jurisdictions in which the nature of the business transacted by it or
its ownership of properties or assets makes qualification necessary;
the authorized and outstanding capitalization of Summit is as set
forth in the Prospectus and the description in the Prospectus of the
capital stock of Summit conforms with and accurately describes the
rights set forth in the instruments defining the same;
(d) Summit is not in violation of its certificate of incorporation
or Bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
bond, debenture, note, or other evidence of indebtedness, contract or
lease or in any indenture or loan agreement to which it is a party or
by which it is bound.
(e) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary corporate action on the part of
Summit and MIS and performance of the foregoing agreement and the
consummation of the transactions contemplated thereby, will not
conflict with or result in a breach of any of the terms or constitute
a violation of the respective certificates of incorporation or Bylaws
of Summit or MIS, or any deed of trust, lease, sublease, indenture,
mortgage, or other agreement or instrument to which Summit or MIS is a
party or by which either of them or their property is bound, or any
applicable law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over Summit or MIS or their properties or
obligations; and no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein and in the other agreements
previously referred to in this paragraph except as may be required
under the Act or under any state securities or Blue Sky Laws.
(f) Any certificate signed by an officer of Summit and delivered to
Welco pursuant to this Agreement shall be deemed a representation and
warranty by Summit to Welco, to have the same force and effect as
stated herein, as to the matters covered thereby.
(g) If any event relating to or affecting Summit shall occur as a
result of which it is necessary, in Welco's opinion, to amend or
supplement the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it
is delivered to a purchaser, Summit undertakes to inform MIS of such
events within a reasonable time thereafter, and will forthwith prepare
and furnish to MIS, without expense to them, a reasonable number of
copies of an amendment or amendments or a supplement or supplements to
the Prospectus (in form and substance satisfactory to Welco) which
will amend or supplement the Prospectus so that as amended or
supplemented it will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein in light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading.
(h) Summit hereby warrants and represents that it will offer the
Certificates described herein in accordance with the pricing formula
set forth in Exhibits "A" and "B" hereto.
(i) All representations, warranties and agreements contained in
this Agreement, or contained in certificates of officers of Summit
submitted pursuant hereto, shall remain operative and in full force
and effect, surviving the date of this Agreement.
6. AVAILABILITY OF INFORMATION. Summit hereby agrees to provide
Welco, at its expense, with all information and documentation with
respect to its business, financial condition and other matters as
Welco may deem relevant based on the standards of reasonableness and
good faith and shall request in connection with Welco's performance
under this Agreement, including, without limitation, copies of all
correspondence with the Commission, certificates of its officers,
opinions of its counsel and comfort letters from its auditors. The
above-mentioned certificates, opinions of counsel and comfort letters
shall be provided to Welco as Welco may request on the effective date
of the Registration Statement. Summit will make reasonably available
to Welco, its auditors, counsel, and officers and directors to discuss
with Welco any aspect of Summit which Welco may deem relevant. In
addition, Summit, at Welco's request, will cause to be delivered to
Welco copies of all certificates, opinions, letters and reports to be
delivered to the underwriter or underwriters, as the case may be,
pursuant to any underwriting agreement executed in connection with the
Offering or otherwise, and shall cause the person issuing such
certificate, opinion, letter or report to authorize Welco to rely
thereon to the same extent as if addressed directly to Welco. Summit
represents and warrants to Welco that all such information and
documentation provided pursuant to this paragraph 6 will not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statement therein not misleading. In
addition, Summit will promptly advise Welco of all telephone
conversations with the Commission which relate to or may affect the
Offering.
7. INDEMNIFICATION.
(a) Subject to the conditions set forth below, and in
addition to any rights of indemnification and contribution to which
Welco may be entitled pursuant to any agreement among underwriters,
underwriting agreement or otherwise, and to the extent allowed by law,
Summit hereby agrees that it will indemnify and hold Welco and each
person controlling, controlled by or under common control with Welco
within the meaning of Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the rules and regulations thereunder (individually, an "Indemnified
Person") harmless from and against any and all loss, claim, damage,
liability, cost or expense whatsoever to which such Indemnified Person
may become subject under the Act, the Exchange act, or other federal
or state statutory law or regulation, at common law or otherwise,
arising out of, based upon, or in any way related or attributed to (i)
this Agreement, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or
Prospectus or any other filing, report, document, release or
communication, whether oral or written, referred to in paragraph 5
hereof or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any application or other document
executed by Summit or based upon written information furnished by
Summit filed in any jurisdiction in order to qualify the Certificates
under the securities or Blue Sky laws thereof, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or (iv) the breach of any representation or warranty made
by Summit in this Agreement. Summit further agrees that upon demand
by an Indemnified Person at any time or from time to time, it will
promptly reimburse such Indemnified Person for, or pay, any loss,
claim, damage, liability, cost or expense as to which Summit has
indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this paragraph 7, any such payment or
reimbursement by Summit of fees, expenses or disbursement incurred by
an Indemnified Person in any proceeding in which a final judgment by a
court of competent jurisdiction (after all appeals or the expiration
of time to appeal) is entered against such Indemnified Person as a
direct result of such person's negligence, bad faith or willful
misfeasance will be promptly repaid to Summit. In addition, anything
in this paragraph 7 to the contrary notwithstanding, Summit shall not
be liable for any settlement of any action or proceeding effected
without its written consent.
(b) Promptly after receipt by an Indemnified Person under
sub- paragraph (a) above of notice of the commencement of any action,
such Indemnified Person will, if a claim in respect thereof is to be
made against Summit under paragraph (a), notify Summit in writing of
the commencement thereof; but the omission to so notify Summit will
not relieve Summit from any liability which it may have to any
Indemnified Person otherwise than under this paragraph 7 if such
omission shall not have materially prejudiced Summit's ability to
investigate or to defend against such claim. In case any such action
is brought against any Indemnified Person, and such Indemnified Person
notifies Summit of the commencement thereof, Summit will be entitled
to participate therein and, to the extent that it may elect by written
notice delivered to the Indemnified Person promptly after receiving
the aforesaid notice from such Indemnified Person, to assume the
defense thereof with counsel reasonably satisfactory to such
Indemnified Person; PROVIDED, HOWEVER, that if the defendants in any
such action include both the Indemnified Person and Summit or any
corporation controlling, controlled by or under common control with
Summit, or any director, officer, employee, representative or agent of
any thereof, or any other "Qualified Independent Underwriter" retained
by Summit in connection with the Offering and the Indemnified Person
shall have reasonably concluded that there may be legal defenses
available to it which are different from or additional to those
available to such other defendant, the Indemnified Person shall have
the right to select separate counsel to represent it. Upon receipt of
notice from Summit to such Indemnified Person of its election so to
assume the defense of such action and approval by the Indemnified
Person of counsel, Summit will not be liable to such Indemnified
Person under this paragraph 7 for any fees of counsel subsequently
incurred by such Indemnified Person in connection with the defense
thereof (other than the reasonable costs of investigation subsequently
incurred by such Indemnified Person) unless (i) the Indemnified Person
shall have employed separate counsel in accordance with the provision
of the next preceding sentence (it being understood, however, that
Summit shall not be liable for the expenses of more than one separate
counsel in any one jurisdiction representing the Indemnified Person,
which counsel shall be approved by Welco), (ii) Summit, within a
reasonable time after notice of commencement of the action, shall not
have employed counsel reasonably satisfactory to the Indemnified
Person to represent the Indemnified Person, or (iii) Summit shall have
authorized in writing the employment of counsel for the Indemnified
Person at the expense of Summit, and except that, if clause (i) or
(iii) is applicable, such liability shall be only in respect of the
counsel referred to in such clause (i) or (iii).
(c) In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in
paragraph 7 is due in accordance with its terms but is for any reason
held by a court to be unavailable from Summit to Welco on grounds of
policy or otherwise, Summit and Welco shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating or
defending same) to which Summit and Welco may be subject in such
proportion so that Welco is responsible for that portion represented
by the percentage that its fee under this Agreement bears to the
public offering price appearing on the cover page of the Prospectus
and Summit is responsible for the balance, except as Summit may
otherwise agree to reallocate a portion of such liability with respect
to such balance with any other person, including, without limitation,
any other "Qualified Independent Underwriter"; PROVIDED, HOWEVER, that
(i) in no case shall Welco be responsible for any amount in excess of
the fee set forth in paragraph 4 above and (ii) no person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of
the Act shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this
paragraph (c), any person controlling, controlled by or under common
control with Welco, or any partner, director, officer, employee,
representative or any agent of any thereof, shall have the same rights
to contribution as Welco and each person who controls Summit within
the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, each officer of Summit who shall have signed the Registration
Statement and each director of Summit shall have the same rights to
contribution as Summit, subject in each case to clause (i) of this
paragraph (c). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for
contribution may be made against the other party under this paragraph
(c), notify such party from whom contribution may be sought, but the
omission to so notify such party shall not relieve the party from whom
contribution may be sought from any other obligation it or they may
have hereunder or otherwise than under this paragraph (c). The
indemnity and contribution agreements contained in this paragraph 7
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Indemnified Person or
termination of this Agreement.
8. AUTHORIZATION BY SUMMIT. Summit represents and warrants to
Welco that this Agreement has been duly authorized, executed and
delivered by Summit and constitutes a valid and binding obligation of
Summit.
9. AUTHORIZATION BY MIS. MIS represents and warrants to Welco
that this Agreement has been duly authorized, executed and delivered
by MIS and constitutes a valid and binding obligation of MIS.
10. AUTHORIZATION BY WELCO. Welco represents and warrants to
Summit that this Agreement has been duly authorized, executed and
delivered by Welco and constitutes a valid and binding obligation of
Welco.
11. NOTICE. Whenever notice is required to be given pursuant to
this Agreement, such notice shall be in writing and shall be mailed by
first class mail, postage prepaid, addressed (a) if to Welco, at 101
West City Avenue, Suite 2130, Bala Cynwyd, PA 19004-9967, Attention:
Kenneth S. Shapiro, and (b) if to Summit, at W. 929 Sprague Ave.,
Spokane, WA 99204 Attention: Susan A. Thomson.
12. GOVERNING LAW. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with and governed
by the laws of the State of Idaho applicable to agreements made and to
be performed wholly within such jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above mentioned.
SUMMIT SECURITIES, INC.
By: ______________________________________________
Tom Turner, President
By: ______________________________________________
Greg Gordon, Secretary/Treasurer
METROPOLITAN INVESTMENT SECURITIES, INC.
By: ______________________________________________
Susan A. Thomson, Vice President
By: ______________________________________________
Reuel Swanson, Secretary
WELCO SECURITIES, INC.
By: _____________________________________________
Kenneth S. Shapiro, President
EXHIBIT A
The opinion of Welco is conditioned upon Summit's undertaking to
maintain the rates on its Certificates at least equal to an "assumed
floor." Based upon the pricing formula described below:
1. The interest rate to be paid on the Certificates shall be fixed
by Summit from time to time. However, the rate shall not be
lower than the computation made per the worksheet on Exhibit
B, which is attached and incorporated by reference herein.
2. The "assumed floor" for 6 to 11 month Certificates shall be at
least 1.0% above the lesser of the interest rate on the 6
month U.S. Treasury Bills, on a discount basis, based upon
the auction average (which is published widely in newspapers
throughout the country, normally on the day following the
auction) and a composite average of the offering rates on 6
month certificates of deposit currently being offered by
banks and savings institutions in the northwestern section
of the United States. For purposes of this composite
average of certificate of deposit rates, the rates being
offered by the following institutions shall be considered
initially:
a. First Interstate Bank of Washington
b. Great American Bank
c. West One Bank, Idaho, N.A.
d. U.S. Bank of Washington
e. Security Pacific Bank of Washington
f. Seattle First National Bank
g. Washington Mutual Savings Bank
h. Washington Trust Bank
Welco and Summit agree to review on an ongoing basis the group
which comprises the composite average, and may substitute
another institution in the composite group from time-to-time
by mutual agreement, as the case may be.
3. The "assumed floor" for 60 to 120 month Certificates shall be
computed in like manner as that described in paragraph "2"
above, except that the latest auction average on 5 year U.S.
Treasury Notes shall be considered in place of the 6 month
U.S. Treasury Bills, and 5 year certificates of deposit
currently offered in the composite group shall be considered
in lieu of the 6 month rate.
4. Rates on 12 to 23 month, 24 to 35 month, 36 to 47 month and 48
to 59 month Certificates shall be at least equal to the
interpolated differences between the computation of the
"assumed floor" of 6 to 11 month Certificates and 60 to 120
month Certificates, based upon the computation set forth in
Exhibit B.
5. Rates on Certificates payable in installments of principal and
interest shall be no lower than .25% below the "assumed
floor" for 60 to 120 month Certificates.
6. The computation of the "assumed floor" shall be made monthly,
as of the first Tuesday of each month, or at such other
times during any month that Summit causes the offering rates
to change from those in effect on the first Tuesday of each
month ("the computation date"). Summit agrees to furnish
Welco with a computation of the "assumed floor" by
completing the worksheet on Exhibit B. Should the offering
rates at that time on Summit's Certificates be less than the
"assumed floor" as computed, Summit agrees to raise the
rates on its Certificates to at least the "assumed floor"
within 10 calendar days of the computation date. Should
Summit fail to raise its offering rates within the 10 day
period referred to above, Welco reserves the right, in its
uncontrolled discretion, to withdraw its opinion regarding
the offering rates on the Certificates.
EXHIBIT B
Summit Securities
PRICING FORMULA
<TABLE>
<CAPTION>
C.D. RATE GOVERNMENT RATE
Average rate between a composite of 8 selected Most current of 8 selected auction rate
Banks and Savings and Loans as of the 1st Tuesday available on the 1st Tuesday of each month.
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
CERTIFICATE OF DEPOSIT GOVERNMENT RATE ENTER LESSER SUMMIT'S
(CD) CALCULATION CALCULATION OF COLUMN A OR B ASSUMED FLOOR CURRENT RATE
<S> <C> <S> <C> <C> <C> <C> <C>
5 yr CD rate = ________ 5 yr Govt Rate = ________
6 mo CD Rate = ________ 6 mo Govt Rate = ________
DIFFERENCE = ________ DIFFERENCE = ________
x .20 x .20
________ ________
Differential = ________ Differential = ________
(enter in (a) (enter in (a)
below) below)
6 mo (actual) 6 mo (actual)
rate = ________ rate = ________ ____________________ + 1% ________________ _________
(a) + (a) + 6-11 mos.
________ ________
1 year rate = ________ 1 year rate = ________ ____________________ + 1% ________________ __________
(a) + (a) + 12-23 mos.
________ ________
2 year rate = ________ 2 year rate = ________ ____________________ + 1% ________________ _________
(a) + (a) + 24-35 mos.
________ ________
3 year rate = ________ 3 year rate = ________ ____________________ + 1% ________________ _________
(a) + (a) + 36-47 mos.
________ ________
4 year rate = ________ 4 year rate = ________ ____________________ + 1% ________________ _________
(a) + (a) + 48-59 mos.
________ ________
5 - 10 year 5 year
(actual) rate ________ (actual) rate ________ ____________________ + 1% ________________ __________
60-120 mos.
- .25
________________
<CAPTION>
<S> <C> <C>
INSTALLMENT PAYMENTS (Floor equal to Five Yr. rate MINUS .25)......................... ________________ _________*
Install.
* The rate for installment payment bonds is .5% less than those specified for comparable terms.
</TABLE>
FORM OF
AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
This agreement made as of the day of _____________, by and
between Summit Securities, Inc., an Idaho corporation ("Summit"),
Metropolitan Investment Securities, Inc., a Washington corporation ("MIS"),
and Welco Securities, Inc., a Nevada Corporation ("Welco").
WITNESSETH:
WHEREAS Summit intends to offer 150,000 shares of Preferred Stock,
designated as "Variable Rate Cumulative Preferred Stock, Series S-2,"
(hereinafter referred to as the "Preferred Stock"), which will be offered in
reliance on a post-effective amendment to a registration statement filed on
Form S-2, bearing SEC file number 33- ; and,
WHEREAS, MIS, a wholly-owned broker/dealer an affiliate of Summit and a
member of the National Association of Securities Dealers ("NASD"), will be
engaged as the sole selling agent for its affiliate, Summit,
WHEREAS, pursuant to Section 3 of Schedule E of the Bylaws of the NASD,
MIS, as a NASD member, may participate in such underwriting only if the
price at which the Preferred Stock is offered to the public is no higher
than the price recommended by a "Qualified Independent Underwriter" as that
term is defined in Section 2(l) (1) through 2(l) (6) of Schedule E to the
Bylaws of the NASD, and who participates in the preparation of the
registration statement and prospectus relating to the offering and exercises
customary standards of due diligence, with respect thereto; and,
WHEREAS, this agreement ("Agreement") describes the terms on which Summit
is retaining Welco to serve as such a "Qualified Independent Underwriter" in
connection with this offering of Preferred Stock;
NOW, THEREFORE, in consideration of the recitations set forth above, and
the terms, promises, conditions, and covenants herein contained, the parties
hereby contract and agree as follows:
DEFINITIONS
As hereinafter used, except as the context may otherwise require, the term
"Registration Statement" means the registration statement on Form S-2
(including the related preliminary prospectus, financial statements,
exhibits and all other documents to be filed as a part thereof or
incorporated therein) for the registration of the offer and sale of the
preferred stock under the Securities Act of 1933, as amended, and the rules
and regulations thereunder (the "Act") filed with the Securities and
Exchange Commission (the "Commission"), and any amendment thereto, and the
term "Prospectus" means the prospectus including any preliminary or final
prospectus (including the form of prospectus to be filed with the Commission
pursuant to Rule 424(b) under the Act) and any amendment or supplement
thereto, to be used in connection with the offering.
1. SCHEDULE E REQUIREMENT. Welco hereby confirms its agreement as set
forth in clause (6) of paragraph (l) of Section 2 of Schedule E of the
Bylaws of the NASD and represents that, as appropriate, Welco satisfies or
at the times designated in such paragraph (l) satisfies the other
requirements set forth therein or will receive an exemption from such
requirements from the NASD.
2. CONSENT. Welco hereby consents to be named in the Registration
Statement and Prospectus as having acted as a "Qualified Independent
Underwriter" solely for the purposes of Schedule E referenced herein.
Except as permitted by the immediately preceding sentence or to the extent
required by law, all references to Welco in the Registration Statement or
Prospectus or in any other filing, report, document, release or other
communication prepared, issued or transmitted in connection with the
offering by Summit or any corporation controlling, controlled by or under
common control with Summit, or by any director, officer, employee,
representative or agent of any thereof, shall be subject to Welco's prior
written consent with respect to form and substance.
3. PRICING FORMULA AND OPINION. Welco agrees to render a written
opinion as to the price above which Summit's Preferred Stock may not be
offered based on the computation of dividends to be declared on those shares
that is set forth in Schedule "A," a copy of which is attached hereto, and
incorporated herein by reference. It is understood and agreed by Welco that
the securities to which this Agreement relates will be offered on a best
efforts basis by MIS, as the sole selling agent of Summit pursuant to the
selling agreement to be entered into between MIS and Summit which is filed
as exhibit to the Registration Statement referred to above. Summit, through
MIS, will continue to offer the preferred stock according to the terms and
conditions of said agreement, in accordance with this Agreement. Welco
reserves the right to review and amend its opinion upon the filing of any
post-effective amendment to this Registration Statement or upon occurrence
of any material event which may or may not require such an amendment to be
filed, or at such time as the offering under this registration shall
terminate or otherwise lapse under operation of law.
4. FEES AND EXPENSE. It is understood that Summit shall reimburse Welco
for its expenses on a nonaccountable basis in the amount of $5,000 of which
$2,500 has been paid to date, and the balance to be paid at closing. It is
further agreed that Welco shall be paid an additional amount of $15,000 at
the time the pricing opinion is rendered, concurrent with the closing.
Welco agrees to pay all fees and expenses to any legal counsel whom it may
employ to represent it separately in connection with or on account of its
actions contemplated herein. All mailing, telephone, travel, hotel, meals,
clerical, or other office costs incurred or to be incurred by Welco in
conjunction with Summit's proposed offering which is the subject of this
Agreement shall be reimbursed to Welco by Summit at closing on an
accountable basis upon receipt of an itemization of said expenses.
5. MATERIAL FACTS. Summit represents and warrants to Welco that at the
time the Registration Statement and, at the time the Prospectus is filed
with the Commission (including any preliminary prospectus and the form of
prospectus filed with the Commission pursuant to Rule 424(b)) and at all
times subsequent thereto, to and including the date on which payment for,
and delivery of, the Preferred Stock to be sold in the Offering is made by
the underwriter or underwriters, as the case may be, participating in the
Offering and by Summit (such date being referred to herein as the "Closing
Date"), the Prospectus (as amended or supplemented if it shall have been so
amended or supplemented) will contain all material statements which are
required to be stated therein in accordance with the Act and will conform to
all other requirements of the federal securities laws, and will not, on such
date include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and that all contracts and documents
required by the Act to be filed or required as exhibits to said registration
statement have been filed. Summit further represents and warrants that any
further filing, report, document, release or communication which in any way
refers to Welco or to the services to be performed by Welco pursuant to this
Agreement will not contain any untrue or misleading statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Summit further warrants and represents that:
(a) All leases, contracts and agreements referred to in or filed as
exhibits to the Registration Statement to which Summit or its subsidiaries
is a party or by which it is bound are in full force and effect.
(b) Summit has good and marketable title, except as otherwise indicated
in the Registration Statement and Prospectus, to all of their assets and
properties described therein as being owned by them, free and clear of all
liens, encumbrances and defects except such encumbrances and defects which
do not, in the aggregate, materially affect or interfere with the use made
and proposed to be made of such properties as described in the Registration
Statement and Prospectus; and Summit has no material leased properties
except as disclosed in the Prospectus.
(c) Summit is duly organized under the laws of the State of Idaho and, as
of the effective date of the Registration Statement and at Closing Summit
will be validly existing and in good standing under the laws of the State of
Idaho with full corporate power and authority to own its properties and
conduct its business to the extent described in the Registration Statement
and Prospectus; Summit is duly qualified to do business as foreign
corporations and in good standing in all jurisdictions in which the nature
of the business transacted by them or their ownership of properties or
assets makes their qualification necessary; the authorized and outstanding
capitalization of Summit is as set forth in the Prospectus and the
description in the Prospectus of the capital stock of Summit conforms with
and accurately describes the rights set forth in the instruments defining
the same;
(d) Summit is not in violation of their respective certificates of
incorporation or Bylaws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
bond, debenture, note, or other evidence of indebtedness, contract or lease
or in any indenture or loan agreement to which any of them is a party or by
which any of them is bound.
(e) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary corporate action on the part of Summit and
MIS and performance of the foregoing agreement and the consummation of the
transactions contemplated thereby, will not conflict with or result in a
breach of any of the terms or constitute a violation of the respective
certificates of incorporation or Bylaws of Summit or MIS, or any deed of
trust, lease, sublease, indenture, mortgage, or other agreement or
instrument to which Summit or MIS is a party or by which any of them or
their property is bound, or any applicable law, rule, regulation, judgment,
order or decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over Summit or MIS or their
properties or obligations; and no consent, approval, authorization or order
of any court or governmental agency or body is required for the consummation
of the transactions contemplated herein and in the other agreements
previously referred to in this paragraph except as may be required under the
Act or under any state securities or Blue Sky Laws.
(f) Any certificate signed by an officer of Summit and delivered to Welco
pursuant to this Agreement shall be deemed a representation and warranty by
Summit to Welco, to have the same force and effect as stated herein, as to
the matters covered thereby.
(g) If any event relating to or affecting Summit or any of its
subsidiaries shall occur as a result of which it is necessary, in Welco's
opinion, to amend or supplement the Prospectus in order to make the
Prospectus not misleading in the light of the circumstances existing at the
time it is delivered to a purchaser, Summit undertakes to inform Welco of
such events within a reasonable time thereafter, and will forthwith prepare
and furnish to Welco, without expense to them, a reasonable number of copies
of an amendment or amendments or a supplement or supplements to the
Prospectus (in form and substance satisfactory to Welco) which will amend or
supplement the Prospectus so that as amended or supplemented it will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein in light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not
misleading.
(h) Summit hereby warrants and represents that it will offer the
preferred stock in accordance with the pricing formula set forth in Schedule
"A" which is incorporated by reference herein.
(i) All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of Summit submitted
pursuant hereto, shall remain operative and in full force and effect,
surviving the date of this Agreement.
6. AVAILABILITY OF INFORMATION. Summit hereby agrees to provide Welco,
at its expense, with all information and documentation with respect to its
business, financial condition and other matters as Welco may deem relevant
based on the standards of reasonableness and good faith and shall request in
connection with Welco's performance under this Agreement, including, without
limitation, copies of all correspondence with the Commission, certificates
of its officers, opinions of its counsel and comfort letters from its
auditors. The above-mentioned certificates, opinions of counsel and comfort
letters shall be provided to Welco as Welco may request on the effective
date of the Registration Statement and on the Closing Date. Summit will
make reasonably available to Welco, its auditors, counsel, and officers and
directors to discuss with Welco any aspect of Summit which Welco may deem
relevant. In addition, Summit, at Welco's request, will cause to be
delivered to Welco copies of all certificates, opinions, letters and reports
to be delivered to the underwriter or underwriters, as the case may be,
pursuant to any underwriting agreement executed in connection with the
Offering or otherwise, and shall cause the person issuing such certificate,
opinion, letter or report to authorize Welco to rely thereon to the same
extent as if addressed directly to Welco. Summit represents and warrants to
Welco that all such information and documentation provided pursuant to this
paragraph 6 will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statement therein not
misleading. In addition, Summit will promptly advise Welco of all telephone
conversations with the Commission which relate to or may affect the
Offering.
7. INDEMNIFICATION.
(a) Subject to the conditions set forth below, and in addition to
any rights of indemnification and contribution to which Welco may be
entitled pursuant to any agreement among underwriters, underwriting
agreement or otherwise, and to the extent allowed by law, Summit hereby
agrees that it will indemnify and hold Welco and each person controlling,
controlled by or under common control with Welco within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or the rules and regulations thereunder
(individually, an "Indemnified Person") harmless from and against any and
all loss, claim, damage, liability, cost or expense whatsoever to which such
Indemnified Person may become subject under the Act, the Exchange Act, or
other federal or state statutory law or regulation, at common law or
otherwise, arising out of, based upon, or in any way related or attributed
to (i) this Agreement, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or Prospectus or
any other filing, report, document, release or communication, whether oral
or written, referred to in paragraph 5 hereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) any
application or other document executed by Summit or based upon written
information furnished by Summit filed in any jurisdiction in order to
qualify the Debentures under the securities or Blue Sky laws thereof, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or (iv) the breach of any representation or warranty made by Summit in this
Agreement. Summit further agrees that upon demand by an Indemnified Person
at any time or from time to time, it will promptly reimburse such
Indemnified Person for, or pay, any loss, claim, damage, liability, cost or
expense as to which Summit has indemnified such person pursuant hereto.
Notwithstanding the foregoing provisions of this paragraph 7, any such
payment or reimbursement by Summit of fees, expenses or disbursement
incurred by an Indemnified Person in any proceeding in which a final
judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against such Indemnified Person as
a direct result of such person's negligence, bad faith or willful
misfeasance will be promptly repaid to Summit. In addition, anything in
this paragraph 7 to the contrary notwithstanding, Summit shall not be liable
for any settlement of any action or proceeding effected without its written
consent.
(b) Promptly after receipt by an Indemnified Person under paragraph
(a) above of notice of the commencement of any action, such Indemnified
Person will, if a claim in respect thereof is to be made against Summit
under paragraph (a), notify Summit in writing of the commencement thereof;
but the omission to so notify Summit will not relieve Summit from any
liability which it may have to any Indemnified Person otherwise than under
this paragraph 7 if such omission shall not have materially prejudiced
Summit's ability to investigate or to defend against such claim. In case
any such action is brought against any Indemnified Person, and such
Indemnified Person notifies Summit of the commencement thereof, Summit will
be entitled to participate therein and, to the extent that it may elect by
written notice delivered to the Indemnified Person promptly after receiving
the aforesaid notice from such Indemnified Person, to assume the defense
thereof with counsel reasonably satisfactory to such Indemnified Person;
provided, however, that if the defendants in any such action include both
the Indemnified Person and Summit or any corporation controlling, controlled
by or under common control with Summit, or any director, officer, employee,
representative or agent of any thereof, or any other "Qualified Independent
Underwriter" retained by Summit in connection with the Offering and the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to such other defendant, the Indemnified Person shall have the
right to select separate counsel to represent it. Upon receipt of notice
from Summit to such Indemnified Person of its election so to assume the
defense of such action and approval by the Indemnified Person of counsel,
Summit will not be liable to such Indemnified Person under this paragraph 7
for any fees of counsel subsequently incurred by such Indemnified Person in
connection with the defense thereof (other than the reasonable costs of
investigation subsequently incurred by such Indemnified Person) unless (i)
the Indemnified Person shall have employed separate counsel in accordance
with the provision of the next preceding sentence (it being understood,
however, that Summit shall not be liable for the expenses of more than one
separate counsel in any one jurisdiction representing the Indemnified
Person, which counsel shall be approved by Welco), (ii) Summit, within a
reasonable time after notice of commencement of the action, shall not have
employed counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person, or (iii) Summit shall have authorized in
writing the employment of counsel for the Indemnified Person at the expense
of Summit, and except that, if clause (i) or (iii) is applicable, such
liability shall be only in respect of the counsel referred to in such clause
(i) or (iii).
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph 7 is
due in accordance with its terms but is for any reason held by a court to be
unavailable from Summit to Welco on grounds of policy or otherwise, Summit
and Welco shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) to which Summit and Welco
may be subject in such proportion so that Welco is responsible for that
portion represented by the percentage that its fee under this Agreement
bears to the public offering price appearing on the cover page of the
Prospectus and Summit is responsible for the balance, except as Summit may
otherwise agree to reallocate a portion of such liability with respect to
such balance with any other person, including, without limitation, any other
"Qualified Independent Underwriter"; provided, however, that (i) in no case
shall Welco be responsible for any amount in excess of the fee set forth in
paragraph 4 above and (ii) no person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the Act shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (c), any person
controlling, controlled by or under common control with Welco, or any
partner, director, officer, employee, representative or any agent of any
thereof, shall have the same rights to contribution as Welco and each person
who controls Summit within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, each officer of Summit who shall have signed the
Registration Statement and each director of Summit shall have the same
rights to contribution as Summit, subject in each case to clause (i) of this
paragraph (c). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim for contribution may be made against
the other party under this paragraph (c), notify such party from whom
contribution may be sought, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any other
obligation it or they may have hereunder or otherwise than under this
paragraph (c). The indemnity and contribution agreements contained in this
paragraph 7 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Indemnified Person or
termination of this Agreement.
8. AUTHORIZATION BY SUMMIT. Summit represents and warrants to Welco
that this Agreement has been duly authorized, executed and delivered by
Summit and constitutes a valid and binding obligation of Summit.
9. AUTHORIZATION BY MIS. MIS represents and warrants to Welco that this
Agreement has been duly authorized, executed and delivered by MIS and
constitutes a valid and binding obligation of MIS.
10. AUTHORIZATION BY WELCO. Welco represents and warrants to Summit that
this Agreement has been duly authorized, executed and delivered by Welco and
constitutes a valid and binding obligation of Welco.
11. NOTICE. Whenever notice is required to be given pursuant to this
Agreement, such notice shall be in writing and shall be mailed by first
class mail, postage prepaid, addressed (a) if to Welco, at 101 West City
Avenue, Suite 2130, Bala Cynwyd, PA 19004-9967, Attention: Kenneth S.
Shapiro, and (b) if to Summit, at West 929 Sprague Avenue, Spokane,
Washington 99204, Attention: Susan A. Thomson.
12. GOVERNING LAW. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with and governed by
the laws of the State of Washington applicable to agreements made and to be
performed wholly within such jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above mentioned.
SUMMIT SECURITIES, INC.
By:__________________________________________
Tom Turner, President
By:__________________________________________
Greg Gordon, Secretary/Tresurer
METROPOLITAN INVESTMENT SECURITIES, INC.
By:__________________________________________
Susan A. Thomson, Vice President
By:__________________________________________
Reuel Swanson, Secretary
WELCO SECURITIES, INC.
By:__________________________________________
Kenneth S. Shapiro, President
SCHEDULE A
The opinion of Welco is conditioned upon Summit's undertaking to maintain
the distribution rate of the Preferred Stock in accordance with the formula
set forth below:
Notwithstanding anything to the contrary herein the Applicable Rate for
any monthly distribution period shall not, in any event, be less than 6% or
greater than 14% per annum. The Board of Directors may, however, by
resolution, authorized distributions in excess of the Applicable Rate. The
Applicable Rate for any monthly distribution period shall be the highest of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty
Year Constant Maturity Rate (each as hereinafter defined) plus one half of
one percentage point for such dividend period. In the event that the
Company determines in good faith that for any reason one or more of such
rates cannot be determined for any distribution period, then the Applicable
Rate for such period shall be the higher of whichever of such rates can be
so determined.
EXHIBIT B
VARIABLE RATE, CUMULATIVE
PREFERRED STOCK, SERIES S-2
PRICING
For Distributions Payable On: _____________________________________
Distributions Record Date: ________________________________________
Effective
Date Date Average Rate
3 Mo. Treasury Bill _____________________________ +1.5%
10 Yr Constant Rate _____________________________ +1.5%
20 Year _____________________________ +1.5%
HIGHEST EFFECTIVE RATE: _______________________________
MONTHLY DISTRIBUTION PER SHARE: _______________________
As resolved by the Board of Directors, distribution will be deemed declared
on the 1st day of each month, payable on the 20th of each month to the
holders of record on the 5th of each month.
_______________________________________________________
Greg Gordon, Secretary
Form of
Pricing Opinion of Welco Securities, Inc.
Welco Securities, Inc.
P.O. Box 688
101 West City, Avenue, Suite 2130
Bala Cynwyd, PA 19004-9967
Date:
Tom Turner, President
Metropolitan Investment Securities, Inc.
917 W. Sprague Avenue
Spokane, Washington 99210
Re: Summit Securities, Inc., Offering of $40,000,000 in
Principal Amount of Investment Certificates, Series A
Dear Mr.Turner:
This letter will serve to confirm our engagement as a "qualified
independent underwriter" as that term is defined in Sections 2(l)
(1) through (7) of Schedule E to the NASD bylaws, as amended
("Schedule E").
Based upon our review of the registration statement, and the
performance of "due diligence" as required in Section 3 (c) (1) to
Schedule E, it appears that the yields on the Certificates (which
are based upon the computation set forth in Exhibits A and B to
the Agreement to Act as "Qualified Independent Underwriter" dated
, which is filed as Exhibit 1(b)(i) to
the registration statement referred to hereafter,) are no lower
than those which we would recommend.
We hereby consent to the use of our name as a "qualified
independent underwriter," in the Registration Statement (SEC File
No. 33- ).
Very truly yours,
WELCO SECURITIES, INC.
By:
________________________________________
Kenneth S. Shapiro, President
cc: National Association of Securities Dealers, Inc.
Form of
Pricing Opinion of Welco Securities, Inc.
Date:
Tom Turner, President
Metropolitan Investment Securities, Inc.
917 W. Sprague Avenue
Spokane, Washington 99210
Re: Summit Securities, Inc. Offering of $15,000,000 of
Variable Rate Cumulative Preferred Stock, Series S-2
Dear Mr.Turner:
This letter will serve to confirm our engagement as a "qualified
independent underwriter" as that term is defined in Sections 2(l)
(1) through (7) of Schedule E to the NASD bylaws, as amended
("Schedule E").
Based upon our review of the registration statement, and the
performance of "due diligence" as required in Section 3 (c) (1) to
Schedule E, it appears that the price of $100.00 per share on the
Variable Rate Cumulative Preferred Stock, Series S-2 (provided
that the manner in which the computation of dividends are those
set forth in Exhibit A to the Agreement to Act as "Qualified
Independent Underwriter" dated __________________, which is filed
as Exhibit 1(b)(ii) to the registration statement referred to
hereafter,) is no higher than that which we would recommend.
We hereby consent to the use of our name as a "qualified
independent underwriter," to the Registration Statement (SEC File
No. ).
Very truly yours,
WELCO SECURITIES, INC.
By:_______________________________________
Kenneth S. Shapiro, President
KSS/mm
cc: National Association of Securities Dealers, Inc.
Metropolitan Investment Securities, Inc. West 917 Sprague
Avenue, Spokane, WA 99204 (the"Underwriter"), invites your
participation as a Participating Dealer ("Participating Dealer")
in an offering of _______________________________________
(referred to herein as the "Securities"), being offered by Summit
Securities, Inc. (the Company). The Securities are more
particularly described in the enclosed Prospectus, additional
copies of which will be supplied in reasonable quantities upon
request. The Company through the Underwriter is offering the
Securities subject to the terms of this Agreement, the
Underwriter's instructions which may be forwarded to the
Participating Dealers from time to time, and is made only to
Selected Dealers who are members in good standing of the National
Association of Securities Dealers, Inc. ("NASD") or foreign
dealers who are not eligible for membership in the NASD and who
agree to abide by the Rules of Fair Practice of the NASD including
Section 8, 24, 25 and 36 thereof, and the interpretations of the
NASD's Board of governors with respect to free-riding and
withholding in making sales to purchasers outside the United
States and not to effect sales of the Securities within the United
States, its territories or its possessions, or to persons who are
citizens thereof or residents therein. This invitation is made by
the Underwriter only if the Company's Securities may be lawfully
offered to dealers in your state. The terms and conditions of
this invitation are as follows:
1. Acceptance of Orders. Orders received from the
Participating Dealer will be accepted only at the price, in the
amounts, and on the terms which are set forth in the Company's
Prospectus.
2. Selling Concession. As a Participating Dealer, you
will be allowed a concession of up to a maximum of 5% of the
offering price of the Securities ($100 per shares).
3. Status of Dealer. The Participating Dealer agrees to
purchase the Company's Securities being offered for its customers
only through the Underwriter, and all such purchases shall be made
only upon offers already received by the Participating Dealer from
its customers. In all sales of the Company's Securities to the
public the Participating Dealer shall confirm as agent for
another.
4. Delivery of Funds. The Participating Dealer will
promptly transmit directly to the Company, all funds received form
the Purchasers and a confirmation of a record of such sale which
will set forth the name, address, and social security number of
each individual purchaser, and if there is more than one
registered owner, whether the certificate or certificates
evidencing the ownership of the security purchased are to be
issued to the purchaser in joint tenancy or otherwise. Also, each
Participating Dealer shall report, in writing, to the Company the
principal amount of Securities which have been sold in each state
and the number of persons in each such state who purchased the
Company's Securities from the Participating Dealer. Each sale may
be rejected by the Company, and if rejected, the Underwriter as
agent for the Company will return to you all funds paid by the
purchaser which ave been received by the Company. In
such event, the Participating Dealer will return to the Purchaser
within five (5) business days after actual receipt from the
Underwriter the full purchaser is a subscriber for the principal
amount of Securities until such time as his subscription is
received and accepted by the Underwriter as agent for the Company.
5. Payment. Payment for the Company's Securities shall
accompany all subscriptions. All checks and other orders for
payment of money shall be made payable to "Summit Securities,
Inc." Securities sold by the Participating Dealer shall be
available for delivery from the Company.
6. Dealer's Undertakings. No person is authorized to make
any representations concerning the Company's Securities except
those contained in the Company's Prospectus. The Participating
Dealer will not sell the Company's Securities pursuant to this
Agreement unless the Prospectus is furnished to the purchaser at
least 48 hours prior to the mailing of the confirmation of sale.
The participating Dealer agrees not to use any supplemental sales
literature of any kind without prior written approval of the
Company unless it is furnished by the Company for such purpose.
In offering and selling the Company's Securities, the
Participating Dealer will rely solely on the representations
contained in the Company's Prospectus. Additional copies of the
Prospectus will be supplied by the Company in reasonable
quantities upon request.
7. Conditions of Offering. All sales will be subject to
delivery by the Company to the purchaser of certificates (or about
entry acknowledgements) evidencing ownership of the Securities.
8. Failure to Order. If an order is rejected or if a
payment is received which proves insufficient or worthless, any
compensation paid to the Participating Dealer shall be returned
either by the Participating Dealer's remittances in cash or by a
charge against the account of the Participating Dealer as the
Underwriter may elect.
9. Representations and Agreements of Dealers. By
accepting this Agreement, the Participating Dealer represents
that: it is registered as a Broker/Dealer under the Securities
Exchange Act of 1934, as amended; it is qualified to act as a
dealer in the states or other jurisdictions in which it offers the
Company's Securities; it is a member in good standing of the
National Association of Securities Dealers, Inc.' and it will
maintain such registration, qualifications and memberships
throughout the term of those Agreement. Further, the
participating dealer agrees to comply with all applicable federal
laws; the laws of the state or other jurisdictions concerns; and
the Rules and Regulations of the National Association of
Securities Dealers, Inc. Further, the Participating Dealer agrees
that it will not offer or sell the Company's Securities in any
state or jurisdiction except where the Securities are qualified
for sale. The participating dealer shall not be entitled to any
compensation during any period in which it has been suspended or
expelled from membership in the National Association of Securities
Dealer, Inc. The Participating Dealer will be advised concerning
the states where the certificates have been registered for sale.
10. Dealer's Employees. By accepting this Agreement, the
Participating Dealer has assumed full responsibility for thorough
and prior training of its representatives concerning the selling
methods to be used in connection with the offer and sale of the
Company's Securities giving special emphasis to the principles of
full and fair disclosure to prospective investors and the
prohibition against "Free-Riding and Withholders".
11. Participating dealer's Indemnification. The
Participating Dealer hereby agrees to indemnify and to hold
harmless the Underwriter and each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Securities Act
of 1933, as amended, from and against any and all losses, claims,
damages, or liabilities to which the Underwriter may become
subject under the Securities Act of 1933, as amended, or otherwise
insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon information
contained in the Registration Statement, or other documents filed
with the Securities and Exchange Commission to the extent such
information is supplied by the Participating Dealer to the
Underwriter for inclusion therein, or are based upon alleged
misrepresentations or omissions to state material facts in
connection with statements made by the Participating Dealer or the
Participating Dealer will reimburse the Underwriter for any legal
or other expenses reasonably incurred in connection with the
investigation of or the defending of any such action or claim.
The underwriter shall, after receiving the first Summons or other
legal process disclosing the nature of the action being served
upon it, in any proceeding in respect of which indemnity may be
sought by the Underwriter hereunder, promptly notify the
Participating Dealer in writing of the commencement thereof and
the Participating Dealer shall be entitled to participate in (and,
to the extent the Participating Dealer shall wish, to direct) the
defense, which shall be conducted by counsel of good standing
satisfactory to the Underwriter. If the Participating Dealer
shall fail to provide such defense, the Underwriter may defend
such action at the Participating Dealer's cost and expense. The
Participating Dealer's obligation under this paragraph shall
survive the termination of this Agreement.
12. Compliance with NASD By-Laws and Regulations. Each
Participating Dealer shall conduct itself in a manner consistent
with the provisions of the Section 12 of Schedule E to the NASD
by-Laws, and no transaction in the Securities to be offered will
be executed by an member in a discretionary account without the
prior specific written approval of the customer.
Investor's checks will be transmitted directly to the Company
by noon of the next business day following receipt.
13. Expenses. No expense will be charged to Participating
Dealers. A single transfer tax, if any, on the sale of the
Securities by the Participating Dealer to its customer will be
paid when such Securities are delivered to the Participating
Dealer for delivery to its customers. However, the Participating
Dealer will pay its proportionate share of any transfer tax or any
other tax (other than the single transfer tax described above) if
any such tax shall be from time to time assessed against the
Underwriter and other Participating Dealers.
14. Communications. All communications to the Underwriter
should be sent to the address shown in the opening paragraph of
this Agreement. Any notice to the Participating Dealer shall be
properly given if mailed or telephone to the Participating Dealer
below. This Agreement shall be construed according to the laws of
the State of Idaho.
15. Assignment and Termination. This Agreement may not be
assigned by the Participating Dealer without the Underwriter's
consent. This Agreement will terminate upon the termination of
the offering except that either party may terminate this Agreement
at any time by giving written notice to the other.
Accepted on:
METROPOLITAN INVESTMENT
SECURITIES, INC.
By:________________________
Firm Name:_________________________
Address:
Telephone:
By:_________________________________
I.R.S. Employer Identification No.
STATEMENT OF RIGHTS, DESIGNATIONS AND PREFERENCES OF VARIABLE
RATE
CUMULATIVE PREFERRED STOCK, SERIES S-2
1. Name of Corporation: Summit Securities, Inc.
2. Copy of resolution establishing and designating Variable Rate
Cumulative Preferred Stock, Series S-2, and determining the
relative rights and preferences thereof: Attached hereto.
3. The undersigned does hereby certify that the attached resolution
was duly adopted by the Board of Directors of the corporation
on December 13, 1995.
/S/ GREG GORDON
______________________________________
Greg Gordon, Secretary
SUMMIT SECURITIES, INC.
PREFERRED STOCK SERIES S-2 AUTHORIZING RESOLUTION
Resolved, that pursuant to the authority expressly granted
and vested in the Board of Directors (the "Board") of this
Corporation by its Articles of Incorporation, as amended, a
sub-series of Preferred Stock, Series S-2 of the Corporation be,
and is hereby, established which will consist of 150,000 shares of
the par value of $10.00 per share ($15,000,000), shall be
designated "Variable Rate Cumulative Preferred Stock, Series S-2"
(hereafter called "Preferred Stock"), shall be offered at $100.00
per share and which shall have rights, preferences, qualifications
and restrictions as follows:
1. DIVIDENDS.
a) Dividends (or other distributions deemed dividends
for purposes of this resolution) on the issued and outstanding
shares of Preferred Stock shall be declared and paid monthly at a
percentage rate per annum of the liquidation preference of $100.00
per share equal to the "Applicable Rate," as hereinafter defined,
or such greater rate as may be determined by the Board.
Notwithstanding the foregoing, the Applicable Rate for any monthly
dividend period shall, in no event, be less than 6% per annum or
greater than 14% per annum. Such dividends shall be cumulative
from the date of original issue of such shares and shall be
payable, when and as declared by the Board, on such dates as the
Board deems advisable, but at least once a year, commencing June
1, 1993. Each such dividend shall be paid to the holders of
record of shares of Preferred Stock as they appear on the stock
register of the Corporation on such record date as shall be fixed
by the Board in advance of the payment date thereof. Dividends on
account of arrears for any past Dividend Periods may be declared
and paid at any time, without reference to any regular dividend
payment date, to holders of record on such date as shall be fixed
by the Board in advance of the payment date thereof.
b) Except as provided below in this section, the
Applicable Rate for any monthly dividend period shall be the
highest of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Twenty Year Constant Maturity Rate (each as defined
in Exhibit A attached hereto and incorporated by reference herein)
plus one half of one percentage point. In the event that the Board
determines in good faith that for any reason one or more of such
rates cannot be determined for any dividend period, than the
Applicable Rate for such dividend period shall be the higher of
whichever of such rates can be so determined. In the event that
the Board determines in good faith that none of such rates can be
determined for any dividend period, then the Applicable Rate in
effect for the preceding dividend period shall be continued for
such dividend period. The Treasury Bill Rate, the Ten Year
Constant Maturity Rate and the Twenty Year Constant Maturity Rate
shall each be rounded to the nearest five hundredths of a
percentage point.
c) No dividend shall be paid upon, or declared or set
apart for, any share of Preferred Stock for any Dividend Period
unless at the same time a like dividend shall be paid upon, or be
declared and set apart for, all shares of Preferred Stock then
issued and outstanding and all shares of all other series of
preferred stock then issued and outstanding and entitled to
receive dividends. Holders of Preferred Stock shall not be
entitled to any dividend, whether payable in cash, property or
stock, in excess of full cumulative dividends as herein provided.
No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments which may
be in arrears on Preferred Stock.
d) Dividends payable for each full monthly Dividend
Period shall be computed by dividing the Applicable Rate for such
monthly Dividend Period by twelve and applying such rate against
the liquidation preference of $100.00 per share. Dividends shall
be rounded to the nearest whole cent. Dividends payable for any
period less than a full monthly Dividend Period shall be computed
on the basis of 30 day months and a 360 day year. The Applicable
Rate with respect to each monthly Dividend Period shall be
calculated as promptly as practicable by the Corporation according
to the method provided herein. The Corporation will cause notice
of such Applicable Rate to be enclosed with the dividend payment
check next mailed to the holders of shares of Preferred Stock.
e) So long as any shares of Preferred Stock are
outstanding, (i) no dividend (other than a dividend in common
stock or in any other stock ranking junior to Preferred Stock as
to dividends and upon liquidation and other than as provided in
the foregoing section 1(c)) shall be declared or paid or set aside
for payment; (ii) no other distribution shall be declared or made
upon common stock or upon any other stock ranking junior to or on
a parity with Preferred Stock as to dividends or upon liquidation;
and (iii) no common stock or any other stock of the Corporation
ranking junior to or on a parity with Preferred Stock as to
dividends or upon liquidation shall be redeemed, purchased or
otherwise acquired by the Corporation for any consideration (or
any monies paid to or made available for a sinking fund for the
redemption of any shares of any such stock) except by conversion
into or exchange for stock of the Corporation ranking junior to
Preferred Stock as to dividends and upon liquidation unless, in
each case, the full cumulative dividends on all outstanding shares
of Preferred Stock shall have been paid or declared and set apart
for all past dividend payment periods.
f) The holders of Preferred Stock shall be entitled to
receive, when and as declared by the Board, dividend distributions
out of the funds of the Corporation legally available therefor.
Any distribution made which may be deemed to have been made out of
the capital surplus of Preferred Stock shall not reduce either the
redemption process or the liquidation rights as hereafter
specified.
2. REDEMPTION.
a) The Corporation, at its option, may redeem shares of
Preferred Stock, in whole or in part, at any time or from time to
time, at redemption prices hereafter set forth plus accrued and
unpaid dividends to the date fixed for redemption.
i) In the event of a redemption of shares pursuant
to this subsection prior to January 1, 1995, the redemption price
shall be $102.00 per share; and the redemption price shall be
$100.00 per share in the event of redemption anytime after
December 31, 1994.
ii) In the event that fewer than all of the
outstanding shares of Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the
Corporation and the shares to be redeemed shall be determined by
lot, or pro rata, or by any other method, as may be determined by
the Corporation in its sole discretion to be equitable.
iii) In the event that the Corporation shall
redeem shares hereunder, notice of such redemption shall be given
by first class mail, postage prepaid, mailed not less than 30 days
or more than 60 days prior to he redemption date, to each holder
of record of the shares to be redeemed, at such holder's address
as it appears on the stock register of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the number of
shares to be redeemed and, if fewer than all shares held by such
holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; (iv) the
place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on
such redemption date.
iv) Notice having been mailed as aforesaid, from
and after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the redemption
price), dividends on the shares so called for redemption shall no
longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease.
Upon surrender in accordance with said notice of the certificates
representing shares redeemed (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all of the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
b) Discretionary Redemption Upon Request of the Holder:
The shares of Preferred Stock are not redeemable at the option of
the holder. If, however, the Corporation receives an unsolicited
written request for redemption of a block of shares from any
holder, the Corporation may, in its sole discretion and subject to
the limitations described below, accept such shares for
redemption. Any shares so tendered, which the Corporation in its
discretion, allows for redemption, shall be redeemed by the
Corporation directly, and not from or through a broker or dealer,
at a price equal to $97 per share, plus any declared but unpaid
dividends to date if redeemed during the first year after the date
of original issuance and $99 per share plus any declared but
unpaid dividends if redeemed thereafter. The Corporation may
change such optional redemption prices at any time with respect to
unissued shares.
The Corporation may not redeem any such shares tendered for
redemption if to do so would be unsafe or unsound in light of the
Corporation's financial condition (including its liquidity
position); if payment of interest or principal on any outstanding
instrument of indebtedness is in arrears or in default; or if
payment of any dividend on Preferred Stock or share of any stock
of the Company ranking at least on a parity therewith is in
arrears as to dividends.
c) Any shares of Preferred Stock which shall at any
time have been redeemed shall, after such redemption, have the
status of authorized but unissued shares of Preferred Stock,
without designation as to series until such shares are designated
as part of a particular series by the Board.
d) Notwithstanding the foregoing provisions of this
Section 2, if any dividends on Preferred Stock are in arrears, no
shares of Preferred Stock shall be redeemed unless all outstanding
shares of Preferred Stock are simultaneously redeemed, and the
Corporation shall not purchase or otherwise acquire any shares of
Preferred Stock; provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to
holders of all of the outstanding shares of Preferred Stock.
3. CONVERSION OR EXCHANGE. The holders of shares of
Preferred Stock shall not have any rights to convert such shares
into or exchange such shares for shares of any other class or
series of any class of securities of the Corporation.
4. VOTING. Except as required from time to time by law,
the shares of Preferred Stock shall have no voting powers.
Provided, however, not withstanding the foregoing, that whenever
and as often as dividends payable on any shares of Preferred Stock
shall be in arrears in an amount equal to twenty four full monthly
dividends or more per share, the holders of Preferred Stock
together with the holders of any other preferred stock hereafter
authorized, voting separately and as a single class shall be
entitled to elect a majority of the Board of Directors of the
Corporation. Such right shall continue until all dividends in
arrears on preferred stock have been paid in full.
5. LIQUIDATION RIGHTS.
a) Upon the dissolution, liquidation or winding up of
the Corporation, the holders of the shares of Preferred Stock
shall be entitled to receive out of the assets of the Corporation,
before any payment or distribution shall be made on the Common
Stock, or on any other class of stock ranking junior to Preferred
Stock, upon liquidation, the amount of $100.00 per share, plus a
sum equal to all dividends (whether or not earned or declared) on
such shares accrued and unpaid thereon to the date of final
distribution.
b) Neither the sale, lease or conveyance of all or
substantially all the property or business of the Corporation, nor
the merger or consolidation of the Corporation into or with any
other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary,
for the purposes of this Section.
c) After the payment to the holders of the shares of
Preferred Stock of the full preferential amounts provided for in
this Section, the holders of Preferred Stock as such shall have no
right or claim to any of the remaining assets of the Corporation.
d) In the event the assets of the Corporation available
for distribution to the holders of shares of Preferred Stock upon
any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in
full all amounts to which such holders are entitled pursuant to
this Section, no such distribution shall be made on account of any
shares or any other series of Preferred Stock or any other class
of stock ranking on a parity with the shares of Preferred Stock
upon such dissolution, liquidation or winding up, unless
proportionate distributive amounts shall be paid on account of the
shares of Preferred Stock, ratably in accordance with the sums
which would be payable in such distribution if all sums payable in
respect of the shares of all series of Preferred Stock and any
such other class of stock as aforesaid were discharged in full.
6. PRIORITIES. For purposes of this Resolution, any stock
of any class or classes of the Corporation shall be deemed to
rank:
a) Prior to the shares of Preferred Stock, either as to
dividends or upon liquidation if the holders of such class or
classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in preference or priority
to the holders of shares of Preferred Stock.
b) On a parity with shares of Preferred Stock, either
as to dividends or upon liquidation, whether or not the dividend
rates, dividend payment dates or redemption or liquidation prices
per share or sinking fund provisions, if any, are different from
those of Preferred Stock, if the holder of such stock shall be
entitled to the receipt of dividends or of amounts distributable
upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in proportion to their respective dividend rates
or liquidation prices, without preference or priority, one over
the other, as between the holder of such stock and the holders of
Preferred Stock; and
c) Junior to shares of Preferred Stock, either as to
dividends or upon liquidation, if the holders of shares of
Preferred Stock shall be entitled to receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in preference or priority
to the holders of shares of such class or classes.
7. SHARES NON-ASSESSABLE. Any and all shares of Preferred
Stock issued, and for which the full consideration has been paid
or delivered, shall be deemed fully paid stock and the holder of
such shares shall not be liable for any further call or assessment
or any other payment thereon.
8. PRE-EMPTIVE RIGHTS. Holders of Preferred Stock shall
have no pre-emptive rights to acquire additional shares of
Preferred Stock.
EXHIBIT A
Treasury Bill Rate
Except as provided below in this paragraph, the "Treasury
Bill Rate" for each dividend period will be the arithmetic average
of the two most recent weekly per annum market discount rates (or
the one weekly per annum market discount rate, if only one such
rate shall be published during the relevant Calendar Period (as
defined below)) for three-month U.S. Treasury bills, as published
weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding
the first day of the dividend period for which the dividend rate
on Preferred Stock Series E-5, is being determined. In the event
that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during any such Calendar Period, then
the Treasury Bill Rate for the related dividend period shall be
the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount
rate, if only one such rate shall be published during the relevant
Calendar Period) for three-month U.S. Treasury bills, as published
weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the
Company. In the event that a per annum market discount rate for
three-month U.S Treasury bills shall not be published by the
Federal Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such Calendar Period,
then the Treasury Bill Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum market
discount rates (or the one weekly per annum market discount rate,
if only one such rate shall be published during the relevant
Calendar Period) for all of the U.S. Treasury bills then having
maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board shall not publish such rates, by
any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company
determines in good faith that for any reason no such U.S. Treasury
bill rates are published as provided above during such Calendar
Period, then the Treasury Bill Rate for such dividend period shall
be the arithmetic average of the per annum market discount rates
based upon bids during such Calendar Period for each of the issues
of marketable non-interest bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the date
of each such quotation, as quoted daily for each business day in
New York City (or less frequently if daily quotations shall not be
generally available) to the Company by at least three recognized
primary U.S. Government securities dealers selected by the
Company. In the event that the Company determines in good faith
that for any reason the Company cannot determine the Treasury Bill
Rate for any dividend period as provided above in this paragraph,
the Treasury Bill Rate for such dividend period shall be the
arithmetic average of the per annum market discount rates based
upon the closing bids during such Calendar Period for each of the
issues of marketable interest-bearing U.S. Treasury securities
with a maturity of not less than 80 nor more than 100 days from
the date of each such quotation, as quoted daily for each business
day in New York City (or less frequently if daily quotations shall
not be generally available) to the Company by at least three
recognized primary U.S. Government securities dealers selected by
the Company.
Ten Year Constant Maturity Rate
Except as provided below in this paragraph, the "Ten Year
Constant Maturity Rate" for each dividend period shall be the
arithmetic average of the two most recent weekly per annum Ten
Year Average Yields (or the one weekly per annum Ten Year Average
Yield, if only one such Yield shall be published during the
relevant Calendar Period as provided below, as published weekly by
the Federal Reserve Board during the Calendar Period immediately
prior to the ten calendar days immediately preceding the first day
of the dividend period for which the dividend rate on Preferred
Stock, Series E-5 is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum Ten
Year Average Yield during such Calendar Period, then the Ten Year
Constant Maturity Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum Ten
Year Average Yields (or the one weekly per annum Ten Year Average
Yield, if only one such Yield shall be published during such
Calendar Period), as published weekly during such Calendar Period
by any Federal Reserve Bank or by any U.S. Government department
or agency selected by the Company. In the event that a per annum
Ten Year Average Yield shall not be published by the Federal
Reserve Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then
the Ten Year Constant Maturity Rate for such dividend period shall
be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published during the
relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other
than Special Securities (as defined below)) then having maturities
of not less tan eight nor more than twelve years, as published
during such Calendar Period by the Federal Reserve Board or, if
the Federal Reserve Board shall not publish such yields, by any
Federal Reserve Bank o by any U.S. Government department or agency
selected by the Company. In the event that the Company determines
in good faith that for any reason the Company cannot determine the
Ten Year Constant Maturity Rate for any dividend period as
provided above in this paragraph, then the Ten Year Constant
Maturity Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity
date not less than eight nor more than twelve years from the date
of each such quotation, as quoted daily for each business day in
New York City (or less frequently if daily quotations shall not be
generally available) to the Company by at least three recognized
primary U.S. Government securities dealers selected by the
Company.
Twenty Year Constant Maturity Rate
Except as provided below in this paragraph, the "Twenty Year
Constant Maturity Rate" for each dividend period shall be the
arithmetic average of the two most recent weekly per annum Twenty
Year Average Yields (or the one weekly per annum Twenty year
Average Yield, if only one such Yield shall be published during
the relevant Calendar Period), as published weekly by the Federal
Reserve Board during the Calendar Period immediately prior to the
ten calendar days immediately preceding the first day of the
dividend period for which the dividend rate on Preferred Stock,
Series E-5 is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum Twenty Year
Average Yield during such Calendar Period, then the Twenty Year
Constant Maturity Rate for such dividend period shall be the
arithmetic average of the two most recent weekly per annum Twenty
Year Average Yields (or the one weekly per annum Twenty Year
Average Yield, if only one such Yield shall be published during
such Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event that a
per annum Twenty Year Average Yield shall not be published by the
Federal Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such Calendar Period,
then the Twenty Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one weekly
average yield to maturity, if only one such yield shall be
published during such Calendar Period) for all of the actively
traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) then having maturities of not less
than eighteen nor more than twenty-two years, as published during
such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or
agency selected by the Company. In the event that the Company
determines in good faith that for any reason the Company cannot
determine the Twenty Year Constant Maturity Rate for any dividend
period as provided above in this paragraph, then the Twenty Year
Constant Maturity Rate for such dividend period shall be the
arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each
of the issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with a
final maturity date not less than eighteen nor more than
twenty-two years from the date of each such quotation, as quoted
daily for each business day in New York City (or less frequently
if daily quotations shall not be generally available) to the
Company by at least three recognized primary U.S. Government
securities dealers selected by the Company.
As used herein, the term "Calendar Period" means a period of
14 calendar days; the term "Special Securities" means securities
which may, at the option of the holder, be surrendered at face
value in payment of any federal estate tax or which provide tax
benefits to the holder and are priced to reflect such tax benefits
or which were originally issued at a deep or substantial discount;
the term "Ten Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of ten
years); and the term "Twenty Year Average Yield" means the average
yield to maturity for actively traded marketable U.S. Treasury
fixed interest rate securities (adjusted to constant maturities of
20 years).
OPINION OF SUSAN A. THOMSON
Dated February 1, 1996
The Directors and Stockholder
Summit Securities, Inc.
929 West Sprague Avenue
Spokane, WA 99204
Gentlemen:
I have acted as counsel to you in connection with the
proceedings for the authorization and issuance of $40,000,000
principal amount of Investment Certificates of the Company and the
preparation of a Registration Statement (Form S-2) under the
Securities Act of 1933, as amended, which you have filed with the
Securities and Exchange Commission with respect to the
Certificates. (SEC Registration No. 333-00115).
I have examined the Registration Statement referred to above
and such documents and records of the Company and other documents
as I have deemed necessary for the purpose of this opinion.
Based upon the foregoing, I am of the opinion that upon the
happening of the following events,
(a) due action by the Board of Directors of the Company
authorizing the issuance and sale of the Certificates
pursuant to the Indenture dated as of November 15,
1990, between the Company and West One Bank, Idaho,
N.A. as Trustee;
(b) the Registration Statement referred to above becoming
effective;
(c) compliance with the terms and conditions of the
Indenture with respect to the creation, authentication
and delivery of the Certificates, the due execution by
the Company and authentication and delivery by the
Trustee of the Certificates, and the sale thereof by
the Company as contemplated in the Registration
Statement and in accordance with the above-mentioned
corporate and governmental authorizations;
The Certificates will constitute in the hands of the holders
thereof valid, binding and legal outstanding obligations of the
Company, in accordance with their terms, subject to applicable
bankruptcy and insolvency laws.
I hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to me in the
Prospectus under the caption "Legal Opinion".
Sincerely,
/s/ Susan A. Thomson
Susan A. Thomson
Assistant Corporate Counsel
OPINION OF SUSAN A. THOMSON
Dated February 1, 1996
The Directors and Stockholders
Summit Securities, Inc.
West 929 Sprague Avenue
Spokane, WA 99204
Gentlemen:
I have acted as counsel to Summit Securities, Inc. (the
"Company") in connection with the proceedings for the
authorization and issuance of 150,000 shares of Variable Rate
Cumulative Preferred Stock, Series S-2 ("Preferred Stock, Series
S") including the preparation of a Registration Statement (Form
S-2) under the Securities Act of 1933, as amended, which has been
filed with the Securities and Exchange Commission. (SEC
Registration No 333-00115).
I have examined the Registration Statement referred to above
and such other documents and records as I have deemed necessary
for the purpose of this opinion.
Based upon the foregoing, and subject to the Board of
Directors' adoption of Articles of Amendment to the Company's
Article of Incorporation which incorporate the Statement of
Rights, Designation and Preferences of variable Rate Cumulative
Preferred Stock, Series S-2, and the filing of same with the
Secretary of State of the State of Idaho in accordance with IRC
30-1420, I am of the opinion that:
(1) the Preferred Stock, Series S-2 of the Company which is
being registered, when issued and sold in the manner
and for the consideration contemplated by the
Registration Statement, will be legally issued, fully
paid and non-assessable; and
(2) in the event of dissolution, liquidation or winding up
of the affairs of the Company, whether voluntary or
involuntary, the holders of Preferred Stock, Series S-2
will be entitled to receive, on parity with all other
issued and outstanding preferred stock, before any
payment or distribution is made on the Company's Class
A or Class B Common Stock, the amount of ($100.00 per
share plus an amount equal to all accrued and unpaid
dividends thereon to the date of distribution or
payment; and
(3) The liquidation preference of the preferred stock
exceeds the par value thereof. There are no
restrictions upon surplus by reason of such excess and
there are no remedies available to security holders by
reason of such excess before or after payment of any
dividend that would reduce surplus to an amount less
than the amount of such excess and which remedies arise
by reason of such excess..
This opinion is furnished pursuant to the requirements of
Item 601(b)(5) and 601(b) of Regulation S-K.
I hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to me in the
Prospectus under the caption "Legal Opinion."
Sincerely,
/s/ Susan A. Thomson
Susan A. Thomson
Assistant Corporate Counsel
MANAGEMENT, ACQUISITION AND SERVICING AGREEMENT
Agreement made this 9th day of September, 1994 by and between Summit
Securities, Inc. (hereinafter "SUMMIT"), a Washington corporation with
principal offices at 1000 West Hubbard, Suite 140, Coeur d'Alene, ID 83814, and
Metropolitan Mortgage & Securities Co., Inc. (hereinafter "METROPOLITAN"), a
Washington corporation with its principal office at W. 929 Sprague Ave.,
Spokane, Washington 99204, (also hereinafter referred to jointly as the
"Parties".)
WITNESSETH
WHEREAS, METROPOLITAN engages in the business of purchasing and servicing
receivables, and maintains subsidiaries, internal staff, and operations to
support such activities, and;
WHEREAS, SUMMIT also engages in the business of investing in receivables,
but SUMMIT does not maintain internal staff or operations to support the
purchasing and servicing of receivables, and;
WHEREAS, METROPOLITAN has the personnel, systems and expertise to provide
to SUMMIT general support services, receivable acquisition services and
receivable collection and management services, and;
WHEREAS, SUMMIT desires to obtain from METROPOLITAN general support
services, receivable acquisition services and receivable collection and
management 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. REPRESENTATIONS AND WARRANTIES OF METROPOLITAN:
METROPOLITAN REPRESENTS AND WARRANTS TO SUMMIT 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, collection 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.
5. The execution and delivery of this agreement, the servicing of
receivables by METROPOLITAN, 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 the ability of SUMMIT to collect its receivables or impair
the value of SUMMIT'S receivables.
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 receivables acquisition practices, receivable collection
practices and other services provided hereunder shall each be conducted in
accordance with generally accepted business practices in all respects, as
applicable to each respective activity.
II. REPRESENTATIONS AND WARRANTIES OF SUMMIT
SUMMIT REPRESENTS AND WARRANTS TO METROPOLITAN THAT:
1. SUMMIT is a corporation duly organized, validly existing and in
good standing under the laws of the State of Idaho.
2. SUMMIT 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 SUMMIT
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 SUMMIT
to make this agreement binding upon SUMMIT in accordance with its terms.
4. The consummation of the transactions contemplated by this agreement
are in the ordinary course of business of SUMMIT.
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 SUMMITS articles of
incorporation, bylaws or any other agreement, instrument, law, regulation,
rule, order, or judgment to which SUMMIT is a party, by which it is bound or
its property is subject, which would impair the ability of METROPOLITAN to
service and collect the receivables in accordance with the terms of this
Agreement.
6. SUMMIT 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 SUMMIT 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 SUMMIT, or in any
material impairment of the right or ability of SUMMIT 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 SUMMIT contemplated herein, or which would be likely to impair
materially the ability of SUMMIT 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 SUMMIT's execution, delivery and
performance of or compliance with this agreement.
III. GENERAL SUPPORT SERVICES:
1. DESCRIPTION OF SERVICES
a. Administrative Support Services:
METROPOLITAN shall provide SUMMIT administrative support services
including but not limited to Transfer Agent, Registrar, Human Resources,
Information Systems, Art & Advertising, Accounting, legal, check
processing, and cashiering services.
b. Financial Services:
METROPOLITAN shall provide financial advice to SUMMIT.
c. Office Space:
METROPOLITAN shall lease or sublease to SUMMIT sufficient office space
for SUMMIT'S business needs at METROPOLITAN'S headquarters facility in
Spokane, Washington and/or such other location as agreed to by the
parties. Any such lease may include lease of office furnishing and
equipment.
2. FEES FOR GENERAL SUPPORT SERVICES
SUMMIT will pay METROPOLITAN monthly fees for General Support Services
provided by METROPOLITAN to SUMMIT. Fees for General Support Services shall be
determined by mutual agreement of the parties.
IV. RECEIVABLE ACQUISITION SERVICES
1. GENERAL DUTIES AND AUTHORITY
METROPOLITAN shall provide receivable acquisition services to SUMMIT
which shall be performed substantially in compliance with the following:
a. METROPOLITAN shall secure opportunities for SUMMIT to purchase
receivables through the use of METROPOLITAN's branch office system,
industry contacts and the other methods developed by METROPOLITAN for its
own receivable purchases.
b. In reviewing the receivables offered to SUMMIT, METROPOLITAN shall
review, among other things, the receivable loan to value ratio, security
value, security condition, payment record, payor's credit, security title
reports and legal documents, taking into account the investment
guidelines provided by SUMMIT.
c. METROPOLITAN or its agent, shall close the receivable purchase in a
manner and using practices which are consistent with industry standards
for the location where the receivable is closed.
d. Loans resulting from financing that may be provided by METROPOLITAN
as a means to induce the purchase of property (e.g. for the financing of
repossession resales or other seller financing) may be placed in SUMMIT's
receivable portfolio if such receivables are consistent with SUMMIT's
investment guidelines.
e. METROPOLITAN shall prepare and maintain such books, records,
computer systems and procedures as shall be required and necessary to
maintain control over the day to day activities regarding offers to
purchase and closing of receivable purchases.
f. METROPOLITAN shall furnish to SUMMIT such periodic, special or
other reports or information as requested by SUMMIT including reports of
total receivables purchased, closing periods and closing costs. All such
reports, documents or information shall be provided by and in accordance
with all reasonable instructions and directions which SUMMIT may give.
g. METROPOLITAN may carry out any other activity or procedure, which
in METROPOLITAN's discretion, is necessary or appropriate in connection
with the acquisition and closing of the receivables for the benefit of
SUMMIT.
2. RECEIVABLE ACQUISITION SERVICES FEE:
SUMMIT shall pay METROPOLITAN fees for Receivable Acquisition and Support
Services provided by METROPOLITAN to SUMMIT. Fees shall be determined by
mutual agreement of the parties.
3. RIGHT TO REJECT.
SUMMIT shall have the right at anytime to review the receivables acquired
pursuant to this agreement and to reject any receivables which in SUMMIT's
opinion are not consistent with its investment guidelines as such guidelines
existed at the time of the acquisition. Any receivables not rejected within
three months of acquisition are deemed accepted. Any receivable which is
rejected shall be purchased by METROPOLITAN at its face amount or such other
amount as agreed to by the parties.
V. RECEIVABLE COLLECTION AND MANAGEMENT SERVICES
1. SERVICING:
METROPOLITAN or its agents shall perform collection and management
services for SUMMIT substantially in compliance with the following:
a. Hold and safe keep all original receivable documents and files.
b. Prepare and maintain such books, records, computer systems and
procedures as shall be required and necessary to maintain control over
the day to day activities regarding the collection and enforcement of the
rights, obligations and performance of each receivable subject to this
agreement.
c. Furnish to SUMMIT such periodic, special, or other reports,
documents or information as requested by SUMMIT including, but not
limited to, cash receipt reports, aging of all receivables balances on a
contractual basis, and itemizations of unearned or deferred income all in
accordance with generally accepted accounting and statutory accounting
principles. All such reports, documents or information shall be provided
by and in accordance with all reasonable instructions and directions
which SUMMIT may give.
d. METROPOLITAN shall manage the receipt of receivable payments
substantially as follows:
i. Deposit all monies received from the receivable payors into a
general collection account maintained by METROPOLITAN, or its
agent, which account may contain other monies and funds which may
be held for others. Within a reasonable time the amounts collected
and deposited on behalf of SUMMIT shall be transferred to an
account designated by SUMMIT.
ii. For the purposes of this subparagraph d, reasonable time
shall mean two to three business days, unless extraordinary
circumstances beyond METROPOLITAN'S control, such as computer
failure, makes such time frame unreasonable, in which case the
reasonable time shall be two to three days following elimination of
the circumstances causing the delay.
e. Accept and remit to appropriate parties any amounts designated as
reserves for the payment of real estate taxes, insurance premiums or
similar items as may be provided by the receivable documents;
f. Monitor the tax, insurance and other payments required to be paid
directly by receivable payor to third parties, or collect from the
receivable payors and remit to the appropriate third parties any amounts
due for any taxes imposed upon the real estate securing any receivable,
any insurance premiums and any other sums required to be paid by the
receivable payor pursuant to the terms of any receivable. Any funds so
collected by METROPOLITAN or subsidiaries shall be held in escrow if
required by the receivable documents or applicable regulations, or
METROPOLITAN shall pay such sums to SUMMIT as provided in Paragraph
V.1.d. hereinabove. METROPOLITAN shall pay out such monies to such
taxing authorities or other parties or persons as shall be authorized to
receive such payments.
g. Implement routine collection procedures (including telephone calls
and the preparation and mailing of written notices) as METROPOLITAN may,
in its discretion, deem to be reasonable or appropriate and in accordance
with its customary practice and procedure in the servicing of its own
accounts, on delinquent receivables;
h. When appropriate, in METROPOLITAN's discretion, METROPOLITAN or its
agent may undertake any legal action, whether judicial or non-judicial,
to enforce the payment of any sums due or other performance required by
the terms of any receivable documents or to foreclose upon or forfeit any
real estate or other security securing a receivable.
i. Whenever METROPOLITAN shall commence suit to enforce the terms of a
receivable which is subject to this agreement, METROPOLITAN shall be
deemed to be the authorized legal agent and representative of SUMMIT in
any court of law in any federal, state, or commonwealth, or other court
of competent jurisdiction, and to so act, without receiving any other
prior authority of SUMMIT, to enforce, sue, settle, compromise, and/or
collect such monies and recover any and all such real estate security
which shall be the subject of any receivable. Any such action may be
maintained in the name of "SUMMIT" or "METROPOLITAN", at METROPOLITAN's
discretion.
j. Carry out any other activity or procedure which, in METROPOLITAN'S
discretion, is necessary or appropriate in connection with the
maintenance and enforcement of the receivables for the benefit of SUMMIT.
2. COOPERATION BY SUMMIT
SUMMIT agrees to cooperate with METROPOLITAN in the enforcement of all
receivables, make personnel available to METROPOLITAN and cause such personnel
to execute documents, and to make such documents, records, papers, or other
items of evidence available as needed to assist METROPOLITAN in the collection
and servicing of the receivables subject to this agreement.
3. RECEIVABLE COLLECTION AND MANAGEMENT SERVICES FEES
SUMMIT agrees to compensate METROPOLITAN for its duties performed
hereunder in the following manner and amounts:
a. SUMMIT agrees to pay in addition to any applicable taxes a monthly
management and servicing fee. Such sum shall be due whether or not a
receivable is in default. The Receivable Collection and Management
Services Fee shall be determined by mutual agreement of the parties.
b. In addition, SUMMIT shall reimburse METROPOLITAN for all outside
attorney costs and all third party fees and charges which may be incurred
in performance of the collections services.
c. SUMMIT agrees that as additional compensation to METROPOLITAN for
such management and collection efforts that METROPOLITAN shall be
entitled to retain any and all late charges, extension charges, and any
other charges or costs imposed upon a delinquent obligor that do not
relate to changing the terms or conditions of the loan to effect a
restructuring or otherwise.
VI. GENERAL TERMS AND CONDITIONS
1. ADJUSTMENTS TO FEES
METROPOLITAN may, from time to time, change the method for determining
any or all of the fees charged pursuant to this agreement so long as the new
method conforms with the intent of the parties, is reasonable and reflects
changes in market rates and/or the cost for providing such services.
2. REVIEW OF FEES
SUMMIT shall have the right at any time to review the method for
determining the fees charged pursuant to this Agreement. If, in SUMMIT's
opinion, any fee is unacceptable SUMMIT may request a review by the officers of
SUMMIT and METROPOLITAN, who shall use their best efforts to resolve any
objection in consideration of the best interests of both parties.
3. NON-EXCLUSIVITY OF AGREEMENT
a. This agreement is non-exclusive. SUMMIT 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
SUMMIT shall not be construed as an event of termination of this
agreement.
b. SUMMIT may withdraw any receivable at any time from those being
serviced pursuant to this agreement, which action shall not be a breach
or termination of this agreement.
4. DELEGATION
METROPOLITAN may utilize, delegate to or subcontract with any of its
subsidiaries, divisions, affiliates or third parties in connection with its
performance of the terms of this agreement, in full or in part, as deemed
appropriate at METROPOLITAN's discretion.
5. RIGHT TO EXAMINE METROPOLITAN'S RECORDS
SUMMIT 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 during business hours or at such
other times as may be reasonable under applicable circumstances.
6. EVENT OF DEFAULT
The following shall be construed as an event of default:
a. The failure by METROPOLITAN to deliver any and all monies received
by METROPOLITAN which METROPOLITAN is obligated to pay to SUMMIT pursuant
to the terms of this agreement;
b. The failure by SUMMIT to deliver any sums required to be paid to
METROPOLITAN pursuant to the terms of this agreement.
c. 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.
d. In the event that METROPOLITAN shall file bankruptcy or otherwise
be determined to be insolvent, this agreement may be terminated by SUMMIT
and SUMMIT may take immediate steps to employ another entity to collect
and service the receivables then being serviced by METROPOLITAN.
7. TERMINATION
a. Either party may terminate this agreement by providing written
notice of termination to the other party, in which event this agreement
shall terminate immediately upon receipt of such notice or at such later
date as provided in said notice.
b. In the event of a default as defined in paragraph VI.6.
hereinabove, 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 shall
terminate upon expiration of said time period.
8. 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:
a. ATTN: PRESIDENT
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
W. 929 Sprague Ave.
Spokane, WA 99204.
b. ATTN: PRESIDENT
SUMMIT SECURITIES INC.
1000 W. Hubbard, Suite 140
Coeur d'Alene, ID 83814
9. 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.
10. PRIOR AGREEMENTS
This agreement replaces and supersedes each and every prior agreement
executed by the parties related to the management, Receivable acquisition and
Receivable collection services provided by METROPOLITAN to SUMMIT.
This agreement is executed the day, month, and year first above written by
the duly authorized officers of each party.
METROPOLITAN MORTGAGE & SUMMIT SECURITIES, INC.
SECURITIES CO., INC.
/S/ C. PAUL SANDIFUR, JR. /S/ JOHN TRIMBLE
By: By:
C. Paul Sandifur, Jr. John Trimble
President President
/S/ SUSAN THOMSON /S/ TOM TURNER
Attest Attest
Susan Thomson Tom Turner
Assistant Secretary Secretary/Treasurer
ADDENDUM TO MANAGEMENT, ACQUISITION AND SERVICING AGREEMENT
BETWEEN
SUMMIT SECURITIES, INC.
AND
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
DATE OF Amended ORIGINAL AGREEMENT: September 9, 1994
DATE OF THIS ADDENDUM: September 9, 1994
ADDENDUM NUMBER: 1
1. FEES FOR GENERAL SUPPORT SERVICES
a. Administrative Support Fees:
i. SUMMIT will pay METROPOLITAN a monthly fee for general
office services provided by METROPOLITAN to SUMMIT. It is the
intent of the parties hereto that the Administrative Support Fees
be calculated at a fair and equitable rate that reflects the
current market cost for comparable services.
ii. 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 cost allocation system will be used to
support charges found in the market place for comparable services
and may be used as an approximation for market charges when the
market cost for such services cannot be determined and as agreed to
by the parties.
b. Financial Services Fees:
i. SUMMIT shall pay to METROPOLITAN an agreed amount to
METROPOLITAN for METROPOLITAN providing financial consultation and
advice.
ii. The financial consultation and advice, when provided, shall be
charged at a fee negotiated by the parties in each instance and
based upon the expertise and hours required to provide the service.
c. Office Space Rental Fees:
i. SUMMIT shall also pay to METROPOLITAN an agreed amount of
rent for the real and personal property utilized by SUMMIT during
the term hereof, which amount shall be determined on the basis of a
triple net lease.
ii. The lease for office space and related triple net charges
shall be determined on a square foot basis, based upon a percentage
of the building's total expenses, or such other appropriate measure
as determined by the parties.
2. RECEIVABLE ACQUISITION SERVICES FEE:
a. METROPOLITAN shall acquire receivables for SUMMIT, which, after
deduction of METROPOLITAN'S fee, earn a minimum net yield equivalent to
the yield obtainable in the market place for assets of comparable credit
quality (estimated to approximate 400 basis points over the average
Treasury Mortgage Equivalent Yield). Calculation of this fee shall be
determined by mutual agreement of the parties.
b. The minimum fee to METROPOLITAN will be no less than 100 basis
points for all receivables purchased through its origination network.
c. The following formula sets forth the initial method for calculating
the fee and corresponds to the sample calculation set forth in Exhibit A.
i. Determine the net carrying value (net book value) of the
receivables(s) by decreasing its/their face amount by the purchase
discount, and adding back the capitalized closing costs. For the
purposes of this paragraph, purchase discount is the difference
between the face value of the receivable and its purchase price
paid to the third party seller.
ii. Determine the weighted average remaining contractual term of
the receivable(s).
iii. Set forth the expected average remaining life for the
receivable(s), which expectation shall be determined after applying
the prepayment assumption set forth in paragraph v. The average
remaining life is equal to the life in which the average balanced
is reached.
iv. Determine the weighted average coupon (weighted average
interest rate) for the receivable(s).
v. Set forth the expected prepayment assumption for the
receivable(s) which shall be determined by considering the weighted
average coupon (set forth in iv. hereinabove) in light of the
current interest rate environment.
vi. Determine the average weekly treasury yield for the expected
average time to maturity of the receivable(s) as set forth in
paragraph IV.2.c.iii. over the time period that the receivable(s)
was/were acquired. The weekly yield shall be a weekly average
calculated on a consistent basis, such as the average weekly rate
published by the Bloomberg Investment System. The rate used may
reflect an interpolation between proximate treasury yields and
terms. The rate may be the result of rounding to the nearest whole
year, e.g. an expected receivable average term of 4.6 years may be
rounded to 5.0 years.
vii. Determine the mortgage equivalent (monthly payment
equivalent) for the average weekly treasury yield set forth in vi.
hereinabove.
viii. Add the appropriate spread to the mortgage yield equivalent
(IV.2.a.). The result is the receivable yield to SUMMIT (subject
to IV.2.b.).
ix. Determine the percent of the face value of the receivable
which SUMMIT can pay to achieve its yield requirement as set forth
in viii. hereinabove.
x. Set forth the dollar amount which results from applying the
percent in paragraph ix, to the face amount of the receivable.
xi. The difference between the amount SUMMIT can pay to obtain
its desired yield (ix.) and the net carrying value (i.), is the
acquisition services fee.
xii. Determine that the fee prescribed in (xi.) is equal to or
greater than the minimum fee prescribed in IV>2.b. If the fee
derived from the above formula is less than the minimum then
recalculate the fee at the prescribed minimum.
d. The receivable acquisition services fee may be calculated by
METROPOLITAN, at its discretion, on an individual receivable basis, or on
a pooled basis.
3. RECEIVABLE COLLECTION AND MANAGEMENT SERVICES FEES
SUMMIT agrees to compensate METROPOLITAN for its duties performed
hereunder in the following manner and amounts:
a. SUMMIT agrees to pay in addition to any applicable taxes a monthly
management and servicing fee. Such sum shall be due whether or not a
receivable is in default. The fee shall be calculated based on the cost
for similar services in the market place. The charge will be derived
based generally on the following methodology: The standard servicing
charge in the market place for conventional residential receivables
(currently 25 basis points) will be applied to the average Washington,
regional, or national average receivable balance. The parties may agree
to further segregate the charges between residential, commercial or other
receivable types. The resulting annual per receivable charge will be
divided by the recent average SUMMIT receivable balance and multiplied by
one plus a factor that considers the additional servicing cost attendant
to the types of receivables generally acquired SUMMIT.
METROPOLITAN MORTGAGE & SUMMIT SECURITIES, INC.
SECURITIES CO., INC.
/S/ C. PAUL SANDIFUR, JR. /S/ JOHN TRIMBLE
By: By:
C. Paul Sandifur, Jr. John Trimble
President President
/S/ SUSAN THOMSON /S/ TOM TURNER
Attest Attest
Susan Thomson Tom Turner
Assistant Secretary Secretary/Treasurer
MANAGEMENT, ACQUISITION AND SERVICING AGREEMENT
Agreement made this 31st day of December, 1994 by and between Old
Standard Life Insurance Company (hereinafter "OLD STANDARD"), an Idaho
corporation with principal offices at 1000 West Hubbard, Coeur d'Alene, ID
83814, and Metropolitan Mortgage & Securities Co., Inc. (hereinafter
"METROPOLITAN"), a Washington corporation with its principal office at W. 929
Sprague Ave., Spokane, Washington 99204, (also hereinafter referred to jointly
as the "Parties".)
WITNESSETH
WHEREAS, METROPOLITAN engages in the business of purchasing and servicing
receivables, and maintains subsidiaries, internal staff, and operations to
support such activities, and;
WHEREAS, OLD STANDARD also engages in the business of investing in
receivables, but OLD STANDARD does not maintain internal staff or operations to
support the purchasing and servicing of receivables, and;
WHEREAS, METROPOLITAN has the personnel, systems and expertise to provide
to OLD STANDARD general support services, receivable acquisition services and
receivable collection and management services, and;
WHEREAS, OLD STANDARD desires to obtain from Metropolitan general support
services, receivable acquisition services and account receivable and management
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. REPRESENTATIONS AND WARRANTIES OF METROPOLITAN:
METROPOLITAN REPRESENTS AND WARRANTS TO OLD STANDARD 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, collection 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.
5. The execution and delivery of this agreement, the servicing of
receivables by METROPOLITAN, 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 the ability of OLD STANDARD to collect its receivables or
impair the value of OLD STANDARD'S receivables.
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 receivables acquisition practices, receivable collection
practices and other services provided hereunder shall each be conducted in
accordance with generally accepted business practices in all respects, as
applicable to each respective activity.
II. REPRESENTATIONS AND WARRANTIES OF OLD STANDARD
OLD STANDARD REPRESENTS AND WARRANTS TO METROPOLITAN THAT:
1. OLD STANDARD is a corporation duly organized, validly existing and
in good standing under the laws of the State of Idaho.
2. OLD STANDARD 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 OLD
STANDARD 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 OLD
STANDARD to make this agreement binding upon OLD STANDARD in accordance with
its terms.
4. The consummation of the transactions contemplated by this agreement
are in the ordinary course of business of OLD STANDARD.
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 OLD STANDARDS
articles of incorporation, bylaws or any other agreement, instrument, law,
regulation, rule, order, or judgment to which OLD STANDARD is a party, by which
it is bound or its property is subject, which would impair the ability of
METROPOLITAN to service and collect the receivables in accordance with the
terms of this Agreement.
6. OLD STANDARD 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 OLD STANDARD 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 OLD STANDARD, or in
any material impairment of the right or ability of OLD STANDARD 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 OLD STANDARD contemplated herein, or which
would be likely to impair materially the ability of OLD STANDARD to perform
under the terms of this agreement.
III. GENERAL SUPPORT SERVICES:
1. DESCRIPTION OF SERVICES
a. Administrative Support Services:
METROPOLITAN shall provide OLD STANDARD administrative support services
including but not limited to Human Resources, Information Systems, Art &
Advertising, Accounting, legal, check processing, and cashiering
services.
b. Financial Services:
METROPOLITAN shall provide financial advice and investment portfolio
management services to OLD STANDARD.
c. Office Space:
Metropolitan shall lease or sublease to OLD STANDARD sufficient office
space for OLD STANDARD'S business needs at METROPOLITAN'S headquarters
facility in Spokane, Washington and/or such other location as agreed to
by the parties. Any such lease may include lease of office furnishings
and equipment.
2. FEES FOR GENERAL SUPPORT SERVICES
OLD STANDARD will pay METROPOLITAN monthly fees for General Support
Services provided by METROPOLITAN to OLD STANDARD. Fees for General Support
Services shall be determined by mutual agreement of the parties.
IV. RECEIVABLE ACQUISITION SERVICES
1. GENERAL DUTIES AND AUTHORITY
METROPOLITAN shall provide receivable acquisition services to OLD
STANDARD which shall be performed substantially in compliance with the
following:
a. METROPOLITAN shall secure opportunities for OLD STANDARD to
purchase receivables through the use of METROPOLITAN's branch office
system, industry contacts and the other methods developed by METROPOLITAN
for its own receivable purchases.
b. In reviewing the receivables offered to OLD STANDARD, METROPOLITAN
shall review, among other things, the receivable loan to value ratio,
security value, security condition, payment record, payor's credit,
security title reports and legal documents, taking into account the
investment guidelines provided by OLD STANDARD.
c. METROPOLITAN or its agent, shall close the receivable purchase in a
manner and using practices which are consistent with industry standards
for the location where the receivable is closed.
d. Loans resulting from financing that may be provided by METROPOLITAN
as a means to induce the purchase of property (e.g. for the financing of
repossession resales or other seller financing) may be placed in OLD
STANDARD's receivable portfolio if such receivables are consistent with
OLD STANDARD's investment guidelines.
e. METROPOLITAN shall prepare and maintain such books, records,
computer systems and procedures as shall be required and necessary to
maintain control over the day to day activities regarding offers to
purchase and closing of receivable purchases.
f. METROPOLITAN shall furnish to OLD STANDARD such periodic, special
or other reports or information as requested by OLD STANDARD including
reports of total receivables purchased, closing periods and closing
costs. All such reports, documents or information shall be provided by
and in accordance with all reasonable instructions and directions which
OLD STANDARD may give.
g. METROPOLITAN may carry out any other activity or procedure, which
in METROPOLITAN's discretion, is necessary or appropriate in connection
with the acquisition and closing of the receivables for the benefit of
OLD STANDARD.
2. RECEIVABLE ACQUISITION SERVICES FEE:
OLD STANDARD shall pay METROPOLITAN fees for Receivable Acquisition and
Support Services provided by METROPOLITAN to OLD STANDARD. Fees shall be
determined by mutual agreement of the parties.
3. RIGHT TO REJECT.
OLD STANDARD shall have the right at anytime to review the receivables
acquired pursuant to this agreement and to reject any receivables which in OLD
STANDARD's opinion are not consistent with its investment guidelines as such
guidelines existed at the time of the acquisition. Any receivables not
rejected within three months of acquisition are deemed accepted. Any
receivable which is rejected shall be purchased by Metropolitan at its face
amount or such other amount as agreed to by the parties.
V. RECEIVABLE COLLECTION AND MANAGEMENT SERVICES
1. SERVICING:
METROPOLITAN or its agents shall perform collection and management
services for OLD STANDARD substantially in compliance with the following:
a. Hold and safe keep all original receivable documents and files.
b. Prepare and maintain such books, records, computer systems and
procedures as shall be required and necessary to maintain control over
the day to day activities regarding the collection and enforcement of the
rights, obligations and performance of each receivable subject to this
agreement.
c. Furnish to OLD STANDARD such periodic, special, or other reports,
documents or information as requested by OLD STANDARD including, but not
limited to, cash receipt reports, aging of all receivables balances on a
contractual basis, and itemizations of unearned or deferred income all in
accordance with generally accepted accounting and statutory accounting
principles. All such reports, documents or information shall be provided
by and in accordance with all reasonable instructions and directions
which OLD STANDARD may give.
d. METROPOLITAN shall manage the receipt of receivable payments
substantially as follows:
i. Deposit all monies received from the receivable payors into a
general collection account maintained by METROPOLITAN, or its
agent, which account may contain other monies and funds which may
be held for others. Within a reasonable time the amounts collected
and deposited on behalf of OLD STANDARD shall be transferred to an
account designated by OLD STANDARD.
ii. For the purposes of this subparagraph d, reasonable time
shall mean two to three business days, unless extraordinary
circumstances beyond METROPOLITAN'S control, such as computer
failure, makes such time frame unreasonable, in which case the
reasonable time shall be two to three days following elimination of
the circumstances causing the delay.
e. Accept and remit to appropriate parties any amounts designated as
reserves for the payment of real estate taxes, insurance premiums or
similar items as may be provided by the receivable documents;
f. Monitor the tax, insurance and other payments required to be paid
directly by receivable payor to third parties, or collect from the
receivable payors and remit to the appropriate third parties any amounts
due for any taxes imposed upon the real estate securing any receivable,
any insurance premiums and any other sums required to be paid by the
receivable payor pursuant to the terms of any receivable. Any funds so
collected by METROPOLITAN or subsidiaries shall be held in escrow if
required by the receivable documents or applicable regulations, or
METROPOLITAN shall pay such sums to OLD STANDARD as provided in Paragraph
V.1.d. hereinabove. METROPOLITAN shall pay out such monies to such
taxing authorities or other parties or persons as shall be authorized to
receive such payments.
g. Implement routine collection procedures (including telephone calls
and the preparation and mailing of written notices) as METROPOLITAN may,
in its discretion, deem to be reasonable or appropriate and in accordance
with its customary practice and procedure in the servicing of its own
accounts, on delinquent receivables;
h. When appropriate, in METROPOLITAN's discretion, METROPOLITAN or its
agent may undertake any legal action, whether judicial or non-judicial,
to enforce the payment of any sums due or other performance required by
the terms of any receivable documents or to foreclose upon or forfeit any
real estate or other security securing a receivable.
i. Whenever METROPOLITAN shall commence suit to enforce the terms of a
receivable which is subject to this agreement, METROPOLITAN shall be
deemed to be the authorized legal agent and representative of OLD
STANDARD in any court of law in any federal, state, or commonwealth, or
other court of competent jurisdiction, and to so act, without receiving
any other prior authority of OLD STANDARD, to enforce, sue, settle,
compromise, and/or collect such monies and recover any and all such real
estate security which shall be the subject of any receivable. Any such
action may be maintained in the name of "OLD STANDARD" or "METROPOLITAN",
at METROPOLITAN's discretion.
j. Carry out any other activity or procedure which, in METROPOLITAN'S
discretion, is necessary or appropriate in connection with the
maintenance and enforcement of the receivables for the benefit of OLD
STANDARD.
2. COOPERATION BY OLD STANDARD
OLD STANDARD agrees to cooperate with METROPOLITAN in the enforcement of
all receivables, make personnel available to METROPOLITAN and cause such
personnel to execute documents, and to make such documents, records, papers, or
other items of evidence available as needed to assist METROPOLITAN in the
collection and servicing of the receivables subject to this agreement.
3. RECEIVABLE COLLECTION AND MANAGEMENT SERVICES FEES
OLD STANDARD agrees to compensate METROPOLITAN for its duties performed
hereunder in the following manner and amounts:
a. OLD STANDARD agrees to pay in addition to any applicable taxes a
monthly management and servicing fee. Such sum shall be due whether or
not a receivable is in default. The Receivable Collection and Management
Services Fee shall be determined by mutual agreement of the parties.
b. In addition, OLD STANDARD shall reimburse METROPOLITAN for all
outside attorney costs and all third party fees and charges which may be
incurred in performance of the collections services.
c. OLD STANDARD agrees that as additional compensation to METROPOLITAN
for such management and collection efforts that METROPOLITAN shall be
entitled to retain any and all late charges, extension charges, and any
other charges or costs imposed upon a delinquent obligor that do not
relate to changing the terms or conditions of the loan to effect a
restructuring or otherwise.
VI. GENERAL TERMS AND CONDITIONS
1. ADJUSTMENTS TO FEES
METROPOLITAN may, from time to time, change the method for determining
any or all of the fees charged pursuant to this agreement so long as the new
method conforms with the intent of the parties, is reasonable and reflects
changes in market rates and/or the cost for providing such services.
2. REVIEW OF FEES
OLD STANDARD shall have the right at any time to review the method for
determining the fees charged pursuant to this Agreement. If, in OLD STANDARD's
opinion, any fee is unacceptable OLD STANDARD may request a review by the
officers of OLD STANDARD and METROPOLITAN, who shall use their best efforts to
resolve any objection in consideration of the best interests of both parties.
3. NON-EXCLUSIVITY OF AGREEMENT
a. This agreement is non-exclusive. OLD STANDARD 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 OLD
STANDARD shall not be construed as an event of termination of this
agreement.
b. OLD STANDARD may withdraw any receivable at any time from those
being serviced pursuant to this agreement, which action shall not be a
breach or termination of this agreement.
4. DELEGATION
METROPOLITAN may utilize, delegate to or subcontract with any of its
subsidiaries, divisions, affiliates or third parties in connection with its
performance of the terms of this agreement, in full or in part, as deemed
appropriate at Metropolitan's discretion.
5. RIGHT TO EXAMINE METROPOLITAN'S RECORDS
OLD STANDARD 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 during business hours or at such
other times as may be reasonable under applicable circumstances.
6. EVENT OF DEFAULT
The following shall be construed as an event of default:
a. The failure by METROPOLITAN to deliver any and all monies received
by METROPOLITAN which METROPOLITAN is obligated to pay to OLD STANDARD
pursuant to the terms of this agreement;
b. The failure by OLD STANDARD to deliver any sums required to be paid
to METROPOLITAN pursuant to the terms of this agreement.
c. 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.
d. In the event that METROPOLITAN shall file bankruptcy or otherwise
be determined to be insolvent, this agreement may be terminated by OLD
STANDARD and OLD STANDARD may take immediate steps to employ another
entity to collect and service the receivables then being serviced by
METROPOLITAN.
7. TERMINATION
a. Either party may terminate this agreement by providing written
notice of termination to the other party, in which event this agreement
shall terminate immediately upon receipt of such notice or at such later
date as provided in said notice.
b. In the event of a default as defined in paragraph VI.6.
hereinabove, 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 shall
terminate upon expiration of said time period.
8. 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:
a. ATTN: PRESIDENT
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
W. 929 Sprague Ave.
Spokane, WA 99204.
b. ATTN: PRESIDENT
OLD STANDARD LIFE INSURANCE COMPANY
1000 West Hubbard
Coeur d'Alene, ID 83814.
9. 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.
10. PRIOR AGREEMENT
This Agreement replaces and supersedes each and every prior agreement
executed by the parties related to the management, receivable acquisition and
receivable collection services provided by METROPOLITAN to OLD STANDARD.
This agreement is executed the day, month, and year first above written by
the duly authorized officers of each party.
METROPOLITAN MORTGAGE & OLD STANDARD LIFE INSURANCE COMPANY
SECURITIES CO., INC.
/s/ C. PAUL SANDIFUR, JR. /S/ M. DAVID GORTON
By: By:
C. Paul Sandifur, Jr. M. David Gorton
President Vice-President
/S/ SUSAN THOMSON /S/ THOMAS TURNER
Attest Attest
Susan Thomson Thomas Turner
Assistant Secretary Secretary/Treasurer
ADDENDUM TO MANAGEMENT, ACQUISITION AND SERVICING AGREEMENT
BETWEEN
OLD STANDARD LIFE INSURANCE COMPANY
AND
METROPOLITAN MORTGAGE & SECURITIES CO., INC.
DATE OF ORIGINAL AGREEMENT: 12/31/94
DATE OF THIS ADDENDUM: 12/31/94
ADDENDUM NUMBER: 1
1. FEES FOR GENERAL SUPPORT SERVICES
a. Administrative Support Fees:
i. OLD STANDARD will pay METROPOLITAN a monthly fee for general
office services provided by METROPOLITAN to OLD STANDARD. It is
the intent of the parties hereto that the Administrative Support
Fees be calculated at a fair and equitable rate that reflects the
current market cost for comparable services.
ii. 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 to be allocated to OLD STANDARD. The cost allocation
system shall be expressed in terms of labor hours, machine hours,
square footage, and/or other appropriate measures. The cost
allocation system will be used to support charges found in the
market place for comparable services and may be used as an
approximation for market charges when the market cost for such
services cannot be determined and as agreed to by the parties.
b. Financial Services Fees:
i. OLD STANDARD shall pay to METROPOLITAN an agreed amount to
METROPOLITAN for METROPOLITAN providing financial consultation and
advice, and for managing OLD STANDARD'S investment portfolio.
ii. The financial consultation and advice, when provided, shall be
charged at a fee negotiated by the parties in each instance and
based upon the expertise and hours required to provide the service.
The portfolio management services shall be charged to OLD STANDARD
as a percentage of the portfolio size and payable monthly.
c. Office Space Rental Fees:
i. OLD STANDARD shall also pay to METROPOLITAN an agreed amount
of rent for the real and personal property utilized by OLD STANDARD
during the term hereof, which amount shall be determined on the
basis of a triple net lease.
ii. The lease for office space and related triple net charges
shall be determined on a square foot basis, based upon a percentage
of the building's total expenses, or such other appropriate measure
as determined by METROPOLITAN.
2. RECEIVABLE ACQUISITION SERVICES FEE:
a. METROPOLITAN shall acquire receivables for OLD STANDARD, which,
after deduction of METROPOLITAN'S fee, earn a minimum net yield
equivalent to the yield obtainable in the market place for assets of
comparable credit quality (estimated to approximate 400 basis points over
the average Treasury Mortgage Equivalent Yield). Calculation of this fee
shall be determined by mutual agreement of the parties.
b. The minimum fee to METROPOLITAN will be no less than 100 basis
points.
c. The following formula sets forth the initial method for calculating
the fee and corresponds to the sample calculation set forth in Exhibit A.
i. Determine the net carrying value (net book value) of the
receivables(s) by decreasing its/their face amount by the purchase
discount, and adding back the capitalized closing costs. For the
purposes of this paragraph, purchase discount is the difference
between the face value of the receivable and its purchase price
paid to the third party seller.
ii. Determine the weighted average remaining contractual term of
the receivable(s).
iii. Set forth the expected average remaining life for the
receivable(s), which expectation shall be determined after applying
the prepayment assumption set forth in paragraph v. The average
remaining life is equal to the life in which the average balanced
is reached.
iv. Determine the weighted average coupon (weighted average
interest rate) for the receivable(s).
v. Set forth the expected prepayment assumption for the
receivable(s) which shall be determined by considering the weighted
average coupon (set forth in iv. hereinabove) in light of the
current interest rate environment.
vi. Determine the average weekly treasury yield for the expected
average time to maturity of the receivable(s) as set forth in
paragraph IV.2.c.iii. over the time period that the receivable(s)
was/were acquired. The weekly yield shall be a weekly average
calculated on a consistent basis, such as the average weekly rate
published by the Bloomberg Investment System. The rate used may
reflect an interpolation between proximate treasury yields and
terms. The rate may be the result of rounding to the nearest whole
year, e.g. an expected receivable average term of 4.6 years may be
rounded to 5.0 years.
vii. Determine the mortgage equivalent (monthly payment
equivalent) for the average weekly treasury yield set forth in vi.
hereinabove.
viii. Add the appropriate spread to the mortgage yield equivalent
(IV.2.a.). The result is the receivable yield to OLD STANDARD
(subject to IV.2.b.).
ix. Determine the percent of the face value of the receivable
which OLD STANDARD can pay to achieve its yield requirement as set
forth in viii. hereinabove.
x. Set forth the dollar amount which results from applying the
percent in paragraph ix, to the face amount of the receivable.
xi. The difference between the amount OLD STANDARD can pay to
obtain its desired yield (ix.) and the net carrying value (i.), is
the acquisition services fee.
xii. Determine that the fee prescribed in (xi.) is equal to or
greater than the minimum fee prescribed in IV>2.b. If the fee
derived from the above formula is less than the minimum then
recalculate the fee at the prescribed minimum.
d. The receivable acquisition services fee may be calculated by
METROPOLITAN, at its discretion, on an individual receivable basis, or on
a pooled basis.
3. RECEIVABLE COLLECTION AND MANAGEMENT SERVICES FEES
OLD STANDARD agrees to compensate METROPOLITAN for its duties performed
hereunder in the following manner and amounts:
a. OLD STANDARD agrees to pay in addition to any applicable taxes a
monthly management and servicing fee. Such sum shall be due whether or
not a receivable is in default. The fee shall be calculated based on the
cost for similar services in the market place. The charge will be
derived based generally on the following methodology: The standard
servicing charge in the market place for conventional residential
receivables (currently 25 basis points) will be applied to the average
Washington, regional, or national average receivable balance. The
parties may agree to further segregate the charges between residential,
commercial or other receivable types. The resulting annual per
receivable charge will be divided by the recent average OLD STANDARD
receivable balance and multiplied by one plus a factor that considers the
additional servicing cost attendant to the types of receivables generally
acquired OLD STANDARD.
METROPOLITAN MORTGAGE & OLD STANDARD LIFE INSURANCE COMPANY
SECURITIES CO., INC.
/S/ C. PAUL SANDIFUR, JR. /S/ M. DAVID GORTON
By: By:
C. Paul Sandifur, Jr. M. David Gorto
President Vice President
/S/ SUSAN THOMSON /S/ THOMAS TURNER
Attest Attest
Susan Thomson Thomas Turner
Assistant Secretary Secretary/Treasurer
SUMMIT SECURITIES, INC.
RATIO OF EARNING TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
The ratio of adjusted earnings to fixed charges and Preferred Stock dividends was computed using the
following tabulations to compute adjusted earnings and the defined fixed charges and Preferred Stock
dividends.
Year Ended
September 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C>
Income before extraordinary
item $ 587,559 $ 264,879 $ 283,107 $ 611,595 $ 238,205
Add:
Interest 3,251,334 2,527,945 1,792,059 1,390,968 640,318
Taxes (benefit) on
income 239,707 140,407 145,951 127,989 (2,689)
---------- ---------- ----------- ---------- ---------
Adjusted Earnings $4,078,600 $2,933,231 $2,221,117 $2,130,552 $ 875,834
========== ========== ========== ========== =========
Preferred Stock Dividend
Requirements $ 309,061 $ 2,930
Ratio Factor of Income
after provision for income
taxes to income before
provision for income taxes 71% 65%
Preferred Stock Dividend
Factor on Pretax Basis 435,297 4,508
Fixed Charges
Interest 3,251,334 $2,527,945 $1,792,059 $1,390,968 $ 640,318
---------- ---------- ---------- ---------- ----------
Fixed Charges and Preferred
Stock Dividends $3,686,631 $2,532,453 $1,792,059 $1,390,968 $ 640,318
========== ========== ========== ========== ==========
Ratio of Adjusted Earnings
to Fixed Charges and
Preferred Stock Dividends 1.11 1.16 1.24 1.53 1.37
==== ==== ==== ==== ====
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form
S-2 (File No. ) of our report, which includes an explanatory
paragraph describing changes in the methods of accounting for
repossessed real property and income taxes in fiscal 1993, dated
November 20, 1995 on our audit of the consolidated financial
statements of Summit Securities, Inc. and Subsidiaries.
We consent to the inclusion in this Registration Statement on Form
S-2 of our report, which includes an explanatory paragraph
describing a change in the method of accounting for investments in
certain debt securities in fiscal 1993, dated January 12, 1995 on
our audit of the financial statements of Old Standard Life Insurance
Company.
We also consent to the reference of our firm under the caption
"Experts".
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Spokane, Washington
January 9, 1996
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
_____________________________
Statement of Eligibility and Qualification
Under the Trust Indenture Act of 1939 of a
Corporation Designated to Act as Trustee
_____________________________
WEST ONE BANK, IDAHO
(Exact name of trustee as specified in its charter)
_____________________________
Idaho 82-0130211
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
101 S. Capitol Boulevard 83702
Boise, Idaho (Zip code)
(Address of Trustee's
principal executive offices)
______________________________
SUMMIT SECURITIES, INC.
(Exact name of obligor as specified in its charter)
Idaho 82-0438135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 W. Hubbard 83814
Coeur d'Alene, Idaho (Zip code)
(Address of principal
executive offices)
_________________________________
INVESTMENT CERTIFICATES
(Title of the indenture securities)
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Name Address
Federal Reserve Bank of
San Francisco San Francisco, CA
Federal Deposit Insurance
Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
power.
Yes.
Item 2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an
affiliate of the trustee, describe such affiliation.
None.
Item 3. Voting Securities of the Trustee.
Furnish the following information as to each class of
voting securities of the trustee:
As of December 7, 1995
Col. A Col. B
Title of Class Amount Outstanding
Capital Stock (Common)
par value $2.50 per share 6,148,202 shares
Item 4. Trusteeships under Other Indentures.
If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, furnish the following information:
(a) Title of the securities outstanding under each such
other indenture.
None.
(b) A brief statement of the facts relied upon as a basis
for the claim that no conflicting interest within the
meaning of Section 310(b) (1) of the Act arises as a
result of the trusteeship under any such other
indenture, including a statement as to how the
indenture securities will rank as compared with the
securities issued under such other indenture.
Nonapplicable.
Item 5. Interlocking Directorates and Similar Relationships with
the Obligor or Underwriters.
If the trustee or any of the directors or executive
officers of the trustee is a director, officer, partner,
employee, appointee, or representative of the obligor or
of any underwriter for the obligor, identify each such
person having any such connection and state the nature of
each such connection.
None.
Item 6. Voting Securities of the Trustee Owned by the Obligor or
its Officials.
Furnish the following information as to the voting
securities of the trustee owned beneficially by the
obligor and each director, partner and executive officer
of the obligor.
As of December 7, 1995
The amount of voting securities of the trustee owned
beneficially by the obligor and its directors and
executive officers, taken as a group, does not exceed one
percent of the outstanding voting securities of the
trustee.
Item 7. Voting Securities of the Trustee Owned by Underwriters or
their Officials.
Furnish the following information as to the voting
securities of the trustee owned beneficially by each
underwriter for the obligor and each director, partner,
and executive officer of each such underwriter.
As of December 7, 1995.
None.
Item 8. Securities of the Obligor Owned or Held by the Trustee.
Furnish the following information as to securities of the
obligor owned beneficially or held as collateral security
for obligations in default by the trustee.
As of December 7, 1995
None.
Item 9. Securities of Underwriters Owned or Held by the Trustee.
If the trustee owns beneficially or holds as collateral
security for obligations in default any securities of an
underwriter for the obligor, furnish the following
information as to each class of such underwriter any of
which are so owned or held by the trustee.
As of December 7, 1995
None.
Item 10. Ownership or Holdings by the Trustee of Voting Securities
of Certain Affiliates or Security Holders of the Obligors.
If the trustee owns beneficially or holds as collateral
security for obligations in default voting securities of a
person who, to the knowledge of the trustee (1) owns 10
percent or more of the voting securities of the obligor or
(2) is an affiliate, other than a subsidiary, of the
obligor, furnish the following information as to the
voting securities of such person.
As of December 7, 1995
None.
Item 11. Ownership or Holdings by the Trustee or any Securities of
Person Owning 50 percent or More of the Voting Securities
of the Obligor.
If the trustee owns beneficially or holds as collateral
security for obligations default any securities of a
person who, to the knowledge of the trustee, owns 50
percent or more of the Voting Securities of the Obligor,
furnish the following information as to each class of
securities of such person any of which are so owned or
held by the trustee.
As of December 7, 1995
None.
Item 12. List of Exhibits.
Exhibit 1. Articles of Incorporation of the trustee, as
amended, and as now in effect.
Exhibit 2. Certificate of authority of the trustee to
commence business.
Exhibit 3. Authorization of the trustee to exercise
corporate trust powers.
Exhibit 4. Existing By-Laws of the trustee.
Exhibit 5. None.
Exhibit 6. Consent of the trustee required by Section
321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or
examining authority.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act OF 1939
the trustee, West One Bank, Idaho, N.A. a corporation organized and
existing under the laws of the United States of America, has duly
caused this statement of eligibility and qualification to be signed
on its behalf by the undersigned, thereunto duly authorized, all in
the City of Boise, State of Idaho, on the 7th day of December, 1994.
WEST ONE BANK, IDAHO
/s/ ROGER WRIGHT
By:_________________________________________
Roger Wright
Vice President and Manager
Corporate Trust Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,979
<SECURITIES> 11,388
<RECEIVABLES> 77,778
<ALLOWANCES> 765
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 96,347
<CURRENT-LIABILITIES> 0
<BONDS> 38,651
<COMMON> 100
0
356
<OTHER-SE> 3,451
<TOTAL-LIABILITY-AND-EQUITY> 96,347
<SALES> 0
<TOTAL-REVENUES> 9,577
<CGS> 0
<TOTAL-COSTS> 5,053
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 445
<INTEREST-EXPENSE> 3,251
<INCOME-PRETAX> 827
<INCOME-TAX> 240
<INCOME-CONTINUING> 587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 587
<EPS-PRIMARY> 27.85
<EPS-DILUTED> 27.85
