<PAGE> 1
As filed with the Securities and Exchange Commission on February 25, 1998.
Registration No. 333-43829
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUMMIT SECURITIES, INC.
An Idaho Corporation--IRS Employer No. 82-0438135
929 West Sprague Avenue
Spokane, WA 99201
(509) 838-3111
Agent for Service
Tom Turner, President
Summit Securities, Inc.
929 West Sprague Ave.
Spokane, WA 99201
(509) 838-3111
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. /x/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and
<PAGE> 2
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
/ /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Title of each class of Amount offering aggregate Amount of
securities to be to be price per offering registration
registered registered unit price fee
______________________ ___________ _________ ___________ ____________
<S> <C> <C> <C> <C>
Investment Certificates $40,000,000 $1 $40,000,000 $12,122
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Commission
acting pursuant to said Section 8(a) may determine.
<PAGE> 3
PART I
SUMMIT SECURITIES, INC.
Cross Reference Sheet
Showing Location in Prospectus of Items of the Form
<TABLE>
<CAPTION>
Item of Form Location
__________________________________ _______________________
<S> <C> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus---------------- Outside Front Cover
Page
2. Inside Front and Outside Back
Cover Pages of Prospectus--------- Inside Front Cover Page
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends------------------------- Prospectus Summary;
Summary Consolidated
Financial Data; Risk
Factors
4. Use of Proceeds------------------- Use of Proceeds
5. Determination of Offering Price--- *
6. Dilution-------------------------- *
7. Selling Security Holders---------- *
8. Plan of Distribution-------------- Plan of Distribution
9. Description of Securities to be
Registered------------------------ Description of
Certificates
10. Interests of Named Experts and
Counsel--------------------------- Legal Matters; Experts
11. Information with Respect to the
Registrant------------------------ Front Cover Page;
Prospectus Summary;
Capitalization
12. Incorporation of Certain
Information by Reference---------- Available Information;
Incorporation of
Certain Documents by
Reference
13. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities------------------- Indemnification
<FN>
* Not applicable or negative.
</TABLE>
<PAGE> 4
SUBJECT TO COMPLETION DATED February 25, 1998 .
PROSPECTUS
SUMMIT SECURITIES, INC.
$40,000,000 Investment Certificates, Series B
A Certificateholder of the Investment Certificates, Series B
("Certificates") of Summit Securities, Inc. ("Summit") may elect to receive
interest monthly, quarterly, semi-annually or annually, without compounding;
or, at the election of a Certificateholder, if interest is left with Summit it
will compound semi-annually until maturity; or, at the election of the
Certificateholder the Certificates will pay equal monthly installments of
principal and interest until maturity according to an amortization schedule
selected by the owner.
The Certificates are unsecured debt instruments, senior in liquidation
to outstanding equity securities of Summit, subordinate to collateralized debt
of the Consolidated Group (Summit and its subsidiaries), subordinate to all
debt of the subsidiaries included in the Consolidated Group, on parity with
unsecured accounts payable and accrued liabilities of Summit and on parity
with all previously issued and outstanding investment certificates. At
September 30, 1997, the Consolidated Group had approximately $107,022,000 of
debt senior to and approximately $1,168,000 of debt in parity with
approximately $50,407,000 of outstanding Certificates.
The Certificates will be issued in fully negotiable form in fractional
denominations of $0.01 or multiples thereof at 100% of the principal amount
paid.
Summit reserves the right to change, prospectively, by way of supplement
to this Prospectus, the interest rates, maturities, and minimum investment
amounts on unsold Certificates. The current provisions are set forth below.
See "DESCRIPTION OF CERTIFICATES."
<TABLE>
<CAPTION>
MINIMUM ANNUAL
INVESTMENT TERM TO MATURITY INTEREST RATE
__________ ________________ ______________
<S> <C> <C>
$ %
$ %
$ %
$ %
<PAGE> 5
$ %
</TABLE>
There is no trading market for the Certificates and none is expected to
be established in the future. See "RISK FACTORS." This offering of
Certificates is subject to withdrawal or cancellation by Summit without
notice. No minimum amount of Certificates must be sold.
FOR A DISCUSSION OF MATERIAL RISKS ASSOCIATED WITH THE CERTIFICATES
OFFERED HEREBY, SEE RISK FACTORS ON PAGE _____ OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO ISSUER
PUBLIC COMMISSIONS(1) OR OTHER PERSONS(2)
___________ _________________ ________________________
<S> <C> <C> <C>
Per Certificate 100% 0% to 6% 100% to 94%
Total: $40,000,000 None-$2,400,000 $40,000,000-$37,600,000
</TABLE>
(1) There is no direct sales charge to the investor. Certificates earn
interest, without deduction for underwriting discounts or commissions. Summit
will reimburse Metropolitan Investment Securities ("MIS"), a wholly owned
subsidiary, for commissions paid to licensed securities sales representatives.
Sales commission rates on the sale of Certificates depend upon the terms of
the sale and upon whether the sales are reinvestments or new purchases. See
"PLAN OF DISTRIBUTION."
(2) Before deducting other expenses estimated at $155,000.
The Certificates are being offered for sale on a continuous, best
efforts basis. There are no minimum amounts of securities that must be sold.
The offering is subject to NASD Rule 2720. No offering will be made pursuant
to this Prospectus subsequent to January 31, 1999. See "PLAN OF
DISTRIBUTION."
METROPOLITAN INVESTMENT SECURITIES, INC.
The date of this Prospectus is _____________________.
<PAGE> 6
INSIDE FRONT COVER PAGE OF PROSPECTUS
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus
and any Pricing Supplement. Neither the delivery of this Prospectus and any
Pricing Supplement nor any sale made thereunder shall, under any
circumstances, create any implication that the information therein is correct
at any time subsequent to the date thereof. This Prospectus and any Pricing
Supplement shall not constitute an offer to sell or a solicitation of an offer
to buy any of the Certificates offered hereby by anyone in any jurisdiction in
which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to any person
to whom it is unlawful to make such offer or solicitation.
<PAGE> 7
AVAILABLE INFORMATION
Summit is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and, in accordance
therewith, files periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other
information filed by Summit with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission in Washington,
D.C. at 450 Fifth Street, N.W., Washington, DC 20549 and at certain of its
regional offices which are located in the New York Regional Office, Seven
World Trade Center, Suite 1300, New York, NY 10048, and the Chicago Regional
Office, CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661-2511. In addition, the Commission maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants, such as Summit, that file electronically with the
Commission at the following Internet address: (http:\\www.sec.gov).
Summit has filed with the Securities and Exchange Commission in
Washington, D.C., a Registration Statement on Form S-2 under the Securities
Act of 1933, as amended, with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, as permitted by the rules and regulations of the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference in this prospectus:
Annual report on Form 10-K for the fiscal year ended September 30, 1997
(filed January 7, 1998).
Quarterly report on Form 10-Q for the quarter ended December 31, 1997
(filed February 23, 1998).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Summit will provide without charge to each person, including to whom a
Prospectus is delivered, upon written or oral request of such person, a copy
of any and all of the information that has been referenced in this Prospectus
other than exhibits to such documents. Requests for such copies should be
directed to Corporate Secretary, Summit Securities, Inc., PO Box 2162,
Spokane, WA 99210-2162, telephone number (509) 838-3111.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
____
<S> <C>
Available Information-------------------------------------
Incorporation of Certain Documents by Reference-----------
Prospectus Summary----------------------------------------
Capitalization--------------------------------------------
Summary Consolidated Financial Data-----------------------
Risk Factors----------------------------------------------
Description of Certificates-------------------------------
Legal Matters---------------------------------------------
Legal Opinion-------------------------------------------
Legal Proceedings---------------------------------------
Experts---------------------------------------------------
Plan of Distribution--------------------------------------
Use of Proceeds-------------------------------------------
Indemnification-------------------------------------------
</TABLE>
<PAGE> 9
PROSPECTUS SUMMARY
This summary is qualified in its entirety by reference to, and should be
read in conjunction with, the detailed information appearing elsewhere in this
Prospectus. This offering involves certain investment considerations for
prospective investors which are set forth in "DESCRIPTION OF CERTIFICATES" &
"RISK FACTORS."
THE SUMMIT CONSOLIDATED GROUP OF COMPANIES
Summit Securities, Inc. was incorporated under the laws of the State of
Idaho on July 25, 1990. Its principal executive offices are located at 929
West Sprague Avenue, Spokane WA 99201. Its mailing address is PO Box 2162,
Spokane WA 99210-2162 and its telephone number is (509) 838-3111. Summit also
maintains an office at 8601 W. Emerald, Ste. 150, Boise, Idaho 83704 and its
telephone number is (208) 376-8260.
Where reference herein is intended to include Summit Securities, Inc.
and its subsidiaries, they are jointly referred to as the "Consolidated
Group." Where reference herein is intended to refer to Summit Securities,
Inc. as the parent company only, it is referred to individually as "Summit."
Summit was founded in 1990 by Metropolitan Mortgage & Securities Co.,
Inc. ("Metropolitan") as a wholly owned subsidiary. On September 9, 1994,
Summit was acquired by National Summit Corp., which is wholly owned by C. Paul
Sandifur, Jr. Mr. Sandifur is President and controlling shareholder of
Metropolitan. Accordingly, the change in ownership altered the form of
control, but did not result in a change of the individual in control.
Between January and June of 1995, Summit acquired MIS and a wholly owned
holding company acquired Old Standard Life Insurance Company ("Old Standard")
from Metropolitan. In addition, Summit commenced operation of a property
development company, Summit Property Development Inc. On December 28, 1995,
Old Standard acquired Arizona Life Insurance Company ("Arizona Life").
The Consolidated Group is engaged, nationwide, in the business of
acquiring, holding and selling receivables (hereinafter "Receivables"). These
Receivables include real estate contracts, and promissory notes collateralized
by first position liens on residential real estate. The Consolidated Group
also invests in Receivables consisting of real estate contracts and promissory
notes collateralized by second and lower position liens, structured
settlements, annuities, lottery prizes, and other investments. The
Receivables collateralized by real estate are typically non-conventional in
that they were originated as the result of seller financing, or they were
originated by
<PAGE> 10
institutional lenders who specialize in borrowers with impaired credit or non-
conventional properties. In addition to Receivables, the Consolidated Group
invests in U.S. Treasury obligations, corporate bonds and other securities.
The Consolidated Group invests in Receivables using funds generated from
Receivable cash flows, the sale of annuities, the sale and securitization of
Receivables, the sale of certificates and preferred stock, collateralized
borrowing, and securities portfolio earnings. Metropolitan provides
Receivable acquisition services, and Metwest Mortgage Services, Inc.
("Metwest"), a wholly owned subsidiary of Metropolitan, provides Receivable
collection and servicing to Summit, Old Standard and to Arizona Life.
Terms
For ease of reading, the following is a compilation of several of the
defined terms which appear regularly within this document.
Arizona Life: Arizona Life Insurance Company
Certificates: When this term is capitalized, it refers to the
Investment Certificates being offered herein. When this term is not
capitalized, it refers to certificates generally.
Consolidated Group: This term refers to the combined businesses
consisting of Summit and all subsidiaries.
MIS: Metropolitan Investment Securities, Inc.
Old Standard: Old Standard Life Insurance Company.
Preferred Stock: When this term is uncapitalized, it refers to
preferred stock generally. When this term is capitalized, it refers to any
Preferred Stock which may be offered contemporaneously with this Certificates
offering.
Receivables: Investments in cash flows, consisting of obligations
collateralized by real estate, structured settlements, annuities, lottery
prizes and other investments.
Summit: Summit Securities, Inc.
Affiliated Companies: The following companies are affiliated with
Summit through the common control of C. Paul Sandifur, Jr. These affiliates
provide services to the Consolidated Group for a fee and engage in various
business transactions with the Consolidated Group.
<PAGE> 11
Metropolitan: Metropolitan Mortgage & Securities Co., Inc.,
Summit's former parent company.
Metwest: Metwest Mortgage Services Inc., a subsidiary of
Metropolitan.
Western United: Western United Life Assurance Company, a
subsidiary of Metropolitan.
<PAGE> 12
ORGANIZATIONAL CHART
(as of September 30, 1997)
National Summit Corp.
|
|
100%
Summit Securities, Inc.
|
_______________________________|__________________________________
| | |
100% 100% 100%
Metropolitan Summit Summit Group
Investment Property Holding Company
Securities, Development, |
Inc. Inc. |
100%
Old Standard Life
Insurance Company
|
|
100%
Arizona Life
Insurance Company
The above chart lists the Consolidated Group's principal operating
subsidiaries and their ownership.
National Summit Corp.: Parent Company, inactive except as owner of
Summit Securities, Inc. Wholly owned by C. Paul Sandifur, Jr., President of
Metropolitan.
Summit Securities, Inc.: Invests in Receivables and other investments
principally funded by proceeds from Receivable investments, other investments,
and securities offerings.
Metropolitan Investment Securities, Inc.: Broker/dealer marketing
securities offered by Summit and Metropolitan, mutual funds, and general
securities.
Summit Property Development, Inc.: Provides real estate development
services to others, with the principal clients being Metropolitan and its
subsidiaries.
Summit Group Holding Company: Inactive except as owner of Old Standard
Life Insurance Company.
Old Standard Life Insurance Company: Invests in Receivables and other
investments principally funded by proceeds from Receivable investments and
from annuity sales.
<PAGE> 13
Arizona Life Insurance Company: Old Standard purchased this insurance
company effective December 28, 1995. Invests in Receivables and other
investments principally funded by proceeds from Receivable investments and
from annuity sales.
<PAGE> 14
THE OFFERING
INVESTMENT CERTIFICATES
Offering . . . . This Certificate offering consists of $40,000,000 in
principal of Investment Certificates, Series B, issued at minimum investment
amounts, terms, and rates set forth on the cover page of this Prospectus.
There is no minimum amount of Certificates which must be sold. Certificates
are issued in book entry form. See "DESCRIPTION OF CERTIFICATES."
Certificates . . . . The Certificates are unsecured indebtedness of Summit.
At September 30, 1997, Summit had outstanding approximately $50,407,000
(principal and compounded and accrued interest) of certificates and similar
obligations and approximately $201,000 (principal and accrued interest) of
collateralized debt. See "CAPITALIZATION."
Use of Proceeds . . . . The proceeds of this Certificate offering will provide
funds (in descending order of priority) for Receivable investments, other
investments (which may include investments in existing subsidiaries, the
commencement of new business ventures, or the acquisition of other companies),
retiring maturing certificates, preferred stock dividends, and general
corporate purposes. See "USE OF PROCEEDS."
Principal and Interest Payments . . . . Certificateholders may elect to
receive interest monthly, quarterly, semiannually or annually (without
compounding); or at the election of the Certificateholder, if interest is left
with Summit, it will compound semiannually until maturity; or,
Certificateholders may elect to be paid equal monthly installments of
principal and interest pursuant to an amortization schedule. The minimum
investment amounts, terms and interest rates on unissued Certificates offered
hereby may be changed from time to time by Summit, by way of supplement to
this Prospectus but any such change shall not affect any Certificates issued
prior to the change. See "DESCRIPTION OF CERTIFICATES-Payment of Principal
and Interest."
<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of the Consolidated
Group at September 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
DEBT PAYABLE
Real estate contracts and mortgage notes payable 6.5% to
8.5%, due 1997 to 2008.................................... $ 200,992
___________
Total Debt Payable........................................ $ 200,992
___________
INVESTMENT CERTIFICATES
Investment Certificates, maturing 1997 to 2002, at 6.35%
to 10%.................................................... 44,894,825
Compound and accrued interest............................... 5,512,166
___________
Total Investment Certificates............................. 50,406,991
___________
STOCKHOLDERS' EQUITY
Preferred Stock, $10 par: 10,000,000 shares authorized;
53,817 shares issued and outstanding (liquidation
preference $5,381,690).................................... 538,169
Common Stock, $10 par: 2,000,000 shares authorized;
10,000 shares issued and outstanding...................... 100,000
Additional paid-in capital.................................. 3,326,007
Retained earnings........................................... 3,741,613
Net unrealized gains on investments......................... 50,854
___________
Total Stockholders' Equity................................ 7,756,643
___________
Total Capitalization.................................... $58,364,626
===========
</TABLE>
<PAGE> 16
SUMMIT SECURITIES, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
The consolidated financial data shown below as of September 30, 1997 and
1996 and for the years ended September 30, 1997, 1996 and 1995 (other than the
ratio of earnings to fixed charges and preferred stock dividends) have been
derived from, and should be read in conjunction with, the consolidated financial
statements, related notes, and Management's Discussion and Analysis of Financial
Condition and Results of Operations appearing in Summit's Form 10-K, which is
incorporated herein by reference. The consolidated financial data shown below
as of September 30, 1995, 1994 and 1993 and for the years ended September 30,
1994 and 1993 have been derived from the consolidated financial statements not
included elsewhere herein.
Year Ended September 30,
___________________________________________________________________________
1997 1996 1995 1994 1993
____________ ____________ ___________ ___________ ___________
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 19,785,462 $ 14,536,449 $ 9,576,615 $ 3,395,252 $ 2,815,624
============ ============ =========== =========== ===========
Net income 1,851,240 $ 1,244,522 $ 587,559 $ 264,879 $ 283,107
Preferred stock dividends (446,560) (333,606) (309,061) (2,930) --
____________ ____________ ___________ ___________ ___________
Income applicable to common
stockholders $ 1,404,680 $ 910,916 $ 278,498 $ 261,949 $ 283,107
============ ============ =========== =========== ===========
PER COMMON SHARE DATA:
Income applicable to common
stockholders $ 140.47 $ 91.09 $ 27.85 $ 13.47 $ 14.15
============ ============ =========== =========== ===========
Weighted average number of
common shares outstanding 10,000 10,000 10,000 19,445 20,000
============ ============ =========== =========== ===========
Ratio of earnings to fixed
charges 1.46 1.40 1.25 1.16 1.24
<PAGE> 17
Ratio of earnings to fixed
charges and preferred
stock dividends 1.31 1.26 1.11 1.16 1.24
BALANCE SHEET DATA:
Due from/(to) affiliated
companies, net $ 870,255 $ 1,296,290 $(1,960,104) $ 267,735 $ 1,710,743
Total assets $166,354,070 $117,266,680 $96,346,572 $35,101,988 $25,441,605
Investment Certificates
and other debt payable $ 50,607,983 $ 46,674,841 $38,650,532 $31,212,718 $21,982,078
Stockholders' equity $ 7,756,643 $ 5,358,774 $ 3,907,067 $ 3,321,230 $ 3,188,024
</TABLE>
<PAGE> 18
RISK FACTORS
Investment in the Certificates offered hereby involves a certain degree
of risk. Each prospective investor should carefully consider the following
risk factors inherent in and affecting the business of the Consolidated Group
and this offering before making an investment decision. This Prospectus
contains forward-looking statements which involve risk and uncertainties.
Actual events or results may differ as a result of various factors including,
without limitation, the risk factors set forth below and the matters set forth
in the Prospectus generally.
1. Risk of Fluctuation in Interest Rates: During the twelve month
period ending September 30, 1998, more of the Consolidated Group's financial
liabilities, principally annuities and certificates, are scheduled to reprice
or mature than are its financial assets, principally Receivables and fixed
income investments. Consequently, in a falling interest rate environment, the
current level of profitability and the fair value of the Consolidated Group's
equity would be expected to increase as the spread between interest revenues
and interest expenses improves. Conversely, in a rising interest rate
environment, the net interest income and the fair value of equity for the
Consolidated Group would likely decline. The fair value of equity (as opposed
to book value) is the difference between the fair value of all assets less the
fair value of all liabilities. The impact of a change in interest rates will
be reflected to the greatest extent in the fair value of assets and
liabilities with the longest maturities or time until their scheduled
repricing date. Additionally, borrowers tend to repay Receivable loans when
interest rates decline and they are able to refinance such loans at lower
rates of interest. This factor reduces the amount of interest to be received
over time as loans with higher rates of interest are prepaid more rapidly.
While interest rates evidenced a fairly stable to declining trend during the
twelve months preceding the date of this Prospectus, management is unable to
forecast with any certainty the fluctuations in interest rates in the future.
2. Dependence upon Securitization and Direct Sales of Receivables:
Summit and Old Standard sell pools of Receivables through direct sales and
securitizations. During the years ended September 30, 1997 and 1996, gains
from the sale of Receivables were approximately $1 million each year. These
gains substantially contributed to the net income of the Consolidated Group
for each of these two years. Adverse changes in the markets for the
Consolidated Group's Receivables, including but not limited to fluctuations in
interest rates, increased competition and regulatory changes could impair its
ability to sell or securitize Receivables. Any such adverse changes could
have a
<PAGE> 19
material adverse effect upon the Consolidated Group's future results of
operations and financial condition, including its future profitability and
liquidity position.
As a result of securitizations, the Consolidated Group has acquired
residual interests in securitized loan pools. At September 30, 1997, the
Consolidated Group held residual interests aggregating approximately
$1,744,000. These residual interests are valued by the Consolidated Group,
and accrue income, based upon assumptions regarding anticipated prepayments,
defaults and losses on the securitized Receivables. Although Management
believes that it has made reasonable assumptions, actual experience may vary
from its estimates. The value of the residual interests and the amount of
income accrued will have been overstated if prepayments or losses are greater
than anticipated.
3. Risk Related to Expanding Commercial Lending: During 1997, the
Consolidated Group (principally Old Standard) began originating loans
collateralized by multi-family and commercial properties ("Commercial Loans").
The Consolidated Group currently projects expansion of these activities during
1998. Current projections include the possibility that a substantial majority
of the Consolidated Group's Receivable acquisitions during 1998 may be new
Commercial Loan originations. This projection is in part due to management's
current perception that this market may be inadequately served by lenders who
are flexible in their underwriting and pricing policies.
Management is unable to predict with any certainty whether it will be
able to, or will desire to continue to originate Commercial Loans in these
potential volumes or that these lending activities will achieve desirable
yields. Additionally, management is unable to predict whether Commercial
Lending default rates will exceed management expectations. Also See "RISK
FACTORS-Risks Related to Investments in Receivables."
4. Risks Related to Investments in Receivables:
Receivables Collateralized by Real Estate, Risk of Fluctuation in
Collateral Value and Economic Conditions: The Consolidated Group is engaged
in the purchase of Receivables which include Receivables collateralized by
real estate. All such Receivable investments are subject to a risk of payment
default and loss in the event of foreclosure. The risk of default and loss
can be affected by many things including changes in economic conditions,
property values, changes in zoning, land use, environmental laws and other
legal restrictions, including restrictions on timing and methods of
foreclosure. There is no assurance that these Receivables will be paid
according to their terms, or that property values will be adequate to preclude
loss
<PAGE> 20
in the event of a foreclosure. The Consolidated Group's underwriting
is currently provided through Metropolitan. Metropolitan's investment
underwriting procedures include a review of demographics, market trends,
property value, economy and the buyer's credit. Through Metropolitan, the
Consolidated Group buys these Receivables nationwide, allowing it to diversify
its investments geographically into areas where the market trends and economic
conditions may be favorable. Management believes that these procedures
minimize the risk of default or loss in the event of foreclosure. However,
there is no assurance that these procedures will be effective.
Investments in Other Receivables Risks of Default: In addition to the
purchase of Receivables collateralized by real estate, the Consolidated Group,
through Metropolitan, is engaged nationwide in the purchase of other types of
Receivables including the purchase of annuities issued in the settlement of
disputes, other types of annuities, lottery prizes, and other investments.
All such Receivables are subject to the risk of default by the payor
(frequently an unrelated insurance company, or in the case of lotteries, a
state government). Unlike Receivables collateralized by real estate, these
Receivables are generally not collateralized by a specific asset. The
Consolidated Group's underwriting is currently provided through Metropolitan.
Metropolitan's investment underwriting procedures vary with the type of
investment and generally include a review of the credit rating of the payor
and other relevant factors designed to evaluate the risk of the particular
investment. Management believes that these procedures minimize the risk of
default, and of loss in the event of a default. However, there is no
assurance that these procedures will be effective to minimize the occurrence
of any default or loss in the event of a default.
As of September 30, 1997, the Consolidated Group's Receivable
investments as a percentage of total Receivables consisted of the following:
83% Receivables collateralized by real estate
14% Annuities
3% Lotteries and loans collateralized by lotteries
As of September 30, 1997, the Consolidated Group's Receivable
investments collateralized by real estate were principally located in the
following regions:
<TABLE>
<CAPTION>
Percent Region
_______ ___________________________________________________________________
<S> <C>
27% Pacific Northwest (Washington, Alaska, Oregon, Idaho and Montana)
<PAGE>
21
18% Pacific Southwest (California, Nevada and Arizona)
13% North Atlantic (Connecticut, New Jersey, New York, and Pennsylvania)
12% Southwest (Texas, Louisiana and New Mexico)
9% Southeast (Florida, Georgia, North Carolina and South Carolina)
21% Other areas (of which no more than 3% were located in any one state)
</TABLE>
5. Dependence Upon Metropolitan: All decisions with respect to the day-
to-day management of the Consolidated Group will be made exclusively by the
officers of the respective companies, many of whom are also employees of
Metropolitan and/or its subsidiaries. The Consolidated Group has contracted
with Metropolitan and Metwest to provide principally all of the administrative
services related to their Receivable acquisition, servicing and sales.
Metropolitan and Metwest charge fees for their services. The fee charged to
the Consolidated Group relating to Receivable acquisition activities during
the fiscal years ended September 30, 1997, 1996 and 1995 was $3,384,542,
$1,753,206, and $1,967,409, respectively.
Management considers these contractual arrangements to be more
beneficial to the Consolidated Group than incurring the cost to duplicate
these services internally. These contracts do not restrict any of the
companies from obtaining these services from other sources and they may be
terminated at any time. However, it is anticipated that these contracts will
continue indefinitely.
6. Conflicts of Interest: Many of the officers and directors of Summit
and its subsidiaries are also employees of Metropolitan, therefore certain
conflicts of interest may arise between the companies. The officers and
directors expect to devote as much time as necessary to the affairs of Summit
and its subsidiaries. Summit, Old Standard and Arizona Life may compete with
Metropolitan and its subsidiaries in the acquisition of Receivables. The
Consolidated Group may compete with Metropolitan for the sale of securities,
and Old Standard and Arizona Life may compete with Metropolitan's insurance
subsidiary for the sale of annuities.
On September 9, 1994, Metropolitan sold Summit to National Summit Corp.,
a holding company wholly owned by C. Paul Sandifur Jr. During fiscal 1995,
Summit purchased MIS and Old Standard from Metropolitan, and commenced
operations of Summit Property Development, Inc. Mr. Sandifur is the President
and has voting control of Metropolitan. Prior to these transactions, Mr.
Sandifur had effective control of Summit and its subsidiaries through his
control of Metropolitan. Following these transactions, Mr. Sandifur through
National Summit Corp. continues to control Summit, and through Summit controls
Summit's subsidiaries.
<PAGE> 22
Conflicts of interest are not anticipated to be substantially different
from those which existed prior to these sales, such as conflicts in the time
available to devote to Summit or its subsidiaries and conflicts with respect
to securities sales and with respect to the selection of Receivables. Other
conflicts may arise in the normal course of business transactions. Such
potential additional conflicts cannot currently be identified with any
certainty and therefore cannot be quantified at this time. Purchasers of
Certificates must, to a great extent, rely on the integrity and corporate
fiduciary responsibilities of Summit's current and future officers and
directors to assure themselves that they will not abuse their discretion in
selecting Receivables for purchase by each company, and in making other
business decisions.
7. Dependence upon Insurance Subsidiary Earnings and Restriction on
Subsidiary Dividends and Fees: At September 30, 1997, approximately 75% of
the Consolidated Group's assets were held by its insurance subsidiaries, Old
Standard and Arizona Life. Insurance company regulations restrict transfers
of assets and the amount of dividends that the insurance subsidiaries may pay.
Accordingly, to the extent of such restrictions, assets and earnings of the
insurance subsidiaries are not available to Summit without special permission
from the respective Insurance Commissioner in the insurance subsidiary's state
of domicile. This restriction on dividends could adversely affect Summit's
ability to pay interest, retire certificates and meet its other obligations.
As of September 30, 1997, Old Standard and Arizona Life had unassigned
statutory deficits of approximately $70,000 and $1,383,000, respectively, and
were statutorily prohibited from paying dividends.
8. Dependence upon Leverage Financing: The Consolidated Group's
principal sources of cash flow include Receivable payments, the sale of
annuities, the sale of Receivables and the sale of certificates and preferred
stock. To the extent Summit's cash flow is insufficient or unavailable for
payment of certificates which mature during the period ending January 31,
1999, portions of the net proceeds from this Certificate offering may be used
for such purpose. See "USE OF PROCEEDS." Approximately $7,995,000 in
principal amount of certificates will mature between February 1, 1998 and
January 31, 1999. The majority of Summit's certificates have been sold with a
five-year maturity. During the fiscal year ended September 30, 1997, its
seventh full year of operation, 56% of Summit's maturing certificates were
reinvested. The cash flow from the existing assets has been adequate during
the past five years to satisfy the demand for payment of maturing
certificates. Summit's ability to repay its other outstanding obligations,
including those created by the sale of the securities described herein, may be
contingent
<PAGE> 23
in part upon the success of future public offerings of certificates and
preferred stock.
The following table summarizes anticipated cash requirements for
principal and interest obligations of Summit's certificates and other debts
payable; and anticipated cash dividend requirements on its preferred stock for
the five-year period ending September 30, 2002 based on amounts outstanding at
September 30, 1997 and assuming no reinvestment of maturing certificates:
<TABLE>
<CAPTION>
Fiscal Year Preferred
Ending Investment Other Debt Stock
September 30, Certificates Payable Dividends Total
_____________ ____________ __________ __________ _________
(Dollars in Thousands)
<S> <C> <C> <C> <C>
1998 $ 12,583 $ 20 $ 492 $ 13,095
1999 10,954 18 492 11,464
2000 9,468 26 492 9,986
2001 15,205 28 492 15,725
2002 9,681 28 492 10,201
____________ __________ __________ _________
$ 57,891 $ 120 $ 2,460 $ 60,471
============ ========== ========== =========
</TABLE>
9. Risk of Fluctuation in Life Insurance and Annuity Termination Rates:
An increase in the number of annuity contract terminations will tend to
negatively impact the insurance subsidiaries' earnings (and in turn the
Consolidated Group's earnings) by requiring the expensing of unamortized
deferred acquisition costs related to surrendered policies. Annuity
surrenders can be impacted by, among other things, interest rate fluctuations,
competition, and changes in tax and other regulations. At September 30, 1997,
deferred policy acquisition costs on annuities were approximately 6.2% of
annuity reserves. Surrender charges typically do not exceed 1% times the
years of the initial annuity contract times the annuity contract balance at
the contract's inception, and such surrender charges decline annually from
that rate. Annuity termination rates adjusted for internal rollovers
(surrender of one policy and reinvestment into another) were 11.1% during
fiscal 1997.
10. Lack of Indenture Restrictions on Operations and Ability to Incur
Additional Indebtedness: The Indenture pursuant to which the Certificates are
issued does not restrict Summit's ability to issue additional certificates or
to incur other unsecured or
<PAGE> 24
collateralized debt. Neither does the Indenture require Summit to
maintain any specified financial ratios, minimum net worth, minimum working
capital or a sinking fund. The Certificates are senior in liquidation to all
outstanding equity securities of Summit, are subordinate to Summit's
collateralized debt and are on a parity with all other outstanding
certificates, unsecured accounts payable and other unsecured accrued
liabilities. As of September 30, 1997, Summit had approximately $201,000 of
collateralized debt and related accrued interest. Also as of September 30,
1997, the principal and compound and accrued interest on Summit's outstanding
certificates was approximately $50,407,000.
11. Absence of Insurance and Guarantees: The Certificates are not
insured by any governmental agency (as are certain investments in financial
institutions such as banks, savings and loans or credit unions) nor are they
guaranteed by any public agency or private entity. It should also be noted
that Summit is not subject to any generally applicable governmental
limitations on its own borrowing. In these respects, Summit is similar to
other commercial enterprises which sell debt to public investors, but
dissimilar to those financial institutions providing insurance against the
risk of loss to investors. The investment risk of the Certificates is thus
higher than the risk incurred by investors in such insured financial
institutions.
12. Term Investment/Absence of a Trading Market/Lack of Liquidity:
There is no trading market for the Certificates, and it is not anticipated
that one will develop. The Certificates are not subject to redemption prior
to maturity. Prepayments pursuant to the "prepayment on death" provision or
upon mutual agreement between Summit and a Certificateholder will not
constitute redemptions. Prospective investors should carefully consider their
needs for liquidity before investing in the Certificates and upon investing,
should be prepared to hold the Certificates until maturity. See "DESCRIPTION
OF CERTIFICATES."
13. Risks Related to Environmental Conditions and Regulations: In the
course of its business, the Consolidated Group acquires properties, generally
through foreclosure. Various state and federal laws and regulations impose
liability upon the owner and previous owner of property on account of
hazardous waste or substances released onto or disposed of on property. As a
result, the owner or former owner may be liable to the government or a third
party for the clean up costs. The costs of investigation, remediation and
removal can be substantial. While the Consolidated Group endeavors to avoid
the acquisition of Receivables or properties which may be contaminated, there
can be no assurance that significant losses could not be incurred due to
environmental contamination.
<PAGE> 25
DESCRIPTION OF CERTIFICATES
General
The Certificates will be issued under an Indenture, as amended, dated as
of November 15, 1990 and First Supplemental Indenture dated as of December 31,
1997. The following statements under this caption relating to the
Certificates and the Indenture are summaries and do not purport to be
complete. Such summaries are subject to the detailed provisions of the
Indenture and are qualified in their entirety by reference to the Indenture.
A copy of the Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part and is available for inspection at the
principal office of Summit.
The Certificates will represent general unsecured obligations of Summit
and will be issued in book entry form without coupons, in fractional
denominations of $0.01 or more. The Certificates will have the minimum
investment amounts, maturities and the interest rates set forth on the cover
page of this Prospectus. The stated interest rates, maturities, and minimum
investment amounts of unissued Certificates may be changed at any time by
Summit by way of supplement to this Prospectus. Any such change will have no
effect on the terms of the previously sold Certificates.
Certificates may be transferred or exchanged for other Certificates of
the same series of a like aggregate principal amount, subject to the
limitations set forth in the Indenture. No service charge will be made for
any transfer or exchange of Certificates. Summit may require payment of taxes
or other governmental charges imposed in connection with any such transfer or
exchange. Interest will accrue at the stated rate from the date of issue
until maturity. The Certificates are not convertible into capital stock or
other securities of Summit.
The Certificates are not subject to redemption prior to maturity, but
may be prepaid pursuant to the prepayment on death provision described below
or in limited circumstances involving an investor's demonstrated financial
hardship, subject to regulatory restrictions affecting redemptions and
exchanges of securities during an offering. Summit may, in its sole
discretion, entertain a request for an early payout of a Certificate upon
terms mutually agreed to by the holder of the Certificate and Summit. Such
early payout requests, when received, are reviewed in the order received and
are subject to review by Summit's executive management.
Payment of Principal and Interest
<PAGE> 26
Interest will be payable to the Certificateholder(s) under one of
several plans of interest payment. The purchaser may elect to have interest
paid on a monthly, quarterly, semiannual or annual basis, without compounding;
or may elect to leave the accrued interest with Summit in which case it will
compound semiannually at the stated interest rate. Certificateholders make
the interest payment election at the time of purchase of the Certificates.
The interest payment election may be changed at any time by written notice to
Summit. Under the compounding option, the Certificateholder(s), upon written
notice to Summit, may withdraw the interest accumulated during the last two
completed semiannual compounding periods as well as the interest accrued from
the end of the last compounding period to the date Summit receives the notice.
Amounts compounded prior to the last two completed semi-annual compounding
periods are available only at maturity.
Alternatively, at the election of the Certificateholder at the time of
investment, and subject to the minimum term and investment requirements set
forth on the cover page of this Prospectus, level monthly installments
comprised of principal and interest will be paid to the Certificateholder
commencing 30 days from the issue date of the Certificate until maturity. The
amount of each installment will be determined by the amortization term
designated by the Certificateholder at the time the Certificate is purchased.
Certificateholders will be notified in writing approximately 30 days
prior to the date their Certificates will mature. The amounts due on maturity
are placed in a separate bank trust account until paid to the
Certificateholder(s). Certificates do not earn interest after the maturity
date. Unless otherwise requested by the Certificateholder, Summit will pay
the principal and accumulated interest due on the matured certificate to the
Certificateholder(s) at Summit's main office, or by mail to the address
designated by the Certificateholder(s).
Prepayment on Death
In the event of the death of a registered owner of a Certificate, any
party entitled to receive some or all of the proceeds of the Certificate may
elect to have his or her portion of the principal and any accrued but unpaid
interest prepaid in full in five consecutive equal monthly installments.
Interest will continue to accrue on the declining principal balance of such
portion. No interest penalties will be assessed. Any request for prepayment
shall be made to Summit in writing and shall be accompanied by the Certificate
and evidence satisfactory to Summit of the death of the registered owner or
joint registered owner. Before prepayment, Summit may require the submission
of additional
<PAGE> 27
documents or other material which it may consider necessary to determine the
portion of the proceeds the requesting party is entitled to receive, or
assurances which, in Summit's discretion, it considers necessary to the
fulfillment of its obligations.
Related Indebtedness
The Indenture pursuant to which the Certificates are issued does not
restrict Summit's ability to issue additional Certificates or to incur other
debt. The Indenture does not require Summit to maintain any specified
financial ratios, minimum net worth or minimum working capital. Certificates
will not be guaranteed or insured by any governmental or private agency. The
Certificates offered hereby are senior in liquidation to all outstanding
equity securities of Summit. They are subordinate to Summit's collateralized
debt and are on a parity with all other outstanding certificates, unsecured
accounts payable and accrued liabilities. The amount of outstanding
certificates on September 30, 1997, (including compound and accrued interest)
was approximately $50,407,000. There are no limitations on Summit's ability
to incur collateralized debt. Collateralized debt outstanding on that date
was approximately $201,000 (principal and accrued interest).
Concerning the Trustee
West One Bank ("West One")was the Indenture Trustee until April 24,
1996, when West One resigned and First Trust National Association was
appointed successor Trustee ("First Trust" or the "Trustee"). Management was
informed by West One that the reason for the resignation was its business
decision to discontinue Trust services. First Trust has assumed all of the
duties and obligations of the trustee as set forth in the Trust Indenture, as
amended and supplemented. The Trustee, is obligated under the Indenture to
oversee, and if necessary, to take action to enforce fulfillment of Summit's
obligations to Certificateholders. The Trustee is a national banking
association, with a combined capital and surplus in excess of $100 million.
Summit and certain of its affiliates may maintain deposit accounts with and
may, from time to time, borrow money from the Trustee and conduct other
banking transactions with it. At September 30, 1997 and as of the date of
this Prospectus, no loans from the Trustee were outstanding. In the event of
default, the Indenture permits the Trustee to become a creditor of Summit and
does not preclude the Trustee from enforcing its rights as a creditor,
including rights as a holder of collateralized indebtedness.
Rights and Procedures in the Event of Default
<PAGE> 28
Events of default include the failure of Summit to pay interest on any
Certificate for a period of 30 days after it becomes due and payable; the
failure to pay the principal or any required installment thereof of any
Certificate when due; the failure to perform any other covenant in the
Indenture for 60 days after notice; and certain events in bankruptcy,
insolvency or reorganization with respect to Summit. Upon the occurrence of
an event of default, either the Trustee or the holders of 25% or more in
principal amount of Certificates then outstanding may declare the principal of
all the Certificates to be due and payable immediately.
The Trustee must give the Certificateholders notice by mail of any
default within 90 days after the occurrence of the default, unless it has been
cured or waived. The Trustee may withhold such notice if it determines in
good faith that such withholding is in the best interest of the
Certificateholders, except if the default consists of failure to pay principal
or interest on any Certificate.
Subject to certain conditions, any such default, except failure to pay
principal or interest when due, may be waived by the holders of a majority (in
aggregate principal amount) of the Certificates then outstanding. Such
holders will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or of exercising any
power conferred on the Trustee, except as otherwise provided in the Indenture.
The Trustee may require reasonable indemnity from holders of Certificates
before acting at their direction.
Within 120 days after the end of each fiscal year, Summit must furnish
to the Trustee a statement of certain officers of Summit concerning their
knowledge as to whether or not Summit is in default under the Indenture.
Modification of the Trust Indenture
Certificateholders' rights may be modified with the consent of the
holders of 66 2/3% of the outstanding principal amounts of Certificates, and
66 2/3% of each series affected. In general, no adverse modification of the
terms of payment and no modification reducing the percentage of Certificates
required for modification is effective against any Certificateholder without
his or her consent.
Restrictions on Consolidation, Merger, etc.
Summit may not consolidate with or merge into any other corporation or
transfer substantially all its assets unless either Summit is the continuing
corporation formed by such consolidation,
<PAGE> 29
or into which Summit is merged, or the person acquiring by conveyance or
transfer of such assets shall be a corporation organized and existing under
the laws of the United States or any state thereof which assumes the
performance of every covenant of Summit under the Indenture and certain other
conditions precedent are fulfilled. The Indenture contains no other
provisions or covenants which afford holders of the Certificates special
protection in the event of a highly leveraged buyout transaction.
Transfer Agent and Registrar
Metropolitan acts as Transfer Agent and Registrar for Summit's
Certificates.
LEGAL MATTERS
LEGAL OPINION
The legality of the Certificates being offered hereby is being passed
upon for Summit by Susan A. Thomson, Esq., who is Assistant Corporate Counsel
for Summit.
LEGAL PROCEEDINGS
There are no material legal proceedings or actions pending or threatened
against Summit, or to which its property is subject.
EXPERTS
The consolidated balance sheets of Summit and its subsidiaries as of
September 30, 1997 and 1996 and the consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 1997, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the report, which includes an
explanatory paragraph for changes in the methods of accounting for the
transfer and servicing of financial assets in 1997 and impaired loans in 1996,
of Coopers & Lybrand L.L.P., independent accountants, given on the authority
of that firm as experts in accounting and auditing.
PLAN OF DISTRIBUTION
The Certificates are offered directly to the public on a continuing best
efforts basis through MIS which is a subsidiary of Summit. Accordingly, the
offering has not received the independent selling agent review customarily
made when an unaffiliated selling agent offers securities. No commission or
other expense of the offering will be paid by the purchasers of
<PAGE> 30
the Certificates. A commission will, however, be paid by Summit on most
Certificate purchases in the maximum amount of 6% of the Certificate price,
depending on the term of the Certificate and whether or not the transaction is
a reinvestment or new purchase. Certificates are offered only for cash or
cash equivalents. MIS will transmit such funds directly to Summit by noon of
the next business day after receipt. Summit will also pay certain other
expenses in connection with the offering. During the three fiscal years ended
September 30, 1997, MIS received commissions of $1,085,141 from Summit on
sales of approximately $35,140,000 of Summit's certificates.
MIS is a member of the National Association of Securities Dealers,
Inc. ("NASD"). As such, NASD Rule 2720 applies and requires, in part, that a
qualified independent underwriter be engaged to render an opinion regarding
the fairness of the interest rates to be paid on the Certificates offered
through this Prospectus. Accordingly, MIS has obtained an opinion from Welco
Securities, Inc., a NASD member, ("Welco") that the interest rates on the
Certificates using a formula tied to corresponding interest rates paid by the
U.S. Treasury and regional financial institutions meets this fairness
objective based on conditions and circumstances existing as of the date of the
Prospectus. Summit undertakes to maintain the interest rates on Certificates
no lower than those recommended by Welco based on the formula. Accordingly,
the yield at which the Certificates will be distributed will be no lower than
that recommended by Welco. Welco has assumed the responsibilities of acting as
the qualified independent underwriter in pricing the offering and conducting
due diligence. For performing its functions as a qualified independent
underwriter with respect to the Certificates offered hereunder, Welco is to be
paid $20,000 in fees and a maximum of $5,000 in accountable expenses.
The Registrant has agreed to indemnify Welco against, or make
contributions to Welco with respect to certain liabilities under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended.
There is not now and Summit does not expect that there will be a public
trading market for the Certificates in the future. MIS does not intend to
make a market for the Certificates. See "RISK FACTORS-Term Investment/Absence
of a Trading Market/Lack of Liquidity."
MIS may enter into selected dealer agreements with and reallow to
certain dealers who are members of the NASD, and certain foreign dealers who
are not eligible for membership in the NASD, a commission of up to 6% of the
principal amount of
<PAGE> 31
Certificates sold by such dealers. After the commencement of the offering,
the commissions and reallowances, if any, may be lowered.
USE OF PROCEEDS
Certificate Proceeds: If all of the Certificates are sold, Summit
expects net proceeds from this Certificate offering of $37,600,000 to
$40,000,000 before deducting offering expenses estimated at $155,000 and after
sales commissions. There can be no assurance, however, that any of the
Certificates can be sold. Sales commissions will range up to $2,400,000 (6%)
depending on maturities of Certificates sold and whether sales are
reinvestments or new purchases.
In conjunction with the other funds available to it through operations
and/or borrowings, Summit will utilize the proceeds of the Certificates
offering for the following purposes, which are shown in their descending order
of priority: funding investments in Receivables, and other investments, which
may include investments in existing subsidiaries, the commencement of new
business ventures and the acquisition of other companies. The Consolidated
Group continues to evaluate possible acquisition candidates. Presently, there
are no commitments or agreements for material acquisitions. To the extent
internally generated funds are insufficient or unavailable for the retirement
of maturing certificates through the period ending January 31, 1999, proceeds
of this offering may be used for retiring maturing certificates, preferred
stock dividends and for general corporate purposes (debt service, and other
general operating expenses). Approximately $7,995,000 in principal amount of
debt securities will mature between February 1, 1998 and January 31, 1999 with
interest rates ranging from 6.35% to 10% and averaging approximately 8.3% per
annum. See "RISK FACTORS-Dependence upon Leverage Financing."
Management anticipates that some of the proceeds of this offering will
be invested in money market funds, bank repurchase agreements, commercial
paper, U.S. Treasury Bills and similar short-term investments until used as
stated above. Due to Summit's inability to accurately forecast the total
amount of Certificates to be sold pursuant to this offering, no specific
amounts have been allocated for any of the foregoing purposes.
In the event substantially less than the maximum proceeds are obtained,
Summit does not anticipate any material changes to its planned use of proceeds
from those described above.
<PAGE> 32
INDEMNIFICATION
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 or her duties in the conduct of his or her
office. Such right of indemnification is not exclusive of any other rights
that may be provided by contract of other agreement or provision of law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act")may be permitted to Summit's officers, directors or
controlling persons pursuant to the foregoing provisions, Summit has been
informed 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.
<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14: Other Expenses of Issuance and Distribution
SEC Registration Fee.......................... $ 12,122
NASD Filing Fee............................... 4,500
Independent Underwriter Fee and Expenses...... 25,000
* Printing Expenses........................... 10,000
* Legal Fees and Expenses..................... 10,000
* Accounting Fees and Expenses................ 25,000
* Trustee's Fees and Expenses................. 5,000
* Blue Sky Fees and Expenses.................. 12,000
* Advertising and Marketing Expenses.......... 50,000
* Miscellaneous Expenses...................... 1,378
Total Expenses................................ $155,000
* Estimated
Item 15. Indemnification of Directors and Officers
Summit has no contractual or other arrangement with its controlling
persons, directors or officers regarding indemnification, other than as
set forth in its Articles of Incorporation. Summit's Articles of
Incorporation permits indemnification of a director, officers or
employee up to the indemnification limits permitted by Idaho state law
which permits indemnification for judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with an
action, suit or proceeding if the indemnified person acted in good faith
and in a manner reasonable believed to be in and not opposed in the best
interest of the corporation.
Item 16: Exhibits
(a) Exhibits:
*1(a). Form of Selling Agreement between Summit and
Metropolitan Investment Securities, Inc. with
respect to Certificates.
*1(b). 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.
<PAGE> 34
*1(c). Form of Pricing Opinion of Welco Securities,
Inc. with respect to Certificates to be registered.
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). Tri-Party Agreement dated as of April 24, 1996
between West One Bank, First Trust and Summit,
appointing First Trust as successor Trustee (Exhibit
4(c) to Registration No. 333-19787).
4(c). First Supplemental Indenture between Summit and
First Trust dated as of December 31, 1997, with
respect to Investment Certificates, Series B
(Exhibit 4(c) to Form 10-K filed January 7, 1998).
*5. Opinion of Susan A. Thomson, Attorney at Law, as to
validity of Investment Certificates.
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 Registration No.
33-57619).
10(b). Receivable Acquisition, Management and Services
Agreement between Old Standard Life Insurance
Company and Metropolitan Mortgage & Securities Co.,
Inc. dated December 31, 1994 (Exhibit 10(d) to
Registration No. 333-115).
10(c). Receivable Acquisition, Management and Services
Agreement between Arizona Life Insurance Company and
Metropolitan Mortgage & Securities Co., Inc. dated
October 10, 1996 (Exhibit 10(d) to Registration No.
333-19787).
10(d). Reinsurance Agreement between Western United Life
Assurance Company and Old Standard Life Insurance
Company (Exhibit 10(d) to Form 10-K filed January 7,
1998).
<PAGE> 35
*11. Statement of computation of earnings per common
share.
*12. Statement of computation of ratio of earnings to
fixed charges.
*23. Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
*25. Statement on Form T-1 of eligibility of Trustee,
First Trust National Association. (The Exhibits to
this Exhibit have been filed in paper pursuant to a
continuing hardship exemption granted January 24,
1994.)
27. Financial Data Schedule (Exhibit 27 to Form 10-K
filed January 7, 1998).
*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
<PAGE> 36
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.
(c) For the purpose of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
Amendment 1 to registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Spokane, State of
Washington, on this 25th day of February, 1998.
SUMMIT SECURITIES, INC.
/s/ Tom Turner
By: _______________________________________________
Tom Turner
President/Director
Pursuant to the requirements of the Securities Act of 1933, this
Amendment 1 to registration statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ TOM TURNER
_____________________ President/Director 2/25/98
Tom Turner
/s/ PHILIP SANDIFUR
_____________________ Vice President/Director 2/25/98
Philip Sandifur
/s/ GREG GORDON
_____________________ Secretary/Treasurer 2/25/98
Greg Gordon Director
/s/ STEVEN CROOKS
_____________________ Principal Accounting 2/12/98
Steven Crooks Officer/Principal
Financial Officer
<PAGE> 38
</TABLE>
<PAGE> 39
FORM OF SELLING AGREEMENT
This Agreement made as of the ____ day of _______________, 19___ 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 B (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
<PAGE> 40
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.
<PAGE> 41
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
<PAGE> 42
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 First Trust, 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 _____________________________________
Reuel Swanson, Secretary
<PAGE> 43
FORM OF AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
SUMMIT SECURITIES, INC.
Investment Certificates, Series B
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 $40,000,000 in Investment Certificates,
Series B (hereinafter referred to as the "Certificates"), which will be
offered in reliance on a registration statement filed on Form S-2, bearing SEC
file number ___________________; and,
WHEREAS, MIS, a wholly owned broker/dealer of Summit and a member of the
National Association of Securities Dealers ("NASD"), will be engaged as the
managing agent for Summit and MIS may enter into Selected Dealer Agreements
with other qualified broker/dealers; and,
WHEREAS, pursuant to subparagraph (c) of Rule 2720 of the Bylaws of the
NASD, MIS, as a NASD member, may participate in such underwriting only if the
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 subparagraph (b)(15) of Rule 2720 to the Bylaws of the NASD, and
who participates in the preparation of the registration statement and
prospectus relating to the offering and exercises customary standards of due
diligence, with respect thereto; and,
WHEREAS, this agreement ("Agreement") describes the terms on which
Summit is retaining WELCO to serve as such a "Qualified Independent
Underwriter" in connection with this offering of Certificates; and,
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.
<PAGE> 44
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. RULE 2720.
WELCO hereby confirms its agreement as set forth in sub-paragraph
15(g) of Rule 2720 of the Bylaws of the NASD and represents that,
as appropriate, WELCO satisfies or at the times designated in such
paragraph (l5) will satisfy the other requirements set forth
therein or will receive an exemption from such requirements from
the NASD.
2. CONSENT.
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 Rule 2720 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 Schedules "A" and "B" copies
of which are attached hereto, and incorporated herein by
reference. It is understood and agreed by WELCO that the
securities to
<PAGE> 45
which this Agreement relates will be offered on a continuous, best
efforts basis by MIS, as the managing agent, pursuant to the
Selling Agreement in effect between MIS and Summit which is an
exhibit to the Registration Statement referred to above. Summit,
through MIS, will continue to offer the Certificates according to
the terms and conditions of said Selling Agreement, and in
accordance with this Agreement, including, without limitation,
Schedules "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 an accountable basis in the maximum amount of $5,000.
Such expenses shall not include payment for salaries, supplies, or
similar expenses of WELCO incurred in the normal conduct of
business. It is further agreed that WELCO shall be paid a fee in
the amount of $20,000 payable as follows:
1) $10,500 payable at the time the pricing opinion is rendered,
at closing on the effective date of the registration, and
2) $1,000 payable monthly for ten consecutive months on the
first day of each month beginning March 1, 1998 provided that
Welco continues to serve as the "Qualified Independent
Underwriter" on each date a monthly payment is due.
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 Certificates 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
<PAGE> 46
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 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
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 a foreign corporation and
is in good standing in all jurisdictions in which the
nature
<PAGE> 47
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 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.
<PAGE> 48
(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 WELCO of such events within a
reasonable time thereafter, and will forthwith prepare and
furnish to WELCO, without expense to it, a reasonable
number of copies of any amendment or amendments or a
supplement or supplements to the Prospectus (in form and
substance satisfactory to 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 in accordance with the pricing formula
that is set forth in Schedules "A" and B which are
incorporated by reference herein.
(i) All representations, warranties and agreements contained in
this Agreement, or contained in certificates of officers of
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
<PAGE> 49
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
<PAGE> 50
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
<PAGE> 51
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)
<PAGE> 52
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
<PAGE> 53
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
SECURITIES, INC., at, Attention: Kenneth S. Shapiro, One Belmont
Avenue, Suite 105, Bala Cynwyd, PA 19004-3207 and (b) if to Summit
or Metropolitan Investment Securities, Inc., at 929 West Sprague
Ave., Spokane, WA 99201, Attention: Susan A. Thomson, Assistant
Corporate Counsel.
12. GOVERNING LAW.
This Agreement shall be construed (both as to validity and
performance) and enforced in accordance with and governed by the
laws of the State of 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
METROPOLITAN INVESTMENT SECURITIES, INC.
By: ______________________________________________
Reuel Swanson, Secretary
WELCO SECURITIES, INC.
By: _____________________________________________
Kenneth S. Shapiro, President
<PAGE> 54
SCHEDULE A
SUMMIT SECURITIES, INC.
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 Schedule 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. Seattle First National Bank
b. Security State Bank
c. U.S. Bank of Washington
d. Wells Fargo Bank
e. Washington Trust Bank
f. Washington Mutual Savings Bank
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 Schedule B.
<PAGE> 55
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 Schedule 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.
<PAGE> 56
SCHEDULE B
SUMMIT SECURITIES, INC.
PRICING FORMULA
C.D. RATE
Average rate between a composite of 8 selected Banks and Savings and Loans as of
the 1st Tuesday of each month.
GOVERNMENT RATE
Most current of 8 selected auction rates available on the 1st Tuesday of each
month.
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Certificate of
Deposit (CD) Government Rate Enter Lesser of Summit's
Calculation Calculation Column A or B Assumed Floor Current Rate
____________________ _______________________ _______________ _____________ ______________
<S> <C> <C> <C> <C>
5 yr CD rate = _____ 5 yr Gov't Rate = _____
6 mo CD rate = _____ 6 mo Gov't Rate = _____
DIFFERENCE = _____ DIFFERENCE = _____
x .20 X .20
_____ _____
Differential = _____ Differential = _____
(enter in (a) below) (enter in (a) below)
6 mo (actual) 6 mo (actual)
rate = _____ rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 6-11 months
_____ _____
1 yr rate = _____ 1 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 12-23 months
_____ _____
<PAGE> 57
2 yr rate = _____ 2 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 24-35 months
_____ _____
3 yr rate = _____ 3 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 36-47 months
_____ _____
4 yr rate = _____ 4 yr rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 48-59 months
_____ _____
5 yr (actual) 5 yr (actual)
rate = _____ rate = _____ _______________ + 1%___________ _______________
(a) + (a) + 60-120 months
_____ _____
</TABLE>
INSTALLMENT PAYMENTS (Floor equal to yearly _______ _______ ____________
rate MINUS .50) (yearly -.50
rate)
<PAGE> 58
Date: __________________
C. Paul Sandifur, Jr., President
Metropolitan Investment Securities, Inc.
917 W. Sprague Avenue
Spokane, Washington 99201
Re: Pricing Opinion of Welco Securities, Inc.
Summit Securities, Inc., Offering of $40,000,000 in
Principal Amount of Investment Certificates, Series B
Dear Mr. Sandifur:
This letter will serve to confirm our engagement as a "qualified
independent underwriter" as that term is defined subparagraph (b)(15) of Rule
2720 to the NASD bylaws, as amended ("Rule 2720").
Based upon our review of the registration statement, and the performance
of "due diligence" as required in subparagraph (c)(3) to Rule 2720, it appears
that the yields on the Investment Certificates, Series B (which are based upon
the computation set forth in Schedules A and B to the Agreement to Act as
"Qualified Independent Underwriter" dated ____________, which is filed as
Exhibit ____ to the registration statement), are no lower than those which we
would recommend.
We hereby consent to the use of our name as a "qualified independent
underwriter," in the Registration Statement (SEC File No.______________).
Very truly yours,
WELCO SECURITIES, INC.
By:__________________________________
cc: National Association of Securities Dealers, Inc.
<PAGE> 59
OPINION OF SUSAN A. THOMSON
February 25, 1998
The Directors and Stockholder
Summit Securities, Inc.
929 West Sprague Avenue
Spokane, WA 99201
Gentlemen:
I have acted as counsel to Summit Securities, Inc. (the "Company") 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. 333-43829).
I have examined Amendment 1 to 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, the Tri-Party Agreement
dated April 24, 1996 between West One, Summit and First Trust
National Association, Successor Trustee, and the First
Supplemental Indenture dated as of December 31, 1997 between
Summit and First Trust National Association;
(b) the Registration Statement referred to above becoming effective;
(c) compliance with the terms and conditions of the Indenture with
respect to the creation, and delivery of the Certificates the due
execution by the Company of the Certificates, and the sale thereof
by the Company
<PAGE> 60
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
<PAGE> 61
SUMMIT SECURITIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year ended September 30,
1997 1996 1995 1994 1993
__________ __________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Earnings:
Net income $1,851,240 $1,244,522 $ 587,559 $ 264,879 $ 283,107
Preferred dividends (446,560) (333,606) (309,061) (2,930) --
__________ __________ _________ _________ _________
Net income available to
common stockholders $1,404,680 $ 910,916 $ 278,498 $ 261,949 $ 283,107
========== ========== ========= ========= =========
Weighted average number
of common shares
outstanding 10,000 10,000 10,000 19,445 20,000
========== ========== ========= ========= =========
Net income per common
share $ 140.47 $ 91.09 $ 27.85 $ 13.47 $ 14.15
========== ========== ========= ========= =========
</TABLE>
<PAGE> 62
SUMMIT SECURITIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
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.
<TABLE>
<CAPTION>
Year Ended September 30
______________________________________________________________________
(Dollars in Thousands)
1997 1996 1995 1994 1993
__________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary item $1,851,240 $1,244,522 $ 587,559 $ 264,879 $ 283,107
Add:
Interest 4,325,528 3,741,095 3,251,334 2,527,945 1,792,059
Taxes (benefit) on income 126,905 237,951 239,707 140,407 145,951
__________ __________ __________ __________ __________
Adjusted earnings $6,303,673 $5,223,568 $4,078,600 $2,933,231 $2,221,117
========== ========== ========== ========== ==========
Preferred stock dividend
requirements $ 446,560 $ 333,606 $ 309,061 $ 2,930
Ratio factor of income after
provision for income taxes
to income before provision
for income taxes 94% 84% 71% 65%
Preferred stock dividend
factor on pretax basis 477,196 397,387 435,297 4,508
Fixed charges
Interest 4,325,528 3,741,095 3,251,334 2,527,945 1,792,059
__________ __________ __________ __________ __________
<PAGE> 63
Fixed charges and
preferred stock
dividends $4,802,724 $4,138,482 $3,686,631 $2,532,453 $1,792,059
========== ========== ========== ========== ==========
Ratio of adjusted earnings
to fixed charges and
preferred stock dividends 1.31 1.26 1.11 1.16 1.24
========== ========== ========== ========== ==========
</TABLE>
<PAGE> 64
CONSENT OF INDEPENDENT ACCOUNTANTS
Summit Securities, Inc.
Spokane, Washington
We consent to the incorporation by reference in this Amendment 1 to
Registration Statement on Form S-2 (File No. 333-43829) of our reports, which
include an explanatory paragraph describing changes in the methods of
accounting for the transfer and servicing of financial assets in fiscal 1997
and for impaired loans in fiscal 1996, dated November 21, 1997 on our audits
of the consolidated financial statements and financial statement schedules of
Summit Securities, Inc. and Subsidiaries as of September 30, 1997 and 1996 and
for each of the three years in the period ended September 30, 1997, which
report is included in the Annual Report on Form 10-K.
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
February 25, 1998
<PAGE> 65
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Statement of Eligibility Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as Trustee
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) ______
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
91-1587893
(I.R.S. Employer Identification No.)
601 UNION STREET, SUITE 2120, SEATTLE, WA 98101
(Address of principal executive offices) (Zip code)
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.)
929 WEST SPRAGUE AVENUE, SPOKANE, WA (509) 838-3111 99201
(Address & phone no. of principal executive offices) (Zip code)
INVESTMENT CERTIFICATES
(Title of the indenture securities)
<PAGE> 66
1. General information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency, Washington D.C. 20521.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with the obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
No such affiliation exists with the trustee, First Trust National
Association.
3. Voting securities of the trustee. Furnish the following information as
to each class of voting securities of the trustee:
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B
Title of class Amount outstanding
______________ __________________
<S> <C>
Common Stock 1,000 Shares
</TABLE>
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 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
<PAGE> 67
indenture securities will rank as compared with the securities
issued under such other indenture.
Not applicable.
5. Interlocking directories 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.
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:
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B Col. C Col. D
Percentage of
voting
securities
represented by
Amount owned amount given
Name of owner Title of class beneficially in Col. C
_____________ ______________ ____________ ______________
<S> <C> <C> <C>
None.
</TABLE>
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.
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B Col. C Col. D
<PAGE> 68
Percentage of
voting
securities
represented by
Amount owned amount given
Name of owner Title of class beneficially in Col. C
_____________ ______________ ____________ ______________
<S> <C> <C> <C>
None.
</TABLE>
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:
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B Col. C Col. D
Amount owned
beneficially
Whether the or held as Percentage of
securities are collateral class
voting or security for represented by
nonvoting obligations in amount given
Title of class securities default in Col. C
______________ ______________ ______________ ______________
<S> <C> <C> <C>
None.
</TABLE>
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 securities of such underwriter
any of which are so owned or held by the trustee.
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B Col. C Col. D
Amount owned
beneficially
or held as
collateral Percentage of
security for class
Title of obligations in represented by
issuer and Amount default by amount given
title of class outstanding trustee in Col. C
______________ ______________ ______________ ______________
<S> <C> <C> <C>
None.
<PAGE> 69
</TABLE>
10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor. 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% 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.
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B Col. C Col. D
Amount owned
beneficially
or held as
collateral Percentage of
security for class
Title of obligations in represented by
issuer and Amount default by amount given
title of class outstanding trustee in Col. C
______________ ______________ ______________ ______________
<S> <C> <C> <C>
None.
</TABLE>
11. Ownership or holdings by the trustee of any securities of a person
owning 50% or more of the voting securities of the obligor. If the
trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge
of the trustee, owns 50% 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.
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B Col. C Col. D
Amount owned
beneficially
or held as
collateral Percentage of
security for class
Title of obligations in represented by
issuer and Amount default by amount given
title of class outstanding trustee in Col. C
<PAGE> 70
______________ ______________ ______________ ______________
<S> <C> <C> <C>
None.
</TABLE>
12. Indebtedness of the obligor to the trustee. Except as noted in the
instructions, if the obligor is indebted to the trustee, furnish the
following information:
<TABLE>
<CAPTION>
As of December 1, 1997
Col. A Col. B Col. C
Nature of indebtedness Amount outstanding Date due
______________________ __________________ ________
<S> <C> <C>
None.
</TABLE>
13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
Not applicable.
(b) 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, or is
trustee for more than one outstanding series of securities under
the indenture, state whether there has been a default under any
such indenture or series, identify the indenture or series
affected, and explain the nature of any such default.
Not applicable.
14. Affiliations with the underwriters. If any underwriter is an affiliate
of the trustee, describe each such affiliation.
None.
15. Foreign trustee. Identify the order or rule pursuant to which the
foreign trustee is authorized to act as sole trustee under indentures
qualified or to be qualified under the Act.
Not applicable.
<PAGE> 71
16. List of exhibits. List below all exhibits filed as part of this
statement of eligibility and qualification.
1. Articles of association of First Trust National Association
(attached).
2. Certificate of authority of First Trust National Association to
commence business (attached).
3. Authorization of the trustee to exercise corporate trust powers
(attached).
4. Bylaws of First Trust National Association (attached).
5. Not applicable.
6. Consent of First Trust National Association required by Section
321(b) of the Act (attached).
7. Latest report of condition of First Trust National Association
(attached).
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, First Trust National Association, a national banking association
organized under the laws of the United States, 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 Seattle, and State
of Washington, on the 1st day of December, 1997.
FIRST TRUST NATIONAL ASSOCIATION
/s/ D. Huhta
By____________________________________
<PAGE> 72
