<PAGE> 1
As filed with the Securities and Exchange Commission on February 25, 1998.
Registration No.333-43831
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. / /
<PAGE> 2
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
/ /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<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>
Preferred Stock Shares 150,000 $100 $15,000,000 $4,545
</TABLE>
The Registrant is hereby proposing to register 10,000 Shares of
Preferred Stock, Series S-3. The amount of the filing fee associated with
such newly registered securities is $303. The Registrant is hereby amending
Registration No. 333-19787 pursuant to Rule 429 of which approximately
$140,000 of Preferred Stock, Series S-3, remain unsold. The amount of the
filing fee associated with such previously registered securities, which fee
was previously paid with prior Registration Statements, was $4,242. The
amount of the registration fee shown above is the combined fee for the
previously registered securities and for the newly registered securities.
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 Securities;
Description of Capital and
Common Stock; Description
of Preferred Stock
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.
150,000 Shares
Variable Rate Cumulative Preferred Stock, Series S-3
($100 Per Share Offering Price and Liquidation Preference)
<TABLE>
<CAPTION>
PRICE PER
SHARE DISTRIBUTION FORMULA (APPLICABLE RATE)
_________ ___________________________________________
<S> <C>
$100 The greater per annum rate of
the Three-Month U.S. Treasury Bill Rate, or
the Ten Year Constant Maturity Rate, or
the Twenty Year Constant Maturity Rate,
plus .5% (Minimum 6%/Maximum 14%)
</TABLE>
The shares of Variable Rate Cumulative Preferred Stock, Series S-3
("Preferred Stock") of Summit Securities, Inc. ("Summit") offered hereunder
will be sold in whole or fractional units. Preferred Stock distributions are
cumulative and are to be declared and paid monthly. See "DESCRIPTION OF
PREFERRED STOCK-Distributions." Preferred Stock may be redeemed, in whole or
in part, at the option of Summit at the redemption prices set forth herein.
Under certain limited circumstances, the Board of Directors may, in its sole
discretion and without any obligation to do so, redeem shares tendered for
redemption by stockholders. See "DESCRIPTION OF PREFERRED STOCK-Redemption of
Shares." In liquidation, Preferred Stock is subordinate to all debts of
Summit including Summit's certificates, on parity with other preferred stock
and senior to Summit's common stock. See "DESCRIPTION OF PREFERRED STOCK-
Liquidation Rights."
There is no trading market for the Preferred Stock and none is expected
to be established in the future. See "RISK FACTORS." A list of persons
willing to sell or purchase Summit's issued and outstanding shares of
preferred stock is maintained by Metropolitan Investment Securities, Inc.,
("MIS") as a convenience to holders of Summit's preferred stock. See
"DESCRIPTION OF PREFERRED STOCK-Redemption of Shares." This offering of
Preferred Stock is subject to withdrawal or cancellation by Summit without
notice. No minimum amount of Preferred Stock must be sold.
<PAGE> 5
FOR A DISCUSSION OF MATERIAL RISKS ASSOCIATED WITH THE PREFERRED STOCK
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 Preferred
Share $100 0% to 6% 100% to 94%
Total: $15,000,000 None-$900,000 $15,000,000-$14,100,000
</TABLE>
(1) There is no direct sales charge to the investor. Preferred Stock
distributions are calculated on their full respective offering prices, without
deduction for underwriting discounts or commissions. Summit will reimburse
MIS, a wholly owned subsidiary, for commissions paid to licensed securities
sales representatives. See "PLAN OF DISTRIBUTION."
(2) Before deducting other expenses estimated at $110,000.
The Preferred Stock is 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 Preferred Stock 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 Securities---------------------------------
Description of Capital and Common Stock-----------------
Description of Preferred Stock--------------------------
Transfer Agent and Registrar----------------------------
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 SECURITIES" &
"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 uncapitalized, it refers to
certificates generally. When this term is capitalized, it refers to any
Certificates which may be offered contemporaneously with this Preferred Stock
offering.
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 capitalized, it refers to the Series
S-3 Preferred Stock being offered herein. When this term is uncapitalized, it
refers to preferred stock generally.
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
PREFERRED STOCK
Offering . . . . This Preferred Stock offering consists of 150,000 shares of
Variable Rate Cumulative Preferred Stock, Series S-3 (the "Preferred Stock"),
offered at $100 per share, and sold in whole and fractional shares. There is
no minimum amount of Preferred Stock which must be sold. Preferred Stock is
issued in book entry form.
Distributions . . . . Distributions on Preferred Stock offered hereunder are
cumulative from the date of issuance, and, when and as declared, are payable
monthly at the annual rates described on the cover page of this Prospectus
based on the price of $100 per share. All preferred stock of Summit including
this Preferred Stock is entitled to receive distributions on the same basis.
See "DESCRIPTION OF PREFERRED STOCK-Distributions."
Liquidation Rights . . . . In the event of liquidation of Summit, the
Preferred Stock liquidation rights are $100 per share of Preferred Stock, plus
declared and unpaid dividends. The liquidation rights of the Preferred Stock
are senior to the common stock of Summit, on parity with the liquidation
rights of all other previously issued and outstanding preferred stock and
junior to all debts of Summit, including Summit's certificates. See
"DESCRIPTION OF PREFERRED STOCK-Liquidation Rights."
Redemption: Upon Call by Summit . . . . The shares of Preferred Stock are
redeemable, in whole or in part, at the option of Summit, upon not less than
30 nor more than 60 days notice by mail, at a redemption price of $100 per
share plus any declared but unpaid dividends to the date fixed for redemption.
See "DESCRIPTION OF PREFERRED STOCK-Redemption of Shares."
Redemption: Upon Request of Holder . . . . Subject to certain limitations,
Summit may, in its sole discretion and without any obligation to do so, accept
share(s) of Preferred Stock for redemption upon the receipt of unsolicited
written requests for redemption of share(s) from any holder. Redemption
prices in such event will be established by the Board, in its sole discretion,
plus, any declared but unpaid dividends. Any such discretionary redemptions
will also depend on Summit's financial condition, including its liquidity
position. See "DESCRIPTION OF PREFERRED STOCK-Redemption of Shares." Summit,
through MIS, intends to use its best efforts to maintain a trading list for
holders of Preferred Stock. See "DESCRIPTION OF PREFERRED STOCK-Redemption of
Shares" & "RISK FACTORS."
<PAGE> 15
Voting Rights . . . . The holders of Preferred Stock have no voting rights
except (i) as expressly granted by the laws of the State of Idaho and (ii) in
the event distributions payable on Preferred Stock are in arrears in an amount
equal to twenty-four full monthly distributions or more, per share. See
"DESCRIPTION OF PREFERRED STOCK-Voting Rights."
Use of Proceeds . . . . The proceeds of this Preferred Stock offering will
provide funds (in descending order of priority) for Receivable investments,
other investments (which may include investments in existing subsidiaries, and
the commencement of new business ventures, or the acquisition of other
companies) retiring maturing certificates, preferred stock dividends, and for
general corporate purposes. See "USE OF PROCEEDS."
Federal Income Tax Considerations. . . . In the event the Consolidated Group
has earnings and profits for federal income tax purposes in any future year,
the distributions paid on Preferred Stock in that year will constitute taxable
income to the recipient to the extent of such earnings and profits.
Management is unable to predict the future character of its distributions.
Purchasers are advised to consult their own tax advisors with respect to the
federal income tax treatment of distributions made. See "DESCRIPTION OF
PREFERRED STOCK-Federal Income Tax Consequences of Distributions."
<PAGE> 16
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> 17
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> 18
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> 19
RISK FACTORS
Investment in the Preferred Stock 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> 20
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> 21
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>
22
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> 23
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
Preferred Stock 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 preferred stock distributions 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 Preferred Stock 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> 24
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. Risks Related to Lack of Liquidity and Limited Marketability of
Shares: The Preferred Stock is not listed, nor does management anticipate
applying for a listing on any national or regional stock exchange and no
independent public market for
<PAGE> 25
Preferred Stock is anticipated. The broker/dealer for this offering,
MIS, operates a trading list to match buyers and sellers of Summit's preferred
stock. Summit will use its best efforts to maintain the availability of this
listing for the Preferred Stock offered hereunder. With limited exceptions,
Summit has established a policy that all preferred shareholders must place
their shares for sale on the trading list for 60 consecutive days before
Summit will entertain a request for redemption. There is no assurance that
the shares will be sold within the 60 day period. There is no assurance that
Summit will redeem the shares if they have not sold within the 60 day period.
Therefore, a prospective purchaser should not rely on this trading list or
Summit's discretionary redemption provisions as assurance that such shares
could ever be sold or redeemed. There can be no assurance that this system
will continue to operate, or that it will provide liquidity comparable to
securities traded on a recognized public stock exchange. See "DESCRIPTION OF
PREFERRED STOCK-Redemption of Shares."
11. Limitations on Redemption and Restrictions on Distributions:
Preferred Stock is designed as a long-term investment in the equity of Summit,
not as a short-term, liquid investment. The Preferred Stock is redeemable
under limited circumstances solely at the option of Summit. In addition,
Summit may not purchase or acquire any shares of Preferred Stock in the event
that cumulative dividends thereon have not been paid in full except pursuant
to a purchase or exchange offer made on the same terms to all holders of
Preferred Stock. See "DESCRIPTION OF PREFERRED STOCK-Redemption of Shares."
Summit is restricted from making distributions on Preferred Stock in the event
that any distributions to which the holders of other Series of preferred stock
are entitled to and have not been paid. See "DESCRIPTION OF PREFERRED STOCK-
Distributions."
12. Subordination and Liquidation Rights: The liquidation preference of
Preferred Stock offered herein is $100 per share. In the event of liquidation
of Summit, all shares of Series S Preferred Stock, including shares of
additional sub-series which may subsequently be authorized and sold, are on a
parity. Preferred Stock is subordinate to all outstanding debt of Summit
including its certificates. Preferred Stock is preferred in liquidation to
Summit's common stock. As of September 30, 1997, total assets of Summit were
approximately $166,354,000 and the total liabilities of Summit ranking senior
in liquidation preference to Preferred Stock were approximately $158,597,000,
and the total liquidation preference of all outstanding shares of Series S
preferred stock was approximately $5,382,000.
<PAGE> 26
The preference in liquidation would not necessarily be applicable to
terms afforded Preferred Stock in the event of other extraordinary corporate
events such as the sale of substantially all its assets, capital
restructuring, merger, reorganization and bankruptcy. The outcome in such
events could be subject to negotiation among all interested parties and/or
court determinations and are not presently determinable. In such
circumstances, Preferred Stock would not necessarily enjoy any preference over
terms available to common stock, or even be as favorable.
13. Control by Common Shareholders/Lack of Voting Rights: The Common
Stock is the only class of Summit's stock carrying voting rights. Common
stockholders now hold, and upon completion of this offering will continue to
hold, effective control of Summit except as described below. The Board
resolution authorizing the Preferred Stock provides that in the event
distributions payable on any shares of preferred stock, including the
Preferred Stock offered hereunder, are in arrears in an amount equal to twenty-
four full monthly dividends or more per share, then the holders of Preferred
Stock and all other outstanding preferred stock shall be entitled to elect a
majority of the Board of Directors of Summit. Preferred Stock shareholders
may also become entitled to certain other voting rights as required by law.
See "DESCRIPTION OF PREFERRED STOCK-Voting Rights."
14. Possible Redemption/Call of Preferred Shares by Summit: The
Preferred Stock is redeemable upon call by Summit, in its sole discretion, at
any time at a price of $100 per share plus any declared and unpaid dividends.
If fewer than all of the outstanding shares are redeemed, Summit may determine
the Shares to redeem in its sole discretion. See "DESCRIPTION OF PREFERRED
STOCK-Redemption of Shares."
15. Federal Income Tax Considerations: Under the current Federal Income
Tax Code, to the extent that Summit may not have current or accumulated
earnings and profits as computed for federal income tax purposes, Summit
believes that distributions made with respect to Preferred Stock would be
characterized as tax free returns of capital for federal income tax purposes.
Summit is unable to predict the future character of its distributions, but
will report annually to shareholders regarding the tax character of the prior
year's distributions. In addition, as each Preferred Shareholders' individual
tax circumstance is unique, Preferred Shareholders are advised to consult
their own tax advisors each year with respect to their individual federal
income tax treatment of distributions. See "DESCRIPTION OF PREFERRED STOCK-
Federal Income Tax Consequences of Distributions."
<PAGE> 27
16. 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> 28
DESCRIPTION OF SECURITIES
DESCRIPTION OF CAPITAL AND COMMON STOCK
As of the date of this prospectus the authorized capital of Summit
consists of 2,000,000 shares of Common Stock ($10 par value), and 10,000,000
shares of Series S Preferred Stock ($10 par value), from which 185,000 shares
of Series S-1, 159,500 shares of Series S-2, 200,000 shares of Series S-3 and
80,000 shares of Series S-RP have been authorized.
DESCRIPTION OF PREFERRED STOCK
This offering consists of 150,000 shares of Variable Rate Cumulative
Preferred Stock, Series S-3 (hereinafter referred to as "Preferred Stock").
All of the shares of Preferred Stock offered by Summit, hereby, when issued
and sold against the consideration set forth in this Prospectus will be
validly issued, fully paid and nonassessable. The relative rights and
preferences of Preferred Stock have been fixed and determined by the Board of
Directors of Summit and are set forth in the Preferred Stock Authorizing
Resolution (the "Authorizing Resolution"). Preferred Stock is issued in Book
Entry form.
The following statements relating to the Preferred Stock are summaries
and do not purport to be complete and are qualified in their entirety by
reference to the Authorizing Resolution, a copy of which has been filed with
the Commission 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.
Distributions
Distributions on Preferred Stock are cumulative and are to be declared
monthly on the first business day of the month payable to the shareholders of
record as of the fifth calendar day of each month. Distributions are to be
paid in cash on the twentieth calendar day of each month in an amount equal to
the offering price of $100 per share multiplied by the distribution rate
divided by twelve. The distribution rate will be the "Applicable Rate" as
defined herein subject to the authority of Summit's Board of Directors to
authorize, by resolution, a higher rate.
The Applicable Rate for any monthly distribution period cannot be less
than 6% or greater than 14% per annum. The Applicable Rate for any monthly
distribution period shall be (i) the highest of the three-month U.S. Treasury
Bill Rate, the Ten-Year Constant Maturity Rate and the Twenty-Year Constant
Maturity Rate (each as more fully described in the Authorizing Resolution),
(ii) plus one half of one percentage point. Each of the above
<PAGE> 29
three rates shall be calculated as the arithmetic average of the two most
recent weekly per annum yields as published weekly by the Federal Reserve
Board during the Calendar Period immediately prior to the ten calendar days
immediately preceding the first day of the distribution period for which the
distribution rate on Preferred Stock is being determined. Should Summit
determine in good faith that one or more of such rates cannot be determined
for any distribution period, then the Applicable Rate for such period shall be
the higher of whichever of such rates can be so determined, plus one half of
one percentage point. Should Summit determine in good faith that none of such
rates can be determined for any distribution period, then the Applicable Rate
in effect for the preceding distribution period shall be continued for such
distribution period. The distribution rate for each monthly distribution
period shall be calculated as promptly as practical by Summit. Summit will
cause notice of the distribution rate to be enclosed with the next mailed
distribution payment check. In making such calculation, the three-month U.S.
Treasury Bill Rate, Ten-Year Constant Maturity Rate and Twenty-Year Constant
Maturity Rate shall each be rounded to the nearest five hundredths of a
percentage point.
Prior to the effective date of this Prospectus, Summit's Board of
Directors had adopted a resolution to authorize a distribution rate on the
Preferred Stock at two percentage points higher than the Applicable Rate.
Such higher distribution rate will continue from month to month until the
Board elects to terminate it. The Board may increase, decrease or eliminate
the additional points at any time, in its sole discretion.
Restrictions on Distributions
Summit may not declare or pay a distribution on any share of Preferred
Stock for any distribution period unless, at the same time, a like
distribution shall be declared or paid on all shares of preferred stock then
issued and outstanding and entitled to receive distributions. See
"CAPITALIZATION."
So long as any shares of Preferred Stock are outstanding, and unless the
full cumulative dividends on all outstanding preferred shares shall have been
paid or declared and set apart for all past dividend periods, Summit may not:
(i) declare or pay or set aside for payment any dividend (other than a
dividend in common stock or in any other stock ranking junior to Preferred
Stock as to dividends and upon liquidation and other than as provided in the
foregoing paragraph); (ii) declare or pay any other distribution upon common
stock or upon any other stock ranking junior to or on a parity with Preferred
Stock as to dividends or upon liquidation; or (iii) redeem, purchase or
otherwise acquire common stock or any other stock of Summit ranking junior to
or on a parity with
<PAGE> 30
Preferred Stock as to dividends or upon liquidation for any consideration (or
pay or make available any funds for a sinking fund for the redemption of any
shares of any such stock) except by conversion into or exchange for stock of
Summit ranking junior to Preferred Stock as to dividends and upon liquidation.
Summit may make distributions ratably on the shares of Preferred Stock
and shares of any stock of Summit ranking on a parity therewith with regard to
the payment of dividends, in accordance with the sums which would be payable
on such shares if all dividends, including accumulations, if any, were
declared and paid in full. As of the date hereof, no dividends on Summit's
preferred stock are in arrears. No interest will be paid for or on account of
any unpaid dividends.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Summit, the holders of shares of Preferred Stock will be
entitled to receive out of the assets of Summit available for distribution to
stockholders, before any distribution of assets is made to holders of common
stock or any stock of Summit ranking, upon liquidation, junior to Preferred
Stock, liquidating distributions in the amount of $100 per share plus declared
and unpaid dividends. Preferred Stock is junior in liquidation to outstanding
debt of Summit. As of September 30, 1997, the total liabilities of Summit
ranking senior in liquidation preference to Preferred Stock were approximately
$158,597,000. Obligations ranking on a parity with Preferred Stock upon
liquidation (i.e. the total liquidation preference of the outstanding shares
of all previously issued series of preferred stock) as of September 30, 1997
were approximately $5,382,000. There are no limitations on Summit's ability
to incur additional secured or unsecured indebtedness. See "CAPITALIZATION" &
"RISK FACTORS."
The Preferred Stock Authorizing Resolution provides that, without
limitation, the voluntary sale, lease or conveyance of all or substantially
all of Summit's property or assets to, or its consolidation or merger with,
any other corporation shall not be deemed to be a liquidation, dissolution or
winding up of Summit. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of Summit, the amounts payable with respect to
Preferred Stock and any other shares of stock of Summit ranking as to any such
distribution on a parity with Preferred Stock are not paid in full, the
holders of Preferred Stock and of such other shares will share ratably in any
such distribution of assets of Summit in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the
<PAGE> 31
holders of shares of Preferred Stock will not be entitled to any further
participation in any distribution of assets by Summit.
Redemption of Shares
Upon call by Summit: Subject to regulatory restrictions affecting
redemptions during an offering, the shares of Preferred Stock are redeemable,
in whole or in part, only at the option of Summit at a redemption price of
$100 per share if redeemed anytime after December 31, 1997 plus declared and
unpaid dividends to the date fixed for redemption. In the event that fewer
than all of the outstanding shares of Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by Summit and the shares
to be redeemed shall be determined by such method as Summit, in its sole
discretion, deems to be equitable.
Discretionary Redemption Upon Request of the Holder: As provided in the
Preferred Stock Authorizing Resolution, the shares of Preferred Stock are not
redeemable at the option of the holder. If, however, Summit receives an
unsolicited written request for redemption of shares from any holder, Summit
may, in its sole discretion, subject to regulatory restrictions affecting
redemptions during an offering, and subject to the limitations described
below, accept such shares for redemption. Such redemption requests are
reviewed in the order received, and are subject to review by Summit's
executive management. Any shares so tendered, which Summit in its discretion,
allows for redemption shall be redeemed by Summit directly, (and not from or
through a broker or dealer), at a price established by the Board, from time to
time, in its sole discretion plus any declared but unpaid dividends.
There can be no assurance that Summit's financial condition will allow
it to exercise its discretion to accept any particular request for redemption
of Preferred Stock. Summit will not redeem any such shares tendered for
redemption if to do so would, in the opinion of Summit's management, be unsafe
or unsound in light of Summit's financial condition (including its liquidity
position); if payment of interest or principal on any outstanding instrument
of indebtedness is in arrears or in default; or if payment of any dividend on
Preferred Stock or share of any stock of Summit ranking at least on a parity
therewith is in arrears as to dividends. In the event that cumulative
dividends on Preferred Stock have not been paid in full, Summit may not
purchase or acquire any shares of Preferred Stock otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of Preferred
Stock.
The Preferred Stock is not expected to be traded on any national or
regional stock exchange and no independent public
<PAGE> 32
market for Preferred Stock is anticipated. Management does not anticipate
applying for a listing for such public trading. The broker-dealer for this
offering, MIS, maintains a trading list to match buyers and sellers of
preferred stock. Summit will use its best efforts to maintain the
availability of this listing for the Preferred Stock offered hereunder
following completion of this offering. With limited exceptions, Summit has
established a policy that all preferred shareholders, including holders of the
Preferred Stock offered herein, must place their shares for sale on the
trading list for 60 consecutive days before Summit will entertain a request
for redemption. See "RISK FACTORS-Risks Related to Lack of Liquidity and
Limited Marketability of Shares."
Voting Rights
The Preferred Stock has no voting rights except as provided in the
Authorizing Resolution and except as required by Idaho State Law regarding
amendments to Summit's Articles of Incorporation which adversely affect
holders of such shares as a class and requires approval of a majority of the
outstanding shares entitled to vote.
The Authorizing Resolution provides that holders of Preferred Stock,
together with the holders of Summit's other preferred stock hereafter
authorized, voting separately and as a single class, shall be entitled to
elect a majority of the Board of Directors of Summit in the event that
distributions payable on any shares of Preferred Stock shall be in arrears in
an amount equal to twenty-four full monthly dividends or more per share. Such
right will continue until all distributions in arrears have been paid in full.
Federal Income Tax Consequences of Distributions
The following discussion of the federal income tax consequences of
distributions is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), existing Treasury regulations, current published administrative
positions of the Internal Revenue Service (the "Service") contained in revenue
rulings, revenue procedures and notes and existing judicial decisions. No
assurance can be given that legislative or administrative changes or court
decisions may not be forthcoming that could significantly modify the
statements in this discussion. Any such changes may or may not be retroactive
with respect to transactions effected prior to the date of such changes.
Distributions made to the holders of Preferred Stock will either be
taxable or not depending, in part, on the extent to which they are made out of
current or accumulated earnings and profits of Summit as calculated for
federal income tax purposes.
<PAGE> 33
To the extent, if any, that distributions made by Summit to the holders of
Preferred Stock exceed current and accumulated earnings and profits of Summit,
such distributions will be treated first as a tax-free return of capital,
reducing the holder's basis in Preferred Stock (not below zero) and thereafter
as capital gains (provided Preferred Stock is held by the holder as a capital
asset).
Summit believes that the majority of the distributions on its
outstanding common and preferred stock were tax free returns of capital for
federal income tax purposes in calendar 1994, and were taxable for 1995 and
1996. Summit is currently unable to predict the character of its
distributions for future years, but as required by the Code, will report
annually to shareholders regarding the tax character of the prior year's
distributions.
Each Preferred Shareholder's individual tax circumstance is unique;
accordingly, Preferred Shareholders are advised to consult their own tax
advisor with respect to the income tax treatment or any distribution made with
respect to the Preferred Stock.
Distributions paid with respect to Preferred Stock, whether deemed to be
dividends, return of capital, or capital gains for federal income tax purposes
will result in the same federal income tax consequences to Summit as other
payments of dividends. These distributions are not deductible by Summit under
current tax law. Additionally, distributions to foreign taxpayers are subject
to special rules not discussed herein.
TRANSFER AGENT AND REGISTRAR
Metropolitan acts as Transfer Agent and Registrar for Summit's capital
stock, including its Preferred Stock.
LEGAL MATTERS
LEGAL OPINION
The legality of the Preferred Stock 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
<PAGE> 34
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 Preferred Stock is 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 the Preferred
Stock. A commission in the maximum amount of 6% of the offering price will be
paid by Summit on most Preferred Stock purchases. Preferred Stock is offered
for cash or other consideration acceptable to Summit as determined by the
Board of Directors. MIS will transmit such funds or other consideration
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
$116,831 from Summit on sales of approximately $2,093,000 of Summit's
preferred stock.
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 pricing of the Preferred Stock offered through this
Prospectus. Accordingly, MIS has obtained an opinion from Welco Securities,
Inc., a NASD member, ("Welco") which states that the offering price of the
Preferred Stock meets the fairness objective based on conditions and
circumstances, existing as of the date of the Prospectus. The price offered
for the Preferred Stock will be no higher than Welco would have independently
recommended. 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 Preferred Stock offered hereunder, Welco is to be paid $15,000
in fees and up to a maximum of $5,000 in accountable expenses.
<PAGE> 35
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 Preferred Stock in the future. MIS does not intend to
make a market for the Preferred Stock. However, MIS undertakes to maintain a
list of persons willing to sell or purchase outstanding series of preferred
stock of Summit. Summit will use its best efforts to maintain the
availability of this listing for Preferred Stock offered hereunder following
completion of this offering. See "RISK FACTORS-Risks Related to Lack of
Liquidity and Limited Marketability of Shares."
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 Preferred Stock sold by such dealers. After the
commencement of the offering, the commissions and reallowances, if any, may be
lowered.
USE OF PROCEEDS
Preferred Stock Proceeds: If all of the Preferred Stock is sold, Summit
expects net proceeds from this Preferred Stock offering of $14,100,000 to
$15,000,000 before deducting offering expenses estimated at $110,000 and after
sales commissions of up to $900,000 (6%), assuming all of the Preferred Stock
is sold. There can be no assurance, however, that any of the Preferred Stock
can be sold.
In conjunction with the other funds available to it through operations
and/or borrowings, Summit will utilize the proceeds of the Preferred Stock
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
<PAGE> 36
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 Preferred Stock 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> 37
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> 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14: Other Expenses of Issuance and Distribution
SEC Registration Fee.......................... $ 4,545
NASD Filing Fee............................... 2,000
Independent Underwriter Fee and Expenses...... 20,000
* 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.......... 20,000
* Miscellaneous Expenses...................... 1,455
Total Expenses................................ $110,000
* 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). Selling Agreement between Summit and Metropolitan
Investment Securities, Inc. with respect to
Preferred Stock Series S-3 (Exhibit 1(a)(ii) to
Registration No. 333-19787).
*1(b). Form of Agreement to Act as Qualified Independent
Underwriter between Summit, Metropolitan Investment
Securities, Inc. and Welco Securities, Inc.
with respect to Preferred Stock, Series S-3.
<PAGE> 39
*1(c). Form of Pricing Opinion of Welco Securities,
Inc. with respect to Preferred Stock, Series S-3.
4. Statement of Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series S-3
(Exhibit 4(d) to Amendment 3 to Registration No. 333-
19787).
*5. Opinion of Susan A. Thomson, Attorney at Law, as to
validity of Preferred Stock.
7. Opinion Regarding Liquidation Preference. (See
Exhibit 5.)
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).
*11. Statement of computation of earnings per common
share.
*12. Statement of computation of ratio of earnings to
fixed charges.
*23(a). Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
<PAGE> 40
23(b). Consent of Susan Thomson, Attorney at Law. (See
Exhibit 5.)
*24(a). Power of Attorney.
*24(b). Certified Resolution of the Board of Directors
authorizing board signatures pursuant to a Power of
Attorney.
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 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
<PAGE> 41
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> 42
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>
**
_____________________ President/Director 2/25/98
Tom Turner
**
_____________________ Vice President/Director 2/25/98
Philip Sandifur
**
_____________________ Secretary/Treasurer 2/25/98
Greg Gordon Director
**
_____________________ Director 2/25/98
Robert Potter
/s/ STEVEN CROOKS
_____________________ Principal Accounting 2/25/98
Steven Crooks Officer/Principal
Financial Officer
<PAGE> 43
/s/ SUSAN THOMSON
_____________________
Susan Thomson
**Susan Thomson, by signing her name hereto, signs this document on behalf of
Messrs. Turner, Sandifur, Gordon and Potter, indicated above, pursuant to a
power of attorney duly executed by such persons and filed herewith.
</TABLE>
<PAGE> 44
FORM OF AGREEMENT TO ACT AS "QUALIFIED INDEPENDENT UNDERWRITER"
SUMMIT SECURITIES, INC.
Preferred Stock, Series S-3
This agreement made as of the ____ day of ____________, by and between
Summit Securities, Inc., an Idaho corporation ("Summit"), Metropolitan
Investment Securities, Inc., a Washington corporation ("MIS"), and WELCO
SECURITIES, INC., a Nevada corporation ("WELCO").
WITNESSETH:
WHEREAS Summit intends to offer 150,000 shares of Preferred Stock,
designated as "Variable Rate Cumulative Preferred Stock, Series S-3,"
(hereinafter referred to as the "Preferred Stock"), 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
price at which the Preferred Stock is offered to the public is no higher than
the price recommended by a "Qualified Independent Underwriter" as that term is
defined in 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 Preferred Stock; 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:
<PAGE> 45
DEFINITIONS.
As hereinafter used, except as the context may otherwise require, the
term "Registration Statement" means the registration statement on Form S-2
(including the related preliminary prospectus, financial statements, exhibits
and all other documents to be filed as a part thereof or incorporated therein)
for the registration of the offer and sale of the Preferred Stock under the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Act") filed with the Securities and Exchange Commission (the
"Commission"), and any amendment thereto, and the term "Prospectus" means the
prospectus including any preliminary or final prospectus (including the form
of prospectus to be filed with the Commission pursuant to Rule 424(b) under
the Act) and any amendment or supplement thereto, to be used in connection
with the offering.
1. 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 price above
which Summit's Preferred Stock may not be offered based on the
computation of dividends to be declared on those shares that is
set forth in Schedules
<PAGE> 46
"A" and "B" attached hereto, and incorporated herein by
reference. It is understood and agreed by WELCO that the
securities to which this Agreement relates will be offered on a
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 Preferred
Stock 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 $15,000 payable as follows:
1) $7,500 payable at the time the pricing opinion is rendered,
at closing on the effective date of the registration, and
2) $750 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 Preferred Stock to
be sold in the Offering is made by the underwriter or
underwriters, as the case may be, participating in the Offering
and by Summit (such date being referred to herein as the "Closing
Date"), the Prospectus (as
<PAGE> 47
amended or supplemented if it shall have been so amended or
supplemented) will contain all material statements which are
required to be stated therein in accordance with the Act and will
conform to all other requirements of the federal securities laws,
and will not, on such date include any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and that all contracts and documents required by the
Act to be filed or required as exhibits to said registration
statement have been filed. Summit further represents and warrants
that any further filing, report, document, release or
communication which in any way refers to WELCO or to the services
to be performed by WELCO pursuant to this Agreement will not
contain any untrue or misleading statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Summit further warrants and represents that:
(a) All leases, contracts and agreements referred to in or
filed as exhibits to the Registration Statement to which
Summit or its subsidiaries is a party or by which it is
bound are in full force and effect.
(b) Summit has good and marketable title, except as otherwise
indicated in the Registration Statement and Prospectus, to
all of 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
<PAGE> 48
business as a foreign corporation and is in good standing
in all jurisdictions in which the nature of the business
transacted by it or its ownership of properties or assets
makes qualification necessary; the authorized and
outstanding capitalization of Summit is as set forth in the
Prospectus and the description in the Prospectus of the
capital stock of Summit conforms with and accurately
describes the rights set forth in the instruments defining
the same;
(d) Summit is not in violation of its Certificate of
Incorporation or Bylaws or in default in the performance or
observance of any material obligation, agreement, covenant
or condition contained in any bond, debenture, note, or
other evidence of indebtedness, contract or lease or in any
indenture or loan agreement to which it is a party or by
which it is bound.
(e) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary corporate action
on the part of Summit and MIS and performance of the
foregoing agreement and the consummation of the
transactions contemplated thereby, will not conflict with
or result in a breach of any of the terms or constitute a
violation of the respective Certificates of Incorporation
or Bylaws of Summit or MIS, or any deed of trust, lease,
sublease, indenture, mortgage, or other agreement or
instrument to which Summit or MIS is a party or by which
either of them or their property is bound, or any
applicable law, rule, regulation, judgment, order or decree
of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over Summit or MIS
or their properties or obligations; and no consent,
approval, authorization or order of any court or
governmental agency or body is required for the
consummation of the transactions contemplated herein and in
the other agreements previously referred to in this
paragraph except as may be required under the Act or under
any state securities or 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
<PAGE> 49
thereby.
(g) If any event relating to or affecting Summit shall occur as
a result of which it is necessary, in WELCO's opinion, to
amend or supplement the Prospectus in order to make the
Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, Summit
undertakes to inform 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 Preferred Stock 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,
<PAGE> 50
and officers and directors to discuss with WELCO any aspect of
Summit which WELCO may deem relevant. In addition, Summit, at
WELCO's request, will cause to be delivered to WELCO copies of all
certificates, opinions, letters and reports to be delivered to the
underwriter or underwriters, as the case may be, pursuant to any
underwriting agreement executed in connection with the Offering or
otherwise, and shall cause the person issuing such certificate,
opinion, letter or report to authorize WELCO to rely thereon to
the same extent as if addressed directly to WELCO. Summit
represents and warrants to WELCO that all such information and
documentation provided pursuant to this paragraph 6 will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statement therein not
misleading. In addition, Summit will promptly advise WELCO of all
telephone conversations with the Commission which relate to or may
affect the Offering.
7. INDEMNIFICATION.
(a) Subject to the conditions set forth below, and in addition
to any rights of indemnification and contribution to which
WELCO may be entitled pursuant to any agreement among
underwriters, underwriting agreement or otherwise, and to
the extent allowed by law, Summit hereby agrees that it
will indemnify and hold WELCO and each person controlling,
controlled by or under common control with WELCO within the
meaning of Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the rules and regulations thereunder
(individually, an "Indemnified Person") harmless from and
against any and all loss, claim, damage, liability, cost or
expense whatsoever to which such Indemnified Person may
become subject under the Act, the Exchange Act, or other
federal or state statutory law or regulation, at common law
or otherwise, arising out of, based upon, or in any way
related or attributed to (i) this Agreement, (ii) any
untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or Prospectus
or any other filing, report, document, release or
communication, whether oral or written, referred to in
paragraph 5 hereof or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,
(iii) any application or
<PAGE> 51
other document executed by Summit or based upon written
information furnished by Summit filed in any jurisdiction
in order to qualify the Preferred Stock 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
<PAGE> 52
such Indemnified Person; PROVIDED, HOWEVER, that if the
defendants in any such action include both the Indemnified
Person and Summit or any corporation controlling,
controlled by or under common control with Summit, or any
director, officer, employee, representative or agent of any
thereof, or any other "Qualified Independent Underwriter"
retained by Summit in connection with the Offering and the
Indemnified Person shall have reasonably concluded that
there may be legal defenses available to it which are
different from or additional to those available to such
other defendant, the Indemnified Person shall have the
right to select separate counsel to represent it. Upon
receipt of notice from Summit to such Indemnified Person of
its election so to assume the defense of such action and
approval by the Indemnified Person of counsel, Summit will
not be liable to such Indemnified Person under this
paragraph 7 for any fees of counsel subsequently incurred
by such Indemnified Person in connection with the defense
thereof (other than the reasonable costs of investigation
subsequently incurred by such Indemnified Person) unless
(i) the Indemnified Person shall have employed separate
counsel in accordance with the provision of the next
preceding sentence (it being understood, however, that
Summit shall not be liable for the expenses of more than
one separate counsel in any one jurisdiction representing
the Indemnified Person, which counsel shall be approved by
WELCO), (ii) Summit, within a reasonable time after notice
of commencement of the action, shall not have employed
counsel reasonably satisfactory to the Indemnified Person
to represent the Indemnified Person, or (iii) Summit shall
have authorized in writing the employment of counsel for
the Indemnified Person at the expense of Summit, and except
that, if clause (i) or (iii) is applicable, such liability
shall be only in respect of the counsel referred to in such
clause (i) or (iii).
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in
paragraph 7 is due in accordance with its terms but is for
any reason held by a court to be unavailable from Summit to
WELCO on grounds of policy or otherwise, Summit and WELCO
shall contribute to the aggregate losses, claims, damages
and liabilities (including
<PAGE> 53
legal or other expenses reasonably incurred in connection
with investigating or defending same) to which Summit and
WELCO may be subject in such proportion so that WELCO is
responsible for that portion represented by the percentage
that its fee under this Agreement bears to the public
offering price appearing on the cover page of the
Prospectus and Summit is responsible for the balance,
except as Summit may otherwise agree to reallocate a
portion of such liability with respect to such balance with
any other person, including, without limitation, any other
"Qualified Independent Underwriter"; PROVIDED, HOWEVER,
that (i) in no case shall WELCO be responsible for any
amount in excess of the fee set forth in paragraph 4 above
and (ii) no person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the Act shall be
entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this
paragraph (c), any person controlling, controlled by or
under common control with WELCO, or any partner, director,
officer, employee, representative or any agent of any
thereof, shall have the same rights to contribution as
WELCO and each person who controls Summit within the
meaning of Section 15 of the Act or Section 20 of the
Exchange Act, each officer of Summit who shall have signed
the Registration Statement and each director of Summit
shall have the same rights to contribution as Summit,
subject in each case to clause (i) of this paragraph (c).
Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim
for contribution may be made against the other party under
this paragraph (c), notify such party from whom
contribution may be sought, but the omission to so notify
such party shall not relieve the party from whom
contribution may be sought from any other obligation it or
they may have hereunder or otherwise than under this
paragraph (c). The indemnity and contribution agreements
contained in this paragraph 7 shall remain operative and in
full force and effect regardless of any investigation made
by or on behalf of any Indemnified Person or termination of
this Agreement.
8. AUTHORIZATION BY SUMMIT.
<PAGE> 54
Summit represents and warrants to WELCO that this Agreement has
been duly authorized, executed and delivered by Summit and
constitutes a valid and binding obligation of Summit.
9. AUTHORIZATION BY MIS.
MIS represents and warrants to WELCO that this Agreement has been
duly authorized, executed and delivered by MIS and constitutes a
valid and binding obligation of MIS.
10. AUTHORIZATION BY WELCO.
WELCO represents and warrants to Summit that this Agreement has
been duly authorized, executed and delivered by WELCO and
constitutes a valid and binding obligation of WELCO.
11. NOTICE.
Whenever notice is required to be given pursuant to this
Agreement, such notice shall be in writing and shall be mailed by
first class mail, postage prepaid, addressed (a) if to WELCO
SECURITIES, INC., 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 W. 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 55>
SCHEDULE A
Summit Securities, Inc.
The opinion of WELCO is conditioned upon Summit's undertaking to
maintain the distribution rate of the Preferred Stock in accordance with the
formula set forth below:
Notwithstanding anything to the contrary herein the Applicable Rate for
any monthly distribution period shall not, in any event, be less than 6% or
greater than 14% per annum. The Board of Directors may, however, by
resolution, authorized distributions in excess of the Applicable Rate. The
Applicable Rate for any monthly distribution period shall be the highest of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Twenty
Year Constant Maturity Rate (each as defined in the Preferred Stock
Authorizing Resolution) plus one half of one percentage point for such
dividend period. In the event that the Company determines in good faith that
for any reason one or more of such rates cannot be determined for any
distribution period, then the Applicable Rate for such period shall be the
higher of whichever of such rates can be so determined.
<PAGE> 56
SCHEDULE B
Summit Securities, Inc.
VARIABLE RATE, CUMULATIVE PREFERRED STOCK, SERIES S-3
PRICING
For Distributions Payable On: _________________________________
Distributions Record Date: ____________________________________
<TABLE>
<CAPTION>
Applicable Effective Resultant
Date Date Average Rate Rate* Rate
<S> <C> <C> <C> <C> <C> <C>
3 Mo Treasury Bill _____________________ +.5% +2% _________
10 Yr Constant Rate _____________________ +.5% +2% _________
20 Yr Constant Rate _____________________ +.5% +2% _________
</TABLE>
HIGHEST RESULTANT RATE: ___________________________
MONTHLY DISTRIBUTION PER SHARE: ____________________
(Highest applicable rate divided by 12)
As resolved by the Board of Directors, distribution will be deemed
declared on the 1st day of each month, payable on the 20th of each month to
the holders of record on the 5th of each month.
* Includes any distribution authorized by the Board in excess of the
Applicable Rate.
_______________________________________________________
Authorized Signature
<PAGE> 57
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 $15,000,000 of
Variable Rate Cumulative Preferred Stock, Series S-3
Dear Mr. Sandifur:
This letter will serve to confirm our engagement as a "qualified
independent underwriter" as that term is defined in 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 price of $100.00 per share on the Variable Rate Cumulative Preferred
Stock, Series S-3 (provided that the manner in which the computation of
dividends are those 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), is no higher than that which
we would recommend.
We hereby consent to the use of our name as a "qualified independent
underwriter," to the Registration Statement (SEC File No. ________________).
Very truly yours,
WELCO SECURITIES, INC.
By:__________________________________
cc: National Association of Securities Dealers, Inc.
<PAGE> 58
OPINION OF SUSAN A. THOMSON
February 25, 1998
The Directors and Stockholders
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 150,000
shares of Variable Rate Cumulative Preferred Stock, Series S-3 ("Preferred
Stock, Series S") including the preparation of a Registration Statement (Form
S-2) under the Securities Act of 1933, as amended, which has been filed with
the Securities and Exchange Commission. (SEC Registration No. 333-43831.)
I have examined Amendment 1 to the Registration Statement referred to
above and such other documents and records as I have deemed necessary for the
purpose of this opinion.
Based upon the foregoing, and subject to the Board of Directors'
adoption of Articles of Amendment to the Company's Article of Incorporation
which incorporate the Statement of Rights, Designation and Preferences of
variable Rate Cumulative Preferred Stock, Series S-3, and the filing of same
with the Secretary of State of the State of Idaho, I am of the opinion that:
1. the Preferred Stock, Series S-3 of the Company which is being
registered, when issued and sold in the manner and for the
consideration contemplated by the Registration Statement, will be
legally issued, fully paid and non-assessable; and
2. in the event of dissolution, liquidation or winding up of the
affairs of the Company, whether voluntary or involuntary, the
holders of Preferred Stock, Series S-3 will be entitled to
receive, on parity with all other issued and outstanding preferred
stock, before any payment or distribution is made on the Company's
Common Stock, the amount of ($100.00 per share plus an amount
equal to all accrued and unpaid dividends thereon to the date of
distribution or payment; and
<PAGE> 59
3. the liquidation preference of the preferred stock exceeds the par
value thereof. There are no restrictions upon surplus by reason
of such excess and there are no remedies available to security
holders by reason of such excess before or after payment of any
dividend that would reduce surplus to an amount less than the
amount of such excess and which remedies arise by reason of such
excess.
This opinion is furnished pursuant to the requirements of Item 601(b)(5)
and 601(b) of Regulation S-K.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me in the Prospectus under the
caption "Legal Opinion."
Sincerely,
/s/ SUSAN A. THOMSON
Susan A. Thomson
Assistant Corporate Counsel
<PAGE> 60
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> 61
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> 62
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> 63
CONSENT OF INDEPENDENT ACCOUNTANTS
Summit Securities, Inc.
Spokane, Washington
We consent to the incorporation by reference in this Registration
Statement on Form S-2 (File No.333-43831) 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 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> 64
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Susan Thomson and Tom Turner and each of them,
his true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement registering 150,000 shares variable
rate cumulative Preferred Stock, Series S-3 on Form S-2 and file the same,
with all exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto such attorney-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, to all
intents and purposes and as full as they might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, or their
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ TOM TURNER
_________________________ President, Director 1/7/98
Tom Turner
/s/ PHILIP SANDIFUR
_________________________ Vice President, Director 1/7/98
Philip Sandifur
/s/ GREG GORDON
_________________________ Secretary/Treasurer, 1/7/98
Greg Gordon Director
/s/ ROBERT POTTER
<PAGE> 65
_________________________ Director 1/7/98
Robert Potter
</TABLE>
<PAGE> 66
CERTIFICATE OF ADOPTION OF CORPORATE RESOLUTION
I, Greg Gordon, hereby certify that I am the Secretary of Summit
Securities, Inc. As such officer I have custody of the records of meetings of
the Board of Directors of said corporation and I hereby certify that the
following resolution was unanimously adopted by the Board of Directors of the
corporation at the Board meeting held on December 30, 1997. I further certify
that the Power of Attorney referred to in the resolution is the Power of
Attorney attached hereto which grants a Power of Attorney to Susan Thomson and
Tom Turner to execute any and all amendments (including post-effective
amendments) to this Registration Statement on Form S-2 and file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission.
WHEREAS, each of the Board members has received a copy of the power of
attorney form for his review and approval;
RESOLVED, the Board hereby authorizes each member of the Board of
Directors of the corporation to execute the power of attorney.
I further certify that said resolution is still in full force and effect
and is not contrary to any provision of the charter or bylaws of said
corporation.
IN WITNESS WHEREOF, this certification is executed as of this 7th day of
January, 1998.
/s/ GREG GORDON
_______________________________
Greg Gordon, Secretary
State of Washington )
)
County of Spokane )
Personally appeared before me the above-named, Greg Gordon, personally
known to me, who, being duly sworn, deposes and says that he executed the
above instrument.
Subscribed and sworn before me this 7th day of January, 1998.
<PAGE> 67
/s/ SUSAN THOMSON
________________________________
Notary Public
Residing at Spokane, WA
[Seal] My Commission Expires 9/1/99
<PAGE> 68
