AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 2000.
REGISTRATION NO. 333- .
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
SUMMIT SECURITIES, INC.
(Exact Name of Registrant as Specified in its Charter)
IDAHO 82-0438135
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 WEST FIRST AVENUE
SPOKANE, WASHINGTON 99201-5015
(509) 838-3111
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
TOM TURNER, PRESIDENT
SUMMIT SECURITIES, INC.
601 WEST FIRST AVENUE
SPOKANE, WASHINGTON 99201-5015
(509) 838-3111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
Robert J. Ahrenholz, Esq.
Kutak Rock LLP
717 Seventeenth Street, Suite 2900
Denver, Colorado 80202
(303) 297-2400
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. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and 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
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
Notes Due 2005..................... $22,500,000 -- $22,500,000 $5,940
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(a).
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED JUNE 26, 2000
THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO COMPLETION
OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
PROSPECTUS
[SUMMIT SECURITIES LOGO]
$22,500,000
SUMMIT SECURITIES, INC.
% NOTES DUE 2005
------------------
The notes will mature on 15, 2005. Interest on the notes is payable
monthly as of the 15th day of each month, beginning with the 15th day of the
month following the month that the offering closes. The notes are unsecured and
rank equally with all of our other unsecured indebtedness. We will only issue
the notes in book-entry form in denominations of $1,000, and will only sell or
exchange them in increments of $5,000 in principal amount. We intend to list the
notes for trading on the Pacific Stock Exchange under the symbol " ".
If you currently hold our Investment Certificates, you may exchange your
investment certificates for an equal principal amount of notes, subject to the
limitations and conditions contained in this prospectus. See "THE EXCHANGE
OFFER."
------------------------
INVESTING IN THE NOTES INVOLVES RISKS. YOU SHOULD CAREFULLY CONSIDER THE
RISK FACTORS BEGINNING ON PAGE 11 IN THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
------------------------
PER NOTE TOTAL
-------- -----
Public offering price................................... 100% $22,500,000
Sales commissions(1).................................... 1.0% to 7.0% $225,000 - $1,575,000
Maximum proceeds to Summit (before expenses)(2)......... 95.0% $21,375,000
- ------------------------
(1) You will not incur a direct sales charge. Notes earn interest, without
deduction for commissions. We will reimburse salespersons between 1.0% to
7.0% for commissions, depending on whether they are sales for cash or
exchanges of investment certificates. See "THE EXCHANGE OFFER" and "PLAN OF
DISTRIBUTION."
(2) The maximum proceeds to Summit is based upon sales of $22,500,000 in new
notes, and no exchanges and an average commission of 5%. We will not receive
any new proceeds for notes that are exchanged for investment certificates.
------------------------
The notes are obligations of Summit and they are not insured or guaranteed
by any governmental agency, any insurance company, any affiliate of our company
or any other person or entity.
We are offering the notes on a best efforts basis with conditions. If the
conditions to the offering are not satisfied by 15, 2000, the offering
will terminate unless we extend the offering period.
------------------------
METROPOLITAN INVESTMENT SECURITIES, INC.
, 2000
TABLE OF CONTENTS
PAGE
--------
FORWARD-LOOKING STATEMENTS.................................. 2
PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 11
USE OF PROCEEDS............................................. 11
CONDITIONS TO THE OFFERING AND ALLOCATION OF NOTES.......... 12
DESCRIPTION OF THE NOTES.................................... 13
THE EXCHANGE OFFER.......................................... 19
COMPARISON OF NOTES AND INVESTMENT CERTIFICATES............. 25
FEDERAL INCOME TAX CONSIDERATIONS........................... 26
PLAN OF DISTRIBUTION........................................ 28
LEGAL MATTERS............................................... 29
EXPERTS..................................................... 29
AVAILABLE INFORMATION....................................... 29
INCORPORATION OF DOCUMENTS BY REFERENCE..................... 30
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about Summit, including:
- Our anticipated growth strategies,
- Anticipated trends in our businesses, including trends in the markets for
insurance, mortgages, annuities and real estate,
- Future interest rate trends, movements and fluctuations,
- Future investments in receivables, and
- Our ability to continue to control costs and accurately price the risk of
default on the payment of receivables.
------------------------
You should only rely on the information contained in this prospectus. We
have not, and the placement agent has not, authorized any person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
placement agent is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
2
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider before investing in the notes. You should read both this
prospectus and the Annual Report on Form 10-K of the Summit consolidated group
for the fiscal year ended September 30, 1999, and Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000, which are incorporated by reference
into and attached to this prospectus, carefully before making your investment
decision.
THE SUMMIT CONSOLIDATED GROUP OF COMPANIES
GENERAL
Summit Securities, Inc. was incorporated under the laws of the State of
Idaho on July 25, 1990. Its principal executive offices are located at 601 West
First Avenue, Spokane, Washington 99201-5015. Its mailing address is P.O. Box
2162, Spokane, Washington 99210-2162 and its telephone number is
(509) 838-3111. Summit also maintains an office at 8601 W. Emerald, Suite 150,
Boise, Idaho 83704 and its telephone number at that address is (208) 376-8260.
Summit and its subsidiaries are collectively referred to in this prospectus as
the "consolidated group," while the terms "Summit," "we" and "our" refer solely
to the parent company, Summit Securities, Inc.
HISTORY
We were founded in 1990, as a wholly owned subsidiary of Metropolitan
Mortgage & Securities Co., Inc., or "Metropolitan." We were later acquired by
National Summit Corp., or "National", on September 9, 1994. In the first six
months of 1995, we acquired a broker/dealer, Metropolitan Investment
Securities, Inc. from Metropolitan, and created a subsidiary holding company,
Summit Group Holding Company. Summit Group Holding Company then acquired Old
Standard Life Insurance Company from Metropolitan. On December 28, 1995, Old
Standard acquired another insurance company, Arizona Life Insurance Company,
which subsequently changed its name to Old West Annuity & Life Insurance
Company. We also own a property development company, Summit Property
Development, Inc. The chart on the next page depicts the relationship among the
significant companies within the consolidated group. The chart excludes
affiliated companies that are not subsidiaries of Summit.
Even though our parent company changed from Metropolitan to National, we
continue to be controlled by C. Paul Sandifur, Jr., who is both the owner of
National and the Chief Executive Officer, President and controlling shareholder
of Metropolitan. As a result of Mr. Sandifur's control, we have several
affiliates that are subsidiaries of Metropolitan, including Metwest Mortgage
Services, Inc. and Western United Life Assurance Company. Collectively,
Metropolitan, Metwest and Western United are referred to as "affiliated
companies."
BUSINESS
The consolidated group is engaged in a nationwide business of originating,
acquiring, holding and selling receivables. These receivables include small to
mid-sized commercial real estate loans and real estate contracts and promissory
notes that are secured by first position liens on residential real estate.
Currently, the consolidated group is focusing its receivable investing
activities on loans collateralized by commercial real estate. The consolidated
group also invests in receivables consisting of real estate contracts and
promissory notes secured by second and lower position liens, structured
settlements, annuities, lottery prizes, and other investments. The receivables
secured by real estate are typically non-conventional because they were either
financed by the sellers of the property or they were originated by institutional
lenders who originate loans for borrowers with impaired credit or for
non-conventional properties. In addition to receivables, the consolidated group
invests in investment securities, including U.S. Treasury obligations, corporate
bonds and other securities, and in other assets.
3
Our capital to invest in these receivables comes from several sources. The
consolidated group uses 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.
The affiliated companies provide services to the consolidated group for a
fee and engage in various business transactions with the consolidated group.
Metropolitan provides receivable acquisition services, and Metwest provides
receivable collection and servicing to Summit, Old Standard and Old West. For a
more detailed discussion of the business of the consolidated group, see "Item 1"
in Summit's Annual Report filed on Form 10-K for the year ended December 31,
1999, which is incorporated by reference in and attached to this prospectus.
ORGANIZATIONAL CHART
(as of March 31, 2000)
The consolidated group consists of Summit Securities, Inc. and all of its
subsidiaries. The chart below lists the principal operating subsidiaries and
ownership of the consolidated group.
[organizational chart]
NATIONAL SUMMIT CORP.: The parent company of Summit; inactive except as
owner of Summit Securities, Inc. It is wholly owned by C. Paul Sandifur, Jr.,
who is also the president and controlling shareholder of Metropolitan.
SUMMIT SECURITIES, INC.: Invests in receivables and other investments that
are principally funded by proceeds from receivable investments, other
investments and securities offerings.
METROPOLITAN INVESTMENT SECURITIES, INC.: Broker/dealer that is in the
business of marketing securities that are offered by Summit and Metropolitan,
mutual funds and general securities.
SUMMIT PROPERTY DEVELOPMENT, INC.: Provides real estate development
services to others; principally to Metropolitan and its subsidiaries.
4
SUMMIT GROUP HOLDING COMPANY: Inactive except as the owner of Old Standard
Life Insurance Company.
OLD STANDARD LIFE INSURANCE COMPANY: Invests in receivables and other
investments that are principally funded by proceeds from receivable investments
and from annuity sales.
OLD WEST ANNUITY & LIFE INSURANCE COMPANY: Formerly known as Arizona Life
Insurance Company; invests in receivables and other investments that are
principally funded by the proceeds from receivable investments and from annuity
sales.
SUMMARY OF THE NOTE OFFERING
------------------------------------------------------------
NOTES OFFERED................. We are offering up to $22,500,000 in principal amount of the
% notes due 2005. The offering will only be completed if
we sell notes for cash and/or exchange notes for investment
certificates, as described on the following page, in a total
amount of at least $20,000,000 in principal amount.
ISSUE PRICE................... We will sell the notes for 100% of their aggregate principal
amount.
MINIMUM PURCHASE.............. You may only purchase notes in increments of $5,000 in
aggregate principal amount, or exchange investment
certificates in increments of $5,000 for an equivalent
principal amount of notes as described on the following
page.
MATURITY...................... The notes will mature on 15, 2005.
INTEREST...................... We will pay interest on the notes at an annual rate of %,
and will make interest only payments monthly as of the 15th
day of each month. Interest on the notes will begin to
accrue on the later of 15, 2000, or the closing date
of the offering. We will make the first interest payment as
of the 15th day of the month following the month that the
offering closes.
OPTIONAL REDEMPTION........... We may, at our option, redeem any or all of the notes at any
time on or after 15, 2002, by giving you notice 60
days before the date of redemption. If we do redeem your
notes, we will redeem them for their face value in minimum
amounts of $1,000, or in any integral multiple of $1,000,
plus interest accrued to the date of redemption.
MARKET FOR THE NOTES.......... The notes are newly issued, and therefore there is not a
current trading market for the notes. We intend to list the
notes for trading on Tier I of the Pacific Exchange, Inc.
under the symbol " ". However, we cannot assure you
that an active public trading market for the notes will
develop. If the notes are not approved for listing, we may
choose to not close the offering.
RANKING OF THE NOTES.......... The notes are unsecured debt instruments of Summit, and will
rank equal to our investment certificates and our other
unsecured debt. The notes will rank junior to any secured
debt that we have now, or any that we issue in the future.
At March 31, 2000, we had outstanding approximately
$74,480,000, including principal and compounded and accrued
interest, of unsecured investment certificates and $282,000,
including principal and accrued interest, of collateralized
debt and similar obligations.
5
USE OF PROCEEDS............... We will use the proceeds from the sales of these notes to
invest in receivables and to make other investments, which
may include investments in existing subsidiaries, new
business ventures or to acquire other companies. We may also
use the proceeds to retire maturing investment certificates,
pay preferred stock dividends and for general corporate
purposes. We will not receive any proceeds for notes that
are exchanged for investment certificates.
RISK FACTORS.................. Your investment in the notes involves risk. You should
invest in the notes only after reviewing the risks described
in this prospectus and the attached Annual Report on Form
10-K. See "RISK FACTORS" for a discussion of the risks
associated with investing in the notes.
SUMMARY OF THE EXCHANGE OFFER
------------------------------------------------------------
EXCHANGE OFFER................ If you are currently a holder of our investment
certificates, you will have the option to exchange your
investment certificates for the notes we are offering
through this prospectus. Subject to the limitations and
conditions described under the heading "THE EXCHANGE OFFER,"
you will receive an equal principal amount of notes for the
principal amount of all investment certificates that you
validly tender and we accept. To exchange your investment
certificates, you must properly tender them to us and we
must accept them. There is a limited amount of investment
certificates that we will accept. The notes will be issued
on the terms described in this prospectus, and may not have
the same terms and interest rates as your investment
certificates.
EXPIRATION DATE............... The exchange offer will expire at 5:00 p.m., New York City
time, 15, 2000, unless we decide to extend the
expiration date.
CONDITIONS AND PRIORITY OF
ALLOCATION.................. The minimum amount of notes we will issue is $20,000,000 and
the maximum amount of notes that we will issue in this
offering is $22,500,000. If purchases of notes by investors,
together with investors who desire to exchange their
investment certificates for notes, exceeds $22,500,000, we
intend to sell or exchange notes in the following order of
priority: (1) first to investors who are purchasing notes
and not exchanging investment certificates, then (2) to
existing investors who are purchasing notes and exchanging
their investment certificates for notes, but are purchasing
a higher principal amount of notes than they are exchanging
investment certificates, and then (3) equally to existing
investors who are purchasing less principal amount of notes
than they are exchanging investment certificates and
existing investors who are only exchanging investment
certificates, all subject to our discretion to accept or
reject any tender for any reason. For a more detailed
description of our intended priority of allocation, see
"CONDITIONS TO THE OFFERING AND ALLOCATION OF NOTES."
6
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........... If you are the beneficial owner of investment certificates
and you registered your investment certificates in the name
of a broker or other institution, and you wish to
participate in the exchange, you should promptly contact the
person in whose name you registered your investment
certificates and instruct that person to tender your
investment certificates on your behalf. If you wish to
tender on your own behalf, you must, before completing and
executing the letter of transmittal and delivering your
outstanding investment certificates, either make appropriate
arrangements to register ownership of the outstanding
investment certificates in your name or obtain a properly
completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
GUARANTEED DELIVERY
PROCEDURE................... If you wish to tender your investment certificates and time
will not permit your required documents to reach the
exchange agent by the expiration date, or you cannot
complete the procedure for book-entry transfer on time, or
you cannot deliver your certificates for registered
investment certificates on time, you may tender your
investment certificates in compliance with the procedures
described in this prospectus under the heading "THE EXCHANGE
OFFER--How to Use the Guaranteed Delivery Procedures if You
Will Not Have Enough Time to Send all Documents to Us."
EXCHANGE AGENT................ Metropolitan Investment Securities, Inc. will act as the
exchange agent for the exchange offer. For questions
relating to the exchange offer, you can reach them at (509)
835-2210.
RISK FACTORS.................. Exchanging notes for your investment certificates involves
risk. You should exchange notes for your investment
certificates only after reviewing the risks described in
this prospectus. See "RISK FACTORS" for a discussion of the
risks associated with exchanging notes for your investment
certificates.
7
CAPITALIZATION
The following table sets forth the capitalization of the consolidated group
at March 31, 2000.
AMOUNT
CLASS OUTSTANDING
----- ------------
DEBT PAYABLE:
Real estate contracts and mortgage notes payable, 6.5% to
8.0%, due 2000 to 2020.................................. $ 282,066
Total Debt Payable...................................... 282,066
------------
INVESTMENT CERTIFICATES:
Investment certificates, maturing 2000 to 2010 at 6.1% to
10.0%................................................... 66,180,489
Compound and accrued interest............................. 8,299,550
Total Investment Certificates........................... 74,480,039
------------
STOCKHOLDERS' EQUITY:
Preferred Stock........................................... 2,200,053
Common Stock.............................................. 100,000
Additional paid-in capital................................ 17,448,912
Accumulated other comprehensive loss...................... (1,817,779)
Retained earnings......................................... 8,860,699
------------
Total Stockholders' Equity.............................. 26,791,885
------------
Total Capitalization.................................... $101,553,990
============
8
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data shown below as of and for the six
months ended March 31, 2000 and 1999, other than the ratio of earnings to fixed
charges and preferred stock dividends, have been derived from the unaudited
financial statements appearing in Summit's Form 10-Q for the quarter ended
March 31, 2000, which is incorporated by reference in and attached to this
prospectus. The summary consolidated financial data shown below as of
September 30, 1999 and 1998 and for the years ended September 30, 1999, 1998 and
1997, 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 for the year ended September 30, 1999, which is incorporated
by reference in and attached to this prospectus. The summary consolidated
financial data shown below as of September 30, 1997, 1996 and 1995 and for the
years ended September 30, 1996 and 1995, other than the ratio of earnings to
fixed charges and preferred stock dividends, have been derived from the
consolidated financial statements not included elsewhere in this prospectus.
SIX MONTHS ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
--------------------------- -----------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Revenues.................. $ 24,267,305 $ 16,790,237 $ 36,198,936 $ 29,965,547 $ 19,785,462 $ 14,536,449 $ 9,576,615
============ ============ ============ ============ ============ ============ ===========
Net income................ $ 3,361,490 $ 1,430,383 $ 2,814,828 $ 2,524,027 $ 1,851,240 $ 1,244,522 $ 587,559
Preferred stock
dividends............... (898,101) (303,071) (838,356) (498,533) (446,560) (333,606) (309,061)
------------ ------------ ------------ ------------ ------------ ------------ -----------
Income applicable to
common stockholder...... $ 2,463,389 $ 1,127,312 $ 1,976,472 $ 2,025,494 $ 1,404,680 $ 910,916 $ 278,498
============ ============ ============ ============ ============ ============ ===========
PER COMMON SHARE DATA:
Basic and diluted income
per share applicable to
common stockholder(1)... $ 246.34 $ 112.73 $ 197.65 $ 202.55 $ 140.47 $ 91.09 $ 27.85
============ ============ ============ ============ ============ ============ ===========
Weighted average number of
common shares
outstanding............. 10,000 10,000 10,000 10,000 10,000 10,000 10,000
============ ============ ============ ============ ============ ============ ===========
Cash dividends per common
share................... $ 100.00 $ 0.00 $ 0.00 $ 21.07 $ 0.00 $ 0.00 $ 0.00
============ ============ ============ ============ ============ ============ ===========
Ratio of earnings to fixed
charges................. 2.49 1.62 1.57 1.64 1.46 1.40 1.25
Ratio of earnings to fixed
charges and preferred
stock dividends(2)...... 1.78 1.43 1.34 1.46 1.31 1.26 1.11
BALANCE SHEET DATA:
Due from/(to) affiliated
companies, net.......... $ (1,576,458) $ 410,784 $ (151,077) $ 10,985,805 $ 870,525 $ 1,296,290 $(1,960,104)
Total assets.............. $299,674,537 $260,493,134 $295,115,959 $206,594,234 $166,354,070 $117,266,680 $96,346,572
Investment certificates
and other debt
payable................. $ 74,762,105 $ 64,769,234 $ 72,086,696 $ 56,078,514 $ 50,607,983 $ 46,674,841 $38,650,532
Stockholders' equity...... $ 26,791,885 $ 13,419,089 $ 19,104,955 $ 10,684,064 $ 7,756,643 $ 5,358,774 $ 3,907,067
- ------------------------------
(1) Earnings per common share, basic and diluted, are computed by deducting
preferred stock dividends from net income and dividing the result by the
weighted average number of shares of common stock outstanding. There were no
common stock equivalents or potentially dilutive securities outstanding
during any period presented.
(2) The consolidated ratio of earnings to fixed charges and preferred stock
dividends was 1.78, 1.43, 1.34, 1.46, 1.31, 1.26, and 1.11 for the six
months ended March 31, 2000 and 1999 and the years ended September 30, 1999,
1998, 1997, 1996 and 1995, respectively. Assuming no benefit from the
earnings of its subsidiaries with the exception of direct dividend payments,
the ratio of earnings to fixed charges and preferred dividends for Summit
alone was 1.49 and 1.03 for the six months ended March 31, 2000 and the year
ended September 30, 1995, respectively. Assuming no benefit from the
earnings of its
9
subsidiaries with the exception of direct dividend payments, earnings were
insufficient to meet fixed charges and preferred stock dividends for the six
months ended March 31, 1999 and years ended September 30, 1999, 1998, 1997
and 1996. The consolidated ratio of earnings to fixed charges excluding
preferred stock dividends was 2.49 and 1.62 for the six months ended March
31, 2000 and 1999, respectively; and 1.57, 1.64, 1.46, 1.40, and 1.25 for
the years ended September 30, 1999, 1998, 1997, 1996 and 1995, respectively.
The ratio of earnings to fixed charges excluding preferred stock dividends
for Summit, assuming no benefit from the earnings of its subsidiaries with
the exception of direct dividend payments was 2.10 and 1.16, for the six
months ended March 31, 2000 and year ended September 30, 1995, respectively.
Excluding preferred stock dividends for Summit, assuming no benefit from the
earnings of its subsidiaries with the exception of direct dividend payments,
earnings were insufficient to meet fixed charges for the six months ended
March 31, 1999 and the years ended September 30, 1999, 1998, 1997 and 1996.
10
RISK FACTORS
WHEN DECIDING WHETHER OR NOT TO PURCHASE THE NOTES OR EXCHANGE YOUR
INVESTMENT CERTIFICATES FOR NOTES, YOU SHOULD CAREFULLY CONSIDER THE RISKS
CONTAINED IN THE SECTION ENTITLED "BUSINESS OVERVIEW--FACTORS AFFECTING FUTURE
OPERATING RESULTS" OF SUMMIT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1999, INCORPORATED BY REFERENCE IN AND ATTACHED TO THIS
PROSPECTUS. YOU SHOULD ALSO CONSIDER THE FOLLOWING RISKS ASSOCIATED WITH AN
INVESTMENT IN THE NOTES:
THE INDENTURE DOES NOT RESTRICT OUR ABILITY
TO INCUR ADDITIONAL DEBT................... Summit's and your rights and obligations in
the notes are defined in an indenture dated
as of May 25, 2000. The indenture does not
restrict our ability to issue additional
notes or to incur other debt. We are not
required to maintain any specified financial
ratios, minimum net worth, minimum working
capital or a sinking fund.
THE NOTES ARE NOT INSURED AGAINST THE RISK
OF LOSS.................................... The notes offered in this prospectus are
unsecured obligations of Summit and they are
not insured or guaranteed by any bank, any
governmental agency, any insurance company,
any affiliate of Summit or any other person
or entity. Thus, the notes have greater risk
than investments that are insured against the
risk of loss.
THERE IS NO ESTABLISHED TRADING MARKET FOR
THE NOTES.................................. There is currently no trading market for the
notes. Although we intend to list the notes
for trading on Tier I of the Pacific
Exchange, we can not assure you that an
active public market for the notes will
develop. You should consider your needs for
liquidity before investing in the notes.
USE OF PROCEEDS
If all the notes offered are sold as new sales and none are exchanged, we
expect the maximum proceeds from the offering to total $22,500,000 before
deducting sales commissions and other expenses. We will not receive any new
proceeds for notes exchanged for investment certificates. Commissions will range
from one percent (1.0%) to seven percent (7.0%) depending on whether notes are
exchanged for investment certificates or sold for cash. This will result in
commissions of between $225,000 and $1,575,000, depending on the amount of
investment certificates exchanged and the amount of notes purchased. Other
expenses are estimated to be $138,000. We can not assure you that the conditions
to the offering will be satisfied and that the notes will be sold or exchanged.
In conjunction with the other funds available to us through operations
and/or borrowings, we currently plan to utilize the new proceeds of this
offering for funding investments in receivables and other investments, which may
include investments in existing subsidiaries, the commencement of new business
ventures or the acquisition of other companies. We do not have any commitments
or agreements for material acquisitions. However, the consolidated group
continues to evaluate possible acquisition candidates. To the extent internally
generated funds are insufficient or unavailable for the retirement of maturing
investment certificates, new proceeds of this offering may be used for retiring
maturing investment certificates, preferred stock dividends and for general
corporate purposes, including debt service and other general operating expenses.
Approximately $9.5 million in principal
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amount of debt securities will mature between June 1, 2000 and May 31, 2001 with
interest rates ranging from 6.1% to 10.0% and averaging approximately 7.95% per
annum. See "BUSINESS OVERVIEW--Factors Affecting Future Operating Results" under
Item 1 in our Annual Report on Form 10-K for the year ended September 30, 1999.
We anticipate that some of the new proceeds from this offering will be
invested in money market funds, bank repurchase agreements, commercial paper,
U.S. Treasury Bills and similar securities investments while awaiting use as
described above. Since we won't receive any new proceeds for exchanges of
investment certificates, and because we do not know how many notes will be sold
for cash, we are unable to accurately forecast the total new proceeds generated
by this offering. Therefore, we have not allocated specific amounts for any of
the foregoing purposes.
CONDITIONS TO THE OFFERING AND ALLOCATION OF NOTES
CONDITIONS TO THE OFFERING
This offering is conditional upon investment certificate holders tendering,
and us accepting, together with sales of new notes, at least $20,000,000 in
aggregate amount of investment certificates, including principal and interest,
and new sales of notes. The maximum amount of notes we will sell for cash or
exchange for investment certificates in this offering is $22,500,000. We will
only sell notes or exchange investment certificates for notes in increments of
$5,000 in principal amount.
We are making the offering of the notes on the basis that if we do not
receive subscriptions for at least $20,000,000 of notes by 15, 2000,
unless we extend that period from time to time, which we may do in our sole
discretion, then we will promptly return to you any investment certificates
tendered for exchange or any funds received without interest. While we wait for
these conditions to be satisfied, we will promptly deposit any funds we receive
from you in an escrow account with U.S. Bank Trust National Association, as
escrow agent.
If we receive subscriptions for at least $20,000,000 during the period of
our offering described in the prior paragraph, then we may continue to offer the
notes until the end of our offering period or until the end of any extension
period. If the notes are not approved for listing on the Pacific Exchange, we
have the option, in our sole discretion, not to close the offering.
PRIORITY OF ALLOCATION
If more investors desire to exchange their investment certificates for the
notes, together with new investors desiring to purchase the notes for cash, than
there are notes available for us to sell, then we have the discretion to
determine in which order we will sell you our notes or exchange your investment
certificates for notes. If there is an over-subscription, we intend to allocate
the notes in the following order of priority:
- First, to investors making new purchases of notes,
- Then, to investors who are both exchanging investment certificates and are
also making new purchases of notes in an amount equal to or greater than
the principal and interest on the investment certificates they are
exchanging,
- Then, equally to investors that are only exchanging investment
certificates for notes and investors who are both exchanging investment
certificates for notes and purchasing new notes in an amount less than the
principal and interest on the investment certificates they are exchanging.
We may, in our sole discretion and without notice to you, change the overall
priority in which we intend to allocate the notes or elect not to follow the
above priority on a case by case basis. For the orders we receive to exchange or
purchase our notes that we do not accept, following our
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determination of non-acceptance, we will promptly return to you any exchange
documents received or any funds received without interest. If we do not accept
your offer to exchange your investment certificates for the new notes that we
are offering, then you will continue to be a holder of your investment
certificates and entitled to receive interest payments as though you had not
tendered your investment certificates for exchange.
DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued under an indenture dated as of May 25, 2000,
between Summit and U.S. Bank Trust National Association. The following
statements relating to the notes and the indenture are summaries and are not
complete. These summaries are subject to the detailed provisions of the
indenture and are qualified in their entirety by reference to the indenture, a
copy of which is filed as an exhibit to the registration statement that includes
this prospectus and is also available for inspection at the office of the
trustee at 1420 Fifth Avenue, 7(th) Floor, Seattle, Washington 98101.
The notes represent unsecured general obligations of our company and will be
issued as global securities without coupons. A global security is a single fully
registered note in book-entry form. The notes will be sold to the public at 100%
of their principal amount. The notes are not convertible into our capital stock
or other securities. The notes will not be guaranteed or insured by any
governmental agency or by any other person or entity. At March 31, 2000, we had
outstanding approximately $74,480,000, including principal and compounded and
accrued interest, of unsecured investment certificates and $282,000, including
principal and accrued interest, of collateralized debt and similar obligations.
INTEREST AND MATURITY
The notes will bear interest at an annual rate of % commencing on the
later of 15, 2000, or the closing date of the offering, until they
mature or until we redeem them. Interest payments will be made monthly, as of
the 15th day of each month, beginning with the 15th day of the month following
the month that the offering closes, to the person in whose name a note is
registered at the close of business on the first day of that month. The notes
will mature on 15, 2005. The notes are not subject to any sinking
fund provision.
OPTIONAL REDEMPTION
We can redeem the notes, at our option, in whole or in part at any time on
or after 15, 2002, upon at least 60 days prior written notice. The
redemption price will be equal to 100% of the principal amount of the notes
being redeemed plus accrued interest to the date set for redemption.
If we make a partial redemption of the notes, selection of the notes for
redemption will be made by the trustee on a pro rata basis, by lot or by other
methods as the trustee in its sole discretion shall deem to be fair and
appropriate. No note of less than $1,000 in principal amount will be redeemed in
part. If any note is to be redeemed in part only, the notice of redemption
relating to that note will state the portion of the principal amount of that
note that will be redeemed. In this case, a new note in a principal amount equal
to the unredeemed portion will be issued in the holders name upon cancellation
of the original note.
THE INDENTURE
GENERAL. The notes will be issued under the indenture between Summit and
U.S. Bank Trust National Association, as trustee. The indenture does not
restrict our ability to issue additional notes or to incur other debt. The
indenture does not require us to maintain any specified financial ratios,
minimum net worth or minimum working capital. The notes that we are offering are
senior in
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liquidation only to our outstanding equity securities. They are subordinate to
our collateralized debt and rank equal to our investment certificates, our
unsecured debt and our unsecured accounts payable and accrued liabilities. You
should not rely on the terms of the indenture for protection of your investment,
but should look rather to our creditworthiness and ability to satisfy our
obligations.
MERGER, CONSOLIDATION OR SALE OF ASSETS. The indenture provides that we
may, with or without your consent, consolidate with, or sell, lease or convey
all or substantially all of our assets to, or merge with or into, any other
entity, provided that (1) either Summit is the continuing entity, or the
successor entity formed by or resulting from any consolidation or merger or the
entity that received the transfer of the assets shall be an entity organized and
existing under the laws of the United States or a state thereof and the
successor entity shall expressly assume our obligation to pay the principal and
interest on the notes and shall also assume the due and punctual performance and
observance of all the covenants and conditions contained in the indenture;
(2) immediately after giving effect to this transaction and treating any
indebtedness that becomes an obligation of the successor entity, no event of
default under the indenture, and no event that, after notice or the lapse of
time, or both, would become an event of default, shall have occurred and be
continuing; and (3) an officers' certificate and legal opinion covering these
conditions shall be delivered to the trustee.
EXISTENCE. The indenture requires us to do or cause to be done all things
necessary to preserve and keep in full force and effect our corporate existence,
material rights and material franchises; provided, however, that we are not
required to preserve any right or franchise if our board of directors determines
that the preservation is no longer desirable in the conduct of our business.
MAINTENANCE OF PROPERTIES. The indenture requires us to cause all of our
material properties used or useful in our business or the business of any
subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment. It also requires us to cause all
necessary repairs, renewals, replacements, betterments and improvements to be
made, all as in our judgment may be necessary so that our business may be
properly and advantageously conducted at all times; provided, however, that we
and our subsidiaries are not prevented from selling or otherwise disposing of
our properties for value in the ordinary course of business.
INSURANCE. The indenture will require us and our subsidiaries to keep in
force upon all of our properties and operations policies of insurance carried
with responsible companies in amounts and covering all risks as are customary in
the industry and customary with prevailing market conditions and availability.
PAYMENT OF TAXES AND OTHER CLAIMS. The indenture requires us to pay or
discharge or cause to be paid or discharged, before delinquent, (1) all taxes,
assessments and governmental charges levied or imposed on us or any of our
subsidiaries or on our income, profits or property and (2) all lawful claims for
labor, materials and supplies that, if unpaid, might by law become a lien upon
our or our subsidiaries' property; provided, however, that we are not required
to pay or discharge any tax, assessment, charge or claim where the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings.
PROVISION OF FINANCIAL INFORMATION. The indenture requires us, within
15 days after each of the respective dates by which we are required to file
annual reports, quarterly reports and other documents with the SEC, (1) to
transmit by mail to all registered note holders, as their names and addresses
appear in the applicable register, without cost to the note holders, summaries
of the annual reports, quarterly reports and other documents that we file with
the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934,
(2) to file with the trustee copies of the annual reports, quarterly reports and
other documents that we file with the SEC under Section 13 or 15(d) of the
Securities Exchange Act, and (3) to supply, promptly upon written request and
payment of the reasonable cost of duplication and delivery, copies of these
documents to any prospective note holder.
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MODIFICATION OF THE INDENTURE. Note holders' rights may be modified with
the consent of the holders of a majority in aggregate principal amount
outstanding of the notes. In general, no adverse modification of the terms of
payment and no modifications reducing the percentage of notes required for
modification can be made without the consent of each note holder affected by
that amendment.
EVENTS OF DEFAULT, NOTICE AND WAIVER. The following events will be an
"event of default" under the indenture:
- A default for 30 days in the payment of any installment of interest that
is due and payable under the terms of the notes;
- A default in the payment of the principal that is due and payable at
maturity;
- A default in the performance or breach of selected covenants or warranties
of Summit contained in the indenture which continues for 60 days after
written notice;
- A default under any bond, investment certificate, note, mortgage,
indenture or other instrument or other evidence of indebtedness for money
borrowed by Summit or any of its subsidiaries, in an aggregate principal
amount in excess of $10 million, whether this indebtedness currently
exists or is subsequently created; or
- In some events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of Summit or any of its
significant subsidiaries.
If an event of default under the indenture occurs and is continuing, then
the trustee or the holders of not less than 25% in principal amount of the
outstanding notes may declare the principal amount of all the notes to be due
and payable immediately by written notice to Summit and the trustee. However, at
any time after a declaration of acceleration with respect to the notes has been
made, but before a judgment or decree for payment of the money due has been
obtained by the trustee, the holders of not less than a majority of the
principal amount of the outstanding notes may rescind and annul the declaration
and its consequences if (1) Summit deposits with the trustee all required
payments of principal and overdue interest on the notes, plus any applicable
fees, expenses, disbursements and advances of the trustee, and (2) all events of
default, other than the nonpayment of accelerated principal, or specified
portion of principal, has been cured or waived as provided in the indenture. The
indenture also provides that the holders of not less than a majority in
principal amount of the outstanding notes may waive any past default and its
consequences, except a default (a) in the payment of the principal or interest
on the notes or (b) in respect of a covenant or provision contained in the
indenture that cannot be modified or amended without the consent of the holder
of each outstanding note.
The indenture requires the trustee to give notice to the note holders within
90 days of a default under the indenture unless the default is cured or waived;
provided, however, that the trustee may withhold notice to the note holders if
specified responsible officers of the trustee consider the withholding of notice
to be in the note holders' interest, except for a default in the payment of the
principal or interest on any note.
The indenture provides that no note holders may institute any proceedings,
judicial or otherwise, with respect to the indenture or for any remedy in the
indenture, except in the case of failure of the trustee, for 60 days, to act
after (1) it has received a written request to institute proceedings in respect
of an event of default from the holders of not less than 25% in principal amount
of the outstanding notes, (2) it has received an offer of indemnity reasonably
satisfactory to the trustee, and (3) no contrary directions from the holders of
more than 50% of the outstanding notes have been received by the trustee. This
provision will not prevent, however, any note holder from instituting suit for
the enforcement of payment of the principal and interest on the notes at the
respective due dates.
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The indenture provides that the trustee is under no obligation to exercise
any of its rights or powers under the indenture at the request or direction of
any note holders, unless these holders offer to the trustee reasonable security
or indemnity. The holders of not less than a majority in principal amount of the
outstanding notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or of
exercising any trust or power conferred upon the trustee. The trustee may,
however, refuse to follow any direction that is in conflict with any law or the
indenture or that may involve the trustee in personal liability or that may be
unduly prejudicial to the note holders not joining therein.
BOOK-ENTRY SYSTEM
The notes will be issued in the form of a global security, which is a single
fully registered note in book-entry form, which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the name of
DTC or its nominee. Unless and until it is exchanged in whole or in part for the
individual notes represented thereby, a global security may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any nominee to a successor depository or any
nominee of the successor.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by a global security for all purposes under the
indenture and the beneficial owners of the notes will be entitled only to those
rights and benefits afforded to them in compliance with DTC's regular operating
procedures. Except as provided below, owners of a beneficial interest in a
global security will not be entitled to have any of the individual notes
registered in their names, will not receive or be entitled to receive physical
delivery of any of these notes in definitive form and will not be considered the
owners or holders of these notes under the Indenture. The laws of some states
require that some purchasers of securities take physical delivery of those
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a global security.
If any of the following occur, we will issue individual notes in
certificated form in exchange for a global security:
- DTC is at any time unwilling or unable to continue as depository or if at
any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act, and we do not appoint a successor depository
within 90 days;
- an event of default under the indenture with respect to the notes has
occurred and is continuing and the beneficial owners representing a
majority in principal amount of the notes represented by a global security
advise DTC to cease acting as depository; or
- we, in our sole discretion, determine at any time that the notes shall no
longer be represented by a global security.
In any of these instances, an owner of a beneficial interest in a global
security will be entitled to physical delivery of individual notes in
certificated form of like tenor, equal in principal amount to the beneficial
interest and to have the notes in certificated form registered in its name.
Notes so issued in certificated form will be issued in denominations of $1,000
or any integral multiple of $1,000, and will be issued in registered form only,
without coupons.
DTC has advised us of the following information regarding DTC:
DTC is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
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- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act.
DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among its participants of securities transactions,
like transfers and pledges, in deposited securities through electronic
computerized book-entry changes in its participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations. DTC is owned by
a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others like
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
Purchases of notes under the DTC system must be made by or through direct
participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual purchaser of each note, or a beneficial owner,
is in turn recorded on the direct and indirect participants' records. A
beneficial owner does not receive written confirmation from DTC of its purchase,
but the beneficial owner is expected to receive a written confirmation providing
details of the transaction, as well as periodic statements of its holdings, from
the direct or indirect participant through which the beneficial owner entered
into the transaction.
Transfers of ownership interests in the notes are accomplished by entries
made on the books of participants acting on behalf of beneficial owners.
Beneficial owners do not receive certificates representing their ownership
interests in notes, unless use of the book-entry system for the notes is
discontinued.
To facilitate subsequent transfers, the notes are registered in the name of
DTC's partnership nominee, Cede & Co. The deposit of the notes with DTC and
their registration in the name of Cede & Co. effects no change in beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the notes.
DTC records reflect only the identity of the direct participants to whose
accounts notes are credited, which may or may not be the beneficial owners. The
participants remain responsible for keeping account of their holdings on behalf
of their customers.
Delivery of notices and other communications by DTC to direct participants,
by direct participants to indirect participants, and by direct participants and
indirect participants to beneficial owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the notes
represented by a global security are to be redeemed, DTC's practice is to
determine by lot the amount of the interest of each direct participant to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the notes.
Under its usual procedures, DTC mails a proxy (an "omnibus proxy") to the issuer
as soon as possible after the record date. The omnibus proxy assigns Cede &
Co.'s consenting or voting rights to those direct participants to whose accounts
the notes are credited on the record date, which are identified on a list
attached to the omnibus proxy.
Summit will provide the funds for the payment of principal and interest
payments on the notes to the trustee, who will also act as the paying agent, and
the trustee will pay principal and interest on the
17
notes to DTC. DTC's practice is to credit direct participant's accounts on the
payable date in proportion to their respective holdings as shown on DTC's
records unless DTC has reason to believe that it will not receive payment on the
payable date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of that participant and not of DTC, the
trustee or Summit, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and interest to DTC is the
responsibility of Summit or the trustee. Disbursement of payments to direct
participants is the responsibility of DTC, and disbursement of the payments to
the beneficial owners is the responsibility of direct and indirect participants.
DTC may discontinue providing its services as securities depository with
respect to the notes at any time by giving reasonable notice to Summit or the
trustee. Under these circumstances, if a successor securities depository is not
appointed, note certificates are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC, or a successor securities depository. In that event, note
certificates will be printed and delivered.
None of Summit, the trustee, any paying agent, the security registrar or the
salespersons will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a global security for any notes or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests or for any
other aspect of the relationship between DTC and its participants or the
relationship between the participants and the owners of beneficial interests in
a global security owned through those participants.
INTEREST, REGISTRATION AND TRANSFER
The principal and interest on the notes will be payable at the trustee's
corporate trust office at 601 Union Street, Suite 2120, Seattle, Washington
98101; provided, however, that, at our option, payment of interest may be made
by check mailed to the address of the person entitled thereto as it appears in
the applicable register for the notes or by wire transfer of funds to that
person at an account maintained within the United States.
Subject to limitations imposed on the notes in the indenture, and if the
notes are no longer a global security, the notes will be exchangeable for any
authorized denomination of notes of the same series and of a like aggregate
principal amount and tender upon surrender of a note or notes at the trustee's
corporate trust office or at the applicable office of any designated agent of
Summit. In addition, subject to limitations imposed on the notes in the
indenture, the notes may be surrendered for registration of transfer at the
trustee's corporate trust office or at the applicable office of any designated
agent of Summit. Every note surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer and
evidence of title and identity satisfactory to the trustee, Summit, or its
transfer agent, as applicable. No service charge will be made for any
registration of transfer or exchange of any note. However, with some exceptions,
we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the transfer.
Neither Summit nor the trustee shall be required to (1) issue, register the
transfer of or exchange any notes during a period beginning at the opening of
business 15 days before the day of mailing of notice of redemption of any note
selected for redemption and ending at the close of business on the day of
mailing the relevant notice of redemption, or (2) register the transfer of or
exchange any note, or portion of a note, selected for redemption, in whole or in
part, except the unredeemed portion of any note being redeemed in part.
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THE EXCHANGE OFFER
HOW TO DETERMINE IF YOU ARE ELIGIBLE TO PARTICIPATE IN THE EXCHANGE OFFER
We are offering to exchange, upon the terms and subject to the conditions
contained in this prospectus and in the letter of transmittal accompanying it,
$1,000 in principal amount of notes for each $1,000 in principal amount and
accrued interest of our investment certificates, that you hold. You must
exchange at least $5,000 in aggregate amount of principal and accrued interest
of investment certificates to participate in the exchange offer. You may tender
cash in addition to your investment certificates to meet the $5,000 minimum, or
additional $5,000 increments. We will only exchange investment certificates in
increments of $5,000 in principal amount. The terms of the notes are not the
same as the terms of the investment certificates you may exchange in this
exchange offer. For a description of the terms of the notes you may receive, see
"DESCRIPTION OF THE NOTES". For a description of some of the differences between
the notes and your investment certificates, see "COMPARISON OF NOTES AND
INVESTMENT CERTIFICATES".
We are not making the exchange offer to, nor will we accept surrenders for
exchange from, holders of outstanding investment certificates in any
jurisdiction in which this exchange offer or the acceptance of a investment
certificate for exchange would not be in compliance with the securities or blue
sky laws of that jurisdiction.
If you are a broker-dealer that resells notes that you received for your own
account in the exchange offer, and if you participate in a distribution of the
notes, you may be an "underwriter" within the meaning of the Securities Act and
any profit on any resale of notes and any commissions or concessions you receive
may be underwriting compensation under the Securities Act. If you are a
broker-dealer who acquires investment certificates as a result of market-making
or other trading activities, you may use this prospectus, as supplemented or
amended, in connection with resales of the notes. We have agreed that, for a
period of one year after we consummate the exchange offer, we will make this
prospectus available to any broker-dealer for use in connection with any resale.
If you tender investment certificates in the exchange offer for the purpose of
participating in a distribution of the notes, or if you cannot rely upon these
interpretations, you must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction to sell your notes.
If you are tendering investment certificates, we will not require you to pay
brokerage commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes with respect to the exchange of the investment
certificates in the exchange offer.
MATURING INVESTMENT CERTIFICATES AND PARTIAL TENDERS
If you are the holder of an investment certificate that matures between the
date of this prospectus and the expiration date of the offering, and wish to
purchase new notes instead of receiving the principal amount due on maturity of
your investment certificate, you will, for purposes of the priority of
allocation in the offering, be deemed to be exchanging your investment
certificate for notes. If there is an over subscription of the offering, you
will be placed on even priority as other investors who wish to exchange their
investment certificates as described above. If you do elect to exchange your
maturing investment certificates for notes, you will not earn any interest on
the matured investment certificate for the period beginning immediately after
the maturity date of your investment certificate and before the date when
interest begins to accrue on the notes, unless you invest those funds in a
transaction independent of this offering.
You may elect to exchange part of an investment certificate for notes. You
must exchange investment certificates in increments of $5,000 in aggregate
amounts of principal and interest. If you elect to exchange only part of an
investment certificate, a new investment certificate will be issued for
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the portion of the old investment certificate that is not being exchanged. No
new investment certificates will be issued in denominations of less than $100.
INFORMATION ABOUT THE EXPIRATION DATE OF THE EXCHANGE OFFER AND CHANGES TO IT
The exchange offer expires on the expiration date, which is 5:00 p.m., New
York City time, on 15, 2000, unless we, in our sole discretion,
extend from time to time the period the exchange offer is open. If we extend the
period for the exchange offer, the term "expiration date" means the latest time
and date the exchange offer, as so extended, expires. We reserve the right to
extend the exchange offer at any time and from time to time before the
expiration date by giving written notice to Metropolitan Investment
Securities, Inc., which is the exchange agent, and by timely public announcement
communicated by no later than 5:00 p.m. on the next business day following the
expiration date, unless applicable law or regulation requires otherwise, by
making a release to the Dow Jones News Service, or other similar news wire
service. During any extension of the exchange offer, all investment certificates
previously tendered in the exchange offer will remain subject to the exchange
offer.
The exchange date will be the first business day following the expiration
date of the offering, or as close to that date as possible. We expressly reserve
the right to terminate the exchange offer and not accept for exchange any
investment certificates for any reason, including if any of the events listed
below under "--We may modify or terminate the exchange offer under some
circumstances" have occurred and we have not waived them. We also reserve the
right to amend the terms of the exchange offer in any manner, whether before or
after any tender of the investment certificates. If we terminate or amend the
exchange offer, we will notify the exchange agent in writing and will either
issue a press release or give written notice to you as a holder of the
investment certificates as promptly as practicable. Unless we terminate the
exchange offer before 5:00 p.m., New York City time, on the expiration date, we
will exchange the notes for investment certificates on the exchange date if the
conditions to the offering are satisfied.
We will mail this prospectus and the related letter of transmittal and other
relevant materials to you as a record holder of investment certificates and we
will furnish these items to brokers, banks and similar persons whose names, or
the names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of investment certificates.
HOW TO TENDER YOUR INVESTMENT CERTIFICATES
If you tender any of your investment certificates to us by complying with
one of the procedures below, that tender will constitute an agreement between
you and us under the terms and subject to the conditions that we describe below
and in the letter of transmittal for the exchange offer.
You may tender investment certificates by properly completing and signing
the letter of transmittal or a facsimile of it. All references in this
prospectus to the "letter of transmittal" include a facsimile of the letter. You
must deliver it, together with the certificate or certificates representing the
investment certificates that you are tendering and any required signature
guarantees, or a timely confirmation of a book-entry transfer in compliance with
the procedure that we describe below, to the exchange agent at Metropolitan
Investment Securities, Inc., 601 West First Avenue, Department 141000, Spokane,
Washington 99201, on or before the expiration date. You may also tender
investment certificates by complying with the guaranteed delivery procedures
that we describe below.
Your signature does not need to be guaranteed if you registered your
investment certificates in your name, you will register the notes in your name
and you sign the letter of transmittal. In any other case, the registered holder
of your investment certificates must endorse them or send them with duly
executed written instruments of transfer in form satisfactory to us. Also, we
may, in our discretion, require an "eligible institution," like a bank, broker,
dealer, credit union, savings association, clearing
20
agency or other institution that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Securities
Exchange Act, to guarantee the signature on the endorsement or instrument of
transfer.
If your investment certificates are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and you wish to tender
investment certificates, you should contact the registered holder promptly and
instruct the holder to tender investment certificates on your behalf. If you
wish to tender your investment certificates yourself, you must, before
completing and executing the letter of transmittal and delivering your
investment certificates, either make appropriate arrangements to register
ownership of the investment certificates in your name or follow the procedures
described in the immediately preceding paragraph. Transferring record ownership
from someone else's name to your name may take considerable time.
HOW TO TENDER IF YOU HOLD YOUR INVESTMENT CERTIFICATES THROUGH A BROKER OR OTHER
INSTITUTION AND YOU DO NOT HAVE THE ACTUAL INVESTMENT CERTIFICATES
If you will not be able to send all the exchange documents on time, you can
still tender your investment certificates by using the guaranteed delivery
procedures described below.
YOU ASSUME THE RISK OF CHOOSING THE METHOD OF DELIVERY OF YOUR INVESTMENT
CERTIFICATES AND ALL OTHER DOCUMENTS. IF YOU SEND YOUR INVESTMENT CERTIFICATES
AND YOUR DOCUMENTS BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL, RETURN
RECEIPT REQUESTED, YOU OBTAIN PROPER INSURANCE, AND YOU MAIL THESE ITEMS
SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE
EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
If you do not provide your taxpayer identification number, which is your
social security number or employer identification number, as applicable, and
certify that the number is correct, the exchange agent will withhold 31% of the
gross proceeds otherwise payable to you in the exchange offer, unless an
exemption applies under the applicable law and regulations concerning "backup
withholding" of federal income tax. You should complete and sign the main
signature form and the Substitute Form W-9 included as part of the letter of
transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and you prove it
in a manner satisfactory to us and the exchange agent.
HOW TO USE THE GUARANTEED DELIVERY PROCEDURES IF YOU WILL NOT HAVE ENOUGH TIME
TO SEND ALL DOCUMENTS TO US
If you desire to tender your investment certificates, and time will not
permit a letter of transmittal, a book-entry transfer or investment certificates
to reach the exchange agent before the expiration date, you may tender your
investment certificates if the exchange agent has received at its office listed
on the letter of transmittal on or before the expiration date a letter, telegram
or facsimile transmission from an eligible institution setting forth your name
and address, the principal amount of the investment certificates that you are
tendering, the names in which you registered the investment certificates and, if
possible, the certificate numbers of the investment certificates that you are
tendering.
The eligible institution's correspondence to the exchange agent must state
that the correspondence constitutes the tender and guarantee that within three
New York Stock Exchange trading days after the date that the eligible
institution executes the correspondence, the eligible institution will deliver
the investment certificates, or a book-entry transfer, in proper form for
transfer, together with a properly completed and duly executed letter of
transmittal and any other required documents. We may, at our option and in our
discretion, reject the tender if you do not tender your investment certificates
and accompanying documents by either the above-described method or by a timely
book-entry confirmation, and if you do not deposit your investment certificates
and tender documents with the exchange agent
21
within the time period stated above. Copies of a notice of guaranteed delivery
that eligible institutions may use for the purposes described in this paragraph
are available from the exchange agent.
Valid receipt of your tender will occur as of the date when the exchange
agent receives your properly completed letter of transmittal, accompanied by
either the investment certificates or a timely book-entry confirmation, and any
additional cash that you may tender. We will issue notes in exchange for
investment certificates that you tendered with a notice of guaranteed delivery
or correspondence to similar effect as described above by an eligible
institution only against deposit of the letter of transmittal, any other
required documents and either the tendered investment certificates or a timely
book-entry confirmation.
WE RESERVE THE RIGHT TO DETERMINE VALIDITY OF ALL TENDERS
We will be the sole judge of all questions as to the validity, form,
eligibility, including time of receipt, and acceptance for exchange of your
tender of investment certificates and our judgment will be final and binding. We
reserve the absolute right to reject any or all of your tenders that are not in
proper form or the acceptances for exchange of which may, in the opinion of our
counsel, be unlawful. We also reserve the absolute right to waive any of the
conditions of the exchange offer or any defect or irregularities in tenders of
any particular holder whether or not we waive similar defects or irregularities
in your case. Neither we, the exchange agent nor any other person will be under
any duty to give you notification of any defects or irregularities in tenders
nor shall any of us incur any liability for failure to give you any
notification. Our interpretation of the terms and conditions of the exchange
offer, including the letter of transmittal and its instructions, will be final
and binding.
TO PARTICIPATE, YOU MUST COMPLETE THE LETTER OF TRANSMITTAL CERTIFYING
INFORMATION ABOUT YOURSELF
By tendering investment certificates and executing the letter of
transmittal, you certify the following:
- you are not our "affiliate";
- you are not a broker-dealer that owns investment certificates you acquired
directly from us or our affiliate; and
- you are acquiring the notes we are offering in this prospectus in the
ordinary course of your business and that you have no arrangement with any
person to participate in the distribution of the notes.
If you cannot certify the foregoing, you may certify that you are an affiliate
of us or of the initial purchasers of the investment certificates, and you will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to you.
By tendering investment certificates for exchange, you will exchange, assign
and transfer the investment certificates to us and irrevocably appoint the
exchange agent as your agent and attorney-in-fact to assign, transfer and
exchange the investment certificates. You will also represent and warrant that
you have full power and authority to tender, exchange, assign and transfer the
investment certificates and to acquire notes issuable upon the exchange of your
tendered investment certificates. The letter of transmittal requires you to
agree that, when we accept your investment certificates for exchange, we will
acquire good and unencumbered title to them, free and clear of all liens,
restrictions, charges and encumbrances and that they are not subject to any
adverse claim.
You will also warrant that you will, upon our request, execute and deliver
any additional documents that we believe are necessary or desirable to complete
the exchange, assignment and transfer of your tendered investment certificates.
All authority conferred by you will survive your death
22
or incapacity and every obligation of you shall be binding upon your heirs,
legal representatives, successors, assigns, executors and administrators.
HOW WE WILL EITHER EXCHANGE YOUR INVESTMENT CERTIFICATES FOR NOTES OR RETURN
THEM TO YOU
On the exchange date, we will determine which investment certificates the
holders validly tendered and we will issue notes in exchange for the validly
tendered investment certificates that we accept for exchange. The exchange agent
will act as your agent for the purpose of receiving notes from us and
registering the notes in your name promptly after acceptance of the tendered
investment certificates. If we do not accept your investment certificates for
exchange, we will return them without expense to you promptly following the
expiration of the exchange offer. If we do not accept your investment
certificates and return them to you, they will retain the same terms as they had
immediately before your tender. Interest will continue to accrue on your
investment certificates while they are being held in escrow by the escrow agent.
WE MAY MODIFY OR TERMINATE THE EXCHANGE OFFER UNDER SOME CIRCUMSTANCES
We are not required to issue notes in respect of any properly tendered
investment certificates that we have not previously accepted. We may terminate
the exchange offer or, at our option, we may modify or otherwise amend the
exchange offer. If we terminate the exchange offer, it will be by oral or
written notice to the exchange agent and by timely public announcement
communicated no later than 5:00 p.m. on the next business day following the
expiration date, unless applicable law or regulation requires otherwise, by
making a release to the Dow Jones News Service, or other similar news wire
service. We may terminate the exchange offer in the following circumstances:
- Any court or governmental agency brings a legal action seeking to prohibit
the exchange offer or assessing or seeking any damages as a result of the
exchange offer, or resulting in a material delay in our ability to accept
any of the investment certificates for exchange; or
- Any government or governmental authority, domestic or foreign brings or
threatens any law or legal action that in our sole judgment, might
directly or indirectly result in any of the consequences referred to
above; or, if in our sole judgment, this activity might result in the
holders of notes having obligations with respect to resales and transfers
of notes that are greater than those we described above in the
interpretations of the staff of the SEC or would otherwise make it
inadvisable to proceed with the exchange offer; or
- A material adverse change has occurred in our business, condition,
financial or otherwise, operations or prospects.
The foregoing conditions are for our sole benefit and we may assert them
with respect to all or any portion of the exchange offer regardless of the
circumstances giving rise to the condition. We also reserve the right to waive
these conditions in whole or in part at any time or from time to time in our
discretion. Our failure at any time to exercise any of the foregoing rights will
not be a waiver of any right, and each right will be an ongoing right that we
may assert at any time or from time to time. In addition, we may in our sole
discretion, even if the above conditions are satisfied, terminate or amend the
exchange offer.
Any determination by us concerning the fulfillment or nonfulfillment of any
conditions will be final and binding upon all parties.
In addition, we will not accept for exchange any tendered investment
certificates, and we will not issue notes in exchange for any investment
certificates, if at that time there is, or the SEC has threatened, any stop
order with respect to the registration statement that this prospectus is a part
of, or if qualification of the indenture is required under the Trust Indenture
Act of 1939, and has not been so qualified.
23
WHERE TO SEND YOUR DOCUMENTS FOR THE EXCHANGE OFFER
We have appointed Metropolitan Investment Securities, Inc. as the exchange
agent for the exchange offer. You must send your letter of transmittal to the
exchange agent at:
Metropolitan Investment Securities, Inc.
601 West First Avenue
Spokane, Washington 99201-5041
Telephone: (509) 835-2210
Facsimile: (509) 835-2767
Attention: Exchange Agent
IF YOU SEND YOUR DOCUMENTS TO ANY OTHER ADDRESS OR FAX NUMBER, YOU WILL NOT
HAVE VALIDLY DELIVERED THEM AND YOU WILL NOT RECEIVE NOTES IN EXCHANGE FOR YOUR
INVESTMENT CERTIFICATES. WE WILL RETURN YOUR INVESTMENT CERTIFICATES TO YOU.
WE ARE PAYING OUR COSTS FOR THE EXCHANGE OFFER
We have retained Metropolitan Investment Securities, Inc., one of our
affiliates, to act as a dealer-manager and the exchange agent in connection with
the exchange offer and will pay them a commission of 1.0% to 3.5% of the
principal amount of investment certificates exchanged, plus reimbursement of
reasonable out-of-pocket expenses. We will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses that
they incur in forwarding tenders for their customers. We will pay the expenses
incurred in connection with the exchange offer, including the fees and expenses
of the exchange agent, the escrow agent and printing, accounting, investment
banking and legal fees. We estimate that these fees are approximately $138,000.
See "PLAN OF DISTRIBUTION".
NO PERSON HAS BEEN AUTHORIZED TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS TO YOU IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
THAT THIS PROSPECTUS CONTAINS. IF ANYONE ELSE GIVES YOU INFORMATION OR
REPRESENTATIONS ABOUT THE EXCHANGE OFFER, YOU SHOULD NOT RELY UPON THAT
INFORMATION OR REPRESENTATION OR ASSUME THAT WE HAVE AUTHORIZED IT. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR
AFFAIRS SINCE THE RESPECTIVE DATES AS OF WHICH THIS PROSPECTUS GIVES
INFORMATION.
WE ARE NOT MAKING THE EXCHANGE OFFER TO, NOR WILL WE ACCEPT TENDERS FROM OR
ON BEHALF OF, HOLDERS OF INVESTMENT CERTIFICATES IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE THE EXCHANGE OFFER OR TO ACCEPT IT. HOWEVER, WE MAY, AT OUR
DISCRETION, TAKE ACTION AS WE MAY DEEM NECESSARY TO MAKE THE EXCHANGE OFFER IN
ANY JURISDICTION AND EXTEND THE EXCHANGE OFFER TO HOLDERS OF INVESTMENT
CERTIFICATES IN THOSE JURISDICTIONS. IN ANY JURISDICTION WHERE THE SECURITIES
LAWS OR BLUE SKY LAWS REQUIRE A LICENSED BROKER OR DEALER TO MAKE THE EXCHANGE
OFFER ONE OR MORE REGISTERED BROKERS OR DEALERS THAT ARE LICENSED UNDER THE LAWS
OF THAT JURISDICTION IS MAKING THE EXCHANGE OFFER ON OUR BEHALF.
HOLDERS OF INVESTMENT CERTIFICATES WILL NOT HAVE DISSENTERS' RIGHTS OR
APPRAISAL RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
24
COMPARISON OF NOTES AND INVESTMENT CERTIFICATES
The following is a brief summary of some of the differences and similarities
between the notes we are offering in this prospectus and the investment
certificates that you may currently own. For a more detailed description of the
notes, see "DESCRIPTION OF THE NOTES". The table below lists some of the
provisions of our outstanding investment certificates in general. For a more
detailed description of the terms of your investment certificates, see the
provisions of your investment certificates as they are described in the physical
certificates representing your investment certificates.
NOTES INVESTMENT CERTIFICATES
----------------------------- -----------------------------
Maturity dates............... The notes will mature on The investment certificates
15, 2005. have a maturity date between
2000 and 2010, depending on
the series and type of
investment certificates and
the date originally
purchased.
Interest rates and
payments................... Interest only payments will Interest payments on the
be made monthly at an annual investment certificates range
rate of %. from monthly, quarterly,
annually, to only payable at
maturity. The investment
certificates also make
amortizing payments of
principal and interest.
Interest rates on the
investment certificates range
from 6.1% to 10.0%.
Conversion................... The notes are not convertible The investment certificates
into any other security of are not convertible into any
Summit. other security of Summit.
Optional redemption by the
issuer..................... We may redeem the notes at The investment certificates
any time on or after are not redeemable by Summit.
15, 2002.
Ranking...................... The notes will rank equally The investment certificates
with our investment rank equally with the notes
certificates and our other and our other unsecured debt.
unsecured debt.
Voting Rights................ Amendments to the indenture Amendments to the indenture
or the terms of the notes may that relate to the investment
be made in most cases with certificates or the terms of
the consent of the holders of any series of investment
a majority in principal certificates may be made in
amount outstanding. most cases with the consent
of the holders of 66 2/3% in
principal amount outstanding
of the series affected by the
amendment.
Listing and trading.......... Intended to be listed for Not listed for trading on a
trading on Tier I of the securities exchange.
Pacific Exchange.
25
FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of some of the federal income tax consequences
to persons exchanging their investment certificates for notes or making new
purchases of notes for cash in this offering. The discussion contains some of
the tax consequences to investors in this offering, but does not deal with all
aspects of federal taxation, or with any aspect of state, local or foreign
taxation that may be relevant to investors in light of their personal investment
and tax circumstances. Some investors, including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations,
persons who are not citizens or residents of the United States and qualified
employee benefit plans under the Employee Retirement Income Security Act of
1974, or tax-qualified retirement plans and individual retirement accounts under
the Internal Revenue Code of 1986 (the "Code"), may be subject to special
rules not discussed below. Investment certificate holders desiring to tender
their investment certificates for notes are advised to consult with their own
tax advisors regarding the federal, state, local and foreign tax consequences
which could result therefrom. Furthermore, all potential holders of notes should
consult with their own tax advisors regarding the federal, state, local and
foreign tax consequences of acquiring, holding and disposing of the notes.
Summit believes that the notes should be characterized as debt for federal
income tax purposes. The following discussion makes the same assumption.
EXCHANGE OF INVESTMENT CERTIFICATES
Generally, the amount of gain or loss that will be recognized upon the
exchange of investment certificates for notes will be equal to the difference
between (1) the fair market value of the notes received and (2) the adjusted
basis of the investment certificates surrendered increased by any original issue
discount or market discount previously included in income by the holder. See
discussions of Original Issue Discount and Market Discount below. Therefore,
assuming a investment certificate holder's basis in his investment certificates
is equal to the fair market value of the notes he receives, the holder should
not recognize gain as a result of the exchange. In the event an investment
certificate holder acquired them at a market discount that has not been
previously taken into income, or his basis therein is otherwise less than the
fair market value of the notes received, the holder likely will recognize gain
upon the exchange.
STATED INTEREST
Under general federal income tax principles, holders of notes must include
stated interest in income in accordance with their method of tax accounting.
Accordingly, holders of notes using the accrual method of tax accounting must
include stated interest in income as it accrues and holders of notes using the
cash method of tax accounting must include stated interest in income as it is
actually or constructively received.
Payments of interest to taxable holders of notes will constitute portfolio
income for purposes of Section 469 of the Code and not passive activity income.
Accordingly, this income will not be subject to reduction by losses from passive
activities (e.g., any interest in a trade or business held as a limited partner
or other arrangements in which the holders of notes do not materially
participate) of holders of notes who are subject to the passive activity loss
rules. However, income attributable to interest payments may be offset by
investment expense deductions, subject to the limitation that individual
investors may only deduct miscellaneous itemized deductions, including
investment expenses, to the extent these deductions exceed two percent of the
investor's adjusted gross income.
26
HOLDING PERIOD OF NOTES
For purposes of determining whether gain or loss on the disposition of the
note is long term or short term capital gain or loss, the holding period of the
notes begins with the date the notes are issued in connection with the offering.
DISPOSITION OF THE NOTES
On the sale, redemption or other disposition of the notes, the holder will
recognize gain or loss measured by the difference between (1) the amount of cash
and the fair market value of the property received and (2) the holder's tax
basis in the notes sold, exchanged or otherwise disposed of, increased by any
original issue discount or market discount previously included income by the
holder. See discussions of Original Issue Discount and Market Discount below.
Provided that the notes are issued for cash at par or are exchanged for
investment certificates at par, a holder's basis in the notes will be equal to
the original principal amount of the notes received. Subject to the market
discount and bond premium rules discussed below, the gain or loss from
disposition of the notes will be a capital gain or loss, provided the notes were
held as a capital asset, and will be long term gain or loss if the notes were
held for more than one year.
ORIGINAL ISSUE DISCOUNT
Original issue discount is generally defined as the excess of a debt
instrument's stated redemption price at maturity over its issue price, subject
to a statutorily-defined DE MINIMIS exception, generally one-quarter of 1% of
the debt instrument's stated redemption price at maturity multiplied by the
number of complete years to maturity from its issue date. The "stated redemption
price at maturity" of a debt instrument is generally the sum of the debt
instrument's stated principal amount plus all other payments required
thereunder, other than payments of "qualified stated interest," generally,
stated interest that is unconditionally payable in cash at least annually at a
single fixed rate that equals or exceeds a published federal rate. The "issue
price" of a debt instrument that is not part of an issue of which a substantial
part is sold for money and is traded on an established securities market is its
fair market value when issued. Summit believes that (1) the interest paid on the
note will be qualified stated interest and (2) the issue price and stated
redemption price at maturity will equal each other. Therefore, Summit expects
that the notes will not be issued with original issue discount.
In the event notes were deemed to be issued with more than a DE MINIMIS
discount, the original issue discount will be included in income by the
acquiring holder as it accrues under a constant yield method which would
generally require the recognition of taxable income associated with such
discount prior to the receipt of cash by such holder.
NOTE PREMIUM
Summit believes that the notes will be issued without premium. However, in
the event a note holder's initial adjusted basis in the notes or their fair
market value immediately after the issuance, whichever is lower, exceeds the
amount payable at maturity of the notes, or in some cases, on an earlier call
date, the holders of notes may be able to elect to deduct the excess using a
constant yield method over the remaining term of the notes as amortizable bond
premium under Section 171 of the Code provided the notes are held as a capital
asset. Except as provided in the Treasury Regulations relating thereto, the
amortizable bond premium will be treated as an offset to interest income on the
notes rather than as a separate deduction item. An election under Section 171 of
the Code generally is binding once made and applies to all obligations owned or
subsequently acquired by the taxpayer.
27
MARKET DISCOUNT
With respect to notes acquired subsequent to the date of issuance, the
market discount provisions of the Code generally provide that, subject to a
statutorily defined DE MINIMIS exception, if a note is acquired at a market
discount and the holder thereof thereafter recognizes gain on a disposition of
such note, including a gift, the lesser of the gain or the portion of the market
discount that accrued while the note was held by the holder will be treated as
ordinary interest income at the time of the disposition. For this purpose, in
the case of a note not issued with original issue discount, an acquisition at a
market discount includes an acquisition, other than an acquisition at original
issuance, resulting in a basis in the note below the note's stated redemption
price at maturity. The market discount rules also provide that a holder who
acquires a note at a market discount, and who does not elect to include the
market discount in income on a current basis, may be required to defer the
deduction of a portion of any interest incurred or maintained to purchase or
carry the debt instrument until the holder disposes of the debt instrument in a
taxable transaction.
The notes provide that they may be redeemed, in whole or in part, before
maturity. If some or all of the notes are redeemed, each holder of a note
acquired at a market discount would be required to treat the principal payment
as ordinary interest income to the extent of any accrued market discount on the
notes.
A holder of a debt instrument may elect to have market discount currently
included in income. The current inclusion election, once made, applies to all
market discount obligations acquired by the holder on or after the fist day of
the first taxable year to which the election applies and may not be revoked
without the consent of the Service. If a note holder elects to include market
discount in income in accordance with the preceding sentence, the foregoing
rules with respect to the recognition of ordinary income on a sale or other
dispositions of a note and the deferral of interest deduction on indebtedness
related to the note will not apply.
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of a investment certificate or
note may be subject to backup withholding at the rate of 31% with respect to
interest paid on, and the cash proceeds of the sale, redemption or other
disposition of, the investment certificates or notes unless the holder (1) is a
corporation or comes within other exempt categories and, when required,
demonstrates that fact, or (2) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. Backup
withholding may be required for the amount of notes received.
PLAN OF DISTRIBUTION
The notes are being offered directly to the public on a best efforts basis,
with conditions, through Metropolitan Investment Securities, Inc. ("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 notes. A commission of between 1.0% and 7.0% of
the principal amount purchased or exchanged will, however, be paid by Summit,
depending on whether purchases of notes are for cash or for exchange for
outstanding investment certificates. Commissions of 1.0% to 3.5% will be paid on
exchanges, and commissions up to 7.0% will be paid on new purchases of notes for
cash. The notes are being offered only for cash or cash equivalents, or for
exchange on the terms described under the section entitled "THE EXCHANGE OFFER."
If you are not tendering through an account set up with an approved selected
dealer, then checks tendered should be made payable to "U.S. Bank Trust National
Association--Summit Securities, Inc.," as escrow agent. The offering will only
be completed if we sell notes for cash and/or exchange notes for investment
certificates in a total amount of at least $20,000,000 in principal amount. In
addition, if the notes are not approved for listing on the Pacific
28
Exchange, we have the option not to close the offering. MIS will promptly
deposit funds it receives for new purchases in an escrow account with U.S. Bank
Trust National Association as escrow agent, to be transmitted directly to Summit
pending the satisfaction of the conditions to the offering. During the three
fiscal years ended September 30, 1999, MIS has received commissions of
$2,153,000 from Summit on sales of approximately $53,230,000 of Summit's
investment certificates.
MIS is a member of the National Association of Securities Dealers, Inc. Due
to the affiliation of Summit and MIS, Rule 2720 of the NASD Conduct Rules
requires, in part, that a qualified independent underwriter be engaged to make a
recommendation regarding the interest rates to be paid on the notes offered by
this prospectus. Accordingly, MIS has obtained a letter from Roth Capital
Partners, Inc., a NASD member, stating that the interest rate on the notes is
consistent with Roth's recommendations which were based on conditions and
circumstances existing as of the date of the prospectus. Roth 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 notes offered, Roth will
receive $25,000 in fees. Roth will also be reimbursed by Summit for its actual
out-of-pocket expenses.
We have agreed to indemnify Roth against, or make contributions to Roth with
respect to, some liabilities under the Securities Act of 1933 and the Securities
Exchange Act.
MIS does not intend to make a market for the notes. MIS may enter into
selected dealer agreements with and reallow to some dealers, who are members of
the NASD, and some foreign dealers who are not eligible for membership in the
NASD, a commission of up to 7.0% of the principal amount of notes sold by those
dealers. No sales will be made to discretionary accounts without the prior
specific written approval of the customer. All NASD members participating in the
offering will comply with the suitability standards contained in NASD Rule
2720(k) when selling the notes.
LEGAL MATTERS
The legality of the notes to be issued in connection with this offering is
being passed upon for Summit by the law firm of Kutak Rock LLP, Denver,
Colorado.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-K for the year ended September 30, 1999, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act, and, in compliance with the act, file periodic reports and other
information with the SEC. These reports and the other information that we file
with the SEC can be inspected and copied at the public reference facilities
maintained by the SEC in Washington, D.C. at 450 Fifth Street, N.W., Washington,
DC 20549 and at some 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 SEC maintains a World Wide
Web site that contains reports, proxy statements and other information regarding
registrants like Summit, that file electronically with the SEC at the following
Internet address: (http://www.sec.gov).
We have filed with the SEC in Washington, D.C., a registration statement on
Form S-2 under the Securities Act with respect to the notes offered by this
prospectus. This prospectus does not contain all of the information contained in
the registration statement, as permitted by the rules and regulations of the
SEC.
29
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this
prospectus by reference:
Annual Report on Form 10-K of Summit for the fiscal year ended
September 30, 1999, filed December 27, 1999.
Quarterly Report on Form 10-Q of Summit for the fiscal quarter ended
December 31, 1999, filed February 14, 2000.
Quarterly Report on Form 10-Q of Summit for the fiscal quarter ended
March 31, 2000, filed May 15, 2000.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus modifies or supersedes that statement. Any
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 that person, a copy of
any and all of the information that has been referenced in this prospectus other
than exhibits to these documents. Requests for these copies should be directed
to Corporate Secretary, Summit Securities, Inc., PO Box 2162, Spokane,
Washington 99210-2162, telephone number (509) 838-3111.
30
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SUMMIT SECURITIES, INC.
[SUMMIT SECURITIES LOGO]
$22,500,000
% NOTES DUE 2005
---------------
PROSPECTUS
------------------
, 2000
METROPOLITAN INVESTMENT SECURITIES, INC.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee........................................ $ 5,940
NASD Filing Fee............................................. 2,750
Independent Underwriter Fee and Expenses.................... 25,000
Accounting Fees and Expenses(1)............................. 20,000
Legal Fees and Disbursements(1)............................. 42,000
Trustee's Fees and Expenses(1).............................. 10,000
Printing Expenses(1)........................................ 30,000
Miscellaneous Expenses(1)................................... 2,310
--------
Total Expenses.............................................. $138,000
========
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(1) 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, officer 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 reasonably believed to be in and not opposed to the
best interests of the corporation.
ITEM 16: EXHIBITS
(a) Exhibits
1.01(1) Selling Agreement between Summit and Metropolitan Investment
Securities, Inc.
1.02(1) Form of Agreement to Act as "Qualified Independent
Underwriter," between Summit, Metropolitan Investment
Securities, Inc. and Roth Capital Partners, Inc. with
respect to the notes to be registered.
1.03(1) Form of Pricing Recommendation Letter of Roth Capital
Partners, Inc. with respect to the notes to be registered.
4.01(1) Indenture, dated as of May 25, 2000, between Summit and U.S.
Bank Trust National Association, trustee.
5.01(1) Opinion of Kutak Rock LLP as to the validity of the notes.
10.01 Management Receivable Acquisition and Servicing Agreement
between Summit and Metropolitan Mortgage & Securities Co.,
Inc. dated September 9, 1994 (incorporated by reference to
Exhibit 10(a) to Registration No. 33-57619).
10.02 Receivable Acquisition, Management and Services Agreement
between Old Standard Life Insurance Company and Metropolitan
Mortgage & Securities Co., Inc. dated December 31, 1994
(incorporated by reference to Exhibit 10(d) to Registration
No. 333-115).
II-1
10.03 Receivable Acquisition, Management and Services Agreement
between Arizona Life Insurance Company and Metropolitan
Mortgage & Securities Co., Inc. dated October 10, 1996
(incorporated by reference to Exhibit 10(d) to Registration
No. 333-19787).
10.04 Reinsurance Agreement between Western United Life Assurance
Company and Old Standard Life Insurance Company
(incorporated by reference to Exhibit 10(d) to Summit's
Annual Report on Form 10-K filed January 7, 1998).
12.01(2) Statement of computation of ratio of earnings to fixed
charges and preferred stock dividends.
13.01 Quarterly Report of Summit on Form 10-Q for the fiscal
quarter ended December 31 1999 (incorporated by reference to
Summit's Form 10-Q filed February 24, 2000)
13.02 Quarterly Report of Summit on Form 10-Q for the fiscal
quarter ended March 31, 2000 (incorporated by reference to
Summit's Form 10-Q filed May 15, 2000).
23.01(1) Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.02 Consent of Kutak Rock LLP (included in Exhibit 5.01).
24.01 The Power of Attorney, included on Page II-3 of the
Registration Statement, is incorporated herein by reference.
25.01(1) Statement of eligibility of trustee.
99.01(1) Form of Letter of Transmittal
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(1) Filed herewith
(2) To be filed by amendment
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) For the purpose of determining any liability under the Act, 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.
(2) For the purpose of determining any liability under the Act, 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.
II-2
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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Spokane, State of Washington, on this 23rd day of
June, 2000.
SUMMIT SECURITIES, INC.
/s/ TOM TURNER
---------------------------------------------
Tom Turner, PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, whose signatures
appear below, hereby constitute and appoint Tom Turner their true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for them and in their name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as full
and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ TOM TURNER President, and Director June 23, 2000
--------------------------------- (Principal Executive Officer)
Tom Turner
/s/ PHILIP SANDIFUR Vice President and Director June 23, 2000
---------------------------------
Philip Sandifur
/s/ GREG STRATE Secretary, Treasurer and Director June 23, 2000
---------------------------------
Greg Strate
/s/ JULIE SHIFLETT Principal Accounting Officer and June 23, 2000
--------------------------------- Principal Financial Officer
Julie Shiflett
II-4
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.01(1) Selling Agreement between Summit and Metropolitan Investment
Securities, Inc.
1.02(1) Form of Agreement to Act as "Qualified Independent
Underwriter," between Summit, Metropolitan Investment
Securities, Inc. and Roth Capital Partners, Inc. with
respect to the notes to be registered.
1.03(1) Form of Pricing Recommendation Letter of Roth Capital
Partners, Inc. with respect to the notes to be registered.
4.01(1) Indenture, dated as of May 25, 2000, between Summit and U.S.
Bank Trust National Association, trustee.
5.01(1) Opinion of Kutak Rock LLP as to the validity of the notes.
10.01 Management Receivable Acquisition and Servicing Agreement
between Summit and Metropolitan Mortgage & Securities Co.,
Inc. dated September 9, 1994 (incorporated by reference to
Exhibit 10(a) to Registration No. 33-57619).
10.02 Receivable Acquisition, Management and Services Agreement
between Old Standard Life Insurance Company and Metropolitan
Mortgage & Securities Co., Inc. dated December 31, 1994
(incorporated by reference to Exhibit 10(d) to Registration
No. 333-115).
10.03 Receivable Acquisition, Management and Services Agreement
between Arizona Life Insurance Company and Metropolitan
Mortgage & Securities Co., Inc. dated October 10, 1996
(incorporated by reference to Exhibit 10(d) to Registration
No. 333-19787).
10.04 Reinsurance Agreement between Western United Life Assurance
Company and Old Standard Life Insurance Company
(incorporated by reference to Exhibit 10(d) to Summit's
Annual Report on Form 10-K filed January 7, 1998).
12.01(2) Statement of computation of ratio of earnings to fixed
charges and preferred stock dividends.
13.01 Quarterly Report of Summit on Form 10-Q for the fiscal
quarter ended December 31 1999 (incorporated by reference to
Summit's Form 10-Q filed February 24, 2000)
13.02 Quarterly Report of Summit on Form 10-Q for the fiscal
quarter ended March 31, 2000 (incorporated by reference to
Summit's Form 10-Q filed May 15, 2000).
23.01(1) Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.02 Consent of Kutak Rock LLP (included in Exhibit 5.01).
24.01 The Power of Attorney, included on Page II-5 of the
Registration Statement, is incorporated herein by reference.
25.01(1) Statement of eligibility of trustee.
99.01(1) Form of Letter of Transmittal
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(1) Filed herewith
(2) To be filed by amendment