<PAGE>
Rule 424(b)(1)
File No. 333-94127
[LOGO OF SUMMIT SECURITIES]
PROSPECTUS
SUMMIT SECURITIES, INC.
200,000 Shares of Preferred Stock, Series S-3
We are offering variable rate cumulative preferred stock with the following
terms:
. The preferred stock is subordinate to all of our debt, including our
investment certificates.
. Preferred stock distributions are cumulative and will be declared monthly
according to a variable rate formula described in this prospectus.
. The preferred stock has a liquidation preference of $100 per share.
. We may redeem the preferred stock at any time at a price of $100 per share
plus the amount of any declared but unpaid distributions.
You should consider carefully the risk factors beginning on page 9 in this
prospectus.
<TABLE>
<CAPTION>
Per Preferred Share Total
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<S> <C> <C>
Public offering price...................... $100 $20,000,000
Maximum underwriting discounts and
commissions*.............................. 6% $ 1,200,000
Maximum proceeds to Summit (before
expenses)................................. $ 94 $18,800,000
</TABLE>
* You will not incur a direct sales charge. Preferred stock distributions
will be based on their full offering price, without deduction for underwriting
discounts or commissions. We will reimburse our underwriters for commissions
paid to licensed securities sales representatives. Sales commission rates on
the sale of preferred stock depend upon the terms of the sale. See "PLAN OF
DISTRIBUTION."
. Currently there is no trading market for the preferred stock and you should
not expect one to be established in the future.
. The preferred stock is being issued only in book-entry form.
. The underwriter maintains a list of persons willing to sell or purchase our
issued and outstanding shares of preferred stock.
. We are offering the preferred stock on a continuous, best efforts basis, and
there is no minimum amount of preferred stock that must be sold.
. You may not purchase the preferred stock pursuant to this prospectus after
January 31, 2001.
The shares of preferred stock are securities of our company 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.
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.
METROPOLITAN INVESTMENT SECURITIES, INC.
The date of this prospectus is February 11, 2000.
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TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
FORWARD-LOOKING STATEMENTS.................................................. 2
PROSPECTUS SUMMARY.......................................................... 3
RISK FACTORS................................................................ 9
USE OF PROCEEDS............................................................. 11
DESCRIPTION OF SECURITIES................................................... 11
PLAN OF DISTRIBUTION........................................................ 15
LEGAL MATTERS............................................................... 16
EXPERTS..................................................................... 16
AVAILABLE INFORMATION....................................................... 16
INCORPORATION OF DOCUMENTS BY REFERENCE..................................... 17
</TABLE>
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 expenditures for purchasing 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 underwriters have 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
underwriters are 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.
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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 preferred stock. You should read
both this prospectus and the attached Annual Report on Form 10-K of Summit for
the fiscal year ended September 30, 1999, carefully before you make 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. 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. 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.
Currently, the consolidated group is focusing its receivable investing
activities on loans collateralized by commercial real estate. 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.
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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. At
regular meetings of our board of directors, we will periodically request that a
majority of the independent directors ratify and approve all material
affiliated transactions and forgiveness of loans, if any. 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 September 30, 1999, which
is attached to this prospectus.
Organizational Chart
(as of September 30, 1999)
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.
[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 president and controlling shareholder of Metropolitan.
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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.
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 Preferred Stock Offering
Preferred stock offering We are offering 200,000 shares of variable rate
........................... cumulative preferred stock, series S-3 at $100
per share. The preferred stock will be sold in
whole and fractional shares. There is no minimum
amount of preferred stock that must be sold. The
preferred stock will be issued only in book-entry
form.
Distributions ............. We will pay distributions on the preferred stock
on a cumulative basis from the date the shares
are issued. When we make distributions, they will
be paid monthly at the applicable annual rates
described in "DESCRIPTION OF SECURITIES--
Distributions."
Liquidation rights......... If we liquidate Summit, you will have a right to
receive a liquidation preference of $100 per
share, plus declared and unpaid distributions.
Your liquidation rights will be paid only after
all of our debts, including our outstanding
investment certificates, are paid. Your
liquidation rights will be paid before any
liquidating distributions to the common
stockholders.
Redemption upon request of We may consider a written shareholder request you
holder..................... make to have your shares redeemed. We will
generally not consider a request to redeem shares
unless they have been listed for sale on
Metropolitan Investment Securities, Inc.'s
trading list for at least 60 days. We are under
no obligation to redeem your shares of preferred
stock. Our decision whether or not to redeem your
shares will depend, in part, on our financial
condition and our liquidity position at the time.
Any shares that we do redeem will be redeemed at
a price per share that is determined by our board
of directors in its discretion, and will include
any declared but unpaid distributions. This price
may be less than your original $100 per share
purchase price. See "DESCRIPTION OF SECURITIES--
Redemption of Shares" and "RISK FACTORS."
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Redemption upon call by We can redeem any or all shares of the preferred
Summit...................... stock if we provide you with notice at least 30
but not more than 60 days prior to redemption by
mail. If we decide to redeem your shares, you
will be paid $100 per share plus the amount of
any declared but unpaid distributions as of the
date fixed for redemption. See "DESCRIPTION OF
SECURITIES--Redemption of Shares."
Voting rights............... Your voting rights will be limited to two
situations. First, you will have those voting
rights expressly granted by the laws of the State
of Washington. Second, you will have voting
rights if the distributions payable to you on
your preferred stock remain unpaid for a period
of time that equals twenty-four monthly
distributions. See "DESCRIPTION OF SECURITIES--
Voting Rights."
Federal income tax If we earn a profit on a tax accounting basis
considerations.............. during any future year, any earnings or profits
that we distribute to you will be taxable. If we
incur a loss on a tax accounting basis, the
distributions will be a return of capital and not
taxed, but will reduce your basis. We cannot
predict whether we will have future
distributions, or whether those distributions
will be taxable to you. You are encouraged to
consult your own tax advisors about whether the
distributions you will receive will be taxable
income. See "DESCRIPTION OF SECURITIES--Federal
Income Tax Consequences of Distributions."
Use of proceeds............. We will use the proceeds of this preferred stock
offering to invest in receivables and to make
other investments which may include investments
in existing subsidiaries, new business ventures,
to acquire other companies or for other
investment purposes. The proceeds may also be
used to retire maturing investment certificates,
for property development, to pay preferred stock
distributions and for general corporate purposes.
See "USE OF PROCEEDS."
Risk factors................ Your investment in the preferred stock involves
risk. You should review the risks described in
this prospectus and those described in the
attached Annual Report of Summit, on Form 10-K,
before investing in the preferred stock. See
"RISK FACTORS" for a discussion of the risks
associated with investing in the preferred stock.
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Capitalization
The following table sets forth the capitalization of the consolidated group
at September 30, 1999:
<TABLE>
<S> <C>
Debt Payable:
Real estate contracts and mortgage notes payable 6.5% to 8.0%,
due 1999 to 2020............................................... $ 279,792
-----------
Total Debt Payable.............................................. 279,792
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Investment Certificates:
Investment Certificates, maturing 1999 to 2009, at 6.1% to
10.0%.......................................................... 65,504,128
Compound and accrued interest................................... 7,302,776
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Total Investment Certificates................................... 71,806,904
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Stockholders' Equity:
Preferred Stock, $10 par: 10,000,000 shares authorized; 155,747
shares issued and outstanding (liquidation preference
$15,574,690)................................................... 1,557,469
Common Stock, $10 par: 2,000,000 shares authorized; 10,000
shares issued and outstanding.................................. 100,000
Additional paid-in capital...................................... 11,988,926
Retained earnings............................................... 7,397,310
Accumulated other comprehensive loss............................ (1,938,750)
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Total Stockholders' Equity...................................... 19,104,955
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Total Capitalization............................................ $91,191,651
===========
</TABLE>
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Summary Consolidated Financial Data
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 ratios of earnings to fixed charges and preferred stock dividends, have
been derived from, and should be read in conjunction with, the consolidated
financial statements, related notes, and Management's Discussion and Analysis
of Financial Condition and Results of Operations appearing in Summit's Form 10-
K, which is incorporated into and attached to this prospectus. The 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 ratios of earnings to
fixed charges and preferred stock dividends, have been derived from
consolidated financial statements not included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended September 30,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
INCOME
STATEMENT
DATA:
Revenues..... $ 36,198,936 $ 29,965,547 $ 19,785,462 $ 14,536,449 $ 9,576,615
============ ============ ============ ============ ===========
Net income... $ 2,814,828 $ 2,524,027 $ 1,851,240 $ 1,244,522 $ 587,559
Preferred
stock
dividends... (838,356) (498,533) (446,560) (333,606) (309,061)
------------ ------------ ------------ ------------ -----------
Income
applicable
to common
stockholder.. $ 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.. $ 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
============ ============ ============ ============ ===========
Cash
dividends
per common
share....... $ 0.00 $ 21.07 $ 0.00 $ 0.00 $ 0.00
============ ============ ============ ============ ===========
Ratio of
earnings to
fixed
charges..... 1.57 1.64 1.46 1.40 1.25
Ratio of
earnings to
fixed
charges and
preferred
stock
dividends... 1.34 1.46 1.31 1.26 1.11
BALANCE SHEET
DATA:
Due from/(to)
affiliated
companies,
net......... $ (151,077) $ 10,985,805 $ 870,525 $ 1,296,290 $(1,960,104)
Total
assets...... $295,115,959 $206,594,234 $166,354,070 $117,266,680 $96,346,572
Investment
certificates
and other
debt
payable..... $ 72,086,696 $ 56,078,514 $ 50,607,983 $ 46,674,841 $38,650,532
Stockholders'
equity...... $ 19,104,955 $ 10,684,064 $ 7,756,643 $ 5,358,774 $ 3,907,067
</TABLE>
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RISK FACTORS
When deciding whether or not to purchase the preferred stock, 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 year ended September 30, 1999, incorporated into and
attached to this prospectus. You should also consider the following risks
associated with an investment in the preferred stock:
We can issue more company
securities...................
Summit's and your rights and obligations in the
preferred stock are defined in the Statement of
Rights, Designations and Preferences of
Variable Rate Cumulative Preferred Stock Series
S-3. This statement does not restrict our
ability to issue additional debt, preferred
stock or other equity securities in our
company.
Preferred stock is not
insured against the risk of
loss......................... The preferred stock is not insured or
guaranteed by any bank, any governmental
agency, any insurance company, any affiliate of
our company or any other person or entity.
Thus, the preferred stock has greater risk than
investments that are insured against the risk
of loss.
Preferred stock is not a
liquid investment because
there is no established
trading market...............
The preferred stock is not listed for trading
on a stock exchange. We do not anticipate
listing the preferred stock on any stock
exchange or that an independent public market
for the preferred stock will develop.
Trading list does not
guarantee a market for the
preferred stock..............
The broker/dealer for this offering maintains a
trading list of persons willing to sell or
purchase outstanding shares of our preferred
stock. We can not assure you that this list
will continue to operate or that it will
provide you a means to sell your shares.
Our discretionary redemption
option does not guarantee
you the ability to sell
securities to Summit.........
Under our discretionary redemption option, we
are under no obligation to redeem your shares.
You should not rely on this option as a
guarantee that you will be able to have us
reacquire your shares. See "DESCRIPTION OF
SECURITIES--Redemption of Shares."
The preferred stock has
limitations on redemption
and restrictions on
distributions................
If we have not paid cumulative distributions to
all preferred shareholders, we cannot purchase
or offer to exchange your shares unless we make
the same offer to all preferred shareholders.
See "DESCRIPTION OF SECURITIES--Redemption of
Shares." We will not make distributions to you
unless distributions can be made to all other
holders of preferred stock. See "DESCRIPTION OF
SECURITIES--Distributions."
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Liquidation rights are
junior to Summit's
outstanding debt............. If we liquidate, we must pay all of our
outstanding debt before we can make any
distributions to you. If there is not enough
money to distribute to all preferred
shareholders for their entire respective
liquidation rights, you will share the
shortfall with the other preferred shareholders
in proportion to your respective liquidation
rights.
Extraordinary corporate
events could eliminate the
liquidation rights of the
holders of preferred stock...
Your preferences in liquidation could be
adversely effected if we have an asset sale, a
capital restructuring, a merger, a
reorganization or a bankruptcy. If one of these
events occurs, your rights may be compromised
by a negotiation between all interested parties
or by a court determination.
Lack of voting control of
the company..................
You will have very few voting rights as an
owner of preferred stock. The only class of
stock carrying full voting rights is the common
stock. See "DESCRIPTION OF SECURITIES--Voting
Rights."
Summit can redeem or call
the preferred stock at its
own discretion...............
We have the option of calling or redeeming your
shares at any time for $100 per share plus any
declared and unpaid distributions. See
"DESCRIPTION OF SECURITIES--Redemption of
Shares."
Risk of holding book-entry
shares of preferred stock
because there are no
physical shares to
transfer..................... Our use of book-entry shares of preferred stock
rather than actual physical shares in this
offering could limit the markets for these
securities, prevent a secondary market from
forming and could delay payments to you. The
absence of physical shares may prevent a
secondary market from developing because
investors may be unwilling to invest in
securities if they cannot obtain delivery of
physical shares. The use of book-entry shares
may delay payments to you because distributions
on the shares would be made first to the person
in whose name the shares are registered.
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USE OF PROCEEDS
If all of the preferred stock we are offering is sold, we expect proceeds to
total $20,000,000 before deducting sales commissions and other expenses.
Offering expenses are estimated at $124,000 and sales commissions will be a
maximum of six percent (6%) of the offering proceeds. There can be no
assurance, however, that any of the preferred stock can or will be sold.
In conjunction with the other funds available to us through operations
and/or borrowings, we currently plan to utilize the proceeds of the preferred
stock offering for the following purposes: priority will be given first to (1)
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, and then to (2) the development of real
estate. 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, proceeds of
this offering may be used for retiring maturing investment certificates,
preferred stock distributions and for general corporate purposes, including
debt service and other general operating expenses. Approximately $8.6 million
in principal amount of debt securities will mature between February 1, 2000 and
January 31, 2001 with interest rates ranging from 6.1% to 10.0% and averaging
approximately 7.8% 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 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 do not know how many shares of preferred stock will
be sold, we are unable to accurately forecast the total net proceeds generated
by this offering. Therefore, we have not allocated specific amounts for any of
the foregoing purposes.
In the event substantially less than the maximum proceeds are obtained, we
do not anticipate any material changes to our planned use of proceeds from
those described above.
DESCRIPTION OF SECURITIES
Description of Capital Stock
The authorized capital of Summit consists of 2,000,000 shares of common
stock, $10 par value, and 10,000,000 shares of Series S preferred stock, $10
par value. Of the stock authorized, 10,000 shares of common stock and 155,747
shares of Series S preferred stock were issued and outstanding as of September
30, 1999.
Description of Preferred Stock
This offering consists of 200,000 shares of variable rate cumulative
preferred stock, Series S-3. All of the outstanding shares of preferred stock
and the shares of preferred stock we are offering in this prospectus, when
issued and sold, will be validly issued, fully paid and nonassessable. The
relative rights and preferences of preferred stock have been fixed and
determined by our board of directors and are set forth in the statement of
rights, designations and preferences of preferred stock, duly approved by the
board of directors. The preferred stock is issued in book-entry form only.
The following statements relating to the preferred stock are summaries, do
not purport to be complete and are qualified in their entirety by reference to
the statement of rights which is filed as an exhibit to the registration
statement that includes this prospectus. The statement of rights is also
available for inspection at the principal office of Summit.
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Distributions
Distributions on the preferred stock are cumulative and will be declared
monthly on the first business day of the month, payable to the shareholders of
record as of the fifth calendar day of each month. Distributions will be paid
in cash on the twentieth calendar day of each month in an amount equal to the
offering price of $100 per share multiplied by the distribution rate divided by
twelve. The distribution rate will be the "applicable rate," as defined below,
subject to the authority of Summit's board of directors to authorize, by
resolution, a higher rate.
The applicable rate for any monthly distribution period cannot be less than
6% or greater than 14% per annum. The applicable rate for any monthly
distribution period shall be (1) the highest of the three-month U.S. Treasury
Bill rate, the ten-year constant maturity rate or the twenty-year constant
maturity rate, each as described below, plus (2) one-half of one percentage
point (0.5%).
The three-month Treasury Bill rate for each distribution period is based on
the weekly per annum market discount rate for three-month U.S. Treasury bills.
The ten-year constant maturity rate for each distribution period is based on
the weekly per annum average yield to maturity for actively traded marketable
U.S. Treasury fixed interest rate securities adjusted to constant maturities of
ten years. The twenty-year constant maturity rate for each distribution period
is based on the weekly per annum average yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities adjusted to constant
maturities of twenty years.
Each of the above three rates shall be calculated as the arithmetic average
of the two most recent weekly per annum yields as published weekly by the
Federal Reserve Board, the Federal Reserve Bank or any U.S. Government
department or agency selected by Summit, during the period of 14 calendar days
immediately prior to the 10 calendar days immediately preceding the first day
of the distribution period for which the distribution rate on preferred stock
is being determined.
If any or all of these methods are unavailable, the statement of rights
includes other methods to determine the distribution rate. If we determine in
good faith that one or more of these rates cannot be determined for any
distribution period, then the applicable rate for that period will be the
higher of whichever of the rates that can be determined, plus one-half of one
percentage point. If we determine in good faith that none of the rates can be
determined for any distribution period, then the applicable rate in effect for
the preceding distribution period will be continued for that distribution
period. The distribution rate for each monthly distribution period will be
calculated as promptly as practicable by Summit. Summit will enclose notice of
the distribution rate with the next mailed distribution payment check. In
making the calculation, the three-month U.S. Treasury Bill rate, ten-year
constant maturity rate and twenty-year constant maturity rate will each be
rounded to the nearest five one-hundredths of a percentage point.
Prior to the effective date of this prospectus, Summit's board of directors
adopted a resolution authorizing a distribution rate on the preferred stock at
two percentage points higher than the applicable rate. This higher distribution
rate will continue from month to month until the board elects to terminate it.
The board may increase, decrease or eliminate the additional percentage rate at
any time in its sole discretion.
Restrictions on Distributions
Summit may not declare or pay a distribution on any share of preferred stock
offered in this prospectus for any distribution period unless, at the same
time, a like distribution is declared and paid on all shares of preferred stock
previously issued and outstanding and entitled to receive distributions.
Distributions may only be paid from legally available funds.
If any shares of preferred stock are outstanding and the full cumulative
distributions on all previously outstanding preferred stock, including the
preferred stock offered by this prospectus, have not been paid or declared and
set apart for all past distribution periods, Summit may not:
. declare, pay or set aside for payment any distribution, except as
provided below;
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. declare or pay any other distribution upon common stock or upon any
other stock ranking junior to or on a parity with preferred stock as to
distributions or upon liquidation; or
. redeem, purchase or otherwise acquire common stock or any other stock of
Summit ranking junior to or on a parity with preferred stock as to
distributions or upon liquidation for any consideration, or pay or make
available any funds for a sinking fund for the redemption of any shares
of that stock, except by conversion into or exchange for stock of Summit
ranking junior to preferred stock as to distributions and upon
liquidation.
Notwithstanding the above, Summit may declare, pay or set aside payment for:
. distributions in common stock;
. distributions in any other stock ranking junior to preferred stock as to
distributions;
. liquidation rights; and
. distributions where a like distribution is declared or paid on all
shares of preferred stock then issued and outstanding and entitled to
receive distributions.
Summit may make distributions ratably on the shares of preferred stock and
shares of any stock of Summit ranking on a parity with the preferred stock with
regard to the payment of distributions, in accordance with the sums which would
be payable on those shares if all distributions, including accumulations, if
any, were declared and paid in full. As of the date of this prospectus, no
distributions on Summit's preferred stock were in arrears. No interest will be
paid for or on account of any unpaid distributions.
Liquidation Rights
If any voluntary or involuntary liquidation, dissolution or winding up of
Summit occurs, the preferred stock shareholders will be entitled to receive
liquidating distributions, in the amount of $100 per share plus declared and
unpaid regular monthly distributions, out of the assets of Summit available for
distribution to shareholders, before any distribution of assets is made to
holders of common stock or any stock of Summit ranking, upon liquidation,
junior to preferred stock. The preferred stock is junior in liquidation to
outstanding debt of Summit and on parity with all other issued and outstanding
preferred stock to the extent of its liquidation preference of $100 per share.
As of September 30, 1999, the total consolidated liabilities of Summit ranking
senior in liquidation preference to preferred stock were approximately
$274,910,000. Obligations ranking on a parity with preferred stock upon
liquidation, like the total liquidation preference of the outstanding shares of
all previous series of preferred stock, as of September 30, 1999, were
approximately $15,575,000. There are no limitations on Summit's ability to
incur additional secured indebtedness. See "RISK FACTORS."
The statement of rights provides that, without limitation, the voluntary
sale, lease or conveyance of all or substantially all of Summit's property or
assets to, or its consolidation or merger with, any other corporation will not
be deemed to be a liquidation, dissolution or winding up of Summit. If the
aggregate liquidation preference payable with respect to preferred stock and
any other shares of stock of Summit ranking on a parity with preferred stock
with respect to the distribution are not paid in full upon any voluntary or
involuntary liquidation, dissolution or winding up of Summit, then the holders
of preferred stock and of these other shares will share ratably in any
distribution of assets of Summit in proportion to the full respective
preferential amounts they are entitled to receive. After payment of the full
amount of the liquidating distribution they are entitled to receive, the
preferred stock shareholders will not be entitled to any further participation
in any distribution of assets by Summit.
Redemption of Shares
Upon call by Summit. Subject to regulatory restrictions affecting
redemptions during an offering, the shares of preferred stock are redeemable,
in whole or in part, only at the option of Summit at a redemption
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price of $100 per share plus declared and unpaid distributions to the date
fixed for redemption. If fewer than all of the outstanding shares of preferred
stock are redeemed, the number of shares redeemed will be determined by Summit
and the shares to be redeemed will be determined by any method Summit in its
sole discretion deems to be equitable.
Discretionary Redemption Upon Request of the Holder. Preferred Stock is not
redeemable at the option of the holder. If, however, Summit receives an
unsolicited written request for redemption of shares from any holder, Summit
may, in its sole discretion, subject to regulatory restrictions affecting
redemptions during an offering, and subject to the limitations described below,
consider redemption of these shares. Redemption requests, when received, are
reviewed in the order received. Any shares so tendered, which Summit in its
discretion allows for redemption, will be redeemed by Summit directly, and not
from or through a broker/dealer, at a price established by the board of
directors, from time to time, in its sole discretion.
There can be no assurance that Summit's financial condition will allow it to
exercise its discretion to accept any request for redemption of preferred
stock. Summit will not redeem any shares tendered for redemption:
. if to do so would, in the opinion of Summit's management, be unsafe or
unsound in light of Summit's financial condition, including its
liquidity position;
. if payment of interest or principal on any outstanding instrument of
indebtedness is in arrears or in default; or
. if payment of any distribution on preferred stock or on shares of any
stock of Summit ranking at least on a parity with the preferred stock is
in arrears as to distributions.
If cumulative distributions on preferred stock have not been paid in full,
Summit may not purchase or acquire any shares of preferred stock other than by
a purchase or exchange offer made on the same terms to all holders of preferred
stock.
Absence of Trading Market
We do not anticipate listing the preferred stock for trading on any national
or regional stock exchange nor do we anticipate an independent public market
for the preferred stock to develop. The underwriter for this offering,
Metropolitan Investment Securities, Inc. maintains a trading list to match
buyers and sellers of preferred stock. With limited exceptions, Summit has
established a policy that all preferred shareholders, including holders of the
preferred stock offered in this prospectus, must place their shares for sale on
the trading list for 60 consecutive days before Summit will entertain a request
for redemption. See "RISK FACTORS."
Voting Rights
The preferred stock has no voting rights except as provided in the statement
of rights and except as required by Idaho State law regarding amendments to
Summit's articles of incorporation that adversely affect holders of these
shares as a class and requires approval of 66 2/3% of the outstanding shares
entitled to vote.
The statement of rights provides that holders of the preferred stock,
together with the holders of Summit's other outstanding preferred stock and any
other preferred stock previously authorized, voting separately and as a single
class, are entitled to elect a majority of the board of directors of Summit if
distributions payable on any shares of preferred stock are in arrears in an
amount equal to twenty-four or more full monthly distributions per share. This
right will continue until all distributions in arrears have been paid in full.
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Federal Income Tax Consequences of Distributions
The following discussion of the federal income tax consequences of
distributions paid on the preferred stock is based upon the Internal Revenue
Code of 1986 (the "tax code"), existing Treasury Department regulations,
current published administrative positions of the Internal Revenue Service
contained in revenue rulings, revenue procedures and notes and existing
judicial decisions. No assurance can be given that legislative or
administrative changes or court decisions may not be forthcoming that could
significantly modify the statements in this discussion. Any of these changes
may or may not be retroactive with respect to transactions effected prior to
the date of the changes.
Distributions paid to the holders of preferred stock may or may not be
taxable depending, in part, on the extent to which they are made out of
current or accumulated earnings and profits of Summit as calculated for
federal income tax purposes. To the extent, if any, that distributions paid by
Summit to the holders of preferred stock exceed current and accumulated
earnings and profits of Summit, these distributions will be treated first as a
tax-free return of capital, reducing the holder's basis in preferred stock,
but not below zero, and thereafter, as capital gains, or ordinary gains if the
preferred stock is not held by the holder as a capital asset.
Summit believes that the majority of the distributions on its outstanding
preferred stock were tax free returns of capital for federal income tax
purposes in calendar 1994 and 1999, and were taxable for 1995 through 1998.
Summit is currently unable to predict the character of its distributions for
future years, but as required by the tax code, will report annually to
shareholders regarding the tax character of the prior year's distributions.
Each preferred shareholder's individual tax circumstances is unique;
accordingly, preferred shareholders are advised to consult their own tax
advisor with respect to the income tax treatment or any distribution made with
respect to the preferred stock.
Distributions paid with respect to the preferred stock, whether deemed to
be dividends, return of capital, or capital gains for federal income tax
purposes, will result in the same federal income tax consequences to Summit as
other payments of distributions. These distributions are not deductible by
Summit under current tax law. Additionally, distributions to foreign taxpayers
are subject to special rules not discussed in this prospectus.
Transfer Agent and Registrar
Metropolitan acts as transfer agent and registrar for Summit's capital
stock, including its preferred stock.
PLAN OF DISTRIBUTION
The preferred stock is being offered to the public on a continuing best
efforts basis 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 preferred stock. A commission in the maximum
amount of 6% of the offering price will be paid by Summit on most preferred
stock sales. Preferred stock is offered for cash or other consideration,
tangible or intangible property, which is acceptable to Summit as determined
in good faith by the board of directors. MIS will transmit the funds or other
consideration it receives directly to Summit by noon of the next business day
after receipt. During the three fiscal years ended September 30, 1999, MIS
received commissions of $46,835 from Summit on sales of approximately $781,000
of Summit's preferred stock through an in-house trading list.
MIS is a member of the National Association of Securities Dealers, Inc. Due
to the affiliation of Summit and MIS, NASD Rule 2720 of the NASD Conduct Rules
requires, in part, that a qualified independent underwriter be engaged to
render a recommendation regarding the pricing of the preferred stock offered
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through this prospectus. Accordingly, MIS has obtained a letter from Cruttenden
Roth Incorporated, a NASD member, stating that the offering price of the
preferred stock is consistent with Cruttenden's recommendations which were
based on conditions and circumstances existing as of the date of the
prospectus. Therefore, the price offered for the preferred stock will be no
higher than Cruttenden would have independently recommended. Cruttenden has
assumed the responsibilities of acting as the qualified independent underwriter
in pricing the offering and conducting due diligence. For performing its
functions as a qualified independent underwriter with respect to the preferred
stock offered in this prospectus, Cruttenden will receive $13,333 in fees.
We have agreed to indemnify Cruttenden against, or make contributions with
respect to some liabilities under the Securities Act of 1933 and the Securities
Exchange Act of 1934.
There is not now and we do not expect that there will be a public trading
market for the preferred stock in the future. MIS does not intend to make a
market for the preferred stock. Summit, through MIS, undertakes to maintain a
list of persons willing to sell or purchase outstanding shares of preferred
stock. See "RISK FACTORS" and "DESCRIPTION OF SECURITIES--Redemption of
Shares."
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 6% of the principal
amount of preferred stock sold by those dealers.
Sales of preferred stock will not be made in discretionary accounts without
the prior specific written approval of the customer. In addition, sales will
only be made in compliance with the suitability standards listed in Rule 2720
of the NASD Conduct Rules.
LEGAL MATTERS
The legality of the preferred stock being issued in this prospectus is being
passed upon for Summit by the law firm of Kutak Rock LLP, Denver, Colorado.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report of Summit on Form 10-K for the year ended
September 30, 1999 have been incorporated in reliance upon 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 this act, file periodic reports and other
information with the SEC. These reports and the other information 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 preferred stock 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.
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INCORPORATION OF DOCUMENTS BY REFERENCE
The following document filed with the SEC is incorporated in this prospectus
by reference:
Annual Report on Form 10-K of Summit for the fiscal year ended September 30,
1999.
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., P.O. Box 2162,
Spokane, Washington 99210-2162, telephone number (509) 838-3111.
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Summit Securities, Inc.
[LOGO OF SUMMIT SECURUTUES]
200,000 Preferred Shares, Series S-3
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PROSPECTUS
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February 11, 2000
Metropolitan Investment Securities, Inc.
