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As filed with the Securities and Exchange Commission on April 8, 1997
Registration Statement No. 333-6328
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
REGISTRATION STATEMENT ON FORM S-1
UNDER THE SECURITIES ACT OF 1933
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
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(Exact name of registrant as specified in its charter)
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Florida 6500 65-0716464
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(Standard Industrial
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(State of Incorporation) Classification Code Number) (I.R.S. Employer I.D.Number)
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12408 North Florida Avenue
Tampa, FL 33612
813/935-9476
(address and phone number of principal executive office)
Anthony A. Sutter
President and Chief Executive Officer
Sterling Financial Services of Florida - I, Inc.
12408 North Florida Avenue
Tampa, FL 33612
813/935-9476
(name, address and phone number of agent for service)
Copy to:
Michael T. Williams, Esquire
3112 W. Kennedy Blvd.
Tampa, Florida 33609
Fax (813) 877-7725
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If 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. [ ]
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Proposed
Proposed maximum maximum aggregate
Title of each Amount being offering price offering Amount of
class of Securities registered per Unit* price registration fee
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Promissory Notes 9,900 $1,000 $9,900,000 $3,000.00
Total $3,000.00
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*Stated only for the purpose of calculating registration fee.
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, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The securities being registered hereby are to be offered on a
continuous basis as provided under Rule 415.
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STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501B, Regulation S-K
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S-1 ITEM LOCATION IN PROSPECTUS
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1. Forepart of the Registration Statement and Cover Page of Registration Statement and Outside
Outside Front Cover Page of the Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Page of Inside Front and Outside Back Cover Pages of
Prospectus Prospectus
3. Summary Information, Risk Factors and Ratio Summary of the Offering, Risk Factors, Selected
of Earnings to Fixed Charges Financial Information, Earnings to Fixed Charges
4. Use of Proceeds Sources and Uses of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Underwriting
9. Description of Securities to be Registered Summary of the Offering, Description of Securities
10. Interest of Named Experts and Counsel Not Applicable
11. Information with Respect to the Registrant
(a) Description of Business Business, Management, The Corporation
(b) Properties Business
(c) Legal Proceedings Legal Proceedings
(d) Market for Common Equity and Related
Stockholder Matters Not Applicable
(e) Financial Statements Financial Statements
(f) Selected Financial Data Selected Financial Data
(g) Supplementary Financial Information Not Applicable
(h) Management's Discussion and Analysis Management's Discussion and Analysis and Results
and Results of Operations of Operations
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S-1 ITEM LOCATION IN PROSPECTUS
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(i) Changes in and Disagreements with Title of each
Accountants on Accounting and
Financial Disclosure Not Applicable
(j) Directors and Executive Officers Management
(k) Executive Compensation Management
(l) Security Ownership of Certain Security Ownership of Certain Beneficial Owners
Beneficial Owners and Management and Management
(m) Certain Relationships and Related
Transactions Certain Relationships and Related Transactions
12. Disclosure of Commission Position on Underwriting
Indemnification for Securities Act Liabilities
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PRELIMINARY PROSPECTUS DATED APRIL 8, 1997 SUBJECT TO COMPLETION
Information contained herein is 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 law of any such state.
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
$9,900,000
9,900 NOTES
$1,000 PER NOTE
MINIMUM PURCHASE: 2 NOTES
Sterling Financial Services of Florida - I, Inc., a Florida
corporation (the "Corporation"), was formed in January, 1997 to offer a package
of financial services to the sub-prime mobile home industry, including
originating and refinancing for its own account retail mobile home installment
sale contracts (the "Contracts") created in connection with the financing of
primarily used as well as some new mobile homes (the "Homes"); selling
Contracts to other lenders; and providing certain floor plan financing to
mobile home dealers (the "Dealers") (collectively, the "Financing Activities").
In addition, the Corporation may also: (1) purchase, refurbish (if necessary)
and lease or sell new or used Homes; (2) buy and improve land for development
of mobile home parks (the "Parks"), or provide financing to others for such
purpose; (3) buy and sell Parks; and (4) purchase other sub-prime financial
companies in the mobile home lending business (collectively, the "Other
Activities"). (The Financing Activities and the Other Activities are
collectively referred to herein as the "Activities.") As of the date of this
Prospectus, the Corporation has had no operations.
THIS OFFERING INVOLVES CERTAIN MATERIAL RISKS IN CONNECTION WITH THE
PURCHASE OF THESE SECURITIES. SEE "RISK FACTORS" LOCATED AT PAGES 16 TO 25 OF
THIS PROSPECTUS.
The Corporation is offering subscriptions for a maximum of 9,900 Notes
(the "Notes") in the principal amount of $1,000 each. The Notes will bear
simple interest at the rate of 10.5% per annum, payable interest only monthly,
with all principal and accrued interest, if any, due on June 30, 2002. Interest
is calculated on the basis of a 365-day year (the "Calculation Basis") but is
paid in 12 equal monthly installments, regardless of the number of days in each
month (the "Payment Basis"), with any difference between interest determined on
the Calculation Basis and the Payment Basis paid in the final installment due
under the Notes. The Corporation will use the proceeds of this offering
primarily for the Financing Activities. See "Sources and Uses of Proceeds." The
primary source of payment on the Notes will be payments made by sub-prime
borrowers on the Contracts. A sub-prime borrower is a purchaser of a Home who
does not qualify for traditional "A" or "Prime" credit, which in general means
that the borrower does not
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have characteristics such as a good credit history, long-term employment or a
homeowner. See "Business - Mobile Home Finance Industry - Sub-Prime Market
Segment."
The Notes will be secured by a first lien on the assets ("Assets")
acquired with the proceeds of the offering or other Assets ("Replacement
Assets") acquired with funds obtained from the repayment, sale or refinancing
of such Assets. (The Assets and the Replacement Assets are collectively
referred to herein as the "Collateral.") The principal due on the Notes is
prepayable in whole or in part at any time without premium or penalty. Any
prepayment will include accrued and unpaid interest at the time of prepayment
on the entire principal amount due. There are limited sources of funds to make
interest and principal payments due on the Notes. See "Risk Factors" and
"Description of Securities."
The minimum purchase is 2 Notes. There is no minimum offering. There
are certain suitability standards for Investors. Notes will only be sold to a
person who makes the required minimum purchase and represents in writing that
he has either: (i) a minimum annual gross income of at least $30,000 and a net
worth of $30,000 (exclusive of home, home furnishings and automobiles); or (ii)
a net worth of $75,000 (exclusive of home, home furnishings and automobiles);
or (iii) that he is purchasing in a fiduciary capacity for a person who (or for
an entity which) meets such conditions. In the case of sales to fiduciary
accounts, the suitability standards must be satisfied by the beneficiary;
however, where the fiduciary is the donor of funds used for investment in the
Corporation, the fiduciary and not the beneficiary must meet the standards set
forth above. Certain states may impose higher suitability standards which an
Investor must satisfy. See "State Suitability Standards," Exhibit A and
"Suitability Standards: Who Can Invest?"
The price and amount of Notes offered by the Corporation has been
established arbitrarily and bears no relationship to its asset value, book
value, net worth or any other established criteria of value.
A NOTE HOLDER WILL NOT ACQUIRE OR OBTAIN ANY BENEFITS WHICH MIGHT
ACCRUE THROUGH AN EQUITY INTEREST IN THE CORPORATION BY A PURCHASE OF THE
NOTES.
No public or other market for the Notes exists and there can be no
assurance that one may develop in the future.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY NOR HAS THE
COMMISSION OR ANY STATE SECURITIES AGENCY PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Underwriting Discounts and Commissions Proceeds to
Price to Public (1)(2)(3)(4) Corporation(5)
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Per Note $ 1,000 $ 90 $ 910
Total Maximum $ 9,900,000 $ 891,000 $ 9,009,000
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(1) The Notes are being offered on a "best-efforts" basis through Southern
Capital Securities, Inc. (the "Managing Dealer") and other Dealers
("Participating Dealers") who are members of the National Association
of Securities Dealers, Inc. (the "NASD"). See "Underwriting."
(2) The Corporation has agreed to indemnify the Managing and Participating
Dealers against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(3) The Corporation will pay the Managing Dealer 7% of the offering price
($70 per Note) for all Notes sold, a portion of which may be reallowed
to Participating Dealers, and a Managing Dealer Fee in an amount up to
2% ($20 per Note) to the Managing Dealer. See "Underwriting."
(4) This amount does not include reimbursement to the Managing Dealer for
actual due diligence expenses in an amount up to .5% per Note ($5 per
Note) and payments which may be made to the Managing Dealer by the
Corporation as a Non-Accountable Expense Allowance not to exceed 1% of
the offering price per Note ($10 per Note) for all Notes sold in the
offering, a portion of the foregoing which may be reallowed to
Participating Dealers. See "Underwriting."
(5) This is before deducting other expenses of issuance and distribution
payable by the Corporation in connection with this offering. The
Corporation will pay from the proceeds of this offering all of such
expenses, estimated to be $148,500. These expenses are in addition to
the $49,500 (Maximum) due diligence reimbursement and the $99,000
(Maximum) Non-Accountable Expense Allowance. See "Sources and Uses of
Proceeds" and "Underwriting."
SOUTHERN CAPITAL SECURITIES, INC.
13902 North Dale Mabry Highway, Suite 118
Tampa, FL 33618
813/962-3335
THE DATE OF THIS PROSPECTUS IS , 1997.
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If the Corporation does not terminate the offering earlier, which in
the sole discretion of Management it may, the offering of Notes will continue
until the Corporation raises an aggregate of $9,900,000, provided that the
offering period for all Notes of the Corporation will not exceed 24 months from
the date of this Prospectus. The Termination Date may not be extended.
No notice will be given if the Notes are prepaid. The Notes, if
prepaid, will be paid at par without premium or penalty.
The Notes are being offered subject to prior sale, withdrawal,
cancellation or modification of the offer, including its structure, terms and
conditions, without notice. The Corporation reserves the right, in its sole
discretion, to reject, in whole or in part, any offer to purchase the Notes.
See "Underwriting."
UNTIL THE TERMINATION OF THIS OFFERING, AND IN ANY EVENT 90 DAYS AFTER
THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES TO WHICH THIS PROSPECTUS RELATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
Information contained herein is 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.
No dealer, salesman or other person has been authorized in connection
with this offering to give any information or to make any representations other
than those contained in this Prospectus or in literature issued by the
Corporation, or, if authorized by the Corporation, the Participating Dealers
(which literature shall not be deemed to be a part of this Prospectus). No
person associated with this offering or the Corporation has been sponsored,
recommended, or approved, nor has his abilities or qualifications in any
respect been passed upon by any state or any agency or officer of any state or
by the United States or any agency or officer of the United States. This
Prospectus does not constitute an offer or solicitation in any state or other
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such state or jurisdiction. Neither the delivery of this
Prospectus nor any sale hereunder shall under any circumstances create an
implication that there has been no change in the affairs of the Corporation
since the date thereof; however, if any material change in the Corporation's
affairs occurs at any time when this Prospectus is required to be delivered,
this Prospectus will be amended or supplemented.
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The Corporation intends to sell the Notes in this offering only in the
states in which the offering is qualified. An offer to purchase may only be
made and the purchase of the Notes may only be negotiated and consummated in
such states. The Subscription Agreement for the Notes must be executed, and the
Notes may only be delivered in such states. Resale or transfer of the Notes may
be restricted under state law. See "Risk Factors - No Market for Notes" and " -
Transferability of Notes."
NEITHER THESE SECURITIES NOR THE CORPORATION HAVE BEEN GUARANTEED,
SPONSORED, RECOMMENDED, OR APPROVED BY THE STATE OF FLORIDA OR ANY AGENCY OR
OFFICER OF THE STATE OF FLORIDA OR BY THE UNITED STATES OR ANY AGENCY OR
OFFICER OF THE UNITED STATES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
No public or other market for the Notes exists and there can be no
assurance that one may develop in the future. Accordingly, the Notes should be
purchased only to be held to term, because Note Holders may not be able to
liquidate or otherwise utilize their investment in the event of an emergency or
for any other reason. See "Risk Factors."
ADDITIONAL INFORMATION
The Corporation has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of 1933
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, its amendments
and exhibits. For further information pertaining to the Notes offered hereby,
and the Corporation, reference is made to the Registration Statement, including
the exhibits, filed therewith or incorporated by reference as a part thereof.
Statements in this Prospectus concerning the contents of any contract or other
document referred to are not necessarily complete. Where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions of such exhibit, to which reference
is hereby made for a full statement of the provisions thereof. The Registration
Statement may be inspected and copied at the Commission's Washington, D.C.
office at 450 Fifth Street, N.W., Washington, D.C. 20549 and the Northeast
Regional Office, Midwest Regional Office and Atlanta Regional Office at the
following addresses: 7 World Trade Center, Suite 1300, New York, NY 10048,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661-2511 and 3475 Lenox Road, N.E., Suite 1000, Atlanta GA 30326-1232,
respectively. The Registration Statement also may be inspected but not copied
at the Commission's Atlanta, Georgia office. Further, copies can be obtained at
prescribed rates from the Washington, D.C. office. Exchange Act reports may be
inspected and copied at the Commission's Washington, D.C. office and Northeast
and Midwest Regional Offices and may be obtained at prescribed rates from the
Commission's Washington, D.C. office. The Commission also maintains a Website
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, and the
address of such site is http://www.sec.gov.
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REPORTS TO NOTE HOLDERS
The Corporation intends to distribute to the Note Holders annual
reports containing financial statements that have been examined and reported on
by an independent certified public accountant. The Corporation may furnish such
other reports as the sole Director may deem necessary to inform the Note
Holders of major developments concerning the Corporation.
SUITABILITY STANDARDS: WHO CAN INVEST?
Notes will only be sold to a person who makes the required minimum
purchase and represents in writing that he has either: (i) a minimum annual
gross income of at least $30,000 and a net worth of $30,000 (exclusive of home,
home furnishings and automobiles); or (ii) a net worth of $75,000 (exclusive of
home, home furnishings and automobiles); or (iii) that he is purchasing in a
fiduciary capacity for a person who (or for an entity which) meets such
conditions. In the case of sales to fiduciary accounts, the suitability
standards must be satisfied by the beneficiary; however, where the fiduciary is
the donor of funds used for investment in the Corporation, the fiduciary and
not the beneficiary must meet the standards set forth above. Certain states may
impose higher suitability standards which an Investor must satisfy. See "State
Suitability Standards," Exhibit A.
All Participating Dealers will make reasonable inquiry to assure that
there is compliance with these suitability standards, and the Corporation will
not accept subscriptions from any person who does not represent in the
Subscription Agreement that he meets such standards.
No transfers will be permitted of less than the minimum permitted
purchase, nor may an investor transfer, fractionalize or subdivide Notes so as
to retain less than such minimum purchase.
The reasons for establishing these standards include the relative lack
of liquidity of Notes and certain risk factors associated with an investment in
the Notes. See "Risk Factors."
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TABLE OF CONTENTS
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I. PROSPECTUS PAGE
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Additional Information 10
Reports to Note Holders 11
Suitability Standards: Who Can Invest? 11
Summary of the Offering 14
The Corporation 16
Risk Factors 16
Sources and Uses of Proceeds 26
Business 28
Management 40
Certain Relationships and Related Transactions 41
Compensation Committee Interlocks and Insider Participation 41
Security Ownership of Certain Beneficial Owners and Management 41
Management's Discussion and Analysis and Results of Operations 43
Description of Securities 43
Underwriting 48
Indemnification 49
Transferability of Notes 49
Legal Matters 49
Legal Proceedings 50
Experts 50
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Financial Statements F-1
II. EXHIBITS
A. State Suitability Standards A-1
B. Subscription Agreement B-1
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SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by the detailed
information and financial statements appearing elsewhere in this Prospectus.
THE CORPORATION
The Corporation was formed under the laws of the State of Florida in
January, 1997, with its principal place of business at 12408 North Florida
Avenue, Tampa, Florida 33612, telephone (813) 935-9476.
THE NOTES AND THE OFFERING
The Corporation is offering subscriptions for a maximum of 9,900 Notes
in the principal amount of $1,000 each. The Notes will bear simple interest at
the rate of 10.5% per annum, payable interest only monthly, with all principal
and accrued interest, if any, due on June 30, 2002. Interest is calculated on
the Calculation Basis but is paid on the Payment Basis, with any difference
between interest determined on the Calculation Basis and the Payment Basis paid
in the final installment due under the Notes. The Corporation will use the
proceeds of this offering primarily for the Financing Activities. See "Sources
and Uses of Proceeds." The Notes will be secured by a first lien on the
Collateral. The principal due on the Notes is prepayable in whole or in part at
any time without premium or penalty. Any prepayment will include accrued and
unpaid interest at the time of prepayment on the entire principal amount due.
There are limited sources of funds to make interest and principal payments due
on the Notes. See "Risk Factors" and "Description of Securities."
The minimum purchase is 2 Notes. There is no minimum offering. There
are certain suitability standards for Investors. See "Suitability Standards:
Who Can Invest?"
BUSINESS
The Corporation was formed in January, 1997 to offer a package of
financial services to the sub-prime mobile home industry, including originating
and refinancing for its own account Contracts created in connection with the
financing of primarily used as well as some new Homes; selling Contracts to
other lenders; and providing certain floor plan financing to Dealers. In
addition, the Corporation may also: (1) purchase, refurbish (if necessary) and
lease or sell new or used Homes; (2) buy and improve land for development of
Parks or provide financing to others for such purpose; (3) buy and sell Parks;
and (4) purchase other sub-prime financial companies in the mobile home lending
business. As of the date of this prospectus, the Corporation has had no
operations.
RISK FACTORS
An investment in the Notes involves various risks, including the
following:
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- Because most of the borrowers under the Contracts are considered
sub-prime, the risk of default on the Contracts is greater than
if the Corporation originated Contracts with "A" credit or prime
borrowers.
- Over the past several years, lenders to sub-prime borrowers have
experienced increased rates of delinquency, default and credit
losses.
- There are various conflicts of interest resulting from the
relationship between the Corporation and Sterling Financial
Services, Inc., a Florida corporation (the "Servicing Company").
- Increased competition in the sub-prime mobile home finance
business and deviations from credit underwriting guidelines could
result in the Corporation originating Contracts with a greater
risk of loss.
- The Corporation has had no operations since inception.
- The Corporation anticipates experiencing negative interest
income and net operating losses in the initial stages of
operation, which will be funded from the proceeds of the offering
in an amount up to one year's aggregate interest payment on all
outstanding Notes at the close of this offering (maximum of
$1,039,500).
- There are limited sources of payment of interest and principal
on the Notes.
- The value of the Collateral will be less than the principal due
on the Notes.
- No public or other market for the Notes exists and there can be
no assurance that one may develop in the future.
- The success of the Corporation will, to a large extent, depend
on the quality of services provided by Mr. Sutter and the
Servicing Company's employees. The loss of the services of Mr.
Sutter could materially adversely affect the business of the
Corporation.
See "Risk Factors."
SELECTED FINANCIAL INFORMATION
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
JANUARY 10, 1997
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Assets . . . . . . . . . . . . . . . . . . . . . . . . $1,000
Liabilities. . . . . . . . . . . . . . . . . . . . . . $ 0
Net Worth . . . . . . . . . . . . . . . . . . . . . . $1,000
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THE CORPORATION
The Corporation was formed under the laws of the State of Florida in
January, 1997, primarily to originate and refinance sub-prime mobile home
financing Contracts as well as engage in other related business activities. The
principal place of business of the Corporation is located at 12408 North
Florida Avenue, Tampa, Florida 33612, telephone (813) 935-9476.
RISK FACTORS
A purchase of the Notes issued by the Corporation involves various
risks, as set forth below. Prospective Investors should consider these risk
factors before making a decision to purchase the Notes.
1. SUB-PRIME BORROWERS
Most of the mobile home purchasers in the sub-prime market segment are
hourly wage-earners with little or no personal savings. In most cases, such
purchasers' ability to remit payments as required by the terms of the Contracts
is entirely dependent on their continued employment, and job losses will
quickly result in defaults on their consumer debts. A prolonged economic
recession resulting in widespread unemployment in this wage-earning sector
could cause a significant rise in delinquencies and charge-offs, which could
adversely affect the Note Holders by reducing the funds available to make
payments on the Notes and reducing the value of the Collateral.
2. INDUSTRY TRENDS
Over the past several years, lenders in the sub-prime market have
experienced increased rates of delinquency, default and credit losses.
Management believes this is due in part to the maturation of the young
sub-prime lending industry, the current weakening trend of the consumer credit
market, attempts by lenders which lack effective knowledgeable management to
determine the correct balance between risk and reward, and the effect of
additional competition on the marketplace. If these trends continue, the
Corporation may experience credit losses, which could adversely affect the Note
Holders by reducing the funds available to make payments on the Notes and the
value of the Collateral. See "Business."
3. COMPETITION
The sub-prime mobile home finance market is highly fragmented and, to
date, is served by only a few non-traditional consumer finance sources. If
commercial banks, savings and loans, credit unions and other consumer lenders
that apply more traditional lending criteria, all of which are larger and have
significantly greater financial resources than the Corporation, expand their
activities in the market served by the Corporation, the competition for
suitable Contracts in that market will continue to intensify. See "Business
Mobile Home Finance Industry - Sub-Prime Market Segment" and "Business -
Competition."
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4. CONFLICTS OF INTEREST
Anthony A. Sutter, the sole officer and director of the Corporation
and the Servicing Company, may engage for his own account, or for the account
of others, including the Affiliated Entities, in other business ventures, some
of which may have the same investment objectives as the Corporation, and
therefore compete with the Corporation.
To the extent the Corporation competes with other businesses,
including Affiliated Entities, competition for origination of suitable
Contracts would intensify, which could have an adverse effect on the
Corporation because the Corporation may originate Contracts with a greater risk
of loss, which could adversely affect the Note Holders by reducing the funds
available to make payments on the Notes and the value of the Collateral.
This competition for origination of Contracts creates a potential
conflict of interest because it is anticipated that the Servicing Company,
which is responsible for originating Contracts, will provide similar
origination services to Affiliated Entities formed by Management and his
affiliates which are engaged in businesses similar to that of the Corporation.
An additional conflict of interest with respect thereto exists because
Management of the Corporation and Management of the Servicing Company are the
same individual, Mr. Sutter. See "Management." Accordingly, there is no
assurance that decisions concerning Contract origination and other matters will
be made which more favorably impact the Corporation than the Affiliated
Entities, increasing the risk of default on the Notes.
See "Business - Relationship with Servicing Company - Conflicts of
Interest."
5. DEVIATIONS FROM CREDIT UNDERWRITING GUIDELINES
Although the Corporation has established certain guidelines with
minimum acceptable credit criteria for Contract origination, there is no
limitation upon the number of Contracts which deviate from these guidelines
which can be originated. See "Business." The origination of a significant
number of Contracts which deviate from underwriting guidelines could cause a
significant rise in delinquencies and charge-offs, which could adversely affect
the Note Holders by reducing the funds available to make payments on the Notes
and reducing the value of the Collateral.
6. SUBJECTIVE DECISIONS BY SERVICING COMPANY
It is anticipated that the Servicing Company, which is responsible for
originating Contracts, will provide similar services to Affiliated Entities.
Any decision concerning the investment of funds available to the Corporation
and the Affiliated Entities will be made on a subjective, case-by-case basis in
a manner in which Management believes to be in the best interest of each
entity. There is a conflict of interest because Management of the Corporation
and Management of the Servicing Company are the same individual, Mr. Sutter.
See "Management." Accordingly, there is no assurance that decisions will be
made which more
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favorably impact the Corporation than the Affiliated Entities,
increasing the risk of default on the Notes. See "Business Relationship with
Servicing Company."
7. NO OPERATING HISTORY
The Corporation has had no operations since inception. The success of
the Corporation and its ability to make payments to the Note Holders is
dependent upon the extent to which the Corporation is able to conduct
successfully its Activities, particularly the origination of Contracts. There
is no assurance that the Corporation will be able to conduct its Activities in
a manner which will generate sufficient cash flow to make payments to Note
Holders.
8. ANTICIPATED RESULTS OF CONTINUING OPERATIONS
The Corporation anticipates experiencing negative interest income and
net operating losses in the initial stages of operation. These losses would
primarily be the result of the delay between the time subscription proceeds are
received from investors and the time the Corporation commences to receive
interest payments under the Contracts originated with such funds or other
revenues from its Activities. Thus, in the initial stages of the Corporation's
operation, interest accrued and paid on the Notes will exceed revenues from
Activities. As the proceeds of the offering become fully invested, the
Corporation anticipates receiving interest payments on the Contracts
significantly in excess of interest which will accrue on the Notes.
9. POTENTIAL FOR PAYMENT OF INTEREST FROM OFFERING PROCEEDS
In accordance with the provisions of the Security Agreement, an amount
up to one year's aggregate interest payment on all outstanding Notes at the
close of this offering (maximum of $1,039,500) may be paid from the proceeds of
this offering. If such payments are made, the amount of offering proceeds
available to fund the Activities will be reduced, the amount of the Collateral
will be reduced and the Corporation will have to generate revenues from a
smaller number of Contracts or reduced other Activities to make payments on the
Notes, increasing the risk of default on the Notes and the risk of loss on the
Notes in the event of such default. See "Sources and Uses of Proceeds" and
"Description of Securities - Security Agreement."
10. LIMITED SOURCES OF PAYMENT ON THE NOTES
There are limited sources of payment of interest and principal on the
Notes. There is no assurance that sufficient funds will be available to make
such payments, particularly principal payments due at the term of the Notes, if
the source thereof is a sale or refinancing of the Notes. See "Description of
Securities."
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11. VALUE OF COLLATERAL LESS THAN PRINCIPAL OF THE NOTES
Note Holders will have a security interest in the Collateral. The
value of the Collateral, if liquidated upon an Event of Default on the Notes,
in the early part of the term of the Notes will not and in the later part of
the term of the Notes may not be sufficient to repay all amounts due thereon,
this situation arises because some of the proceeds of this offering will be
used for purposes other than the origination of Contracts or other Activities
which result in underlying Collateral. It is anticipated that upon the
completion of the investment of the proceeds of this offering, the maximum
value of such Collateral will not exceed 78.9% of the principal balance on the
Notes, and may be less to the extent that the proceeds of this offering are
used to pay interest on the Notes. Holders of Notes are required under the
Security Agreement to proceed against and liquidate all the Contracts and other
Collateral before looking to any other assets of the Corporation. See "Sources
and Uses of Proceeds" and "Business."
The Corporation will have to operate at a profit to generate
sufficient funds to offset these expenditures to be able to make principal and
interest payments on the Notes when due. If sufficient profits are not
generated, the repayment of all or part of the interest or principal on the
Notes may be delayed or never be made. See "Sources and Uses of Proceeds" and
"Description of Securities."
12. FLUCTUATIONS IN QUALITY AND VALUE OF COLLATERAL
The Collateral securing the Notes may fluctuate in quality and value
as the Corporation replaces Collateral due to sale, refinancing or similar
reasons, because Borrowers under the Replacement Collateral may be more or less
creditworthy or the nature of the Replacement Collateral may be less liquid or
depreciate faster than the Collateral which it replaced. These fluctuations may
adversely affect the aggregate value of the Collateral, which may reduce the
funds available in the event of a default on the Notes and thereby increase the
risk of loss to Note Holders upon default.
13. POSSIBLE LOSS OF PERFECTED SECURITY INTEREST IN AND PRIORITY CLAIM ON
THE COLLATERAL
Under certain limited circumstances, the Note Holders' security
interest in the Collateral may become unperfected subsequent to the
Corporation's acquisition of the Collateral. See "Business." If such security
interest were not perfected, the Note Holders would not have a priority claim
on the Collateral and would, in effect, be treated as any unsecured creditor of
the Corporation.
The Note Holders' security interest in the Collateral may also be
adversely affected by a number of Federal and state laws, including the Uniform
Commercial Code, Federal Bankruptcy Code, numerous Federal and state consumer
protection laws, laws which apply when a Home is moved to a state other than
the state in which it is initially registered, and liens for unpaid taxes under
the Internal Revenue Code of 1986. All of the foregoing could cause the Note
Holders to
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lose a priority claim on the Collateral, even if they have a perfected security
interest thereon. See "Business."
Upon an Event of Default under the Notes, if the Note Holders did not
have a priority claim on the Collateral through perfection of their security
interest, or if they lose a priority claim on the Collateral, their ability to
sell the Collateral and use the proceeds to repay the Notes would be adversely
affected as other creditors would have an equal, or in some cases a superior,
claim to the Collateral, and Note Holders could suffer a partial or total loss
of principal and unpaid interest on the Notes.
14. PREPAYMENT OF NOTES
The Corporation may prepay the principal on the Notes in whole or in
part at any time without notice, premium or penalty. Any prepayment will
include accrued and unpaid interest on the entire principal amount due at the
time of prepayment. If the Notes are prepaid before maturity, Note Holders may
not be able to acquire investments paying the same or greater return at the
time of prepayment, which could result in the Note Holders receiving less
income during the period from origination to stated maturity date of the Notes
than had been anticipated at the time of acquiring the Notes. See "Description
of Securities."
15. NON-SELF-AMORTIZING LOANS
The Notes do not provide for the amortization of any of the principal
amount prior to maturity. Such Notes involve greater risks than loans in which
the principal amount is amortized over the term of the loan because the ability
of the Corporation to repay at maturity the outstanding principal amount of
such loans is dependent upon the Corporation's ability to operate at a profit,
including collecting all principal and interest due on the Contracts.
16. NO SINKING FUND FOR REPAYMENT OF THE NOTES
There is no sinking fund for payment of principal or interest on the
Notes. Thus, there is less security for the repayment of Notes upon default
than if there was such a fund.
17. CONTRACTS OUTSTANDING AT MATURITY DATE OF THE NOTES
Management believes that a substantial portion of the Contracts will
generally be refinanced or repaid before contractual maturity dates. However,
the Corporation intends to originate Contracts with maturity dates of up to 180
or more months. Thus, the Corporation may have a significant number of
outstanding Contracts at the maturity date of the Notes. If the Corporation is
not able to sell or refinance its portfolio of Contracts at the maturity date
of the Notes, the Corporation could default on repayment of the Notes, and
repayment of amounts due on the Notes may be delayed or impaired. See
"Business."
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<PAGE> 21
18. LOSS ON NOTES
If a Note Holder suffers a loss on his Notes, it may be treated as a
capital rather than an ordinary loss, which may affect the manner in which such
loss may be utilized for tax purposes.
19. NO MARKET FOR AND LIMITED TRANSFERABILITY OF NOTES
No public or other market for the Notes exists and there can be no
assurance that one may develop in the future. Because there is a lack of a
market for the Notes, Note Holders should purchase the Notes only as a
long-term investment, as they may not be able to liquidate their investment in
the Notes in the event of an emergency or for any other reason.
20. NO RATING OF THE NOTES
The Notes will not be rated by any rating agency. In general, unrated
notes have a greater risk of loss and less liquidity than rated Notes.
21. ARBITRARY DETERMINATION OF OFFERING PRICE OF NOTES
The price and amount of Notes offered by the Corporation has been
established arbitrarily and bears no relationship to its asset value, book
value, net worth or any other established criteria of value or to the earning
potential of the Corporation or the Notes.
22. NO MINIMUM OFFERING
There is no minimum offering. If less than the Maximum Offering is
sold, the proceeds will used for any of the business purposes described in this
Prospectus as determined in the best interest of the Corporation by Management.
If substantially less than the Maximum Offering is sold, Management anticipates
that there will be no floor plan financing or working capital reserve, and the
majority of the proceeds will be used for origination of Contracts. However, if
less than the Maximum Offering is sold, there will be a smaller and less
diversified portfolio of Contracts or other assets as Collateral, Note Holders
will pay a higher organizational cost per Note, and Note Holders may have an
increased risk of default and loss upon default. See "Sources and Uses of
Proceeds" and "Business."
23. INVESTMENT OF PROCEEDS
The success of the Corporation, in large part, depends on its ability
to keep its assets continuously invested. If the Corporation cannot locate
sufficient acceptable investments on a timely basis, the Corporation may be
unable to keep the maximum anticipated percentage of its assets so invested,
which may result in lower rates of return from the investment of its assets in
other permitted investments. This may reduce the funds available to make
payment of interest and principal on the Notes.
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<PAGE> 22
24. NO CONTRACTS IDENTIFIED
The uncertainty and risk of an investment in the Notes is increased to
the extent that investors are unable to evaluate for themselves the economic
merit of the Contracts originated or other assets to be acquired to be
identified. Although the Corporation is currently seeking suitable Contracts
and other assets, no agreement or understanding has been reached to originate
any specific Contracts or assets. Investors must depend solely upon the ability
of Management and the Servicing Company with respect to the selection of
Contracts and other assets. See "Management" and "Business - Relationship with
the Servicing Company." There can be no assurance that the Corporation will be
successful in using all of the proceeds of the offering to originate Contracts
or acquire other assets. The inability of the Corporation to find suitable
Contracts to originate or other assets to acquire with the proceeds of this
offering may result in delays in investment of such proceeds and in payment of
interest and principal due on the Notes.
25. FIXED EXPENSES
Operating expenses of the Corporation, including certain compensation
which may be paid to the Servicing Company, must be met regardless of the
Corporation's profitability. See "Business" and "Management." Accordingly, it
is possible that the Corporation may be required to borrow funds or liquidate a
portion of its investments in order to pay its expenses or to make the required
payments to Note Holders. There can be no assurance that such funds will be
available to the extent, and at the time, required by the Corporation,
increasing the risk of default on the Notes if such situation occurs.
26. NO INTEREST IN THE CORPORATION
A NOTE HOLDER WILL NOT ACQUIRE OR OBTAIN ANY BENEFITS WHICH MIGHT
ACCRUE THROUGH AN EQUITY INTEREST IN THE CORPORATION BY A PURCHASE OF NOTES.
NOTE HOLDERS HAVE NO ABILITY TO VOTE ON CORPORATE MATTERS OR OTHERWISE
INFLUENCE MANAGEMENT OF THE CORPORATION.
27. RELIANCE ON MANAGEMENT AND SERVICING COMPANY
The Corporation's day-to-day affairs will be administered entirely
through and decisions thereto will be made exclusively by the Servicing
Company, which has the same management as that of the Corporation. The success
of the Corporation will, to a large extent, depend on the quality of services
provided by Mr. Sutter and the Servicing Company's future employees. As of the
date of this Prospectus, there was only one employee of the Corporation, Mr.
Sutter, and only one other employee of the Servicing Company in addition to Mr.
Sutter.
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The loss of the services of Mr. Sutter or the termination of the
Serving Agreement with the Servicing Company could materially adversely affect
the business of the Corporation. There is no employment agreement between Mr.
Sutter and the Corporation or the Servicing Company. There is no "key man"
insurance on the life of Mr. Sutter. The Servicing Agreement may be terminated
by either party without cause upon 15 days' notice. If the Servicing Agreement
is terminated, the Corporation will have to locate replacement personnel or
another servicing company. There is no assurance that such personnel or company
could be located, or located on a timely basis, with potential adverse
consequences to Note Holders. See "Business - Relationship with the Servicing
Company."
28. ALLOCATION OF MANAGEMENT RESOURCES
Mr. Sutter will devote only so much of his time to the business of the
Corporation as in his judgment is reasonably required. Mr. Sutter will have
conflicts of interest in allocating management time, services and functions
between the Corporation and any future entities which he may organize, as well
as other business ventures in which he is involved. Mr. Sutter believes that he
will be able to retain sufficient staff personnel to be fully capable of
discharging his responsibilities to all entities he has organized.
29. SERVICING COMPANY'S NEED FOR ADDITIONAL EMPLOYEES
The Servicing Company will need to hire additional employees to
fulfill its duties under the Servicing Agreement with the Company. There is no
assurance that such personnel can be located, or located on a timely basis,
with potential adverse consequences to Note Holders. See "Business -
Relationship with Servicing Company."
30. LIMITED GEOGRAPHIC AREA OF OPERATIONS
The Corporation intends to limit its operations to Florida.
Consequently, the Corporation's operations could be unfavorably impacted by
adverse changes in the economic environment in Florida which could adversely
affect the creditworthiness of the Corporation's prospective borrowers in the
sub-prime market in Florida. Although the Corporation believes Florida's
economy will continue to grow, there can be no assurance that this is the case.
The resulting lack of diversity in the geographic area in which the Corporation
operates may increase the risk of loss to the Corporation and the Note Holders
because adverse economic conditions which may occur in Florida but not
elsewhere in the country will have a greater adverse affect on the
Corporation's operations and thus its ability to make payments on the Notes
than if the Corporation operated in a broader geographic area.
See "Business - Market Area."
31. CONSUMER FINANCE LAWS AND REGULATIONS
The Corporation's business, particularly its Finance Activities, is
subject to regulation and licensing under various federal, Florida and local
consumer protection statutes, regulations and ordinances. These laws, rules and
regulations: (i) govern the way the Corporation can operate; (ii) limit the
interest rate and other charges that may be imposed by, or prescribe certain
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<PAGE> 24
other terms of, the Contracts that the Corporation originates; and (iii) define
the Corporation's rights to repossess and sell collateral. If the Corporation
fails to comply with these laws and regulations, it could be be required to
cease operations or be subject to fines and penalties, and borrowers under the
Contracts could have civil remedies against the Corporation and defenses under
the Contracts which could adversely affect the Corporations ability to enforce
its rights and collect payment of sums due thereunder, all of which could
eliminate or reduce the Corporation's cash flow and thereby its ability to make
payments on the Notes. There is no assurance that laws and regulations under
which the Corporation operates will not become more restrictive, which could
reduce the Corporation's cash flow and thereby its ability to make payments on
the Notes. See "Business - Consumer Finance Laws and Regulations."
32. CHANGES IN PROGRAMS, PRODUCTS, POLICIES AND PROCEDURES
Factors such as increased competition in the industry and other
industry trends, as well as other factors, may cause the Corporation from time
to time to review and change its financing programs, products and services
offered, and other business policies and procedures. To the extent there are
future changes in these areas, the Corporation may originate Contracts or be
subject to other circumstances which increase the risk of loss to Note Holders.
The Corporation will continually review these areas and reserves the right to
change any criteria related thereto described herein or otherwise as it deems
appropriate. See "Business - Changes in Programs, Products, Policies and
Procedures."
33. SECURITIES LAW LIABILITIES
Management of the Corporation has in the past and may in the future
organize offerings of similar investment programs. Such programs may not be
registered or qualified under federal or state securities laws. Although
Management is currently not aware of any violations of federal securities laws
which have occurred, there is no assurance that Management may not incur
liabilities in the future or as a result of such activities, in which event he
may not be able to carry out the management functions under the Servicing
Agreement (the "Servicing Agreement") between the Corporation and the Servicing
Company, which may affect the Corporation's ability to make payments to Note
Holders. Although the capital of the Corporation is all pledged as Collateral,
if, as a result of any such violation, a third party were to obtain ownership
of Management's equity interest in the Corporation and the Servicing Company,
there is no assurance that the Corporation or Servicing Company would be
operated by such third party in a manner which would not adversely affect the
Note Holders. See "Business Relationship with Servicing Company."
34. INVESTMENT COMPANY ACT OF 1940
The sole Director intends to conduct the operations of the Corporation
so that it will not be subject to regulation under the Investment Company Act
of 1940. Among other things, he will attempt to monitor the proportion of the
Corporation's portfolio which is placed in various investments so that the
Corporation does not come within the definition of an investment
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company under such Act. As a result, the Corporation may have to forego certain
investments which would produce a more favorable return to the Corporation,
increasing the risk of default on the Notes.
35. INCREASE IN TRUSTEE FEES UPON THE OCCURRENCE OF AN EVENT OF DEFAULT
The Indenture of Trust provides that, in addition to the fee of $500
per year to be paid to the Trustee, upon the occurrence of an Event of Default,
as defined in the Indenture of Trust or Security Documents, the Trustee will
receive an additional fee of $75 per hour for time incurred in rendering his
duties as Trustee. If such an Event of Default occurs, there is no assurance
that the Trustee will not be required to expend a significant amount of time in
exercising his duties as Trustee, and the resulting compensation paid to the
Trustee will reduce funds available to make payments due on the Notes.
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SOURCES AND USES OF PROCEEDS
The following table sets forth the estimated application by the
Corporation of the anticipated proceeds of the sale of Notes.
<TABLE>
<CAPTION>
Maximum
-------
(9,900 Notes)
AMOUNT PERCENT
------ -------
<S> <C> <C>
Origination of Contracts $5,697,500 57.6%
Interest on the Notes (1) 1,039,500 10.4
Floor Plan Financing (1) 1,000,000 10.1
Estimated Initial Expenses Related to Origination of Contracts (2) 600,000 6.1
Loan to Servicing Company for Purchase and/or Lease of Equipment (1) (3) 75,000 .8
Working Capital Reserve (4) 300,000 3.0
Sales Commissions and Concessions and Managing Dealer Fee (5) 891,000 9.0
Due Diligence Reimbursement and Non-Accountable Expense Allowance (6) 148,500 1.5
Other Organizational and Offering Expenses (7) 148,500 1.5
---------- -------
TOTAL USES OF PROCEEDS $9,900,000 100%
========== =======
</TABLE>
- ----------------------------
(1) To the extent these funds are not used for this purpose, they will be
available for other aspects of the Corporation's business. See
"Business."
(2) Until the Corporation generates Cash Flow in excess of operating
expenses including interest payments due under the Notes, offering
proceeds will be used to make payments under the Servicing Agreement.
See "Business."
(3) This amount will be lent to the Servicing Company to be used for the
purchase and/or lease of office space, office equipment, trucks and
automobiles. The Servicing Company
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will repay any advanced funds in equal monthly installments of
principal and interest at the rate of 10.5% per annum, with the final
payment due on June 30, 2002.
(4) This amount is available for payment of operating expenses other than
interest on the Notes.
(5) The Corporation will pay the Managing Dealer a selling commission of
7.0% of the offering price ($70 per Note) for all Notes sold and a
Managing Dealer Fee in an amount up to 2% ($20 per Note). See
"Underwriting."
(6) This amount includes reimbursement for actual due diligence expenses
which may be paid to the Managing Dealer in an amount up to .5% per
Note ($5 per Note) and payments which may be made to the Managing
Dealer by the Corporation as a Non-Accountable Expense Allowance not
to exceed 1.0% of the offering price per Note ($10 per Note) See
"Underwriting."
(7) This amount ("Amount") includes legal, accounting, printing and other
offering costs and is in addition to the amounts referred to in
footnotes 5 and 6 above. The Corporation will pay from the proceeds of
this offering all of such Amount, estimated to be $148,500 (Maximum
Offering).
If less than the Maximum Offering is sold, the proceeds of the
offering will be used in the following order of priority: Loan to Servicing
Company for Purchase and/or Lease of Equipment, Estimated Initial Expenses
Related to Origination of Contracts, Origination of Contracts, Interest on the
Notes, Floor Plan Financing, and Working Capital Reserve. See "Risk Factors."
The Corporation believes it will be able to satisfy its cash
requirements for the foreseeable future if it does not expand its business by
originating additional Contracts. However, in order for the Corporation to
continue to expand its dealer base and portfolio of Contracts, the Corporation
must secure additional capital resources, including additional debt or equity
offerings and institutional financing, such as a line of credit. No assurance
can be given that additional capital resources will be available through such
sources, or available on reasonable terms. Management does not believe that
Investors in this offering will be adversely affected if the Corporation is not
able to expand its business by securing additional capital resources.
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BUSINESS
The Corporation was formed in January, 1997, to offer a package of
financial services to the sub-prime mobile home industry.
It is anticipated that approximately 85% of the Corporation's business
will involve originating and refinancing the Contracts created in connection
with the financing of primarily used as well as some new Homes. As a secondary
activity, not anticipated to exceed approximately 15% of the Corporation's
business, the Corporation may also provide certain floor plan financing to
Dealers. From time to time, in what is anticipated to be isolated transactions,
the Corporation may also purchase, refurbish (if necessary) and lease or sell
new or used Homes; buy and improve land for development of Parks, or provide
financing to others for such purpose; buy and sell Parks; and purchase other
sub-prime financial companies in the mobile home lending business. These
ancillary activities would only be undertaken if Management becomes aware of a
profitable business opportunity in these isolated segments. Although some of
these activities may result in the financing of the purchase of Homes to be
located in Parks owned by Management and his Affiliates, the Corporation was
not formed with the primary purpose of, and it is not anticipated that a
significant amount of the Corporation's activities will facilitate, such
transactions.
The Corporation has had no operations since inception. Accordingly, as
of the date of this Prospectus, the Corporation has no contracts or
arrangements in place with respect to these activities. See "Risk Factors."
MOBILE HOME FINANCE INDUSTRY
SUB-PRIME MARKET SEGMENT
The Corporation operates in the sub-prime segment of the mobile home
finance market, focusing on financing used Homes sold to sub-prime borrowers. A
sub-prime borrower is a purchaser of a Home who does not qualify for
traditional "A" or "Prime" credit, which in general means that the borrower
does not have all of the following characteristics: (i) a long credit history
and no defaults, (ii) at his/her current job for at least 18 months, (iii) can
easily finance a Home through a traditional financial institution, such as a
bank, (iv) usually a homeowner, and (v) typical risk of loan loss is less than
3% and whose typical cost of credit is prime plus 1% to 3%. Sub-prime borrowers
are rated "B," "C" or "D," based upon the degree of variance from the foregoing
characteristics.
It has been Management's experience that lenders to prime mobile home
financing borrowers impose interest rates less than the maximum provided by
law. Management anticipates that almost all of its Contracts will be at the
maximum interest rate permitted by law. See "Consumer Finance Laws and
Regulations." To the extent this interest rate differential continues,
Contracts financed in the sub-prime market segment will have the potential for
higher yields, but, because sub-prime borrowers are not as creditworthy as
prime
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borrowers, these Contracts also present greater risk of default and loss.
Accordingly, the net yield on sub-prime contracts may be less than that on
prime contracts. See "Risk Factors."
COMPETITION
Although there is some competition in the mobile home finance
business, the Corporation believes that there are few competitors providing
financing to sub-prime purchasers of Homes. The sub-prime market is highly
fragmented and, to date, is served by only a few non-traditional consumer
finance sources. Because the Corporation provides financing to borrowers who do
not qualify for traditional financing, the Corporation does not believe that it
competes with most commercial banks, savings and loans, credit unions and other
consumer lenders that apply more traditional lending criteria to the credit
approval process. Historically, these traditional sources of mobile home
financing (some of which are larger and have significantly greater financial
resources) have not served the Corporation's sub-prime market segment to any
significant extent. However, if these and other companies expand their
activities in the market served by the Corporation, the competition for
suitable Contracts in that market will continue to intensify, which could have
an adverse effect on the Corporation. See "Risk Factors."
In connection with the origination of Contracts, the Corporation will
encounter significant competition from persons or entities which may have
objectives similar in whole or in part to those of the Corporation. Most of
such competitors may be substantially better financed and have reputations and
public awareness of their operations which are more widely known and accepted.
The pressure of such competition may require that the Corporation pay more for
Contracts it originates or to originate Contracts of lesser quality, which
could reduce or eliminate payments to Note Holders. See "Risk Factors."
ORIGINATION AND SERVICING OF CONTRACTS
The Corporation has entered into a Servicing Agreement with the
Servicing Company, to provide all services in connection with Contact
origination and servicing. which agreement may be terminated by either party
without cause upon 15 days' notice. See "Risk Factors." Because the Servicing
Company must operate within the guidelines established by the Corporation, all
management and operational decisions made by the Servicing Company will be the
same as would be made if the Corporation made such decisions directly. A
description of the guidelines of the corporation is set forth below. No funds
of the Corporation are deposited or kept in any account commingled with funds
of the Servicing Company or any other person or entity. See "Business
Relationship with Servicing Company."
ORIGINATION
The Corporation intends to originate Contracts, as opposed to
purchasing Contracts at a discount from Dealers or others. The Corporation will
contact borrowers as well as Park owners and Dealers directly or by telephone
or mailing to advise them of the Corporation's program for Contract
origination. It is not anticipated that the Corporation will be dependent upon
one or a few Park owners or Dealers for identifying potential borrowers under
Contracts originated by the
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Corporation. In addition, the Corporation may use print advertising directed at
individual borrowers. It is anticipated that a Park owner, Dealer or potential
borrower will contact the Corporation regarding the availability of financing,
and the Corporation will make a credit application available directly to the
borrower.
When the credit application from the borrower is received, an
investigator will review the application and obtains the applicant's credit
bureau and other information.
Contract origination guidelines include the following minimum
acceptable criteria:
- Employment history - at least six months on the job;
- Income - depends on the amount of the loan and the debt to
income ratio (see below) of the borrower;
- Time at residence - at least one year at current residence;
- Debt to income ratio - personal debt cannot exceed 50% of the
borrower's net income;
- Bankruptcy - all debts must have been fully discharged at
least one year prior to application for the loan;
- Child support - if the borrower is paying child support, it
will be treated as a personal debt and factored into the debt
to income ratio; if the borrower is receiving child support,
such income will only be considered if court mandated;
- Repossessions - must have occurred at least one year prior to
application for the loan;
- Liens/judgments - will be decided on a case-by-case basis,
depending on the type of lien or judgment, the amount
involved and the age thereof;
- Previous delinquencies, collections and charge-offs - will be
decided on a case-by-case basis with consideration taken for
mitigating circumstances, such as divorce, disability,
extended illness or layoff due to downsizing; and
- Co-buyers and co-signers - will also be subject to the
minimum acceptable criteria set forth above.
There are no fixed criteria pursuant to which material deviation these
guidelines will be permitted. However, no Contract will be originated to a
borrower deviating from these guidelines for which there is not an increased
down payment or a co-signer meeting the guidelines, or both. The additional
down payment required will increase with the increase in deviation from the
guidelines, although there is no fixed formula for determining the amount of
increased down payment required.
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In addition, the Corporation will not finance more than 130% of
National Automobile Dealers Association (NADA) manufactured home book retail
value. It will not finance Homes manufactured before 1980. Contracts under
$10,000 will have no more than a 10-year term, and Contracts between $10,000
and $25,000 will not have more than a 15-year term. The Corporation will not
finance amounts in excess of $25,000. See "Business - Consumer Finance Laws and
Regulations."
When this process is complete, an application will be approved
unconditionally or with conditions, such as adjustments to the interest rate,
down payment, maximum loan to value, co-maker or other significant conditional
criteria. It is anticipated that no more than ten percent (10%) of the
Contracts originated will deviate materially from these guidelines, although
there is no specific limitation imposed thereon.
Prior to closing the funding, the Corporation reviews the financing to
determine the following: (i) all required documentation has been included, (ii)
the math is correct, (iii) the regulatory requirements have been satisfied,
(iv) the amount financed does not exceed the maximum loan allowed, and (v) any
conditions imposed have been satisfied. The Corporation will contact the
insurance carrier to confirm insurance.
SERVICING
Billing. The Servicing Company generates bi-monthly statements which
are sent to the borrower.
Collections. The Corporation has established certain collection
guidelines, which guidelines will not necessarily be followed in all cases and
which are subject to modification at any time.
When a delinquency occurs, a Collector will make a call by the first
day of the delinquency. By the third day of delinquency, if the account has not
been brought current, the Collector will personally visit the delinquent
borrower. If the borrower is unable to make all required payments on a current
basis, the Collector may make reasonable payment arrangements to cure the
delinquency. If all of these collection processes are not successful, the
repossession process commences immediately.
Repossessions and Resale Department. Either the borrower voluntarily
agrees to vacate the Home, or an attorney is contacted by the Corporation to
effect an involuntary repossession. All costs associated with the repossession
are an obligation of the borrower. To effect an involuntary repossession, in
general, the borrower is first given written notice of intent to repossess, and
a period of time, generally five days, to cure all defaults. If the defaults
are not cured within said time period, a complaint is filed and a judgment
obtained. After the judgment is obtained, a writ of possession is obtained and
given to the appropriate law enforcement agencies, who evict the borrower from
the Home. The Home will be renovated as necessary and sold in its then current
location, if possible, or moved to a Dealer's lot or another Park for resale-
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In the event of default by Home purchasers, the holder of the retail
installment sale contract has all the remedies of a secured party under the
Uniform Commercial Code (the "UCC"), except where specifically limited by other
state laws, including the right to repossession through self-help. The UCC and
other state laws place restrictions on repossession sales, including
requirements that the secured party provide the debtor with reasonable notice
of the date, time and place of any public sale and/or the date after which any
private sale of the collateral may be held. The debtor has the right to redeem
the collateral prior to actual sale by paying the secured party the delinquent
principal balance of the obligation plus reasonable expenses for repossessing,
holding, and preparing the collateral for disposition and arranging for its
sale, plus, in some jurisdictions, reasonable attorneys' fees, or by payment of
the unpaid balance. In addition, in several cases, consumers have asserted that
the self-help remedies of secured parties under the UCC and related laws
violate the due process protection provided under the 14th Amendment to the
Constitution of the United States. Courts have generally upheld the notice
provisions of the UCC and related laws as reasonable or have found that the
repossession and resale by the creditor does not involve sufficient state
action to afford constitutional protection to consumers. The foregoing may
limit the ability of the Corporation to realize maximum recovery upon
repossession of a Home, which may decrease funds available to make payments on
the Notes.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated
by the UCC, other state statutes or the common law, has the effect of
subjecting a seller (and certain related lenders and their assignees) in a
consumer credit transaction and any assignee of the Seller to all claims and
defenses which the debtor in the transaction could assert against the seller of
the goods. Liability under the FTC Rule is limited to the amounts paid by a
debtor under the contract, and the possible forfeiture of any balance remaining
due thereunder from the debtor. This may limit the Corporation's recovery in
the event of a default under a Contract, or require the Corporation to refund
to the Borrower amounts already paid on the Contract, which may decrease funds
available to make payments on the Notes.
In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral and/or to enforce a deficiency judgment. For
example, in a Chapter 13 proceeding under the Federal Bankruptcy Code, a court
may prevent a lender from repossessing a mobile home, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the Home at the time of bankruptcy, leaving the lender as a
general unsecured creditor for the remainder of the
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<PAGE> 33
indebtedness. A bankruptcy court may also reduce the monthly payments due under
a contract or change the rate of interest and time of repayment of the
indebtedness. This may limit the Corporation's ability to receive full payments
on a Contract or recovery in the event of a default under a Contract, which may
decrease funds available to make payments on the Notes.
SALE OF CONTRACTS
The Corporation may from time to time sell blocks of Contracts (the
"Sale Contracts") which it originates to other lenders. The Corporation does
not anticipating selling such Contracts until at least twelve (12) months after
the origination date.
Contracts will not be sold unless the aggregate consideration received
therefor is equal to or greater than the principal due under the Contract at
the time of sale (the "Minimum Sale Amount"), unless in a transaction (the
"Repayment Transaction") which results in the repayment of all principal and
interest due on all Notes, in which case the amount of such repayment shall be
the Minimum Sale Amount. The Security Agreement and Indenture of Trust provide
that the Trustee shall release the security interest in the Sale Contracts and
release all Collateral related thereto upon the receipt by the Corporation of
cleared funds in excess of the Minimum Sale Amount. Except for a Repayment
Transaction, it is not anticipated that the premium received upon the sale of
the Sale Contracts plus the interest to be earned on the Replacement Contracts
will be less than the amount that would have been received on the Sale
Contracts if the sale had not occurred.
FLOOR PLAN FINANCING
The Corporation may provide financing to Dealers for Homes held for
resale to Home purchasers, called floor plan financing. The Corporation
anticipates that the financing will be at effective interest rates ranging from
14% to 24% (the A.P.R. may be less, but the effective rate includes additional
interest payments in the form of points or similar charges allowed by law),
with maturaties ranging from one to two years. The Corporation does not
anticipate lending more than One Hundred Thousand Dollars ($100,000) to any one
dealer.
OTHER BUSINESS SEGMENTS
The Corporation may also: (1) purchase, refurbish (if necessary) and
lease or sell new or used Homes; (2) buy and improve land for development of
Parks or provide financing to others for such purpose; (3) buy and sell Parks;
and (4) purchase other sub-prime financial companies in the mobile home lending
business. As of the date of this Prospectus, the Corporation has no
understandings or agreements with any third party to engage in such activities.
The Corporation anticipates that it will only engage in such activities if it
becomes aware of favorable opportunities in such segments in connection with
its financing activities described above, and an appropriate amendment to this
Registration Statement will be filed in connection therewith if this offering
has not closed.
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<PAGE> 34
MARKETING
The Corporation anticipates that it will not have to engage in any
significant marketing activities because of the anticipated high demand for the
financing it provides and the lack of significant competition to provide such
financing. However, the Corporation intends to contact Dealers throughout
Florida to advise them of the availability of the Corporations financing
program.
MARKET AREA
There are a large number of Home purchases in Florida and there is
significant wealth in Florida because of the nature and size of the population.
The Corporation believes that Florida currently benefits from a strong economy.
According to the Florida Chamber of Commerce, Florida is the fourth largest
consumer market in the U.S. In 1993, Florida's population was over 13.4
million, with approximately 70% of new arrivals in the 18 to 44 age bracket.
Florida emerged as a major economic force in the U.S. in the 1980's. By the end
of the decade, Florida had become the nation's leader in major new plant
locations or expansions. Florida consistently ranks as one of the top locations
for industry. Florida has consistently been a pacesetter in new business
incorporation, leading the nation a number of recent years. Florida has three
cities in the nation's top twelve metropolitan statistical areas in terms of
percentage growth in the number of new. The state has the largest number of
manufacturing plants in the Southeast. Numerous economists predict moderate but
continued steady growth in Florida's economy.
However, because the Corporation intends to limit its operations to
Florida, the Corporation's operations could be unfavorably impacted by adverse
changes in the economic environment in Florida which could adversely affect the
creditworthiness of the Corporation's prospective borrowers in the sub-prime
market in Florida. Although the Corporation believes Florida's economy will
continue to grow, there can be no assurance that this is the case. The
resulting lack of diversity in the geographic area in which the Corporation
operates may increase the risk of loss to the Corporation and the Note Holders
because adverse economic conditions which may occur in Florida but not
elsewhere in the country will have a greater adverse affect on the
Corporation's operations and thus its ability to make payments on the Notes
than if the Corporation operated in a broader geographic area. See "Risk
Factors."
CHANGES IN PROGRAMS, PRODUCTS, POLICIES AND PROCEDURES
Factors such as increased competition in the industry and other
industry trends described above, as well as other reasons, may cause the
Corporation from time to time to review and change its financing programs,
products and services offered, and other business policies and procedures. To
the extent there are future changes in these areas, the Corporation may
originate Contracts or be subject to other circumstances which may increase the
risk of loss to Note Holders. The Corporation will continually review these
areas and reserves the right to change any criteria related thereto described
herein or otherwise as it deems appropriate. See "Risk Factors."
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CONSUMER FINANCE LAWS AND REGULATIONS
The Corporation's business, particularly its Finance Activities, is
subject to regulation and licensing under various federal, Florida and local
consumer finance statutes, regulations and ordinances which are described
below. These laws, rules and regulations: (i) govern the way the Corporation
can operate; (ii) limit the interest rate and other charges that may be imposed
by, or prescribe certain other terms of, the Contracts that the Corporation
originates; and (iii) define the Corporation's rights to repossess and sell
collateral. If the Corporation fails to comply with these laws and regulations,
it could be required to cease operations or be subject to fines and penalties,
and borrowers under the Contracts could have civil remedies against the
Corporation and defenses under the Contracts which could adversely affect the
Corporations ability to enforce its rights and collect payment of sums due
thereunder, all of which could eliminate or reduce the Corporation's cash flow
and thereby its ability to make payments on the Notes. There is no assurance
that laws and regulations under which the Corporation operates will not become
more restrictive, which could reduce the Corporation's cash flow and thereby
its ability to make payments on the Notes. See "Risk Factors - Consumer Finance
Laws and Regulations."
The Corporation is required to be licensed by the State of Florida
under the terms of the Florida Consumer Finance Act and Regulations (the "Act")
to conduct its Finance Activities. The Act governs all aspects of the
operations of the Corporation, including licensing requirements, duties of
licensee, consumer protection, credit insurance, monthly installments, referral
fees and billing practices. The Act limits interest on loans under $25,000 to
the following: The maximum interest rate shall be 30% per annum, computed on
the first $1,000 of the principal amount as computed from time to time; 24% per
annum on that part of the principal amount as computed from time to time
exceeding $1,000 and not exceeding $2,000; and 18% per annum on that part of
the principal amount as computed from time to time exceeding $2,000 and not
exceeding $25,000. The original principal amount as used in the Act shall be
the same amount as the amount financed, as defined by the federal Truth in
Lending Act and Regulation Z of the Board of Governors of the Federal Reserve
System. In determining compliance with the statutory maximum interest and
finance charges set forth in the Act, the computations utilized shall be simple
interest and not add-on interest or any other computations. The Corporation
will not make loans in excess of $25,000.
The Corporation is also subject to numerous federal laws, including
the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act and the rules and regulations promulgated thereunder, and certain
rules of the Federal Trade Commission. These laws require the Corporation to
provide certain disclosures to applicants, prohibit misleading advertising and
protect against discriminatory financing or unfair credit practices. The Truth
in Lending Act and Regulation Z promulgated thereunder require disclosure of,
among other things, the terms of repayment, the final maturity, the amount
financed, the total finance charge and the annual percentage rate charged on
each retail installment contract. The Equal Credit Opportunity Act prohibits
creditors from discriminating against loan applicants (including retail
installment contract obligors) on the basis of race, color, sex, age or marital
status. Under the Equal Credit Opportunity Act, creditors are required to make
certain disclosures regarding consumer rights and advise consumers whose credit
applications are not approved of the reasons for the objection.
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<PAGE> 36
The Fair Credit Reporting Act requires the Corporation to provide certain
information to consumers whose credit applications are not approved on the
basis of a report obtained from a consumer reporting agency. The rules of the
Federal Trade Commission limit the types of property a creditor may accept as
collateral to secure a consumer loan and its holder in due course rules provide
for the preservation of the consumer's claim and defenses when a consumer
obligation is assigned to a subject holder. The Credit Practices Rule of the
Federal Trade Commission imposes additional restrictions on loan provisions and
credit practices.
RELATIONSHIP WITH SERVICING COMPANY
SERVICING AGREEMENT
The Corporation has entered into a Servicing Agreement with the
Servicing Company, to provide all services in connection with Contact
origination and servicing. The Servicing Agreement is for an initial term
commencing January 1, 1997 through June 30, 2002, after which it may be
extended in the sole discretion of the Corporation upon such terms and
conditions and for such periods as mutually agreed between the Corporation and
the Servicing Company; however, either party may terminate the Servicing
Agreement without cause for any reason upon 15 days' advance notice. See "Risk
Factors."
It is an event of default under the Servicing Agreement upon the
happening of any of the following events (an "Event of Default"):
i. If the Corporation fails to timely remit to Servicing
Company any Compensation or other amounts due under the Servicing Agreement
which are due and payable and such failure to pay continues for a period of ten
days form the date of the mailing or delivery of an invoice from Servicing
Company.
ii. If any representation or warranty of the Corporation in
the Servicing Agreement is false, incorrect or misleading in any material
respect, or if any representation or warranty contained in any reports,
documents, certificates or other papers delivered to Servicing Company from
time to time is false, incorrect or misleading in any material respect, and is
not cured within 30 days of written notice thereof to the Corporation.
iii. If the Corporation breaches or fails to perform or
observe any obligation or condition to be performed or observed by it under the
Servicing Agreement in any material respect and such breach or default is not
cured within 30 days after Servicing Company has given the Corporation written
notice demanding that such breach or default be cured.
iv. If any representation or warranty of Servicing Company in
the Servicing Agreement is false, incorrect or misleading in any material
respect, or if any representation or warranty contained in any reports,
documents, certificates or other papers delivered to the Corporation from time
to time is false, incorrect or misleading in any material respect and is not
cured within 30 days of written notice thereof to Servicing Company;
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<PAGE> 37
v. If Servicing Company breaches or fails to perform or
observe any obligation or condition to be performed or observed by it under the
Servicing Agreement in any material respect and such breach or default is not
cured within 30 days after the Corporation has given Servicing Company written
notice demanding that such breach or default be cured.
vi. If Servicing Company fails, in any material respect, to
perform its obligations under the Servicing Agreement in conformance with
industry standards applicable to servicing of similar Accounts and such failure
is not cured within 30 days after the Corporation has given Servicing Company
written notice demanding such failure be cured.
Upon the happening of an Event of Default, after the expiration of any
opportunity to cure such Default, the non-defaulting party may terminate the
Servicing Agreement by notice in writing to the defaulting party sent by
facsimile or certified mail, postage prepaid, or by hand delivery. In the event
of termination, Servicing Company agrees to make available to the Corporation
such computer records as are reasonably required to effect an orderly
conversion to another computer system.
Because the Servicing Company must operate within the guidelines
established by the Corporation, all management and operational decisions made
by the Servicing Company will be the same as would be made if the Corporation
made such decisions directly. No funds of the Corporation are deposited or kept
in any account commingled with funds of the Servicing Company or any other
person or entity.
The Corporation will pay the Servicing Company an amount equal to all
expenses of the Servicing Company computed on an accrual basis ("Actual Cost")
plus twenty percent (20%) of Actual Cost for services rendered. If the
Servicing Company provides similar services to future Affiliated Entities, the
Corporation will pay the Servicing Company as follows: (i) any acquisition or
disposition of out-of-pocket cash expenditures, such as attorneys' fees and
court costs, will be paid by the entity which owns the Contract to which such
expenses relate (the
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"Direct Expenses"); and (ii) an amount equal to Actual Cost less Direct
Expenses will be paid directly by each entity based upon the ratio of the total
number of Contracts held by each entity to the total number of Contracts held
by all entities. In addition, the Corporation will loan up to $75,000 to the
Servicing Company for the purchase and/or least of office space, office
equipment, trucks and automobiles. The Servicing Company will repay any
advanced funds in equal monthly installments of principal and interest at the
rate of 10.5% per annum, with the final payment due on June 30, 2002.
REASON FOR USING THE SERVICING COMPANY
A separate servicing company was formed for administrative
convenience. It is anticipated that additional employees will need to be hired
to perform servicing functions for the Corporation. In addition, if Affiliated
Entities are formed by Management and his Affiliates in the future, the same
employees performing servicing functions for the Corporation would perform
similar servicing functions for the Affiliated Entities. If there were no
separate servicing company, such employees would be considered to be employees
of the Corporation and the Affiliated Entities, requiring separate paychecks
and related income tax filings and deposits to be made by each separate entity.
As of the date of this Prospectus, only Mr. Sutter and his assistant
are employed by the Servicing Company. Additional administrative employees will
be hired as necessary.
CONFLICTS OF INTEREST
Anthony A. Sutter, the sole officer and director of the Corporation
and the Servicing Company, may engage for his own account, or for the account
of others, including the Affiliated Entities, in other business ventures, some
of which may have the same investment objectives as the Corporation, and
therefore compete with the Corporation.
To the extent the Corporation competes with other businesses,
including Affiliated Entities, competition for origination of suitable
Contracts would intensify, which could have an adverse effect on the
Corporation because the Corporation may originate Contracts with a greater risk
of loss, which could adversely affect the Note Holders by reducing the funds
available to make payments on the Notes and the value of the Collateral.
This competition for origination of Contracts creates a potential
conflict of interest because it is anticipated that the Servicing Company,
which is responsible for originating Contracts, will provide similar
origination services to Affiliated Entities formed by Management and his
affiliates which are engaged in businesses similar to that of the Corporation.
An additional conflict of interest with respect thereto exists because
Management of the Corporation and Management of the Servicing Company are the
same individual, Mr. Sutter. See "Management." Accordingly, there is no
assurance that decisions concerning Contract origination and other matters will
be made which more favorably impact the Corporation than the Affiliated
Entities, increasing the risk of default on the Notes.
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In order to minimize the foregoing conflicts of interest, the
Corporation and the Servicing Company have agreed that if the Corporation and
Affiliated Entities both have funds available for Contract origination,
Contracts will be originated on an alternating basis, meaning first the
Corporation will originate a Contract, then the Affiliated Entities will
originate a Contract (or Contracts if there is more than one Affiliated Entity
with funds available), then the Corporation will originate a Contract, and so
on.
EMPLOYEE
As of the date of this Prospectus, there was only one (1) employee of
the Corporation, Mr. Sutter. Management of the Corporation and the employee are
the same individual. Management believes that it has an excellent relationship
with its employee. Its employee is not represented by a collective bargaining
agreement.
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PROPERTIES
The Corporation's executive offices are located at 12408 North Florida
Avenue, Tampa, Florida. Pursuant to an oral agreement, the office is leased
from an Affiliate, Halliday Village Mobile Home Park, Inc., a Florida
corporation ("Halliday"), on a month-to-month basis. Prior to the date of this
Prospectus, Halliday has been providing this space to the Corporation at no
charge; however, commencing on the Effective Date of the Registration
Statement, the Corporation will pay rent to Halliday in the amount of $2,200
per month, including utilities and taxes, which Management believes to be the
prevailing market rate. No payment will be required for any time prior to the
Effective Date of the Registration Statement.
MANAGEMENT
Set forth below is certain information concerning the sole officer,
director and key employee of the Corporation and the Servicing Company. The
sole director serves for a term of one year until the next annual meeting of
the Corporation, and until his successor(s) are elected and qualified.
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---- -------- ---
<S> <C> <C>
Anthony A. Sutter President, Chief Executive Officer, 45
Secretary, Treasurer and Sole Director
</TABLE>
ANTHONY A. SUTTER, age 45, has been the President, Chief Executive
Officer, Secretary, Treasurer and Sole Director of the Corporation and the
Servicing Company since their inception. He has also been the sole officer and
director of Sterling Properties Management, Inc., a Tampa, Florida property
management company, since October. 1989. He is also the sole officer and
director of four Florida corporations owning mobile home parks in Florida,
Halliday Village Mobile Home Park, Inc., Oak Bend Mobile Home Park, Inc.,
Hidden Oaks Mobile Home Park, Inc., and Regency Oaks Mobile Home Park, Inc. He
received a B.S. degree in Accounting and Economics from St. Louis University,
St. Louis, Missouri in 1973. He has been involved in the residential housing
business for 25 years, during which time he has owned, managed and operated
many properties, including mobile home parks.
The Corporation does not have a written employment agreement with Mr.
Sutter. All compensation paid to Mr. Sutter will be paid by the Servicing
Company, based upon available funds, with no other limitation. No compensation
has been paid to Mr. Sutter as of the date of this Prospectus.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a description of the relationships and related transactions which
exist between the Corporation and the Servicing Company, see "Compensation
Committee Interlocks and Insider Participation," below.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Mr. Sutter is President, Chief Executive Officer, Secretary, Treasurer
and Sole Director of both the Corporation and the Servicing Company. Mr. Sutter
owns the controlling interest in both the Corporation and the Servicing
Company.
The Corporation may sell or lease Homes to affiliates. Any lease will
be at Fair Market Value, based upon the Corporation's lease rates to
independent third parties, and any sale will be at Fair Market Value based upon
wholesale value published by the National Automobile Dealers Association.
There is a Servicing Agreement between the Corporation and the
Servicing Company. See "Business - Relationship with Servicing Company."
The Corporation will loan up to $75,000 to the Servicing Company for
the purchase and/or least of office space, office equipment, trucks and
automobiles. The Servicing Company will repay any advanced funds in equal
monthly installments of principal and interest at the rate of 10.5% per annum,
with the final payment due on June 30, 2002. See "Business - Relationship with
Servicing Company - Servicing Agreement" and "Sources and Uses of Proceeds."
The Corporation's executive offices are located at 12408 North Florida
Avenue, Tampa, Florida. Pursuant to an oral agreement, the office is leased
from an Affiliate, Halliday Village Mobile Home Park, Inc., a Florida
corporation ("Halliday"), on a month-to-month basis. Prior to the date of this
Prospectus, Halliday has been providing this space to the Corporation at no
charge; however, commencing on the Effective Date of the Registration
Statement, the Corporation will pay rent to Halliday in the amount of $2,200
per month, including utilities and taxes, which Management believes to be the
prevailing market rate. No payment will be required for any time prior to the
Effective Date of the Registration Statement. See "Business-Properties."
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information as of the date of this
Prospectus with respect to any persons known to the Corporation to be the
beneficial owner of more than 5% of the Corporation's Common Stock and of the
Common Stock owned by the sole officer and director of the Corporation. Because
the Notes do not constitute and are not convertible into equity of the
Corporation, the percentage of ownership set forth below will not vary as a
result of this offering.
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<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP % OF CLASS
- ------------------------ -------------- --------- ----------
<S> <C> <C> <C>
Anthony A. Sutter Common 800 80%
Judith Estrin, Trustee; Stanley D. Common 200 20%
Estrin Irrevocable Trust --- ---
dated 3/16/93
All officers and directors as a group
(1 person) 800 80%
=== ===
- ----------------------------
</TABLE>
Other than as set forth above, the Corporation is not aware of any
other shareholders who beneficially own, individually or as a group, 5% or more
of the outstanding shares of Common Stock of the Corporation. Mr. Sutter may be
deemed a "founder" or "parent" of the Corporation as such term is defined in
the Securities Act of 1933, as amended.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
AND RESULTS OF OPERATIONS
The Corporation has no earnings and no significant assets. The
Corporation will use the proceeds of this offering primarily to engage in the
Financing Activities.
DESCRIPTION OF SECURITIES
The following is a summary of certain provisions of the Note, Security
Agreement and Indenture of Trust, which are filed as Exhibits to this
Registration Statement. This summary is qualified in its entirety by the terms
and conditions of such documents.
NOTES
The Corporation is offering subscriptions for a maximum of 9,900 Notes
in the principal amount of $1,000 each. The Notes will bear simple interest at
the rate of 10.5% per annum, payable interest only monthly, with all principal
and accrued interest, if any, due on June 30, 2002. Interest is calculated on
the Calculation Basis but is paid on the Payment Basis, with any difference
between interest determined on the Calculation Basis and the Payment Basis paid
in the final installment due under the Notes. The Corporation will use the
proceeds of this offering primarily for the Financing Activities. See "Sources
and Uses of Proceeds." The Notes will be secured by a first lien on the
Collateral. The principal due on the Notes is prepayable in whole or in part at
any time without premium or penalty. Any prepayment will include accrued and
unpaid interest at the time of prepayment on the entire principal amount due.
The sole sources of payment of interest on the Notes will be cash flow
generated from operations, the proceeds of this offering in an amount not to
exceed $1,039,500, any other cash flow of the Corporation not otherwise pledged
as security for other obligations of the Corporation, of which there is not
anticipated to be any, capital contributions or loans of the shareholders, or
operational borrowings obtained from third party lenders. See "Sources and Uses
of Proceeds." Shareholders and their affiliates are under no obligation to make
capital contributions or loans to the Corporation. The Corporation has no
commitment to obtain loans from third party lenders, and there is no assurance
that such loans could be obtained. See "Risk Factors." The sole sources of
repayment of principal and accrued interest on the Notes at the end of their
term will be cash flow generated from operations, a refinancing of the Notes, a
sale of the Collateral which is pledged as security for the Notes, proceeds
from the repayment of the Contracts or other income generating assets which are
pledged as security for the Notes not used to originate additional Contracts,
loans or capital contributions from the shareholders, although the shareholders
are under no obligation to do so, or proceeds of future securities offerings,
if any. See "Risk Factors."
The Corporation reserves the right to sell additional notes or equity
interests in a public offering or in an offering exempt from registration under
federal and state securities laws to provide additional financing for the
Corporation. There is no assurance that any such offering
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would be undertaken or successful. If sufficient funds are not available from
any of such sources, the repayment of all or part of the interest or principal
on the Notes may be delayed or never be made. See "Risk Factors."
There is no sinking fund for payment of principal or interest on the
Notes. Neither the Notes, nor any other obligations of the Corporation, have
cross-default provisions. See "Risk Factors."
The price, amount of, and interest rate on the Notes to be offered
have been established arbitrarily by the Corporation and may bear no
relationship to its assets or to the earning potential of the Contracts or the
Corporation. NOTE HOLDERS WILL NOT ACQUIRE OR OBTAIN ANY BENEFITS WHICH MIGHT
ACCRUE THROUGH AN EQUITY INTEREST IN THE CORPORATION BY HIS PURCHASE OF NOTES.
See "Risk Factors."
SECURITY AGREEMENT
Under the Security Agreement, the Corporation has granted the Note
Holders through the Trustee a security interest (the "Security Interest") in
and to all of the following: The Assets or Replacement Assets acquired with
funds obtained from the repayment, sale or refinancing of the Assets, including
all rights to receive payments thereunder and security interests in and
instruments of title, whether now owned or hereafter acquired, all funds in the
following bank account: Barnett Bank - Account #1408067369; all proceeds of the
offering pursuant to the Registration Statement of Corporation declared
effective by the Securities and Exchange Commission on _______________, 1997
(the "Registration Statement"); and in all products thereof and all cash and
non-cash proceeds of any of the foregoing, in any form, including, without
limitation, proceeds of insurance policies from the loss thereof, assignments
or other documents and instruments located in a separate, segregated, locked
file cabinet marked "Cabinet A - Sterling Financial Services of Florida - I,
Inc. - Notes" in the possession, custody and control of the Trustee as
described herein and in the Indenture of Trust (all of the foregoing
hereinafter called the "Collateral"); provided, however, that the security
interest granted hereunder is subject to the conditions and limitations set
forth in the Registration Statement and the Security Agreement.
The Collateral may be released to the Corporation upon receipt of an
affidavit signed and sworn to by a duly authorized officer of the Corporation
that (a) the Corporation has received or anticipates receiving within five (5)
business days payment in full from the obligor under the Contract or payment of
at least the Minimum Sale Amount by the Purchaser of the Contracts if there is
a sale of a block of Contracts as described in the Registration Statement, (b)
the Corporation needs the Collateral for repossession or other similar purpose
after default on a Contract, or (c) any administrative event for which release
for mailing to the State is required under statute, rule, regulation or
practice such as change in name of a borrower due to marriage or divorce,
change of address, or notation of a subordinate lien. Upon a release of the
Collateral pursuant to (c) above, Corporation or its Agent shall promptly
return Collateral to the Trustee upon receipt of the reissued Collateral after
the changes have been made by the appropriate state agency. In addition, amount
up to one year's aggregate interest payment on all outstanding
44
<PAGE> 45
Notes at the close of the offering pursuant to the Registration Statement
(maximum of $1,039,500) shall be released to the Corporation upon written
request to pay interest due on the Notes.
Subject to the following limitations, an Event of Default under the Security
Agreement occurs if:
a. the Corporation receives written notice from a Trustee on
behalf of the Note Holders of a default in the payment of interest on any Note
when the same becomes due and payable and the default continues for a period of
30 days after receipt of such notice;
b. the Corporation receives written notice from a Trustee on
behalf of the Note Holders of a default in the payment of the principal of any
Note when the same becomes due and payable at maturity or otherwise after
receipt of such notice;
c. the Corporation fails to comply with any of its other
agreements in the Notes, this Agreement or the Indenture of Trust and the
default continues for the period and after the notice specified below;
d. the Corporation pursuant to or within the meaning of any
Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief against it
in any involuntary case,
(3) consents to the appointment of a Receiver of it or for
any substantial part of its property,
(4) makes a general assignment for the benefit of its
creditors, or
(5) fails generally to pay its debts as they become due; or
e. a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(1) is for relief against the Corporation in an involuntary
case,
(2) appoints a Receiver of the Corporation or for any
substantial part of its property, or
(3) orders the liquidation of the Corporation, and the
order or decree remains unstayed and in effect for 90 days.
45
<PAGE> 46
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of Corporations. The term
"Receiver" means any receiver, trustee, assignee, liquidator, or similar
official under any Bankruptcy Law.
A default under section (c) is not an Event of Default until the
Trustee on behalf of the Note Holders holding at least a majority in principal
amount of the Notes notifies the Corporation of the default and the Corporation
does not cure the default within 90 days after receipt of the notice. The
notice must specify the default, demand that it be remedied, and state that the
notice is a "Notice of Default."
If an Event of Default occurs and is continuing either: (a) the
Trustee, by written notice to the Corporation or (b) the Trustee on behalf of
the Note Holders holding at least 25% in principal amount of the Notes, by
written notice to the Corporation and the Trustee, may declare the principal of
and accrued interest on all the Notes to be due and payable immediately. After
a declaration such principal and interest shall be due and payable immediately.
An acceleration and its consequences shall be rescinded if all existing Events
of Default have been cured or waived prior to the entry of a judgment against
the Corporation and if the rescission would not conflict with any judgment or
decree.
Subject to the provisions of the preceding paragraph, if an Event of
Default occurs and is continuing, the Trustee on behalf of the Note Holders may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal and interest on the Notes or to enforce the performance of
any provision of the Notes or this Agreement.
Subject to the foregoing, the Trustee on behalf of the Note Holders
holding a majority in principal amount of the Notes by notice to the Trustee on
behalf of the Note Holders may waive an existing Default or Event of Default
and its consequences. When a Default or Event of Default is waived, it is cured
and stops continuing and no rights and remedies thereon may continue to be
enforced.
Notwithstanding anything to the contrary in the Security Agreement,
Trustee on behalf of the Note Holders is required to proceed against and
liquidate all Collateral before looking to any other assets of the Corporation.
INDENTURE OF TRUST
Stanton K. Shultz, Clearwater, Florida, will serve as the Trustee
under the Indenture of Trust. From August, 1989 to date, he has been President
of Stanton Shultz, CPA, PA, an accounting firm in Clearwater, Florida. From
May, 1984, to August, 1989, he was Vice President - Finance of Jones & Hawkins
Insurance, Inc., an independent insurance agency in Clearwater, Florida, where
he handled all accounting functions. From May, 1982 to April, 1984, he was a
business consultant to a computer manufacturer and distributor and was
responsible for computerization of the entire company. From June, 1981 to May,
1982, he was an account executive at Merrill Lynch Pierce Fenner and Smith,
Inc., a brokerage firm, where he was responsible for providing investment
advice to clients. From May, 1976 to May, 1981, he was
46
<PAGE> 47
Controller of Waterbed City, Inc., where he was responsible for all accounting
and data processing functions. Mr. Shultz currently has no direct or indirect
employment, financial or other relationship with the Corporation or its
affiliates, and, as such, is acting as an independent Trustee. Mr. Shultz
received a B.S. degree in Accounting from Jacksonville University,
Jacksonville, Ohio, in 1975 and a 5th year Accounting Degree from Tampa
College, Tampa, Florida, in 1992. Pursuant to the terms of the Indenture of
Trust, Mr. Shultz will receive a fee of $500 per year plus reimbursement of
actual expenses. In addition, upon the occurrence of an Event of Default under
the Trust Agreement or the Security Documents, the Trustee shall receive a fee
of $75 per hour for time incurred in rendering his duties as Trustee.
An Indenture of Trust will be entered into between the Corporation and
the Trustee for the benefit of Note Holders. The Trustee will accept title to
the Security Agreement on behalf of the Note Holders. The description of the
Indenture of Trust set forth below and references to Note Holders will be
determined based on the Notes issued to Note Holders. The duties of the Trustee
are to hold the Security Agreement, to perform certain obligations in the event
of a default in the payment of the principal and interest on the Notes, and to
execute and deliver to the Corporation partial or full satisfaction of the
Security Agreement upon partial or full repayment of the Notes.
The Events of Default under the Indenture of Trust are the same as
under the Security Agreement.
Any and all monies collected by the Trustee shall be applied in the
following order:
(1) To the payment of all costs and expenses of collection;
(2) To the payment of interest on the Notes, such payments to be
made ratably to the persons entitled thereto;
(3) To the payment of the outstanding principal balance on the
Notes, such payments to be made ratably to the persons
entitled thereto; and
(4) The remainder, if any, shall be paid to the Corporation, its
successors and assigns or to any other person under an order
of court.
The Note Holders of a majority in aggregate principal amount of the
Notes at any time outstanding have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee;
however, the Trustee has the right to decline to follow any such direction if
the Trustee has been advised by counsel that the action may not be lawfully
taken or that the action will be unduly prejudicial to the Note Holders not
taking part in such direction.
The Trustee is obligated to mail to the Note Holders notice of the
occurrence of an Event of Default within thirty (30) days after it receives
notice of such event, unless such event shall have been cured before the giving
of such notice.
47
<PAGE> 48
The Corporation agrees to indemnify the Trustee for any liability or
expense incurred without negligence or bad faith on the part of the Trustee in
connection with the administration of the Indenture of Trust.
The Indenture contains various provisions protecting the Trustee when
he acts in good faith in reliance on certificates and other documents supplied
by the Corporation and on opinions of the Trustee's counsel.
The Trustee may resign at any time by giving written notice to the
Corporation and to the Note Holders. The Corporation is obligated to appoint
promptly a successor Trustee. If no successor Trustee shall have been so
appointed within thirty (30) days after the mailing of notice of resignation,
the resigning Trustee may petition a court of competent jurisdiction for the
appointment of a successor Trustee, or any Note Holder may, on behalf of
himself and the other Note Holders, petition any such court for appointment of
a successor Trustee. In addition, the holders of a majority of the aggregate
principal amount of the Notes at any time outstanding may remove the Trustee at
any time and appoint a successor Trustee.
The Trustee shall act as Custodian of the Collateral for the benefit
of Note Holders.
UNDERWRITING
The Notes are being offered on a "best-efforts" $9,900,000 Maximum
Offering through the Managing Dealer and other Participating Dealers who are
members of the NASD. The Corporation has agreed to indemnify the Managing and
Participating Dealers against certain liabilities, including liabilities under
the Securities Act of 1933. The Corporation will pay the Managing Dealer 7% of
the offering price ($70 per Note), a portion of which may be reallowed to
Participating Dealers. The Corporation will also pay to the Managing Dealer a
Managing Dealer Fee of 2% of the offering price ($20 per Note) for all Notes
sold in the offering. The Corporation will also reimburse the Managing Dealer
for actual due diligence expenses in an amount up to .5% per Note ($5 per Note)
and pay to the Managing Dealer a Non-Accountable Expense Allowance not to
exceed 1% of the offering price per Note ($10 per Note) for all Notes sold in
the offering, a portion of the foregoing which may be reallowed to
Participating Dealers. Neither the Managing Dealer nor any Participating
Dealers are affiliated with the Corporation or the Servicing Company.
Southern Capital Securities, Inc. is the lead underwriter for this
offering and will execute a Managing Dealer Agreement with the Corporation. The
Managing Dealer may enter into Selected Dealer Agreements with other
broker/dealers (the "Selected Dealers"), and may reallow a portion of the
compensation payable to it for selling the Notes hereunder to such Selected
Dealers.
The Notes are being offered subject to prior sale, withdrawal,
cancellation or modification of the offer, including its structure, terms and
conditions, without notice. The
48
<PAGE> 49
Corporation reserves the right, in its sole discretion, to reject, in whole or
in part, any offer to purchase the Notes.
The Corporation intends to sell the Notes in this offering only in the
states in which the offering is qualified. An offer to purchase may only be
made and the purchase of the Notes may only be negotiated and consummated in
such states. The Subscription Agreement for the Notes must be executed, and the
Notes may only be delivered in, such states. Resale or transfer of the Notes
may be restricted under state law. See "Risk Factors - No Market for Notes" and
"Transferability of Notes."
If the Corporation does not terminate the offering earlier, which in
the sole discretion of Management it may, the offering of Notes will continue
until the Corporation raises an aggregate of $9,900,000, provided that the
offering period for all of Notes of the Corporation will not exceed 24 months
from the date of this Prospectus.
The Managing Dealer and the Selected Dealers have agreed in accordance
with the provisions of SEC rule 15c2-4 to cause all funds received for the sale
of a Note to be promptly deposited with the Corporation upon the receipt of
executed Subscription Agreement and the related funds by the participating
Dealer by or before noon of the next business day following the sale of said
Notes.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under Securities
Act of 1933 may be permitted to directors, officers and controlling persons the
Corporation pursuant to any provisions contained in its Certificate of
Incorporation, or bylaws, or otherwise, the Corporation has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
TRANSFERABILITY OF NOTES
The Notes will be registered with the Securities and Exchange
Commission and the State of Florida. The Notes may be registered or exempt from
registration in other states. NO PUBLIC OR OTHER MARKET FOR THE NOTES EXISTS
AND THERE CAN BE NO ASSURANCE THAT ONE MAY DEVELOP IN THE FUTURE. No transfers
will be permitted of less than the minimum permitted purchase, nor may an
investor transfer, fractionalize or subdivide Notes so as to retain less than
such minimum purchase. Accordingly, the Notes should be purchased only as an
investment to be held to the end of the term of the Notes because Note Holders
may not be able to liquidate their investment in the event of an emergency or
for any other reason. See "Risk Factors."
LEGAL MATTERS
The legality of the Notes offered hereby will be passed upon for the
Corporation by Michael T. Williams, Esq., in his capacity as counsel to the
Corporation.
49
<PAGE> 50
LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the
Corporation is a party.
EXPERTS
The financial statements of the Corporation from January 3, 1997 (date
of inception) to January 10, 1997 appearing in this Prospectus and Registration
Statement have been audited by Timothy M. Hohl Company P. A., Certified Public
Accountant, independent auditors, as set forth in their reports thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
[THE BALANCE OF THIS PAGE IS
INTENTIONALLY LEFT BLANK]
50
<PAGE> 51
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Report of independent auditor F-2
Balance Sheet, December 31, 1996 F-3
Statement of Stockholder's Equity F-3
Statement of Cash Flows F-4
Notes to Financial Statements F-5
</TABLE>
51
<PAGE> 52
TIMOTHY M. HOHL COMPANY P.A.
CERTIFIED PUBLIC ACCOUNTANTS
4104 W. LINEBAUGH AVENUE, SUITE 201 MEMBERS OF:
TAMPA, FLORIDA 33624 AMERICAN INSTITUTE OF CPA'S
(813)960-9803 FAX (813)960-9802 FLORIDA INSTITUTE OF CPA'S
SEC PRACTICE SECTION
REPORT OF INDEPENDENT AUDITORS
To the Board of Sterling Financial Services of Florida - I, Inc.
We have audited the accompanying balance sheet of Sterling Financial Services
of Florida - I, Inc. as of January 10, 1997 and the related statements of
stockholders' equity and cash flows for the period January 3, 1997 (inception)
through January 10, 1997. These financial statements are the responsibility of
the Company's Management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sterling Financial Services of
Florida - I, Inc. as of January 10, 1997 and its cash flows for the period
January 3, 1997 (inception) through January 10, 1997 in conformity with
generally accepted accounting principles
/s/ TIMOTHY M. HOHL COMPANY P.A.
- -------------------------------
Tampa, FL
January 13, 1997
52
<PAGE> 53
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
(A Development Stage Company)
BALANCE SHEET
JANUARY 10, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $ 1,000
------------
Total Assets $ 1,000
============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities $ -0-
Stockholders' Equity
Paid in Capital 900
Common Stock,
$ .01 par value, 7,500
shares authorized, 1,000
shares issued and
outstanding 100
------------
Stockholder's equity 1,000
------------
Total Liabilities and
Stockholders' Equity $ 1,000
============
</TABLE>
53
<PAGE> 54
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD JANUARY 3, 1997 (Inception) TO JANUARY 10, 1997
<TABLE>
<CAPTION>
Common Stock
---------------- Paid in Total
Shares Value Capital Value
------ ------- --------------
<S> <C> <C> <C> <C>
January 3, 1997
(Inception) -0- -0- -0- -0-
January 10, 1997 100 $100 $900 $1,000
--- ---- ---- ------
Balance, January 10, 1997 100 $100 $900 $1,000
=== ==== ==== ======
</TABLE>
See notes to financial statements.
54
<PAGE> 55
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 3, 1997 (Inception) TO JANUARY 10, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ -0-
CASH FLOWS FROM INVESTING ACTIVITIES -0-
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 1,000
------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,000
CASH AND CASH EQUIVALENTS, BEGINNING -0-
------
CASH AND CASH EQUIVALENTS, ENDING $1,000
======
</TABLE>
See notes to financial statements.
55
<PAGE> 56
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Sterling Financial Services of Florida - I, Inc. (the "Company") was
incorporated under the laws of the state of Florida on January 3, 1997. The
Company is considered to be in the development stage as defined in Financial
Accounting Standard No. 7.
The Company intends to be primarily in the business of offering a package of
financial services to the sub-prime mobile home industry, including originating
and refinancing for its own account retail mobile home installment sale
contracts (the "Contracts") created in connection with primarily used as well
as some new mobile homes.
No statement of operations has been included, since there were no operational
activities, other than the issuance of common stock.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Accounting records of the Company and financial statements are maintained and
prepared on the accrual basis.
Year End
The Company's year end for financial reporting and tax purposes is December 31.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
NOTE D - PROPOSED SECURED NOTE OFFERING
The Company intends to offer subscriptions for a maximum of 9,900 Notes in the
principal amount of $1,000 each. The Notes will bear simple interest at 10.5%
per annum, payable interest only monthly, with all principal and accrued
interest, if any, due on June 30, 2002. The Notes will be secured by a first
lien on the assets acquired with the proceeds of the offering or other assets
acquired with funds obtained from repayment, sale or refinancing of such
assets. The Notes are prepayable in whole or in part at any time without
premium or penalty.
The Notes are being offered on a "best-effort" basis. There is no minimum
offering for the Notes.
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<PAGE> 57
EXHIBIT A
STATE SUITABILITY STANDARDS
INSERT
57
<PAGE> 58
EXHIBIT B
STERLING FINANCIAL SERVICES OF FLORIDA - I, INC.
SUBSCRIPTION AGREEMENT - PROMISSORY NOTES
Gentlemen: The Investor named below, by payment of the purchase price for such
Promissory Notes, by the delivery of a check payable to STERLING FINANCIAL
SERVICES OF FLORIDA - I, INC., hereby subscribes for the purchase of the number
of Promissory Notes indicated below (minimum of two) of STERLING FINANCIAL
SERVICES OF FLORIDA - I, INC., at a purchase of $1,000 per Note as set forth in
the Prospectus. By such payment, the named Investor further acknowledges
receipt of the Prospectus and any Supplement and the Subscription Agreement,
the terms of which govern the investment in the Promissory Notes being
subscribed for hereby.
<TABLE>
<S> <C> <C>
A. INVESTMENT: (1) Number of Notes (2) Total Contribution ($1,000/Note) $
- -----------------------------------------------------------------------------------------------------------------------------------
(3) Initial Purchase [ ] Additional Purchase [ ] Date of Investor's check
- -----------------------------------------------------------------------------------------------------------------------------------
B. REGISTRATION:
(4) Registered Owner: Co-Owner:
- -----------------------------------------------------------------------------------------------------------------------------------
(5) Mailing Address: City, State & Zip:
- -----------------------------------------------------------------------------------------------------------------------------------
(6) Residence Address (if different from above):
- -----------------------------------------------------------------------------------------------------------------------------------
(7) Birth Date: / /
- -----------------------------------------------------------------------------------------------------------------------------------
(8) Employee or Affiliate: Yes No
- -----------------------------------------------------------------------------------------------------------------------------------
(9) Please indicate Citizenship Status:
- -----------------------------------------------------------------------------------------------------------------------------------
(10) Social Security #: / /
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Citizen [ ] Other [ ] Co-Owner SS#: / /
- -----------------------------------------------------------------------------------------------------------------------------------
(11) Telephone (H) ( ) Corporate or Custodial: / /
- -----------------------------------------------------------------------------------------------------------------------------------
(O) ( ) Taxpayer ID #: - /
- -----------------------------------------------------------------------------------------------------------------------------------
C. OWNERSHIP [ ] Individual Ownership [ ] IRA or Keogh [ ] Joint Tenants with Rights of Survivorship
[ ] Trust/Date Trust Established Pension/Trust (S.E.P.) [ ] Tenants in Common [ ] Tenants by the Entirety
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] Corporate Ownership [ ] Partnership [ ] Other
- -----------------------------------------------------------------------------------------------------------------------------------
D. SIGNATURES: By signing below, I/we represent that I/we meet the suitability standards set forth in the Prospectus
- -----------------------------------------------------------------------------------------------------------------------------------
under "Suitability Standards."
- -----------------------------------------------------------------------------------------------------------------------------------
Signatures - Registered Owner: Co-Owner:
- -----------------------------------------------------------------------------------------------------------------------------------
Print Name of Custodian or Trustee: Authorized Signature:
- -----------------------------------------------------------------------------------------------------------------------------------
Date: Witness Signature
- -----------------------------------------------------------------------------------------------------------------------------------
E. PAYMENT SHOULD BE SENT TO (IF DIFFERENT THAN REGISTERED OWNER):
- -------------------------------------------------------------------
Name: c/o
- -----------------------------------------------------------------------------------------------------------------------------------
Address: Account Number:
- -----------------------------------------------------------------------------------------------------------------------------------
City, State & Zip: Telephone Number:
- -----------------------------------------------------------------------------------------------------------------------------------
F: BENEFICIAL OWNER(S): All reports and financial statements will normally be sent to the registered owner at the address in
Section B.
- -----------------------------------------------------------------------------------------------------------------------------------
If reports and financial statements are to be sent to the Beneficial Owner of an IRA or Keogh, insert name of the Beneficial Owner.
- -----------------------------------------------------------------------------------------------------------------------------------
Name of Beneficial Owner Only: Telephone Number:
- -----------------------------------------------------------------------------------------------------------------------------------
Address: City, State & Zip:
- -----------------------------------------------------------------------------------------------------------------------------------
G. BROKER-DEALER/REGISTERED REPRESENTATIVE DATA: ALL LINES MUST BE COMPLETED, ANY MISSING SIGNATURES MAY DELAY
- -----------------------------------------------------------------------------------------------------------------------------------
PROCESSING OF THIS ORDER.
- -----------------------------------------------------------------------------------------------------------------------------------
Broker-Dealer NASD Firm Name: Date: Telephone Number:
- -----------------------------------------------------------------------------------------------------------------------------------
Main Office Address: City, State & Zip:
- -----------------------------------------------------------------------------------------------------------------------------------
Print or Type Name of Broker-Dealer, Principal or other
- -----------------------------------------------------------------------------------------------------------------------------------
Authorized Signatory:
- -----------------------------------------------------------------------------------------------------------------------------------
Authorized Signature:
- -----------------------------------------------------------------------------------------------------------------------------------
Print or Type Name of Registered Representative or other Authorized
- -----------------------------------------------------------------------------------------------------------------------------------
Signatory:
-------------------------------------------------------------------------------------------------------------------------
Signature:
-------------------------------------------------------------------------------------------------------------------------
Branch Office Address: City, State & Zip:
- -----------------------------------------------------------------------------------------------------------------------------------
MAIL TO: Sterling Financial Services of Florida - I, Inc., 12408 North Florida Avenue, Tampa, FL 33612, telephone 813/935-9476,
facsimile 813/948-8537.
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICE USE ONLY: Date Received: Date Accepted/Rejected
- -----------------------------------------------------------------------------------------------------------------------------------
Subscriber's Check Amount: Check No. Date Check Deposited
- -----------------------------------------------------------------------------------------------------------------------------------
MR #
- ----------------------
WHITE-STERLING YELLOW-BROKER PINK-REG.REP GOLD-INVESTOR
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
Maximum
Offering
--------
<S> <C>
*SEC Registration Fee $ 3,413.79
*NASD Registration Fee 1,490.00
*Legal Fees and Expenses 50,000.00
*Accounting Fees and Expenses 35,000.00
*Blue Sky Qualification 35,000.00
Other Organization and Offering Expenses 5,000.00
Printing and Engraving Fees and Expenses 10,000.00
Due Diligence Reimbursement 49,500.00
Non-Accountable Expense Allowance 99,000.00
Miscellaneous 18,596.21
--------------
Total $ 297,000.00
</TABLE>
ITEM 14: INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida General Corporation Law permits indemnification by the
Corporation of any director, officer, employee or agent of the Corporation or
person who is serving at the Corporation's request as a director, officer,
employee or agent of another corporation, or other enterprise, as set forth in
the statute which appears on the next page.
The Corporation's Articles of Incorporation and Bylaws provide that
the Corporation shall, to the fullest extent permitted by the laws of the State
of Florida, indemnify any director, officer and employee of the Corporation
against expenses incurred by such person by reason of the fact that he serves
or has served the corporation in such capacity.
The Corporation's Bylaws provide that the Corporation shall, to the
fullest extent permitted by the laws of the State of Florida, indemnify each
officer or director against expenses (including attorney's fees), judgments,
taxes, fines and amounts paid in settlement incurred by him in connection with,
and shall advance expenses (including attorney's fees) incurred by him in
defending, any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) through which he is,
or is threatened to be made, a party by reason of his being a director or
officer of the Corporation, or his serving or having served at the request of
the Corporation as a director, officer, partner, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
59
<PAGE> 60
Indemnification under the Corporation's Articles of Incorporation and
Bylaws is nonexclusive of any other right such persons may have under statute,
agreement, bylaw or action of the Board of Directors or shareholders of the
corporation.
ITEM 15: RECENT SALES OF UNREGISTERED SECURITIES
Since its organization in January 1997, the Corporation has not sold
any unregistered securities.
ITEM 16: EXHIBITS
*1.1 Form of Managing Dealer Agreement
*1.2 Form of Selected Dealer Agreement
*1.3 Subscription Agreement
*3.1 Articles of Incorporation
*3.2 Bylaws
*4.1 Form of Note
*4.2 Form of Security Agreement and Collateral Assignment
*4.3 Form of Indenture of Trust
*5.1 Opinion regarding legality (including Consent)
**10.1 Servicing Agreement
*10.2 Form of Credit Application
**24 Consent of Accountants
*27 Financial Data Schedule (for SEC use only)
- -------------------------
* Filed previously
** Filed herewith
All other schedules are omitted because they are not required or the
information is otherwise included in the financial statements.
ITEM 17: UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement;
60
<PAGE> 61
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to any provisions contained in its
certificate of Incorporation, or bylaws, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the
Securities act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
61
<PAGE> 62
The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the Trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
LIST OF CONSENTS REQUIRED BY RULE 435
The consent of Michael T. Williams, Esquire to the reference to said attorney
in the Prospectus constituting a part of this Registration Statement and to the
use of his opinion as an exhibit to this Registration Statement is included in
the opinion of said firm (Exhibit 5).
62
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Tampa,
State of Florida, on the 8th day of April, 1997.
STERLING FINANCIAL SERVICES
OF FLORIDA - I, INC.
a Florida corporation
By: /s/ Anthony A. Sutter
----------------------------------------------
Anthony A. Sutter
President, Chief Executive Officer,
Secretary , Treasurer and Sole Director
Principal Executive Officer
Principal Financial Officer and
Principal Accounting Officer
In accordance with 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 stated.
<TABLE>
<CAPTION>
Name Position Date
- ---- -------- ----
<S> <C> <C>
/s/ Anthony A. Sutter President, Chief Executive Officer,
- --------------------- -------------------------------------- -------------
Anthony A. Sutter Secretary, Treasurer and Sole Director April 8, 1997
</TABLE>
63
<PAGE> 64
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
*1.1 Form of Managing Dealer Agreement
*1.2 Form of Selected Dealer Agreement
*1.3 Subscription Agreement
*3.1 Articles of Incorporation
*3.2 Bylaws
*4.1 Form of Note
*4.2 Form of Security Agreement and Collateral Assignment
*4.3 Form of Indenture of Trust
*5.1 Opinion regarding legality (including Consent)
**10.1 Servicing Agreement
*10.2 Credit Application
**23 Consent of Accountants
*27 Financial Data Schedule (for SEC use only)
</TABLE>
- -------------------------
* Filed previously
** Filed herewith
EXHIBIT 24
64
<PAGE> 1
EXHIBIT 10.1
SERVICING AGREEMENT
THIS AGREEMENT is made as of the 1st day of January, 1997, by and
between STERLING FINANCIAL SERVICES, INC., a Florida corporation (the
"Servicing Company") and STERLING FINANCIAL SERVICES OF FLORIDA - I, INC., a
Florida corporation ("Sterling").
RECITALS:
WHEREAS, Sterling is engaged in the business of providing financial
services to the sub-prime mobile home industry, including, among other things,
originating, purchasing and refinancing for its own account retail mobile home
installment sale contracts (the "Contracts") created in connection with the
financing of primarily used as well as some new mobile homes (the "Homes");
WHEREAS, the Servicing Company is engaged in the business of, among
other things, originating, acquiring and servicing loans and accounts; and
WHEREAS, Sterling desires to retain the Servicing Company to provide
all services in connection with Contract origination or acquisition and
servicing (the "Services"), and the Servicing Company agrees to provide such
Services in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. DUTIES AND SERVICES. Sterling hereby retains the Servicing Company
and the Servicing Company hereby agrees to render the Services upon the terms
and conditions hereinafter set forth:
a. The Servicing Company hereby agrees to provide to Sterling
the Services set forth on Schedule A attached hereto.
b. The Servicing Company agrees to operate within the
guidelines established by Sterling from time to time.
c. No funds of Sterling shall be deposited or kept in any
account commingled with funds of the Servicing Company or any other person or
entity.
2. RIGHTS. Nothing herein shall grant any direct or indirect ownership
rights to any aspect of the Services to the Servicing Company.
3. TERM. The initial term of this Agreement shall be January 1, 1997,
through June 30, 2002 (the "Term"). This Agreement
<PAGE> 2
shall be extended thereafter in the sole and absolute discretion of Sterling,
upon such terms and conditions as shall be mutually agreed. Either Sterling or
the Servicing Company may voluntarily elect to terminate this Agreement without
cause, for any reason; provided that the terminating party must deliver to the
other party written notice of such intention to terminate not less than fifteen
(15) days prior to the date of such termination.
4. COMPENSATION. So long as the Servicing Company is in full
compliance with all terms and conditions of this Agreement, Sterling will pay
the Servicing Company for services hereunder, as follows:
a. Sterling will pay the Servicing Company an amount equal to
all cash expenses of the Servicing Company ("Actual Cost") plus twenty percent
(20%) of Actual Cost for services rendered. If the Servicing Company provides
similar services to future Affiliated Entities, Sterling will pay the Servicing
Company as follows: (i) any acquisition or disposition of cash expenditures,
such as attorneys' fees and court costs, will be paid by the entity which owns
the Contract to which such expenses relate (the "Direct Expenses"); and (ii) an
amount equal to Actual Cost less Direct Expenses will be paid directly by each
entity based upon the ratio of the total number of Contracts held by each
entity to the total number of Contracts held by all entities.
b. Sterling shall reimburse the Servicing Company for
reasonable travel expenses actually incurred by the Servicing Company in the
furtherance of Sterling's business, provided said expenses have been approved
in advance by Sterling and proper itemization of said expenses is furnished to
Sterling by the Servicing Company. All such expenditures shall be subject to
the reasonable control of Sterling.
5. RELATIONSHIP. The Servicing Company is an independent contractor
with respect to this Agreement. This Agreement is not intended to, and shall
not be construed to, create a joint venture or partnership between the said
parties or constitute either of them as agents of the other. Except as
otherwise expressed and provided for in this Agreement or otherwise expressly
agreed in writing by the parties, neither party shall have any power or
authority to bind or commit the other party. The Servicing Company assumes full
responsibility for the actions of any of its employees, officers, directors,
independent contractors or agents including negligence, malfeasance,
nonfeasance or other misconduct by such persons or entities. The Servicing
Company shall pay timely and in full all taxes, federal, state, or local, due
in connection with any compensation payable hereunder.
6. AUTHORITY. Each party represents and warrants that it has the full
right, power and authority to enter into this Agreement on the terms and
conditions hereof and that the parties executing this Agreement on behalf of
each party have been duly authorized to do so.
7. INDEMNIFICATION. The Servicing Company agrees to indemnify, defend
and hold Sterling harmless from any liabilities, claims, losses, damages,
demands or expenses, including
2
<PAGE> 3
reasonable attorneys' fees, that may be made by anyone due to a breach of any
representation, warranty or agreement of the Servicing Company contained in or
made pursuant to this Agreement. Sterling agrees to indemnify, defend and hold
the Servicing Company harmless from any liabilities, claims, losses, damages,
demands or expenses, including reasonable attorneys' fees, that may be made by
anyone due to a breach of any representation, warranty or agreement of Sterling
contained in or made pursuant to this Agreement.
8. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered on the date personally delivered or the date mailed, postage prepaid
by certified mail, return receipt requested, or faxed and confirmed, if
addressed to the respective parties as follows:
<TABLE>
<S> <C>
If to the Servicing Company: Sterling Financial Services, Inc.
12406 North Florida Avenue
Tampa, FL 33612
If to Sterling: Sterling Financial Services of Florida- I, Inc.
12406 North Florida Avenue
Tampa, FL 33612
</TABLE>
Either party may change its address for the purpose of receiving notices,
demands and other communications by giving written notice to the other party of
the change.
9. SUCCESSORS AND ASSIGNS. All of the terms and conditions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. Neither party may assign this
Agreement without the prior written consent of the other.
10. NO WAIVER. The failure of either party to object to a breach of
any term or condition of this Agreement shall not be deemed a waiver of any
right or remedy the non-breaching party may have arising out of the breach, nor
shall it be deemed a waiver of its right to subsequently enforce the term or
condition. Each remedy under this Agreement is cumulative and shall be in
addition to all other rights or remedies existing in this Agreement or in law,
equity or bankruptcy.
11. SEVERABILITY. If any clause of this Agreement is determined to be
invalid or unenforceable, the validity or enforceability of any other
provisions hereof will not be affected thereby.
12. NUMBER AND GENDER. In this Agreement whenever the context so
requires, the masculine gender includes the feminine and/or neuter, and vice
versa, and the singular number includes the plural.
13. COUNTERPARTS. This Agreement may be executed in counterparts, and
any number of counterparts signed in the aggregate by the parties hereto shall
constitute but one single original Agreement.
3
<PAGE> 4
14. THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND ALL PAST, PRESENT AND
FUTURE AGREEMENTS INVOLVING THE PARTIES. THIS WAIVER OF TRIAL BY JURY PROVISION
IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS AGREEMENT.
15. COMPLIANCE WITH LAWS. The Servicing Company will comply with all
federal and state laws, rules and regulations relating to any of its
responsibilities and duties with Sterling and will not violate any such laws,
rules and regulations.
16. VOLUNTARY AGREEMENT. The Servicing Company represents that it has
not been pressured, misled or induced to enter this Agreement based upon any
representation by Sterling not contained herein.
17. PROVISIONS TO SURVIVE. The parties hereto acknowledge that many of
the terms and conditions of this Agreement are intended to survive the term of
this Agreement. Therefore, any terms and conditions that are intended by the
nature of the promises or representations to survive the term of this Agreement
shall survive the term of this Agreement regardless of whether such provision
is expressly stated as so surviving.
18. MERGER. This Agreement represents the entire Agreement between the
parties and shall not be subject to modification or amendment by any oral
representation, or any written statement by either party, except for a dated
written amendment to this Agreement signed by an authorized officer of the
Servicing Company and an authorized officer of Sterling.
19. VENUE AND APPLICABLE LAW. This Agreement shall be enforced and
construed in accordance with the laws of the State of Florida, and venue for
any action or arbitration under this Agreement shall be Hillsborough County,
Florida.
20. ASSIGNMENT. This Agreement shall not be assignable by either party
without the written consent of the other party. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
21. ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement or any provision thereof shall be settled by binding
arbitration in a manner agreed upon by the parties, or if not otherwise agreed
upon, then in accordance with the rules of the American Arbitration Association
in effect at that time. Judgment upon the award so rendered may be entered in
any court having competent jurisdiction thereover. The costs of the arbitration
shall be borne by the non-prevailing party, including the cost of experts,
evidence and legal counsel (and all employees and assistants) of the prevailing
party.
4
<PAGE> 5
22. DEFAULT AND REMEDIES.
a. It shall be an event of default under this Agreement upon the
happening of any of the following events (an "Event of Default"):
i. If the Corporation fails to timely remit to Servicing
Company any Compensation or other amounts due under this Agreement which are
due and payable and such failure to pay continues for a period of ten days form
the date of the mailing or delivery of an invoice from Servicing Company.
ii. If any representation or warranty of the Corporation in
this Agreement is false, incorrect or misleading in any material respect, or if
any representation or warranty contained in any reports, documents,
certificates or other papers delivered to Servicing Company from time to time
is false, incorrect or misleading in any material respect, and is not cured
within 30 days of written notice thereof to the Corporation.
iii. If the Corporation breaches or fails to perform or
observe any obligation or condition to be performed or observed by it under
this Agreement in any material respect and such breach or default is not cured
within 30 days after Servicing Company has given the Corporation written notice
demanding that such breach or default be cured.
iv. If any representation or warranty of Servicing Company in
this Agreement is false, incorrect or misleading in any material respect, or if
any representation or warranty contained in any reports, documents,
certificates or other papers delivered to the Corporation from time to time is
false, incorrect or misleading in any material respect and is not cured within
30 days of written notice thereof to Servicing Company;
v. If Servicing Company breaches or fails to perform or
observe any obligation or condition to be performed or observed by it under
this Agreement in any material respect and such breach or default is not cured
within 30 days after the Corporation has given Servicing Company written notice
demanding that such breach or default be cured.
vi. If Servicing Company fails, in any material respect, to
perform its obligations under this Agreement in conformance with industry
standards applicable to servicing of similar Accounts and such failure is not
cured within 30 days after the Corporation has given Servicing Company written
notice demanding such failure be cured.
b. Upon the happening of an Event of Default, after the expiration of
any opportunity to cure such Default, the non-defaulting party may terminate
this Agreement by notice in writing to the defaulting party sent by facsimile
or certified mail, postage prepaid, or by hand delivery. In the event of
termination, Servicing Company agrees to make available to the Corporation such
computer records as are reasonably required to effect an orderly conversion to
another computer system.
5
<PAGE> 6
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
"Servicing Corporation"
STERLING FINANCIAL SERVICES, INC.,
a Florida corporation
By:
------------------------------------------
Anthony A. Sutter
President
"Sterling"
STERLING FINANCIAL SERVICES OF
FLORIDA - I, INC., a Florida corporation
By:
------------------------------------------
Anthony A. Sutter
President
7
<PAGE> 8
SCHEDULE A
ORIGINATION
The Corporation intends to originate Contracts, as opposed to
purchasing Contracts at a discount from Dealers or others. The Corporation will
contact borrowers as well as Park owners and Dealers directly or by telephone
or mailing to advise them of the Corporation's program for Contract
origination. It is not anticipated that the Corporation will be dependent upon
one or a few Park owners or Dealers for identifying potential borrowers under
Contracts originated by the Corporation. In addition, the Corporation may use
print advertising directed at individual borrowers. It is anticipated that a
Park owner, Dealer or potential borrower will contact the Corporation regarding
the availability of financing, and the Corporation will make a credit
application available directly to the borrower.
When the credit application from the borrower is received, an
investigator will review the application and obtains the applicant's credit
bureau and other information.
Contract origination guidelines include the following minimum
acceptable criteria:
- Employment history - at least six months on the job;
- Income - depends on the amount of the loan and the debt to
income ratio (see below) of the borrower;
- Time at residence - at least one year at current residence;
- Debt to income ratio - personal debt cannot exceed 50% of the
borrower's net income;
- Bankruptcy - all debts must have been fully discharged at
least one year prior to application for the loan;
- Child support - if the borrower is paying child support, it
will be treated as a personal debt and factored into the debt
to income ratio; if the borrower is receiving child support,
such income will only be considered if court mandated;
- Repossessions - must have occurred at least one year prior to
application for the loan;
- Liens/judgments - will be decided on a case-by-case basis,
depending on the type of lien or judgment, the amount
involved and the age thereof;
- Previous delinquencies, collections and charge-offs - will be
decided on a case-by-case basis with consideration taken for
mitigating circumstances, such as divorce, disability,
extended illness or layoff due to downsizing; and
8
<PAGE> 9
- Co-buyers and co-signers - will also be subject to the minimum
acceptable criteria set forth above.
There are no fixed criteria pursuant to which material deviation these
guidelines will be permitted. However, no Contract will be originated to a
borrower deviating from these guidelines for which there is not an increased
down payment or a co-signer meeting the guidelines, or both. The additional
down payment required will increase with the increase in deviation from the
guidelines, although there is no fixed formula for determining the amount of
increased down payment required.
In addition, the Corporation will not finance more than 130% of
National Automobile Dealers Association (NADA) manufactured home book retail
value. It will not finance Homes manufactured before 1980. Contracts under
$10,000 will have no more than a 10-year term, and Contracts between $10,000
and $25,000 will not have more than a 15-year term. The Corporation will not
finance amounts in excess of $25,000. See "Business - Consumer Finance Laws and
Regulations."
When this process is complete, an application will be approved
unconditionally or with conditions, such as adjustments to the interest rate,
down payment, maximum loan to value, co-maker or other significant conditional
criteria. It is anticipated that no more than ten percent (10%) of the
Contracts originated will deviate materially from these guidelines, although
there is no specific limitation imposed thereon.
Prior to closing the funding, the Corporation reviews the financing to
determine the following: (i) all required documentation has been included, (ii)
the math is correct, (iii) the regulatory requirements have been satisfied,
(iv) the amount financed does not exceed the maximum loan allowed, and (v) any
conditions imposed have been satisfied. The Corporation will contact the
insurance carrier to confirm insurance.
SERVICING
Billing. The Servicing Company generates bi-monthly statements which
are sent to the borrower.
Collections. The Corporation has established certain collection
guidelines, which guidelines will not necessarily be followed in all cases and
which are subject to modification at any time.
When a delinquency occurs, a Collector will make a call by the first
day of the delinquency. By the third day of delinquency, if the account has not
been brought current, the Collector will personally visit the delinquent
borrower. If the borrower is unable to make all required payments on a current
basis, the Collector may make reasonable payment arrangements to cure the
delinquency. If all of these collection processes are not successful, the
repossession process commences immediately.
9
<PAGE> 10
Repossessions and Resale Department. Either the borrower voluntarily
agrees to vacate the Home, or an attorney is contacted by the Corporation to
effect an involuntary repossession. All costs associated with the repossession
are an obligation of the borrower. To effect an involuntary repossession, in
general, the borrower is first given written notice of intent to repossess, and
a period of time, generally five days, to cure all defaults. If the defaults
are not cured within said time period, a complaint is filed and a judgment
obtained. After the judgment is obtained, a writ of possession is obtained and
given to the appropriate law enforcement agencies, who evict the borrower from
the Home. The Home will be renovated as necessary and sold in its then current
location, if possible, or moved to a Dealer's lot or another Park for resale
10
<PAGE> 1
EXHIBIT 23
TIMOTHY M. HOHL COMPANY P.A.
CERTIFIED PUBLIC ACCOUNTANTS
4104 W. LINEBAUGH AVENUE, SUITE 201 MEMBERS OF:
TAMPA, FLORIDA 33624 AMERICAN INSTITUTE OF CPA'S
(813)960-9803 FAX (813)960-9802 FLORIDA INSTITUTE OF CPA'S
SEC PRACTICE SECTION
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Sterling Financial Services of Florida - I, Inc.
We hereby consent to the reference to our firm under the heading "Experts" in
the Registration Statement and to the filing of our report on the financial
statements of Sterling Financial Services of Florida - I, Inc. as of January
10, 1997.
/s/ Timothy M. Hohl Company P.A.
- -------------------------------
Timothy M. Hohl Company P.A.
April 8, 1997
