<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BINGHAM FINANCIAL
SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
MICHIGAN 38-3313951 6141
(State or other jurisdiction (I.R.S. Employer Identification (Primary Standard Industrial
of incorporation or No.) Classification Code Number)
organization)
</TABLE>
31700 MIDDLEBELT ROAD, SUITE 125
FARMINGTON HILLS, MICHIGAN 48334
(248) 932-9656
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JEFFREY P. JORISSEN
31700 MIDDLEBELT ROAD, SUITE 125
FARMINGTON HILLS, MICHIGAN 48334
(248) 932-9656
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
PETER SUGAR, ESQ. DONALD J. KUNZ, ESQ.
JAFFE, RAITT, HEUER & WEISS, P.C. HONIGMAN MILLER SCHWARTZ AND COHN
ONE WOODWARD AVENUE, SUITE 2400 2290 FIRST NATIONAL BUILDING
DETROIT, MICHIGAN 48226 DETROIT, MICHIGAN 48226
(313) 961-8380 (313) 256-7800
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock.................... 1,150,000 $10.00 $11,500,000 $3,485
========================================================================================================================
</TABLE>
(1) Includes 150,000 shares of Common Stock that the Underwriters may purchase
from the Company to cover overallotments.
(2) Estimated pursuant to Rule 457(o) under the Securities Act of 1933 solely
for the purpose of calculating the 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.
================================================================================
<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED AUGUST 27, 1997
PROSPECTUS
1,000,000 SHARES
BINGHAM FINANCIAL
SERVICES CORPORATION
COMMON STOCK
------------------
1,000,000 shares of common stock, without par value, (the "Common Stock")
are being offered hereby (the "Offering") by Bingham Financial Services
Corporation (the "Company"). The Company is an affiliate of Sun Communities,
Inc., a fully integrated, publicly held real estate investment trust ("REIT").
See "Business -- General" and "-- Formation and Structure."
The shares of Common Stock offered hereby will constitute all of the
outstanding shares of Common Stock of the Company after consummation of the
Offering. Prior to the Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
approximately $10.00 per share. See "Underwriting" for information relating to
the factors to be considered in determining the initial public offering price.
Application has been made to have the Common Stock listed on the Nasdaq SmallCap
Market under the symbol " ."
------------------
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A SIGNIFICANT AMOUNT OF
RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 8
FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVEST-
MENT IN THE COMPANY'S COMMON STOCK.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNTS(1) COMPANY(2)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................................
- --------------------------------------------------------------------------------------------------------------------------
Total(3)....................................
==========================================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses of the Offering, estimated at $ , payable by
the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
150,000 additional shares of Common Stock at the Initial Public Offering
Price, less the Underwriting Discounts, solely to cover over-allotments, if
any. If such option is exercised in full, the total Initial Public Offering
Price, Underwriting Discounts and Proceeds to Company will be $ ,
$ and $ , respectively.
------------------
The shares of Common Stock are being offered by the Underwriters subject to
prior sale, when, as and if delivered to and accepted by the Underwriters,
subject to the right of the Underwriters to withdraw, cancel or modify such
offer and to reject orders in whole or in part. It is expected that delivery of
the shares of Common Stock will be made in Detroit, Michigan, on or about
, 1997.
------------------
RONEY & CO. LOGO
The date of this Prospectus is , 1997
<PAGE> 3
-------------------------
AVAILABLE INFORMATION
The Company is not currently a reporting Company pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"), but will be required to file reports
pursuant to the Exchange Act following the completion of the Offering. The
Company, which will use a September 30 fiscal year, intends to furnish its
stockholders with annual reports containing audited financial information and,
for the first three quarters of each fiscal year, quarterly reports containing
unaudited financial information.
Requests for such documents should be directed to Jeffrey P. Jorissen,
31700 Middlebelt Road, Suite 125, Farmington Hills, Michigan 48334.
-------------------------
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Except as
otherwise indicated, all information in this Prospectus assumes no exercise of
the Underwriters' over-allotment option. Terms used but not otherwise defined
herein are defined elsewhere in this Prospectus.
THE COMPANY
The Company was incorporated in August of 1996 as an affiliate of Sun and
began transacting business in January of 1997 as a specialized financial
services company to provide financing for new and previously owned manufactured
homes. The Company makes conventional loans under installment loan agreements
secured by the borrower's manufactured home ("Contracts"). The Company intends
to market property and casualty, credit life and warranty insurance relating to
Contracts. The Company initially intends to offer loans on manufactured homes
only but may offer other types of commercial and consumer loans, engage in the
acquisition and sale of loans or engage in other related businesses in the
future through initiation of new businesses or through acquisitions of existing
businesses.
The Company was formed by Sun Communities, Inc. (together with all entities
owned or controlled by Sun Communities, Inc., "Sun"), a fully integrated real
estate investment trust ("REIT"), in response to the growing need for providing
timely and competitive financing to residents of Sun's manufactured home
communities. Sun is one of the nation's largest owners and managers of
manufactured housing communities. Established in 1975, Sun became a public
company in 1993 with its common stock listed on the New York Stock Exchange
under the symbol SUI. Sun has experienced rapid growth since becoming public,
growing from 24 communities and 6,500 developed sites as of 1993 to 84
communities and over 30,500 developed sites as of July 31, 1997.
The manufactured housing industry has grown substantially in recent years.
In 1976, Congress passed a law requiring home builders to meet strict HUD
construction and safety standards, increasing home quality and fueling growth in
the market. During the past decade, manufactured home sales increased by
approximately 60% making it the fastest growing segment of the nation's housing
market. New manufactured home shipments were 363,000 in 1996 compared to 340,000
in 1995 and comprised over 32% of all single family homes sold in the United
States in 1996. Manufactured homes have become an affordable option for the
fastest growing segment of the population, retirees and moderate income
families, and are on average less than one-half the cost to construct, per
square foot of living space, than comparable site-built homes.
FORMATION AND STRUCTURE
The Company was formed in response to demand for financing from residents
in the communities owned and managed by Sun ("Sun Communities"). As the
Company's business has grown and developed, its objectives and opportunities
have become clearer and management of Sun and the Company have concluded that
the Company's growth will be enhanced as an independently owned and capitalized
entity. Sun is committed to focusing on its core business of owning and
operating manufactured home communities and maintaining a more conservative
leverage profile consistent with its status as a REIT as compared to the
traditionally higher leverage profile of a finance company. The Company
currently has 3 employees and to date has relied on Sun for financing pursuant
to a demand promissory note (the "Demand Note") and for administrative and
support services. A portion of the net proceeds from the Offering will be used
to repay Sun's loans to the Company under the Demand Note and to repay Sun for
the services provided to the Company. In connection with this Offering, Sun and
the Company have entered into a subordinated loan agreement pursuant to which
Sun has agreed to provide the Company with a $4 million term loan and a $6
million revolving credit facility (the "Subordinated Debt"). In connection with
the Subordinated Debt arrangement, the Company has issued Common Stock purchase
warrants to Sun to purchase up to 400,000
3
<PAGE> 5
shares of Common Stock at a price of $10 per share (the "Detachable Warrants").
See "Business -- Formation and Structure" and "-- Financing."
Sun has agreed to offer the Company as the only preferred financing source
to residents in all of its communities, which currently number 84. The services
to be provided by Sun will include the origination and closing of Contracts,
assistance with preservation of collateral and resale of homes under defaulted
Contracts. Sun also has agreed to continue to provide certain administrative
services to the Company at its cost for a period of three years. In addition,
Sun and certain directors and officers of Sun, some of whom are also directors
or officers of the Company, have indicated that they intend to purchase 100,000
shares of Common Stock in the offering. These transactions and purchases of
Common Stock will be completed in accordance with the following arrangements:
Participants Support Agreement
Sun is currently active in the marketing and sale of new and used homes for
placement in Sun Communities. The Company has entered into the Participants
Support Agreement with Sun, whereby Sun will offer the Company as the only
preferred financing source to home purchasers and home owners through Sun
personnel located on site. For its services, Sun will receive an annual fee of
0.5% of the average loan balance under Contracts originated by Sun and will be
eligible to receive up to 330,000 options (the "Participants Options") as
described below. In addition, the Company will pay Sun customary brokerage fees
for resale of foreclosed homes. See "Business -- Sales and Marketing" and
"Certain Transactions -- Participants Support Agreement."
The Company has developed the Participants Options to encourage Sun to
continue to refer and close Contracts with the Company over a 10-year period.
The Participants Options have been designed to align certain economic interests
of Sun with those of the Company by promoting the production of Contracts. The
Participants Options will be issued in eight equal annual amounts beginning in
January 2001, each consisting of 41,250 Participants Options and may be
exercised at any time after issuance until expiration ten years after the date
of issuance. To receive Participants Options in any year of issue, Sun must be a
party to and in compliance with the terms of the Participants Support Agreement
with the Company on the issue date and on December 31st of the preceding year.
This requirement provides an incentive to Sun to remain a party to the
Participants Support Agreement in order to continue to receive the Participants
Options. See "Business -- Participants Options" and "Certain Transactions --
Participants Support Agreement."
The Company intends to market similar arrangements to other community
owners. While the exact terms of any such arrangement will be negotiated at the
time of entering into an agreement, the Company expects that these agreements
will include the payment of an annual fee of 0.5% of the average loan balance
under Contracts originated by that party and will also include some form and
amount of options to acquire Common Stock similar to the Participants Options.
In the event the Company does enter into a form of a participants support
agreement with manufactured home community owners and operators (the
"Participants"), the Company will increase the number or create additional
Participants Options to take this into account.
Administrative Services Agreement
Sun will also provide accounting, data processing and administrative
support to the Company under an Administrative Services Agreement (the
"Administration Agreement"). Services provided by Sun under the Administration
Agreement will be billed at cost and are estimated initially to be $75,000 on an
annualized basis. See "Certain Transactions -- Administration Agreement."
Stock Purchases by Sun and its Affiliates
Sun and certain directors and officers of Sun, some of whom are also
directors or officers of the Company, have indicated that they intend to
purchase a total of 100,000 shares of Common Stock at the initial public
offering price. See "Risk Factors -- Reliance on Sun" and "-- Conflicts of
Interest," "Capitalization," "Description of Common Stock" and "Business --
Formation and Structure."
4
<PAGE> 6
BUSINESS STRATEGY
The Company's business strategy is based on management's belief that the
financing of manufactured homes is a profitable business filling a need in the
expanding manufactured home industry. Sun is currently one of the nation's
largest owners and operators of manufactured home communities and is becoming
one of the country's larger dealers of new manufactured homes. Prior to the
formation of the Company all financing within Sun Communities was handled by
outside unaffiliated financial institutions. Sun and the Company believe that it
makes prudent business sense to offer financing through the Company to take
advantage of Sun's industry expertise and its existing relationships with home
owners in Sun Communities. The Company's Participants Support Agreement with Sun
will provide the Company with immediate access to a significant and growing
source of borrowers in Sun Communities. Management estimates that $50-$70
million of financing is consummated annually on properties in Sun Communities.
The Company currently is capturing 15-20% of this volume prior to the
implementation of the Participants Support Agreement with Sun, and will attempt
to capture a more significant share in the future. The Company's strategy is to
market its services principally through Sun and other manufactured home
community owners, and their on-site managers and sales organizations. Although
the Company's strategy focuses on Sun and other community owners, the Company
may in the future decide to originate loans through dealers as well.
The Company believes that marketing directly to Sun and other community
owners will have several advantages over its principal competitors who market
their services primarily through dealers of manufactured homes. These include:
1) having preferred access as the only financial institution designated as a
preferred financing source to customers of Sun and, potentially, to other
Participants; 2) originating its Contracts in high quality communities such as
Sun's; 3) having reduced pressure to lower credit standards due to its strategy
of concentrating in Sun Communities and, potentially, to other Participants and
not competing primarily at the dealership level where there may be pressure to
lower credit standards; 4) receiving on-site support from Sun and, potentially,
from other Participants, in the event of serious defaults on loans; 5) aligning
the economic interests of Sun with the Company through the Participants Options
which will reward Sun only if the Common Stock increases in value; and 6)
controlling overhead through the outsourcing of services to Sun at cost.
The Company's growth strategy consist of the following key elements:
- to expand the Company's business in existing Sun Communities in order to
gain a larger share of the financing opportunities already in existence
and to participate in the anticipated growth of Sun;
- to market its services to other community owners and operators who may
become Participants on terms similar to its arrangement with Sun; and
- to enhance profitability through the marketing of property and casualty,
warranty and credit life insurance to borrowers and to expand into other
lines of business through initiation of new business activities or through
potential future acquisitions.
The Company's principal executive offices are located at 31700 Middlebelt
Road, Suite 125, Farmington Hills, Michigan 48334. The Company's telephone
number is (248) 932-9656.
5
<PAGE> 7
THE OFFERING
COMMON STOCK OFFERED BY THE COMPANY......... 1,000,000 shares. The Company
has granted the Underwriters an
option to purchase an additional
150,000 shares to cover
over-allotments.(1)
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING.......................... 1,000,000 shares (1,150,000
shares if the over-allotment
option is exercised in full).(2)
USE OF PROCEEDS............................. The Company anticipates using
the proceeds of the Offering:
(i) to repay the Company's
indebtedness to Sun under the
Demand Note and repay Sun for
services advanced; (ii) to fund
loans and provide an equity base
for borrowings; and (iii) for
working capital and general
corporate purposes. See "Use of
Proceeds."
DIVIDEND POLICY............................. Since its inception, the Company
has neither declared nor paid
dividends on its Common Stock to
its shareholders. The Company
does not anticipate paying any
cash dividends on the Common
Stock in the foreseeable future.
PROPOSED NASDAQ SMALLCAP MARKET SYMBOL......
- -------------------------
(1) The Company has issued Detachable Warrants to Sun in connection with the
Subordinated Debt covering 400,000 shares of Common Stock. The Company also
has set aside 330,000 shares of Common Stock for issuance upon exercise of
the Participants Options. See "Description of Capital Stock," "Business --
Formation and Structure" and "-- Financing."
(2) Does not include shares of Common Stock (equal to 10% of the total
outstanding shares of Common Stock) reserved for issuance under the
Company's 1997 Stock Option Plan (the "Stock Option Plan" and the "Stock
Options") or shares issuable upon exercise of the Detachable Warrants or
Participants Options. See "Management -- Executive Compensation," "Business
-- Formation and Structure," "-- Participants Options" and "-- Financing."
6
<PAGE> 8
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Financial Statements, including the Notes thereto, appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED
JUNE 30, 1997*
----------------
<S> <C>
STATEMENT OF EARNINGS DATA:
Total Interest Income..................................... $ 122,100
Interest Expense.......................................... 85,200
Net Interest Income....................................... 36,900
Provision for Credit Losses............................... 31,500
Operating Expenses........................................ 70,600
Net Loss.................................................. $ 65,200
SELECTED OPERATING DATA:
Average Contract Yield.................................... 10.7%
Net Interest Margin....................................... 3.7%
Average Gross Contract Receivable Outstanding............. $ 28,600
Net Charge-Offs as a Percentage of Average Gross Contracts
Outstanding............................................ 0.0%
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1997
----------------
<S> <C>
BALANCE SHEET DATA:
Total Assets.............................................. $5,422,100
Contracts Receivable, Gross............................... 5,355,300
Allowance for Credit Losses............................... 31,500
Contracts Receivable, Net................................. 5,323,800
Short Term Debt due to Sun................................ 5,363,600
Stockholder's Deficiency.................................. 65,100
Delinquencies Greater than 30 days as a Percentage of
Gross Contracts Receivable............................. 1.0%
OTHER DATA:
Number of States in which the Company Operates............ 6
Number of Outstanding Contracts........................... 187
Number of Employees....................................... 3
</TABLE>
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*The Company's fiscal year ends on September 30.
7
<PAGE> 9
RISK FACTORS
Prospective investors should carefully consider the following information
in conjunction with the other information contained in this Prospectus before
purchasing Common Stock in the Offering. This Prospectus contains certain
forward-looking statements and information relating to the Company that are
based on the beliefs of management as well as assumptions made by and
information currently available to management. In addition, the words
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company, or the Company's management, are intended to
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in this
Prospectus. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated,
expected or intended. The Company does not intend to update these
forward-looking statements.
ABILITY OF THE COMPANY TO IMPLEMENT ITS STRATEGY
The Company's strategy is to market its services principally through
manufactured home community owners or managers, which will initially consist
solely of Sun. The Company's ability to increase its loan portfolio and thus
increase net interest income will depend in large part upon: (i) continued new
home sales activity, resale activity of previously owned homes and to a lesser
extent, refinancing activity within Sun Communities and in other communities as
to which the Company may establish a relationship; (ii) its ability to increase
market penetration in Sun Communities; (iii) its ability to effectively market
its services to manufactured home community owners and operators other than Sun
and to establish and maintain relationships with them by entering into
participants support agreements; and (iv) its ability to attract and retain
qualified underwriting, collection and support personnel. Through the
Participants Support Agreement the Company will provide Sun (i) an annual fee of
0.5% of the average loan balances under Sun's respective Contracts and (ii) the
opportunity to receive Participants Options. The Participants Options only have
value if the price of the Common Stock exceeds the applicable exercise price.
The Company intends to market similar arrangements to other community owners and
operators which it expects will consist of an annual fee of 0.5% and some form
of options to acquire Common Stock similar to the Participants Options. There
can be no assurance that these incentives will be sufficient to make the
Company's strategy to market its services to community owners and operators
successful. Community owners and operators may see the value offered by the
participants support agreements and the opportunity to acquire options for
shares of Common Stock as insufficient or too speculative, may be concerned
about the Company's lack of operating history, may choose not to do business
with the Company due to the Company's relationship with Sun, or may elect not to
become a Participant for other reasons. The Company's ability to maintain its
profitability, as it pursues its strategy, will be dependent on, among other
things, its ability to: (i) maintain appropriate procedures, policies and
systems to ensure that the Company offers Contracts with an acceptable level of
credit risk and loss; (ii) locate sufficient financing with acceptable terms to
fund its Contracts; (iii) manage the costs associated with hiring additional
personnel and with other activities associated with the planned growth of the
Company; and (iv) identify and operate in competitive, economic and regulatory
environments which are conducive to the Company's business activities. Changes
in any or all of these factors or in the Company's ability to successfully
implement its strategy could have a material adverse effect on the Company. See
"Business -- Business Strategy" and "-- Sales and Marketing."
SIGNIFICANT START-UP LOSSES EXPECTED
As a result of the substantial start-up expenditures that must be incurred
by a finance company and the time it will take to develop its loan portfolio to
a profitable level, it is expected that the Company will operate at a loss
during the start-up phase of its business. The Company is not expected to be
profitable for at least the first year of operation and the book value of the
Common Stock will decrease accordingly. Further, there is no assurance that the
Company will ever operate profitably. If the Company does not reach
profitability and recover its accumulated operating losses and the
non-recoverable portion of its investment in fixed assets, investors will suffer
a significant decline in the value of their shares of Common Stock.
8
<PAGE> 10
LACK OF OPERATING HISTORY AND EXPERIENCE OF MANAGEMENT
The Company commenced operations in January, 1997. While management
believes the Participants Support Agreement with Sun will lessen the potential
effects of start-up risks, the business of the Company is subject to the risks
inherent in the establishment of a new business enterprise. Because the Company
has only recently commenced operations, prospective investors do not have access
to all of the information that, in assessing their proposed investment, is
available to the purchasers of securities of a company with a history of
operations.
Certain members of management of the Company have extensive experience in
the acquisition, ownership and operation of manufactured home communities but
management has limited experience managing the existing and prospective
financial services business of the Company. To the extent such experience is
material to the execution of the Company's business strategy and to the
maintenance of profitable operations, and unless persons with such experience
are subsequently employed and retained by the Company, management's relative
inexperience may have an adverse effect on the Company.
RELIANCE ON SUN
The Company's business depends in large part upon its relationship with
Sun, including its arrangement with Sun to be the sole preferred financing
source offered to purchasers and homeowners in Sun Communities through the
Participants Support Agreement and the general and administrative support
provided by Sun pursuant to the Administration Agreement. To date, the Company's
business has been conducted solely in Sun Communities. There can be no assurance
that Sun will be successful in maintaining or increasing its existing
communities, or that Sun will continue to grow at a rate comparable to its
historical performance. If Sun is adversely affected in any way, the Company
will be adversely affected. Although Sun has entered into the Participants
Support Agreement with the Company for a term of three years, there is no
guarantee that this arrangement will continue thereafter and thus, no guarantee
that the Company will continue to have access to Sun Communities. If the Company
is no longer the only preferred financing source at Sun Communities its business
will be adversely affected. See "Risk Factors -- Dependence on External
Financing", "Business -- Formation and Structure," "-- Financing" and "Certain
Transactions."
DEPENDENCE ON EXTERNAL FINANCING
The Company's operations are dependent on its ability to maintain adequate
capital and access satisfactory lending sources to fund its Contracts.
Historically, the Company has relied exclusively on the funds provided by Sun.
For its immediate financing needs, the Company will draw on the funds provided
by the proceeds of the Offering and the Subordinated Debt. The Subordinated Debt
facility provides a $4 million term loan, which will mature seven years after
the date of the Note, and a five-year $6 million revolving credit facility.
Prepayment of the term loan is permitted after the first three years without
premium or penalty subject to the approval of the non-employee directors of the
Company. Concurrent with the completion of this Offering the Company will borrow
$4 million from Sun pursuant to the Subordinated Debt. Although the Company
intends to negotiate with independent financial institutions to provide senior
financing, there can be no assurance that the Company will be able to obtain
these or other comparable financing arrangements on acceptable terms or that the
Company will continue to have sufficient sources of funds to meet its short-term
and long-term financing needs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Financing."
CONFLICTS OF INTEREST
After completion of the Offering, Sun and directors and officers of Sun,
some of whom are also directors or officers of the Company, will own in the
aggregate approximately 10% of the Common Stock of the Company. Sun expects to
receive Participants Options in the Participants Option Program and will receive
the Detachable Warrants in connection with its agreement to provide the
Subordinated Debt. If these Participants Options and Detachable Warrants are
exercised and retained, Sun may be a significant stockholder in the future.
While Sun, as a REIT, cannot directly own more than 10% of the shares of Common
Stock, it may own an unlimited amount through its affiliates.
9
<PAGE> 11
In addition to Sun's ownership of Common Stock in the Company and Common
Stock ownership by affiliates, directors and officers of Sun, Sun is closely
tied to the management of the Company. Other than the independent directors, all
of the directors and some of the officers of the Company also are shareholders,
officers or directors of Sun.
Sun has been involved in virtually every aspect of the Company's existence.
Sun has loaned the Company funds to start its operations and expects to be
repaid with the proceeds of this Offering. In addition, Sun has entered into a
new financing arrangement with the Company in the form of the Subordinated Debt,
evidencing its continued interest in the Company. The Company's dependence on
Sun for financing and for access to Sun Communities as the preferred financing
source places Sun in a position to exercise significant influence over the
affairs of the Company. Sun's involvement in the business as a provider of
services under the Administration Agreement, a lender under the Subordinated
Debt, and its potential ownership of shares of Common Stock may cause it to have
interests which are not identical to those of the Company which may lead to
conflicts of interest with respect to certain transactions.
It is the intention of the Company and Sun that any agreement or
transaction between the Company and Sun is fair to all parties and consistent
with market terms. The Company's Bylaws provide that certain transactions
between the Company and Sun require the approval of a majority of the
independent directors of the Company to attempt to achieve fair dealings between
the Company and Sun. Such transactions include the Administration Agreement, the
Participants Support Agreement, Participants Option Program and the Subordinated
Debt. However, there can be no assurance that such agreements or transactions
will be on terms as favorable to the Company as those that could have been
obtained from unaffiliated third parties. See "Certain Transactions."
COMPETITION
The manufactured housing finance industry is very fragmented and highly
competitive. There are numerous non-traditional consumer finance sources serving
this market. Specifically, Green Tree Financial Corporation ("Green Tree"),
founded in 1975 to provide financing for the purchase of manufactured homes, is
the clear financing leader. With approximately a 28% market share in the
financing of new manufactured housing shipments, it is the leading commercial
lender to manufactured housing retail dealers. In addition, some of the
manufactured housing industry's larger manufacturers, such as Clayton Homes and
Oakwood Homes, maintain their own finance subsidiaries to provide financing for
purchasers of their manufactured homes. Historically, traditional financing
sources (commercial banks, savings and loans, credit unions and other consumer
lenders) have not consistently served this market. Existing manufactured home
lenders and traditional financing sources, many of which have significantly
greater resources and more experience than the Company, may be able to offer
more attractive terms to potential customers. To the extent that non-traditional
and traditional lenders significantly expand their activities in this market,
the Company may be adversely affected. See "Business -- Competition" and "--
Manufactured Housing and Manufactured Home Financing Industries."
POTENTIAL LOSSES FROM DELINQUENCIES AND DEFAULTS
The most frequent purchasers of manufactured homes are younger, first-time
buyers and retirees. The Company's borrowers may be deemed to be relatively high
credit risks due to various factors, including, among other things, the manner
in which they have handled previous credit, the absence or limited extent of
their prior credit history, or limited financial resources. Consequently, the
loans originated by the Company bear a higher rate of interest, have a higher
probability of default and may involve higher delinquency rates and greater
servicing costs relative to loans to more creditworthy borrowers. The Company's
profitability depends upon its ability to properly evaluate the creditworthiness
of borrowers, limit its default rates and foreclosure costs and to efficiently
service the Contracts. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business -- Operations" and "Business --
Management Information Systems."
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<PAGE> 12
FEDERAL AND STATE REGULATORY AND LEGAL COMPLIANCE
The Company is subject to regulation and licensing under various federal
and state statutes and regulations. The Company's business is currently
conducted in the states of Michigan, Indiana, Kansas, Missouri, Texas, and
Florida, and the Company intends to operate in the states of Illinois, Ohio, and
Colorado. Accordingly, the laws and regulations of such states govern the
Company's operations therein. Most states where the Company operates: (i) limit
the interest rate and other charges that may be imposed by, or prescribe certain
other terms of, the Contracts into which the Company enters; (ii) regulate the
sale and type of insurance products that the Company anticipates it may offer
and the insurers for which it may act as agent; and (iii) define the Company's
rights to repossess and sell collateral. In addition, the Company is required to
be licensed to conduct its finance operations in the states of Indiana, Kansas,
Missouri and Texas where it presently conducts its business. If the Company
expands its operations into other states, it will be required to comply with the
laws of such states.
In addition, the Company is 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 Company to provide
certain disclosures to applicants, prohibit misleading advertising and protect
against discriminatory financing or unfair credit practices. An adverse change
in, modification to, or interpretation of any of these existing laws or
regulations, or the promulgation of any additional laws or regulations could
have a material adverse effect on the Company. The cost of complying with these
regulations is significant and a failure to comply with these regulations could
have a material adverse effect on the Company.
Each of the states in which the Company operates prohibit it from charging
a finance charge in excess of statutory maximum rates. Finance charges typically
include interest and fees charged in connection with marketing the loan. The
Company's forms are in compliance with all applicable laws. If a material number
of the Company's Contracts involved violations of applicable lending laws by the
Company, the Company's financial position could be materially adversely affected
and a continuing pattern of violation by the Company could have a material
adverse effect on the Company's future prospects. A violation of state usury
laws, for instance, typically carries a penalty of loss of all interest
collected or to be collected on a Contract. See "Business -- Regulation and
Supervision."
GENERAL ECONOMIC CONDITIONS, GEOGRAPHIC CONCENTRATIONS AND SENSITIVITY TO
INTEREST RATES
Real Estate Market
The Company's business is affected by a number of factors beyond its
control, including sales activity in the new and used manufactured housing
market, which may be affected by the general condition of the economy and
interest rate levels. Changes in general economic conditions could have a
material adverse effect on the Company.
Geographic Concentration
The Company's business has been concentrated in certain states. As of June
30, 1997, all of the Company's contracts in its portfolio were made to consumers
in Michigan (54%), Indiana (22%), Texas (17%), Florida (6%) and others. As a
result, the Company's Contracts may be subject to a greater risk of default than
other comparable loans in the event of adverse economic, political or business
developments or natural hazards that may affect one or more of these states and
the ability of property owners in one or more of these states to make payments
on their Contracts.
Interest Rates
The Company's net interest income or loss is the difference between the
interest income it earns on the loans it originates and the interest expense it
pays on its interest-bearing liabilities to fund such loans. The Company will
principally fund its loans from its borrowings from Sun under the Subordinated
Debt and the proceeds from this Offering. The Company's profitability is
determined largely by the difference, or "spread,"
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<PAGE> 13
between the rate of interest at which the Company funds such loans and the fixed
rate of interest charged to and collected from borrowers pursuant to their
Contracts. There can be no assurance that the Company's cost of funds will not
rise to a level that adversely affects its ability to maintain profitability
with respect to the loan portfolio it holds. The Company may also be adversely
affected by declines in interest rates. If interest rates decline and loan
prepayments therefore increase due to refinancing activity, the income stream
from the Company's current loan portfolio may decline. This may, in turn,
adversely affect the Company's operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Financing."
INDUSTRY CONDITIONS, CYCLICALITY AND SEASONALITY
The manufactured housing industry historically has been cyclical and is
generally subject to many of the same national and regional economic and
demographic factors which affect the housing industry generally. Such factors
include consumer confidence, inflation, interest rates, regional population and
employment trends, availability of and cost of alternative housing, weather
conditions and general economic conditions. In addition, sales typically peak
during the spring and summer seasons and decline to lower levels from mid-
November through January.
CONTROL AND ANTI-TAKEOVER CONSIDERATIONS
The Restated Articles of Incorporation (the "Articles of Incorporation")
and the Amended and Restated Bylaws (the "Bylaws") of the Company contain
certain provisions which could impede a non-negotiated change in control of the
Company and thereby adversely affect the holders of the Common Stock. These
provisions include a grant of authority to issue, without shareholder approval,
up to 10,000,000 shares of preferred stock in one or more series, with such
preferences, limitations and relative rights as are determined by the Board of
Directors at the time of issuance. The Michigan Business Corporation Act (the
"Act") also contains provisions which will impede a change of control not
approved by the Board of Directors. The Board of Directors of the Company has
been divided into three classes of directors with staggered terms. The staggered
terms for directors may affect the stockholders' ability to change control of
the Company even if a change in control were in the stockholders' interest. See
"Description of Capital Stock."
ABSENCE OF PRIOR MARKET FOR COMMON STOCK
There has been no public market for the Common Stock prior to the Offering
and there can be no assurance that a public market will develop or, if it
develops, that it will be sustained following the Offering. The price of the
Common Stock offered hereby has been determined through negotiation between the
Company and the Underwriters. Certain factors, such as changes in market
conditions generally, could cause the market price of the Common Stock to vary
substantially. See "Shares Eligible for Future Sale" and "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of the Common Stock in the public
market following the Offering could adversely affect the market price of the
Common Stock. The Company intends to register under the Securities Act a number
of shares equal to 10% of the total outstanding shares of Common Stock, issuable
upon exercise of Stock Options, of which approximately options will be
granted upon completion of the Offering. See "Shares Eligible for Future Sale"
and "Underwriting." Shares issued upon the exercise of Stock Options will be
eligible for sale in the public market, subject, in the case of affiliates of
the Company, to the volume and other limitations of Rule 144, the lock-up
agreements and any employment agreements. The Company has issued Detachable
Warrants to Sun covering 400,000 shares of Common Stock in connection with the
Subordinated Debt. The Company has also set aside 330,000 shares of Common Stock
for issuance upon exercise of the Participants Options. Sun's REIT status may
increase the likelihood of future sales of Common Stock as it cannot directly
own more than 10% of the shares of the Company. See "Shares Eligible for Future
Sale." No prediction can be made regarding the effect that future sales of
shares of Common Stock will have on the market price of the Common Stock.
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<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered by the Company (based upon an assumed public offering price
of $10.00 per share) are estimated to be approximately $[ ] ($[ ]
million if the Underwriters' over-allotment option is exercised in full), after
deduction of the underwriting discount and estimated offering expenses payable
by the Company. The Company anticipates using the net proceeds of the Offering
together with $4 million of borrowings under the Subordinated Debt facility to
(i) repay the indebtedness outstanding to Sun under the Demand Note and repay
Sun for services advanced; (ii) fund loans and provide an equity base for
borrowings; and (iii) for working capital and general corporate purposes. The
Demand Note provides the Company with funds to originate loans, bears interest
at a rate of 7.0% and is payable on demand. See "Capitalization," "Certain
Transactions," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Financing."
DIVIDEND POLICY
Since its inception, the Company has neither declared nor paid dividends on
its Common Stock to its stockholders. The Company does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future. The Company
currently intends to retain all of its earnings, if any, for use in its
business.
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<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997 and is adjusted to reflect the sale of the 1,000,000 shares of Common
Stock offered hereby (excluding the overallotment) and the application of the
estimated net proceeds. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Debt
Note payable, Sun (7% due on demand)...................... $5,363,600
Subordinated Debt (Term Note) (9 3/4% due 2004)........... -- $4,000,000
---------- ----------
Total Debt.................................................. $5,363,600 $4,000,000
---------- ----------
Stockholder's Equity
Common Stock no par value, 60,000 shares authorized; 100
issued (actual); 10,000,000 shares authorized;
1,000,000(1) shares issued and outstanding (as
adjusted).............................................. $ 100 $
Preferred Stock, no par value, 10,000,000 shares
authorized; no shares issued and outstanding........... -- --
Retained earnings (deficit)............................... (65,200) (65,200)
---------- ----------
Total stockholder's equity (deficiency)..................... $ (65,100) $
---------- ----------
Total capitalization........................................ $5,298,500 $
========== ==========
</TABLE>
- -------------------------
(1) 1,150,000 shares if the over-allotment option is exercised in full. In
addition, the Company has issued Detachable Warrants to Sun in connection
with the Subordinated Debt covering 400,000 shares of Common Stock. The
Company also has set aside 330,000 shares of Common Stock for issuance upon
exercise of the Participants Options. See "Description of Capital Stock,"
"Business -- Formation and Structure," "-- Financing" and "-- Participants
Options." Does not include shares of Common Stock (equal to 10% percent of
the total outstanding shares of Common Stock) reserved for issuance under
the Company's 1997 Stock Option Plan (the "Stock Option Plan" and the "Stock
Options") or shares issuable upon exercise of the Detachable Warrants or
Participants Options. See "Management -- Executive Compensation," "Business
-- Formation and Structure," "-- Participants Options" and "-- Financing."
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<PAGE> 16
DILUTION
As of June 30, 1997, the net tangible book value of the Company was
approximately [$ ], or [$ ] per share. "Net tangible book value per
share" represents the total tangible assets of the Company, less all
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to the sale by the Company of 1,000,000 shares of Common Stock
offered hereby (at an assumed initial public offering price of $10.00 per share
and after deducting the underwriting discount and estimated offering expenses
payable by the Company) and the application of the net proceeds therefrom, the
pro forma net tangible book value of the Company as of June 30, 1997, would have
been approximately $[ ] million or $[ ] per share, representing an
immediate increase in net tangible book value of $[ ] per share to current
shareholders and an immediate dilution of $[ ] per share to new investors.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C> <C>
Assumed public offering price per share..................... $10.00
Net tangible book value per share at June 30, 1997..... $ ____
Pro forma net tangible book value per share................. $ ____
Increase attributable to new investors................. $ ____
Pro forma net tangible book value after the Offering........ ____
Dilution to new investors................................... $ ____
</TABLE>
The foregoing table does not give effect to the exercise of outstanding
options to purchase shares of Common Stock pursuant to the Stock Option Plan at
an exercise price of $10.00 per share, the exercise of the Detachable Warrants
at $10.00 per share and the exercise of the Participants Options. See
"Management -- Executive Compensation" and "Business -- Formation and
Structure."
MARKET FOR THE COMMON STOCK
There has been no market for the Common Stock of the Company. The initial
public offering price of $10.00 per share was determined by the Company in
consultation with the Underwriters. This price is not based upon earnings or any
history of operations and should not be construed as indicative of the present
or anticipated future value of the Common Stock. Prior to the Offering, there
has been no public trading market for the Common Stock. The price at which these
shares are being offered to the public may be greater than the market price for
the Common Stock following the Offering. The Company has applied for trading and
quotation on the Nasdaq SmallCap Market. There can be no assurance, however,
that the Company will be able to obtain or maintain its designation. The
Representative has advised the Company that, upon completion of the Offering, it
intends to use reasonable efforts to initiate quotations of the Common Stock on
the Nasdaq SmallCap Market and to act as a market maker in the Common Stock,
subject to applicable laws and regulatory requirements, although the
Representative is not obligated to do so. Making a market in securities involves
maintaining bid and ask quotations and being able, as principal, to effect
transactions in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. The development of a public
trading market depends, however, upon the existence of willing buyers and
sellers, the presence of which is not within the control of the Company or any
market maker. Market makers on the Nasdaq SmallCap Market are not required to
maintain a continuous two-sided market, are required to honor firm quotations
for only a limited number of shares, and are free to withdraw firm quotations at
any time. Even with a market maker, factors such as the limited size of the
offering, the lack of earnings history of the Company and the absence of a
reasonable expectation of dividends within the near future mean that there can
be no assurance that an active and liquid trading market for the Common Stock
will develop or, if developed, will be sustained following the Offering.
Purchasers of Common Stock should carefully consider the limited liquidity of
their investment in the shares being offered hereby. See "Risk Factors --
Absence of Prior Market for Common Stock."
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<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company commenced operations in January, 1997, for the primary purpose
of originating loans on manufactured homes located within the communities owned
by Sun. The Company expects to extend its business to include the sale of
insurance products, other installment loans or engage in other related
businesses in the future through the initiation of new businesses or through
acquisitions of existing businesses.
The following should be read in conjunction with "Selected Financial Data"
and the notes thereto and the Financial Statements and the Notes thereto of the
Company included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
As the financial statements and selected financial data present only a
six-month period, there are no comparative financial data against which to
describe changes in operations, margins or performance. Additionally, as this
represents a start-up period with all financing consisting of debt, management
does not believe that the results of the period are indicative of the operations
of the Company when it is appropriately financed and has grown its loan
portfolio through origination of new loans consistent with its business
strategy.
It is the intention of the Company to generate larger business volume from
the Sun portfolio as well as from the portfolios of other community owners.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been totally dependent upon Sun for capital with which to
finance its portfolio of Contracts. The Company expects to improve its financial
base as a result of the Offering and the Subordinated Debt facility from Sun,
consisting of a $4 million term loan to be funded upon completion of the
Offering and a five-year revolving line of credit up to $6 million. The Company
believes that this financial base will allow for the successful negotiation of
bank warehousing and other loans to provide sufficient cash to support the
growth of the business. See "Capitalization" and "Business -- Financing."
There can be no assurance that the Company will successfully execute its
business strategies such that the Company's business will grow as expected by
management. See "Risk Factors."
LOAN PORTFOLIO
At June 30, 1997, the average remaining balance was approximately $28,600,
and had a weighted average interest rate of approximately 10.7%. All loans made
by the Company are fully amortizing and provide for equal payment over the term
of the Contract (typically 5 to 25 years). The portions of such payments
allocable to principal and interest are, for payoff and deficiency purposes,
determined in accordance with the terms of the Contract. The following table
sets forth, at the date shown, the average loan balance, weighted average loan
yield and weighted average initial term.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
<S> <C>
Outstanding Contract Receivable............................. $ 5,355,300
Average Loan Balance........................................ $ 28,600
Weighted Average Loan Yield................................. 10.7%
Weighted Average Initial Term............................... 23.3 years
</TABLE>
CREDIT LOSS AND FORECLOSURE EXPERIENCE
The Company's profitability depends in large part upon its ability to
effectively monitor and control credit losses. The Company provides for a
reserve for credit losses estimated at published industry averages of 0.75% of
loan balances. To the extent the Company experiences loss rates or foreclosure
rates in excess of those
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<PAGE> 18
estimated, the Company may experience an adverse material effect. Due to the
Company's short operating history, there can be no assurance that actual Company
experience will track industry averages.
IMPACT OF INFLATION
Increases in the inflation rate generally result in increased interest
rates and increases in the Company's operating expenses. As the Company expects
to borrow funds at both a fixed rate and at variable rates, increased interest
rates will increase the borrowing costs of the Company, and such increased
borrowing costs may not be offset by increases in the rates of the Company's
Contracts.
SEASONALITY
Higher sales of manufactured homes during the Spring and Summer seasons
results in a greater volume of new Contracts during those periods.
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<PAGE> 19
BUSINESS
THE COMPANY
The Company was incorporated in August of 1996 as an affiliate of Sun and
began transacting business in January of 1997 as a specialized financial
services company to provide financing for new and previously owned manufactured
homes. The Company makes conventional loans under Contracts secured by the
borrower's manufactured home. The Company intends to market property and
casualty, credit life and warranty insurance relating to Contracts. The Company
initially intends to offer loans on manufactured homes only but may offer other
types of commercial and consumer loans, engage in the acquisition and sale of
loans, or engage in other related businesses in the future through initiation of
new businesses or through acquisitions of existing businesses.
The Company was formed by Sun in response to the growing need of providing
timely and competitive financing to residents of its manufactured home
communities. Sun is one of the nation's largest owners and managers of
manufactured housing communities. Established in 1975, Sun became a public
company in 1993 with its common stock listed on the New York Stock Exchange
under the symbol SUI. Sun has experienced rapid growth since becoming public,
growing from 24 communities and 6,500 developed sites to 84 communities and over
30,500 developed sites as of July 30, 1997.
FORMATION AND STRUCTURE
Sun commenced the Company's business in response to demand for financing
from purchasers and residents in Sun Communities. To assist in the formation of
the Company, Sun has loaned the Company amounts required to fund the Company's
Contracts pursuant to the Demand Note, will continue to provide financial
assistance in the form of the Subordinated Debt, with a $4 million term loan and
a $6 million five-year revolving credit facility, and has provided
administrative and support services. A portion of the net proceeds from the
Offering will be used to repay Sun's loans to the Company under the Demand Note
and to pay Sun for the services advanced to the Company. See "Use of Proceeds"
and "Business -- Financing."
As the Company's business has developed, its objectives and opportunities
have become clearer and management has concluded that the Company's business
will be enhanced by the introduction of significant outside borrowings to fund
lending for its Contracts. As a REIT, Sun is committed to focusing on its core
business of owning and operating manufactured home communities and maintaining a
more conservative leverage profile consistent with its status as a REIT as
compared to the traditionally higher leverage profile of a finance company. In
consideration of these factors, the Company and Sun have concluded that the
Company's business can be operated and grown more effectively as an
independently capitalized entity. See "Risk Factors -- Reliance on Sun," "--
Conflicts of Interest."
Following completion of this Offering, the Company will continue to have
significant relationships with Sun and certain of its affiliates. Sun and
certain directors and officers of Sun, some of whom are also directors or
officers of the Company, will acquire Common Stock in the Offering, Sun owns
Detachable Warrants issued in connection with the Subordinated Debt and Sun
expects to receive the Participants Options. See "Risk Factors -- Reliance on
Sun," "-- Conflicts of Interest" and "Business -- Participants Options."
Through an affiliated company, Sun actively markets and sells new and used
homes for placement in Sun Communities. The Company has entered into the
Participants Support Agreement with Sun, under the terms of which, Sun will
offer the Company as the sole preferred financing source to home purchasers and
home owners in Sun Communities. The services to be provided by Sun will include
the origination and closing of Contracts, assistance with foreclosure, and
refurbishing and resale of homes under defaulted Contracts. For its services,
Sun will receive an annual fee of 0.5% of average loan balances under Contracts
originated in Sun Communities. In addition, the Company will pay customary fees
for resale of foreclosed homes. Sun also will be eligible to receive up to
330,000 Participants Options, designed by the Company to align certain economic
interests of Sun with the Company. See "Business -- Participants Options."
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<PAGE> 20
Sun will also provide accounting, data processing and administrative
support to the Company under the Administration Agreement. Services provided by
Sun under the Administration Agreement will be billed to the Company on a direct
cost basis estimated initially to be $75,000 annually. See "Certain Transactions
- --Administration Agreement."
BUSINESS STRATEGY
The Company's business plan is based on the Company's belief that financing
of manufactured homes is a profitable business filling a need in the expanding
manufactured home industry. The Company believes its relationship with Sun under
the Participants Support Agreement will provide immediate access to a
significant and growing source of borrowers in Sun Communities. Sun currently
estimates that $50-$70 million of financing is consummated annually on
properties in its communities, and the Company, which is currently capturing
15-20% of this volume prior to the implementation of the Participants Support
Agreement with Sun, will attempt to capture a more significant share in the
future. The Company's strategy is to market its services principally through Sun
and other manufactured home community owners and their on-site managers. The
Company intends to compete aggressively for manufactured housing loans through a
systematic approach to all 84 housing communities currently owned and operated
by Sun, but the Company also intends to market its services to other
manufactured housing community owners and operators. Although the Company's
strategy focuses on Sun and other community owners, the Company may in the
future decide to originate loans through dealers as well. Management believes
that under the provisions of the Participants Support Agreement which the
Company has entered into with Sun and the participants support agreements the
Company will offer to other selected community owners and operators, the Company
will have the following advantages over its principal competitors who market
their services primarily through dealers of manufactured homes:
1. Preferred Access to Customers: Typically, a lender competes for new
business at the point of sale of the manufactured homes which in most
cases is the dealership. This requires sales personnel to call on the
dealers, and for lenders to develop and maintain an advertising and
marketing program with its attendant costs. As a preferred financing
source, the Company expects to receive a flow of applications from Sun
Communities and, potentially, from other Participants mitigating the
need to compete at the dealership level.
2. Origination of Contracts in High Quality Communities: Sun Communities
are high quality communities due in part to the on site managers' close
attention to detail in maintaining the entire infrastructure of the
community. Sun Communities are managed according to a set of rules which
establishes homeowners' obligations with respect to the maintenance of
homes and sites ensuring that they are well maintained. If those
standards are not met, violations are issued which, if the owner remains
unresponsive, can result in the eviction of his home from the community.
By concentrating lending efforts to Sun Communities and other high
quality communities, the Company expects to mitigate foreclosure costs
from defaulted loans.
3. Reduced Pressure to Lower Credit Standards: In some cases, in order for
a lender to begin to compete in the dealer network, the lender may
initially have to approve loans of a lower credit standard and in some
cases loans the dealer cannot find approval for elsewhere. Because the
Company will not be directing its marketing solely at the dealer level
it will face reduced pressure to lower credit standards to be
competitive.
4. Collection, Foreclosure and Repossession Support: The Company's
relationship with Sun will help the Company monitor the condition of the
collateral. In addition, Sun will assist the Company in the event of a
foreclosure. Sun is experienced in working with financial institutions
on foreclosures. As of June 30, 1997, Sun had 114 foreclosures financed
by independent financial institutions or .48% of the approximately
24,000 occupied manufactured housing community homesites. Following
foreclosure, Sun will also assist in and oversee refurbishment and
resale of manufactured homes which will save the Company additional
personnel costs. Prompt resale of the foreclosed home reduces rent
continuation costs and eliminates the approximate $3,000 to $6,000 cost
of taking the home out of the
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<PAGE> 21
community which the owner could require if rents remain unpaid for
extended periods. The Company anticipates similar advantages from
arrangements with other Participants.
5. Aligned Economic Interests: Sun will receive an annual fee equal to 0.5%
of the average annual balance of loans generated in Sun Communities. The
Company believes a key motivation for Sun to initiate loans is embodied
in the Participants Options. These Participants Options only have value
if the Company is successful and the price of the Common Stock exceeds
the exercise price of the Participants Options which in all cases is
greater than or equal to the initial public offering price. The
Participants Options are structured to be the primary economic motivator
for Sun to generate and direct loan volume to the Company on a
continuing basis. The Company intends to market similar arrangements to
other manufactured home community owners and operators. While the exact
terms of any such arrangement will be negotiated at the time of entering
into an agreement, the Company expects to offer an annual fee of 0.5% of
the average loan balance under Contracts originated by the Participant
and an opportunity to acquire shares of Common Stock. See "Risk Factors
-- Ability of the Company to Implement its Strategy."
6. Outsourced Personnel and Systems Costs: The Company intends to rely on
the personnel of Sun and other Participants to originate Contracts and
therefore the Company does not need to staff extensively for
origination, marketing, or closing loans. While Sun, and potentially,
other Participants will receive an annual fee, the fee is based on
successful, closed loans. In addition, the Company does not expect to
incur field or other sunk costs on deals which do not close. In
addition, through the Administration Agreement with Sun, the Company
believes it will minimize the overhead costs generally associated with a
start-up operation.
The Company's growth strategy consists of the following key elements:
- to continue to expand the Company's business capabilities in order to
gain a larger share of financing opportunities generated by purchasers
and residents in Sun Communities;
- to market its services to other community owners and operators on terms
similar to its arrangement with Sun;
- to market property and casualty, warranty and credit life insurance to
borrowers; and
- to provide additional services and engage in activities that the Company
believes will be profitable including other types of consumer and
commercial lending by originating new activities or acquiring existing
operations from others and possibly the acquisition and management of
real estate and other assets.
Participants Options
As part of the Participants Support Agreement, the Company developed the
Participants Options to encourage Sun to continue to refer and close Contracts
with the Company over a 10-year period. The Participants Options have been
designed to align certain economic interests of Sun with those of the Company by
promoting the production of Contracts. The Company has set aside 330,000
Participants Options to purchase Common Stock which have been established in
respect of Sun's Participants Support Agreement. The Participants Options will
be issued in eight equal annual amounts, each consisting of 41,250 Participants
Options, on January 31 in 2001 through 2008, and may be exercised at any time
after issuance until expiration ten years after the date of issuance. To be
eligible to receive the Participants Options, Sun must be a party to and in
compliance with the terms of the Participants Support Agreement on the issue
date and on December 31st of the previous year. The Participants Options will
have anti-dilution provisions which will adjust the number and purchase price of
shares of Common Stock subject to purchase upon exercise of a Participants
Option in the event of certain types of recapitalization transactions of the
Common Stock.
Each Participants Option to be issued on January 31, 2001, 2002 and 2003
will entitle the holder to purchase one share of Common Stock for a purchase
price of $10. Each Participants Option to be issued on January 31, 2004, 2005
and 2006, will entitle the holder to purchase one share of Common Stock for a
20
<PAGE> 22
purchase price of $12. Each Participants Option to be issued on January 31, 2007
and 2008 will entitle the holder to purchase one share of Common Stock for a
purchase price of $14.
The Participants Support Agreement has a three year term and is
automatically renewable for successive one year periods unless terminated by
either party. The Participants Options are structured to provide an incentive to
Sun to continue its relationship with the Company under the Participants Support
Agreement in order to receive the continuing benefit of the Participants
Options.
The Company intends to market an arrangement similar to the Participants
Support Agreement with other manufactured home community owners and operators.
While the exact terms of any such arrangement will be negotiated at the time of
entering into an agreement, the Company expects that these agreements will
include the payment of an annual fee of 0.5% of the average loan balance under
Contracts originated by the Participant and will also include some form and
amount of options to acquire Common Stock similar to the Participants Options.
In the event the Company does enter into a form of a participants support
agreement with Participants, the Company will increase the number or create
additional Participants Options to take this into account.
MANUFACTURED HOUSING AND MANUFACTURED HOME FINANCING INDUSTRIES
Statistics and data cited in this section were obtained from reports and
surveys prepared by the Manufactured Housing Institute.
The manufactured housing finance market is highly fragmented and
historically has been serviced by a variety of financial services entities,
including finance subsidiaries of the manufactured housing industry's larger
manufacturers. These finance subsidiaries are created by the manufacturers to
provide financing for purchasers of their manufactured homes. Many of these
finance subsidiaries do not consistently solicit business in the segment of the
market that the Company is targeting. Other participants in the industry include
banks, financial institutions and financial services companies offering a broad
array of consumer and commercial loans and related services. Several of the
dominant players in the manufactured home financing market, such as Green Tree,
have focused primarily on manufactured home dealers.
A manufactured housing community is a residential subdivision designed and
improved with sites for the placement of manufactured homes and related
improvements and amenities. Manufactured homes are detached, single-family homes
which are produced off-site by manufacturers and installed on sites within the
community. Manufactured homes may be constructed as either single section or
multi-section. Multi-section homes are built in sections, transported separately
to the site and then assembled. Multi-section homes are larger, offer more
amenities, look more like site-built homes and retail for an average of $40,000
to $50,000. Single section homes range in price from $20,000 to $30,000.
Manufactured homes are available in a wide array of designs, providing owners
with a level of customization generally unavailable in other forms of multi-
family housing.
Modern manufactured housing communities, such as the high quality
properties owned by Sun, contain improvements similar to garden-style
residential developments, including centralized entrances, paved streets, curbs
and gutters, and parkways. In addition, these communities also often provide a
number of amenities, such as a clubhouse, a swimming pool, shuffleboard courts,
tennis courts, laundry facilities and cable television service and occasionally
include a golf course.
In 1976, the United States Congress passed a law requiring manufactured
home builders to meet strict HUD construction and safety standards, increasing
home quality and fueling growth in the market. In addition, the development of
multi-section homes has improved quality and design and increased market
acceptance of manufactured homes as a viable alternative to site-built homes.
During the past decade, manufactured home sales increased by 60 percent making
it the fastest growing segment of the nation's housing market. New manufactured
home shipments were 363,000 in 1996 compared to 340,000 in 1995. Multi-section
shipments continue to grow as a percentage of total shipments, representing more
than 50% of the total shipments for 1996.
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<PAGE> 23
Manufactured homes have become an affordable option for the fastest growing
segment of the population, retirees and moderate income families. Manufactured
home borrowers generally have lower incomes than average buyers of site-built
homes and tend to be more payment size sensitive than interest rate sensitive.
The majority of single section manufactured home purchasers who financed their
purchase are between the ages of 18 to 34, have been employed less than five
years on the same job and have an annual household income of less than $25,000.
The demographics for multi-section manufactured home borrowers differ slightly,
with a majority of borrowers between the ages of 35-54, employed 5 to 10 years
on the same job and with an annual household income between $25,000 and $50,000.
The growth of the manufactured housing market over the past several years
is due to substantial improvements in quality, improved perception of
manufactured housing, and a continued large price advantage over site-built
homes. New manufactured homes are less than one-half the cost per square foot of
living space, than comparable new single-family site-built homes. Manufactured
housing costs an average of $28 per square foot, compared with approximately $59
per square foot for new single-family site-built homes. In 1996, manufactured
housing shipments reached 32.4% of new single-family homes sold, up from a low
of 23.4% in 1989. Manufactured houses remain much less expensive than site-built
homes, and can now compete in quality and aesthetics with site built homes.
The manufactured housing market is expanding and manufactured home
shipments continue to increase as a percentage of all housing. As the average
price of new site-built homes continues to rise, manufactured homes present
potential home owners with the most affordable single family homes in the market
place. The following tables compare manufactured and site-built homes as a
percentage of new housing and the average prices of each for the same period.
COMPARISON OF NEW MANUFACTURED HOME SHIPMENTS TO
SINGLE-FAMILY HOUSING STARTS AND HOMES SOLD
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Manufactured Home Shipments........ 171,713 210,787 254,276 303,932 339,601 363,411
New Single-Family Housing Starts... 840,400 1,030,100 1,125,600 1,198,400 1,076,300 1,160,300
Manufactured Homes Shipped as a %
of New Single-Family Housing
Starts........................... 16.9% 17.0% 18.4% 20.2% 24.0% 23.9%
New Single-Family Homes Sold....... 507,000 610,000 666,000 670,000 667,000 757,000
Manufactured Homes Shipped as a %
of New Single-Family Homes
Sold............................. 25.2% 25.7% 27.6% 31.2% 33.7% 32.4%
</TABLE>
COMPARISON OF NEW MANUFACTURED HOME & SITE-BUILT HOME SELLING PRICES
(AVERAGE SALES PRICES)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Single Section Manufactured
Homes............................ $ 19,900 $ 20,600 $ 21,900 $ 23,900 $ 26,700 $ 28,200
Multi-Section Manufactured Homes... $ 36,900 $ 37,200 $ 39,600 $ 42,900 $ 45,900 $ 47,300
Single-Family Site-Built Homes..... $110,400 $108,075 $110,775 $115,575 $119,025 $124,650
</TABLE>
OPERATIONS
Description of Services Offered
The Company originates conventional loans that generally range in size from
$4,500 to $60,000 and have a term of 5-25 years. Loans are booked on a fixed
interest rate basis.
The Company also plans to offer insurance products to borrowers by acting
as an agent under an agreement with a major carrier. The Company intends to
offer property and casualty, credit life, and warranty insurance. As is
customary, the cost of insurance products can be financed up to 5% of the loan.
The
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<PAGE> 24
Company, as the insurance agent, would receive a commission from the carrier
that varies as to which type of insurance, but will not bear any of the
underwriting liability.
Sales and Marketing
The Company will focus its sales and marketing efforts principally through
manufactured home community owners and operators. Initially, this focus will be
on the communities owned and operated by Sun where the Company's services will
be offered as the only preferred means of financing. A potential borrower is not
required to obtain a loan from the Company and is free to seek financing
elsewhere. As of June 30, 1997, Sun owned 84 manufactured housing communities
concentrated in 12 states. Each of the Sun Communities has a manufactured home
sales center staffed with experienced Sun personnel capable of handling various
aspects of manufactured home sales and that will be trained to offer the
Company's financing services. Each sales center has at least one, and in most
cases several, manufactured home models ready for immediate possession. These
models provide potential purchasers with the opportunity to view the style and
quality of the homes offered and either purchase a model or order a home
directly. In addition to new manufactured homes, Sun also brokers the resale of
previously owned homes which are expected to be a significant source of
Contracts. The Company expects to rely on the personnel at Sun Communities sales
centers and at other potential Participants' communities as its primary sales
and marketing employee force.
The Company's Participants Support Agreement with Sun provides the Company
with immediate access to a significant source of borrowers in Sun Communities.
Sun currently estimates that $50 to $70 million of financing is consummated
annually on properties in Sun Communities and the Company, which is currently
capturing 15 to 20% of this volume prior to the implementation of the
Participants Support Agreement, will attempt to capture a more significant share
in the future. The Company's most immediate business strategy is to take the
steps necessary to capture a greater share of the loans generated by home
purchasers and owners in Sun Communities. To increase its share of these loans,
the Company intends to:
1. Train Sun's on-site personnel in providing the Company's products
and services, handling the loan application and closing process and
in assisting with refurbishing and resale under the Participants
Support Agreement; and
2. Develop and implement policies, procedures and support systems
necessary to handle a larger volume of Contracts.
The Company plans to draw on the manufactured housing industry experience
of its management team to identify and target community owners and operators
that may be amenable to entering into preferred relationships with the Company
similar to its relationship with Sun. The Company plans to conduct its
operations at one central office in an effort to maintain consistency and
quality control and to realize economies of scale through its centralized credit
underwriting operations. As conditions warrant, however, the Company may
consider establishing additional regional offices to solidify its market
presence and to maintain a high level of service.
Loan Application Process
Loans are originated at Sun Communities in connection with sales of new and
previously owned manufactured homes and, to a lesser extent for refinancing of
manufactured homes by residents. A loan applicant (an "Applicant") is asked to
submit a completed credit application which is then delivered via facsimile to
the Company's main office. The Company investigates the credit of the Applicant
and any co-applicants and guarantors under the loan. Upon receiving the credit
report, the Company analyzes the loan through the Company's statistically based
automatic credit scoring system which assigns various numerical values to the
borrower's creditworthiness. See "Business-Operations -- Underwriting."
Soon after the application review, generally within one day, the Company
delivers one of the following: (i) an approval letter reciting terms and
requirements and, where applicable, certain conditions to closing; (ii) a
counter-offer to the proposed terms in the application; (iii) a request for
further information in the case of an incomplete application; or (iv) a
rejection of the application.
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<PAGE> 25
Approval or counter-offer letters generally will reflect different terms
and requirements depending on the creditworthiness of the Applicant and on the
type of loan, i.e., refinance, new purchase or resale. An application approval
on different terms may include a higher down payment or a higher interest rate.
After agreeing on proposed terms, the Company prepares closing documents and a
closing checklist. The closing documents include a promissory note and security
agreement to be executed by each borrower, co-borrower and co-signor and a power
of attorney from the borrower permitting the Company to file the application for
a new certificate of title noting the Company's security interest.
Underwriting
The Company adheres to a set of uniform underwriting guidelines to maintain
an acceptable level of credit risk with respect to its growing portfolio of
loans. The Company has developed processing systems and controls specifically
designed to support its evaluation process of Applicants. This process consists
of a comprehensive evaluation of credit bureau reports in order to eliminate
individuals whose credit quality is deteriorating or suggests too great a
probability of default. The Company also requires verification of certain
information provided by Applicants prior to making its credit decision. This
verification process in many instances requires submission of supporting
documentation and is performed solely by Company personnel.
Upon receiving a credit application, the Sun on-site representative submits
the application to the Company via facsimile transmission, for review of the
Applicant's creditworthiness, the proposed transaction terms and the value of
the collateral. The credit application contains information concerning the
Applicant's background, employment and credit history. Upon receipt of an
application, the credit investigator will immediately run a credit bureau report
through a nationally recognized credit agency. Once the credit bureau report is
received, typically in a matter of minutes, the Company's data entry personnel
input all of the information from the application and the credit report into the
Company's scoring model. The on-screen application is then automatically routed
to the next available underwriter who investigates the information contained in
the application and determines a raw score for the Applicant. The Company's
scoring model uses a statistically based automated credit scoring system, that
is continually refined, which quantifies responses using variables obtained from
the Applicant's credit application and credit report. This scoring model is
based on approximately 25 years of empirical historical data which helps the
Company determine the probability of loan failure and assess what changes in
loan terms would make the loan an acceptable risk. In reviewing the application,
the underwriter looks closely at the Applicant's payment history and income.
While the scoring model is based on objective criteria, the underwriter has the
discretion to award a limited number of points to the Applicant for certain
limited credit and value factors.
From January 1, 1997 to June 29, 1997, approximately 30% of the
applications were approved, approximately 50% were offered credit under
different terms then those applied for and approximately 20% of the applications
were rejected. The underwriter has the flexibility to require a larger down
payment or charge a higher interest rate to an Applicant in order to compensate
for the risk of credit loss to the Company. Approximately 1/3 of all
applications presented were ultimately approved and funded.
Loan Closings
After agreement on loan terms, the closing documents are delivered to the
Sun on-site representative to conduct the closing. The Company is capable of
e-mailing or faxing closing documents to the closing office immediately after
credit is approved. On average, a closing will take place within thirty days of
when the application was submitted. While the length of time required to close
each loan varies on a case by case basis, some loans have been closed within one
day. Loans for new homes which have to be ordered from the factory, however, do
not close until the home is delivered which is usually thirty to sixty days
after it is ordered. The Company's ongoing systems development efforts will
continue to enhance the Company's ability to provide rapid turnaround service.
The Company believes its ability to service its customers in a responsive and
efficient manner helps it compete effectively against other manufactured housing
lenders.
The Sun closing representative is responsible for returning the executed
loan documents to the Company along with a copy of the purchase agreement, an
insurance binder, an insurance premium payment receipt, all
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<PAGE> 26
necessary title application or transfer forms, a manufacturer's invoice (for new
homes), a certificate of origin (if new and no liens), authorization for lien
payoff and all related documents such as current paystubs and other forms unique
to certain states. The Company receives and audits the closed loan documents.
Upon approval, disbursements are made to pay off existing liens, insurance
premiums, appraisal fees, government fees and closing fees. In the case of
refinance loans, the borrower has the legal right to rescind the loan within
three days after closing. Refinance loans are not funded until five business
days after closing.
After a loan is funded, the Company follows up on the termination of prior
lienholders' interests and the receipt of title documents. To perfect its
security interest in the manufactured home, the Company delivers the application
for a new certificate of title to the applicable state agency for processing.
Once either the new certificate of title or a stamped application form is
received by the Company, its security interest is deemed "perfected" under
applicable state law.
Servicing of Contracts by Subservicer
The Company has entered into an agreement with an unaffiliated third party
(the "Subservicer") for the servicing of the Contracts (the "Subservicer
Agreement"). The Company delivers Contracts to the Subservicer which then
prepares and delivers a coupon book to the borrower for the payment of the loan
installments. Payments are made in the name of the Subservicer which processes
them on a daily basis by applying them to the relevant Contract. The payments
are deposited in an account held in the name of the Subservicer as agent/bailee
of, and in trust for, the Company. The Subservicer withdraws its servicing fees
from the account and delivers the account balance to the Company accompanied
with a report of payments received and missed and other information.
If the payment is received late and beyond the relevant grace period
(generally 5-15 days), late charges are added in accordance with the Contract.
Late charges are retained by the Subservicer as part of its servicing fees under
the Subservicer Agreement up to $15 per late payment. The Subservicer normally
accepts late payments even if they do not include the late charges incurred.
Upon a missed payment by a borrower and depending on the compliance history
of such borrower, the Subservicer will call the delinquent borrower as early as
10 days after the payment is missed. If no payment is received after making such
telephone calls, the Subservicer will normally send a letter and continue to
make phone calls to the delinquent borrower. If the missed payment is not
received within 30 days after the original due date, the Subservicer will notify
the Company which will send a letter notifying the delinquent borrower of its
intent to repossess the manufactured home securing the Contract if payment is
not made.
The Subservicer Agreement has a 10 year term and terminates if the entire
amounts of principal and interest on all loans are paid in full. The Company may
terminate the agreement sooner upon written notice to the Subservicer and
payment of three months' servicing fees.
Collections and Foreclosure
The Company has designed its finance programs to limit the loss exposure on
each transaction. The Company uses a credit scoring system which management
believes helps strengthen the quality of the loans it originates. The scoring
system is statistically based, quantifying information using variables obtained
from the customer's credit applications and credit reports. See "Business --
Underwriting." The degree of exposure in any transaction is a function of: (i)
the amount of credit granted compared to the value of the underlying collateral;
(ii) the possibility of physical damage to, or the loss of, the collateral; and
(iii) the potential for any legal impediment to the collection of the obligation
or the repossession of the collateral. The Company seeks to control loss
exposure by: (i) limiting the credit it is willing to extend based upon its
assessment of the value of the underlying collateral and the creditworthiness of
the Applicant; (ii) requiring physical damage insurance to be maintained at all
times to protect its financial interest in the collateral; and (iii) determining
whether the Applicant has sufficient disposable income to meet such Applicant's
existing obligations, including the obligations resulting from the proposed
transaction.
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<PAGE> 27
The Company, with the assistance of Sun and, potentially, other
Participants, will be responsible for foreclosing on homes. Although the Company
has not yet foreclosed on any Contract due to its short operating history, the
Company intends to follow all legal requirements when foreclosing on collateral.
See "Business -- Regulation and Supervision." In the event of a foreclosure, the
Company will, after the expiration of any cure period, hire an attorney to issue
a final demand letter and commence legal proceedings to recover possession of
the manufactured home and enforce the Contract terms. It is expected that Sun
and any other Participants will assist with foreclosure procedures with the
manufactured homes in their respective communities.
Loan Portfolio
At June 30, 1997, the average remaining balance was approximately $28,600,
and had a weighted average interest rate of approximately 10.7%. All loans made
by the Company are fully amortizing and provide for equal payment over the term
of the Contract (typically 5 to 25 years). The portions of such payments
allocable to principal and interest are, for payoff and deficiency purposes,
determined in accordance with the terms of the Contract. The following table
sets forth, at the date shown, the average loan balance, weighted average loan
yield and weighted average initial term.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
<S> <C>
Outstanding Contract Receivable............................. $5,355,300
Average Loan Balance........................................ $ 28,600
Weighted Average Loan Yield................................. 10.7%
Weighted Average Initial Term............................... 23.3 years
</TABLE>
OTHER PRODUCTS AND SERVICES
The Company also intends to offer other products or services which are
logical adjuncts to its core business of financing Contracts. Initially, the
Company intends to offer property and casualty, warranty and credit life
insurance coverage. The Company's plans are to place the coverage (for those
borrowers who elect the insurance at the point of sale) with qualified insurers.
All claims liability will lie with the insurer and the Company will earn a
commission for all insurance products sold to borrowers. The Company expects to
finance the cost of property and casualty and warranty insurance as part of the
Contract with the borrower.
FINANCING
Integral to the Company's business and growth strategies is the maintenance
of sufficient capital resources to support its operations. The Company intends
to negotiate a warehouse line of credit at a floating rate and a fixed rate
credit agreement. In addition, a variety of securitization and/or commercial
paper programs are available to borrowers such as the Company, but are not
expected to be used by the Company in the near future. The Company intends to
explore the possibility of obtaining alternative financing, some or all of which
may be at fixed or capped interest rates. As of the date of the Offering, the
Company will operate with the funds provided from the proceeds of the Offering
and advanced by Sun under the Subordinated Debt facility.
Subordinated Debt
The Company has entered into a subordinated loan agreement (the
"Subordinated Loan Agreement") with Sun under which the Company will borrow $4
million from Sun concurrent with the completion of this Offering (the "Term
Loan") and Sun has agreed to provide the Company with a five-year revolving line
of credit up to $6 million (the "Line of Credit", and with the Term Loan, the
"Subordinated Debt"). The Subordinated Debt is limited in aggregate principal
amount to $10,000,000, the Term Loan will mature seven years after the date of
the note (the "Term Note") evidencing the Term Loan (the "Term Due Date") and
the Line of Credit will terminate, unless extended by Sun and the Company, five
years after completion of the Offering (the "Line of Credit Due Date"). Anytime
after the third anniversary of the Term Note, the Term Note may be paid in full
or in part without premium or penalty subject to approval of the non-employee
directors of the Company. The Line of Credit does not restrict the term for
prepayment. Provided the
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Company is in compliance with the Subordinated Loan Agreement, upon the
Company's request, amounts will be advanced from time to time under the Line of
Credit, in increments of $500,000, upon thirty days notice from the Company.
Interest on the unpaid principal balance of the Term Note will accrue at the
rate of nine and 75/100 percent (9.75%) per annum until the Term Due Date, upon
which date the entire unpaid principal balance of the Term Note, together with
all accrued and unpaid interest, will be due and payable in full. Interest on
the unpaid principal balance of the Line of Credit will accrue at the per annum
interest rate equal to the prime rate of interest plus 125 basis points until
the Line of Credit Due Date, upon which date the unpaid principal balance of the
Line of Credit, together with all accrued and unpaid interest, will be due and
payable in full.
In the event of a liquidation or dissolution of the Company, or a
bankruptcy, reorganization, insolvency, receivership, assignment for the benefit
of creditors, marshalling of assets or similar proceeding relating to the
Company, or in the event of a default relating to Senior Debt (as hereinafter
defined), the Subordinated Debt is a general unsecured obligation of the Company
and will be subordinate and junior in right to prior payment in full of all
Senior Debt of the Company. Senior Debt is defined as the principal of and
interest on and other amounts due on or in connection with any indebtedness of
the Company, other than the Subordinated Debt, to any financial institution,
whether or not it is presently outstanding (the "Senior Debt").
Upon the occurrence of any of the following events of default: (a) any
failure to pay any principal of, or interest on the Subordinated Debt when due;
(b) any statement, warranty or representation made by the Company in connection
with the Subordinated Debt is false or misleading; (c) the breach of any
covenant, term, condition or agreement contained in any document relating to the
Subordinated Debt or the Senior Debt; (d) the cessation of the Company's
business or termination of its existence by sale, dissolution, merger or
otherwise; (e) any conveyance of substantially all of the Company's assets, any
assignment for the benefit of creditors, any receiver is appointed, or any
insolvency, liquidation or reorganization proceeding under the Bankruptcy Code
or otherwise is filed by or against the Company; (f) any attachment, execution,
levy, forfeiture, tax lien or similar writ or process is issued against any
property of the Company; (g) a material adverse change in the Company's
financial condition which diminishes the Company's ability to perform its
agreements with Sun; (h) any other indebtedness to Sun or any other creditor
becomes due and remains unpaid after acceleration of the maturity or after the
stated maturity; (i) the Company incurs any indebtedness (other than Senior
Debt) after the date of this Offering or; (j) any change of control after the
closing of this Offering; then, at the election of Sun and without notice,
demand or presentment, the entire principal balance of the Subordinated Debt,
together with all accrued and unpaid interest, will become immediately due and
payable subject to the rights of holders of the Senior Debt.
In connection with the Subordinated Debt, the Company will issue Sun
Detachable Warrants each of which entitles the holder to purchase one share of
Common Stock concurrent with completion of the Offering and the closing of the
Subordinated Debt. The Detachable Warrants cover 400,000 shares of Common Stock
and are exercisable for a purchase price of $10 per share. The Detachable
Warrants have a term of seven years and are exercisable at any time after the
fourth anniversary of their issuance. The Detachable Warrants have anti-dilution
provisions which will adjust the number and purchase price of shares of Common
Stock subject to purchase upon exercise of a Detachable Warrant in the event of
certain types of recapitalization transactions of the Common Stock. See "Certain
Transactions -- Subordinated Debt and Detachable Warrants."
COMPETITION
The manufactured housing finance industry is very fragmented and highly
competitive. There are numerous non-traditional consumer finance sources serving
this market. Specifically, Green Tree, founded in 1975 in order to provide
financing for the purchase of manufactured houses, is the clear financing
leader, with an approximate 28% market share in the financing of new
manufactured housing shipments. It is the leading commercial lender to
manufactured housing retail dealers. In addition, some of the manufactured
housing industry's larger manufacturers, such as Clayton Homes and Oakwood
Homes, maintain their own finance subsidiaries to provide financing for
purchasers of their manufactured homes. Historically, traditional financing
sources (commercial banks, savings and loans, credit unions and other consumer
lenders), many of
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which have significantly greater resources than the Company and may be able to
offer more attractive terms to potential customers, have not consistently served
this market.
The Company believes that its relationship with Sun, its focus on community
owners and operators, its prompt and consistent review of credit applications
and its emphasis on providing a high level of service enable it to compete
effectively for the purchase price financing and refinancing of manufactured
homes. However, to the extent that traditional and non-traditional lenders
significantly expand their activity in this market, the Company may be adversely
affected. There is no assurance that the Company will be able to effectively
compete against its existing or any future competitors.
REGULATION AND SUPERVISION
The Company is subject to regulation and licensing under various federal
and state statutes and regulations. The Company's business is currently
conducted in the states of Michigan, Indiana, Kansas, Missouri, Texas, and
Florida, and the Company currently intends to operate in the states of Illinois,
Ohio, and Colorado. Most states where the Company operates: (i) limit the
interest rate and other charges that may be imposed by, or prescribe certain
other terms of, the Contracts; (ii) regulate the sale and type of insurance
products that the Company presently anticipates it will offer and the insurers
for which it will act as agent; and (iii) define the Company's rights to
repossess and sell collateral. The Company is licensed to conduct its finance
operations in the states of Indiana, Kansas, Missouri and Texas.
The Company is 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 Company 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 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 rejection. The Fair Credit Reporting Act requires the Company 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 claims 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.
In the event of default by a borrower on a Contract, the Company is
entitled to exercise the remedies of a secured party under the Uniform
Commercial Code ("UCC"). The UCC remedies of a secured party include the right
to repossession by self-help means, unless such means would constitute a breach
of peace. Unless the borrower voluntarily surrenders a manufactured home, the
Company may engage the services of an independent repossession specialist.
In most jurisdictions, the UCC and other state laws require the secured
party to provide the obligor with reasonable notice of the date, time, and place
of any public sale or the date after which any private sale of collateral may be
held. Unless the obligor waives his rights after default, the obligor has the
right to redeem the collateral prior to actual sale by paying the secured party
the unpaid installments (less any required discount for prepayment) plus
reasonable expenses for repossessing, holding, and preparing the collateral for
disposition and arranging for its sale, plus in some jurisdictions, reasonable
attorney's fees.
The Company plans to market and provide various insurance products to its
borrowers. Applicable state laws may require the Company to be licensed as an
insurance agency and to hire individuals holding insurance agent's licenses in
order to provide such products. To obtain and operate under such licenses, the
Company may form one or more separate corporations, but there is no assurance
that the Company will be able to obtain
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<PAGE> 30
such licenses. Obtaining necessary licenses and providing such insurance
products will impose another layer of regulation and accompanying expense on the
Company.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that it has sufficient management information systems
in place to permit significant growth in the volume of Contracts processed
without any near term material additional investments in hardware or software.
Due to the Company's desire to increase productivity through automation, the
Company's hardware and software systems are periodically under review for
possible upgrades and enhancements.
EMPLOYEES
At June 30, 1997, the Company had 3 full-time salaried employees.
Additional general and administrative services will be performed by employees of
Sun. The Company provides basic medical insurance and other benefits for
eligible employees. In addition, basic medical insurance is made available to an
employee's family members for an additional contribution, a portion of which is
typically borne by the Company. The Company recently implemented a 401(k)
retirement plan for its employees. The Company considers its employee relations
to be excellent.
PROPERTIES
The Company maintains its corporate headquarters in approximately 600
square feet of office space in Farmington Hills, Michigan.
LEGAL PROCEEDINGS
From time to time, the Company is a party to routine legal proceedings
incidental to its business, none of which have had a material adverse effect on
the operations or financial condition of the Company.
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<PAGE> 31
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors, executive officers and significant employees of the Company,
and their ages and positions as of the date of this Prospectus, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jeffrey P. Jorissen.................. 52 President, Chief Executive Officer, Chief Financial
Officer and Director
Gary A. Shiffman..................... 43 Chairman of the Board and Secretary
Milton M. Shiffman................... 68 Director
William L. Mulvaney.................. 56 Chief Operating Officer
</TABLE>
Jeffrey P. Jorissen is the President, Chief Executive Officer, Chief
Financial Officer and a Director of the Company. As a certified public
accountant, he was with the international accounting firm of Coopers & Lybrand
for sixteen years from 1971 to 1987, including eight years as a partner. During
his tenure at Coopers & Lybrand, Mr. Jorissen specialized in real estate and
mortgage banking and directed financial statement examinations of numerous
public companies. From 1987 to 1991, he was President and Treasurer of
Stoneridge Resources, Inc., the holding entity for three public companies. Mr.
Jorissen is also the Senior Vice President, Treasurer, Chief Financial Officer
and Secretary of Sun. Since the Company's inception, Mr. Jorissen has performed
as chief executive and will continue to perform the duties of Chief Executive
Officer until such time as the Company's growth requires otherwise. While Mr.
Jorissen intends to devote a substantial amount of his time to the Company, he
will still spend a majority of his time as the Chief Financial Officer of Sun.
Gary A. Shiffman is the Secretary and Chairman of the Board of the Company.
He has been actively involved in the management, acquisition, construction and
development of manufactured housing communities and has developed an extensive
network of industry relationships over the past thirteen years. He has overseen
the land acquisition, rezoning, development and marketing of numerous
manufactured home expansion projects. Mr. Shiffman is also the Chief Executive
Officer, President and a director of Sun. Mr. Shiffman is the son of Dr. Milton
Shiffman.
Milton M. Shiffman is a Director of the Company, is Chairman of the Board
of Directors of Sun and has been an executive officer of Sun since its
inception. With his eighteen years of experience in the manufactured housing
community industry, Dr. Shiffman has played an active role in the financing
decisions and corporate structuring of the Company. Since 1964, he has also been
involved in the development, acquisition, construction and operations of diverse
real estate holdings including multi-family, community and regional shopping
centers, nursing homes and various other commercial properties. Dr. Shiffman
retired from medical practice in 1981 in order to devote his full time to real
estate activities. Dr. Shiffman is the father of Mr. Gary Shiffman.
William L. Mulvaney is the Chief Operating Officer of the Company. As a
certified public accountant, he was with Coopers & Lybrand from 1975 to 1979,
where he served as a Consulting Director providing strategic planning,
marketing, systems development, organization planning and re-engineering
services to several of the firm's Fortune 500 clients and start up operations.
Mr. Mulvaney also gained recognition at Coopers & Lybrand for his expertise in
the real estate and construction industries. Mr. Mulvaney has served as
President and Chief Executive Officer of four companies involved in the
manufactured home, real estate, construction and financial services industries.
Most recently, from 1992 to 1996, Mr. Mulvaney served as President to the
Genesis Group, Inc., a mortgage brokerage and commercial real estate firm
dealing with some of the nation's largest lending organizations and development
companies.
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<PAGE> 32
PRINCIPALS HOLDING POSITIONS WITH THE COMPANY
The Company's Board of Directors will include directors and/or officers of
Sun. The Sun directors and officers holding positions in the Company include:
<TABLE>
<CAPTION>
NAME POSITION IN SUN POSITION IN THE COMPANY
- ---- --------------- -----------------------
<S> <C> <C>
Jeffrey P. Jorissen.................. Senior Vice President President
Treasurer Chief Executive Officer
Chief Financial Officer Chief Financial Officer
Secretary Director
Gary A. Shiffman..................... Chief Executive Officer Chairman of the Board
President Secretary
Director
Milton M. Shiffman................... Chairman of the Board Director
</TABLE>
Although the Company will have two (2) independent directors, the existence
of agreements with Sun and the dependence on Sun and the relationship with Sun
is expected to give Sun substantial influence over the Company's activities. Sun
and certain directors and officers of Sun, some of whom are also directors or
officers of the Company, will own in the aggregate approximately 10% of the
Common Stock. In addition, Sun may acquire shares of Common Stock in the future
by exercising the Detachable Warrants and the Participants Options. As a REIT,
Sun cannot directly own more than 10% of the shares of the Company, but
affiliates of Sun may own unlimited amounts providing Sun with an indirect means
of influence. Accordingly, Sun will have substantial influence on the Company,
on transactions between the Company and Sun and/or Sun's affiliates, and on the
outcome of matters submitted to the Company's stockholders for approval, which
influence might not be consistent with the interests of other stockholders. See
"Risk Factors -- Conflicts of Interest."
OUTSIDE DIRECTOR COMPENSATION
Directors who are not employees of the Company or Sun are entitled to an
annual retainer fee of $12,000, payable $3,000 per calendar quarter. No fees
were paid for services during the fiscal year ended December 31, 1996.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Bylaws generally provide that the Company will indemnify its directors
and officers to the fullest extent authorized or permitted under the Michigan
Business Corporation Act and that the Company will advance expenses at the
request of a director or officer. The Company also has agreements with directors
providing for indemnification and advancement of expenses in the event they are
sued in their capacities as directors of the Company. See "Description of
Capital Stock."
In addition, the Articles of Incorporation generally limit the personal
liability of directors for monetary damages for breaches of fiduciary duty. The
Company believes that these indemnification and limitation of liability
provisions will assist it in attracting and retaining talented directors and
officers in light of the risk of litigation directed against directors and
officers of publicly held corporations. See "Description of Capital Stock."
EXECUTIVE COMPENSATION
There were no employees whose remuneration from the Company exceeded
$100,000 in 1996. Mr. Jorissen, who acted in the capacity of chief executive
officer in 1996 and who is currently the Chief Executive Officer, did not
receive any remuneration from the Company in 1996. Mr. Jorissen and Mr. Gary
Shiffman have elected not to receive salaries from the Company to allow the
Company to focus its assets on funding Contracts. It is proposed that Mr.
Jorissen and Mr. Gary Shiffman will each receive Stock Options for and
shares of Common Stock, respectively, pursuant to the Stock Option
Plan. See "Management -- Stock Option Plan."
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<PAGE> 33
The Company has entered into an employment agreement with William L.
Mulvaney, as the Chief Operating Officer of the Company, which provides for an
initial term of three (3) years, a base salary of eighty thousand dollars
($80,000), an annual bonus based on performance and other customary benefits.
STOCK OPTION PLAN
The Board of Directors and stockholder of the Company have adopted a Stock
Option Plan, which is intended to enable certain officers, directors, key
employees and consultants of the Company or any subsidiary to participate in any
growth and profitability of the Company and to encourage their continuation as
officers, directors, employees or consultants of the Company to the benefit of
the Company and its stockholders. Pursuant to the Stock Option Plan, certain
officers, directors, key employees and consultants of the Company will be
granted options to acquire shares of Common Stock ("Stock Options"), including
nonqualified stock options ("NQSOs") and incentive stock options ("ISOs") within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Stock Option Plan will be administered by either the Board of
Directors or a committee of not fewer than two (2) Non-Employee Directors (as
that term is defined in Rule 16b-3 under the Exchange Act) appointed by the
Board of Directors (in either case, the "Administrator"). The Administrator
determines those officers, directors, key employees and consultants to whom, and
the time and times at which, grants of Stock Options will be made. The
Administrator interprets the Stock Option Plan, adopts rules relating thereto
and determines the terms and provisions of Stock Options.
The number of shares of Common Stock subject to Stock Options under the
Stock Option Plan is limited to ten percent (10%) of the total number of shares
of Common Stock issued and outstanding from time to time. Upon consummation of
this Offering, in addition to Stock Options for other selected employees, it
will be proposed to the Administrator that Stock Options for shares of
Common Stock be granted to Milton M. Shiffman and Gary A. Shiffman, that Stock
Options for shares of Common Stock be granted to Jeffrey P. Jorissen and
that Stock Options for shares of Common Stock be granted to William L.
Mulvaney, in each case at an exercise price equal to the initial public offering
price.
The Administrator has authority and discretion to establish the expiration
date, exercise price, vesting period and any other terms and conditions of a
Stock Option, which shall be set forth in an option agreement between the
Company and the grantee. The exercise price per share for a Stock Option will
not be less than eighty five percent (85%) of the fair market value of a share
of Common Stock at the time the Stock Option is granted and, in the case of an
ISO, the exercise price per share will not be less than the fair market value of
a share of Common Stock at the time the Stock Option is granted. The
Administrator may make appropriate adjustments in the number of shares of Common
Stock for which Stock Options may be granted or which may be issued under the
Stock Option Plan and the price per share of each Stock Option if there is any
change in the Common Stock as a result of a stock dividend, stock split,
recapitalization or otherwise. The Administrator also has the authority to
accelerate Stock Option exercise rights or make other adjustments if the Company
is merged or consolidated, the property or stock of the Company is acquired by
another corporation or the Company is reorganized, liquidated or impacted by an
extraordinary transaction.
The Stock Option Plan will terminate at such time as no further shares of
Common Stock are available for issuance upon the exercise of Stock Options and
all outstanding Stock Options have expired or have been exercised. The Board of
Directors may at any time terminate the Stock Option Plan, but termination will
not affect Stock Options previously granted. Any Stock Options which had vested
prior to such a termination would remain exercisable by the holder thereof in
accordance with the terms of the applicable option agreement. In addition, the
Board of Directors may at any time amend the Stock Option Plan without
stockholder approval; provided, however, that stockholder approval of an
amendment of the Stock Option Plan will be required for (a) any amendment which
requires stockholder approval under any applicable law, including Rule 16b-3
promulgated under Section 16(b) of the Exchange Act, or (b) any amendment which,
unless approved by the requisite affirmative approval of stockholders of the
Company, would cause, result in or give rise to "applicable employee
remuneration" within the meaning of Section 162(m) of the Code.
The Company anticipates that the shares available for issuance under the
Stock Option Plan will be registered under a Form S-8 registration statement,
which will be filed within 12 months after the effective date of the
registration statement relating to the Common Stock offered hereby.
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<PAGE> 34
CERTAIN TRANSACTIONS
GENERAL
The Company, from time to time, has entered into transactions with Sun and
its affiliates and believes that each such transaction has been on terms no less
favorable to the Company than could have been obtained in a transaction with an
independent third party. The Company has recently adopted a formal policy that,
after completion of the Offering, all future transactions between the Company
and Sun will be subject to the approval of the non-employee directors, as such
term is used in Rule 16b-3 of the Exchange Act. This policy applies to the
Administration Agreement, the Participants Support Agreement, the Detachable
Warrants and the Subordinated Debt. See "Description of Capital Stock."
The Company's business depends significantly on the business of Sun and
also on the Company's relationship with Sun. See "Business -- General --
Formation and Structure." Specific transactions between Sun and the Company are
described below.
Administration Agreement
The Company has entered into the Administration Agreement with Sun pursuant
to which Sun will provide general and administrative services to the Company,
including the use and occupancy of office space within Sun's offices in
Farmington Hills, Michigan, personnel services and assistance, receptionist,
telephone and facsimile services, conference rooms, copying services, computer
hardware and software systems, accounting services, tax filing services and
other related and incidental services.
The Administration Agreement has a term of three years and is automatically
renewable for successive one year periods thereafter unless terminated by either
party. The Administration Agreement requires that the Company reimburse Sun for
the services provided by Sun. The fee to be paid for the first year is presently
estimated to be and shall not exceed $75,000. The Company believes this fee to
be reasonable and appropriate for the services provided by Sun. After the first
year, any increase in the annual fees to be paid to Sun shall require the
approval of the Company's non-employee directors.
Any amendment, renewal or early termination of the Administration Agreement
or the Participants Support Agreement discussed below requires the approval of
the Company's non-employee directors. See "Description of Capital Stock."
Participants Support Agreement
The Company has entered into the Participants Support Agreement with Sun
which also has a term of three years and is automatically renewable for
successive one year periods thereafter unless terminated by either party. Under
the Participants Support Agreement, Sun will offer the Company as the sole
preferred financing source to home purchasers and owners in Sun Communities, and
also will provide services that include the closing of Contracts and
refurbishing and resale of homes under defaulted Contracts. By entering into the
Participants Support Agreement, Sun is eligible to receive up to 330,000
Participants Options. See "Business -- Formation and Structure" and "--
Participants Options."
Subordinated Debt and Detachable Warrants
The Company has entered into the Subordinated Loan Agreement with Sun under
which Sun has agreed to provide the Company with up to $10 million, consisting
of a $4 million Term Loan and a $6 million Line of Credit. The Subordinated Debt
is a general unsecured obligation of the Company, ranking subordinate in right
of payment to all existing and future Senior Debt of the Company. In connection
with the Subordinated Debt, Sun will receive the Detachable Warrants that cover
400,000 shares of Common Stock and are exercisable for a purchase price of $10
per share. See "Business -- Financing" and "-- Formation and Structure."
33
<PAGE> 35
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of the date of this Prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES COMMON STOCK
OWNED* OWNED*
------------------------- -------------------------
NAME AND ADDRESS BEFORE THE AFTER THE BEFORE THE AFTER THE
OF BENEFICIAL OWNER OFFERING OFFERING OFFERING OFFERING
------------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Sun Communities, Inc.(1).......................... 100 [ ] 100% [ ]
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Jeffrey P. Jorissen............................... 0 [ ] 0% [ ]
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Gary A. Shiffman.................................. 0 [ ] 0% [ ]
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Milton M. Shiffman................................ 0 [ ] 0% [ ]
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
All executive officers and directors as a group
(three persons)................................. 0 [ ] 0% [ ]
</TABLE>
- -------------------------
* Excludes shares of Common Stock issuable upon exercise of: (a) options
granted pursuant to the Stock Option Plan; (b) the Detachable Warrants; and
(c) Participants Options.
(1) Sun Home Services, Inc. ("Sun Homes"), an affiliate of Sun, currently owns
100% of the issued and outstanding shares of Common Stock. Certain officers
and directors of Sun, some of whom may also be officers and directors of the
Company, own 100% of the Common Stock of Sun Homes and Sun Communities
Operating Limited Partnership, a majority subsidiary of Sun, owns 100% of
the preferred stock of Sun Homes, which entitles Sun Communities Operating
Limited Partnership to 95% of the cash flow from operating activities of Sun
Homes.
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<PAGE> 36
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject, in all respects, to applicable Michigan law and
to the provisions of the Articles of Incorporation. The following description is
qualified by reference to the Articles of Incorporation which are incorporated
by reference as an exhibit to the Registration Statement of which this
Prospectus is a part.
The authorized capital stock of the Company consists of 10 million shares
of Common Stock, without par value, and 10 million shares of preferred stock
(the "Preferred Stock"). As of the date of this Prospectus, 100 shares of Common
Stock were outstanding and no shares of Preferred Stock were outstanding.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
Increased Shareholder Vote for Alteration, Amendment or Repeal of Article
or Bylaw Provisions
The Company's Articles of Incorporation require the affirmative vote of the
holders of at least two-thirds (2/3) of the voting stock of the Company entitled
to vote generally in the election of directors for the alteration, amendment or
repeal of, or the adoption of any provision inconsistent with the provisions of
the Company's Articles of Incorporation described below or of any provision of
the Company's Bylaws, unless the alteration, amendment or repeal of any such
provision is recommended by the Board of Directors, in which case the
affirmative vote of the holders of a majority of the voting stock of the Company
is required.
Common Stock
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders. The holders of Common Stock are entitled to
receive such dividends as may from time to time be declared by the Board of
Directors out of funds legally available therefor, subject to any prior rights
of any holders of shares of Preferred Stock. In the event of a liquidation or
dissolution of the Company, holders of Common Stock are entitled, after payment
of any preference due to any holders of Preferred Stock, to share equally and
ratably in all the assets of the Company available for distribution to the
holders of shares of Common Stock subject to any right of participation
applicable to shares of Preferred Stock. Holders of Common Stock have no
preemptive, conversion or redemption rights and are not subject to assessment or
further calls. All of the outstanding shares of Common Stock are, and the shares
of Common Stock offered by the Company hereby when issued and paid for in
accordance with the terms of the Offering will be, fully paid and nonassessable.
Preferred Stock
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 10 million shares of Preferred Stock in one or more
series, to fix the rights, preferences, privileges, and restrictions granted to
or imposed upon any unissued shares of Preferred Stock and to fix the number of
shares constituting any series and the designations of such series.
The existence of authorized but unissued shares of Preferred Stock and the
issuance of shares of Preferred Stock could have the effect of delaying,
deferring or preventing a change in control of the Company. The Board, without
stockholder approval, could issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the voting power of the holders
of shares of Common Stock. The issuance of shares of Preferred Stock could have
the effect of discouraging a takeover or other transaction which the Company's
stockholders might believe to be otherwise in their best interests or in which
the Company's stockholders might receive a premium for their shares of Common
Stock over the then market price of such shares. In addition, such shares of
Preferred Stock could have other rights, including economic rights, senior to
shares of Common Stock, and, as a result, the issuance thereof could have a
material adverse effect on the market value of shares of Common Stock. Currently
there are no shares of Preferred Stock outstanding, and the Company has no
present plan to issue any shares of Preferred Stock.
Anti-Takeover Provisions
The Articles of Incorporation provide that it is a proper corporate
purpose, reasonably calculated to benefit shareholders, for the Board to base
the response of the Company to any "Acquisition Proposal" (as
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<PAGE> 37
defined below), on the Board's evaluation of what is in the best interests of
the Company. This evaluation will include consideration of the best interests of
the Company's shareholders, including the relationship of the consideration
offered in the Acquisition Proposal to the then current market price of the
Company's stock, the current value of the Company in a freely negotiated
transaction and the estimate of the future value of the Company as an
independent entity; the business and financial conditions and earnings prospects
of the acquiring person or persons; the competence, experience and integrity of
the acquiring person or persons and its or their management; and such other
factors as the Board deems relevant, including the social, legal and economic
effects of the Acquisition Proposal upon employees, suppliers, customers, the
Company's business and the general community in which the Company does business.
An "Acquisition Proposal" means any proposal for a tender offer or exchange
offer for any equity security of the Company, any proposal to merge or
consolidate the Company with another corporation, or any proposal to purchase or
otherwise acquire all or substantially all of the properties and assets of the
Company.
The Bylaws also contain certain provisions which may to a limited degree be
deemed anti-takeover defenses. The Bylaws require that notice in writing of
proposed shareholder nominations for the election of directors be timely given
to the Secretary of the Company prior to the meeting. Such notice must contain
certain information about the non-incumbent nominee, including name, age,
business and residence addresses, principal occupation, the class and number of
shares of the Company beneficially owned by the nominee and such other
information as would be required to be included in a proxy statement soliciting
proxies for election of the nominee, as well as certain information about the
nominating shareholder. The Company may require any nominee to furnish other
information reasonably required by the Company to determine the nominee's
eligibility to serve as a director. If the presiding officer of any
shareholders' meeting determines that a person was not nominated in accordance
with the foregoing procedures, such person shall not be eligible for election as
a director.
In addition, the Bylaws require that notice in writing from any shareholder
who proposes to bring business before any meeting of shareholders must be timely
given to the Secretary of the Company prior to the meeting. Such notice must
contain certain information, including a brief description of the business
proposed to be brought before the meeting, the reasons for conducting such
business at the meeting, the class and number of shares of the Company
beneficially owned by such shareholder and any supporting shareholders and any
material interest of the proposing shareholder in the business so proposed. If
the presiding officer of any shareholders' meeting determines that any such
business was not properly brought before the meeting in accordance with the
foregoing procedures, such business will not be conducted at the meeting.
Nothing in the Bylaws will preclude discussion by any shareholder of any
business properly brought before the meeting in accordance with the
above-mentioned procedures.
To be timely, shareholder notice of a nomination for election of a director
or to bring business before any shareholders' meeting must be received by the
Company not less than sixty days nor more than ninety days prior to the meeting
(or, if fewer than forty days' notice or prior public disclosure of the meeting
date is given or made to shareholders, not later than the tenth day following
the day of mailing notice of the meeting or public disclosure thereof).
Classification of the Board of Directors
The Board of Directors of the Company has been divided into three classes
of directors. The terms of the first, second and third classes will expire in
1998, 1999, and 2000 respectively. Directors for each class will be chosen for a
three-year term upon the expiration of such class's term, and the directors in
the other two classes will continue in office. The staggered terms for directors
may affect the stockholders' ability to change control of the Company even if a
change in control was desired by the stockholders and was in the stockholders'
interest. In the absence of the provisions of the Articles of Incorporation
classifying the Board, all of the directors would be elected each year.
Management of the Company believes that the staggered election of directors
tends to promote continuity of management because only one-third of the Board of
Directors are subject to election each year. Staggered terms help to ensure
that, at any one time, approximately two-thirds of the Board will be comprised
of persons who have at least one year's experience as directors of the Company.
In addition, the use of
36
<PAGE> 38
staggered terms moderates the pace of changes in the Board of Directors by
extending the minimum time required to elect a majority of directors from one to
two years.
Removal of Directors
The Act provides that, unless the Articles of Incorporation otherwise
provide, shareholders may remove a director or the entire Board of Directors
with or without cause. The Company's Articles of Incorporation provide that a
director may be removed only for cause and only by the affirmative vote of the
holders of two-thirds of the voting power of all the shares of the Company
entitled to vote generally in the election of directors.
Indemnification of Directors and Officers
The Company's Bylaws provide that the Company shall indemnify its present
and past directors, executive officers, and such other persons as the Board of
Directors may authorize, to the fullest extent permitted by law. The Act
contains indemnification provisions concerning third party actions as well as
actions in the right of the company. The Act provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he or she is or was a
director or officer of the corporation, or while serving as such a director or
officer, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, whether for
profit or not, against expenses (including attorneys' fees), judgments,
penalties, fees and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation or its shareholders, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
With respect to derivative actions, the Act provides that a corporation may
indemnify any person who was or is a party to or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director or officer of the corporation, or, while serving
as such a director of officer, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses (including
attorneys' fees), and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action or suit if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation or its shareholders. No
indemnification is provided in the Act in respect of any claim, issue or matter
in which such person has been found liable to the corporation except to the
extent that a court of competent jurisdiction determines upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses with such court shall deem proper.
Limitation of Director Liability
The Act permits corporations to limit the personal liability of their
directors in certain circumstances. The Company's Articles of Incorporation
provide that a director of the Company shall not be personally liable to the
Company or its shareholders for monetary damages for breach of the director's
fiduciary duty. However, they do not eliminate or limit the liability of a
director for any breach of a duty, act or omission for which the elimination or
limitation of liability is not permitted by the Act, currently including,
without limitation, the following: (i) a breach of the director's duty of
loyalty to the Company or its shareholders (ii) acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law;
(iii) illegal loans, distributions of dividends or assets, or stock purchases as
described in Section 551(1) of Act; (iv) transactions from which the director
derived an improper personal benefit; and (v) any other act or omission as to
which the Act does not permit a director's liability to be so limited.
37
<PAGE> 39
Independent Directors Approval of Certain Transactions with Sun
The Company's Bylaws require that certain agreements and all future
transactions between the Company and Sun will be subject to the approval of the
non-employee directors, as such term is used in Rule 16b-3 of the Exchange Act.
This policy applies to the Administration Agreement, the Participants Support
Agreement, the Subordinated Debt, the Detachable Warrants and any other
agreement to be entered into, amended, altered, renewed, extended or terminated
by and between the Company and Sun.
MICHIGAN LAW
Chapters 7A and 7B of the Act may affect attempts to acquire control of the
Company. In general, under Chapter 7A, "business combinations" (defined to
include, among other transactions, certain mergers, dispositions of assets or
shares and recapitalizations) between covered Michigan business corporations or
their subsidiaries and an "interested shareholder" (defined as the direct or
indirect beneficial owner of at least 10% of the voting power of a covered
corporation's outstanding shares) can be consummated only if approved by at
least 90% of the votes of each class of the corporation's shares entitled to
vote and by at least two-thirds of such voting shares not held by the interested
shareholder or such shareholder's affiliates, unless five years have elapsed
after the person involved became an "interested shareholder" and unless certain
price and other conditions are satisfied. The Board may exempt "business
combinations" with a particular "interested shareholder" by resolution adopted
prior to the time the "interested shareholder" attained that status.
In general, under Chapter 7B of the Act, an entity that acquires "Control
Shares" of the Company may vote the Control Shares on any matter only if a
majority of all shares, and of all non-"Interested Shares," of each class of
shares entitled to vote as a class, approve such voting rights. Interested
Shares are shares owned by officers of the Company, employee-directors of the
Company and the entity making the Control Share acquisition. Control Shares are
shares that, when added to shares already owned by an entity, would give the
entity voting power in the election of directors over any of three thresholds:
one-fifth, one-third and a majority. The effect of the statute is to condition
the acquisition of voting control of a corporation on the approval of a majority
of the pre-existing disinterested shareholders. The Board has the option of
choosing to amend the Bylaws before a Control Share acquisition occurs to
provide that Chapter 7B does not apply to the Company.
Upon consummation of the Offering, depending upon the final distribution of
the shares of the Common Stock, the Company will be subject to Chapters 7A and
7B.
Section 1368 of the Act, which is applicable to corporations organized
under the laws of Michigan including the Company, prohibits a corporation from
purchasing, either directly or indirectly, any of its shares that are listed on
a national securities exchange from any person who holds at least 3% of its
shares unless one of the following conditions is met: (a) the corporation makes
an equivalent offer to all other holders of the same shares; (b) the purchase is
authorized in advance by the stockholders entitled to vote thereon; (c) the
purchase meets the requirements of the articles of incorporation for such a
purchase; (d) the shares are beneficially owned by the person for at least two
years prior to the purchase date; (e) the purchase is made on the open market;
(f) the purchase price is not more than the average market price of the shares
during the 30 business days prior to the purchase date; or (g) the purchase is
otherwise authorized by the Act. Under certain circumstances, Section 1368
prevents a stockholder from selling his shares back to the corporation at a
premium within two years of that stockholder's purchase of the shares unless one
of the other conditions is met. However, the stockholders may approve such a
purchase by the corporation or the corporation may include in its articles of
incorporation lesser requirements for such a transaction. The Company's Articles
of Incorporation do not contain any provisions exempting the Company from the
provisions of Section 1368 of the Act. It is anticipated that the provisions of
Section 1368 may discourage persons from obtaining quantities of the Company's
stock for the sole purpose of eliciting a premium from the Company in a resale
of those shares.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is State Street Bank
& Trust Company.
38
<PAGE> 40
SHARES ELIGIBLE FOR FUTURE SALE
The 1,000,000 shares sold in the Offering and any of the up to 150,000
shares of Common Stock sold upon exercise of the over-allotment option, will be
freely tradeable by persons other than "affiliates" of the Company, as that term
is defined in Rule 144 under the Securities Act, without restriction or
registration under the Securities Act. Sun and certain directors and officers of
Sun, who may also be directors or officers of the Company, will purchase 100,000
shares of Common Stock (the "Affiliates Shares") in the Offering. The purchasers
of the Affiliates Shares have agreed not to offer, sell or otherwise dispose of
any of the Affiliates Shares upon completion of the Offering for a period of one
year from the date of this Prospectus, without the prior written consent of the
Underwriters.
Rule 144 governs the public sale in ordinary trading transactions of
"restricted securities" and of securities owned by "affiliates." Restricted
securities are securities acquired directly or indirectly from an issuer or an
affiliate in a transaction not involving a public offering. In general, under
Rule 144, if a period of at least one year has elapsed since the later of the
date the restricted securities were acquired from the Company or an affiliate,
as applicable, then the holder of such restricted securities (including an
affiliate) is entitled, subject to certain conditions, to sell within any
three-month period a number of shares which does not exceed the greater of: (i)
1% of the Company's then outstanding shares of Common Stock; or (ii) the shares'
average weekly trading volume during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain manner-of-sale provisions
and requirements as to notice and the availability of current public information
about the Company. Affiliates may sell shares not constituting restricted
securities in accordance with the foregoing limitations and requirements but
without regard to the one-year holding period. However, a person who is not and
has not been an affiliate of the Company at any time during the 90 days
preceding the sale of the shares, and who has beneficially owned restricted
securities for at least two years, is entitled to sell such shares under Rule
144 without regard to the volume limitations, manner-of-sale provisions and
notice and public information requirements of Rule 144.
Upon completion of the Offering, all of the Affiliates Shares will be
unrestricted securities within the meaning of Rule 144. Subject to the
above-described one year lock-up period, all of these shares may be sold in the
public market in compliance with the volume limitations, manner-of-sale
provisions and notice and public information requirements of Rule 144 beginning
90 days after the date of this Prospectus.
The Company has reserved up to 10% of the total outstanding shares of its
Common Stock for issuance under its Stock Option Plan, of which shares
will be subject to Stock Options to be issued upon completion of the Offering.
All of the shares of Common Stock issued as a result of any grants under the
Stock Option Plan will be restricted securities unless the Company files a
registration statement under the Securities Act relating to the issuance of the
shares. The Company currently intends to register the shares of Common Stock
reserved for issuance under the Stock Option Plan. Subject to the expiration of
the one year lock-up period and subject to compliance with Rule 144 by
affiliates of the Company and to Section 16 of the Exchange Act by directors,
officers and 10% beneficial owners, any shares issued upon exercise of Stock
Options granted under the Stock Option Plan will become freely tradeable at the
effective date of the registration statement for the shares reserved under the
Stock Option Plan.
The Company has reserved 330,000 Common Stock purchase Participants Options
for distribution to Sun. All of the shares of Common Stock issued upon exercise
of Participants Options will be restricted securities unless the Company files a
registration statement under the Securities Act relating to the issuance of the
shares. See "Business -- Formation and Structure" and "-- Participants Options."
In connection with the Subordinated Debt, the Company will also issue the
Detachable Warrants to Sun which cover 400,000 shares of Common Stock. All of
the shares of Common Stock issued upon exercise of the Detachable Warrants will
be restricted securities unless the Company files a registration statement under
the Securities Act relating to the issuance of the shares. Sun's REIT status
prohibits it from directly owning more than 10% of the Company's shares. As a
result, in order to exercise Participants Options or the Detachable Warrants,
Sun currently must sell or otherwise dispose of those shares that would
represent direct ownership in the Company in excess of 10%. See "Business --
Formation and Structure."
39
<PAGE> 41
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
, 1997 (the "Underwriting Agreement") among the Company and the
underwriters named below (the "Underwriters"), the Company has agreed that the
Company will sell to each of the Underwriters, and each of such Underwriters,
for which Roney & Co., L.L.C., as representative of the several Underwriters
(the "Representative"), has severally agreed to purchase from the Company, the
respective number of shares of the Company's Common Stock set forth opposite its
name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF
UNDERWRITER COMMON STOCK
----------- ----------------
<S> <C>
Roney & Co..................................................
--------
Total.................................................. [ ]
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Representative to pay for and accept delivery of the shares are subject to the
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all 1,000,000 shares of
Common Stock offered hereby (excluding shares covered by the over-allotment
option described below) if any such shares are taken.
If the Underwriting Agreement is terminated, except in certain limited
cases, the Underwriting Agreement provides that the Company will reimburse the
Underwriters for all accountable out-of-pocket expenses incurred by it in
connection with the proposed purchase and sale of the Common Stock up to a
maximum of $50,000. Upon the purchase of at least 1,000,000 shares, the Company
will not reimburse the Underwriters for any out-of-pocket expenses.
The Company and the Underwriters have agreed that the Underwriters will
purchase the 1,000,000 shares of Common Stock offered hereunder at a price to
the public of $10.00 per share less underwriting discounts and commissions of
[$. ] per share. The underwriting discounts or commissions to be incurred by
the Company on the 100,000 shares sold to certain directors and officers of Sun,
some of whom may also be directors or officers of the Company who have expressed
a nonbinding interest in investing in the Company prior to the involvement of
the Underwriters will be 3.0%. Any shares purchased by Sun shall be at 1.0% with
the total number of shares sold at discounted commission not to exceed 100,000.
The Underwriters have informed the Company that the Underwriters do not
intend to make sales to any accounts over which they exercise discretionary
authority.
The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Offering, to purchase up to an additional 150,000
shares of Common Stock from the Company to cover over-allotments, if any, at the
same price per share as is to be paid by the Underwriters for the other shares
offered hereby. The Underwriters may purchase such shares only to cover
over-allotments, if any, in connection with the Offering.
The Underwriting Agreement contains indemnity provisions between the
Underwriters and the Company and the controlling persons thereof against certain
liabilities, including liabilities arising under the Securities Act. The Company
is generally obligated to indemnify the Underwriters and their controlling
persons in connection with losses or claims arising out of any untrue statement
of a material fact contained in this Prospectus or in related documents filed
with the Commission or with any state securities administrator, or any omission
of certain material facts from such documents.
40
<PAGE> 42
There has been no public trading market for the Common Stock. The price at
which the shares are being offered to the public was determined by negotiations
between the Company and the Underwriters. This price is not based upon earnings
or any history of operations and should not be construed as indicative of the
present or anticipated future value of the Common Stock. Several factors were
considered in determining the initial offering price of the Common Stock, among
them the size of the offering, the desire that the security being offered be
attractive to individuals and the Underwriters' experience in dealing with
initial public offerings for financial institutions.
LEGAL MATTERS
The validity of the issuance of Common Stock offered hereby will be passed
upon for the Company by Jaffe, Raitt, Heuer & Weiss, Professional Corporation,
Detroit, Michigan. Certain legal matters in connection with the Offering will be
passed upon for the Underwriters by Honigman Miller Schwartz and Cohn, Detroit,
Michigan.
EXPERTS
The financial statements included in this Prospectus, to the extent and for
the periods indicated in their reports, have been audited by Coopers & Lybrand
L.L.P. independent accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to the
Common Stock offered hereby (together with all amendments, exhibits, schedules
and supplements thereto, the "Registration Statement"). This Prospectus, which
forms a part of the Registration Statement, does not contain all the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement. Statements contained in
this Prospectus as to the contents of any contract, agreement or other document
are not necessarily complete, although all material terms of such documents have
been addressed in this Prospectus, and in each instance, reference is made to
the copy of the document filed as an exhibit to the Registration Statement. The
Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, and 7
World Trade Center (13th Floor), New York, New York 10048. Copies of such
material can also be obtained from the Commission at prescribed rates through
its Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission maintains a World Wide Web site on the Internet that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is "http://www.sec.gov."
The Company is not currently subject to the informational requirements of
the Exchange Act. As a result of the Offering, the Company will become subject
to the informational requirements of the Exchange Act. The Company will fulfill
its obligations with respect to such requirements by filing periodic reports and
other information with the Commission. In addition, the Company intends to
furnish to its stockholders annual reports containing consolidated financial
statements examined by an independent public accounting firm.
41
<PAGE> 43
BINGHAM FINANCIAL SERVICES CORPORATION
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................... F-2
Financial Statements:
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Changes in Stockholder's Equity (deficiency)... F-4
Statement of Cash Flows..................................... F-5
Notes to Financial Statements............................... F-6
</TABLE>
F-1
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
of Bingham Financial Services Corporation
We have audited the accompanying balance sheet of Bingham Financial Services
Corporation as of June 30, 1997 and the related statements of operations,
changes in stockholder's equity (deficiency), and cash flows for the period
January 2, (date of inception) to June 30, 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 audit.
We conducted our audit 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 evaluating the overall financial statement presentation.
We believe that our audit provides 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 Bingham Financial Services
Corporation as of June 30, 1997 and the results of its operations and cash flows
for the period January 2, (date of inception) to June 30, 1997 in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
July 29, 1997
F-2
<PAGE> 45
BINGHAM FINANCIAL SERVICES CORPORATION
BALANCE SHEET
AS OF JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Installment contracts receivable, net....................... $5,323,800
Organization costs, net..................................... 84,900
Other assets................................................ 13,400
----------
Total assets......................................... $5,422,100
==========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Liabilities:
Accounts payable, affiliates.............................. 88,300
Accounts payable, trade................................... 35,300
Note payable, Sun......................................... 5,363,600
----------
Total liabilities.................................... 5,487,200
----------
Stockholder's Equity (deficiency)
Common stock, no par value, 60,000 shares authorized, 100
shares issued and outstanding.......................... 100
Deficit................................................... (65,200)
----------
Total stockholder's equity (deficiency).............. (65,100)
----------
Total liabilities and stockholder's equity
(deficiency)........................................ $5,422,100
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 46
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<S> <C>
Revenues:
Interest income....................... $122,100
--------
Costs and expenses:
Interest expense...................... 85,200
Provision for credit losses........... 31,500
General and administrative............ 62,800
Other operating expenses.............. 7,800
--------
Total costs and expenses........... 187,300
--------
Loss before income taxes........... (65,200)
Provision for income taxes.............. --
--------
Net loss................................ $(65,200)
========
</TABLE>
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
TOTAL
STOCKHOLDER'S
COMMON EQUITY
STOCK DEFICIT (DEFICIENCY)
------ ------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997.................................. -- -- --
Issuance of 100 shares of common stock.................... 100 -- 100
Net loss.................................................. (65,200) (65,200)
--- -------- --------
Balance at June 30, 1997.................................... 100 $(65,200) $(65,100)
=== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 47
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $ (65,200)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Provision for credit losses............................ 31,500
Amortization........................................... 9,400
Increase in the other assets........................... (13,400)
Increase in accounts payable and accrued liabilities... 208,800
-----------
Net cash provided by operating activities.............. 171,100
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Installment contracts receivable originated............ (5,414,500)
Collections on installment contracts receivable........ 59,200
Organization costs..................................... (94,300)
-----------
Net cash used in investing activities..................... (5,449,600)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds note payable, Sun............................. 5,278,400
Issuance of Common Stock............................... 100
-----------
Net cash provided by financing activities................. 5,278,500
-----------
Net change in cash and cash equivalents................... 0
Cash and cash equivalents at beginning of period.......... --
Cash and cash equivalents at end of period................ $ 0
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 48
BINGHAM FINANCIAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. NATURE OF OPERATIONS: Bingham Financial Services Corporation (the
"Company") was incorporated as a wholly-owned subsidiary of Sun Home Services,
Inc. and an affiliate of Sun Communities, Inc. ("Sun"). The Company provides
financing to residents living in Sun's manufactured housing communities for the
purchase of new and used manufactured homes. The Company began operations
January 2, 1997 with its fiscal year ending September 30, 1997. As of June 30,
1997, approximately 55 percent, 22 percent and 17 percent of the borrowers of
the installment contracts receivable were located in Michigan, Indiana and
Texas, respectively.
b. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
c. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments with an initial maturity of three months or less to be cash and cash
equivalents.
d. INSTALLMENT CONTRACTS RECEIVABLE: Installment contracts receivable are
reported at their outstanding unpaid principal balances reduced by any
charge-off or specific valuation accounts and net of any deferred fees or costs
on original loans. Installment contracts receivable are collateralized by the
manufactured homes.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related loan.
Allowance for credit losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic evaluation
of the adequacy of the allowance is based on industry data, known and inherent
risks in the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral and current
economic conditions.
e. INCOME RECOGNITION: Interest income from installment contracts
receivable is recognized using the interest (actuarial) method. Accrual of
interest income on installment contracts receivable is suspended when a loan is
contractually delinquent for 90 days or more. The accrual is resumed when the
loan becomes contractually current, and past-due interest income is recognized
at that time.
f. FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and
assumptions were used by the Company in estimating fair values of financial
instruments as disclosed herein:
- CASH AND CASH EQUIVALENTS: The carrying amount of cash approximates fair
value.
- INSTALLMENT CONTRACTS RECEIVABLE: Fair values for installment contracts
receivable are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Due to the recent issuance of these
loans, the carrying amount approximates fair value.
- ACCOUNTS PAYABLE AND NOTE PAYABLE, AFFILIATE: The carrying amount
approximates fair value because of the short maturity of these
obligations.
- ACCRUED INTEREST: The carrying amount of accrued interest approximates
their fair values.
g. INCOME TAXES: Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and liabilities
are adjusted through the provisions for income taxes.
F-6
<PAGE> 49
BINGHAM FINANCIAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
2. TRANSACTIONS WITH AFFILIATES:
During 1997, the Company had, and expects to have in the future,
transactions with affiliate companies in the ordinary course of business and on
substantially the same terms, including interest rates, as with nonaffiliates.
Sun provided financial support in the form of a note of $5,278,400 bearing
interest at 7.0% per annum. Accrued interest at June 30, 1997 of $85,200 is
unpaid and due on demand. In addition, certain affiliates provide administrative
and management support. Payments to affiliates for such support fees are charged
to operating expenses and were $37,000 and $6,000, respectively.
3. INSTALLMENT CONTRACT RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES:
The contractual maturities of total installment contracts receivable, net
of unearned income, outstanding at June 30, 1997 were as follows: 1998 -
$54,200; 1999 - $60,300; 2000 -$67,100; 2001 - $74,600; 2002 - $83,100, and
$5,016,000 thereafter. The foregoing should not be regarded as a forecast of
future cash collections, as actual experience may be that a substantial portion
of these loans may be renewed or repaid before contractual maturity date.
An analysis of the allowance for credit losses on installment contract
receivables for the six months ended June 30, 1997 follows:
<TABLE>
<S> <C>
Balance, beginning of period................................ $ --
Additions................................................... $31,500
Deductions.................................................. 0
-------
Balance, end of period...................................... $31,500
=======
</TABLE>
All of the Company's installment contract receivables have fixed rates of
interest adjusted as necessary for credit risk.
4. COMMITMENTS AND CONTINGENCIES:
The Company is subject to various claims and legal proceedings arising out
of the normal course of business, none of which, in the opinion of management,
are expected to have a material effect on the Company's financial position.
At June 30, 1997, the Company has commitments to originate installment
contracts receivable approximating $3 million.
F-7
<PAGE> 50
=========================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 8
Use of Proceeds......................... 13
Dividend Policy......................... 13
Capitalization.......................... 14
Dilution................................ 15
Market for the Common Stock............. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 16
Business................................ 18
Management.............................. 30
Certain Transactions.................... 33
Principal Stockholders.................. 34
Description of Capital Stock............ 35
Shares Eligible for Future Sale......... 39
Underwriting............................ 40
Legal Matters........................... 41
Experts................................. 41
Available Information................... 41
</TABLE>
------------------------
UNTIL , 1997 (90 DAYS AFTER THE EFFECTIVE DATE OF THE
OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
=========================================================
=========================================================
1,000,000 SHARES
BINGHAM
FINANCIAL SERVICES
CORPORATION
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
RONEY & CO. LOGO
, 1997
=========================================================
<PAGE> 51
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All of the expenses listed below are estimated except for the SEC
registration fee, the NASD filing fee and the Nasdaq/SmallCap Market fee. The
itemized statement below includes all expenses in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions:
<TABLE>
<S> <C>
S.E.C. registration fee..................................... $3,485
NASD filing fee............................................. 1,650
Nasdaq/SmallCap Market fee.................................. 6,000
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Transfer Agent and Registrar Fees........................... *
Miscellaneous Expenses...................................... *
------
Total....................................................... $ *
======
</TABLE>
- -------------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation contain a provision, authorized by
the Michigan Business Corporation Act (the "Act"), designed to eliminate in
certain circumstances the personal liability of directors for monetary damages
to the Company or its stockholders for breach of their fiduciary duty as
directors. This provision, however, does not limit the liability of any director
who breached his or her duty of loyalty to the Company or its stockholders,
failed to act in good faith, obtained an improper personal benefit or paid a
dividend or approved a stock repurchase or redemption that was prohibited under
Michigan law, derived an improper personal benefit or for any act or omission
that occurred before the effective date of the provision of the Articles of
Incorporation. This provision will not limit or eliminate the rights of the
Company or any stockholder to seek an injunction or any other nonmonetary relief
in the event of a breach of a director's duty of care. In addition, this
provision applies only to claims against a director arising out of his or her
role as a director and does not relieve a director from liability unrelated to
his or her fiduciary duty of care or from a violation of statutory law such as
certain liabilities imposed on a director under the federal securities laws.
The Company's Articles of Incorporation and Bylaws also provide that the
Company shall indemnify all directors and officers of the Company to the fullest
extent permitted by the Act. Under the provisions of the Act, any director or
officer who, in his or her capacity as such, is made or threatened to be made a
party to any suit or proceeding, may be indemnified if the Board of Directors
determines such director or officer acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Company or its stockholders. Reference is made to Exhibits 3.1 and 3.3 of this
Registration Statement for the complete text of the Company's Articles of
Incorporation and Bylaws.
Michigan corporations are also authorized to obtain insurance to protect
directors and officers from certain liabilities, including liabilities against
which corporations cannot indemnify their directors and officers.
The Registrant also has agreements with its directors providing for
indemnification and advancement of expenses. Reference is made to Exhibit 10.4
to this Registration Statement for the complete text of a form of such
agreements.
For provisions regarding the indemnification of the Registrant and the
directors and officers of the Registrant by the Underwriters against certain
liabilities, including liabilities under the Securities Act, reference is made
to Section [ ] of the Underwriting Agreement, filed as Exhibit 1 to this
Registration Statement.
II-1
<PAGE> 52
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company issued 100 shares of Common Stock for $100 on August 21, 1996
to Sun Home Services, Inc. This sale was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended. Within the past three
years, the registrant has not made any other sales of unregistered securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1 Form of Underwriting Agreement*
3.1 Restated Articles of Incorporation
3.2 Certificate of Amendment to Articles of Incorporation (name
change)*
3.3 Amended and Restated Bylaws
4 Form of Common Stock Certificate*
5 Opinion letter of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation, regarding the validity of securities being
registered
10.1 Participants Support Agreement*
10.2 Administration Agreement*
10.3 Form of Participants Option*
10.4 Form of Indemnification Agreement*
10.5 Employment Agreement between the Company and William L.
Mulvaney*
10.6 Demand Promissory Note*
10.7 Subordinated Loan Agreement by and between the Company and
Sun*
10.8 Form of Promissory Note (Line of Credit)*
10.9 Form of Term Note*
10.10 1997 Stock Option Plan
10.11 Form of Stock Option Agreement between the Company and
certain directors, officers and other individuals*
10.12 Detachable Warrant Agreement*
10.13 Subservicer Agreement*
23.1 Consent of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation (included as part of Exhibit 5)
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES:
Not applicable
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
for shares of the Common Stock in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
II-2
<PAGE> 53
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities 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 such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 54
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Detroit, State of
Michigan, on the 25th day of August, 1997.
BINGHAM FINANCIAL SERVICES
CORPORATION
By: /s/ JEFFREY P. JORISSEN
------------------------------------
Jeffrey P. Jorissen
President, Chief Executive Officer,
Chief Financial Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below, hereby constitutes and appoints Gary A. Shiffman and Jeffrey P. Jorissen,
or either of them, his attorneys-in-fact and agents, with full power of
substitution and resubstitution for him in any and all capacities, to sign any
or all amendments or post-effective amendments to this Registration Statement,
and to file the same, with exhibits thereto and other documents in connection
therewith or in connection with the registration of the Common Stock under the
Securities Act of 1933, with the Securities and Exchange Commission, granting
unto each of such attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary in connection
with such matters as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or substitutes may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<S> <C>
Dated: August 25, 1997 /s/ JEFFREY P. JORISSEN
------------------------------------------------------------
Jeffrey P. Jorissen
President, Chief Executive Officer, Chief Financial Officer
and Director
(Principal Executive Officer, Principal Financial and
Accounting Officer)
Dated: August 25, 1997 /s/ GARY A. SHIFFMAN
------------------------------------------------------------
Gary A. Shiffman
Chairman of the Board, and Secretary
Dated: August 25, 1997 /s/ MILTON M. SHIFFMAN
------------------------------------------------------------
Milton M. Shiffman
Director
</TABLE>
<PAGE> 55
EXHIBIT LIST
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ------------
<S> <C> <C>
</TABLE>
1 Form of Underwriting Agreement*
3.1 Restated Articles of Incorporation
3.2 Certificate of Amendment to Articles of Incorporation (name
change)*
3.3 Amended and Restated Bylaws
4 Form of Common Stock Certificate*
5 Opinion letter of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation, regarding the validity of securities being
registered
10.1 Participants Support Agreement*
10.2 Administrative Services*
10.3 Form of Participants Option*
10.4 Form of Indemnification Agreement*
10.5 Employment Agreement between the Company and William L.
Mulvaney*
10.6 Demand Promissory Note*
10.7 Subordinated Loan Agreement by and between the Company and
Sun*
10.8 Form of Promissory Note (Line of Credit)*
10.9 Form of Term Note*
10.10 1997 Stock Option Plan
10.11 Form of Stock Option Agreement between the Company and
certain directors, officers and other individuals*
10.12 Detachable Warrant Agreement*
10.13 Subservicer Agreement*
23.1 Consent of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation (included as part of Exhibit 5)
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
- -------------------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
C&S 510 (Rev. 2-92)
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES - CORPORATION, SECURITIES
AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
DATE RECEIVED (FOR BUREAU USE ONLY)
- ------------------------------------------
- -------------------------------------------------------------
NAME
Laith L. Yaldoo, Esq.
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
- -------------------------------------------------------------
ADDRESS
One Woodward Avenue, Suite 2400
- -------------------------------------------------------------
CITY STATE ZIP CODE
Detroit Michigan 48226
RESTATED ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Articles:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: MANUFACTURED HOME LENDING
CORPORATION
2. The corporation identification number (CID) assigned by the Bureau is:
414-887
3. All former names of the corporation are: NONE
4. The date of filing the original Articles of Incorporation was: August
21, 1996
- --------------------------------------------------------------------------------
The following Restated Articles of Incorporation supersede the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is:
MANUFACTURED HOME LENDING CORPORATION
<PAGE> 2
ARTICLE II
The purpose or purposes for which the corporation is formed is to engage in any
activity within the purposes for which corporations may be formed under the
Michigan Business Corporation Act (the "Act").
ARTICLE III
The total authorized shares:
1. Common Shares 10,000,000
---------------------------------
Preferred Shares 10,000,000
---------------------------------
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The holder of each outstanding common share shall have one vote per
share with respect to all matters submitted to a vote of shareholders.
The preferred shares shall be issued from time to time in one or more
series of such number of shares with such distinctive serial designations
and (a) may have such voting powers, full or limited, or may be without
voting powers; (b) may be subject to redemption at such time or times and
at such prices; (c) may be entitled to receive dividends (which may be
cumulative or non-cumulative) at such rate or rates, on such conditions,
and at such times and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of shares; (d)
may have such rights upon the dissolution of, or upon any distribution of
the assets of, the corporation; (e) may be made convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes or of any other series of
the same or any other class or classes of shares of the corporation, at
such price or prices or at such rates of exchange, and with such
adjustments; and (f) may have such other relative, participating, optional
or other special rights, qualifications, limitations or restrictions
thereof, all as shall hereafter be stated and expressed in the resolution
or resolutions providing for the issue of each such series of preferred
shares from time to time adopted by the board of directors pursuant to
authority so to do which is hereby expressly vested in the board of
directors.
The number of authorized shares of any class of shares of the
corporation, including without limitation, the common shares and the
preferred shares, may be increased or decreased by the affirmative vote of
the holders of the majority of the shares of the corporation entitled to
vote, without regard to class.
-2-
<PAGE> 3
ARTICLE IV
A. The address of the current registered office is:
31700 Middlebelt Road, Ste. 145
Farmington Hills, MI 48334
B. The mailing address of the current registered office if different from
the registered office address:
---------------------------------------------------------------------------
(Address) (City) (Zip Code)
C. The name of the current resident agent at the registered office is:
Gary A. Shiffman
ARTICLE V
Any action required or permitted by the Act to be taken at an annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if consents in writing, setting forth the action so taken, are
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote on the action were present and
voted. The written consents shall bear the date of signature of each
stockholder who signs the consent if fewer than all stockholders entitled to
vote sign the written consent. No written consents shall be effective to take
the corporate action referred to unless, within 60 days after the record date
for determining stockholders entitled to express consent to or to dissent from a
proposal without a meeting, written consents signed by a sufficient number of
stockholders to take the action are delivered to the corporation. Delivery shall
be to the corporation's registered office, its principal place of business, or
an officer or agent of the corporation having custody of the minutes of the
proceedings of its stockholders. Delivery made to a corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to stockholders who have not
consented in writing.
ARTICLE VI
No director of this corporation shall be personally liable to the corporation or
its stockholders for monetary damages for a breach of such director's fiduciary
duty; provided, that the foregoing shall not limit the liability of a
director for any of the following:
(a) A breach of the director's duty of loyalty to the corporation
or its stockholders.
(b) Acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law.
(c) A violation of Section 551(1) of the Act.
(d) A transaction from which the director derived an improper
personal benefit.
(e) Any other act or omission as to which the Act does not permit
a director's liability to be so limited.
If the Act is hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Act, as so amended. Any repeal, modification or
adoption of any provision in these Articles of Incorporation inconsistent with
this Article VI shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal, modification
or adoption.
-3-
<PAGE> 4
ARTICLE VII
A director may be removed from office as a director at any time, but only for
cause, by the affirmative vote of the holders of at least two-thirds (2/3) of
the outstanding shares of stock of the corporation generally entitled to vote
in the election of directors. A special meeting of the stockholders may be
called, in accordance with the corporation's Bylaws, for the purpose of
removing a director.
ARTICLE VIII
Except as may be provided by the Board of Directors in authorizing the issuance
of shares of Preferred Stock pursuant to Article III, no holder of shares of
stock of the corporation shall have any preemptive right to purchase or
subscribe for any additional shares of the stock of the corporation or any
other security of the corporation which it may issue or sell.
ARTICLE IX
It is hereby declared to be a proper corporate purpose, reasonably calculated
to benefit shareholders, for the board of directors to base the response of
this corporation to any "Acquisition Proposal" (as defined herein) on the board
of directors' evaluation of what is in the best interests of the corporation
and, in making that evaluation, for the board of directors to consider:
A. The best interest of the shareholders; for this purpose the board
shall consider, among other factors, not only the consideration being
offered in the Acquisition Proposal, in relation to the then current
market price, but also in relation to the then current value of the
corporation in a freely negotiated transaction and in relation to the
board of directors' then estimate of the future value of the corporation
as an independent entity, the business and financial conditions and
earnings prospects of the acquiring person or persons, and the competence,
experience and integrity of the acquiring person or persons and its or
their management; and
B. Such other factors as the board of directors determines to be
relevant, including, among other factors, the social, legal and economic
effects of the Acquisition Proposal upon employees, suppliers, customers,
business and the general community in which the corporation does business.
For purposes of this Article IX, "Acquisition Proposal" means any proposal of
any person (a) for a tender offer or exchange offer for any equity security of
the corporation; (b) to merge or consolidate the corporation with another
corporation; or (c) to purchase or otherwise acquire all or substantially all
of the properties and assets of the corporation.
ARTICLE X
Notwithstanding any other provision of these Articles of Incorporation, no
amendment to these Articles of Incorporation shall amend or repeal any or all
of the provisions of Articles III, VI, VII, VIII, IX or this Article X of these
Articles of Incorporation, and the stockholders of the corporation shall not
have the right to amend or repeal any or all provisions of the Bylaws of the
corporation, unless so adopted by the affirmative vote of the holders of not
less than two-thirds (2/3) of the outstanding shares of stock of the
corporation generally entitled to vote in the election of directors, considered
for purposes of this Article X as a class; provided, however, that in the event
that the Board of Directors of the corporation recommends to the stockholders
the adoption of any such amendment of a nature described in this Article X, the
stockholders of record holding a majority of the outstanding shares of stock of
the corporation entitled to vote in the election of directors, considered for
the purposes of this Article X as a class, may amend, modify or repeal any or
all of such provisions.
-4-
<PAGE> 5
5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE
UNANIMOUS CONSENT OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE
BOARD OF DIRECTORS; OTHERWISE, COMPLETE SECTION (b)
a.[ ]These Restated Articles of Incorporation were duly adopted on
the___day of________, 19__, in accordance with the
provisions of Section 642 of the Act by the unanimous consent of the
incorporators before the first meeting of the Board of Directors.
Signed this__day of__________, 19
---------------------------- ----------------------
(Signatures of all incorporators; type or print name under each
signature)
b.[X]These Restated Articles of Incorporation were duly adopted on
the ____ day of August, 1997, in accordance with the provisions of
Section 642 of the Act and : (check one of the following)
[] were duly adopted by the Board of Directors without a vote
of the shareholders. These Restated Articles of
Incorporation only restate and integrate and do not
further amend the provisions of the Articles of
Incorporation as heretofore amended and there is no
material discrepancy between those provisions and the
provisions of these Restated Articles.
[] were duly adopted by the shareholders. The necessary
number of shares as required by statute were voted in
favor of these Restated Articles.
[] were duly adopted by the written consent of the
shareholders having not less than the minimum number of
votes required by statute in accordance with Section
407(1) of the Act. Written notice to shareholders who
have not consented in writing has been given. (Note:
Written consent by less than all of the shareholders is
permitted only if such provision appears in the Articles
of Incorporation.)
[] were duly adopted by the written consent of all the
shareholders entitled to vote in accordance with Section
407(2) of the Act.
Signed this __ day of August, 1997
By:
-------------------------------
Jeffrey P. Jorissen, President
-5-
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED BYLAWS
BINGHAM FINANCIAL SERVICES CORPORATION
(hereinafter referred to as the "Corporation")
ARTICLE I.
OFFICES
Section 1. LOCATION. The principal office of the Corporation in the State
of Michigan shall be located in Farmington Hills (Oakland County).
Section 2. CHANGE. The Board of Directors (hereinafter referred to as the
"Board") may change the principal office of the Corporation from time to time
and may establish other offices, either within or without the State of
Michigan, as the business of the Corporation may require.
ARTICLE II.
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
Section 1. ANNUAL MEETING. The annual shareholders' meeting shall be held
at such time on such day as the Board shall annually determine, for the
purposes of electing directors, hearing reports of the affairs of the
Corporation and transacting any other business within the power of the
shareholders. If the election of directors shall not be held on the day
designated herein for an annual meeting, or at any adjournment thereof, the
Board may cause the election to be held at a special shareholders' meeting as
soon thereafter as one may be conveniently called and noticed for that purpose.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called at any time by the Chairman of the Board, President, Chief Executive
Officer or, in case of such officers' death or disability, any Vice President
who is authorized in such circumstances to exercise the authority of the
President, or by the Board of Directors by action at a meeting or a majority of
the directors acting without a meeting, or by shareholders holding 50% or more
of the voting power of the then outstanding shares entitled to vote in an
election of directors. Such meetings may be held within or without the State
of Michigan at such time and place as may be specified in the notice thereof.
The request shall state the purpose or purposes for which the meeting is to be
called, and the business transacted at any such meeting shall be limited to the
purpose or purposes stated in the notice thereof.
Section 3. PLACE OF MEETING. The Board may specifically designate any
place either within or without the State of Michigan as the place of meeting
for any annual or special shareholders' meeting. If no such designation is
made or if a special meeting is called other than at the request of the Board,
the place of meeting shall be the registered office of the Corporation in the
State of Michigan.
Section 4. WRITTEN NOTICE. Notice of any annual shareholders' meeting
shall specify in writing the place, day and hour thereof and shall be given by
the Secretary to each such shareholder entitled to vote thereat not less than
ten (10) nor more than sixty (60) days before each such meeting. Such written
notice shall constitute due, legal, and personal notice to each
<PAGE> 2
such shareholder if it is given by:
(a) delivering it to such shareholder personally; or
(b) sending it to him by mail, telegraph, or other means of written
communication, charges prepaid, addressed to him at:
(i) his address as it appears on the stock transfer books of
the Corporation; or
(ii) such other address as he may have requested in writing
that the Corporation use for the purpose of giving such notice; or
(iii) at the registered office of the Corporation and by
publishing it at least once in some newspaper of general
circulation in the county in which that office is located if his
address does not appear on the stock transfer books of the
Corporation and he has not requested in writing that the
Corporation use any address for such notice.
If mailed, such notice shall be deemed given when deposited in the United
States Mail postage prepaid and addressed to the shareholder at any such
address. Except in extraordinary circumstances where express provision is made
allowable by statute, notice of any special shareholders' meeting shall be
given in the same manner as for annual shareholders' meetings.
Attendance of a person at a meeting of shareholders, in person or by
proxy, constitutes (i) a waiver of notice of the meeting, except when the
shareholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened; and (ii) a waiver of objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
Section 5. ADJOURNED MEETINGS AND NOTICE THEREOF. Any annual or special
shareholders' meeting, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat; in the absence of
a quorum no other business may be transacted at such meeting.
A meeting may be adjourned to another time or place without giving notice
of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken and at
the adjourned meeting only such business is transacted as might have been
transacted at the original meeting. However, after the adjournment the Board
may fix a new record date for the adjourned meeting and a notice of the
adjourned meeting shall be given to each shareholder of record on the new
record date entitled to notice.
Section 6. VOTING. Unless a record date for voting purposes is fixed as
provided in Section l of Article V of these Bylaws, only those persons in whose
names shares entitled to vote stand and are registered on the stock transfer
books of the Corporation on the day three (3) days prior to any meeting of
shareholders shall be entitled to vote at such meeting. Such vote may be by
voice or by ballot; provided however, all elections for directors must be by
ballot upon demand made by a shareholder at any election and before the voting
begins.
Each shareholder of the Corporation shall, at every shareholders' meeting,
be entitled to
2
<PAGE> 3
one (1) vote in person or by proxy for each share of each class of capital
stock of the Corporation outstanding and entitled to vote and registered in his
name on the record date or the date set forth herein. Except as otherwise
provided in the Corporation's Articles of Incorporation, directors shall be
elected by a plurality of the votes cast at an election.
Except as otherwise provided by law, the Corporation's Articles of
Incorporation, or these Bylaws, every act or decision done or made by vote of
the shareholders entitled to exercise a majority of the voting power present in
person or by proxy at any shareholders' meeting shall be regarded as an act or
decision done or made with the approval of the shareholders.
Section 7. QUORUM. Unless otherwise provided in this Corporation's
Articles of Incorporation, the presence in person or by proxy of persons
entitled to vote a majority of the voting shares of the capital stock of the
Corporation that are outstanding and entitled to vote shall constitute a quorum
for the transaction of business at any meeting. The shareholders present at a
duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8. CONSENT OF ABSENTEES. The transactions of any annual or
special shareholders' meeting, however called and noticed, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present either in person or by proxy and if, either before or after the
meeting, each of the shareholders who was entitled to vote but was not present
in person or by proxy, signs a written waiver of notice and written consent to
the holding of such meeting or a written approval of the minutes thereof. All
such waivers and consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Section 9. ACTION WITHOUT MEETING.
(a) As long as the Articles of Incorporation continue to so
provide, any action required or permitted under any provision of the
Michigan Business Corporation Act, to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize
or take the action at a meeting at which all shares entitled to vote
thereon were present and voted. If less than unanimous written consent of
the shareholders shall be given for any action to be taken, the written
consent shall bear the date of signature of each shareholder who signs the
consent and shall be delivered to the Corporation within sixty (60) days
after the record date set forth in Section 6 of this Article II hereof.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to shareholders who
have not consented in writing.
(b) If the Articles of Incorporation do not provide as described in
subsection (a) hereof, any action which under any provision of the
Michigan Business Corporation Act is required or may be taken at a
shareholders' meeting may be taken without such a meeting if authorized
by a writing signed by all of the persons who would be entitled to vote
upon such action at such a meeting and filed with the Secretary of the
Corporation. Such consent shall have the same effect as a unanimous vote
of shareholders.
Section 10. PROXIES. Every person entitled to vote or execute consents or
dissents shall have the right to do so either in person or by one or more
agents authorized by a written proxy executed by such person or his duly
authorized agent and filed at or before the meeting at
3
<PAGE> 4
which they are intended to be used with the Secretary of the Corporation.
Proxies shall be valid for the length of time which the person executing it
specifies, which in no case shall exceed three (3) years from the date of its
execution. Any proxy duly executed shall be deemed not to have been revoked
and to be in full force and effect and, in the absence of any limitation to the
contrary contained in the proxy, it shall extend to all shareholders' meetings,
unless and until an instrument revoking said proxy or a duly executed proxy
bearing a later date is filed with the Secretary of the Corporation. A proxy
shall be deemed sufficient if it appears on its face to confer the requisite
authority and is signed by the owner of the stock to be voted; no witnesses to
the execution of any proxy shall be required. Notwithstanding that a valid
proxy may be outstanding, except in the case of an irrevocable proxy coupled
with an interest which shall state that it is irrevocable on its face, the
powers of the proxy holder or holders shall be suspended if the person or
persons executing such proxy shall be present at the meeting and elect to vote
in person.
Section 11. ORDER OF BUSINESS AT ANNUAL MEETING. The Chairman of the
Board or such other member of the Board as is designated by the Board of
Directors, shall preside over meetings of the shareholders. The Secretary of
the Corporation shall act as Secretary of the shareholders' meeting and shall
record all of the proceedings of such shareholders' meeting; provided, that in
the absence of such officer, the presiding officer shall appoint another
officer of the Corporation to act as Secretary of the meeting.
At an annual or special meeting of shareholders, only such business shall
be conducted, and only such proposals shall be acted upon, as shall have been
properly brought before such meeting. To be properly brought before a meeting
of shareholders, business must be (i) in the case of a special meeting,
specified in the notice of the special meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) properly brought
before the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a shareholder. For business
to be properly brought before a meeting of shareholders by a shareholder, if
such business relates to the nominating by a shareholder of a person to be
voted on for a director position, the shareholder must comply with Article III,
Section 3(c) hereof; for all other business, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered or mailed and received at the
principal executive offices of the Corporation not less than 30 days nor more
than 60 days prior to the shareholders meeting; provided, however, that if less
than 40 days' notice or prior public disclosure of the date of the meeting is
given or made to the shareholders, notice by the shareholder to be timely must
be so delivered or received not later than the close of business on the tenth
day following the earlier of (i) the day on which such notice of the date of
the meeting was mailed, or (ii) the day on which such public disclosure was
made.
A shareholder's notice to the Secretary shall set forth as to each matter
the shareholder proposes to bring before a meeting of shareholders, (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and address,
as they appear on the Corporation's books, of the shareholder proposing such
business and any shareholders known by such shareholder to be supporting such
proposal, (iii) the class and number of shares of the Corporation which are
beneficially owned by the shareholder on the date of such shareholder's to be
supporting such proposal on the date of such shareholder's notice, and (iv) any
material interest of the shareholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at a meeting of shareholders except in accordance with the
procedures set forth in this Section. The presiding officer of the shareholder
meeting shall, if the facts warrant, determine
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and declare to the meeting that the business was not properly brought before
the meeting in accordance with the procedures prescribed by these Bylaws, and
if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 12. REMOVAL OF DIRECTORS. The shareholders may remove any member
of the Board, for cause, at any special meeting called for that purpose in the
manner set forth in the Articles of Incorporation.
Section 13. VOTING OF SHARES BY CERTAIN HOLDERS. Any other corporation
that owns shares of stock of this Corporation outstanding and entitled to vote
may vote the same by the President of the shareholder corporation or proxy
appointed by him, unless some other person is appointed to vote such shares by
resolution of the Board of the shareholder corporation.
Shares held by an administrator, executor, guardian, conservator,
receiver, trustee, or other fiduciary may be voted by him, either in person or
by proxy, without a transfer of such shares into his name, provided the
Corporation is furnished satisfactory proof of the authority of such person to
vote those shares.
A shareholder whose shares are pledged shall be entitled to vote such
shares unless in the transfer the pledgor has expressly empowered the pledgee
to vote such shares and had the same indicated on the books of the Corporation,
in which case only the pledgee or his proxy may represent and vote such shares.
Shares of this Corporation's own stock held by it in a fiduciary capacity
shall not be voted, directly or indirectly, at any meeting or for any purpose
and shall not be counted in determining the total number of shares present for
quorum purposes.
Section 14. INSPECTORS OF ELECTION. Whenever any person entitled to vote
at any shareholders' meeting shall request the appointment of persons to
inspect any election, the Board, prior to the meeting, or the person presiding
at such meeting shall appoint not more than three (3) inspectors, who need not
be shareholders. If the right of any person to vote at such meeting shall be
challenged, the inspectors shall determine such right. The inspectors shall
receive and count the votes for any election or for the decision of any
questions and shall determine the result. Their certificate of any vote shall
be prima facie evidence thereof.
Section 15. SHAREHOLDER MEETING BY CONFERENCE TELEPHONE OR SIMILAR
EQUIPMENT. A shareholder may participate in a meeting of shareholders by a
conference telephone or similar communications equipment by which all persons
participating in the meeting may hear each other if all participants are
advised of the communications equipment and the names of the participants in
the conference are divulged to all participants. Participation in a meeting
pursuant to this section constitutes presence in person at the meeting.
ARTICLE III.
DIRECTORS AND MEETINGS OF THE BOARD OF DIRECTORS
Section 1. POWERS. All of the powers of this Corporation not expressly
reserved to or conferred upon the shareholders by statute, the Articles of
Incorporation, or these Bylaws shall be vested in the Board of Directors of
this Corporation which shall control and manage its business and affairs.
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Section 2. NUMBER OF DIRECTORS. The authorized number of directors of the
Corporation shall be no less than three but no more than eleven until changed
by a duly adopted amendment of these Bylaws.
Section 3. ELECTION, TERM OF OFFICE AND QUALIFICATION OF DIRECTORS.
(a) Directors need not be shareholders of this Corporation. Except
as provided in Subsection (b) below, the directors, other than those
serving on the first Board, shall be elected at each annual shareholders'
meeting or otherwise as provided in Article II, Section 1, above. Each
director shall hold office until he resigns, dies, is removed from
office, or his successor is duly elected and qualified, whichever occurs
first.
(b) In lieu of annual election of all directors, the directors shall
be divided into three classes, each to be as nearly equal in number as
possible. The term of office of directors in the first class shall
expire at the first annual meeting of shareholders after their election,
that of the second class shall expire at the second annual meeting after
their election, and that of the third class, if any, shall expire at the
third annual meeting after their election. At each annual meeting after
such classification, a number of directors equal to the number of the
class whose term expires at the time of the meeting shall be elected to
hold office until the second succeeding annual meeting if there are two
classes, or until the third succeeding annual meeting if there are three
classes.
(c) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors. Nominations of
persons for election as directors of the Corporation may be made at a
meeting of shareholders by or at the direction of the directors, by any
nominating committee or person appointed by the directors, or by any
shareholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set
forth in this Section 3(c). Such nominations, other than those made by
or at the direction of the directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that if less
than 40 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be
timely must be so received not later than the close of business on the
tenth day following the earlier of the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
shareholder's notice shall set forth (a) as to each person who is not an
incumbent director who the shareholder proposes to nominate for election
as a director (i) the name, age, business address and residence address
of such person; (ii) the principal occupation of employment of such
person; (iii) the class and number of shares of the Corporation which are
beneficially owned by such person; and (iv) any other information
relating to such person that is required to be disclosed in solicitations
for proxies for election of directors pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended, or any successor
provision; and (b) as to the shareholder giving notice, (i) the name and
record address of such shareholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such
shareholder. Such notice shall be accompanied by the written consent of
each proposed nominee to serve as a director of the Corporation, if
elected. The Corporation may require any proposed nominee to furnish
such other information as may be reasonably required by the Corporation
to determine the qualifications of such
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proposed nominee to serve as a director of the Corporation.
The presiding officer of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the provisions of this Section 3(c) and if he should so
determine, the defective nomination shall be disregarded.
Section 4. VACANCIES. Vacancies in the Board occurring by reason of
death, resignation, removal, increase in the number of directors or otherwise
shall be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board. Each person so elected shall
serve as a director for a term of office continuing until the next election of
the class of directors for which such new director was elected. A vacancy that
will occur at a specified date, by reason of a resignation effective at a later
date or otherwise, may be filled before the vacancy occurs, but the newly
elected director may not take office until the vacancy occurs.
Section 5. PLACE OF MEETING. Regular Board meetings shall be held at any
place within or without the State of Michigan which has been designated from
time to time by resolution of a majority of the Board or by written consent of
a majority of the members of the Board given either before or after the meeting
and filed with the Secretary of the Corporation. In the absence of such
designation, regular meetings shall be held at the registered office of the
Corporation. Any special Board meeting may be held at any place designated
with the written consent of a majority of the directors; otherwise special
Board meetings shall be held at the registered office of the Corporation in the
State of Michigan.
Section 6. ORGANIZATION MEETING. Immediately following each annual
shareholders' meeting and each adjourned annual and special shareholders'
meeting held for the purpose of electing a new Board, the newly elected Board
may hold a regular meeting for the purpose of organization, election of
officers, and the transaction of other business. Notice of each such meeting
need not be given and is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Board meetings may be regularly
scheduled for dates, times and places as determined by the Board, and in such
case notice of such meetings need not be given and is hereby dispensed with.
Section 8. SPECIAL MEETINGS AND NOTICE THEREOF. Special Board meetings
for any purpose or purposes, may be called at any time by any director or by
the President or, if he is absent or unable to act, by any Vice President. The
business transacted at any such meeting shall be limited to the purpose or
purposes stated in the notice thereof.
Written notice of the place, day, and hour of special Board meetings shall
be given to each director and constitute due, legal, and personal notice to him
if that notice is delivered personally to him or sent to him by mail,
telegraph, or other means of written communication, charges prepaid, addressed
to him at his address as it is shown upon the records or stock transfer books
of the Corporation or, if such address is not so shown on such records or is
not readily ascertainable, at the place in which the regular directors'
meetings are held. If delivered personally, such notice shall be so delivered
at least twenty-four (24) hours prior to the time of the holding of the
meeting. If mailed or telegraphed, such notice shall be deposited in the
United States Mail or delivered to the telegraph company in the place which the
principal office of the Corporation in the State of Michigan is located at
least forty-eight (48) hours prior to the time of holding the meeting; if
mailed, such notice shall be deemed given when deposited in the United States
Mail postage prepaid and addressed as set forth above.
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Section 9. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned Board meeting need not be given to absent directors if the time
and place be fixed at the meeting adjourned provided that the meeting is not
adjourned for more than thirty (30) days.
Section 10. WAIVER OF NOTICE. The attendance of a director at any Board
meeting shall constitute a waiver of notice of such meeting, except where a
director attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called, noticed, or convened.
The transactions of whatever kind or nature held at any Board meeting,
however called and noticed or wherever held, shall be as valid as though had at
a meeting duly held after regular call and notice if a quorum is present and
if, either before or after the meeting, each of the directors not present signs
a written waiver of notice of the meeting and a written consent to holding such
meeting, or a written approval of the minutes thereof. All such waivers and
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
In addition, any action required or permitted to be taken by the Board
under the Michigan Business Corporation Act may be taken without a meeting, if
all members of the Board shall individually and collectively consent in writing
to such action. Such written consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
force and effect as a unanimous vote of such directors at a duly called,
noticed, and held Board meeting. Any certificate or other document filed under
any provision of the Michigan Business Corporation Act which relates to action
so taken shall state that the action was taken by unanimous written consent of
the Board without a meeting and that these Bylaws authorized the directors so
to act, and such statement shall be prima facie evidence of such authority.
Section 11. QUORUM. Except to adjourn the meeting as hereinafter
provided, a majority of the Board without regard to the authorized number of
directors shall be necessary to constitute a quorum for the transaction of
business. Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall be regarded
as the act of the Board unless a greater number be required by law, the
Articles of Incorporation, or these Bylaws.
Section 12. ADJOURNMENT. A quorum may adjourn any Board meeting to meet
again at a stated place, date, and hour; however, in the absence of a quorum, a
majority of the directors present at any regular or special Board meeting may
adjourn from time to time until the time fixed for the next regular Board
meeting.
Section 13. FEES AND COMPENSATION. By resolution of the Board, the
directors may be paid their expenses, if any, of attendance at each Board
meeting and a fixed sum for attendance at each Board meeting or a stated salary
as director. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity as an officer,
agent, employee or otherwise and receiving a separate compensation therefor.
Section 14. PRESUMPTION OF ASSENT. A director who is present at any Board
meeting at which action on any corporate matter is taken shall be presumed to
have assented to any action taken by the Board at that meeting unless his
dissent shall be entered in the minutes of the meeting or he shall file his
written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof or he shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right
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to dissent shall not apply to a director who voted in favor of such action. A
director who is absent from a meeting of the board, or a committee thereof of
which he is a member, at which any such action is taken is presumed to have
assented to the action unless he files his dissent with the Secretary of the
Corporation within a reasonable time after he has knowledge of the action.
Section 15. EXECUTIVE COMMITTEES. The Board, by resolution passed by a
majority of the whole Board, may provide for an Executive Committee by
appointing two (2) or more members thereto, each of whom shall be a director
and who shall serve during the pleasure of the Board. Unless one of the
members shall have been designated as Chairman of the Board, the Executive
Committee shall elect a Chairman from its own members. Except as provided
herein or otherwise by resolution of the Board, the Executive Committee during
the intervals between Board meetings shall possess and may exercise all of the
powers of the Board in the management of the business and affairs of the
Corporation. The Executive Committee shall keep full and fair records and
accounts of its proceedings and transactions. All actions taken by the
Executive Committee shall be reported to the Board at its meeting next
succeeding such action and shall be subject to revision and alteration by the
Board, except that no rights of third persons created in reliance thereon shall
be affected by any such revision or alteration. Vacancies in the Executive
Committee shall be filled by the Board.
Subject to provisions of these Bylaws, the Executive Committee shall fix
its own rules of procedure and shall meet as provided by such rules, by
resolution of the Board, or at the call of the President or Secretary of the
Corporation or of any two (2) members of the committee. Unless otherwise
provided by such rules, the provisions of the Bylaws relating to the notice
required to be given to directors shall apply to all meetings of the Executive
Committee. A majority of the Executive Committee shall be necessary to
constitute a quorum.
Section 16. OTHER COMMITTEES. The Board may by resolution provide for
such other standing or special committees as it deems desirable and discontinue
the same at its pleasure. Each such committee shall have such powers and
perform such duties not inconsistent with law, as may be assigned to it by the
Board. If provision be made for any such committee, the members thereof shall
be appointed by the Board, shall consist of one or more members of the Board
and shall serve during the pleasure of the Board. Vacancies in such committees
shall be filled by the Board.
ARTICLE IV.
OFFICERS
Section 1. OFFICERS. The officers of the Corporation shall include a
chairman of the board, a chief executive officer, a president, a chief
financial officer, a chief operating officer, a secretary and a treasurer and
may include a vice chairman of the board, one or more vice presidents, a chief
operating officer, one or more assistant secretaries and one or more assistant
treasurers. In addition, the Board of Directors may from time to time appoint
such other officers with such powers and duties as they shall deem necessary or
desirable. The officers of the Corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of stockholders, except that the chief executive officer
may appoint one or more vice presidents, assistant secretaries and assistant
treasurers. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as may be convenient. Each
officer shall hold office until his successor is elected and qualifies or until
his death, resignation or removal in the manner hereinafter provided. Any two
or more offices except president and vice president may be held by the same
person. In its discretion, the Board of
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Directors may leave unfilled any office except that of president, treasurer and
secretary. Election of an officer or agent shall not of itself create contract
rights between the Corporation and such officer or agent.
Section 2. ELECTION. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Sections 3 or
5 of this Article IV, shall be chosen by the Board, and each shall hold his
office until he resigns, dies, is removed or otherwise disqualified to serve,
or until his successor is elected and qualified, whichever occurs first.
Section 3. OTHER OFFICERS AND AGENTS. The Board may appoint such other
officers (including, without limitation, a Chief Executive Office, a Chief
Operating Officer, a Chief Financial Officer and a Chief Accounting Officer)
and agents as the business of the Corporation may require, each of whom shall
hold office for such period, have such authority, and perform such duties as
may be provided in these Bylaws or as the Board may from time to time
determine.
Section 4. REMOVAL AND RESIGNATION. Any officer or agent may be removed
by a majority of the whole Board at the time in office at any regular or
special Board meeting.
Any officer may resign at any time by giving written notice to the Board,
the President, or the Secretary. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Shareholders or the Board and shall exercise and perform such other powers and
duties as may from time to time be assigned to him by the Board or prescribed
by these Bylaws.
Section 7. CHIEF EXECUTIVE OFFICER. The Board of Directors shall
designate a chief executive officer. In the absence of such designation, the
chairman of the board (or, if more than one, the co-chairmen of the board in
the order designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall be the chief executive
officer of the Corporation. The chief executive officer shall have general
responsibility for implementation of the policies of the Corporation, as
determined by the Board of Directors, and for the management of the business
and affairs of the Corporation.
Section 8. PRESIDENT. Subject to such powers and duties, if any, as may
be given to the Chairman of the Board by the Board or prescribed by these
Bylaws, the President shall, subject to the control of the Board, have general
supervision, direction and control of the business and affairs of the
Corporation. In the absence of the Chairman of the Board or if there be no
such Chairman, he shall preside at all shareholders' meetings and at all Board
meetings. He shall be ex officio a member of all the standing committees,
including the Executive Committee, if any; shall have the general powers and
duties of management usually vested in the office of President of a
corporation; shall see that all orders and resolutions of the Board are carried
into effect; and shall have such other powers and duties as may be prescribed
by the Board or these Bylaws.
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Section 9. CHIEF OPERATING OFFICER. The Board of Directors may designate
a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 10. CHIEF FINANCIAL OFFICER. The Board of Directors may designate
a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 11. VICE PRESIDENTS. In the event of the President's absence or
disability, the Vice Presidents, if more than one, in order of their rank as
fixed by the Board or, if not ranked, the Vice President designated by the
Board shall perform all the duties of and shall be subject to all the
restrictions upon the President. The Vice Presidents shall have such other
powers and authority and shall perform such other duties as from time to time
may be prescribed for them respectively by the Board or these Bylaws.
Section 12. SECRETARY. The Secretary shall attend all shareholders'
meetings and all Board meetings and shall keep or cause to be kept, in his
custody at the principal or registered office of the Corporation in the State
of Michigan or such other place as the Board may order, a book recording the
minutes of all Board and shareholders' meetings setting forth: the place, date,
and hour of holding; whether regular or special, and, if special, how
authorized; the notice thereof given; the names of those present at Board
meetings; the number of shares present or represented at shareholders'
meetings; and the proceedings thereof.
The Secretary shall keep or cause to be kept at the registered office of
the Corporation in the State of Michigan or at the office of the Corporation's
transfer agent, a share register or a duplicate share register or a list
showing the names of the shareholders and their addresses; the number and
classes of shares held by each; the number and date of certificates issued for
the same; and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall keep in safe custody the seal of the Corporation and,
when authorized by the Board, affix the same or cause the same to be affixed to
any instrument requiring it; when so affixed, the seal shall be attested by his
signature or by the signature of the Treasurer or the Assistant Secretary. The
Secretary shall perform such other duties and have such other authorities as
are delegated to him by the Board.
The Secretary shall give or cause to be given notice of all Board and
shareholders' meetings required by these Bylaws or by law.
Section 13. ASSISTANT SECRETARIES. In the event of the Secretary's
absence or disability, any Assistant Secretary shall act as Secretary in all
respects. The Assistant Secretaries shall exercise such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board, the President, the Secretary, or these Bylaws.
Section 14. TREASURER. The Treasurer shall, subject to the direction of
the Board, have the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation.
The Treasurer shall deposit all monies and other valuables in the name and
to the credit of the Corporation with such depositaries as may be designated by
the Board; shall disburse the funds of the Corporation as may be ordered by the
Board; shall render to the President and the Board, whenever either requests
it, an account of all of his transactions as Treasurer and of the financial
condition of the Corporation; and shall have such other powers and authority
incident to
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the office of Treasurer and shall perform such other duties as may be
prescribed by the Board or these Bylaws.
Section 15. ASSISTANT TREASURERS. In the event of the Treasurer's absence
or disability, the Assistant Treasurer shall act as Treasurer in all respects.
The Assistant Treasurer shall exercise such other powers and perform such other
duties as from time to time may be prescribed for him by the Board, the
President, the Treasurer, or these Bylaws.
Section 16. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board.
ARTICLE V.
MISCELLANEOUS
Section 1. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of and to vote at a meeting of shareholders or
an adjournment of a meeting, the Board may fix a record date which shall not
precede the date on which the resolution fixing the record date is adopted by
the Board and which shall be not more than 60 nor less than 10 days preceding
the date of the meeting.
For the purpose of determining shareholders entitled to express consent to
or to dissent from a proposal without a meeting, the Board may fix a record
date, which shall not be more than 60 days before effectuation of the action
proposed to be taken.
For the purpose of determining shareholders entitled to receive payment of
a share dividend or distribution or allotment of a right, or for the purpose of
any other action, the Board may fix a record date which shall not precede the
date on which the resolution fixing the record date is adopted by the Board and
which shall not be more than 60 days preceding the date of the payment of the
share dividend or distribution or allotment of a right or other action.
Section 2. ANNUAL REPORT. The Corporation shall cause a financial report
of the Corporation for the preceding fiscal year to be made and distributed to
each shareholder thereof within four (4) months after the end of the fiscal
year. The report shall include the Corporation's statement of income, its
year-end balance sheet and, if prepared by the Corporation, its statement of
source and application of funds.
Section 3. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board. Such authority may be general or
confined to specific instances. No loan or advance to or overdraft or
withdrawal by an officer, director, or shareholder of the Corporation other
than in the ordinary and usual course of the business of the Corporation shall
be made or permitted unless each such transaction shall be approved by a vote
of the majority of the members of the whole Board after excluding from any
deliberations about such transaction any director involved in it. A full and
detailed statement of all such transactions and any payments shall be submitted
at the next annual shareholders' meeting, and the aggregate amount of such
transaction less any repayments shall be stated in the next annual report to
shareholders.
Section 4. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The President
or by a proxy appointed by him; or, in the absence of the President and his
proxy, the Treasurer or by a proxy appointed by him; or, in the absence of both
the President and the Treasurer and their
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proxies, the Secretary or by a proxy appointed by him are authorized in that
order to vote, represent, and exercise on behalf of this Corporation all rights
incident to any and all shares of other Corporations standing in the name of
this Corporation. The Board, however, may by resolution appoint some other
person to vote such shares.
Section 5. INDEMNIFICATION. The Corporation shall, to the fullest extent
authorized or permitted by the Michigan Business Corporation Act (as amended
from time to time), (a) indemnify any person, and his or her heirs, executors,
administrators and legal representatives, who was, is, or is threatened to be
made, a party to any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative or investigative) by reason
of the fact that such person is or was a director, officer, partner, trustee,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(collectively, "Covered Matters"); and (b) pay or reimburse the reasonable
expenses incurred by such person and his or her heirs, executors,
administrators and legal representatives in connection with any Covered Matter
in advance of final disposition of such Covered Matter. The Corporation may
provide such other indemnification to directors, officers, employees and agents
by insurance, contract or otherwise as is permitted by law and authorized by
the Board.
Section 6. PERSONAL LIABILITY OF DIRECTORS. As long as the Articles of
Incorporation of the Corporation continue to so provide, a director of the
Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for a breach of the directors fiduciary duty
to the extent that the breach does not involve or constitute:
(a) A breach of the director's duty of loyalty to the Corporation or
its shareholders.
(b) Acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law.
(c) A violation of Section 551(1) of the Michigan Business
Corporation Act.
(d) A transaction from which the director derived an improper
personal benefit.
(e) Any other act or omission as to which the Michigan Business
Corporation Act does not permit a director's liability to be so limited.
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ARTICLE VI.
EXECUTION OF INSTRUMENTS
Section 1. BANK ACCOUNTS. Each bank account of the Corporation shall be
established and continued only by order of the Board.
Section 2. CHECKS, ETC. All checks, drafts, and orders for the payment of
money shall be signed in the name of the Corporation in such manner and by such
officers or agents as the Board shall from time to time designate for that
purpose. No check or other instrument for the payment of money to the
Corporation shall be endorsed otherwise than for deposit to the credit of the
Corporation. All checks of the Corporation shall be drawn to the order of the
payee.
Section 3. CONTRACTS, CONVEYANCES, ETC. When the execution of any
contract, conveyance or other instrument has been authorized without
specification of the executing officers, the President or any Vice President
and the Secretary or Treasurer may execute the same in the name and on behalf
of this Corporation and may affix the corporate seal thereto. The Board shall
have power to designate the officers and agents who shall have authority to
execute any instrument on behalf of the Corporation in more than one capacity.
Notwithstanding anything contained herein to the contrary, no officer,
agent or employee of this Corporation shall have the authority to disburse
monies or other property to other persons, to obligate the Corporation to do or
perform any act, to make any payments of money or property, or to execute any
of the instruments described herein on behalf of this Corporation other than in
the ordinary course of business unless he shall have previously obtained the
approval of the Board and unless such approval or ratification shall appear in
the minutes of this Corporation.
Section 4. CONTRACTS WITH SUN COMMUNITIES, INC. Notwithstanding anything
to the contrary herein, the Corporation shall not, without the majority vote of
its non-employee directors (as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended), (a) enter into, amend, alter,
renew, extend or terminate any agreement by and between the Corporation and Sun
Communities, Inc., a Maryland corporation ("Sun"), including, without
limitation, that certain (i) Participants Support Agreement, dated as of August
__, 1997, (ii) Administrative Services Agreement, dated as of August ___, 1997,
(iii) Subordinated Loan Agreement, dated as of August __, 1997 (the "Loan
Agreement"), or (iv) Detachable Warrant Agreement, dated as of August __, 1997;
or (b) prepay either of the promissory notes delivered in connection with the
Loan Agreement.
ARTICLE VII.
RIGHT OF INSPECTION
Section 1. INSPECTION OF BYLAWS. The Corporation shall keep in its
registered or principal office the original or a copy of these Bylaws and the
Articles of Incorporation as amended or otherwise altered to date, certified by
the Secretary, which shall be open to inspection by all shareholders during
regular business hours.
Section 2. INSPECTION OF RECORDS. A person who is a shareholder of record
of the Corporation, upon at least ten (10) days' written demand may examine for
any proper purpose in person or by agent or attorney, during usual business
hours, its minutes of shareholders' meetings
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<PAGE> 15
and record of shareholders' and make extracts therefrom, at the places where
the said records are kept.
ARTICLE VIII.
DIVIDENDS
Section 1. DIVIDENDS OF CASH OR OTHER PROPERTY. The Board may, from time
to time, declare dividends on its outstanding shares to be paid in cash or
other property, other than the Corporation's shares; provided, however, that
such dividends may not be declared if, after giving effect to the dividend, the
Corporation would not be able to pay its debts as they become due in the usual
course of business, or the Corporation's total assets would be less than the
sum of the total liabilities.
Section 2. DIVIDENDS OF STOCK. The Board may, from time to time, declare
dividends on its outstanding shares to be paid in the Corporation's stock;
provided, however, that shares of one class or series may not be issued as a
share dividend in respect of shares of another class or series unless a
majority of the votes entitled to be cast by the class or series to be issued
approve the issue, or there are no outstanding shares of the class or series to
be issued.
ARTICLE IX.
CAPITAL STOCK
Section 1. ISSUANCE OF SHARES. The shares of capital stock of the
Corporation shall be issued by the Board in such amounts, at such times, for
such consideration, and on such terms and conditions as the Board shall deem
advisable, subject to the provisions of the Articles of Incorporation and these
Bylaws.
Section 2. CERTIFICATES FOR SHARES. The shares of the Corporation shall
be represented by certificates and every shareholder of this Corporation shall
be entitled to have a certificate. The certificate shall be signed by the
Chairman of the Board, President or a Vice President and may also be signed by
another officer of the Corporation; shall certify the number and class of
shares represented by such certificate; shall state, if such shares are not
fully paid, the amount paid; and may be sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers of the Corporation upon
a certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation itself
or an employee of the Corporation. If an officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
an officer before the certificate is issued, it may be issued by the
Corporation with the same effect as if he were the officer at the date of its
issue.
Certificates of stock shall in all other respects be in such form as shall
be determined by the Board and shall be consecutively numbered or otherwise
identified.
If the Corporation is authorized to issue shares of more than one class,
every certificate of stock shall set forth on its face or back, or state on its
face or back that the Corporation will furnish to a shareholder upon request
and without charge, a full statement of the designation, relative rights,
preferences and limitations of the shares of each class authorized to be
issued, and if the Corporation is authorized to issue any class of shares in
series, the designation, relative rights, preferences, and limitations of each
series so far as the same have been prescribed and the
15
<PAGE> 16
authority of the Board to designate and prescribe the relative rights,
preferences, and limitations of other series.
Section 3. TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative who shall furnish satisfactory
evidence of his authority, file it with the Secretary of the Corporation, and
surrender for cancellation the certificate for such shares. All certificates
surrendered to the Corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except as otherwise provided
in Section 6 of this Article IX of these Bylaws. The Secretary of the
Corporation shall record each such transfer on the stock transfer books and
shall record the fact that a transfer is made for collateral security and not
absolutely when such is stated in the instrument of transfer.
Section 4. RECORD OWNER. The Corporation shall be entitled to treat the
person in whose name any share of stock is registered as the owner thereof for
the following purposes: recapitalization, consolidation, merger,
reorganization, sale of assets, liquidation or otherwise; for votes, approvals,
and consents by shareholders; for notices to shareholders; and for all other
purposes whatever. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not the Corporation shall have notice thereof, except as
expressly required by law or these Bylaws.
Section 5. LIEN BY CORPORATION. The Corporation shall have a lien upon
the capital stock of the Corporation for debts due to the Corporation from the
owners thereof pursuant to such owner's subscription agreement for such capital
stock.
Section 6. LOST, MUTILATED, OR DESTROYED STOCK CERTIFICATES. Upon the
presentation to the Corporation of a proper affidavit attesting the loss,
destruction or mutilation of any certificate for shares of stock of the
Corporation, the Board may direct the issuance of a new certificate in lieu of
and to replace the certificate so alleged to be lost, destroyed or mutilated.
The Board may require as a condition precedent to the issuance of a new
certificate any or all of the following:
(a) Additional evidence of the loss, destruction or mutilation
claimed;
(b) Advertisement of the loss in such manner as the Board may direct
or approve;
(c) A bond or agreement of indemnity in such form and amount, with
or without such sureties as the Board may approve; or
(d) The order or approval of a court.
The Corporation may recognize the person in whose name the new certificate, or
any certificate thereafter issued as owner of the shares described therein for
all purposes until the owner of the original certificate or a transferee
thereof without notice and for value shall enjoin the Corporation and the
holder of any new certificate, or any certificate issued in exchange or
substitution therefor, from so acting.
Section 7. TRANSFER AGENT AND REGISTRAR. The Board may appoint a transfer
agent and/or a registrar of transfers and may require all certificates of
shares to bear the signature of such transfer agent and of such registrar of
transfers, or as the Board may otherwise direct.
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Section 8. REGULATIONS. The Board shall have power and authority to make
all such rules and regulations as the Board shall deem expedient regulating the
issue, transfer, and registration of certificates for shares in this
Corporation.
Section 9. CANCELED CERTIFICATES. All certificates for shares exchanged
or surrendered to the Corporation for transfer or cancellation shall be marked
with the date of cancellation by the Secretary and shall be immediately
fastened to the stubs in the certificate books from which they were detached
when issued.
Section 10. PAYMENT. Where stock is issued in exchange for a promissory
note, draft, obligation or promise of future services of the purchaser,
certificates therefor shall be delivered to the purchaser and the stock shall
be deemed to be fully paid and non-assessable, unless the Board, upon
authorization of the issuance of such stock, declares that such stock will not
be deemed to be fully paid and non-assessable until such time as the promissory
note or draft is paid, or obligation or promise performed.
ARTICLE X.
FISCAL YEAR
Unless otherwise set by the Board of Directors, the fiscal year of the
Corporation shall end on December 31.
ARTICLE XI.
SEAL
The Corporation may have a seal which shall have inscribed thereon the
name of the Corporation, the state of incorporation, and the words "Corporate
Seal." The seal may be used by causing it or a facsimile to be imprinted,
affixed, reproduced, or otherwise.
ARTICLE XII.
POLICY AS TO COMPENSATION OF EMPLOYEES
It is the policy of this Corporation to fairly and adequately compensate
its employees, to reimburse its employees only for expenses reasonably incurred
for and on behalf of this Corporation to further this Corporation's business,
to pay its employees reasonable rental for any property this Corporation may
lease from its employees and to pay only a fair and proper rate of interest on
any loans made by an employee to this Corporation. However, in recognition of
the fact that the Internal Revenue Code and the regulations issued thereunder
provide that the Internal Revenue Service has the power to determine that some
portion of compensation paid to an employee or some portion of interest or
rental payments made to an employee or some portion of expense reimbursement
paid to an employee is not deductible by the Corporation as a business expense
under the Internal Revenue Code, notwithstanding the fact that such
compensation, interest payment, rental payment and/or expense reimbursement is
based upon a good faith determination by the directors and the officers of the
Corporation as to the worth of an employee and/or the propriety of such
interest payment, rental payment and/or expense reimbursement, it is hereby
declared that any payment made to an employee of this Corporation such as
salary,
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commission, bonus, interest, rent or reimbursement of expenses incurred
by him which is disallowed in whole or in part as a deductible expense by the
Internal Revenue Service shall be reimbursed by such employee to this
Corporation to the full extent of such disallowance. Each employee shall agree
to such reimbursement as a condition of his employment. In lieu of payment by
the employee, the Board may, in its discretion, withhold an appropriate amount
from the employee's future compensation payments until the amount owed to this
Corporation has been recovered.
ARTICLE XIII.
AMENDMENTS
These Bylaws may be added to, altered, amended, or repealed:
(1) By the vote of not less than two-thirds (2/3) of the members of
the Board then in office at any regular or special meeting, if written
notice of the proposed addition, alteration, amendment, or repeal shall
have been given to each director at least five (5) days before the
meeting, or waived in writing; or
(2) By the affirmative vote of the holders of at least two-thirds
(2/3) of the outstanding shares of stock of the Corporation generally
entitled to vote in the election of directors at any annual or special
meeting if notice of the proposed addition, alteration, amendment, or
repeal shall have been included in the notice of such meeting or waived
in writing.
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<PAGE> 1
EXHIBIT 5
August 27, 1997
Bingham Financial Services Corporation
31700 Middlebelt
Suite 125
Farmington Hills, Michigan 48334
Re: Bingham Financial Services Corporation
Gentlemen:
We have acted as counsel to Bingham Financial Services Corporation, a
Michigan corporation (the "Company"), in connection with the proposed offering
of 1,150,000 shares of Common Stock ("Common Stock") by the Company, as
described in the Registration Statement on Form S-1 filed with the Securities
and Exchange Commission on August 27, 1997 (together with all amendments
thereto, the "Registration Statement").
We are attorneys admitted to practice in the State of Michigan.
Accordingly, we express no opinion concerning the laws of any jurisdiction
other than the laws of the United States of America and the State of Michigan.
In rendering the opinion contained in this letter, we have assumed without
investigation that the information supplied to us by the Company is accurate
and complete.
Based upon and subject to the foregoing, it is our opinion that the shares
of Common Stock to be offered under the Registration Statement have been duly
authorized, and upon the sale thereof in the manner referred to in the
Registration Statement, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
JAFFE, RAITT, HEUER & WEISS
Professional Corporation
<PAGE> 1
EXHIBIT 10.10
BINGHAM FINANCIAL SERVICES CORPORATION
1997 STOCK OPTION PLAN
ARTICLE I.
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the Bingham Financial Services Corporation
Stock Option Plan (the "Plan") is to provide certain employees, directors and
consultants of Bingham Financial Services Corporation (the "Company") with an
additional incentive to promote the Company's financial success and to provide
an incentive which the Company may use to induce able persons to enter into or
remain in service of the Company or a Subsidiary.
1.02 ADOPTION AND TERM. The Plan was approved by the Board and the
Company's stockholders on August __, 1997 and will remain in effect until all
shares authorized under the terms of the Plan have been issued, unless earlier
terminated or abandoned by action of the Board; provided, however, that no
Incentive Stock Option may be granted after August __, 2007.
ARTICLE II.
DEFINITIONS
2.01 ADMINISTRATOR means the group of persons having authority to
administer the Plan pursuant to Section 3.01.
2.02 AWARD means any one or combination of Non-Qualified Stock Options,
Performance Based Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Share Rights or any other award made under the terms of the Plan.
2.03 AWARD AGREEMENT means a written agreement between the Company and
Participant or a written acknowledgment from the Company specifically setting
forth the terms and conditions of an Award granted under the Plan.
2.04 AWARD PERIOD means, with respect to an Award, the period of time set
forth in the Award Agreement during which specified conditions set forth in the
Award Agreement must be satisfied.
2.05 BENEFICIARY means (a) an individual, trust or estate who or which, by
will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of the Participant under the Plan and Award Agreement
upon the Participant's death; or (b) an individual, who by designation of the
Participant, succeeds to the rights and obligations of the Participant under
the Plan and Award Agreement upon the Participant's death.
2.06 BOARD means the Board of Directors of the Company.
2.07 CHANGE OF CONTROL EVENT means (a) an event or series of events by
which any Person or other entity or group (as such term is used in Section
13(d) and 14(d) of the Exchange Act) of Persons or other entities acting in
concert as a partnership or other group (a "Group of Persons") (other than
Persons who are, or Groups of Persons entirely made up of, (i) management
personnel of the Company or (ii) any affiliates of any such management
personnel) shall, as a result of a tender or exchange offer or offers, an open
market purchase or purchases, a privately negotiated purchase or purchases or
otherwise, become the beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of 20% or more of the combined voting power of the then
outstanding voting stock of the Company; (b) the
<PAGE> 2
Company consolidates with, or merges with or into, another Person (other than a
Subsidiary in a transaction which is not otherwise a Change of Control Event),
or sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into the Company, in any such event pursuant to a transaction
in which the outstanding voting stock of the Company is converted into or
exchanged for cash, securities or other property; (c) during any consecutive
two-year period, individuals who at the beginning of such period constituted
the Board (together with any new directors whose election by such Board or
whose nomination for election by the stockholders of the Company, was approved
by a vote of 66-2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board then in office; or (d) any liquidation or dissolution of
the Company (other than a liquidation into a Subsidiary that is not otherwise a
Change of Control Event).
2.08 CODE means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section.
2.09 COMMON STOCK means the Common Stock of the Company, no par value.
2.10 COMPANY means Bingham Financial Services Corporation, a Michigan
corporation.
2.11 DATE OF GRANT means the date designated by the Administrator as the
date as of which it grants an Award, which shall not be earlier than the date
on which the Administrator approves the granting of such Award.
2.12 DIRECTOR means a member of the Board of Directors of the Company.
2.13 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.14 EXERCISE PRICE means, with respect to a Stock Appreciation Right, the
amount established by the Administrator, in accordance with Section 7.03
hereunder, and set forth in the Award Agreement, which is to be subtracted from
the Fair Market Value on the date of exercise in order to determine the amount
of the Incremental Value to be paid to the Participant.
2.15 EXPIRATION DATE means the date specified in an Award Agreement as the
expiration date of such Award.
2.16 FAIR MARKET VALUE means, with respect to Awards granted coincident
with the date of the closing of the Company's initial public offering of Common
Stock, the public offering price. Thereafter, Fair Market Value means the last
reported sale price per share of Common Stock, regular way, on such date or, in
case no such sale takes place on such date, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq National Market, or if the Common Stock is not so listed or
admitted to trading or included for quotation, the average of the highest bid
and lowest asked prices, regular way, in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices, regular way, as furnished by a professional market maker making a
market in the Common Stock as selected in good faith by the Administrator. If,
as the case may
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be, the relevant date is not a Trading Day, the determination shall be made as
of the next preceding Trading Day.
2.17 INCENTIVE STOCK OPTION means a stock option described in Section 422
of the Code.
2.18 INCREMENTAL VALUE has the meaning given such term in Section 7.01 of
the Plan.
2.19 NON-EMPLOYEE DIRECTOR PARTICIPANT means a Participant that is a
"non-employee director" of the Company within the meaning of Rule 16b-3.
2.20 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.21 OFFICER means a president, vice president, treasurer, secretary,
controller, and any other person who performs functions corresponding to the
foregoing officers for the Company, any member of the Board or any person
performing similar functions with respect to the Company, and any other
participant who is deemed to be an officer or director of the Company for
purposes of Section 16 of the Exchange Act and the rules thereunder, as
currently in effect or as amended from time to time.
2.22 OPTIONS means all Non-Qualified Stock Options, Incentive Stock
Options and Performance Based Options granted at any time under the Plan.
2.23 PARTICIPANT shall have the meaning set forth in Article V.
2.24 PERFORMANCE BASED OPTION means a stock option which, upon exercise or
at any other time, would not result in or give rise to "applicable employee
remuneration" within the meaning of Section 162(m) of the Code.
2.25 PLAN means the Bingham Financial Services Corporation Stock Option
Plan, as described herein and as it may be amended from time to time.
2.26 PURCHASE PRICE, with respect to options, shall have the meaning set
forth in Section 6.02.
2.27 RESTRICTED SHARE RIGHT means a right to receive Common Stock subject
to restrictions imposed under the terms of an Award granted pursuant to Article
IX.
2.28 RULE 16B-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in
effect and as it may be amended from time to time, and any successor rule.
2.29 STOCK APPRECIATION RIGHT means an Award granted in accordance with
Article VII.
2.30 SUBSIDIARY shall have the meaning set forth in Section 424(f) of the
Code.
2.31 TERMINATION OF EMPLOYMENT means the voluntary or involuntary
termination of a Participant's employment with the Company for any reason,
including death, disability, retirement or as the result of the divestiture of
the Participant's employer or any other similar transaction in which the
Participant's employer ceases to be the Company or a Subsidiary of the
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<PAGE> 4
Company. Whether an authorized leave of absence or absence on military or
government service, absence due to disability, or absence for any other reason
shall constitute Termination of Employment shall be determined in each case by
the Administrator in its sole discretion.
2.32 TRADING DAY means a day on which public trading of securities occurs
and is reported in the principal consolidated reporting system referred to in
Section 2.16 above, or if the Common Stock is not listed or admitted to
trading on a national securities exchange or included for quotation on the
Nasdaq National Market, any business day.
ARTICLE III.
ADMINISTRATION
3.01 ADMINISTRATION. The Plan shall be administered by the Board or, to
the extent determined by the Board, a committee (the "Compensation Committee")
consisting of not less than two non-employee directors of the Company (within
the meaning of Rule 16b-3) to be appointed by, and to serve at the pleasure of,
the Board (in either case, the "Administrator"). It is the intention of the
Company that, with respect to Awards designated as Performance Based Options,
each of the members of the Compensation Committee shall also be "outside
directors" within the meaning of Section 162(m) of the Code. The Administrator
shall administer the Plan in accordance with this provision and shall have the
sole discretionary authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and restrictions
on Awards as it determines appropriate, to cancel Awards (including those made
pursuant to other plans of the Company) and to substitute new options
(including options granted under other plans of the Company) with the consent
of the recipient, and to take such steps in connection with the Plan and Awards
granted thereunder as it may deem necessary or advisable. The Administrator
may, with respect to Participants who are not Officers, delegate such of its
powers and authority under the Plan as it deems appropriate to designated
officers or employees of the Company.
3.02 INDEMNIFICATION. Members of the Administrator shall be entitled to
indemnification and reimbursement from the Company for any action or any
failure to act in connection with service as Administrator to the full extent
provided for or permitted by the Company's articles of incorporation or bylaws
or by any insurance policy or other agreement intended for the benefit of the
Company's officers, directors or employees or by any applicable law.
ARTICLE IV.
COMMON STOCK ISSUABLE PURSUANT TO THE PLAN
4.01 SHARES ISSUABLE. Shares to be issued under the Plan may be
authorized and unissued shares or issued shares which have been reacquired by
the Company. Except as provided in Section 4.03, the Awards granted to any
Participant and to all Participants in the aggregate under the Plan shall be
limited to 100,000; provided, however, that from and after such time as the
number of outstanding shares of Common Stock exceeds 1,000,000, the Awards
granted to any Participant and to all Participants in the aggregate under the
Plan shall be limited so that the sum of the following shall never exceed ten
percent (10%) of the total number of outstanding shares of Common Stock: (i)
all shares which shall be issued upon the exercise of outstanding Options or
other Awards granted under the Plan, (ii) all shares for which payment of
Incremental Value shall be made by reason of the exercise of Stock Appreciation
Rights at any time granted under the Plan, and (iii) the number of shares
otherwise issuable under an Award which are applied by the Company to payment
of the withholding or tax liability discussed in Section 11.04.
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<PAGE> 5
4.02 SHARES SUBJECT TO TERMINATED AWARDS. In the event that any Award at
any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, or an award of
Stock Appreciation Rights is exercised for cash, then all shares formerly
subject to such Award as to which such Award shall not have been exercised
shall be available for any Award subsequently granted in accordance with the
Plan. Shares of Common Stock subject to Options, or portions thereof, which
have been surrendered in connection with the exercise of tandem Stock
Appreciation Rights shall not be available for subsequent Awards under the
Plan, and shares of Common Stock issued in payment of such Stock Appreciation
Rights shall be charged against the number of shares of Common Stock available
for the grant of Awards. Shares which are reacquired by the Company or shares
issuable subject to Restricted Share Rights which are forfeited pursuant to
forfeiture provisions in the Award Agreement shall be available for
subsequently granted Awards only if the forfeiting Participant received no
benefits of ownership (such as dividends actually paid to the Participant)
other than voting rights of the forfeited shares. Any shares of Common Stock
issued by the Company pursuant to its assumption or substitution of outstanding
grants from acquired companies shall not reduce the number of shares available
for Awards under this Plan unless issued under this Plan.
4.03 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such shares,
and the number and kind of shares available for Awards subsequently
granted under the Plan shall be appropriately adjusted to reflect any
stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar
substantive effect upon the Plan or the Awards granted under the Plan.
The Administrator shall have the power to determine the amount of the
adjustment to be made in each case.
(b) SALE OR REORGANIZATION. After any reorganization, merger or
consolidation in which the Company is a surviving corporation, each
Participant shall, at no additional cost, be entitled upon exercise of an
Award to receive (subject to any required action by stockholders), in
lieu of the number of shares of Common Stock receivable or exercisable
pursuant to such Award, a number and class of shares of stock or other
securities to which such Participant would have been entitled pursuant to
the terms of the reorganization, merger or consolidation if, at the time
of such reorganization, merger or consolidation, such Participant had
been the holder of record of a number of shares of Common Stock equal to
the number of shares receivable or exercisable pursuant to such Award.
Comparable rights shall accrue to each Participant in the event of
successive reorganizations, mergers or consolidations of the character
described above.
(c) OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After any
reorganization, merger or consolidation in which the Company or a
Subsidiary of the Company shall be a surviving corporation, the
Administrator may grant substituted Options under the provisions of the
Plan, pursuant to Section 424 of the Code, replacing old options granted
under a plan of another party to the reorganization, merger or
consolidation, where such party's stock may no longer be issued following
such merger or consolidation. The foregoing adjustments and manner of
application of the foregoing provisions shall be determined by the
Administrator in its sole discretion. Any adjustments may provide for
the elimination of any fractional shares which might otherwise have
become subject to any Awards.
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ARTICLE V.
PARTICIPATION
5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall be the
employees, directors and consultants of the Company or any Subsidiary, as
determined and selected from time to time by the Administrator, in its sole and
absolute discretion. The Administrator's designation of a Participant in any
year shall not require the Administrator to designate such person to receive
Awards in any other year. The Administrator shall consider such factors as it
deems pertinent in selecting Participants and in determining the type and
amount of their respective Awards.
ARTICLE VI.
OPTION AWARDS
6.01 POWER TO GRANT OPTIONS. The Administrator may grant, to such
Participants as the Administrator may select, Options entitling the Participant
to purchase Common Stock from the Company at such price, in such quantity and
on such terms and subject to such conditions, not inconsistent with the terms
of this Plan, as may be established by the Administrator. The terms of any
Option granted under this Plan shall be set forth in an Award Agreement.
Notwithstanding the foregoing, Options granted to Officers shall not be
exercisable for a period of at least six months from the Date of Grant.
6.02 PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of
Common Stock which may be purchased upon exercise of any Option granted under
the Plan shall not be less than eighty five percent (85%) of the Fair
Market Value on the Date of Grant; provided, however, that the Purchase Price
for shares of Common Stock purchased pursuant to Stock Options designated by
the Administrator as Incentive Stock Options shall be equal to or greater than
the Fair Market Value on the Date of Grant as required under Section 422 of the
Code and provided further that the Purchase Price for shares of Common Stock
purchased pursuant to Stock Options designated by the Administrator as
Performance Based Options shall be equal to or greater than the Fair Market
Value on the Date of Grant.
6.03 DESIGNATION OF INCENTIVE STOCK OPTIONS. Except as otherwise
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option to a Participant that is an employee of the Company or a
Subsidiary, that the Option is an Incentive Stock Option under Section 422 of
the Code.
(a) INCENTIVE STOCK OPTION SHARE LIMITATION. No Participant may be
granted Incentive Stock Options under the Plan (or any other plans of the
Company) which would result in stock with an aggregate Fair Market Value
(measured on the Date of Grant) of more than $100,000 first becoming
exercisable in any one calendar year, or which would entitle such
Participant to purchase a number of shares greater than the maximum
number permitted by Section 422 of the Code as in effect on the Date of
Grant.
(b) OTHER INCENTIVE STOCK OPTION TERMS. Whenever possible, each
provision in the Plan and in every Option granted under this Plan which
is designated by the Administrator as an Incentive Stock Option shall be
interpreted in such a manner as to entitle the Option to the tax
treatment afforded by Section 422 of the Code. If any provision of this
Plan or any Option designated by the Administrator as an Incentive Stock
Option shall be held not to comply with requirements necessary to entitle
such Option to such tax treatment, then (i) such provision shall be
deemed to have contained from the outset such language as shall be
necessary to entitle the Option to the tax treatment afforded under
Section 422 of the Code, and (ii) all other provisions of this Plan and
the Award Agreement shall remain in full force and effect. If any
agreement
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<PAGE> 7
covering an Option designated by the Administrator to be an
Incentive Stock Option under this Plan shall not explicitly include any
terms required to entitle such Incentive Stock Option to the tax
treatment afforded by Section 422 of the Code, all such terms shall be
deemed implicit in the designation of such Option and the Option shall be
deemed to have been granted subject to all such terms.
6.04 DESIGNATION OF PERFORMANCE BASED OPTIONS. Except as otherwise
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option to a Participant that is an employee of the Company or a
Subsidiary, that the Option is a Performance Based Option. A Performance Based
Option shall have a Purchase Price not less than the Fair Market Value on the
Date of Grant and shall contain such other terms and conditions as the
Administrator may deem necessary so that, upon exercise or at any other time,
the Performance Based Option does not result in or give rise to "applicable
employee remuneration" within the meaning of Section 162(m) of the Code.
6.05 RIGHTS AS A STOCKHOLDER. The Participant or any transferee of an
Option pursuant to Section 8.02 or Section 11.05 shall have no rights as a
stockholder with respect to any shares of Common Stock covered by an Option
until the Participant or transferee shall have become the holder of record of
any such shares, and no adjustment shall be made for dividends and cash or
other property or distributions or other rights with respect to any such shares
of Common Stock for which the record date is prior to the date on which the
Participant or a transferee of the Option shall have become the holder of
record of any such shares covered by the Option.
ARTICLE VII.
STOCK APPRECIATION RIGHTS
7.01 POWER TO GRANT STOCK APPRECIATION RIGHTS. The Administrator is
authorized to grant to any Participant, on such terms established by the
Administrator on or prior to the Date of Grant and subject to and not
inconsistent with the provisions of this Plan, the right to receive the payment
from the Company, payable as provided in Section 7.04, of an amount equal to
the Incremental Value of the Stock Appreciation Rights, which shall be an
amount equal to the remainder derived from subtracting (i) the Exercise Price
for the right established in the Award Agreement from (ii) the Fair Market
Value of a share of Common Stock on the date of exercise. The terms of any
Stock Appreciation Right granted under the Plan shall be set forth in an Award
Agreement.
7.02 TANDEM STOCK APPRECIATION RIGHTS. The Administrator may grant to any
Participant a Stock Appreciation Right consistent with the provisions of this
Plan covering any share of Common Stock which is, at the Date of Grant of the
Stock Appreciation Right, also covered by an Option granted to the same
Participant, either prior to or simultaneously with the grant to such
Participant of the Stock Appreciation Right, provided: (i) any Option covering
any share of Common Stock shall expire and not be exercisable upon the exercise
of any Stock Appreciation Right with respect to the same share; (ii) any Stock
Appreciation Right covering any share of Common Stock shall not be exercisable
upon the exercise of any related Option with respect to the same share; and
(iii) an Option and Stock Appreciation Right covering the same share of Common
Stock may not be exercised simultaneously.
7.03 EXERCISE PRICE. The Exercise Price established under any Stock
Appreciation Right granted under this Plan shall be determined by the
Administrator and, in the case of a tandem Stock Appreciation Right, shall not
be less than the Purchase Price of the related Option. Upon exercise of the
Stock Appreciation Rights, the number of shares subject to exercise under a
related Option shall automatically be reduced by the number of shares of Common
Stock
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<PAGE> 8
represented by the Option or portion thereof which is surrendered as a result
of the exercise of such Stock Appreciation Rights.
7.04 PAYMENT OF INCREMENTAL VALUE. Any payment which may become due from
the Company by reason of Participant's exercise of a Stock Appreciation Right
may be paid to the Participant as determined by the Administrator (i) all in
cash, (ii) all in Common Stock, or (iii) in any combination of cash and Common
Stock. In the event that all or a portion of the payment is made in Common
Stock, the number of shares of the Common Stock delivered in satisfaction of
such payment shall be determined by dividing the amount of the payment by the
Fair Market Value on the date of exercise. The Administrator may determine
whether payment upon exercise of a Stock Appreciation Right will be made in
cash or in stock, or a combination thereof, upon or at any time prior to the
exercise of such Stock Appreciation Right. No fractional share of Common Stock
shall be issued to make any payment; if any fractional shares would be
issuable, the mix of cash and Common Stock payable to the Participant shall be
adjusted as directed by the Administrator to avoid the issuance of any
fractional share. Payment may be made in cash to Officers only if the Stock
Appreciation Right is exercised during the "window period" required under Rule
16b-3(e)(3) and otherwise in accordance with Rule 16b-3.
ARTICLE VIII.
TERMS OF OPTIONS AND STOCK APPRECIATION RIGHTS
8.01 DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and Stock
Appreciation Rights shall terminate after the first to occur of the following
events:
(a) Expiration Date of the Award as provided in the Award Agreement;
or
(b) Termination of the Award as provided in Section 8.02; or
(c) In the case of an Incentive Stock Option, ten years from the
Date of Grant; or
(d) Solely in the case of tandem Stock Appreciation Rights, upon the
Expiration Date of the related Option.
8.02 EXERCISE ON DEATH, TERMINATION OF EMPLOYMENT OR REMOVAL OF DIRECTOR.
(a) Unless otherwise provided in the Award Agreement, in the event
of the death of a Participant while an employee of the Company or a
Subsidiary of the Company, the right to exercise all unexpired Awards
shall be accelerated and shall accrue as of the date of death, and the
Participant's Awards may be exercised by his Beneficiary at any time
within one year after the date of the Participant's death. Unless
otherwise provided in the Award Agreement, in the event of the death of a
Participant while a director of the Company or a Subsidiary of the
Company, the right to exercise all unexpired Awards shall be accelerated
and shall accrue as of the date of death, and the Participant's Awards
may be exercised by his Beneficiary at any time within one year after the
date of the Participant's death.
(b) Unless otherwise provided in the Award Agreement, in the event
of a Participant's Termination of Employment at any time for any reason
(including disability or retirement) other than death or for "cause" (as
defined in paragraph (d) below), an Award may be exercised, but only to
the extent it was otherwise exercisable, on the date of Termination of
Employment, within ninety days after the date of Termination of
Employment. In the event of the death of the Participant within the
ninety-day period following Termination of Employment, his Award may be
exercised by his Beneficiary
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<PAGE> 9
within the one year period provided in subparagraph (a) above. Unless
otherwise provided in the Award Agreement, in the event that a
Non-Employee Director Participant no longer serves on the Board for any
reason other than removal as described in subparagraph (d) below, an
Award may be exercised, but only to the extent it was otherwise
exercisable, on the date that such Non-Employee Director Participant
ceases to be a Director, within ninety days after the date such
Non-Employee Director Participant ceases to be a director. In the event
of the death of the Non-Employee Director Participant within the
ninety-day period following the date he ceases to be a Director, his
Award may be exercised by his Beneficiary within the one year period
provided in subparagraph (a) above.
(c) With respect to an Award which is intended to constitute an
Incentive Stock Option, upon Termination of Employment, such Award shall
be exercisable as provided in Section 422 of the Code.
(d) In the event that a Participant's Termination of Employment is
for "cause", all Awards shall terminate immediately upon Termination of
Employment. A Participant's employment shall be deemed to have been
terminated for "cause" if such termination is determined, in the sole
discretion of the Administrator, to have resulted from an act or omission
by the Participant constituting active and deliberate dishonesty, as
established by a final judgment or actual receipt of an improper benefit
or profit in money, property or services, or from the Participant's
continuous failure to perform his or her duties under any employment
agreement in effect between the Participant and the Company in any
material manner (or, in the absence of such an agreement, the consistent
failure or refusal of the Participant to perform according to reasonable
expectations and standards set by the Board and/or management consistent
with Participant's title and position) after receipt of notice of such
failure from the Company specifying how the Participant has so failed to
perform. In the event that a Non-Employee Director Participant is
removed for cause pursuant to the Company's Restated Articles of
Incorporation, all Awards shall terminate immediately upon such removal.
8.03 ACCELERATION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit purchase of shares under any Award prior to the time such Award would
otherwise become exercisable under the terms of the Award Agreement.
8.04 EXTENSION OF EXERCISE TIME. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit any Award granted under this Plan to be exercised after its Expiration
Date or after the ninety day period following Termination of Employment or
service on the Board, subject, however, to the limitations described in Section
8.01 (c) and (d).
8.05 CONDITIONS FOR EXERCISE. An Award Agreement may contain such waiting
periods, exercise dates and restrictions on exercise (including, but not
limited to, periodic installments which may be cumulative) as may be determined
by the Administrator at the Date of Grant. No Stock Appreciation Right may be
exercised prior to six months from the Date of Grant.
8.06 CHANGE OF CONTROL EVENT. Unless otherwise provided in the Award
Agreement, and subject to such other terms and conditions as the Administrator
may establish in the Award Agreement, upon the occurrence of a Change of
Control Event, irrespective of whether or not an Award is then exercisable, the
Participant shall have the right to exercise in full any unexpired Award to the
extent not theretofore exercised or terminated; provided, however, that any
Stock Appreciation Right so exercised must have a Date of Grant at least six
months
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<PAGE> 10
prior to the date of exercise.
8.07 EXERCISE PROCEDURES. Each Option and Stock Appreciation Right
granted under the Plan shall be exercised by written notice to the Company
which must be received by the officer of the Company designated in the Award
Agreement on or before the Expiration Date of the Award. The Purchase Price of
shares purchased upon exercise of an Option granted under the Plan shall be
paid in full in cash by the Participant pursuant to the Award Agreement;
provided, however, that the Administrator may (but need not) permit payment to
be made by delivery to the Company of either (a) shares of Common Stock
(including shares issuable to the Participant pursuant to the exercise of the
Option), or (b) any combination of cash and shares of Common Stock, or (c) such
other consideration as the Administrator deems appropriate and in compliance
with applicable law (including payment in accordance with a cashless exercise
program under which, if so instructed by the Participant, shares of Common
Stock may be issued directly to the Participant's broker or dealer upon receipt
of the Purchase Price in cash from the broker or dealer.) In the event that
any Common Stock shall be transferred to the Company to satisfy all or any part
of the Purchase Price, the part of the Purchase Price deemed to have been
satisfied by such transfer of Common Stock shall be equal to the product
derived by multiplying the Fair Market Value as of the date of exercise times
the number of shares transferred. The Participant may not transfer to the
Company in satisfaction of the Purchase Price (y) a number of shares which when
multiplied times the Fair Market Value as of the date of exercise would result
in a product greater than the Purchase Price or (z) any fractional share of
Common Stock. Any part of the Purchase Price paid in cash upon the exercise of
any Option shall be added to the general funds of the Company and used for any
proper corporate purpose. Unless the Administrator shall otherwise determine,
any Common Stock transferred to the Company as payment of all or part of the
Purchase Price upon the exercise of any Option shall be held as treasury
shares.
ARTICLE IX.
RESTRICTED STOCK AWARDS
9.01 RESTRICTED SHARE AWARDS. The Administrator may grant to any
Participant an Award of Restricted Share Rights entitling such person to
receive shares of Common Stock in such quantity, and on such terms, conditions
and restrictions (whether based on performance standards, periods of service or
otherwise) as the Administrator shall determine on or prior to the Date of
Grant. The terms of any Award of Restricted Share Rights granted under the
Plan shall be set forth in an Award Agreement.
9.02 DURATION OF RESTRICTED SHARE RIGHTS. In no event shall any
Restricted Share Rights granted entitle the holder to receive shares of Common
Stock free of all restrictions on transfer at any time prior to the expiration
of three years from the Date of Grant, and each Award Agreement shall provide
that the Participant shall remain employed by the Company or a Subsidiary for
that three year period (subject to the Company's or Subsidiary's right to
terminate such employment).
9.03 FORFEITURE OF RESTRICTED SHARE RIGHTS. Subject to Section 9.05, all
Restricted Share Rights shall be forfeited and all Restricted Share Awards
shall terminate unless the Participant continues in the service of the Company
or a Subsidiary until the expiration of the forfeiture and satisfies any other
conditions set forth in the Award Agreement. If the Award Agreement shall so
provide, in the case of death, disability or retirement (as defined in the
Award Agreement) of the Participant, all of the shares covered by the
Restricted Share Rights shall immediately vest and any restrictions shall lapse
as of the date of such death, disability or retirement.
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<PAGE> 11
9.04 DELIVERY OF SHARES UPON VESTING. Upon the lapse of the restrictions
established in the Award Agreement, the Participant shall be entitled to
receive, without payment of any cash or other consideration, certificates for
the number of shares covered by the Award.
9.05 WAIVER OR MODIFICATION OF FORFEITURE PROVISIONS. The Administrator
has full power and authority to modify or waive any or all terms, conditions or
restrictions (other than the minimum restriction period set forth in Section
9.02) applicable to any Restricted Share Rights granted to a Participant under
the Plan; provided that no modification shall, without consent of the
Participant, adversely affect the Participant's rights thereunder and no
modification shall reduce the employment requirement to less than three years,
except in the case of death, disability or retirement.
9.06 RIGHTS AS A STOCKHOLDER. No person shall have any rights as a
stockholder with respect to any shares subject to Restricted Share Rights until
such time as the person shall have been issued a certificate for such shares.
ARTICLE X.
OTHER STOCK BASED AWARDS
10.01 GRANT OF OTHER AWARDS. Other Awards of Common Stock or other
securities of the Company and other Awards that are valued in whole or in part
by reference to, or are otherwise based on, Common Stock ("Other Awards") may
be granted either alone or in addition to or in conjunction with Options or
Stock Appreciation Rights under the Plan. Subject to the provisions of the
Plan, the Administrator shall have the sole and complete authority to determine
the persons to whom and the time or times at which Other Awards shall be made,
the number of shares of Common Stock or other securities, if any, to be granted
pursuant to such Other Awards, and all other conditions of such Other Awards.
Any Other Award shall be confirmed by an Award Agreement executed by the
Administrator and the Participant, which agreement shall contain such
provisions as the Administrator determines to be necessary or appropriate to
carry out the intent of this Plan with respect to the Other Award.
10.02 TERMS OF OTHER AWARDS. In addition to the terms and conditions
specified in the Award Agreement, Other Awards made pursuant to this Article X
shall be subject to the following:
(a) Any shares of Common Stock subject to such Other Awards may not
be sold, assigned, transferred or otherwise encumbered prior to the date
on which the shares are issued, or, if later, the date on which any
applicable restriction, performance or deferral period lapses; and
(b) If specified by the Administrator and the Award Agreement, the
recipient of an Other Award shall be entitled to receive, currently or on
a deferred basis, interest or dividends or dividend equivalents with
respect to the Common Stock or other securities covered by the Other
Award; and
(c) The Award Agreement with respect to any Other Award shall
contain provisions providing for the disposition of such Other Award in
the event of Termination of Employment prior to the exercise, realization
or payment of such Other Award, with such provisions to take account of
the specific nature and purpose of the Other Award.
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ARTICLE XI.
TERMS APPLICABLE TO ALL AWARDS
11.01 AWARD AGREEMENT. The grant and the terms and conditions of the
Award shall be set forth in an Award Agreement between the Company and the
Participant. No person shall have any rights under any Award granted under the
Plan unless and until the Administrator and the Participant to whom the Award
is granted shall have executed and delivered an Award Agreement expressly
granting the Award to such person and setting forth the terms of the Award.
11.02 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the
Administrator have the power to grant any Award under the Plan which is
contrary to any of the provisions of the Plan. In the event any provision of
any Award granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Award, the term in the Plan as
constituted on the Date of Grant of such Award shall control. Except as
provided in Section 4.03, (i) the terms of any Award granted under the Plan may
not be changed after the granting of such Award without the express approval of
the Participant and (ii) no modification may be made to an Award granted to an
Officer except in compliance with Rule 16b-3.
11.03 MODIFICATION OF AWARD AFTER GRANT. Each Award granted under the
Plan to a Participant other than an Officer may be modified after the date of
its grant by express written agreement between the Company and the Participant,
provided that such change (i) shall not be inconsistent with the terms of the
Plan and (ii) shall be approved by the Administrator. No modifications may be
made to any Awards granted to an Officer except in compliance with Rule 16b-3.
11.04 TAXES. The Company shall be entitled, if the Administrator deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any amount payable and/or
shares issuable under such Participant's Award, or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an Incentive Stock Option, and the Company may defer payment or
issuance of the cash or stock upon exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for such tax. The amount
of such withholding or tax payment shall be determined by the Administrator
and, unless otherwise provided by the Administrator, shall be payable by the
Participant at the time of issuance or payment in accordance with the following
rules:
(a) A Participant, other than an Officer, shall have the right to
elect to meet his or her withholding requirement by: (1) having the
Company withhold from such Award the appropriate number of shares of
Common Stock, rounded out to the next whole number, the Fair Market Value
of which is equal to such amount, or, in the case of the cash payment,
the amount of cash, as is determined by the Company to be sufficient to
satisfy applicable tax withholding requirements; or (2) direct payment to
the Company in cash of the amount of any taxes required to be withheld
with respect to such Award.
(b) Unless otherwise provided by the Administrator, with respect to
Officers, the Company shall withhold from such Award the appropriate
number of shares of Common Stock, rounded up to the next whole number,
the Fair Market Value of which is equal to the amount, as determined by
the Administrator, (or, in the case of a cash payment, the amount of
cash) required to satisfy applicable tax withholding requirements.
(c) In the event that an Award or property received upon exercise of
an Award has already been transferred to the Participant on the date upon
which withholding
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requirements apply, the Participant shall pay directly to the Company the
cash amount determined by the Company to be sufficient to satisfy
applicable federal, state or local withholding requirements. The
Participant shall provide to the Company such information as the Company
shall require to determine the amounts to be withheld and the time such
withholding requirements become applicable.
(d) If permitted under applicable federal income tax laws, a
Participant may elect to be taxed in the year in which an Award is
exercised or received, even if it would not otherwise have become taxable
to the Participant. If the Participant makes such an election, the
Participant shall promptly notify the Company in writing and shall
provide the Company with a copy of the executed election form as filed
with the Internal Revenue Service no later than thirty days from the date
of exercise or receipt. Promptly following such notification, the
Participant shall pay directly to the Company the cash amount determined
by the Company to be sufficient to satisfy applicable federal, state or
local withholding tax requirements.
11.05 LIMITATIONS ON TRANSFER. A Participant's rights and interest under
the Plan may not be assigned or transferred other than by will or the laws of
descent and distribution. Notwithstanding the foregoing, or any other
provision of this Plan, a Participant who holds Non-Qualified Stock Options may
transfer such Options to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Options so transferred may thereafter be transferred only
to the Participant who originally received the Options or to an individual or
trust to whom the Participant could have initially transferred the Option
pursuant to this Section 11.05. Options which are transferred pursuant to this
Section 11.05 shall be exercisable by the transferee according to the same
terms and conditions as applied to the Participant.
11.06 SURRENDER OF AWARDS. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Administrator
and Participant approve, including, but not limited to, terms which provide
that upon such surrender the Company will pay to the Participant cash or Common
Stock, or a combination of cash and Common Stock.
ARTICLE XII.
GENERAL PROVISIONS
12.01 AMENDMENT AND TERMINATION OF PLAN.
(a) AMENDMENT. The Board shall have complete power and authority to
amend the Plan at any time and to add any other stock based Award or
other incentive compensation programs to the Plan as it deems necessary
or appropriate and no approval by the stockholders of the Company or by
any other person, committee or entity of any kind shall be required to
make any amendment; provided, however, that the Board shall not, without
the requisite affirmative approval of the stockholders of the Company,
(i) make any amendment which requires stockholder approval under any
applicable law, including Rule 16b-3 or the Code; or (ii) which, unless
approved by the requisite affirmative approval of stockholders of the
Company, would cause, result in or give rise to "applicable employee
remuneration" within the meaning of Section 162(m) of the Code with
respect to any Performance Based Option. No termination or amendment of
the Plan may, without the consent of the Participant to whom any Award
shall theretofore have been granted under the Plan, adversely affect the
right of such individual under such Award. For the purposes of this
section, an amendment to the Plan shall be deemed to have the affirmative
approval of the stockholders of the Company if such amendment shall have
been submitted for a vote by the stockholders at a duly called meeting of
such stockholders at which a quorum was present and the majority of votes
cast with respect to
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<PAGE> 14
such amendment at such meeting shall have been cast in favor of such
amendment, or if the holders of outstanding stock having not less than a
majority of the outstanding shares consent to such amendment in writing
in the manner provided under the Company's bylaws.
(b) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. If the Plan is not earlier terminated,
the Plan shall terminate when all shares authorized under the Plan have
been issued. No Award shall be granted under the Plan after the
termination of the Plan, but the termination of the Plan shall not have
any other effect and any Award outstanding at the time of the termination
of the Plan may be exercised after termination of the Plan at any time
prior to the expiration date of such Award to the same extent such award
would have been exercisable if the Plan had not been terminated.
12.02 NO RIGHT TO EMPLOYMENT OR TO CONTINUE AS DIRECTOR. No employee or
other person shall have any claim or right to be granted an Award under this
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or a
Subsidiary of the Company. Neither the Plan nor any action taken hereunder
shall be construed as giving any Director any right to be retained as a
Director, or to limit in any way the right of the stockholders of the Company
to remove such person as a Director.
12.03 COMPLIANCE WITH RULE 16B-3. It is intended that the Plan be applied
and administered in compliance with Rule 16b-3. If any provision of the Plan
would be in violation of Rule 16b-3 if applied as written, such provision shall
not have effect as written and shall be given effect so as to comply with Rule
16b-3, as determined by the Administrator. The Board is authorized to amend
the Plan and to make any such modifications to Award Agreements to comply with
Rule 16b-3, as it may be amended from time to time, and to make any other such
amendments or modifications as it deems necessary or appropriate to better
accomplish the purposes of the Plan in light of any amendments made to Rule
16b-3.
12.04 SECURITIES LAW RESTRICTIONS. The shares of Common Stock issuable
pursuant to the terms of any Awards granted under the Plan may not be issued by
the Company without registration or qualification of such shares under the
Securities Act of 1933, as amended, or under various state securities laws or
without an exemption from such registration requirements. Unless the shares to
be issued under the Plan have been registered and/or qualified as appropriate,
the Company shall be under no obligation to issue shares of Common Stock upon
exercise of an Award unless and until such time as there is an appropriate
exemption available from the registration or qualification requirements of
federal or state law as determined by the Administrator in its sole discretion.
The Administrator may require any person who is granted an award hereunder to
agree with the Company to represent and agree in writing that if such shares
are issuable under an exemption from registration requirements, the shares will
be "restricted" securities which may be resold only in compliance with
applicable securities laws, and that such person is acquiring the shares issued
upon exercise of the Award for investment, and not with the view toward
distribution.
12.05 NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock or stock options otherwise
than under the Plan.
12.06 CAPTIONS. The captions (i.e., all section headings) used in the
Plan are for
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<PAGE> 15
convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
12.07 SEVERABILITY. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
12.08 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Administrator, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the
Plan or any rule or procedure established by the Administrator.
12.09 CHOICE OF LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Michigan.
-15-
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in this Registration Statement on Form S-1
of our report dated July 29, 1997, on our audits of the financial statements of
Bingham Financial Services Corporation as of June 30, 1997 and for the period of
January 2 (date of inception) to June 30, 1997. We also consent to the
reference of our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Detroit, Michigan
August 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,422,100
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> (65,200)
<TOTAL-LIABILITY-AND-EQUITY> 5,422,100
<SALES> 0
<TOTAL-REVENUES> 122,100
<CGS> 0
<TOTAL-COSTS> 39,300
<OTHER-EXPENSES> 62,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,200
<INCOME-PRETAX> (65,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (65,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (65,200)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
