<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1997
REGISTRATION NO. 333-34453
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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>
<C> <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>
<C> <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>
<S> <C> <C> <C> <C>
========================================================================================================================
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
- ----------------------------------------------------------------------------------------------------------------------------
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 OCTOBER 15, 1997
PROSPECTUS
1,000,000 SHARES
BINGHAM FINANCIAL SERVICES CORPORATION LOGO
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. ("Sun"), 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. 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. There has been no
public trading market for the Common Stock. Roney & Co. L.L.C., as
representative of the several underwriters (the "Representative") has advised
the Company that it anticipates making a market in the Common Stock following
completion of the Offering, although there can be no assurance that an active
trading market will develop. The Company expects that the quotations for the
Common Stock will be reported on the NASD OTC Bulletin Board under the symbol
"BFIN." Sun and certain directors and officers of Sun, some of whom are also
directors or officers of the Company are expected to purchase 100,000 shares of
the Common Stock at the public offering price.
------------------
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>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
<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. See "Underwriting." The Underwriters
have agreed that the Underwriting Discounts to be incurred by the Company
for up to 25,000 shares sold by the Underwriters to Sun and for up to 75,000
shares sold to certain officers and directors of Sun, will be reduced to
1.0% and 3.0% respectively. See "Underwriting." If 25,000 shares are
purchased by Sun and 75,000 shares are purchased by certain directors and
officers of Sun, the Underwriting Discounts will be reduced by, and Proceeds
to the Company increased by $15,000 and $30,000, 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. SEE
"UNDERWRITING."
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. Manufactured homes are detached, single-family homes which are produced
off-site by manufacturers and installed on sites within manufactured home
communities. 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. A manufactured housing community is a residential
subdivision designed and improved with sites for the placement of manufactured
homes and related improvements and amenities. 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. While the Company
does not currently acquire loans or engage in the sale or securitization of its
loans, it may decide to do so in the future.
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 87
communities and over 31,000 developed sites as of September 30, 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
3
<PAGE> 5
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 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 87. Through this
arrangement the Company will be the only financing source that is referred to
potential borrowers in Sun Communities, however borrowers are under no
obligation or pressure to seek financing through the Company and may obtain
financing elsewhere. 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 an agreement with Sun
(the "Participants Support Agreement"), whereby Sun will offer the Company as
the only preferred financing source to home purchasers and home owners through
Sun personnel located on-site. 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 0.43% of the average loan balance under
Contracts originated by Sun and the Company has granted Sun 330,000 options (the
"Participants Options"), which will vest 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 Relationships and Related
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 have been granted to Sun and will vest in eight equal
annual amounts beginning in January 2001, each consisting of 41,250 Participants
Options. The Participants Options may be exercised at any time after vesting
until expiration ten years after the date of vesting. In order for the
Participants Options to vest, Sun must be a party to and in compliance with the
terms of the Participants Support Agreement with the Company on the vesting date
and on December 31st of the preceding year. The Company believes 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 Relationships and Related
Transactions -- Participants Support Agreement."
The Company intends to market similar arrangements to other community
owners and operators, although the Company has not entered into any such
arrangements to date and there is no assurance that the Company will be
successful in doing so. While the exact terms of any such arrangement would be
negotiated at the time of entering into an agreement, the Company expects that
such agreements would include the payment of an annual fee of 0.43% of the
average loan balance under Contracts originated by that party and would also
include some form and amount of options to acquire Common Stock similar to the
Participants Options. In the event the Company is successful in entering into a
form of a participants support agreement with manufactured home community owners
and operators (a "Participant" or collectively, the "Participants"), the Company
will increase the number or create additional Participants Options to take this
into account.
4
<PAGE> 6
Administration 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. The compensation for services provided by Mr. Jeffrey P.
Jorissen, as President, Chief Executive Officer and Chief Financial Officer of
the Company is included in the Administration Agreement. See "Certain
Relationships and Related 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 provided nonbinding expressions of
interest to purchase a total of 100,000 shares of Common Stock at the initial
public offering price. See "Risk Factors -- Possible Business Reversals if
Relationship with Sun is Terminated" and "-- Possible Adverse Influence on
Decisionmaking Resulting from Relationship with Sun," "Capitalization,"
"Description of Common Stock" and "Business -- Formation and Structure."
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. While the Company
was formed in August, 1996 it did not start transacting business until January,
1997. Before the Company began its financing services in January, 1997, 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 its on-site managers and sales organizations. The Company
intends to compete aggressively for manufactured housing loans through a
systematic approach to all 87 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
current 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 collection, foreclosure and
repossession 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;
5
<PAGE> 7
- to market its services to other community owners and operators who may
become Participants on terms similar to its arrangement with Sun;
- to enhance profitability through the marketing of 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.
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.
6
<PAGE> 8
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 NASD OVER-THE-COUNTER ("OTC")
BULLETIN BOARD SYMBOL....................... BFIN
- -------------------------
(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 which were granted to Sun on September 30, 1997.
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."
7
<PAGE> 9
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)
Loss per Share............................................ (652)
==========
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>
- -------------------------
*The Company's fiscal year ends on September 30.
8
<PAGE> 10
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.
INABILITY TO ATTAIN PROFITABLE OPERATIONS ASSOCIATED WITH THE COMPANY'S FAILURE
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
0.43% of the average loan balances under Sun's respective Contracts and (ii) the
Participants Options. The Participants Options will vest if, and only if, Sun is
a party to and in compliance with the terms of the Participants Support
Agreement on the vesting date and on December 31st of the previous year. 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 0.43% 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 including the inability to attain profitable
operations. 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. As of the first six months of
operations, the Company has experienced a net loss of $65,200. The Company is
not expected to be profitable for at least the first year of
9
<PAGE> 11
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.
LIMITED INFORMATION DUE TO LACK OF OPERATING HISTORY
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.
POTENTIAL OPERATING INEFFICIENCIES DUE TO LIMITED EXPERIENCE OF MANAGEMENT
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.
POSSIBLE BUSINESS REVERSALS IF RELATIONSHIP WITH SUN IS TERMINATED
The Company's business depends in large part upon its relationship with
Sun, including its arrangement with Sun to be the only 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 -- Limited Growth due to
Dependence on External Financing," "Business -- Formation and Structure," "--
Financing" and "Certain Relationships and Related Transactions."
INEFFICIENT OPERATIONS OR MISSED OPPORTUNITIES ASSOCIATED WITH LIMITED EXECUTIVE
PERSONNEL AND EMPLOYEES
Jeffrey P. Jorissen, the Company's President, Chief Executive Officer and
Chief Financial Officer, will continue to devote a majority of his time to his
duties as Chief Financial Officer of Sun. Mr. Jorissen's commitment to Sun may
result in his unavailability or inability due to time constraints to adequately
conduct his duties to the Company. If, as a result of his other
responsibilities, Mr. Jorissen is unable to adequately discharge his duties as
an executive officer of the Company and, if the Company is unable to replace Mr.
Jorissen with other executive personnel who can adequately discharge such
duties, the Company may suffer material adverse consequences in the form of
inefficient operations or missed opportunities.
The Company will rely for much of its operations on personnel employed by
Sun, and, potentially, by other owners and managers of manufactured home
communities. If the Company's agreements with Sun and with other owners or
operators of manufactured home communities, if any, terminate, the Company will
be materially adversely affected. Moreover, the Company's ability to supervise
and manage employees of Sun and other owners or managers of manufactured home
communities, if any, may be restricted in comparison to its ability to manage
its own employees and the Company's operations may thereby be materially
adversely affected as the result of underperformance by these employees in their
activities on behalf of the Company.
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<PAGE> 12
LIMITED GROWTH DUE TO 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."
POSSIBLE ADVERSE INFLUENCE ON DECISIONMAKING RESULTING FROM RELATIONSHIP WITH
SUN
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 has been
granted the Participants Options, which will vest in accordance with the terms
of the Participants Support Agreement, and has been issued 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.
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, the Participants Options 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 Relationships and Related
Transactions."
POSSIBLE BUSINESS FAILURE DUE TO 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,
11
<PAGE> 13
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. The Company is currently operating with a loan loss
reserve of 0.75%. As of June 30, 1997, the Company had no Contracts that were
delinquent over 60 days. Contracts past due 30-60 days totaled $57,767 or 1.08%
of the outstanding Contracts receivable. The Company sends a notice of default
after 30 days and sends a final demand letter after 60 days. If the loan is not
brought current pursuant to the terms of the demand letter, the Company
commences collection and repossession procedures. To the extent that the
repossession and resale of the collateral results in a loss, the reserve account
will be charged. If the Company experiences losses in excess of its loan loss
reserve it will incur additional charges to the reserve account which would
adversely affect its profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Operations" and
"Business -- Management Information Systems."
INTERFERENCE WITH OPERATIONS FROM FEDERAL AND STATE REGULATION
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.
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<PAGE> 14
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."
NEGATIVE IMPACT ON OPERATIONS FROM 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," 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."
NEGATIVE IMPACT ON OPERATIONS FROM 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.
POTENTIAL LOSSES AND ADDITIONAL REGULATION ASSOCIATED WITH OFFERING OTHER
PRODUCTS
Insurance Products
The Company intends to offer property and casualty, credit life, and
warranty insurance as an agent for one or more major carriers. The sale of these
products will subject the Company to additional insurance regulation in some
states. There can be no assurance that the Company will succeed in selling these
or other
13
<PAGE> 15
insurance products or that, if sold, these products can be sold on a profitable
basis. See "Business -- Regulation and Supervision"and " -- Other Products and
Services."
Other Types of Consumer and Commercial Loans
The Company intends to offer other types of consumer and commercial loans
where management identifies available markets and satisfactory potential returns
for risks undertaken in these lending activities. The offer and sale of other
types of loans entails operating risks including uncertainty as to whether sales
will attain sufficient levels to offset costs, the possibility that delinquency
and loss experience will exceed anticipated levels and the prospect of
additional regulation and supervision which could interfere with, or increase
the expense of, operations.
Acquisition and Sales of Loans
Should the Company acquire loans originated by others it would be subjected
to additional uncertainty as to the adequacy and compliance with laws of loan
documentation, the creditworthiness of borrowers, and delinquencies and default
experience under the acquired loans which could materially adversely affect the
Company's operations.
Should the Company decide to sell or securitize loans which it has
originated or acquired from others, it may be required to make representations
and warranties and provide indemnities, or otherwise provide recourse to the
Company for losses with respect to sold loans, which might adversely affect the
operations of the Company. Moreover, the Company may be unable to sell loans at
times it desires to do so, or may be required to make such a sale at prices
substantially below the fair market present value of such loans. If the Company
decides to sell or securitize loans and is unable to do so on an economically
beneficial basis, its access to capital necessary to originate or acquire new
loans may be severely limited, thereby adversely affecting the Company's ability
to continue operations.
BENEFITS TO SUN AND CERTAIN DIRECTORS AND OFFICERS OF SUN
Through its relationship with the Company, economic benefits will flow to
Sun as follows: in connection with the Subordinated Debt arrangement, the
Company has issued the Detachable Warrants to Sun to purchase up to 400,000
shares of Common Stock at a price of $10 per share; Sun has been granted 330,000
Participants Options which will vest in accordance with the terms of the
Participant Support Agreement if, and only if, Sun is a party to and in
compliance with the terms of the Participant Support Agreement on the vesting
date and on December 31st of the previous year; Sun will receive an annual fee
of .43% of the average loan balance of Contracts originated in Sun Communities;
Sun will receive payments from the Company for its services under the
Administration Agreement on a direct cost basis; and Sun will receive interest
under the Demand Note and the Subordinated Debt facility. Upon consummation of
this Offering, certain officers and directors of Sun will receive Stock Options
pursuant to the Stock Option Plan. Stock Options for 5,000 shares of Common
Stock each will be granted to Milton M. Shiffman and Gary A. Shiffman and Stock
Options for 10,000 shares of Common Stock each will be granted to Jeffrey P.
Jorissen and Brian W. Fannon.
LIMITATIONS ON STOCKHOLDERS ABILITY TO CHANGE CONTROL
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."
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<PAGE> 16
POSSIBLE NEGATIVE EFFECT ON STOCK PRICE FROM 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."
RISK OF IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share of Common Stock is
substantially higher than the net tangible book value per share of the Common
Stock. Purchasers of shares of Common Stock in this Offering will experience
immediate and substantial dilution of $ in the pro forma net tangible book
value per share of Common Stock. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE MAY NEGATIVELY IMPACT MARKET PRICE OF COMMON
STOCK
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. 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> 17
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 Underwriters have agreed that the Underwriting Discounts to
be incurred by the Company for up to 25,000 shares sold by the Underwriters to
Sun and for up to 75,000 shares sold to certain officers and directors of Sun,
will be reduced to 1.0% and 3.0% respectively. See "Underwriting." If 25,000
shares are purchased by Sun and 75,000 shares are purchased by certain directors
and officers of Sun, the Underwriting Discounts will be reduced by, and Proceeds
to the Company increased by $15,000 and $30,000, respectively.
The Company anticipates using the net proceeds of the Offering together
with $4 million of borrowings under the Subordinated Debt facility in the
following manner. The Company expects to repay the indebtedness outstanding to
Sun under the Demand Note, which at June 30, 1997, was $5,363,600, and to
reimburse Sun for services advanced for administrative and management support
which at June 30, 1997, was $43,000. It is currently anticipated that the
balance of the net proceeds received by the Company (plus any net proceeds as a
result of the exercise of the Underwriters' over-allotment option) will be used
to fund loans, provide an equity base for borrowings and be held by the Company
as working capital for general corporate purposes and to pay operating expenses.
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 Relationships and Related 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> 18
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> 19
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."
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<PAGE> 20
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.
During the six-month period, the Company incurred a loss of $65,200 on
revenues of $122,100 and expenses of $187,300. The primary component of revenues
was interest income earned on the Company's portfolio of Contracts which had a
balance of $5,323,800 at June 30, 1997. The principal components of expenses
were interest of $85,200 and general and administrative expenses of $62,800.
Credit losses of $31,000 were reserved at the rate of .75% of the average loan
balances. In connection with the Participants Support Agreement, the Company has
granted Sun 330,000 Participants Options. The Participants Options will vest in
eight equal annual installments beginning in January, 2001, if, and only if, Sun
is a party to and in compliance with the terms of the Participants Support
Agreement on the vesting date and on December 31st of the previous year. The
value of the Participants Options will be amortized to expense over the period
benefitted.
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."
The Company expects to meet its short term liquidity requirements through
working capital provided by operating activities and proceeds under a warehouse
line of credit at a floating rate and a fixed rate credit agreement which are
currently being negotiated. The Company expects to meet its long term liquidity
requirements through additional equity offerings, draws on its revolving line of
credit of $6 million, and possible future periodic securitizations of its loan
portfolio, which are not likely to occur, if at all, until two to three years
into the future.
As of June 30, 1997, the Company has issued approval letters to 101 credit
applicants totaling $3.1 million. The Company is committed to make such loans if
the applicant decides to proceed with the purchase of a manufactured home. It is
estimated that 80% of the applicants will decide to purchase a manufactured
home. The sources of funds for these commitments will be the proceeds of this
Offering and the Subordinated Debt facility provided by Sun. At June 30, 1997,
this is the Company's only commitment of capital. In addition to its commitment
of capital, the Company also incurs operating expenses which it anticipates will
be paid with the Proceeds of this Offering and the Subordinated Debt.
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<PAGE> 21
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%. The Company is
currently operating with a loan loss reserve of 0.75%. As of June 30, 1997, the
Company had no Contracts that were delinquent over 60 days. Contracts past due
30-60 days totaled $57,767 or 1.08% of the outstanding Contracts receivable. The
Company sends a notice of default after 30 days and sends a final demand letter
after 60 days. If the loan is not brought current pursuant to the terms of the
demand letter, the Company commences collection and repossession procedures. To
the extent that the repossession and resale of the collateral results in a loss,
the reserve account will be charged. If the Company experiences losses in excess
of its loan loss reserve it will incur additional charges to the reserve account
which would adversely affect its profitability. 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
Total Number Contracts Outstanding.......................... 187
Average Loan Balance........................................ $ 28,600
Weighted Average Loan Yield................................. 10.7%
Weighted Average Initial Term............................... 23 years
</TABLE>
The Contracts are secured by manufactured homes which range in age from
1970 to 1997, with approximately 69% of the manufactured homes built in 1996 and
1997. As of June 30, 1997, the Company's Contracts in its portfolio were
concentrated in Michigan (54%), Indiana (22%), Texas (17%) and Florida (6%). The
following table sets forth the number and value of loans for various terms, as
of June 30, 1997.
<TABLE>
<CAPTION>
TERM OF LOAN NUMBER OF LOANS VALUE OF LOANS
- ------------ --------------- --------------
<S> <C> <C>
5............................................... 1 $ 4,284
10............................................... 12 162,266
12............................................... 2 29,454
15............................................... 29 416,642
20............................................... 35 798,475
25............................................... 101 3,484,159
30............................................... 9 460,020
--- ----------
187 $5,355,300
</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 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.
20
<PAGE> 22
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. While the Company
does not currently acquire loans or engage in the sale or securitization of its
loans, it may decide to do so in the future.
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 87 communities and over
31,000 developed sites as of September 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 -- Possible Business
Reversals if Relationship with Sun is Terminated," "-- Possible Adverse
Influence on Decisionmaking Resulting from Relationship with Sun."
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 and Sun owns
Detachable Warrants issued in connection with the Subordinated Debt. See "Risk
Factors -- Possible Business Reversals if Relationship with Sun is Terminated"
and "-- Possible Adverse Influence on Decisionmaking Resulting from Relationship
with Sun."
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 only preferred financing source to home purchasers and
home owners in Sun Communities. Through this arrangement the Company will be the
only financing source that is referred to potential borrowers in Sun
Communities, however borrowers are under no obligation or pressure to seek
financing through the Company and may obtain financing elsewhere. 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 0.43%
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 has been granted 330,000 Participants Options, which will vest in
21
<PAGE> 23
accordance with the terms of the Participants Support Agreement, if, and only
if, Sun is a party to and in compliance with its terms on the vesting date and
on December 31st of the previous year. The Participants Options have been
designed by the Company to align certain economic interests of Sun with the
Company. See "Business -- Participants Options" and "Risk Factors -- Benefits to
Sun and Certain Directors and Officers of Sun."
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
Relationships and Related 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 its on-site managers. The Company intends to compete aggressively for
manufactured housing loans through a systematic approach to all 87 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. On-Site Collection, Foreclosure and Repossession Support: The Company's
relationship with Sun will provide the Company with on-site support to
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
22
<PAGE> 24
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 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
0.43% 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 would be negotiated at the
time of entering into an agreement, the Company expects to offer an
annual fee of 0.43% of the average loan balance under Contracts
originated by the Participant and an opportunity to acquire shares of
Common Stock. See "Risk Factors -- Inability to Attain Profitable
Operations Associated with the Company's Failure to Implement its
Strategy."
6. Outsourced Personnel and Systems Costs: The Company intends to rely on
the personnel of Sun and potentially 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. As the Company's strategy depends on
Sun personnel to market the Company's services and to originate
Contracts rather than its own staff, the Company does not expect to
incur origination or marketing expenses on unsuccessful loans. Moreover,
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 granted 330,000
Participants Options to purchase Common Stock to Sun which will vest if, and
only if, Sun is a party to and in compliance with the terms of the Participants
Support Agreement on the vesting date and on December 31st of the previous year.
The Participants Options will vest 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 vesting until expiration ten years after
the date of vesting. The Participants Options will have anti-dilution provisions
which will adjust
23
<PAGE> 25
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 vesting 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 vesting on January 31, 2004, 2005 and 2006, will
entitle the holder to purchase one share of Common Stock for a purchase price of
$12. Each Participants Option vesting 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 to other manufactured home community owners and operators,
although the Company has not entered into any such arrangements to date and
there is no assurance that the Company will be successful in doing so. While the
exact terms of any such arrangement would be negotiated at the time of entering
into an agreement, the Company expects that these agreements would include the
payment of an annual fee of 0.43% of the average loan balance under Contracts
originated by the Participant and would also include some form and amount of
options to acquire Common Stock similar to the Participants Options.
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
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<PAGE> 26
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.
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........ 170,713 210,787 254,276 303,932 339,601 363,411
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.
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<PAGE> 27
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,
even if the insurance is not purchased through the Company. The 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.
See "Business -- Other Products and Services."
Administration Agreement
The Company has entered into the Administration Agreement with Sun,
pursuant to which Sun will provide the Company with office space and certain
services as the Company shall need and deem desirable and necessary to conduct
its business. The compensation for services provided by Mr. Jorissen, as
President Chief Executive Officer and Chief Financial Officer of the Company is
included in the Administration Agreement. Some of the services to be provided to
the Company may include general administrative, accounting and data processing
support such as the following: management and employee compensation and
benefits, utilities, tax return preparation services, accounts payable and
receivable processing, information management systems, office management,
insurance, storage, equipment leasing, supplies and other personal property,
real and personal property taxes, rental charges, repairs and maintenance
charges. The services to be provided to the Company will be billed on a direct
cost basis, estimated to be and no greater than $75,000 for the first year.
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 87 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
26
<PAGE> 28
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 -- 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.
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
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<PAGE> 29
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 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,
St. James Servicing Corporation, a Michigan corporation (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. For its services, when payments of principal
and interest are made by the borrowers, the Subservicer will receive a monthly
fee of $7.00 per Contract while servicing less than 1,000 Contracts, and $6.00
per Contract while servicing 1,000 or more Contracts.
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. In addition the
Subservicer may retain non-sufficient funds charges payable and collected under
the terms of any Contract. 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
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<PAGE> 30
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.
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%. The Company is
currently operating with a loan loss reserve of 0.75%. As of June 30, 1997, the
Company had no Contracts that were delinquent over 60 days. Contracts past due
30-60 days totaled $57,767 or 1.08% of the outstanding Contracts receivable. The
Company sends a notice of default after 30 days and sends a final demand letter
after 60 days. If the loan is not brought current pursuant to the terms of the
demand letter, the Company commences collection and repossession procedures. To
the extent that the repossession and resale of the collateral results in a loss,
the reserve account will be charged. If the Company experiences losses in excess
of its loan loss reserve it will incur additional charges to the reserve account
which would adversely affect its profitability. 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
Total Number of Contracts Outstanding....................... 187
Average Loan Balance........................................ $ 28,600
Weighted Average Loan Yield................................. 10.7%
Weighted Average Initial Term............................... 23 years
</TABLE>
The Contracts are secured by manufactured homes which range in age from
1970 to 1997, with approximately 69% of the manufactured homes built in 1996 and
1997. As of June 30, 1997, the Company's
29
<PAGE> 31
Contracts in its portfolio were concentrated in Michigan (54%), Indiana (22%),
Texas (17%) and Florida (6%). The following table sets forth the number and
value of loans for various terms as of June 30, 1997.
<TABLE>
<CAPTION>
TERM OF LOAN NUMBER OF LOANS VALUE OF LOANS
- ------------ --------------- --------------
<S> <C> <C>
5............................................... 1 $ 4,284
10............................................... 12 162,266
12............................................... 2 29,454
15............................................... 29 416,642
20............................................... 35 798,475
25............................................... 101 3,484,159
30............................................... 9 460,020
--- ----------
187 $5,355,300
</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.
In order to sell insurance, the Company, or a subsidiary to be formed, will
be required to obtain an insurance license, employ one or more licensed
insurance agents and be appointed by one or more insurance companies. It will
then be subject to regulation by the insurance department of each state in which
it transacts insurance. (Since regulation of the business of insurance is done
by each state with respect to such business transacted within its borders, it
may be necessary to obtain licenses from more than one state; it may not be
possible to sell insurance in every state; the Company's ability to sell
insurance may be severely restricted and/or the Company may have to enter into
corresponding relationships with licensed local agents in certain states.)
Since the insurance business is subject to varying state regulations, and
as the Company is not currently offering insurance products it is not possible
to state in exact terms how such business would be conducted in each
jurisdiction, but the Company expects to offer it in the following general
manner if it is successful in obtaining the necessary licenses and appointments.
The Company intends that only its employees who have the necessary state
licenses, or if necessary, corresponding local agents, rather than the site
representatives, will offer the insurance products. The Company may in the
future hire an individual with experience in the industry to offer its insurance
products. State law in most jurisdictions prohibits the Company from forcing a
borrower to purchase insurance from it or its designee and requires disclosure
of this fact. Each written or oral communication to a proposed borrower from the
Company will include this information. Where permissible, the Company's loan
application will include a place where a borrower may consent to allow the
Company to use information contained therein to provide an insurance quotation.
Following loan approval and gathering of all relevant information, the Company
will pursue, and if obtained from its carriers issue a written quote.
If the borrower decides to purchase insurance through the Company, a binder
will be issued and at closing the borrower will pay for one year of coverage or
finance the premium up to 5% of the loan amount. Even if a borrower uses an
outside insurance provider, the premium may still be financed up to 5% of the
loan amount. Although the Company expects that the agreements it will enter into
with insurer(s) will provide that the insurer will handle all policy issuance,
subsequent billing and adjustment of all substantial claims, the Company may
have the ability to handle certain minor claims and expects to maintain
ownership of all expirations.
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
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<PAGE> 32
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 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.
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<PAGE> 33
In connection with the Subordinated Debt, the Company has issued 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
Relationships and Related 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 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. No license is
required to conduct the Company's finance operations in Michigan and Florida.
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
32
<PAGE> 34
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 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> 35
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
William L. Mulvaney.................. 56 Chief Operating Officer
Milton M. Shiffman................... 68 Director
Robert H. Orley...................... 42 Director
Brian M. Hermelin.................... 32 Director
</TABLE>
The Company's Bylaws provide that the number of directors shall be no less
than three but no more than eleven until changed by a duly adopted amendment to
the Bylaws. The Board of Directors of the Company has been divided into three
classes of directors, with each class serving a staggered three year term and
with the number of directors in each class being as nearly equal as possible.
The initial terms of the first, second and third classes has been established at
one year, two years, and three years, respectively. The subsequent terms of each
class of directors will be three years. The first class of directors is Mr.
Jeffrey P. Jorissen, the second class of directors is made up of Mr. Gary A.
Shiffman and Mr. Robert H. Orley, and the third class of directors is made up of
Dr. Milton M. Shiffman and Mr. Brian M. Hermelin.
Officers of the Company will be elected annually by the Board of Directors.
Each officer shall hold office until his or her successor is elected and
qualifies or until death, registration or removal as provided in the Bylaws.
EXPERIENCE OF DIRECTORS AND OFFICERS
The experience and backgrounds of the directors and officers, and their
proposed positions with the Company are summarized below.
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,
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<PAGE> 36
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.
Robert H. Orley is a Director of the Company. Mr. Orley is the Executive
Vice President of The Oxford Investment Group Inc. ("Oxford"), where since 1985
he has supervised the legal, administrative, taxation and financial reporting
aspects of Oxford's business portfolio and acquisition searches. Mr. Orley is
also Vice President and a director of Real Estate Interests, Inc., where he has
served in such capacity since 1984. Real Estate Interests, Inc. is a real estate
development and management company affiliated with Oxford. Mr. Orley is a
brother-in-law of Mr. Hermelin.
Brian M. Hermelin is a director of the Company. Mr. Hermelin is currently
Chief Operating Officer and a director for USA Jet Airlines Inc., a cargo
airline that also operates Active Aero Charter, an air charter broker and
logistics provider. From 1992 to 1997, Mr. Hermelin provided acquisition
analysis, strategic planning and business development services through various
consulting arrangements. Mr. Hermelin has been active in the fields of finance
and mergers and acquisitions since 1987. Mr. Hermelin is a graduate of the
University of Michigan and has received a Masters in Business Administration
from the Wharton School of the University of Pennsylvania. Mr. Hermelin is a
brother-in-law of Mr. Orley.
SUN'S DIRECTORS/OFFICERS 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 has 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, are expected to 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
35
<PAGE> 37
influence might not be consistent with the interests of other stockholders. See
"Risk Factors -- Possible Adverse Influence on Decision Making Resulting from
Relationship with Sun."
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's compensation
is included in the Administration Agreement. Mr. Gary Shiffman is not entitled
to receive any compensation from the Company. It is proposed that Mr. Jorissen
and Mr. Gary Shiffman will each receive Stock Options for 10,000 and 5,000
shares of Common Stock, respectively, pursuant to the Stock Option Plan. See
"Management -- Stock Option Plan."
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
36
<PAGE> 38
be proposed to the Administrator that Stock Options be granted to the following
persons and in the amounts set forth below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Jeffrey P. Jorissen................................... 10,000
Gary A. Shiffman...................................... 5,000
Milton M. Shiffman.................................... 5,000
William L. Mulvaney................................... 20,000
Robert H. Orley....................................... 5,000
Brian M. Hermelin..................................... 5,000
Brian W. Fannon....................................... 10,000
</TABLE>
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> 39
CERTAIN RELATIONSHIPS AND RELATED 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. A
non-employee director, as such term is used in Rule 16b-3 of the Exchange Act,
is a director who is not currently an officer of the Company or an affiliate of
the Company, is not compensated in any capacity other than as a director, and
does not possess an interest in another transaction or have a business
relationship for which disclosure would be required. 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. It is management's belief that these transactions are as
reasonable as if they had been entered into with unrelated third parties.
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 compensation for services provided by
Mr. Jorissen, as President, Chief Executive Officer and Chief Financial Officer
of the Company is included in the Administration Agreement.
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 to Sun will be billed at cost
and 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. For its services,
Sun will receive an annual fee of 0.43% of the average loan balance under
Contracts originated by Sun and has been granted 330,000 Participants Options.
The Participants Options will vest in accordance with the terms of the
Participants Support Agreement, if, and only if, Sun is a party to and in
compliance with the terms of the Participants Support Agreement on the vesting
date and on December 31st of the previous year. See "Business -- Formation and
Structure" and "-- Participants Options."
38
<PAGE> 40
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, the Company issued Sun 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."
39
<PAGE> 41
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 25,000 100% 2.5%
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Jeffrey P. Jorissen................................ 0 0 0% 0.0%
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Gary A. Shiffman................................... 0 50,000(2) 0% 5.0%
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Milton M. Shiffman................................. 0 50,000 0% 5.0%
31700 Middlebelt, Suite 145
Farmington Hills, Michigan 48334
Robert H. Orley.................................... 0 0 0% 0.0%
2000 N. Woodward Ave., Suite 130
Bloomfield Hills, Michigan 48304
Brian M. Hermelin.................................. 0 0 0% 0.0%
Hangar 2064 D Street
Belleville, Michigan 48111
All executive officers and directors as a group
(five persons)(2)................................ 0 100,000 0% 10.0%
</TABLE>
- -------------------------
* Excludes shares of Common Stock issuable upon exercise of: (a) the
Underwriters' over-allotment option; (b) options granted pursuant to the
Stock Option Plan; (c) the Detachable Warrants; and (d) 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.
(2) By virtue of his position as President and Chief Executive Officer of Sun,
Gary A. Shiffman has the power to vote and may otherwise affect the
ownership of Common Stock by Sun and is deemed to be the beneficial owner of
such shares under Rule 13d-3 of the Exchange Act.
40
<PAGE> 42
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> 43
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
42
<PAGE> 44
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.
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<PAGE> 45
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 American Stock
Transfer & Trust Company.
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<PAGE> 46
SHARES ELIGIBLE FOR FUTURE SALE
The Company presently has one hundred shares of Common Stock outstanding.
Those shares will be redeemed at their original cost of $100 upon completion of
the Offering. 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, are expected to
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. 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 granted 330,000 Participants Options to Sun for the
purchase of Common Stock. All of the shares of Common Stock to be 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 has issued 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."
45
<PAGE> 47
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 75,000 shares expected to be 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%. The underwriting discounts or
commissions to be incurred by the Company on the 25,000 shares expected to be
sold to Sun shall be at 1.0%.
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.
46
<PAGE> 48
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.
47
<PAGE> 49
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> 50
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, except for Note 6,
as to which the date is September 30, 1997
F-2
<PAGE> 51
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)
Preferred Stock no par value, (10,000,000 authorized; no
shares issued and outstanding)......................... --
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> 52
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)
========
Loss per Share of Common Stock.......... $ (652)
========
</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> 53
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
Organization costs..................................... (94,300)
-----------
Net cash provided by operating activities.............. 76,800
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Installment contracts receivable originated............ (5,414,500)
Collections on installment contracts receivable........ 59,200
-----------
Net cash used in investing activities..................... (5,355,300)
-----------
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> 54
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> 55
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. For Sun's
services under the Administration Agreement, the Company is billed on a direct
cost basis, not to exceed $75,000 for the first year. As compensation under the
Participants Support Agreement between Sun and the Company, Sun will receive an
annual fee of .43% of the average loan balance under Contracts originated by
Sun. In addition, Sun has been granted 330,000 Participants Options as discussed
in Note 5 below.
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. At June 30, 1997, there were no
nonaccrual loans.
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 or
results of operations.
At June 30, 1997, the Company has commitments to originate installment
contracts receivable approximating $3 million.
5. STOCK OPTION PLANS:
The Company has stock option plans in which 830,000 shares of Common Stock
have been reserved for issuance as of June 30, 1997. The Company has agreed to
issue Detachable Warrants covering 400,000 shares of Common Stock. The Company
has also set aside 330,000 shares of Common Stock for issuance upon exercise of
the Participants Options and 10% of the total number of shares of Common Stock
issued and outstanding from time to time (i.e., upon consummation of the
Offering, excluding the Underwriters' over-allotment option, there will be
100,000 shares available for issuance) upon exercise of Stock Options granted
pursuant to the Company's 1997 Stock Option Plan.
At June 30, 1997, no options had been granted under the Detachable Warrant
Agreement, Participants Support Agreement and the Company's 1997 Stock Option
Plan. Once options are granted under the Detachable Warrant Agreement and
Participants Support Agreement, the Company will recognize service
F-7
<PAGE> 56
BINGHAM FINANCIAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
5. STOCK OPTION PLANS: -- CONTINUED
costs based on the fair value method as prescribed by Statements of Financial
Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation".
For the 1997 Stock Option Plan, the Company has adopted the disclosure
requirements of SFAS No. 123. In accordance with the provisions of SFAS No. 123,
the Company will apply APB Opinion 25 and related interpretations in accounting
for its 1997 Stock Option Plan and accordingly, will not recognize compensation
costs for those options once granted.
6. SUBSEQUENT EVENTS:
As of September 30, 1997, the Company entered into a Subordinated Loan
Agreement with Sun Communities, Inc. The Subordinated Loan Agreement provides
for a Subordinated Debt facility of up to $10,000,000, which indebtedness shall
be subordinate to all senior debt of the Company. In accordance with the
Subordinated Loan Agreement, the Company issued the Detachable Warrants to Sun
covering 400,000 shares of Common Stock at a price of $10.00 per Warrant Share.
The Detachable Warrants have a term of seven years and may be exercised at any
time after the fourth anniversary of their issuance.
As of September 30, 1997, the Company entered into the Participants Support
Agreement with Sun. Pursuant to the Participants Support Agreement, the
Participants Options were granted to Sun on September 30, 1997 and will vest if,
and only if, Sun is a party to and in compliance with the terms of the
Participants Support Agreement on the vesting date and on December 31st of the
previous year. The Participants Options will vest in eight equal annual amounts,
each consisting of 41,250 Participants Options, on January 31, 2001 through
2008. The Participants Options may be exercised at any time after vesting until
expiration ten years after the date of vesting. Each Participants Option vesting
on January 31, 2001 to 2003 will entitle the holder to purchase one share of
Common Stock for a purchase price of $10. Each Participants Option vesting on
January 31, 2004, 2005 and 2006 will entitle the holder to purchase one share of
Common Stock for $12 per share. Each Participants Option vesting on January 31,
2007 and 2008 will entitle the holder to purchase one share of Common Stock for
$14.
F-8
<PAGE> 57
=========================================================
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............................ 9
Use of Proceeds......................... 16
Dividend Policy......................... 16
Capitalization.......................... 17
Dilution................................ 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 19
Business................................ 21
Management.............................. 34
Certain Relationships and Related
Transactions.......................... 38
Principal Stockholders.................. 40
Description of Capital Stock............ 41
Shares Eligible for Future Sale......... 45
Underwriting............................ 46
Legal Matters........................... 47
Experts................................. 47
Available Information................... 47
</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 LOGO
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
RONEY & CO. LOGO
, 1997
=========================================================
<PAGE> 58
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
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Transfer Agent and Registrar Fees........................... 2,500
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> 59
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
- ----------- -----------
<C> <S>
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 Form of Participants Option
10.3 Administration Agreement
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 Form of Detachable Warrants
10.14 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.
** Previously filed.
(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> 60
(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> 61
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 15th day of October, 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: October 15, 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: October 15, 1997 /s/ GARY A. SHIFFMAN*
------------------------------------------------------------
Gary A. Shiffman
Chairman of the Board, and Secretary
Dated: October 15, 1997 /s/ MILTON M. SHIFFMAN*
------------------------------------------------------------
Milton M. Shiffman
Director
Dated: October 15, 1997
------------------------------------------------------------
Robert H. Orley
Director
Dated: October 15, 1997
------------------------------------------------------------
Brian M. Hermelin
Director
</TABLE>
- -------------------------
* By Jeffrey P. Jorissen pursuant to power of attorney
<PAGE> 62
EXHIBIT LIST
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ------------
<C> <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 Form of Participants Option
10.3 Administration Agreement
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 Form of Detachable Warrants
10.14 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.
** Previously filed.
<PAGE> 1
EXHIBIT 1
BINGHAM FINANCIAL SERVICES CORPORATION
1,000,000 SHARES*
COMMON STOCK
UNDERWRITING AGREEMENT
________, 1997
Roney & Co., L.L.C.
As representative of the several Underwriters
named in Schedule I hereto,
c/o Roney & Co., L.L.C.,
One Griswold
Detroit, Michigan 48226
Ladies and Gentlemen:
Bingham Financial Services Corporation, a Michigan corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of 1,000,000 shares (the "Firm Shares") of the
Company's Common Stock (the "Common Stock") and up to an aggregate of 150,000
shares (the "Optional Shares") of Common Stock (the Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof being collectively referred to as the "Shares").
1. (a) The Company represents and warrants to, and agrees
with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No.
333-34453) as amended by any pre-effective amendment thereto in
respect of the Shares (the "Initial Registration Statement") has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto, as the same may have been amended from time to time,
to each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no
other document with respect to the Initial Registration Statement has
heretofore been filed with the Commission; and no stop
__________________________________
*Plus an option to acquire from the Company up to 150,000 additional shares to
cover overallotments.
<PAGE> 2
order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or, to the knowledge of the Company,
threatened by the Commission (any preliminary prospectus included in
the Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act, as amended, is hereinafter called a "Preliminary
Prospectus;" the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form
of final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective or such
part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the registration statement became effective, is hereinafter
collectively called the "Registration Statement;" and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Roney & Co., L.L.C.
expressly for use therein; and
(iii) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder and do not and will not, as of the
applicable effective date of the Registration Statement and any
amendment thereto, and as of the applicable filing date of the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Roney & Co., L.L.C. expressly for use
therein;
(b) The Company represents and warrants to, and agrees with, each
of the Underwriters that:
2
<PAGE> 3
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in or affecting the general affairs,
management, financial position, stockholders' equity, results of
operations or prospects of the Company, otherwise than as set forth or
contemplated in the Prospectus;
(ii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Michigan, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts
any business so as to require such qualification or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction;
(iii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and
are fully paid and nonassessable;
(iv) The Shares have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein,
will be duly and validly issued and fully paid and nonassessable and
will conform in all material respects to the description of the Common
Stock contained in the Prospectus;
(v) The issue and sale of the Shares by the Company and
the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company is
subject, nor will such action result in any violation of the
provisions of the Articles of Incorporation (or other charter
document) or By-laws of the Company or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no
consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required
for the issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this Agreement, except the
registration under the Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(vi) The Company is not in violation of its Articles of
Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement,
3
<PAGE> 4
lease or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound;
(vii) The statements set forth in the Prospectus under the
captions of "Description of Capital Stock," insofar as they purport to
constitute a summary of the terms of the capital stock of the Company,
and under the captions "The Business--Formation and Structure,"
"--Operations," "--Financing," "--Regulation and Supervision,"
"Certain Transactions" and "Underwriting," insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate, complete in all material respects and fair;
(viii) Other than as set forth in the Prospectus, there are
no legal or governmental proceedings pending to which the Company is a
party or of which any property of the Company is the subject which, if
determined adversely to the Company would individually or in the
aggregate have a material adverse effect on the financial position,
stockholders' equity or results of operations of the Company; and, to
the best of the Company's knowledge, no such proceedings are
threatened or contemplated by any governmental authorities or
threatened by others;
(ix) Each of the agreements listed in Annex II hereto has
been duly authorized, executed and delivered by the Company and
constitutes the valid and legally binding obligation of the Company
and is enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights;
(x) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or an entity "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as Amended (the
"Investment Company Act");
(xi) The Company does not do business with the government
of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes;
(xii) Coopers & Lybrand L.L.P., who have certified certain
financial statements of the Company, are independent public
accountants as required by the Act and the rules and regulations of
the Commission thereunder;
(xiii) This Agreement has been duly authorized, executed and
delivered by the Company;
(xiv) There are no contracts or documents which are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required;
4
<PAGE> 5
(xv) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the
performance by the Company of its obligations hereunder, in connection
with the offering, issuance or sale of the Common Stock hereunder or
the consummation of the transactions contemplated by this Agreement,
except such as have been already obtained or as may be required under
the Act or the rules and regulations thereunder or state securities
laws;
(xvi) The Company possesses such permits, licenses,
approvals, consents, and other authorizations (collectively
"Governmental Licenses") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by it; the Company is in compliance with the
terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not have a material adverse effect on
the financial position, stockholders' equity or results of operations
of the Company; all of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a material adverse effect on the
financial position, stockholders' equity or results of operations of
the Company; the Company has not received any notice of proceedings
relating to the revocation or modification of any such Governmental
Licenses which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material
adverse effect on the financial position, stockholders' equity or
results of operations of the Company;
(xvii) Except as described in the Registration Statement,
there are no persons with registration rights or other similar rights
to have any securities registered pursuant to the Registration
Statement or otherwise registered by the Company under the Act; and
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price per share of $[ ] the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction, the numerator of which is the maximum number
of Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
5
<PAGE> 6
The Company hereby grants to the Underwriters the right to purchase at
their election up to 150,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the
Company, given within a period of 30 business days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you.
As compensation to the Underwriters for their commitments hereunder,
the Company at each Time of Delivery (as defined in Section 4 hereof) will pay
to Roney & Co., L.L.C., for the accounts of the several Underwriters, an amount
equal to $.70 per share for the Shares to be delivered by the Company hereunder
at such Time of Delivery; provided that, with regard to the 25,000 Firm Shares
which have been reserved for sale to Sun Communities, Inc., the Company will
pay to Roney & Co., L.L.C., for the account of the several Underwriters, an
amount equal to $.10 per share and with regard to the 75,000 Firm Shares which
have been reserved for sale to certain officers and directors of Sun
Communities, Inc., the Company will pay to Roney & Co., L.L.C., for the account
of the several Underwriters, an amount equal to $.30 per share.
3. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter
hereunder will be represented by one or more definitive certificates registered
in the name of Roney & Co., L.L.C. which will be deposited by or on behalf of
the Company with The Depository Trust Company ("DTC") or its designated
custodian. The Company will deliver the Shares to Roney & Co., L.L.C., for the
account of each Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer to the account
specified by the Company in Federal (same day) funds, by causing DTC to credit
the Shares to the account of Roney & Co., L.L.C. at DTC. The Company will
cause the certificates representing the Shares to be made available to Roney &
Co., L.L.C. for checking at least twenty-four hours prior to the Time of
Delivery at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with
respect to the Firm Shares, 9:30 A.M., Detroit time, on ______________, 1997 or
such other time and date as Roney & Co., L.L.C. and the Company may agree upon
in writing, and, with respect to the Optional Shares, 9:30 A.M., Detroit time,
on the date specified by Roney & Co., L.L.C. in the written notice given by
Roney & Co., L.L.C. of the Underwriters' election to purchase such Optional
Shares, or such other time and date as Roney & Co., L.L.C. and the Company may
agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery," such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery," and each such time and date for delivery is herein
called a "Time of Delivery."
6
<PAGE> 7
(b) The documents to be delivered at each Time of Delivery by or
on behalf of the parties hereto pursuant to Section 8 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(i) hereof, will be delivered at the offices
of Honigman Miller Schwartz and Cohn, 2290 First National Building, Detroit, MI
48226-3583 (the "Closing Location"), the Shares will be delivered at the
Designated Office, and the wire transfers will be made to the specified
accounts, all at such Time of Delivery. A meeting will be held at the Closing
Location at 2:00 P.M., Detroit time, on the Detroit Business Day next preceding
such Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by
the parties hereto. For the purposes of this Section 4, "Detroit Business Day'
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in Detroit are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus which
shall be disapproved by you promptly after reasonable notice thereof; to advise
you, promptly after it receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use every
reasonable effort to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as delivery of a
Prospectus is required in connection with the offering or sale of the Shares,
to furnish the Underwriters with copies of the Prospectus in Detroit in such
quantities as you may from time to time reasonably request, and, if the
delivery
7
<PAGE> 8
of a prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering or
sale of the Shares and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during such
period to amend or supplement the Prospectus in order to comply with the Act,
to notify you and upon your request to prepare and furnish without charge to
each Underwriter and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus in
connection with sales of any of the Shares at any time nine months or more
after the time of issue of the Prospectus, upon your request but at the expense
of such Underwriter, to prepare and deliver to such Underwriter as many copies
as you may reasonably request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to the Company's security holders
as soon as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company complying with Section
11(a) of the Act and the rules and regulations thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the Prospectus,
not to offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder, any securities of the Company that are substantially
similar to the Shares;
(f) To the extent necessary to comply with the NASD OTC Bulletin
Board rules and regulations or the rules and regulations of any other exchange
on which the Shares are listed, to furnish to holders of the Shares as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders, equity and cash flows of
the Company certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company for such quarter in reasonable detail;
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders of the Company,
and to deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the Company is
listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated
8
<PAGE> 9
basis to the extent the accounts of the Company and its subsidiaries (if any)
are consolidated in reports furnished to their stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds;"
(i) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 5:00 P.M., Washington, D.C. time, on the date of
this Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Act;
(j) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act.
6. The Company covenants and agrees with the several Underwriters
to pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Underwriters' counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Underwriters
and dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement and Blue Sky Memoranda, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws, including the fees and disbursements of counsel for the
Underwriters, if any, in connection with such qualification and in connection
with the Blue Sky surveys; (iv) all fees and expenses in connection with
listing the Shares on the NASD OTC Bulletin Board; (v) the cost of preparing
stock certificates; (vi) the cost and charges of any transfer agent or
registrar; (vii) the cost and charges of DTC; (vii) the out-of-pocket expenses
of the Underwriters, including without limitation, road show expenses and the
Underwriter's legal fees and expenses (provided that the Company's obligation
to pay such out- of-pocket expenses shall not exceed the amount of $50,000) and
(viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. The out-of-pocket expenses of the Underwriters, including the
Underwriters' legal fees and the fees and disbursements in connection with
qualification of the Shares for offering and sale under state securities laws
shall be paid regardless of whether the offering contemplated hereby is
consummated or not consummated for any reason unless the offering is not
consummated due to a willful breach of this Agreement by the Underwriters or
because of the Underwriters' inability to perform their obligations under this
Agreement. Upon consummation of the offering, the Underwriters' agree to
credit such out-of- pocket expenses (up to a maximum of $50,000) against the
fees paid pursuant to Section 2 hereof.
9
<PAGE> 10
7. The obligations of the Underwriters hereunder, as to the
Shares to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of such Time of Delivery, true
and correct, the condition that the Company shall have performed all of their
respective obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with
Section 5(a) hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction; if
the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have become effective by 5:00 P.M., Washington, D.C. time, on
the date of this Agreement;
(b) Honigman Miller Schwartz and Cohn, counsel for the
Underwriters, shall have furnished to you such opinion or opinions, dated as of
such Time of Delivery, with respect to the validity of the Shares as well as
such other related matters as you may reasonably request, and such counsel
shall have received such papers and information as they may reasonably request
to enable them to pass upon such matters;
(c) Jaffe, Raitt, Heuer & Weiss, P.C., counsel for the Company,
shall have furnished to you their written opinion, dated such Time of Delivery,
in form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Michigan with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company (including, when delivered and paid for as provided in
this Agreement, the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid
and non-assessable; and the Shares conform in all material respects to
the description of the Common Stock contained in the Prospectus;
(iii) To the knowledge of such counsel and other than as
set forth in the Prospectus there are no legal or governmental
proceedings pending to which the Company is a party or of which any
property of the Company is the subject which, if determined adversely
to the Company, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or
10
<PAGE> 11
results of operations of the Company; and, to the knowledge of such
counsel, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(iv) This Agreement has been duly authorized, executed and
delivered by the Company;
(v) The issue and sale of the Shares being delivered at
such Time of Delivery by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company is a party or by which the Company is bound or to
which any of the property or assets of the Company is subject, nor
will such action result in any violation of the provisions of the
Articles of Incorporation (or other charter document) or By-laws of
the Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its properties;
(vi) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the agreements listed in Annex II
hereto, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications
as may be required under, state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters;
(vii) The Company is not, to the knowledge of such counsel,
(i) in violation of its Articles of Incorporation (or other charter
documents) or By-laws or (ii) in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(viii) The statements set forth in the Prospectus under the
captions, "Description of Capital Stock," insofar as they purport to
constitute a summary of the terms of the capital stock of the Company,
and under the captions "The Business--Formation and Structure,"
"--Operations," "--Financing," "--Regulation and Supervision,"
"Certain Transactions" insofar as they constitute or purport to
describe matters of law or legal conclusions, provisions of laws and
documents referred to therein, have been reviewed by such counsel, are
accurate in all material respects and present fairly the information
required to be shown therein;
11
<PAGE> 12
(ix) Each of the agreements listed in Annex II hereto has
been duly authorized, executed and delivered by the Company and the
other parties thereto and constitutes the valid and legally binding
obligation of the Company enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights;
(x) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act;
(xi) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements, related
schedules and other financial data therein, as to which such counsel
need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations
thereunder; although such counsel does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained
in the Registration Statement or the Prospectus, except as otherwise
indicated in its opinion, such counsel has no reason to believe that,
as of its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of Delivery
(other than the financial statements, related schedules and other
financial data therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date,
the Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data therein, as to
which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as
of such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data therein, as to
which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement or the Prospectus which are
not filed or described as required; and
(d) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 A.M., Detroit time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Coopers & Lybrand
L.L.P. shall have furnished to you a letter or letters, dated the respective
dates of delivery thereof, in form and substance satisfactory to you, to the
effect set forth in Annex I hereto (the executed copy of the letter delivered
prior to the execution of this
12
<PAGE> 13
Agreement is attached as Annex I(a) hereto and a draft of the form of letter to
be delivered on the effective date of any post-effective amendment to the
Registration Statement and as of each Time of Delivery is attached as Annex
I(b) hereto);
(e) (i) The Company shall not have sustained since the date
of the latest audited financial statements included in the Prospectus, any loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any change in
the capital stock or long-term debt of the Company or any change in or
affecting the general affairs, management, financial position, stockholders'
equity, results of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in clause (i) or (ii), is in the judgment of the Representative after
discussion with the Company so material and adverse as to make it impracticable
or inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(f) (x) On or after the date hereof (i) trading in securities
generally on the NASD OTC Bulletin Board shall not have been suspended or
materially limited, (ii) trading in the Shares on the NASD OTC Bulletin Board
shall not have been suspended, (iii) a general moratorium on commercial banking
activities in Detroit shall not have been declared by Federal or Detroit
authorities, (iv) there shall not have occurred any outbreak of hostilities or
escalation thereof or other calamity or crisis having an adverse effect on the
financial markets of the United States or (v) there shall not have occurred any
material adverse development in any of the real estate markets in which the
mortgaged properties are located and (y) the occurrence or consequences of any
one or more of such events shall have, in the reasonable judgment of the
Underwriters, made it impracticable to market the Shares on the terms and in
the manner contemplated by the Prospectus;
(g) The Shares to be sold at such Time of Delivery shall have been
duly listed, subject to notice of issuance, on the NASD OTC Bulletin Board;
(h) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of Prospectuses;
(i) The Company shall furnish or cause to be furnished to you at
such Time of Delivery certificates of officers of the Company satisfactory to
you as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the Company
of all of its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (e) of this
Section and as to such other matters as you may reasonably request; and
13
<PAGE> 14
(j) The Company and its executive officers and directors shall
have executed and delivered Lock-Up Agreements substantially in the form
attached hereto as Annex III.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement, the Prospectus, or any such amendment
or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Roney & Co.,
L.L.C. expressly for use therein; and provided, further, that with respect to
any untrue statement or omission or alleged untrue statement or omission made
in any Preliminary Prospectus, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Underwriter to the extent
that any such loss, claim, damage or liability of such Underwriter results from
the fact that a copy of the Prospectus was not sent or given to any person at
or prior to the written confirmation of the sale of such securities to such
person; and the Underwriters will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based on the omission or alleged omission to state therein a material fact
required be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement, alleged untrue statement or omission or alleged omission was
made in any Preliminary Prospectus, the Registration Statement, the Prospectus,
or any such amendment or supplement thereto in reliance upon and in conformity
with written information furnished to the Company by such Underwriter through
Roney & Co., L.L.C. expressly for use therein.
(c) Promptly after receipt by an indemnified party under
subsections (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the
14
<PAGE> 15
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such subsection. In
case any such action shall be brought against any indemnified party and it has
notified the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party, and,
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder unless such settlement, compromise or judgment (i)
includes a conditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as
to, or an admission of, fault, culpability or a failure to act, by or on behalf
of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided for by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice
required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this section (d) were
determined by pro rata allocation (even if the Underwriters are treated as one
entity for such purpose) or by any other
15
<PAGE> 16
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company and to
each person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Shares, or the Company
notifies you that it has so arranged for the purchase of such Shares, you or
the Company shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-tenth of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then
16
<PAGE> 17
the Company shall have the right to require each non-defaulting Underwriter to
purchase the number of shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have
not been made, but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-tenth of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Company
shall not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or
Underwriters, then this Agreement (or, with respect to the Second Time of
Delivery, the obligations of the Underwriters to purchase and of the Company to
sell the Optional Shares) shall thereupon terminate, without liability on the
part of any non-defaulting Underwriter or, the Company, except for the expenses
to be borne by the Company and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason,
any Shares are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter except as provided
in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to Roney & Co., L.L.C. at One Griswold, Detroit,
Michigan 48226, Attention Syndicate Department; and if
17
<PAGE> 18
to the Company shall be delivered or sent by mail to the address of the
Company, respectively set forth in the Registration Statement, Attention:
Jeffrey P. Jorissen, CEO; provided, however, that any notice to an Underwriter
pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or
facsimile transmission to such Underwriter at its address set forth in its
Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters and the Company, and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company, and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser
of any of the Shares from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.
14. As used herein, the term "business day" shall mean any day
when the Commission's office in Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us one counterpart for the Company plus one for each counsel
thereof, and upon the acceptance hereof by you, on behalf of each of the
Underwriters, this letter and such acceptance hereof shall constitute a binding
agreement between each of the Underwriters, the Company. It is understood that
your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be
18
<PAGE> 19
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
Bingham Financial Services Corporation
By:_____________________________________
Name:
Title:
Accepted as of the date hereof:
Roney & Co., L.L.C.
By:_________________________________
Name:
Title:
19
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Shares to be Maximum Option
Underwriter Purchased Exercised
----------- --------------- ------------------
<S> <C> <C>
Roney & Co, L.L.C. . . . . .
_________ _________
Total 1,000,000 150,000
</TABLE>
20
<PAGE> 21
ANNEX I
ANNEX 1 (a)
ANNEX 1 (b)
<PAGE> 22
ANNEX II
Participants Support Agreement
Administration Agreement
Subordinated Loan Agreement
<PAGE> 23
ANNEX III
FORM OF LOCK-UP AGREEMENT
23
<PAGE> 1
EXHIBIT 3.2
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
FILING ENDORSEMENT
This is to Certify that the CERTIFICATE OF AMENDMENT - CORPORATION
for
BINGHAM FINANCIAL SERVICES CORPORATION
ID NUMBER: 414887
received by facsimile transmission on August 26, 1997 is hereby endorsed
Filed on August 26, 1997 by the Administrator.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department,
in the City of Lansing, this 26th day
of August, 1997.
[SEAL]
Julie Croll, Director
Corporation, Securities and Land Development Bureau
<PAGE> 2
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES - CORPORATION, SECURITIES
AND LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
- -------------------------------------------------------------------------------------------------------------
Date Received: (FOR BUREAU USE ONLY)
- ------------------------------------------------------
- ---------------------------------------------------------------------------------
Name
Jeffrey M. Weiss, Esq.
- ---------------------------------------------------------------------------------
Address
Jaffe, Raitt, Heuer & Weiss, P.C.
One Woodward Avenue, Suite 2400
- ---------------------------------------------------------------------------------
City State Zip Code
Detroit MI 48226 EFFECTIVE DATE:
- ---------------------------------------------------------------------------------
> DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS YOU ENTER ABOVE >
</TABLE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
<TABLE>
<S><C>
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. The location of its registered office is: 31700 MIDDLEBELT ROAD, SUITE 145, FARMINGTON HILLS, MI 48334
4. Article I of the Articles of Incorporation is hereby amended in its entirety to read as follows:
ARTICLE I
THE NAME OF THE CORPORATION IS: BINGHAM FINANCIAL SERVICES CORPORATION
</TABLE>
<PAGE> 3
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF
DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b)
a. The foregoing amendment to the Articles of Incorporation was duly adopted
on the _____ day of _______________, 199_, in accordance with the
provisions of the Act by the unanimous consent of the incorporator(s)
before the first meeting of the board of directors or trustees.
Signed this ____________ day of ________, 19__.
<TABLE>
<S> <C>
------------------------------------ ------------------------------------
(Signature) (Signature)
------------------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
------------------------------------ ------------------------------------
(Signature) (Signature)
------------------------------------ ------------------------------------
(Type or Print Name) (Type of Print Name)
</TABLE>
b.XX The foregoing amendment to the Articles of Incorporation was duly
adopted on the 25th day of August, 1997. The amendment: (check one
of the following)
-- was duly adopted in accordance with Section 611(2) of
the Act by the vote of the shareholders if a profit
corporation, or by the vote of the shareholders or members if
a nonprofit corporation, or by the vote of the directors if a
nonprofit corporation organized on a nonstock directorship
basis. The necessary votes were cast in favor of the
amendment.
-- was duly adopted by the written consent of all the
directors pursuant to Section 525 of the Act and the
corporation is a nonprofit corporation organized on a
nonstock directorship basis.
-- was duly adopted by the written consent of the
shareholders or members having not less than the minimum
number of votes required by statute in accordance with
Section 407(1) and (2) of the Act if a nonprofit corporation,
and Section 407(1) of the Act if a profit corporation.
Written notice to shareholders or members who have not
consented in writing has been given. (Note: Written consent
by less than all of the shareholders or members is permitted
only if such provision appears in the Articles of
Incorporation.)
XX was duly adopted by the written consent of all the
-- shareholders or members entitled to vote in accordance with
Section 407(3) of the Act if a non-profit corporation, and
Section 407(2) of the Act if a profit corporation.
Signed this 25th day of August, 1997
By:
--------------------------------------------------
(Only signature of: President, Vice-President,
Chairperson and Vice-Chairperson)
Jeffrey P. Jorissen, President
--------------------------------------------------
(Type or Print Name) (Type or Print Title)
<PAGE> 4
<TABLE>
<S><C>
Name of person or organization remitting fees: Preparer's name and business telephone number:
Jaffe, Raitt, Heuer & Weiss, Jeffrey M. Weiss, Esq.
Professional Corporation (313) 961-8380
</TABLE>
<PAGE> 1
EXHIBIT 10.1
PARTICIPANTS SUPPORT AGREEMENT
THIS PARTICIPANTS SUPPORT AGREEMENT (this "Agreement") is made and entered
into on the 30th day of September, 1997, but is effective as of July 1, 1997
(the "Effective Date") by and between SUN COMMUNITIES, INC., a Maryland
corporation ("Sun"), and BINGHAM FINANCIAL SERVICES CORPORATION, a Michigan
corporation (the "Company").
A. The Company currently is in the business of financing purchases of new
and previously owned manufactured homes and refinancing of loans secured by
manufactured homes. The Company makes conventional loans under installment
loan agreements secured by manufactured homes ("Contracts"). Sun owns and/or
operates manufactured home communities in the Midwest and Southeast United
States (the "Sun Communities").
B. The Company desires to provide financing for residents and potential
residents of Sun Communities (the "Borrowers"), and Sun desires to make the
Company's financing available on a preferred basis to Borrowers at Sun
Communities and to provide other support in accordance with the terms and
subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
below, the adequacy and receipt of which are hereby acknowledged, the parties
agree as follows:
1. LOAN ORIGINATION/APPLICATION. Sun shall market the Company as a
preferred financing source to Borrowers by displaying the Company's name, signs
and logos at Sun Communities; supplying Borrowers with loan applications from
the Company; responding to queries regarding loan applications by directing
such queries to the Company as a preferred source; reviewing applications for
loans from the Company; assisting in the processing of applications by the
Company; closing loans made by the Company; and assisting in following up on
post-closing loan issues and documentation (collectively, the "Contract
Origination Services"). Sun shall be entitled to receive a customary closing
fee from Borrowers for each of the Company's Contracts closed by Sun.
2. LOAN SUPPORT SERVICES. Upon the Company's request and as permitted by
law, Sun shall provide, or cause to be provided, the following services
(collectively, the "Contract Support Services") to the Company with respect to
the Contracts secured by manufactured homes located in Sun Communities: (a)
provide the Company with information concerning the location and condition of
manufactured homes securing Contracts; (b) maintain, store and refurbish
repossessed manufactured homes; and (c) sell or rent repossessed manufactured
homes.
3. COMPENSATION. In consideration for the services to be provided by Sun
under this Agreement, Sun shall receive an annual fee of 0.43% of the average
loan balance under Contracts originated by Sun. The annual fee shall be paid
on or before January 31 of each year during the term hereof in respect of the
period ended on the preceding December 31. Sun will be eligible to receive up
to 330,000 options to purchase shares of the Company's common stock (the
"Participants Options"), provided Sun satisfies certain requirements described
below. Sun will be entitled to receive customary site rents and brokerage fees
in connection with the resale of foreclosed homes.
4. PARTICIPANTS OPTIONS. The Company has granted 330,000 Participants
Options to purchase common stock in the Company ("Common Stock") to Sun in
consideration of this Agreement. The Participants Options will vest if, and
only if, Sun is a party to and in compliance with the terms of this Agreement
on the vesting date and on December 31st of the previous year.
<PAGE> 2
The Participants Options generally shall contain the following terms and shall
be in the form attached as Exhibit A:
a) The Participants Options will vest 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 vesting until expiration ten years
after the date of vesting;
b) Each Participants Option vesting on January 31, 2001, 2002 and
2003 will entitle the holder to purchase one share of Common
Stock for a purchase price of $10;
c) Each Participants Option vesting on January 31, 2004, 2005 and
2006 will entitle the holder to Purchase one share of Common
Stock for a purchase price of $12;
d) Each Participants Option vesting on January 31, 2007 and 2008
will entitle the holder to purchase one share of Common Stock
for a purchase price of $14; and
e) 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 or reclassification transactions of the
Common Stock.
5. THE TERM. The initial term of this Agreement shall be three (3)
years from the date hereof, and shall be automatically extended for successive
one year periods thereafter unless either party gives written notice to the
other party not less than sixty (60) days prior to the end of any such initial
or subsequent term of its intention to terminate the Agreement as of the last
day of such initial or subsequent term, or unless terminated earlier by either
party in accordance with Section 6.
6. EARLY TERMINATION. In the event that the Company fails to make
timely payment of all fees and other payments due to Sun hereunder and such
failure to make payment is not cured within twenty-five (25) business days
after the date such payment is due, Sun may terminate this Agreement by giving
the Company notice of termination which termination by Sun shall become
effective ten (10) days from the date of such notice. In the event that Sun
fails to observe and perform in any material respect any of its duties and
obligations under this Agreement which failure has material effect on the
Company's business and continues unremedied for a period of thirty (30) days
after the date on which notice of such failure shall have been given by the
Company to Sun, the Company may terminate this Agreement by giving Sun notice
of termination which termination by the Company shall become effective ten (10)
days from the date of such notice. Notwithstanding any of the foregoing to the
contrary, Sun shall have the right to terminate this Agreement, after
expiration of the initial term hereof, upon thirty days' written notice to the
Company upon the undertaking and completion by Sun, or its successor, whether
in one transaction or a series of transactions, of (a) the sale, lease,
transfer or other disposition of all or substantially all of Sun's assets, or
(b) other significant financing or refinancing, reorganization,
recapitalization, merger, share exchange or any other significant business
combination permitted under applicable law.
-2-
<PAGE> 3
7. ENTIRE AGREEMENT. This Agreement sets forth all of the covenants,
agreements, stipulations, promises, conditions and understandings between Sun
and the Company concerning the Contract Origination Services and the Contract
Support Services and the terms hereof, and there are no covenants, agreements,
stipulations, promises, conditions or understanding, either oral or written,
between them other than set forth herein.
8. CHOICE OF LAW. This Agreement is being entered into and executed in
the State of Michigan, and all questions with respect to the construction of
this Agreement and the rights and liabilities of the parties shall be
determined in accordance with the provisions of the laws of the State of
Michigan, without regard to principles of conflicts of laws.
9. GENERAL PROVISIONS.
a) This Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties; provided,
however, that neither party may assign this Agreement or any
rights hereunder without the prior written consent of the
other and any prohibited assignment shall be absolutely void.
b) Section headings and numbers have been set forth herein for
convenience only.
c) Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
d) This Agreement can be changed or amended only in writing
signed by the parties hereto.
e) Nothing contained in this Agreement shall be construed to be
or create a partnership or joint venture between the parties
hereto, their respective successors or assigns.
10. NOTICES. All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party hereto shall be in
writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid and, if mailed, shall be deemed to be received for
purposes of this Agreement five (5) business days after mailing by the sender.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 11, notice, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at the following addresses:
If to Sun: Gary A. Shiffman
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
With a Copy to: Arthur A. Weiss
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
Suite 2400
-3-
<PAGE> 4
One Woodward Avenue
Detroit, Michigan 48226
If to the Company: Jeffrey P. Jorissen
31700 Middlebelt Road
Suite 125
Farmington Hills, Michigan 48334
With a Copy to: Peter Sugar
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
Suite 2400
One Woodward Avenue
Detroit, Michigan 48226
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date and year first above written.
SUN COMMUNITIES, INC., a Maryland
corporation
By: ____________________________________
Gary A. Shiffman, President
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By:______________________________________
Jeffrey P. Jorissen, President
-4-
<PAGE> 1
EXHIBIT 10.2
BINGHAM FINANCIAL SERVICES CORPORATION
PARTICIPANTS OPTIONS
STOCK OPTION AGREEMENT
Bingham Financial Services Corporation, a Michigan corporation (the
"Company"), upon the recommendation of the Company's Board of Directors (the
"Board") and pursuant to that certain Participants Support Agreement adopted by
the Company's Board of Directors (the "Participants Support Agreement"), and in
consideration of the services rendered to the Company by Sun Communities, Inc.,
a Maryland corporation ("Sun"), hereby grants to Sun, as of September 30, 1997
(the "Date of Grant"), the option to purchase Three Hundred Thirty Thousand
(330,000) shares (the "Participants Options") of the Company's common stock,
(the "Shares"), at a price per share as detailed in Section I (the "Option
Price"), on the terms and subject to the conditions contained in this Stock
Option Agreement (the "Agreement") and subject to all the terms and conditions
of the Participants Support Agreement, which are incorporated by reference
herein.
I. EXERCISE OF PARTICIPANTS OPTIONS
The Participants Options will vest if, and only if, Sun is a party
to and in compliance with the terms of the Participants Support
Agreement on the vesting date and on December 31st of the previous year.
Provided that Sun meets such requirements, the Participants Options
will vest in the following manner:
(a) The Participants Options will vest 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 vesting until expiration ten
years after the date of vesting;
(b) Each Participants Option vesting on January 31, 2001,
2002 and 2003 will entitle the holder to purchase one share
of Common Stock for a purchase price of $10;
(c) Each Participants Option vesting on January 31, 2004,
2005 and 2006 will entitle the holder to Purchase one share
of Common Stock for a purchase price of $12; and
(d) Each Participants Option vesting on January 31, 2007
and 2008 will entitle the holder to purchase one share of
Common Stock for a purchase price of $14.
Sun may exercise the Participants Options at any time on or after
the date of vesting, but in no event later than the tenth anniversary of
the vesting date. Once vested, the Participants Options may be
exercised in whole or in part, in denominations of not fewer than 5,000
shares until expiration.
<PAGE> 2
II. TRANSFERABILITY
The Participants Options may only be transferred by Sun in compliance with
all applicable requirements of state and federal securities laws as evidenced
by an opinion of counsel for Sun, reasonably acceptable to the Company, to the
effect that any such proposed transfer complies with such laws.
III. MANNER OF EXERCISE
The Participants Options may be exercised, in accordance with Section I
above, by delivery (personally or by certified or registered mail in accordance
with Section VIII below) of a written notice to the Company's Secretary
specifying the number of Shares to be purchased and accompanied by payment for
those Shares and any applicable withholding taxes. At the election of the
holder, such payment may be made in cash, check, or by delivery of
certificate(s) representing Shares of the Company's common stock previously
held, duly endorsed for transfer, or shares issuable to the holder pursuant to
the exercise of the Participants Options. The Company may also permit payment
to be made in such other manner as the Company deems appropriate and in
compliance with applicable law. Any shares delivered to the Company in payment
of the Option Price shall be valued at the fair market value of the Company's
shares, such valuation to be equal to the average of the highest and lowest
selling price for the Company's stock quoted on the NASD OTC Bulletin Board, or
other market or exchange on which the shares are then traded, for the date of
exercise of the Participants Options or any part thereof (or if no sales are
reported on that date, for the first date prior to the exercise date upon which
a sale was reported).
IV. EXPIRATION
All unexercised rights under the Option shall expire on the expiration
date specified in Section I above.
V. NON-ISSUANCE
The Company shall not be required to issue or deliver any Shares upon
exercise of the Participants Options:
(a) Prior to the admission of such Shares to listing on any public
exchange on which the Company's common stock may be listed; or
(b) Prior to the completion of any proceedings under any applicable
state or federal securities law, rule or regulation that the Company or
its counsel determines to be necessary or advisable to the issuance of
the Shares; or
(c) Unless such issuance, in the opinion of the Company's counsel,
is exempt from federal and state securities registration requirements.
-2-
<PAGE> 3
The Company may require the holder to represent and agree in writing that if
such Shares are issuable under an exemption from registration requirements, the
Shares will be "restricted". The holder shall not have the rights of a
shareholder with respect to the Shares until certificates evidencing the Shares
have been issued and delivered. While the Company will attempt to process the
exercise of the Participants Options as promptly as possible, it cannot
guarantee a delivery date for the certificates.
VI. REORGANIZATION
If prior to the expiration of the Participants Options, the Shares then
subject to the Participants Options shall be affected by any recapitalization,
merger, consolidation, reorganization, stock dividend, stock split or other
change in capitalization affecting the common stock of the Company, the Company
will appropriately adjust the number and kind of Shares covered by the
Participants Options and the Option Price per share as is necessary to prevent
dilution or the enlargement of rights which might otherwise result.
VII. REGISTRATION RIGHTS
Section VII.1 Required Registration.
(a) Subject to the provisions of subsection (e) of this Section
VII.1, the holder may at any time after the fourth anniversary of the initial
public offering of the common stock of the Company request in writing that the
Company register the Shares under the Securities Act of 1993, as amended (the
"Act") for sale in the manner specified in such notice; provided, that the
Company shall have no obligation to register the Shares pursuant to this
subsection (a) unless the number of Shares for which registration has been
requested constitutes at least five percent (5%) of the Company's common
stock then outstanding; and provided further, that the Company shall not be
obligated to register the Shares pursuant to this subsection (a) on more than
two occasions.
(b) Following receipt of any notice delivered in compliance
with subsection (a) of this Section VII.1 (a "Demand"), the Company
shall use its best efforts to register under the Act, for public sale in
accordance with the method of disposition specified in such Demand, the number
of Shares specified in such Demand. The holder may designate the managing
underwriter or underwriters if the offering is to be underwritten, which shall
be of national standing, subject to the approval of the Company, which approval
shall not be unreasonably withheld or delayed. The Company shall be deemed to
have satisfied an obligation to register the Shares pursuant to a Demand only
when a registration statement covering the Shares specified in the Demand and
any written requests delivered under this subsection (b), for sale in
accordance with the method of disposition specified in the Demand, shall have
become effective and the period of distribution of the Shares contemplated
thereby shall have been completed (determined as hereinafter provided).
(c) The Company shall be entitled to include in any
registration statement filed in response to a Demand made in accordance with
this Section VII.1, for sale in accordance with the method of disposition
specified by the holder in such Demand, shares of common stock to be sold by
the Company for its own account, except as and to the extent that, in the
opinion of the managing underwriter(s), if any, such inclusion would adversely
affect the marketing of the Shares for which registration has been requested in
connection with such Demand, which Shares
-3-
<PAGE> 4
shall be registered prior to the shares that the Company and any other
shareholders propose to register. Except for registration statements on form
S-4, S-8 or any successor forms thereto, the Company will not file with the
Securities and Exchange Commission (the "Commission") any other registration
statement with respect to its securities, whether for its own account or that
of other security holders, from the date of receipt of a Demand pursuant to
this Section VII.1 until 30 days following the completion of the period of
distribution of the Shares contemplated thereby (determined as hereinafter
provided).
(d) The Company may at its option elect that any requested
registration pursuant to this Section VII.1 be delayed for a period not
in excess of 120 days from the date of such Demand; provided, that such right to
delay a Demand may not be exercised by the Company pursuant to this Section
VII.1 more than once in any twelve-month period (so that no such election by the
Company may be made within twelve months of a previous election by the Company
under this subsection (d)).
(e) Notwithstanding anything to the contrary contained in
subsection (a) of this Section VII.1, no Demand may be made under this
Section VII.1 within 90 days after the effective date of a registration
statement filed by the Company covering a public offering in which the holders
of the Shares shall have been entitled to join pursuant to Section VII.2 and in
which there shall have been effectively registered all the Shares as to which
registration shall have been requested in accordance with Section VII.2.
Section VII.2 Incidental Registration. Subject to certain limitations set
forth in subsection (b) of this Section, each time that the Company proposes to
file under the Act a registration statement relating, in whole or in part, to
any of its equity securities, the Company shall at least thirty (30) days prior
to such filing give written notice of such proposed filing to the holder of
outstanding Shares not theretofore registered under the Act. Upon receipt by
the Company not more than ten (10) days thereafter of a written request from
the holder for registration of Shares under this subsection, subject to the
provisions of the succeeding sentence, the Company shall include in such filing
and shall use its best efforts to register the Shares as to which the holder
requested registration, provided, however, if at any time after giving written
notice of its intention to register any equity securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
equity securities, the Company may, at its election, give written notice of
such determination to the holder of the Shares and, thereupon, shall be
relieved from its obligation with such registration (but not from its
obligation to pay the registration expenses in connection therewith). If the
managing or principal underwriters named in the registration statement shall
advise the Company and the holder that has requested the Shares to be
registered that, in the good faith judgment of such managing or principal
underwriters, the number of shares of common stock which the holder, the Company
and all other shareholders have requested be included in such registration
statement exceed the number of shares it is advisable to offer and to sell at
such time, then the Company shall include in such registration, to the extent of
the number of shares of common stock which the Company is so advised can be sold
in such offering, the shares of common stock that the Company proposes to issue
and sell for its own account and the number of shares of common stock to be
registered and sold by the holder and all other shareholders requesting
registration pursuant to such registration statement shall be appropriately
reduced. In such case the number of shares of common stock to be sold after
such reduction shall be ratably allocated among the holder and such other
shareholders in the same proportion as the original number of shares requested
by such Person to be registered bears to a fraction, the numerator of which is
the aggregate number of shares to be registered and the denominator of which is
the aggregate number of shares requested to be registered.
-4-
<PAGE> 5
Section VII.3 Other Provisions Relating to Registration Rights. In
connection with any registration pursuant to this Section VII.3:
(a) Upon the request of the holder of the Shares then being
registered, the Company shall cooperate with any underwriters (as
defined in the Act) for the requesting party approved by the Company (which
approval shall not be unreasonably withheld), including, without limitation,
providing such information, certificates, comfort letters of accountants and
opinions of counsel as may be customarily and reasonably requested by such
underwriters.
(b) The Company shall furnish to the holder of the Shares being
registered, at the Company's sole cost and expense, such number of prospectuses
conforming to the requirements of the Act, and the rules and regulations
thereunder, relating to the Shares subject thereto as may from time to time be
reasonably requested by such holders.
(c) All fees, disbursements and expenses incident to the
Company's performance of or compliance with its obligations under this
Section VII shall be borne by the Company, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company and expenses of complying with applicable securities or
blue sky laws.
(d) The Company agrees to use its best efforts at its own
expense to effect and to keep effective necessary registrations or
qualifications under the securities or Blue Sky laws of such jurisdictions as
may be reasonably requested by any of the holders of the Shares or by any
underwriters for such holders so as to permit the disposition of the Shares
being registered.
(e) The holder agrees to provide in an expeditious manner
whatever information and undertakings are reasonably requested by the
Company in order to comply with the requirements of the Act and of the
Securities Exchange Act of 1934, as amended, the rules and regulations
thereunder and the guides and other pronouncements of the Commission in
connection with the registration of the holder's Shares.
(f) The Company shall indemnify and hold harmless the holder and any
underwriter (as defined in the Act) who participates in such registration for
such holder and each person, if any, who controls the holder or any underwriter
against any losses, claims, damages or liabilities, joint or severally, or
actions in respect thereof to which the holder or any underwriter or
controlling person may become subject under the Act, or otherwise, insofar as
such losses, claims damages, liabilities or actions in respect thereof arise
out of, or are based upon, any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
Shares were registered under the Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or arise
out of, or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the holder or any underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall have the right,
at its option, to defend at its expense and by its own counsel against any
losses, claims, damages or liabilities, provided that (i) such counsel is
reasonably satisfactory to the holder of the Shares; (ii) the holder of the
Shares is kept fully informed of all developments, and is furnished with copies
of all documents and papers, related thereto and is given the right to
participate in the defense and investigation thereof at the expense of the
Company if (A) in the written opinion of counsel to such holders, use of
counsel of the Company's choice would be expected to give rise to a conflict of
interest; (B)
-5-
<PAGE> 6
there are or may be legal defenses available to the holder that
are different from or additional to those available to the Company; (C) the
Company shall not have employed counsel to represent the holder within a
reasonable time after notice of such claim is given to the Company or notice
that the Company intends to assume the defense of such claim is given to the
holder; or (D) the Company shall authorize the holder to employ separate
counsel at the expense of the Company; and provided, further, that to the
extent that any such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus or said final prospectus or in conformity with, written information
furnished to the Company by the holder or by any underwriter for the holder
specifically for use in the preparation thereof, the Company will not be so
liable to the holder or underwriter and the holder agrees to indemnify and hold
the Company harmless from any loss, claim, damage, liability or action arising
from such information furnished to the Company by it and to use its best
efforts to cause any underwriter for the holder to indemnify and hold the
Company harmless from any loss, claim, damage, liability or action arising from
information furnished to the Company by such underwriter.
(g) The holder shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than customary representations, warranties or agreements
regarding the holder, the holder's Shares and the holder's intended method of
distribution and any other representation required by law.
VIII. NOTICE
All notices given pursuant to or in connection with this Agreement shall
be in writing and shall be deemed to be duly given when personally delivered
or when mailed, if sent by certified or registered mail, postage prepaid,
return receipt requested, and addressed as follows, or to such other address as
the parties may indicate:
If to the Company: Bingham Financial Services Corporation
31700 Middlebelt Road, Suite 125
Farmington Hills, Michigan 48334
ATTN: Mr. Jeffrey P. Jorissen
With a Required Copy
of any Notice to: Peter Sugar, Esq.
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
If to Sun: Sun Communities, Inc.
31700 Middlebelt Road, Suite 145
Farmington Hills, Michigan 48334
ATTN: Mr. Gary A. Shiffman
-6-
<PAGE> 7
IX. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable, the
remaining provisions shall continue to be in full force and effect to the
maximum extent permitted by law. If the implementation or presence of any
provision of this Agreement would or will cause the Plan and thereby the Shares
purchased thereunder to not be in compliance with Rule 16b-3 under the
Securities Exchange Act of 1934 or any other statutory provision, such
Agreement provision shall not be implemented or, at the Company's option
following notice, such provision shall be severed from the Agreement as is
appropriate or necessary to achieve statutory compliance; provided, however,
that the parties hereby agree to negotiate in good faith as may be necessary to
modify this Agreement to achieve statutory compliance or otherwise effectuate
the intent of the parties following a severance permitted by this Section IX.
X. AMENDMENT
This instrument contains the entire Agreement of the parties and may only
be amended by written agreement executed by the parties hereto or their
respective successors, as permitted by Section II above.
XI. GOVERNING LAW
This Agreement is made and entered into and shall be construed and
enforced in accordance with the laws of the State of Michigan.
XII. HEADINGS
The section numbers and headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
XIII. ACCEPTANCE OF PARTICIPANTS OPTIONS
The exercise of the Participants Options is conditioned upon the
acceptance by Sun and any transferee hereof of the terms hereof as evidenced by
the execution of this Agreement and the return of an executed copy to the
Secretary of the Company no later than sixty days after the date set forth in
the following paragraph.
-7-
<PAGE> 8
IN WITNESS WHEREOF, this Stock Option Agreement is hereby executed as of
_______________________, 1997.
"COMPANY"
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By: _______________________________________
Jeffrey P. Jorissen, President
"SUN"
SUN COMMUNITIES, INC., a Maryland
corporation
By: _______________________________________
Gary A. Shiffman, President
-8-
<PAGE> 1
EXHIBIT 10.3
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT (this "Agreement") is made and entered into
as of the 1st day of July, 1997, by and between SUN COMMUNITIES, INC., a
Maryland corporation ("Sun"), and BINGHAM FINANCIAL SERVICES CORPORATION, a
Michigan corporation (the "Company").
R E C I T A L S:
A. Sun's principal office is located at 31700 Middlebelt Road, Suite 145,
Farmington Hills, Michigan, 48334 (the "Premises"). In connection with its
business operations at the Premises, Sun incurs administrative and operating
costs and expenses including those for management and employee compensation and
benefits, utilities, accounting, tax return preparation services, accounts
payable and receivable processing, information management systems, office and
Premises management, insurance, storage, purchasing and/or leasing equipment,
tools, supplies and other personal property, real and personal property taxes,
rental charges, repairs and maintenance charges and for other costs and
expenses (collectively, the "Services").
B. The Company desires to lease and share in the use of a portion of the
Premises (the "Leased Premises") from Sun and to use and share the benefits of
some of the Services (the "Shared Services") with Sun. Sun desires to lease
the Leased Premises to, and provide and share the Shared Services with, the
Company in accordance with the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereunder contained, the adequacy and receipt of which are hereby acknowledged,
the parties agree as follows:
1. THE LEASED PREMISES. The Leased Premises shall consist of such portion
of the Premises as the Company shall need and deem desirable and necessary to
conduct its business, but only to the extent such Leased Premises do not
interfere with Sun's business at the Premises, all as mutually determined and
agreed upon by the parties from time to time. The Company hereby rents from
Sun, and Sun hereby demises and leases to the Company, the Leased Premises as
mutually determined and agreed upon by the parties from time to time and in
accordance with the terms and subject to the conditions of this Agreement.
2. THE SHARED SERVICES. The Shared Services shall include such portion of
the Services as the Company shall need and deem desirable and necessary to
conduct its business, all as reasonably requested by the Company from time to
time, in accordance with the terms and subject to the conditions of this
Agreement.
3. ADMINISTRATIVE CHARGES. The Company shall reimburse Sun for its share
of Sun's costs attributable to the Leased Premises and the Shared Services
provided by Sun. The payment by the Company to Sun for the first year of this
Agreement is estimated to be and shall not exceed $75,000. After the first
year, any increase in occupancy or Shared Services or otherwise in the
amount to be paid to Sun hereunder shall require the approval of the Company's
non-employee directors. Costs incurred by the Company hereunder shall be
billed to the Company by Sun not more frequently than quarterly and shall be
payable within 15 days of billing.
4. TERM. The initial term of this Agreement shall be three (3) years from
the date hereof, and shall be automatically extended for successive one year
periods thereafter unless
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either party gives written notice to the other party not less than sixty (60)
days prior to the end of any such initial or subsequent term of its intention
to terminate the Agreement as of the last day of such initial or subsequent
term, or unless terminated earlier by either party in accordance with
Section 5.
5. EARLY TERMINATION. In the event that the Company fails to make timely
payment to Sun for costs incurred hereunder and such failure to make payment is
not cured within twenty-five (25) business days after the date such payment is
due, Sun may terminate this Agreement by giving the Company notice of
termination which termination by Sun shall become effective ten (10) days from
the date of such notice. In the event that Sun fails to observe and perform in
any material respect any of its duties and obligations under this Agreement
which failure has material effect on the Company's business and continues
unremedied for a period of thirty (30) days after the date on which notice of
such failure shall have been given by the Company to Sun, the Company may
terminate this Agreement by giving Sun notice of termination which termination
by the Company shall become effective ten (10) days from the date of such
notice. Notwithstanding any of the foregoing to the contrary, Sun shall have
the right to terminate this Agreement (a) upon the undertaking and completion
by Sun or its successor, whether in one transaction or a series of
transactions, of (i) the sale, lease, transfer or other disposition of all or
substantially all of Sun's assets, or (iii) other significant financing or
refinancing, reorganization, recapitalization, merger, share exchange or any
other significant business combination permitted under applicable law, or (b)
upon moving Sun's main offices or business operations out of the Premises.
6. RELEASE OF LIABILITY. Each party hereby releases the other in respect
of any claim (including a claim for negligence) that it might otherwise have
against the other party for loss, damage or destruction with respect to its
property by fire or other casualty occurring during the term of this Agreement
if, and to the extent, covered under the fire insurance policy covering the
Premises or any other insurance policy carried by Sun or the Company. Sun and
the Company shall both be named insureds under any fire and extended coverage
and "all risk" insurance covering the Premises and any other insurance carried
by Sun or the Company in respect of the Premises.
7. ENTIRE AGREEMENT. This Agreement sets forth all of the covenants,
agreements, stipulations, promises, conditions and understandings between Sun
and the Company concerning the Leased Premises and the Shared Services and the
terms hereof, and there are no covenants, agreements, stipulations, promises,
conditions or understanding, either oral or written, between them other
than set forth herein.
8. CHOICE OF LAW. This Agreement is being entered into and executed in the
State of Michigan, and all questions with respect to the construction of this
Agreement and the rights and liabilities of the parties shall be determined in
accordance with the provisions of the laws of the State of Michigan, without
regard to principles of conflicts of laws.
9. GENERAL PROVISIONS.
a) This Agreement shall bind and inure
to the benefit of the respective successors and assigns
of the parties; provided, however, that neither party
may assign this Agreement or any rights hereunder
without the prior written consent of the other, and any
prohibited assignment shall be absolutely void.
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b) Section headings and numbers have
been set forth herein for convenience only.
c) Each provision of this Agreement
shall be severable from every other provision of this
Agreement for the purpose of determining the legal
enforceability of any specific provision.
d) This Agreement may be changed or
amended only in writing signed by the parties hereto.
e) Nothing contained in this Agreement
shall be construed to be or create a partnership or
joint venture between the parties hereto, their
respective successors or assigns.
10. NOTICES. All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party hereto shall be in
writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid and, if mailed, shall be deemed to be received for
purposes of this Agreement five (5) business days after mailing by the sender.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 10, notice, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at the following addresses:
If to Sun: Gary A. Shiffman
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
With a Copy to: Arthur A. Weiss
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
Suite 2400
One Woodward Avenue
Detroit, Michigan 48226
If to the Company: Jeffrey P. Jorissen
31700 Middlebelt Road
Suite 125
Farmington Hills, Michigan 48334
With a Copy to: Peter Sugar
Jaffe, Raitt, Heuer & Weiss, Professional Corporation
Suite 2400
One Woodward Avenue
Detroit, Michigan 48226
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IN WITNESS WHEREOF Sun and the Company have executed this Agreement as of
the date and year first above written.
SUN COMMUNITIES, INC., a Maryland
corporation
By:
----------------------------------------
Gary A. Shiffman, President
BINGHAM FINANCIAL SERVICES CORPORATION, a
Michigan corporation
By:
----------------------------------------
Jeffrey P. Jorissen, President
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EXHIBIT 10.4
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made this ___ day of _______________, 1997 by and
between BINGHAM FINANCIAL SERVICES CORPORATION, a Michigan corporation (the
"Company"), and ____________________ (the "Indemnitee").
RECITALS:
A. Indemnitee is both a member of the Board of Directors and/or an
executive officer of the Company, and in such capacities is performing a
valuable service for the Company.
B. The Company has adopted Restated Articles of Incorporation (the
"Articles") and Amended and Restated Bylaws (the "Bylaws") authorizing and
directing the Company to indemnify the directors, officers, agents and
employees of the Company to the maximum extent authorized by the Michigan
Business Corporation Act, as amended to date (the "Act").
C. The Act specifically provides that it is not exclusive, and thereby
contemplates that contracts may be entered into between the Company and its
directors, officers, agents and employees with respect to the indemnification
of such persons.
D. Recent developments with respect to the terms and availability of
directors and officers liability insurance ("D&O Insurance") and the
application, amendment and enforcement of statutory and other indemnification
provisions generally have raised questions concerning the adequacy and
reliability of the protection afforded to directors and officers thereby.
E. To resolve such questions and thereby induce Indemnitee to continue to
serve as a member of the Board of Directors of the Company or as an officer, or
both, the Company desires to enter into this contract with Indemnitee.
AGREEMENT
NOW, THEREFORE, in consideration of Indemnitee's continued service with
the Company after the date hereof, the parties agree as follows:
1. D&O Insurance. The Company shall evaluate whether to procure D&O
Insurance, and if it, in its discretion, procures such insurance, it shall
maintain D&O Insurance so long as, in the reasonable business judgment of the
then directors of the Company, both (i) the premium cost for such insurance is
reasonably related to the amount of coverage provided, and (ii) the coverage
provided by such insurance is not so limited by exclusions that insufficient
benefit may be derived therefrom.
2. Indemnity. Subject only to the exclusions set forth in Section 3
hereof, the Company hereby agrees to hold harmless and indemnify Indemnitee, on
demand and as such expenses are incurred, against any and all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by Indemnitee in connection with any
threatened, pending or completed action, suit or proceedings, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Company) to which Indemnitee is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the fact that
Indemnitee is, was or at any time becomes a director, officer, employee or
agent of the Company, or is or was serving or at any time serves at the request
of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise to the
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fullest extent authorized and permitted by the provisions of the Act, or by any
amendment thereof or other statutory provisions authorizing or permitting such
indemnification which is adopted after the date hereof.
3. Limitations on Indemnity. No indemnity pursuant to Section 2 hereof
shall be paid by the Company:
(a) except to the extent the aggregate of losses to be indemnified
hereunder exceed the amount of such losses for which Indemnitee is
indemnified pursuant to any D&O Insurance purchased and maintained by the
Company;
(b) in respect to remuneration paid to Indemnitee if a final
decision by a court having jurisdiction in the matter shall determine
that such remuneration was in violation of law;
(c) on account of any suit in which judgment is rendered against
Indemnitee for an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments
thereto or similar provisions of any federal, state or local statutory
law;
(d) if a final decision by a court having jurisdiction in the matter
shall determine that Indemnitee's act or omission involved an act or
omission undertaken with deliberate intent to cause injury to the Company
or undertaken with reckless disregard for the best interests of the
Company;
(e) if a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful; or
(f) if otherwise prohibited by the Act.
4. Continuation of Indemnity. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is a
director, officer, employee or agent of the Company (or is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) and shall
continue thereafter so long as Indemnitee shall be subject to any possible
claim or threatened, pending or completed action, suit or proceeding, whether
civil, criminal or investigative, by reason of the fact that Indemnitee was a
director of the Company or serving in any other capacity referred to herein.
5. Notification and Defense of Claim. Promptly after receipt by
Indemnitee of notice of the commencement of any action, suit or proceeding,
Indemnitee will, if a claim in respect thereof is to be made against the
Company under this Agreement, notify the Company in writing of the commencement
thereof; but the omission so to notify the Company will not relieve it from any
liability which it may have to Indemnitee otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Indemnitee
notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its own
expense.
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(b) Except as otherwise provided below, to the extent that it may
wish, the Company, jointly with any other indemnifying party similarly
notified, will be entitled to assume the defense thereof, with counsel
selected by the Company and reasonably satisfactory to Indemnitee. After
notice from the Company to Indemnitee of its election so to assume the
defense thereof, the Company will not be liable to Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by
Indemnitee in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Indemnitee shall
have the right to employ counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from the
Company of its assumption of the defense thereof shall be at the expense
of Indemnitee unless (i) the employment of counsel by Indemnitee has been
authorized by Company, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and
Indemnitee in the conduct of the defense of such action or (iii) the
Company shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of counsel
shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any action, suit or proceeding brought
by or on behalf of the Company or as to which Indemnitee shall have made
the conclusion provided for in (ii) above and notified the Company or as
to which Indemnitee shall have made the conclusion provided for in (ii)
above and notified the Company of such decision in writing specifying the
reasons therefore.
(c) The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's prior written consent.
Neither the Company nor Indemnitee will unreasonably withhold their
consent to any proposed settlement.
6. Repayment of Expenses. Indemnitee agrees that Indemnitee will
reimburse the Company for all reasonable fees and expenses paid by the Company
in defending any civil or criminal action, suit or proceeding against
Indemnitee if and only to the extent that a final decision by a court having
jurisdiction in the matter shall determine that Indemnitee is not entitled to
be indemnified by the Company for such fees and expenses under the provisions
of the Act, the Articles, the Bylaws, this Agreement or otherwise.
7. Enforcement.
(a) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on the Company
hereby to induce Indemnitee to continue as a director or as an executive
officer of the Company or any of its subsidiaries or an affiliated
company as directed by the Company, and acknowledges that Indemnitee is
relying upon this Agreement in continuing in such capacity.
(b) If Indemnitee is required to bring any action to enforce rights
or to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Indemnitee for all of Indemnitee's
reasonable fees and expenses in bringing and pursuing such action.
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8. Severability. Each of the provisions of this Agreement is a separate
and distinct agreement, independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
9. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Michigan applicable to contracts made and
to be wholly performed in such state.
(b) This Agreement shall be binding upon Indemnitee and upon the
Company, its successors and assigns, and shall inure to the benefit of
Indemnitee, his/her heirs, personal representatives and assigns and to
the benefit of the Company, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
10. Counterparts. This document may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the day and year first above written.
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By:______________________________________
Jeffrey P. Jorissen, President
_________________________________________
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of June 1, 1997 by
and between WILLIAM L. MULVANEY ("Employee") and BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to continue the employment of the Employee,
and the Employee desires to continue to be employed by the Company, on the
terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, the parties agree as follows:
1. Employment.
(a) The Company agrees to employ the Employee and the Employee accepts
the employment, on the terms and subject to the conditions set forth below.
During the term of employment hereunder, the Employee shall serve as the Chief
Operating Officer ("COO") of the Company, and shall do and perform diligently
all such services, acts and things as are customarily done and performed by a
Chief Operating Officer of companies in similar business and in size to the
Company, together with such other duties as may be requested from time to time
by the Company. As the Company may in the future engage in other related
businesses, the Employee's duties may vary from time to time so long as such
duties are consistent with the duties of an executive officer of the Company.
(b) For service as an officer and employee of the Company, the Employee
shall be entitled to the full protection of the applicable indemnification
provisions of the Articles of Incorporation and Bylaws of the Company, as they
may be amended from time to time.
2. Term of Employment.
Subject to the provisions for termination provided below, the term of
the Employee's employment under this Agreement shall commence on the date hereof
and shall continue thereafter for a period of three (3) years.
3. Devotion to the Company's Business.
The Employee shall devote his best efforts, knowledge, skill, and his
entire productive time, ability and attention to the business of the Company
during the term of this Agreement.
4. Compensation.
(a) During the term of this Agreement, the Company shall pay or provide,
as the case may be, to the Employee the compensation and other benefits and
rights set forth in paragraphs 4, 5 and 6 of this Agreement.
(b) Base Compensation. As compensation for the services to be performed
hereafter, the Company shall pay to the Employee, during his employment
hereunder, a base salary (the "Base Salary") payable in accordance with the
Company's usual pay practices (and in any event no less frequently than
monthly) at the rate of SEVENTY THOUSAND DOLLARS ($70,000) per year through
October 31, 1997, and at the rate of EIGHTY THOUSAND DOLLARS ($80,000) per year
thereafter.
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(c) Bonus. The Company may prepare and adopt an employee bonus plan (the
"Bonus Plan") which shall be established for the payment of an incentive bonus
to the Employee based on the Company achieving certain performance criteria to
be established by the Company and the Employee. Upon adoption, a copy of the
Bonus Plan shall be attached to this Agreement and incorporated herein, and the
Employee shall be eligible to receive an award under the Bonus Plan on the
terms and conditions set forth in that document; provided, however, that such
bonus shall not exceed seventy five (75%) of the Employee's then current Base
Salary.
(d) Disability. During any period that the Employee fails to perform
his duties hereunder as a result of incapacity due to physical or mental
illness (the "Disability Period"), the Employee shall continue to receive his
full Base Salary, bonuses and other benefits at the rate in effect for such
period until his employment is terminated by the Company pursuant to paragraph
7(a)(iii) hereof; provided, however, that payments so made to the Employee
during the Disability Period shall be reduced by the sum of the amounts, if
any, which were paid to the Employee at or prior to the time of any such
payment under disability benefit plans of the Company.
5. Benefits.
(a) Insurance. The Company shall provide to the Employee life, medical
and hospitalization insurance for himself, his spouse and eligible family
members as may be determined by the Company to be consistent with the Company's
standard policies.
(b) Benefit Plans. The Employee, at his election, may participate,
during his employment hereunder, in all retirement plans, 401(K) plans and
other benefit plans of the Company generally available from time to time to
other employees of the Company and for which the Employee qualifies under the
terms of the plans (and nothing in this Agreement shall or shall be deemed to
in any way affect the Employee's right and benefits under any such plan except
as expressly provided herein). The Employee shall also be entitled to
participate in any equity, stock option or other employee benefit plan that is
generally available to other officers of the Company. The Employee's
participation in and benefits under any such plan shall be on the terms and
subject to the conditions specified in the governing document of the particular
plan.
(c) Annual Vacation. The Employee shall be entitled to two (2 ) weeks
vacation time each year without loss of compensation which shall be scheduled
with the advance approval of the Company.
6. Reimbursement of Business Expenses.
The Company shall reimburse the Employee or provide him with an expense
allowance during the term of this Agreement for travel, car telephone, and
other expenses reasonably and necessarily incurred by the Employee in
connection with the Company's business. The Employee shall furnish such
documentation with respect to reimbursement to be paid hereunder as the Company
shall reasonably request.
7. Termination of Employment.
(a) The Employee's employment under this Agreement may be terminated:
(i) by either the Employee or the Company at any time for any
reason whatsoever or for no reason upon not less than thirty (30)
days written notice;
(ii) by the Company at any time for "cause" as defined below,
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without prior notice;
(iii) by the Company upon the Employee's "permanent disability" as
defined below, without prior notice; and
(iv) upon the Employee's death.
(b) For purposes hereof, for "cause" shall mean (i) the breach of any
material provision of this Agreement by Employee, and any action of Employee
(or the Employee's failure to act), which, in the reasonable determination of
the Company, involves malfeasance, fraud or moral turpitude, or which, if
generally known, would or might have a material adverse effect on the Company,
its businesses and/or reputations, (ii) the conviction of the Employee for any
felony, fraud or theft, (iii) any misconduct or gross negligence of the
Employee in performing his duties hereunder, including a knowing failure to
disclose or stop the dishonesty of others, (iv) dishonesty of the Employee, (v)
any act on the part of the Employee of fraud, deceit or misappropriation, (vi)
any failure or refusal on the part of Employee to perform his duties, or (vi)
any unauthorized self-dealing by the Employee. In the event of termination of
the Employee's employment under this Agreement for "cause" or if Employee
voluntarily terminates his employment hereunder, the Employee shall be entitled
to no further compensation or other benefits under this Agreement, except only
as to any unpaid salary, bonus and benefits accrued and earned by him hereunder
up to and including the effective date of such termination.
(c) For purposes hereof, the Employee's "permanent disability" shall be
deemed to have occurred after ninety (90) consecutive days during which the
Employee, by reason of his physical or mental disability or illness, shall have
been unable to discharge his duties under this Agreement. The date of
permanent disability shall be such ninetieth (90th) day. In the event either
the Company or the Employee, after receipt of notice of the Employee's
permanent disability from the other, disputes that the Employee's permanent
disability shall have occurred, the Employee shall promptly submit to a
physical examination by the chief of medicine of any major accredited hospital
in Michigan and, unless such physician shall issue his written statement to the
effect that in his opinion, based on his diagnosis, the Employee is capable of
resuming his employment and devoting his full time and energy to discharging
his duties within thirty (30) days after the date of such statement, such
permanent disability shall be deemed to have occurred.
8. Compensation Upon Termination or Disability.
(a) In the event that the Company terminates the Employee's employment
under this Agreement without "cause" pursuant to paragraph 7(a)(i) hereof, the
Employee shall be entitled to a portion of any unpaid salary, bonus and
benefits accrued and earned by him hereunder up to and including the effective
date of such termination and the Company shall pay the Employee monthly an
amount equal to one-twelfth (1/12) of the Base Salary in effect on the date of
such termination for a period of up to twelve (12) months if the Employee is
terminated within two years of the date of this Agreement, or an amount equal
to one-twelfth (1/12) of the Base Salary in effect on the date of such
termination for a period of up to eighteen (18) months if the Employee is
terminated at any time after two years of the date of this Agreement, provided
that the Employee fully complies with paragraph 11 of this Agreement (the
"Severance Payment"). Notwithstanding the foregoing, the Company, in its sole
discretion, may elect to make the Severance Payment to the Employee in one lump
sum due within thirty (30) days of the Employee's termination of employment.
(b) In the event of termination of the Employee's employment under this
Agreement for "cause" or if the Employee voluntarily terminates his employment
hereunder, the Employee shall be entitled to no further compensation or other
benefits under this Agreement, except only as to any unpaid salary, bonus and
benefits accrued and earned by him hereunder up to
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and including the effective date of such termination.
(c) In the event of termination of the Employee's employment under this
Agreement due to the Employee's permanent disability or death, the Employee (or
his successors and assigns in the event of his death) shall be entitled to a
portion of any unpaid salary, bonus and benefits accrued and earned by him
hereunder up to and including the effective date of such termination and the
Company shall pay the Employee monthly an amount equal to one-twelfth (1/12) of
the Base Salary in effect on the date of such termination for a period of up to
twelve (12) months if the Employee is terminated within two years of the date
of this Agreement, or an amount equal to one-twelfth (1/12) of the Base Salary
in effect on the date of such termination for a period of up to eighteen (18)
months if the Employee is terminated at any time after two years of the date of
this Agreement, provided that the Employee fully complies with paragraph 11 of
this Agreement (the "Disability Payment"); and provided, however, that payments
so made to the Employee shall be reduced by the sum of the amounts, if any,
which were paid to the Employee at or prior to the time of any such payment
under disability benefit plans of the Company. Notwithstanding the foregoing,
the Company, in its sole discretion, may elect to make the Disability Payment
to the Employee in one lump sum due within thirty (30) days of the Employee's
termination of employment.
(d) Regardless of the reason for termination of the Employee's
employment hereunder, bonuses and benefits shall be prorated and paid for any
period of employment not covering an entire year of employment.
(e) Notwithstanding anything to the contrary in this paragraph 8, the
Company's obligation to pay, and the Employee's right to receive, any
compensation under this paragraph 8, including, without limitation, the
Severance Payment and the Disability Payment, shall terminate upon the
Employee's breach of any provision of paragraph 11 hereof. In addition, the
Employee shall promptly forfeit any compensation received from the Company
under this paragraph 8, including, without limitation, the Severance Payment
and the Disability Payment, upon the Employee's breach of any provision of
paragraph 11 hereof.
9. Effect of the Company's Merger, Transfer of Assets, or Dissolution. In
the event of any voluntary or involuntary dissolution of the Company resulting
from either a merger or consolidation in which the Company is not the
consolidated or surviving corporation, or a transfer of all or substantially
all of the assets of the Company, pursuant to which the Employee's employment
under this Agreement is terminated, the Company shall pay to the Employee,
immediately prior to such merger, consolidation, or transfer of assets, an
amount equal to the sum of (a) the portion of any unpaid salary, bonus and
benefits accrued and earned by the Employee hereunder up to and including the
effective date of such change in control; and (b) an amount equal to twelve
(12) months' Base Salary at the rate in effect on the date of such termination,
if such termination is within two years of the date of this Agreement, or an
amount equal to eighteen (18) months' Base Salary at the rate in effect on the
date of such termination, if such termination is at any time after two years of
the date of this Agreement.
10. Stock Options. In the event of termination of the Employee's
employment under this Agreement for "cause", all stock options or other stock
based compensation awarded to the Employee shall lapse and be of no further
force or effect whatsoever in accordance with the Company's 1997 Stock Option
Plan. In the event that the Company terminates the Employee's employment under
this Agreement without "cause" or upon the death or permanent disability of the
Employee, all stock options and other stock based compensation awarded to the
Employee shall become fully vested and immediately exercisable; provided,
however, that such options and other stock based compensation must be exercised
within ninety (90) days and such stock options or other stock based
compensation shall be automatically forfeited upon the Employee's breach of any
of the provisions of paragraph 11 hereof. Any Stock Option Agreements between
the Company and the Employee shall be amended to conform to the provisions of
this paragraph 10.
4
<PAGE> 5
11. Restrictive Covenants. For purposes of this paragraph 11,
"Restrictive Period" shall mean a period commencing from date of execution of
this Agreement and ending upon the expiration of twelve (12) months from the
date of termination of this Agreement, if terminated within two years of the
date of this Agreement, or ending upon the expiration of eighteen (18) months
from the date of termination, if terminated at any time after two years after
the date of this Agreement, in both instances for any reason whatsoever.
Notwithstanding the foregoing, in the event that the validity or enforceability
of this Agreement shall become the subject matter of a legal action following
the termination or expiration of the Employee's employment with the Company,
the Restrictive Period shall begin to run upon the issuance of an order or
judgment by a court of competent jurisdiction enforcing the terms of this
Agreement or upon dismissal of such legal action.
(a) For the Restrictive Period, Employee will not, directly or
indirectly, engage in, or have an interest in or be associated with
(whether as an officer, director, stockholder, partner, associate,
employee, consultant, owner or otherwise) any corporation, limited
liability company, partnership, firm, enterprise or any other entity or
organization which is engaged in, (i) the business of financing purchases
of new or used manufactured homes or any refinancing of loans secured by
manufactured homes, or (ii) any business which is competitive with the
business then or at any time during the term of this Agreement conducted
or proposed to be conducted by the Company, or any company owned or
controlled by the Company, or under common control with the Company
("Affiliate"), anywhere in the United States of America (the "Restrictive
Areas").
(b) For the Restrictive Period, Employee shall not directly or
indirectly divert, or by aid to others, do anything which would tend to
divert, any business from the Company.
(c) For the Restrictive Period, Employee shall not, either directly
or indirectly, induce or attempt to induce any person to leave the
employment of the Company or any Affiliate of the Company.
(d) Confidentiality.
(1) Except as otherwise provided in this Agreement, or as the
Company may otherwise consent to in writing, the Employee shall
keep confidential and not disclose, or make any use of, except for
the Company's benefit, at any time, either during or subsequent to
the Employee's employment, any trade secrets, formulae, methods,
techniques, computations, knowledge, data or other information of
the Company relating to products, processes, know-how, marketing,
merchandising, selling ideas, selling concepts, customer lists,
customer names or addresses, borrower lists, borrower names or
addresses, forecasts, marketing plans, strategies, pricing
strategies, computer programs and copyrightable materials,
finances, or other confidential information or subject matter
pertaining to the Company's business, or any of its clients,
customers, patients, consultants, suppliers or affiliates, which
the Employee may produce, use, view or otherwise acquire during his
employment with the Company ("Proprietary Information").
(2) Employee acknowledges and agrees that Proprietary
Information has been and will be given to the Employee in
confidence, solely to permit the Employee to fulfill his
obligations to the Company under this Agreement, and that such
information derives actual or potential economic value by virtue of
its confidentiality and nondisclosure to the public or other
persons who could obtain economic value from their disclosure or
use. The Employee shall not, under any circumstances, deliver,
reproduce or allow any Proprietary Information, or any
5
<PAGE> 6
documentation relating thereto, to be delivered to, or used by, any
person or entity whatsoever without specific written consent of a
duly authorized representative of the Company. The Employee will
not reveal the names of the Company's personnel to any competitor,
or representative of a competitor.
(e) Employee acknowledges and agrees that the covenants set forth
above are reasonable and valid in geographical and temporal scope and in
all other respects. If any court determines that any of the covenants,
or any part of any covenant, is invalid or unenforceable, the remainder
of the covenants shall not be affected and shall be given full effect,
without regard to the invalid portion. If any court determines that any
of the covenants, or any part of any covenant, is unenforceable because
of its duration or geographic scope, such court shall have the power to
reduce the duration or scope, as the case may be, and, enforce such
provision in such reduced form. The Employee and the Company intend to
and confer jurisdiction to enforce the covenants upon the courts of any
jurisdiction within the geographical scope of such covenants. If the
courts of any one or more of such jurisdictions hold the covenants, or
any part of the covenants, unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Employee and the Company
that such determination not bar or in any way affect the right of the
Company to the relief provided above in the courts of any other
jurisdiction within the geographical scope of such covenants as to
breaches of such covenants in such other respective jurisdictions. For
this purpose, such covenants as they relate to each jurisdiction shall be
severable into diverse and independent covenants.
(f) The Employee understands that the Company would not have an
adequate remedy at law for the breach or threatened breach by the
Employee of any one or more of the covenants set forth above, and agrees
that if there is any such breach or threatened breach, the Company may,
in addition to the other legal or equitable remedies which may be
available to it, obtain an injunction or restraining order to enjoin or
restrain the Employee from the breach or threatened breach of such
covenants.
12. Return of Proprietary Property and Proprietary Information. Upon
the termination of this Agreement for any reason, the Employee (or his heirs,
executors or personal representatives, as the case may be) shall promptly
surrender and deliver to the Company, as the case may be, all property of the
Company in the Employee's possession (the "Proprietary Property"), including,
but not limited to, all records, materials, equipment, drawings, documents and
data pertaining to his employment with, or to any Proprietary Information of,
the Company, including all copies thereof, and the Employee shall not take with
him any description of any Proprietary Information or Proprietary Property of
the Company.
13. Arbitration. Any dispute or controversy arising out of or relating
to this Agreement shall be settled finally and exclusively by arbitration in
the State of Michigan in accordance with the rules of the American Arbitration
Association then in effect. Such arbitration shall be conducted by an
arbitrator(s) appointed by the American Arbitration Association in accordance
with its rules and any finding by such arbitrator(s) shall be final and binding
upon the parties. Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof, and the parties consent to
the jurisdiction of the courts of the State of Michigan for this purpose.
Nothing contained in this paragraph 13 shall be construed to preclude the
Company from obtaining injunctive or other equitable relief to secure specific
performance or to otherwise prevent a breach or contemplated breach of this
Agreement by the Employee as provided in paragraph 11 hereof.
14. Notice. All notices, requests, consents and other communications,
required or permitted to be given hereunder to be given under this Agreement
shall be personally delivered in writing or shall have been deemed duly given
when received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested addressed as follows:
6
<PAGE> 7
If to the Company:
Bingham Financial Services Corporation
31700 Middlebelt Road, Suite 125
Farmington Hills, Michigan 48334
Attn: Jeffrey P. Jorissen
If to the Employee:
William L. Mulvaney
4966 Lockhart
West Bloomfield , Michigan 48323
In all events, with a copy to:
Jaffe, Raitt, Heuer & Weiss,
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attn: Arthur A. Weiss
15. Miscellaneous.
(a) The provisions of this Agreement are severable and if any one
or more provisions may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions and any partially unenforceable
provision to the extent enforceable in any jurisdiction nevertheless shall be
binding and enforceable.
(b) The rights and obligations of the Company under this Agreement
shall inure to the benefit of, and shall be binding on, the Company and its
successors and assigns, and the rights and obligations (other than obligations
to perform services) of the Employee under this Agreement shall inure to the
benefit of, and shall be binding upon, the Employee and his heirs, personal
representatives and assigns. This Agreement is personal to Employee and he may
not assign his obligations under this Agreement in any manner whatsoever.
(c) The failure of either party to enforce any provision or
protections of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions as to any future violations thereof, nor
prevent that party thereafter from enforcing each and every other provision of
this Agreement. The rights granted the parties herein are cumulative and the
waiver of any single remedy shall not constitute a waiver of such party's right
to assert all other legal remedies available to it under the circumstances.
(d) This Agreement supersedes all agreements and understandings
between the parties and may not be modified or terminated orally. No
modification, termination or attempted waiver shall be valid unless in writing
and signed by the party against whom the same is sought to be enforced.
(e) This Agreement shall be governed by and construed according
to the laws of the State of Michigan.
(f) Captions and paragraph headings used herein are for
convenience and are not a part of this Agreement and shall not be used in
construing it.
7
<PAGE> 8
(g) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement on
the date first written above.
COMPANY:
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By: ____________________________________
Jeffrey P. Jorissen, President
EMPLOYEE:
________________________________________
WILLIAM L. MULVANEY
8
<PAGE> 1
EXHIBIT 10.6
DEMAND PROMISSORY NOTE
$10,000,000.00 DETROIT, MICHIGAN
DATED: AS OF JANUARY, 1997
FOR VALUE RECEIVED, BINGHAM FINANCIAL SERVICES CORPORATION, a Michigan
corporation ("Borrower"), promises to pay on demand to the order of SUN
COMMUNITIES, INC., a Maryland corporation ("Lender"), at 31700 Middlebelt Road,
Suite 145, Farmington Hills, Michigan 48334, or at such other place as Lender
may designate in writing, the principal sum of TEN MILLION AND NO/100 DOLLARS
($10,000,000.00) or such lesser sum as shall have been advanced by Lender to
Borrower under the loan account hereinafter described, plus interest as
hereinafter provided, all in lawful money of the United States of America, in
accordance with the terms hereof.
Lender will loan to Borrower, upon not less than thirty (30) days written
notice to Lender, up to the principal amount of $10,000,000.00, in increments
at the discretion of Lender. All advances made hereunder shall be charged to a
loan account in Borrower's name on Lender's books, and Lender shall debit to
such account the amount of each advance made to, and credit to such account the
amount of each repayment made by Borrower. From time to time but not less than
quarterly, Lender shall furnish Borrower a statement of Borrower's loan
account, which statement shall be deemed to be correct, accepted by, and
binding upon Borrower, unless Lender receives a written statement of exceptions
from Borrower within ten (10) days after such statement has been furnished.
The unpaid principal balance of this promissory note ("Note") shall bear
interest, computed upon the basis of a year of 360 days for the actual number
of days elapsed in a month, at a rate of interest of seven and 00/100 percent
(7.0%) per annum (the "Effective Rate"). On demand, the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest,
shall be due and payable in full.
Advances of principal, repayment and readvances may be made under this
Note from time to time but Lender, in its sole discretion, may refuse to make
advances or readvances hereunder during any period that this Note is in
default. All payments received hereunder shall, at the option of Lender, first
be applied against accrued and unpaid interest and the balance against
principal. Borrower expressly assumes all risks of loss or delay in the
delivery of any payments made by mail, and no course of conduct or dealing
shall affect Borrower's assumption of these risks.
Upon the occurrence and during the continuance of a default under this
Note, the outstanding principal amount hereof shall bear interest at a rate
which is three percent (3.0%) per annum greater than the Effective Rate
otherwise applicable.
Acceptance by Lender of any payment in an amount less than the amount then
due shall be deemed an acceptance on account only, and Borrower's failure to
pay the entire amount then due shall be and continue to be a default. Upon the
occurrence of any default, neither the failure of Lender promptly to exercise
its right to declare the outstanding principal and accrued unpaid interest
hereunder to be immediately due and payable, nor the failure of Lender to
demand strict performance of any other obligation of Borrower or any other
person who may be liable hereunder, shall constitute a waiver of any such
rights, nor a waiver of such rights in connection with any future default on
the part of Borrower or any other person who may be liable hereunder.
Borrower and all endorsees, sureties and guarantors hereof hereby jointly
and severally waive presentment for payment, demand, notice of non-payment,
notice of protest or protest of this Note, and Lender diligence in collection
or bringing suit, and do hereby consent to any and all extensions of time,
renewals, waivers or modifications as may be granted by Lender with respect to
payment or any other provisions of this Note. The liability of Borrower under
this Note shall be absolute and unconditional, without regard to the liability
of any other party.
<PAGE> 2
Notwithstanding anything herein to the contrary, in no event shall
Borrower be required to pay a rate of interest in excess of the Maximum Rate.
The term "Maximum Rate" shall mean the maximum non-usurious rate of interest
that Lender is allowed to contract for, charge, take, reserve or receive under
the applicable laws of any applicable state or of the United States of America
(whichever from time to time permits the highest rate for the use, forbearance
or detention of money) after taking into account, to the extent required by
applicable law, any and all relevant payments or charges hereunder, or under
any other document or instrument executed and delivered in connection therewith
and the indebtedness evidenced hereby.
In the event Lender ever receives, as interest, any amount in excess of
the Maximum Rate, such amount as would be excessive interest shall be deemed a
partial prepayment of principal, and, if the principal hereof is paid in full,
any remaining excess shall be returned to Borrower. In determining whether or
not the interest paid or payable, under any specified contingency, exceeds the
Maximum Rate, Borrower and Lender shall, to the maximum extent permitted by
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest; (b) exclude voluntary prepayments and the effects
thereof; and (c) amortize, prorate, allocate and spread the total amount of
interest through the entire contemplated term of such indebtedness until
payment in full of the principal (including the period of any extension or
renewal thereof) so that the interest on account of such indebtedness shall not
exceed the Maximum Rate.
This Note shall be binding upon Borrower and its successors and assigns,
and the benefits hereof shall inure to Lender and its successors and assigns.
This Note has been executed in the State of Michigan, and all rights and
obligations hereunder shall be governed by the laws of the State of Michigan.
BORROWER:
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By:
-----------------------------------
Jeffrey P. Jorissen, President
<PAGE> 1
EXHIBIT 10.7
SUBORDINATED LOAN AGREEMENT
THIS SUBORDINATED LOAN AGREEMENT (the "Agreement") is made and entered
into as of this 30th day of September, 1997 by and between BINGHAM FINANCIAL
SERVICES CORPORATION, a Michigan corporation ("Borrower"), whose address is
31700 Middlebelt Road, Suite 125, Farmington Hills, Michigan 48334, and SUN
COMMUNITIES, INC., a Maryland corporation ("Lender"), whose address is 31700
Middlebelt Road, Suite 145, Farmington Hills, Michigan 48334.
RECITAL:
A. Borrower has requested from Lender, and Lender has agreed to make the
loan described below (the "Loan") to Borrower, in accordance with the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. LOAN. Upon the closing of the first sale of Borrower's securities to
the public pursuant to a registration statement filed with, and declared
effective by, the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "IPO"), Lender will make the following Loan to
Borrower:
Type of Loan Interest Rate Note Amount Maturity
------------ ------------- ----------- --------
Term 9.75% $4,000,000 seven years
Line of Credit Line Rate $6,000,000 five years
The Loan and any amendments, extensions, renewals, or refinancing thereof are
subject to this Agreement.
2. LINE OF CREDIT LOAN. Provided that no Event of Default exists and no
Event of Default will be caused by any draw under the Line of Credit Loan (as
defined below), Lender agrees to loan to Borrower, from time to time upon not
less than thirty (30) days written notice to Lender, up to the principal amount
of $6,000,000 (the "Line of Credit Loan"), in increments of not less than
$500,000 in accordance with the terms of the Line of Credit Note. Lender's
obligation to make any advance to Borrower under the Line of Credit Loan and
the Line of Credit Note shall automatically: (a) cease and terminate upon the
maturity date stated in the Line of Credit Note; and (b) suspend upon any
earlier occurrence of an Event of Default unless and until waived by Lender in
writing.
3. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Lender, all of which representations and warranties shall be
continuing until the Loan is fully paid and Borrower's obligations under this
Agreement and the Related Documents are fully performed, as follows:
A. Borrower's Existence and Authority. Borrower is a Michigan
corporation, the person executing this Agreement has full power and
complete authority to execute this Agreement and all Related Documents,
and this Agreement and the Related Documents are valid, binding and
enforceable against Borrower.
B. Financial Information. All financial information provided to
Lender has been prepared and will continue to be prepared in accordance
with generally accepted
<PAGE> 2
accounting principles ("GAAP"), consistently applied, and fully and
fairly presents the financial condition of Borrower as of the date or for
the operating period thereof. There has been no material adverse change
in Borrower's business, property, or financial condition since the date
of Borrower's latest Financial Statements provided to Bank.
C. No Litigation/No Misrepresentations. There are no civil or
criminal proceedings pending before any court, government agency,
arbitration panel, or administrative tribunal or, to Borrower's
knowledge, threatened against Borrower, which may result in any material
adverse change in the business, property, or financial condition of
Borrower. All representations and warranties in this Agreement and the
Related Documents are true and correct and no material fact has been
omitted.
4. AFFIRMATIVE COVENANTS. As of the date of this Agreement and
continuing until all of Borrower's obligations under this Agreement and the
Related Documents are fully performed and the Loan is fully repaid to Lender,
Borrower shall at all times comply with the following covenants:
A. Financial Requirements. The Interest Coverage Ratio for any Test
Period ending on the last day of each fiscal quarter shall not be less
than ____. Within fifteen (15) days after the end of each fiscal
quarter, Borrower shall deliver to Lender a certificate to the effect
that Borrower was in compliance with the Interest Coverage Ratio for such
fiscal quarter and showing the calculation of such compliance.
B. Notice of Adverse Events. Borrower shall promptly notify Lender
in writing of any litigation, indictment, governmental proceeding,
default, or any other occurrence which may have a material adverse effect
on Borrower's business, property or financial condition.
C. Maintain Business Existence and Operations. Borrower shall do
all things necessary to keep in full force and effect Borrower's
corporate existence and continue its business as presently conducted.
D. General Compliance with Law. Borrower shall at all times operate
its business in strict compliance with all applicable Federal, State, and
local laws, ordinances and regulations, and refrain from engaging in any
civil or criminal activity proscribed by Federal, State or local law.
E. Delivery of Financial Statements. Within forty-five (45) days
after the end of each fiscal quarter, Borrower shall deliver to Lender
copies of its unaudited financial statements prepared in accordance with
GAAP, consistently applied. Within ninety (90) days after the end of
each fiscal year, Borrower shall deliver to Lender copies of its audited
financial statements prepared in accordance with GAAP, consistently
applied.
5. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an Event of Default under this Agreement:
A. Failure to Pay Amounts Due. Any principal or interest under
either of the Notes is not paid when due.
B. Misrepresentations; False Financial Information. Any statement,
warranty or representation of Borrower in connection with or contained in
this Agreement, the Related Documents, or any Financial Statements now or
hereafter furnished to Lender by or on behalf of Borrower, is false or
misleading.
-2-
<PAGE> 3
C. Noncompliance with Loan Agreements. Borrower breaches any
covenant, term, condition or agreement stated in this Agreement, the
Related Documents or any agreement relating to Senior Debt (as defined
below).
D. Cessation/Termination of Existence. Borrower shall cease doing
business or Borrower's existence is terminated by sale, dissolution,
merger or otherwise.
E. Bankruptcy or Receivership. Any conveyance is made of
substantially all of Borrower's assets, any assignment is made for the
benefit of creditors, any receiver is appointed, or any insolvency,
liquidation or reorganization proceeding under the Bankruptcy Code or
otherwise shall be filed by or against Borrower.
F. Attachments; Tax Liens. Any attachment, execution, levy,
forfeiture, tax lien or similar writ or process is issued against any
property of Borrower.
G. Material Adverse Change. Any material adverse change occurs or
is imminent the effect of which would be to substantially diminish
Borrower's financial condition, business, or the ability to perform its
agreements with Lender.
H. Other Lender Default. Any other indebtedness to Lender or any
other creditor (including, without limitation, Financial Institutions (as
defined below)) becomes due and remains unpaid after acceleration of the
maturity or after the stated maturity.
I. Other Indebtedness. Borrower incurs any indebtedness (other than
Senior Debt) after the date of this Agreement.
J. Change of Control Event. Any Change of Control Event occurring
after the effective date of the IPO.
6. REMEDIES ON DEFAULT.
A. Acceleration Set-Off. Upon the occurrence of any Event of
Default, Lender may, at Lender's option, declare the Loan to be
immediately due and payable.
B. Remedies; No Waiver. The remedies provided in this Agreement are
cumulative and not exclusive, and Lender may exercise any remedies
available to it at law, in equity, and as are provided in this Agreement,
the Related Documents and any other written agreement between Borrower
and Lender. No delay or failure of Lender in exercising any right,
remedy, power, or privilege under this Agreement or the Related Documents
shall affect that right, remedy, power or privilege, nor shall any single
or partial exercise preclude the exercise of any other right, remedy,
power or privilege. No delay or failure of Lender to demand strict
adherence to the terms of this Agreement or the Related Documents shall
be deemed to constitute a course of conduct inconsistent with Lender's
right at any time, before or after any Event of Default, to prospectively
demand strict adherence to the terms of this Agreement and the Related
Documents.
7. SUBORDINATION. The indebtedness evidenced by the Notes and any
renewals or extensions thereof (such indebtedness being herein called the
"Subordinated Indebtedness") shall at all times be wholly subordinate and
junior in right to prior payment in full of all Senior Debt (as defined below).
The provisions of this section on subordination shall constitute a continuing
offer to all persons who, in reliance upon such provisions, become holders of,
or continue to
-3-
<PAGE> 4
hold, Senior Debt, and such provisions are made for the benefit of the holders
of Senior Debt, and such holders are hereby made obligees hereunder the same as
if their names were written herein as such, and they and/or each of them may
proceed to enforce such provisions. Unless and until an event of default under
any of the Senior Debt (other than an event of default which exists solely by
reason of a default under this Agreement) shall have occurred and be continuing
("Superior Default"), Borrower shall pay the principal and interest on all
Subordinated Indebtedness according to the terms thereof.
For purposes of this Agreement, "Senior Debt" means the principal of, and
interest on and other amounts due on or in connection with any Indebtedness of
Borrower (other than the Notes) to any Financial Institution (as defined
below), whether outstanding on the date of this Agreement, or thereafter
created, incurred or assumed by Borrower (including all deferrals, renewals,
extensions or refundings of, or amendments, modifications or supplements to,
Indebtedness of the kind described in this clause). Notwithstanding anything
herein to the contrary, Senior Debt shall not include: (a) Indebtedness of or
amounts owed by Borrower for compensation to employees, or for goods or
materials purchased in the ordinary course of business or for services, or (b)
Indebtedness of Borrower to a subsidiary or affiliate of Borrower. In no event
shall any Financial Institution be deemed to be an affiliate of Borrower.
Indebtedness of Borrower to a subsidiary or affiliate of Borrower shall be pari
passu in all respects with the Subordinated Indebtedness.
For purposes of this Agreement, "Financial Institution" means any bank as
defined in section 3(a)(2) of the Securities Act of 1933, as amended (the
"Securities Act"), savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Securities Act, insurance company as defined in
section 2(13) of the Securities Act, or investment banking firm.
For purposes of this Agreement, "Indebtedness" means, with respect to any
person, (a) any liability, contingent or otherwise, of such person (i) for
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such person or only to a portion thereof), (ii) evidenced by a
note, debenture or similar instrument or representing the balance deferred and
unpaid of the purchase price of any property purchased, or (iii) for the
payment of money relating to a lease that is required to be capitalized under
generally accepted accounting principles; (b) any obligation secured by a lien
to which the property or assets of such person are subject, whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
such person's legal liability; and (c) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a) or (b).
The terms hereof, the subordination effected hereby and the rights of the
holders of the Senior Debt shall not be affected by (a) any amendment of or
addition or supplement to any Senior Debt or any instrument or agreement
relating thereto, (b) any exercise or non-exercise of any right, power or
remedy under or in respect of any Senior Debt or any instrument or agreement
relating thereto, or (c) any waiver, consent, release, indulgence, extension,
renewal, modification, delay or other action, inaction or omission, in respect
of any Senior Debt or any instrument or agreement relating thereto or any
security therefor or guaranty thereof, whether or not any holder of any
Subordinated Indebtedness shall have had notice or knowledge of any of the
foregoing.
Upon the happening of (a) a Superior Default which is a default in respect
of payment of principal, premium, if any, or interest on Senior Debt or (b) a
Superior Default (other than a Superior Default in respect of payment of
principal, premium, if any, or interest on Senior Debt) and receipt by Lender
of written notice thereof from any holder of Senior Debt, unless and until all
Senior Debt shall have been paid in full, Borrower shall not, directly or
indirectly, make or agree to make, and neither Lender nor any assignee or
successor holder of any Subordinated
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<PAGE> 5
Indebtedness shall demand, accept or receive (a) any payment (in cash, property
or securities, by set-off or otherwise), direct or indirect, of or on account
of any principal or interest in respect of any Subordinated Indebtedness, and
no such payment shall be accepted by any holder of any Subordinated
Indebtedness, or (b) any payment for the purpose of any redemption, purchase or
other acquisition, direct or indirect, of any Subordinated Indebtedness, and no
such payment shall be due.
In the case of any Superior Default (other than a Superior Default with
respect to payment of principal, premium, if any, or interest on Senior Debt),
the foregoing restrictions shall cease to apply to any payment received with
respect to the Subordinated Indebtedness after the expiration of 180 days after
the holder of the Notes shall have received notice of the Superior Default,
unless prior to the expiration of such 180 day period one or more holders of
the Senior Debt shall have commenced and be diligently prosecuting an action,
suit or other legal or equitable proceeding against Borrower or its property
based upon the Superior Default or unless a Superior Default which is a payment
default shall have occurred and be continuing; provided, further, that during
such 180-day period following the Superior Default (other than a Superior
Default with respect to payment of principal, premium, if any, or interest on
Senior Debt) the holders of the Subordinated Indebtedness shall refrain from
prosecuting any such action, suit or other legal or equitable proceeding
against Borrower or its property based upon an Event of Default hereunder.
In the event that a Superior Default (other than a Superior Default with
respect to payment of principal, premium or interest on Senior Debt) is cured
or is waived by the appropriate holders of the Senior Debt (whether by
amendment to the applicable loan agreement, forbearance agreement or otherwise)
prior to the expiration of the aforesaid 180-day period applicable to such
Superior Default, then any Event of Default occurring under this Agreement
solely by reason of the occurrence of such Superior Default shall be deemed not
to have occurred. Any judicial proceedings initiated by a holder of
Subordinated Indebtedness at a time when such holder has no knowledge that such
proceedings are prohibited by this paragraph shall not be deemed a violation of
any provisions of this Agreement and, upon receipt of notice from the holder of
the Senior Debt that such proceedings are so prohibited, such holder of the
Subordinated Indebtedness shall terminate such proceedings, without prejudice.
Upon any distribution (whether of cash, securities or other property) to
creditors of Borrower in a liquidation or dissolution of Borrower, or in a
bankruptcy, reorganization, insolvency, receivership, assignment for the
benefit of creditors, marshalling of assets or similar proceeding relating to
Borrower or its property:
(1) holders of Senior Debt shall be entitled to receive payment in
full in cash of such Senior Debt (including interest accruing after the
commencement of any such proceeding or interest that would have accrued but for
the commencement of such proceeding to the date of payment on, and other
amounts included in, Senior Debt) before holders of the Notes shall be entitled
to receive any payment of principal of, premium (if any) or interest on the
Notes or any other distributions with respect to the Notes;
(2) until the Senior Debt is paid in full in cash as provided in
clause (1) of this paragraph, any distribution to which holders of the Notes
would be entitled but for this section on subordination shall be made to the
holders of Senior Debt as their interests may appear.
In the event that any payment or distribution of assets of Borrower
prohibited by the provisions of this section on subordination of any kind or
character, whether in cash, property or securities, shall be received by the
holder of the Notes before all Senior Debt is paid in full, or provision made
for such payment in accordance with the terms of the Senior Debt, such payment
or distribution shall be held in trust for the benefit of, and shall be paid
over or delivered to, the holders of such Senior Debt or their representative
or representatives, or to the trustee or trustees
-5-
<PAGE> 6
under any indenture pursuant to which any instruments evidencing any of such
Senior Debt may have been issued, as their respective interests may appear, for
application to the payment of all Senior Debt remaining unpaid to the extent
necessary to pay such Senior Debt in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to the holders of such
Senior Debt.
In the event that the Notes are declared due and payable before their
stated maturity because of the occurrence of an Event of Default hereunder, the
holders of the Senior Debt shall be entitled to receive payment in full of all
amounts due with respect to all Senior Debt before the holders of the Notes
are entitled to receive any payment on account of the principal of, premium (if
any) or interest on, or any repurchase, redemption or other retirement
(including, without limitation, any defeasance) of, the Notes.
Subject to the payment in full of all Senior Debt, the holders of
Subordinated Indebtedness shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of assets of Borrower
applicable to the Senior Debt until all amounts owing on the Subordinated
Indebtedness shall be paid in full, and for the purpose of such subrogation no
such payments or distributions to the holders of Senior Debt by or on behalf of
Borrower or by or on behalf of the holders of the Notes by virtue of this
Agreement which otherwise would have been made to the holders hereof, shall, as
between Borrower and the holders hereof, be deemed to be payment by Borrower to
or on account of the Senior Debt, it being understood that the provisions of
this paragraph are and are intended solely for the purpose of defining the
relative rights of the holders of Subordinated Indebtedness on the one hand and
the holders of Senior Debt, on the other hand.
Nothing contained herein is intended to or shall impair, as between
Borrower and Lender, the obligation of Borrower, which is absolute and
unconditional, to pay to Lender, the principal of and interest on the
Subordinated Indebtedness as and when the same shall become due and payable in
accordance with its terms, or is intended to or shall affect (except to the
extent specifically provided in the above paragraph) the relative rights of the
holders hereof and creditors of Borrower other than the holders of the Senior
Debt, nor shall anything herein or therein prevent any holder hereof from
exercising all remedies otherwise permitted by applicable law upon default
hereunder subject to the rights, if any, hereunder of the holders of Senior
Debt in respect of cash, property or securities of Borrower received upon the
exercise of any such remedy.
8. MISCELLANEOUS.
A. Compliance with Lender Agreements. Borrower acknowledges that
Borrower has read and understands this Agreement, the Related Documents,
and all other written agreements between Borrower and Lender, and
Borrower agrees to fully comply with all of the agreements.
B. Further Action. Borrower agrees, from time to time, upon
Lender's request to make, execute, acknowledge, and deliver to Lender,
such further and additional instruments, documents, and agreements, and
to take such further action as may be required to carry out the intent
and purpose of this Agreement and prompt repayment of the Loan.
C. Governing Law/Partial Illegality. This Agreement and the Related
Documents shall be interpreted and the rights of the parties determined
under the laws of the State of Michigan. Should any part, term, or
provision of this Agreement be adjudged
-6-
<PAGE> 7
illegal or in conflict with any law of the United States of America or
State of Michigan, the validity of the remaining portion or provisions
of the Agreement shall not be affected.
D. Writings Constitute Entire Agreement; Modifications Only in
Writing. This Agreement together with all other written agreements
between Borrower and Lender, including, without limitation, the Related
Documents, constitute the entire agreement of the parties and there are
no other agreements, express or implied. None of the parties shall be
bound by anything not expressed in writing, and neither this Agreement
nor the Related Documents can be modified except by a writing executed by
Borrower and by Lender. This Agreement shall inure to the benefit of and
shall be binding upon all of the parties to this Agreement and their
respective successors and assigns; provided however, that Borrower cannot
assign or transfer its rights or obligations under this Agreement without
Lender's prior written consent.
E. Headings. All section and paragraph headings in this Agreement
are included for reference only and do not constitute a part of this
Agreement.
F. Term of Agreement. This Agreement shall continue in full force
and effect until all of Borrower's obligations to Lender are fully
satisfied and the Loan is fully repaid.
G. Warrants. As partial consideration for making the Loan, Borrower
has issued Lender detachable warrants to purchase up to 400,000 shares of
Borrower's common stock in accordance with the terms and conditions of
that certain Detachable Warrant Agreement.
9. DEFINITIONS. The following words shall have the following meanings
in this Agreement:
A. "Bank" shall mean Michigan National Bank, a national banking
association, and any successor or assign.
B. "Change of Control Event" shall mean (a) an event or series of
events by which any person, entity or group (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (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 Borrower 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 or
entity shall be deemed to have "beneficial ownership" of all securities
that such person or entity 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 Borrower; (b) Borrower consolidates with, or
merges with or into, another person or entity, or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially
all of its assets to any person or entity, or any person or entity
consolidates with, or merges with or into Borrower, in any such event
pursuant to a transaction in which the outstanding voting stock of
Borrower is converted into or exchanged for cash, securities or other
property; or (c) during any consecutive two-year period, individuals who
at the beginning of such period constituted the Board of Directors of
Borrower (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of
Borrower, was
-7-
<PAGE> 8
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 of Directors then in office.
C. "EBIT" shall mean, for any period, Borrower's earnings before
interest and taxes as determined in accordance with GAAP, consistently
applied.
D. "Event of Default" shall mean any of the events described in
Section 5 of this Agreement or in the Related Documents.
E. "Financial Statements" shall mean all balance sheets, income
statements, and other financial information which have been, are now, or
in the future are furnished to Lender.
F. "Interest Coverage Ratio" shall mean, for any period, the ratio
of EBIT to Interest Expense for such period.
G. "Interest Expense" shall mean, for any period, Borrower's total
interest expense, including, without limitation, the interest expense
related to the Senior Debt and the Subordinated Indebtedness, as
determined in accordance with GAAP, consistently applied.
H. "Line of Credit Note" shall mean that certain $6,000,000 line of
credit promissory note from Borrower to Lender, in the form attached
hereto as Exhibit "A".
I. "Line Rate" shall mean the per annum rate of interest equal to
the Prime Rate plus 125 basis points.
J. " Notes" shall mean the Term Note and the Line of Credit Note.
K. "Prime Rate" shall mean that variable rate of interest from time
to time established by Bank as its base or prime commercial lending rate.
L. "Related Documents" shall mean any and all documents, promissory
notes, and agreements executed in connection with this Agreement. The
term shall include documents existing before, at the time of execution
of, and documents executed concurrent with or after the date of, this
Agreement.
M. "Term Note" shall mean that certain $4,000,000 promissory note
from Borrower to Lender, in the form attached hereto as Exhibit "B".
N. "Test Period" shall mean: (a) for any determination made on and
prior to December 31, 1997, the period from January 1, 1997 to the last
day of the fiscal quarter of Borrower then ended; and (b) for any
determination made thereafter, the four consecutive fiscal quarters of
Borrower then ended.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Subordinated Loan
Agreement as of the date first written above.
BORROWER:
BINGHAM FINANCIAL SERVICES CORPORATION, a
Michigan corporation
By:________________________________________
Its:_______________________________________
LENDER:
SUN COMMUNITIES, INC., a Maryland
corporation
By:________________________________________
Its:_______________________________________
-9-
<PAGE> 1
EXHIBIT 10.8
PROMISSORY NOTE
(LINE OF CREDIT)
$6,000,000.00 DETROIT, MICHIGAN
DUE DATE: SEPTEMBER 30, 2002 DATED: AS OF SEPTEMBER 30, 1997
FOR VALUE RECEIVED, BINGHAM FINANCIAL SERVICES CORPORATION, a Michigan
corporation ("Borrower"), promises to pay to the order of SUN COMMUNITIES,
INC., a Maryland corporation ("Lender"), at 31700 Middlebelt Road, Suite 145,
Farmington Hills, Michigan 48334, or at such other place as Lender may
designate in writing, the principal sum of SIX MILLION AND NO/100 DOLLARS
($6,000,000.00) or such lesser sum as shall have been advanced by Lender to
Borrower under the loan account hereinafter described, plus interest as
hereinafter provided, all in lawful money of the United States of America, in
accordance with the terms hereof.
In accordance with the terms of the Loan Agreement (as defined below),
Lender will loan to Borrower, upon not less than thirty (30) days written
notice to Lender, up to the principal amount of $6,000,000.00, in increments of
not less than $500,000.00. All advances made hereunder shall be charged to a
loan account in Borrower's name on Lender's books, and Lender shall debit to
such account the amount of each advance made to, and credit to such account the
amount of each repayment made by Borrower. From time to time but not less than
quarterly, Lender shall furnish Borrower a statement of Borrower's loan
account, which statement shall be deemed to be correct, accepted by, and
binding upon Borrower, unless Lender receives a written statement of exceptions
from Borrower within ten (10) days after such statement has been furnished.
The unpaid principal balance of this promissory note ("Note") shall bear
interest, computed upon the basis of a year of 360 days for the actual number
of days elapsed in a month, at a per annum rate of interest (the "Effective
Rate") which is equal to one and 25/100 percent (1.25%) in excess of that rate
of interest established by Michigan National Bank as its prime commercial
lending rate (the "Index"), as such Index may vary from time to time. If the
Index shall be increased or decreased, the Effective Rate under this Note shall
be increased or decreased by the same amount, effective upon the day of each
increase or decrease in the Index. On the Due Date, the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest,
shall be due and payable in full.
Advances of principal, repayment and readvances may be made under this
Note from time to time but Lender, in its sole discretion, may refuse to make
advances or readvances hereunder during any period that this Note is in
default. All payments received hereunder shall, at the option of Lender, first
be applied against accrued and unpaid interest and the balance against
principal. Borrower expressly assumes all risks of loss or delay in the
delivery of any payments made by mail, and no course of conduct or dealing
shall affect Borrower's assumption of these risks.
Upon the occurrence of any of the following events (each an "Event of
Default"), Lender, at its option, and without notice to Borrower, may declare
the entire unpaid principal balance of this Note and all accrued interest,
together with all other indebtedness of Borrower to Lender, to be immediately
due and payable: (a) failure to pay any principal or interest payment to Lender
when due; (b) any statement, warranty or representation made in any of the
Related Documents or in any Financial Statement is false or misleading; (c)
breach of any covenant, term, condition or agreement stated in this Note, the
Loan Agreement, the Related Documents or any agreement relating to Senior Debt;
(d) any cessation of Borrower's business or the termination of Borrower's
existence by sale, dissolution, merger or otherwise; (e) any conveyance is made
of substantially all of Borrower's assets, any assignment is made for the
benefit of creditors, or if any insolvency, liquidation or reorganization
proceeding shall be filed by or against Borrower under the Bankruptcy Code or
otherwise; (f) any attachment, execution, levy, forfeiture, tax lien or similar
writ or process is issued against any of Borrower's property; (g) any material
adverse change occurs or is imminent the effect of which would be to
substantially diminish Borrower's financial condition, business, or ability to
perform its agreements with Lender; (h) any other indebtedness to Lender or any
other creditor becomes due and remains unpaid after acceleration of the
maturity or after the stated maturity; (i) Borrower incurs any indebtedness
(other than Senior Debt) after the date hereof; or (j) a Change of Control
Event.
<PAGE> 2
Upon the occurrence and during the continuance of an Event of Default, the
outstanding principal amount hereof shall bear interest at a rate which is two
percent (2.0%) per annum greater than the Effective Rate otherwise applicable.
Acceptance by Lender of any payment in an amount less than the amount then
due shall be deemed an acceptance on account only, and Borrower's failure to
pay the entire amount then due shall be and continue to be a default. Upon the
occurrence of any default, neither the failure of Lender promptly to exercise
its right to declare the outstanding principal and accrued unpaid interest
hereunder to be immediately due and payable, nor the failure of Lender to
demand strict performance of any other obligation of Borrower or any other
person who may be liable hereunder, shall constitute a waiver of any such
rights, nor a waiver of such rights in connection with any future default on
the part of Borrower or any other person who may be liable hereunder.
Borrower and all endorsees, sureties and guarantors hereof hereby jointly
and severally waive presentment for payment, demand, notice of non-payment,
notice of protest or protest of this Note, and Lender diligence in collection
or bringing suit, and do hereby consent to any and all extensions of time,
renewals, waivers or modifications as may be granted by Lender with respect to
payment or any other provisions of this Note. The liability of Borrower under
this Note shall be absolute and unconditional, without regard to the liability
of any other party.
Notwithstanding anything herein to the contrary, in no event shall
Borrower be required to pay a rate of interest in excess of the Maximum Rate.
The term "Maximum Rate" shall mean the maximum non-usurious rate of interest
that Lender is allowed to contract for, charge, take, reserve or receive under
the applicable laws of any applicable state or of the United States of America
(whichever from time to time permits the highest rate for the use, forbearance
or detention of money) after taking into account, to the extent required by
applicable law, any and all relevant payments or charges hereunder, or under
any other document or instrument executed and delivered in connection therewith
and the indebtedness evidenced hereby.
In the event Lender ever receives, as interest, any amount in excess of
the Maximum Rate, such amount as would be excessive interest shall be deemed a
partial prepayment of principal, and, if the principal hereof is paid in full,
any remaining excess shall be returned to Borrower. In determining whether or
not the interest paid or payable, under any specified contingency, exceeds the
Maximum Rate, Borrower and Lender shall, to the maximum extent permitted by
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest; (b) exclude voluntary prepayments and the effects
thereof; and (c) amortize, prorate, allocate and spread the total amount of
interest through the entire contemplated term of such indebtedness until
payment in full of the principal (including the period of any extension or
renewal thereof) so that the interest on account of such indebtedness shall not
exceed the Maximum Rate.
This Note is delivered in connection with that certain Subordinated Loan
Agreement by and between Lender and Borrower (the "Loan Agreement").
Capitalized terms used but not otherwise defined in this Note shall have the
meanings ascribed to such terms in the Loan Agreement.
This Note shall be binding upon Borrower and its successors and assigns,
and the benefits hereof shall inure to Lender and its successors and assigns.
This Note has been executed in the State of Michigan, and all rights and
obligations hereunder shall be governed by the laws of the State of Michigan.
BORROWER:
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By:
------------------------------------
Jeffrey P. Jorissen, President
<PAGE> 1
EXHIBIT 10.9
PROMISSORY NOTE
(TERM)
$4,000,000.00 DETROIT, MICHIGAN
DUE DATE: SEPTEMBER 30, 2004 DATED: AS OF SEPTEMBER 30, 1997
FOR VALUE RECEIVED, BINGHAM FINANCIAL SERVICES CORPORATION, a Michigan
corporation ("Borrower"), promises to pay to the order of SUN COMMUNITIES,
INC., a Maryland corporation ("Lender"), at 31700 Middlebelt Road, Suite 145,
Farmington Hills, Michigan 48334, or at such other place as Lender may
designate in writing, the principal sum of FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00), plus interest as hereinafter provided, all in lawful money of
the United States of America, in accordance with the terms hereof.
The unpaid principal balance of this promissory note ("Note") shall bear
interest, computed upon the basis of a year of 360 days for the actual number
of days elapsed in a month, at a rate of interest of nine and 75/100 percent
(9.75%) per annum (the "Effective Rate"). On the Due Date, the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest,
shall be due and payable in full.
This Note may not be paid in full or in part at any time prior to the
third (3rd) anniversary of this Note. At any time after the third (3rd)
anniversary of this Note, this Note may be paid in full or in part without
payment of any prepayment fee or penalty. All payments received hereunder
shall, at the option of Lender, first be applied against accrued and unpaid
interest and the balance against principal. Borrower expressly assumes all
risks of loss or delay in the delivery of any payments made by mail, and no
course of conduct or dealing shall affect Borrower's assumption of these risks.
Upon the occurrence of any of the following events (each an "Event of
Default"), Lender, at its option, and without notice to Borrower, may declare
the entire unpaid principal balance of this Note and all accrued interest,
together with all other indebtedness of Borrower to Lender, to be immediately
due and payable: (a) failure to pay any principal or interest payment to Lender
when due; (b) any statement, warranty or representation made in any of the
Related Documents or in any Financial Statement is false or misleading; (c)
breach of any covenant, term, condition or agreement stated in this Note, the
Loan Agreement, the Related Documents or any agreement relating to Senior Debt;
(d) any cessation of Borrower's business or the termination of Borrower's
existence by sale, dissolution, merger or otherwise; (e) any conveyance is made
of substantially all of Borrower's assets, any assignment is made for the
benefit of creditors, or if any insolvency, liquidation or reorganization
proceeding shall be filed by or against Borrower under the Bankruptcy Code or
otherwise; (f) any attachment, execution, levy, forfeiture, tax lien or similar
writ or process is issued against any of Borrower's property; (g) any material
adverse change occurs or is imminent the effect of which would be to
substantially diminish Borrower's financial condition, business, or ability to
perform its agreements with Lender; (h) any other indebtedness to Lender or any
other creditor becomes due and remains unpaid after acceleration of the
maturity or after the stated maturity; (i) Borrower incurs any indebtedness
(other than Senior Debt) after the date hereof; or (j) a Change of Control
Event.
Upon the occurrence and during the continuance of an Event of Default, the
outstanding principal amount hereof shall bear interest at a rate which is two
percent (2.0%) per annum greater than the Effective Rate otherwise applicable.
Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and Borrower's failure
to pay the entire amount then due shall be and continue to be a default. Upon
the occurrence of any default, neither the failure of Lender promptly to
exercise its right to declare the outstanding principal and accrued unpaid
interest hereunder to be immediately due and payable, nor the failure of Lender
to demand strict performance of any other obligation of Borrower or any other
person who may be liable hereunder, shall constitute a waiver of any such
rights, nor a waiver of such rights in connection with any future default on
the part of Borrower or any other person who may be liable hereunder.
Borrower and all endorsees, sureties and guarantors hereof hereby jointly
and severally waive
<PAGE> 2
presentment for payment, demand, notice of non-payment, notice of protest
or protest of this Note, and Lender diligence in collection or bringing
suit, and do hereby consent to any and all extensions of time, renewals,
waivers or modifications as may be granted by Lender with respect to payment or
any other provisions of this Note. The liability of Borrower under this Note
shall be absolute and unconditional, without regard to the liability of any
other party.
Notwithstanding anything herein to the contrary, in no event shall
Borrower be required to pay a rate of interest in excess of the Maximum Rate.
The term "Maximum Rate" shall mean the maximum non-usurious rate of interest
that Lender is allowed to contract for, charge, take, reserve or receive under
the applicable laws of any applicable state or of the United States of America
(whichever from time to time permits the highest rate for the use, forbearance
or detention of money) after taking into account, to the extent required by
applicable law, any and all relevant payments or charges hereunder, or under
any other document or instrument executed and delivered in connection therewith
and the indebtedness evidenced hereby.
In the event Lender ever receives, as interest, any amount in excess of
the Maximum Rate, such amount as would be excessive interest shall be deemed a
partial prepayment of principal, and, if the principal hereof is paid in full,
any remaining excess shall be returned to Borrower. In determining whether or
not the interest paid or payable, under any specified contingency, exceeds the
Maximum Rate, Borrower and Lender shall, to the maximum extent permitted by
law, (a) characterize any non-principal payment as an expense, fee, or premium
rather than as interest; (b) exclude voluntary prepayments and the effects
thereof; and (c) amortize, prorate, allocate and spread the total amount of
interest through the entire contemplated term of such indebtedness until
payment in full of the principal (including the period of any extension or
renewal thereof) so that the interest on account of such indebtedness shall not
exceed the Maximum Rate.
This Note is delivered in connection with that certain Subordinated Loan
Agreement by and between Lender and Borrower (the "Loan Agreement").
Capitalized terms used but not otherwise defined in this Note shall have the
meanings ascribed to such terms in the Loan Agreement.
This Note shall be binding upon Borrower and its successors and assigns,
and the benefits hereof shall inure to Lender and its successors and assigns.
This Note has been executed in the State of Michigan, and all rights and
obligations hereunder shall be governed by the laws of the State of Michigan.
BORROWER:
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By:
---------------------------------
Jeffrey P. Jorissen, President
<PAGE> 1
EXHIBIT 10.11
BINGHAM FINANCIAL SERVICES CORPORATION
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Bingham Financial Services Corporation, a Michigan corporation (the
"Company"), upon the recommendation of the Company's Board of Directors (the
"Board") and pursuant to that certain 1997 Stock Option Plan adopted by the
Company's Board of Directors (the "Plan") and approved by its shareholders, and
in consideration of the services to be rendered to the Company or its
subsidiaries by _______________ ("_________________________"), hereby grants,
as of __________________ (the "Date of Grant"), _________________________ the
option to purchase __________________ (___________) shares (the "Option") of
the Company's common stock, (the "Shares"), at a price of ___________________
Dollars ($_________) per share (the "Option Price"), on the terms and
conditions contained in this Stock Option Agreement (the "Agreement") and
subject to all the terms and conditions of the Plan, which are incorporated by
reference herein. The Option is designated as a Non-Qualified Stock Option,
Incentive Stock Option or Performance Based Option as defined in the Plan, and
the Option Price specified above shall 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.
I. EXERCISE OF OPTION
_________________________ may exercise this Option at any time on or after
the first date specified below, but in no event later than
______________________, subject only to prior termination or modification of
the Plan and in accordance with and subject to any percentage limitations
contained in this Section I and the expiration provisions contained in Section
IV:
(a) 33 1/3% of the Shares, or any lesser part thereof, on or
after the Date of Grant, or in the case of an officer of the
Corporation, six months on or after the Date of Grant;
(b) An additional 33 1/3% of the Shares, or any lesser part
thereof, on or after the date which is one (1) year from the grant
of the Option; and
(c) The final 33 1/3% of the Shares, or any lesser part
thereof, on or after the date which is two (2) years from the
grant of the Option.
Any Shares not purchased by _________________________ at the time
_________________________ is first eligible to exercise the Option for such
Shares, as determined by this Section I, may be purchased by
_________________________ at any time thereafter but, in no event, later than
___________________.
II. TRANSFERABILITY
This Option may not be transferred by _________________________, except by
will or the laws of descent and distribution or pursuant to the terms of a
domestic relations order, as defined in Section 414(p)(1)(B) of the Internal
Revenue Code of 1986, which satisfies the requirements of Section 414(p)(1)(A)
of the Internal Revenue Code of 1986 (a "Qualified Domestic Relations Order").
During _________________________'s life, this Option shall be exercisable only
by
<PAGE> 2
_________________________ (or _________________________'s personal
representative or attorney-in-fact) or the alternate payee named in a Qualified
Domestic Relations Order pursuant to and in accordance with the terms and
conditions contained in this Agreement. The Option shall not otherwise be
transferred, assigned, pledged or hypothecated for any purpose whatsoever, and
is not subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge or hypothecation or other disposition of the
Option, other than in accordance with the terms of this Agreement, shall be
void and of no effect.
III. MANNER OF EXERCISE
This Option may be exercised, in accordance with Section I above, by
delivery (personally or by certified or registered mail in accordance with
Section VII. below) of a written notice to the Company's Secretary specifying
the number of Shares to be purchased and accompanied by payment for those
Shares and any applicable withholding taxes. At the election of
_________________________, such payment may be made in cash, check, or by
delivery of certificate(s) representing Shares of the Company's common stock
previously held by _________________________, duly endorsed for transfer, or
shares issuable to _________________________ pursuant to the exercise of the
Option. The Administrator may also permit payment to be made in such other
manner as the Administrator deems appropriate and in compliance with applicable
law. Any shares delivered to the Company in payment of the aggregate Option
Price shall be valued at the fair market value of the Company's shares, such
valuation to be equal to the average of the highest and lowest selling price
for the Company's stock quoted on the Composite Tape for New York Stock
Exchange Listed Companies for the date of _________________________'s exercise
of the Option or any part thereof (or if no sales are reported on that date,
for the first date prior to the exercise date upon which a sale was reported).
Unless otherwise provided by the Administrator, if _________________________
is, at the time of exercise, an Officer as defined in the Plan, the Company
shall withhold the appropriate number of Shares, rounded up to the next whole
number, as are determined by the Administrator to have a Fair Market Value
equal to the amount required to satisfy applicable withholding taxes. If
_________________________ is not an Officer at the date of exercise, he may
elect to have Shares withheld or may deliver cash or a check to pay the
withholding taxes. The Option shall be exercised in accordance with such
administrative regulations as the Administrator of the Plan shall from time to
time adopt.
IV. EXPIRATION
All unexercised rights under the Option shall expire on the date specified
in Section I above or on the date specified in this Section IV in the event
that _________________________'s employment is terminated.
(a) Upon termination of _________________________'s employment with
the Company or a subsidiary due to _________________________'s death, the
right to exercise the Option shall be accelerated and shall accrue as of
the date of _________________________'s death, and may be exercised by
_________________________'s executor, administrator or the person to whom
the rights under the Option shall pass by _________________________'s
will or by the laws of descent and distribution, within one (1) year from
the date of _________________________'s death.
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<PAGE> 3
(b) Upon the termination of _________________________'s employment
with the Company or its subsidiaries for "cause," as defined in the Plan,
this Option, to the extent not exercised, shall lapse and be of no
further force or effect whatsoever. Upon such lapse,
_________________________ shall not be entitled nor have the right to
purchase any additional Shares under the Plan or, to the extent not
exercised before such termination, pursuant to this Agreement.
(c) Upon termination of _________________________'s employment for
any reason other than for death or for cause, this Option may be
exercised, to the extent it was otherwise exercisable on the date of
termination of employment, within ninety (90) days of such termination of
employment. In the event of _________________________'s death within the
ninety day period following termination of employment, the Option may be
exercised by his Beneficiary, to the extent it was otherwise exercisable,
within one (1) year of the date of _________________________'s death.
V. NON-ISSUANCE
The Company shall not be required to issue or deliver any Shares upon
_________________________'s exercise of the Option:
(a) Prior to the admission of such Shares to listing on any public
exchange on which the Company's common stock may be listed; or
(b) Prior to the completion of any proceedings under any applicable
state or federal securities law, rule or regulation that the Company or
its counsel determines to be necessary or advisable to the issuance of
the Shares; or
(c) Unless such issuance, in the opinion of the Company's counsel,
is exempt from federal and state securities registration requirements.
The Company may require _________________________ to represent and agree in
writing that if such Shares are issuable under an exemption from registration
requirements, the Shares will be "restricted." _________________________ shall
not have the rights of a shareholder with respect to the Shares until
certificates evidencing the Shares have been issued and delivered to
_________________________. While the Company will attempt to process the
exercise of the Option as promptly as possible, it cannot guarantee a delivery
date for the certificates.
VI. REORGANIZATION
If prior to the expiration of the Option, the Shares then subject to the
Option shall be affected by any recapitalization, merger, consolidation,
reorganization, stock dividend, stock split or other change in capitalization
affecting the common stock of the Company, the Company will appropriately
adjust the number and kind of Shares covered by the Option and the Option Price
per share as is necessary to prevent dilution or the enlargement of rights
which might otherwise result.
VII. NOTICE
All notices given pursuant to or in connection with this Agreement shall
be in writing and shall be deemed to be duly given when personally delivered
or when mailed, if sent by certified or
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<PAGE> 4
registered mail, postage prepaid, return receipt requested, and addressed as
follows, or to such other address as the parties may indicate:
If to the Company: Bingham Financial Services Corporation
31700 Middlebelt Road, Suite 125
Farmington Hills, Michigan 48334
ATTN: Mr. Jeffrey P. Jorissen
If to ____________________: ____________________________
____________________________
____________________________
With a Required Copy
of any Notice to: Peter Sugar, Esq.
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
VIII. NO RIGHT TO EMPLOYMENT CONFERRED
Nothing in this Agreement or the Plan shall confer upon
_________________________ any right to continue in employment with the Company
or a subsidiary or interfere in any way with the right of the Company or any
subsidiary to terminate such person's employment at any time.
IX. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable, the
remaining provisions shall continue to be in full force and effect to the
maximum extent permitted by law. If the implementation or presence of any
provision of this Agreement would or will cause the Plan and thereby the Shares
purchased thereunder to not be in compliance with Rule 16b-3 under the
Securities Exchange Act of 1934 or any other statutory provision, such
Agreement provision shall not be implemented or, at the Company's option
following notice, such provision shall be severed from the Agreement as is
appropriate or necessary to achieve statutory compliance; provided, however,
that the parties hereby agree to negotiate in good faith as may be necessary to
modify this Agreement to achieve statutory compliance or otherwise effectuate
the intent of the parties following a severance permitted by this Section IX.
X. AMENDMENT
This instrument contains the entire Agreement of the parties and may only
be amended by written agreement executed by the parties hereto or their
respective successors, as permitted by Section II above. Notwithstanding the
foregoing, the Administrator may, in its discretion, amend this agreement
without the consent of _________________________ in such a manner as it
believes will prevent the Option from resulting in "applicable
_________________________ remuneration" within the meaning of Section 162(m) of
the Internal Revenue Code or regulations thereunder.
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<PAGE> 5
XI. GOVERNING LAW
This Agreement is made and entered into and shall be construed and
enforced in accordance with the laws of the State of Michigan.
XII. HEADINGS
The section numbers and headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
XIII. ACCEPTANCE OF OPTION
The exercise of the Option is conditioned upon the acceptance by
_________________________ of the terms hereof as evidenced by his or her
execution of this Agreement and the return of an executed copy to the Secretary
of the Company no later than sixty days after the date set forth in the
following paragraph.
IN WITNESS WHEREOF, this Stock Option Agreement is hereby executed as of
_______________________.
"COMPANY"
BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation
By: __________________________________________
Jeffrey P. Jorissen
__________________________________________
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<PAGE> 1
EXHIBIT 10.12
DETACHABLE WARRANT AGREEMENT
This DETACHABLE WARRANT AGREEMENT (the "Agreement") is made and entered
into as of September 30, 1997 by and between Sun Communities, Inc., a Maryland
corporation ("Sun"), and Bingham Financial Services Corporation, a Michigan
corporation ("the Company").
WHEREAS, on the date hereof, pursuant to that certain Subordinated Loan
Agreement, of even date hereof, by and among Sun, as lender, and the Company
(the "Loan Agreement"), Sun has agreed to provide the Company with a
subordinated debt facility of up to $10,000,000, which indebtedness shall be
subordinate to all senior debt of the Company.
WHEREAS, Sun is acquiring from the Company warrants in the form attached
as Exhibit A hereto (the "Detachable Warrants"), representing the right to
purchase from the Company Warrant Shares on the terms and conditions set forth
in the Detachable Warrants.
WHEREAS, the Detachable Warrants are being issued as an inducement and
partial consideration for Sun to enter into the Subordinated Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Closing.
A. Closing. The closing of the issuance of the
Detachable Warrants to Sun (the "Closing") shall take place
simultaneously with the closing of the loan transaction
contemplated by the Loan Agreement. The date of such Closing
is hereinafter referred to as the "Closing Date."
B. Transactions on Closing Date. At the Closing, the
Company shall deliver to Sun the duly issued Detachable
Warrants.
2. Representations and Warranties of The Company. The Company
represents and warrants to Sun as follows:
A. Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Michigan.
B. Authority Relative to this Agreement. The Company
has all requisite corporate power and authority to enter into
and perform this Agreement and to issue and deliver the
Detachable Warrants to Sun. The execution, delivery and
performance by the Company of this Agreement, including the
issuance and delivery of the Detachable Warrants to Sun, have
been duly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly executed and
delivered by the Company and is a legal, valid and binding
obligation of the Company and is enforceable against the
Company in accordance with its terms.
C. No Conflict or Violation. The execution and
delivery of this Agreement by the Company, the performance by
the Company of its terms and the issuance and delivery of the
Detachable Warrants to Sun do not, and on the Closing Date
will not, conflict with or result in a violation of (i) the
Articles of Incorporation or Bylaws of the Company, or (ii)
any agreement, instrument, law, rule, regulation, order, writ,
judgment or decree to which
<PAGE> 2
the Company is a party or is subject, except for such
conflicts and violations which will not, in the aggregate,
have a material adverse effect on the business, operations,
assets or condition (financial or otherwise) of the Company
and will not deprive Sun of any material benefit under this
Agreement.
D. Validity of Issuance. The Detachable Warrants to
be issued to Sun pursuant to this Agreement and the Warrant
Shares (as defined in the Detachable Warrants) issued upon
exercise of the Detachable Warrants will, when issued, be duly
and validly issued, fully paid and nonassessable (assuming in
the case of the Warrant Shares, payment of the exercise price
is made in accordance with the terms of the Detachable
Warrants).
E. Capital Structure. As of the Closing, the
authorized capital stock of the Company consists of (i)
10,000,000 shares of Common Stock, of which 1,000,000 shares
will be issued and outstanding (1,150,000 if the
over-allotment option is exercised in full); and (ii)
10,000,000 shares of Preferred Stock, of which none will be
issued and outstanding.
3. Representations and Warranties of Sun. Sun hereby represents
and warrants to the Company as follows:
A. Investment Intent. Sun is acquiring the
Detachable Warrants, and if the Detachable Warrants are
exercised, the Warrant Shares, for investment solely for its
own account and not with a view to, or for resale in
connection with, the distribution or other disposition
thereof. Sun agrees and acknowledges that it will not,
directly or indirectly, offer, transfer or sell the Detachable
Warrants or any Warrant Shares, or solicit any offers to
purchase or acquire the Detachable Warrants or any Warrant
Shares, unless the transfer or sale is (i) pursuant to an
effective registration statement under the Securities Act of
1933, as amended, and the rules and regulations thereunder
(the "Securities Act") and has been registered under any
applicable state securities or "blue sky" laws or (ii)
pursuant to an exemption from registration under the
Securities Act and applicable state securities or "blue sky"
laws.
B. Legends. Sun acknowledges that the Detachable
Warrants and each Warrant Share will contain a legend
substantially to the following effect:
THE DETACHABLE WARRANTS AND THE WARRANT SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Upon reasonable request of the Company in connection with any transfer of
the Detachable Warrants or the Warrant Shares (other than a transfer pursuant
to a public offering registered under the Securities Act, pursuant to Rule 144
or Rule 144A promulgated under the Securities Act (or any similar rules then in
effect), or to an affiliate of Sun), Sun will deliver, if requested by the
Company, an opinion of counsel knowledgeable in securities laws reasonably
2
<PAGE> 3
satisfactory to the Company to the effect that such transfer may be effected
without registration under the Securities Act. The Company agrees to issue
certificates evidencing the Warrant Shares that do not contain such legend upon
receipt of an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company, to the effect that such legend no longer applies
to the Warrant Shares.
C. Additional Investment Representations. Sun is an
"accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act.
4. Miscellaneous
A. Notices. All notices and other communications
provided for herein shall be dated and in writing and shall be
deemed to have been duly given (i) when delivered, if
delivered personally, sent by registered or certified mail,
return receipt requested and postage prepaid, or sent via
nationally recognized overnight courier or via facsimile with
confirmation of receipt and (ii) when received if delivered
otherwise, to the party to whom it is directed:
Company:
Bingham Financial Services Corporation
31700 Middlebelt Road, Suite 125
Farmington Hills, MI 48334
Attention: Jeffrey P. Jorissen
Facsimile No.: (248) 932-4073
with a copy to:
Jaffe, Raitt, Heuer & Weiss, P.C.
One Woodward, Suite 2400
Detroit, MI 48226
Attention: Peter Sugar
Facsimile No.: (313) 961-8358
Sun:
Sun Communities, Inc.
31700 Middlebelt Road, Suite 145
Farmington Hills, MI 48334
Attention: Gary A. Shiffman
Facsimile No.: (248) 932-3072
or to such other address as either party hereto shall have specified by notice
in writing to the others.
B. Assignment. This Agreement and all the
provisions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors
and permitted assigns, except that neither this Agreement nor
any rights or obligations hereunder shall be assigned by the
Company without the prior written consent of Sun.
C. Amendment. This Agreement may be amended only by
a written instrument signed by the Company and Sun.
3
<PAGE> 4
D. Waiver. Any party hereto may (a) extend the time
for the performance of any of the obligations or other acts of
the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions herein. Any agreement
on the part of a party hereto to any such extension or waiver
shall be valid as to such party if set forth in an instrument
in writing signed by such party.
E. Severability. In the event that any one or more
of the provisions hereof, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect
and of the remaining provisions hereof shall not be in any way
impaired, it being intended that all rights, powers and
privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
F. Applicable Law. The corporate law of the State of
Michigan shall govern all issues and questions concerning the
relative rights of Sun and the Company. In addition, all other
issues and questions concerning the construction,
validity, interpretation and enforceability of this Agreement
and the exhibits and schedules hereto shall be governed by and
construed in accordance with the laws of the State of
Michigan, without giving effect to any choice of law or
conflict of law provisions that would cause the application of
the laws of any jurisdiction other than the State of Michigan.
G. Expenses. All reasonable fees and expenses
incurred by Sun in connection with the preparation of this
Agreement and the transactions referred to herein, including
the reasonable fees of Sun's counsel, shall be paid by the
Company, whether or not the issuance of the Detachable
Warrants, the execution and delivery of the Loan Agreement or
any other transaction contemplated hereby is consummated.
H. Counterparts. This Agreement may be executed in
two or more counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which
together shall be deemed to be one and the same agreement.
I. Descriptive Headings. The headings in this
Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning of the terms contained
herein.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Detachable Warrant
Agreement to be signed and attested by its duly authorized officers and to be
dated as of the date hereof.
BINGHAM FINANCIAL SERVICES CORPORATION
By:
------------------------------------
Jeffrey P. Jorissen
Its: President
SUN COMMUNITIES, INC.
By:
------------------------------------
Gary A. Shiffman
Its: President
5
<PAGE> 1
EXHIBIT 10.13
THESE DETACHABLE WARRANTS AND THE WARRANT SHARES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED.
DETACHABLE WARRANTS TO PURCHASE COMMON STOCK
OF
BINGHAM FINANCIAL SERVICES CORPORATION
Date of Issuance: September 30,1997 Certificate No.
THIS CERTIFIES THAT, for value received, BINGHAM FINANCIAL SERVICES
CORPORATION, a Michigan corporation (the "Company"), hereby grants to SUN
COMMUNITIES, INC., a Maryland corporation (together with its permitted
transferees and assigns, the "Holder"), these warrants (the "Detachable
Warrants"), representing the right to purchase from the Company a total of
400,000 Warrant Shares (as defined herein) at a price of $10.00 per Warrant
Share (the "Initial Exercise Price"). The exercise price and number of Warrant
Shares for which the Detachable Warrants are exercisable shall be subject to
adjustment as provided herein. Certain capitalized terms used herein are
defined in Section 6 hereof.
The Detachable Warrants are subject to the following provisions:
Section 1. Exercise of Detachable Warrants:
Section 1.1. Exercise Period. The Detachable Warrants have a term of seven
years from the date of their issuance and the purchase rights represented by
the Detachable Warrants may be exercised, in whole or in part in denominations
of not less than 5,000 Warrant Shares each, at any time and from time to time
after the fourth anniversary of their issuance but before the date seven years
after their issuance (the "Exercise Period"). After this time, the Detachable
Warrants shall become immediately null and void.
Section 1.2. Restrictions on Transfer. The Detachable Warrants and the
Warrant Shares will be restricted securities as defined under the Securities
Act of 1933, as amended (the "Act") and therefore will not be transferable
except in compliance with applicable federal and state securities laws,
including Rule 144 adopted under the Act. Unless the Warrant Shares shall have
been duly registered under the Act, certificates representing such shares shall
bear a legend comparable to the legend on the first page of the Detachable
Warrants regarding restrictions on transfer. The Holder agrees to give written
notice to the Company before offering for sale, selling or otherwise disposing
of any of the Detachable Warrants or Warrant Shares, except when such offer,
sale or other disposition is made pursuant to a registration statement then in
effect under the Act. The notice shall describe briefly the manner of any
proposed offer, sale or other disposition and shall be accompanied by a written
opinion of counsel for such Holder, which counsel and opinion shall be
reasonably satisfactory to the Company to the effect that the
<PAGE> 2
proposed offer, sale or other disposition of such Detachable Warrants or
Warrant Shares may be effected without registration under the Act.
Section 1.3. Exercise Procedure.
(a) The Detachable Warrants shall be deemed to have been exercised when
all of the following items have been delivered to the Company (the "Exercise
Time"):
(1) a completed Exercise Agreement, as described in Section 1.4
below, executed by the Person exercising all or part of the purchase
rights represented by the Detachable Warrants (the "Purchaser");
(2) the Detachable Warrants;
(3) if the Purchaser is not the initial Holder, an Assignment or
Assignments in the form set forth in attached Exhibit II evidencing the
assignment of the Detachable Warrants to the Purchaser; and
(4) either (i) a check payable to the Company in an amount equal to
the Aggregate Exercise Price (as defined); or (ii) the delivery of a
notice to the Company that the Purchaser is exercising the Detachable
Warrants by authorizing the Company to reduce the number of Warrant
Shares subject to the Detachable Warrants by the number of shares having
an aggregate value equal to the Aggregate Exercise Price; for purposes of
this clause the value of each Warrant Share subject to Detachable
Warrants reduced in payment of exercise hereunder shall be the Fair
Market Value of such Warrant Share subject to Detachable Warrants less
the Exercise Price per share. For purposes hereof, "Aggregate Exercise
Price" means an amount equal to the product of the Exercise Price (as
defined in Section 2) multiplied by the number of Warrant Shares being
purchased and being surrendered for payment at such time.
(b) Certificates for Warrant Shares purchased upon exercise of the
Detachable Warrants shall be delivered by the Company to the Purchaser within
five days after the date of the Exercise Time together with any cash payable in
lieu of a fraction of a share pursuant to Section 14 hereof. Unless the
Detachable Warrants have expired or all of the purchase rights represented
hereby have been exercised, the Company shall prepare a new Warrant,
substantially identical hereto, representing the rights formerly represented by
the Detachable Warrants which have not expired or been exercised and shall,
within such five-day period, deliver such new Warrant to the Person designated
for delivery in the Exercise Agreement.
(c) The Warrant Shares issuable upon the exercise of the Detachable
Warrants shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
holder of such Warrant Shares at the Exercise Time.
(d) The issuance of certificates for Warrant Shares upon exercise of the
Detachable Warrants shall be made without charge to the Holder or the Purchaser
for any issuance tax in respect thereof or other cost incurred by the Company
in connection with such exercise and the related issuance of Warrant Shares;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of the Detachable Warrants or any Warrant
Shares, with respect to any transfer of the Detachable Warrants, which taxes
shall be paid by the transferee prior to the issuance of such Warrant Shares.
(e) The Company shall not by any action including, without limitation,
amending its Articles of Incorporation, any reorganization, transfer of assets,
consolidation, merger,
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<PAGE> 3
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of the
Detachable Warrants, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such action as may be necessary
or appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company will (i) not change the
"stated value" of the Common Stock to par value; (ii) take all such action as
may be necessary or appropriate in order that the Company may validly issue
fully paid and nonassessable Common Stock upon the exercise of the Detachable
Warrants; and (iii) obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under the Detachable
Warrants.
(f) Notwithstanding any other provision hereof, if an exercise of any
portion of the Detachable Warrants is to be made in connection with a public
offering or a sale of the Company (pursuant to a merger, sale of stock or
otherwise), such exercise may at the election of the Holder be conditioned upon
the consummation of such transaction, in which case such exercise shall not be
deemed to be effective until immediately prior to the consummation of such
transaction.
(g) The Company shall at all times reserve and keep available out of its
authorized but unissued Common Stock solely for the purpose of issuance upon
the exercise of the Detachable Warrants, the maximum number of Warrant Shares
issuable upon the exercise of the Detachable Warrants. All Warrant Shares which
are so issuable shall, when issued and upon the payment of the Exercise Price,
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Company shall take all such actions as may be
necessary to ensure that all such Warrant Shares may be so issued without
violation by the Company of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which shares of
Common Stock or other securities constituting Warrant Shares may be listed
(except for official notice of issuance which shall be immediately delivered by
the Company upon each such issuance). The Company will use its best efforts to
cause the Warrant Shares, immediately upon such exercise, to be listed on any
domestic securities exchange upon which shares of Common Stock or other
securities constituting Warrant Shares are listed at the time of such
exercise.
(h) The Company shall at all times in good faith assist in the carrying
out of all terms of the Detachable Warrants. Without limiting the generality of
the foregoing, the Company shall use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under the Detachable Warrants.
(i) No stockholder of the Company has or shall have any preemptive right
to subscribe for the Warrant Shares issuable pursuant hereto.
Section 1.4. Exercise Agreement. Upon any exercise of the Detachable
Warrants, the Purchaser shall deliver to the Company an Exercise Agreement in
substantially the form set forth in Exhibit I hereto, except that if the
Warrant Shares are not to be issued in the name of the Holder, the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the Warrant Shares are to be issued, and if the number of Warrant Shares to be
issued does not include all of the Warrant Shares purchasable hereunder, it
shall also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be issued.
Section 2. Subdivision or Combination of Common Stock. If the Company
shall: (a) pay or make a dividend or other distribution to all holders of its
Common Stock in shares of Common Stock, (b) subdivide, split or reclassify the
outstanding shares of its Common Stock
- 3 -
<PAGE> 4
into a larger number of shares, or (c) combine or reclassify the outstanding
shares of its Common Stock into a smaller number of shares, then in each case
the Warrant Shares shall be adjusted to equal the number of such shares to
which the Holder of the Detachable Warrants would have been entitled upon the
occurrence of such event had the Detachable Warrants been exercised immediately
prior to the happening of such event or, in the case of a stock dividend or
other distribution, prior to the record date for determination of such
shareholder entitled thereto. An adjustment made pursuant to this Section 2
shall become effective immediately after such record date, in the case of a
dividend or distribution, and immediately after the effective date, in the case
of a subdivision, split, combination or reclassification.
Section 2.1. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
the Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change." Prior
to the consummation of any Organic Change, the Company shall make appropriate
provision to ensure that the Holder of the Detachable Warrants shall thereafter
have the right to acquire and receive upon exercise thereof in lieu of the
Warrant Shares immediately theretofore acquirable and receivable upon
exercise of such Holder's Detachable Warrants, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable upon
exercise of such Holder's Warrants had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision with respect to
such Holder's rights and interests to insure that the provisions hereof
(including this Section 2) shall thereafter be applicable to the Detachable
Warrants (including, in the case of any such Organic Change in which the
successor entity or purchasing entity is other than the Company, an immediate
adjustment of the Exercise Price to the value for the Common Stock reflected by
the terms of such Organic Change and a corresponding immediate adjustment in
the number of Warrant Shares acquirable and receivable upon exercise of the
Detachable Warrants, if the value so reflected is less than the Fair Market
Value of the Common Stock in effect immediately prior to such Organic Change).
The Company shall not effect any such Organic Change unless, prior to the
consummation thereof the successor entity (if other than the Company) resulting
from such Organic Change (including a purchaser of all or substantially all the
Company's assets) assumes by written instrument the obligation to deliver to
the Holder of the Detachable Warrants such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such Holder may be
entitled to acquire upon exercise of the Detachable Warrants.
Section 2.2. Certain Events. If any event occurs of the type contemplated
by the provisions of this Section 2 but not expressly provided for by such
provisions, then the Company's Board of Directors shall make in good faith an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
obtainable upon exercise of the Detachable Warrants so as to protect the rights
of the Holder of the Detachable Warrants.
Section 2.3. Notices.
(a) Immediately upon any adjustment of the Exercise Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least 30 days
prior to the date on which the Company closes its books or takes a record (i)
with respect to any dividend or distribution upon the Common Stock; (ii) with
respect to any pro rata subscription offer to holders of Common Stock; or (iii)
for determining rights to vote with respect to any Organic Change, dissolution
or liquidation.
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<PAGE> 5
(c) The Company shall also give written notice to the Holder at least 30
days prior to the date on which any Organic Change, dissolution or liquidation
shall take place.
Section 3. Certain Rights Regarding Dividends. If the Company pays a
dividend or distribution upon the Common Stock, other than dividends or
distributions not in excess of accumulated earnings of the Company and other
than dividends or distributions described in Section 2, then the Company shall
pay to the Holder of the Detachable Warrants, at the time of payment thereof,
such dividend or distribution which would have been paid to such Holder had
the Detachable Warrants been fully exercised immediately prior to the date on
which a record is taken for such dividend or distribution or, if no record is
taken, the date as of which the record holders of Common Stock entitled to said
dividends or distributions are to be determined.
Section 4. Purchase Rights. If at any time the Company grants, issues or
sells any options, convertible securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of the
Common Stock (the "Purchase Rights"), then the Company shall grant, issue or
sell (as the case may be) to the Holder the aggregate Purchase Rights which the
Holder would have acquired if the Holder had held the maximum number of Warrant
Shares acquirable upon complete exercise of the Detachable Warrants immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
Section 5. Registration Rights.
Section 5.1 Required Registration.
(a) Subject to the provisions of subsection (e) of this Section 5.1, the
Holder may at any time after the fourth anniversary of the initial public
offering of the Common Stock request in writing that the Company register the
Warrant Shares under the Act for sale in the manner specified in such notice;
provided, that the Company shall have no obligation to register the Warrant
Shares pursuant to this subsection (a) unless the number of Warrant Shares for
which registration has been requested constitutes at least five percent (5%) of
the Company's Common Stock then outstanding; and provided further, that the
Company shall not be obligated to register the Warrant Shares pursuant to this
subsection (a) on more than two occasions.
(b) Following receipt of any notice delivered in compliance with
subsection (a) of this Section 5.1 (a "Demand"), the Company shall use its best
efforts to register under the Act, for public sale in accordance with the
method of disposition specified in such Demand, the number of Warrant Shares
specified in such Demand. The Holder may designate the managing underwriter or
underwriters if the offering is to be underwritten, which shall be of national
standing, subject to the approval of the Company, which approval shall not be
unreasonably withheld or delayed. The Company shall be deemed to have
satisfied an obligation to register the Warrant Shares pursuant to a Demand
only when a registration statement covering the Warrant Shares specified in the
Demand and any written requests delivered under this subsection (b), for sale
in accordance with the method of disposition specified in the Demand, shall
have become effective and the period of distribution of the Warrant Shares
contemplated thereby shall have been completed (determined as hereinafter
provided).
(c) The Company shall be entitled to include in any registration
statement filed in response to a Demand made in accordance with this Section
5.1, for sale in accordance with the method of disposition specified by the
Holder in such Demand, shares of Common Stock to be sold by the Company for
its own account, except as and to the extent that, in the opinion of the
managing underwriter(s), if any, such inclusion would adversely affect the
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<PAGE> 6
marketing of the Warrant Shares for which registration has been requested in
connection with such Demand, which Warrant Shares shall be registered prior to
the shares that the Company and any other shareholders propose to register.
Except for registration statements on form S-4, S-8 or any successor forms
thereto, the Company will not file with the Securities and Exchange Commission
(the "Commission") any other registration statement with respect to its
securities, whether for its own account or that of other security holders, from
the date of receipt of a Demand pursuant to this Section 5.1 until 30 days
following the completion of the period of distribution of the Warrant Shares
contemplated thereby (determined as hereinafter provided).
(d) The Company may at its option elect that any requested registration
pursuant to this Section 5.1 be delayed for a period not in excess of 120 days
from the date of such Demand; provided, that such right to delay a Demand may
not be exercised by the Company pursuant to this Section 5.1 more than once in
any twelve-month period (so that no such election by the Company may be made
within twelve months of a previous election by the Company under this
subsection (d)).
(e) Notwithstanding anything to the contrary contained in subsection
(a) of this Section 5.1, no Demand may be made under this Section 5.1 within 90
days after the effective date of a registration statement filed by the Company
covering a public offering in which the holders of the Warrant Shares shall
have been entitled to join pursuant to Section 5.2 and in which there shall
have been effectively registered all the Warrant Shares as to which
registration shall have been requested in accordance with Section 5.2.
Section 5.2 Incidental Registration. Subject to certain limitations set
forth in subsection (b) of this Section, each time that the Company proposes to
file under the Act a registration statement relating, in whole or in part, to
any of its equity securities, the Company shall at least thirty (30) days prior
to such filing give written notice of such proposed filing to the Holder of
outstanding Warrant Shares not theretofore registered under the Act. Upon
receipt by the Company not more than ten (10) days thereafter of a written
request from the Holder for registration of Warrant Shares under this
subsection, subject to the provisions of the succeeding sentence, the Company
shall include in such filing and shall use its best efforts to register the
Warrant Shares as to which the Holder requested registration, provided,
however, if at any time after giving written notice of its intention to
register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such equity securities, the
Company may, at its election, give written notice of such determination to the
Holder of the Warrant Shares and, thereupon, shall be relieved from its
obligation with such registration (but not from its obligation to pay the
registration expenses in connection therewith). If the managing or principal
underwriters named in the registration statement shall advise the Company and
the Holder that has requested the Warrant Shares to be registered that, in the
good faith judgment of such managing or principal underwriters, the number of
shares of Common Stock which the Holder, the Company and all other shareholders
have requested be included in such registration statement exceed the number of
shares it is advisable to offer and to sell at such time, then the Company
shall include in such registration, to the extent of the number of shares of
Common Stock which the Company is so advised can be sold in such offering, the
shares of Common Stock that the Company proposes to issue and sell for its own
account and the number of shares of Common Stock to be registered and sold by
the Holder and all other shareholders requesting registration pursuant to such
registration statement shall be appropriately reduced. In such case the number
of shares of Common Stock to be sold after such reduction shall be ratably
allocated among the Holder and such other shareholders in the same proportion
as the original number of shares requested by such Person to be registered
bears to a fraction, the numerator of which is the aggregate number of shares
to be registered and the denominator of which is the aggregate number of shares
requested to be registered.
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<PAGE> 7
Section 5.3 Other Provisions Relating to Registration Rights. In
connection with any registration pursuant to this Section 5:
(a) Upon the request of the Holder of the Warrant Shares then being
registered, the Company shall cooperate with any underwriters (as defined in
the Act) for the requesting party approved by the Company (which approval shall
not be unreasonably withheld), including, without limitation, providing such
information, certificates, comfort letters of accountants and opinions of
counsel as may be customarily and reasonably requested by such underwriters.
(b) The Company shall furnish to the Holder of the Warrant Shares being
registered, at the Company's sole cost and expense, such number of prospectuses
conforming to the requirements of the Act, and the rules and regulations
thereunder, relating to the Warrant Shares subject thereto as may from time to
time be reasonably requested by such holders.
(c) All fees, disbursements and expenses incident to the Company's
performance of or compliance with its obligations under this Section 5 shall be
borne by the Company, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company and expenses of complying with applicable securities or blue sky laws.
(d) The Company agrees to use its best efforts at its own expense to
effect and to keep effective necessary registrations or qualifications under
the securities or Blue Sky laws of such jurisdictions as may be reasonably
requested by any of the holders of the Warrant Shares or by any underwriters
for such holders so as to permit the disposition of the Warrant Shares being
registered.
(e) The Holder agrees to provide in an expeditious manner whatever
information and undertakings are reasonably requested by the Company in order
to comply with the requirements of the Act and of the Securities Exchange Act
of 1934, as amended, the rules and regulations thereunder and the guides and
other pronouncements of the Commission in connection with the registration of
the Holder's Warrant Shares.
(f) The Company shall indemnify and hold harmless the Holder and any
underwriter (as defined in the Act) who participates in such registration for
such Holder and each Person, if any, who controls the Holder or any underwriter
against any losses, claims, damages or liabilities, joint or severally, or
actions in respect thereof to which the Holder or any underwriter or
controlling person may become subject under the Act, or otherwise, insofar as
such losses, claims damages, liabilities or actions in respect thereof arise
out of, or are based upon, any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
Warrant Shares were registered under the Act, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto, or
arise out of, or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Holder or any
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
have the right, at its option, to defend at its expense and by its own counsel
against any losses, claims, damages or liabilities, provided that (i) such
counsel is reasonably satisfactory to the Holder of the Warrant Shares; (ii)
the Holder of the Warrant Shares is kept fully informed of all developments,
and is furnished with copies of all documents and papers, related thereto and
is given the right to participate in the defense and investigation thereof at
the expense of the Company if (A) in the written opinion of counsel to such
holders, use of counsel of the Company's choice would be expected to give rise
to a conflict of interest; (B) there are or may be legal defenses available to
the Holder that are
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<PAGE> 8
different from or additional to those available to the Company; (C) the
Company shall not have employed counsel to represent the Holder within a
reasonable time after notice of such claim is given to the Company or notice
that the Company intends to assume the defense of such claim is given to the
Holder; or (D) the Company shall authorize the Holder to employ separate
counsel at the expense of the Company; and provided, further, that to the
extent that any such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus or said final prospectus or in conformity with, written information
furnished to the Company by the Holder or by any underwriter for the Holder
specifically for use in the preparation thereof, the Company will not be so
liable to the Holder or underwriter and the Holder agrees to indemnify and hold
the Company harmless from any loss, claim, damage, liability or action arising
from such information furnished to the Company by it and to use its best
efforts to cause any underwriter for the Holder to indemnify and hold the
Company harmless from any loss, claim, damage, liability or action arising from
information furnished to the Company by such underwriter.
(g) The Holder shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
customary representations, warranties or agreements regarding the Holder, the
Holder's Warrant Shares and the Holder's intended method of distribution and
any other representation required by law.
Section 6. Definitions. The following terms have the meanings set forth
below:
"Affiliate," as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and
"under common control with"), as applied to any Person, means the possession,
directly, indirectly or beneficially, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
"Common Stock" means the Company's Common Stock without par value and any
securities into which such Common Stock is hereafter converted or exchanged.
" Common Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Section 2.2(a) or
2.2(b).
"Fair Market Value" means (i) the average of the closing sales prices of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day or, (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 p.m., New York time, as
reported on the NASD OTC Bulletin Board or, (iv) if the Common Stock is not
reported on the NASD OTC Bulletin Board, the average of the representative bid
and asked quotations for the Common Stock as of 4:00 p.m., New York time, as
reported on the Nasdaq interdealer quotation system, or any similar successor
organization, in each such case averaged over a period of 21 trading days
consisting of the day as of which "Fair Market Value" is being determined and
the 20 consecutive trading days prior to such day. Notwithstanding the
foregoing, if at any time of determination either (x) the Common Stock is not
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, and either listed on a national securities exchange or authorized for
quotation in the Nasdaq system, or (y) less than 25% of the outstanding Common
Stock is held by the public free of transfer restrictions under the Securities
Act of 1933,
- 8 -
<PAGE> 9
as amended, then Fair Market Value shall mean the price that would
be paid per share of outstanding Common Stock in connection with a sale of the
entire common equity interest in the Company in an orderly sale transaction
between a willing buyer and a willing seller, taking into account the
appropriate lack of liquidity of the Company's securities, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale, which determination of Fair Market Value shall be made
by the Company's Board of Directors in its good faith judgment.
"Permitted Issuance" means any issuance by the Company of shares of Common
Stock or Options (a) upon exercise of the Detachable Warrants; (b) to members
of management and directors of the Company; and (c) to Sun Communities, Inc.
("Sun") or others pursuant to the Participants Support Agreement or similar
agreements whereby Sun or other owners and operators of manufactured home
communities will offer the Company as the only preferred financing source to
home purchasers and home owners at manufactured home communities owned and
operated by such persons.
"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization or government or
department or agency thereof.
"Warrant Shares" means shares of the Common Stock issuable upon exercise
of the Detachable Warrants; provided, that if the securities issuable upon
exercise of the Detachable Warrants are issued by an entity other than the
Company or there is a change in the class of securities so issuable, then the
term "Warrant Shares" shall mean shares of the security issuable upon exercise
of the Detachable Warrants if such security is issuable in shares, or shall
mean the equivalent units in which such security is issuable if such security
is not issuable in shares.
Section 7. No Voting Rights: Limitations of Liability. The Detachable
Warrants shall not entitle the Holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of the Holder shall give rise to any
liability of such Holder for the Exercise Price of Warrant Shares acquirable by
exercise hereof or as a stockholder of the Company.
Section 8. Restrictions. Subject to the provisions of this Section 8, the
Detachable Warrants and all rights hereunder are transferable, in whole or in
part, without charge to the Holder (subject to the provisions of Section 1.3(d)
hereof, upon surrender of the Detachable Warrants with a properly executed
Assignment (in the form of Exhibit II hereto) at the principal office of the
Company. The Holder agrees that it will not sell, transfer or otherwise
dispose of the Detachable Warrants or any Warrant Shares of restricted Common
Stock, in whole or in part, except pursuant to an effective registration
statement under the Securities Act of 1933, as amended, or an exemption from
registration thereunder.
Section 9. Detachable Warrants Exchangeable for Different Denominations.
The Detachable Warrants are exchangeable, upon the surrender hereof by the
Holder at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the purchase rights hereunder, and each of such
new Warrants shall represent such portion of such rights as is designated by
the Holder at the time of such surrender. The date the Company initially
issues the Detachable Warrants shall be deemed to be the date of issuance
hereof regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by the Detachable
Warrants shall be issued.
Section 10. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing the Detachable Warrants, and in the case
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<PAGE> 10
of any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the Holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at its expense) execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 11. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in the Detachable Warrants shall be in
writing, shall be delivered personally, sent by registered or certified mail,
return receipt requested and postage prepaid or sent via nationally recognized
overnight courier or via facsimile, and shall be deemed to have been given when
so delivered (or when received, if delivered by any other method) if sent (i)
to the Company, at its principal executive offices; and (ii) to the Holder, at
such Holder's address as it appears in the records of the Company (unless
otherwise indicated).
Section 12. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Detachable Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Holder.
Section 13. Warrant Register. The Company shall maintain at its principal
executive offices books for the registration and the registration of transfer
of the Detachable Warrants. The Company may deem and treat the Holder as the
absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
Section 14. Fractions of Shares. The Company may, but shall not be
required to issue a fraction of a Warrant Share upon the exercise of the
Detachable Warrants in whole or in part. As to any fraction of a share which
the Company elects not to issue, the Company shall make a cash payment in
respect of such fraction in an amount equal to the same fraction of the Fair
Market Value of a Warrant Share on the date of such exercise.
Section 15. Descriptive Headings: Governing Law. The descriptive headings
of the several Sections and paragraphs of the Detachable Warrants are inserted
for convenience only and do not constitute a part of the Detachable Warrants.
The corporate law of the State of Michigan shall govern all issues and
questions concerning the relative rights of the Holder and the Company. In
addition, all other issues and questions concerning the construction, validity,
interpretation and enforceability of the Detachable Warrants and the exhibits
and schedules hereto shall be governed by, and construed in accordance with,
the laws of the State of Michigan without giving effect to any choice of law or
conflict of law provisions (whether of the State of Michigan or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Michigan.
* * * * *
IN WITNESS WHEREOF, the Company has caused the Detachable Warrants to be
signed and attested by its duly authorized officers and to be dated as of the
date hereof.
BINGHAM FINANCIAL SERVICES CORPORATION
By:
----------------------------------------
Jeffrey P. Jorissen, President
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<PAGE> 11
EXHIBIT I
BINGHAM FINANCIAL SERVICES CORPORATION
EXERCISE AGREEMENT
The undersigned irrevocably elects to exercise the enclosed Detachable
Warrants to purchase __________________ shares of Common Stock, makes payment
of $___________ in payment of the Exercise Price thereof, and requires that
certificates for such shares be issued in the name of:
________________________________________________________________________________
(Please Print Name and Social Security No.)
________________________________________________________________________________
(Street Address)
________________________________________________________________________________
(City, State and Zip Code)
DATED:______________________, 19__
Name of Warrantholder or Assignee: _____________________________________________
(Please Print)
Address: _____________________________________________________________________
_____________________________________________________________________
Signature: _____________________________________________________________________
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<PAGE> 12
EXHIBIT II
ASSIGNMENT
(To be signed only upon assignment of the Detachable Warrants)
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
________________________________________________________________________________
(Name of Assignee Must be Printed or Typewritten)
________________________________________________________________________________
(Street Address)
________________________________________________________________________________
(City, State and Zip Code)
the within Detachable Warrants, irrevocably constituting and appointing
_______________________________ Attorney to transfer such Detachable Warrants
on the books of the Company, with full power of substitution in the premises.
DATED: _____________, 19___
__________________________________
Signature of Registered Holder
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<PAGE> 1
EXHIBIT 10.14
THIS AGREEMENT, dated as of January 01, 1997, between Manufactured Home
Lending Corporation, a Michigan Corporation, (hereinafter referred to as the
Lender") and St. James Servicing Corporation, a Michigan corporation,
(hereinafter referred to as the "Servicer"),
WITNESSETH:
WHEREAS, Lender desires that Servicer shall service certain Installment
Loans on behalf of the Lender, but only on the terms and conditions set forth
herein,
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, the parties agree as follows:
1. DEFINITIONS. Loan shall mean an Installment Loan owned by Lender and
serviced by Servicer.
Errors and Omissions Insurance shall mean insurance, in form and substance
as required by FNMA, insuring against losses from and errors or omissions in
the conduct of the Servicer's servicing business.
Fidelity Insurance shall mean a fidelity bond, in form and substance as
required by FNMA.
FNMA shall mean the Federal National Mortgage Association.
Secured Property shall mean the property covered by a Security Agreement
securing a Loan.
Borrower shall mean the natural person or persons who executed the Security
Instrument securing a Loan and/or signed the Instrument evidencing such Loan.
The term "Borrower" shall also include natural persons who have assumed the
obligations of a Borrower.
Servicing Fee shall mean the fee paid to the Servicer in accordance with
Section 3 hereof.
2. SERVICER'S DUTIES AND RESPONSIBILITIES. The Servicer shall, to the
best of its ability and with reasonable diligence, as agent for the Lender,
service on behalf of the Lender, the Loans owned by Lender in accordance with
the terms, conditions and requirements hereof. In the performance of its duties
hereunder, the Servicer shall perform all services and duties set forth herein
as follows:
(A) Diligently use its best efforts to collect, as agent for the Lender,
all required payments of principal and interest on each Loan when due, or as
soon thereafter as possible. The Servicer hereby acknowledges that all amounts
collected by the Servicer with respect to Loans are collected by the Servicer on
behalf of and for the benefit of the Lender and in making such collections the
Servicer acts as agent for the Lender. That all such amounts so collected are
the property of the Lender and not of the Servicer and that all such amounts,
except an amount equal
<PAGE> 2
to the Servicing Fee and other fees due Servicer, when received by the
Servicer are deemed to be received by the Lender.
(B) Promptly after collection of each payment, deposit the portions
belonging to Lender in a banking or savings and loan institution, the deposit
of which shall be held in trust in the name of the Lender, by the Servicer as
agent, and shall be insured to the full extent legally possible by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation.
(C) On or before the 6th day of each month, remit, except for the
Servicing Fee and other fees due Servicer, to the Lender all payments received
with respect to the Loans and deposited in the payment account as of the last
day of the prior month and shall specify the amounts which represent interest,
principal and prepayments of principal.
(D) The Servicer shall not waive or vary the terms of any Loan or
consent to a postponement of compliance by the Borrower with any of the terms
or provisions thereof, or in any manner grant an indulgence to the Borrower,
without the consent of Lender.
(E) The Servicer shall promptly notify the Lender of any actual
knowledge that the Servicer may acquire that any Secured Property, or any part
thereof, is out of repair or is deteriorated, or if any waste is suffered or
committed with respect to any Secured Property, or if any Secured Property is
damaged by fire or other casualty or cause provided however, that the Servicer
shall have no obligation to inspect the premises to determine the foregoing.
(F) The Servicer shall promptly notify Lender if a Borrower notifies
Servicer of a change of address or of a change of telephone number, except for
a change in area code only implemented by the telephone company.
(G) Promptly after a Borrower misses two consecutive monthly payments,
Servicer shall advise Lender. Lender shall handle collection efforts
thereafter.
(H) The Servicer shall provide lender with a delinquency report at
such times as Lender shall request.
3. SERVICER'S COMPENSATION. In full payment for its services as agent
for the Lender hereunder, the Servicer shall, on a monthly basis, retain from
moneys received a Servicing Fee of $7.00 per Loan per payment, while Servicer
is servicing less than 1,000 Loans, and $6.00 per Loan per payment while
Servicer is servicing 1,000 or more Loans for Lender, but only at the time and
with respect to Loans which payment is in fact made by the respective
Borrowers, of the entire amount of principal and interest of Borrower's payment
due. In addition, the Servicer may retain all late charges up to the amount of
$15.00 per late payment, and non-sufficient funds charges payable and collected
under the terms of any Loan.
4. SERVICER'S SERVICING OPERATIONS. The Servicer agrees that
throughout the entire term of this Agreement:
<PAGE> 3
(A) The Servicer shall maintain loan servicing facilities,
equipment and personnel at all times adequate for the collection of the
Borrowers' payments and the performance of the Servicer's duties hereunder.
The Servicer shall keep all files and documents and related records held
pursuant hereto with the same care exercised by private institutional mortgage
investors for their own investments. It is understood that Lender shall retain
the original Loan Documents in its files, furnishing Servicer with copies of
documents necessary to service the Loans.
(B) The Servicer shall maintain in full force and effect Errors and
Omissions Insurance and Fidelity Insurance on those of its employees having
access to any amounts paid by the Borrowers. The Servicer may provide such
insurance under any blanket policy or policies which it carries.
(C) The Servicer shall maintain adequate books and records setting
forth payments received and disbursements made pursuant to this Agreement, and
shall be made available for examination and audit by the Lender, upon
reasonable request, at any time during normal business hours. All such
records shall be maintained by the Servicer in accordance with generally
accepted accounting practices consistently applied. Such records shall be
retained for such period of time as the Lender shall specify, but not more than
seven years. The Servicer shall furnish the Lender with a monthly statement,
setting forth with respect to each Loan, the amount of principal and interest
payments paid for such month, the principal balance of each Loan and any other
information requested by the Lender.
(D) The Servicer shall furnish to the Lender, within 90 days after
the end of the Servicer's fiscal year, an auditor's report relating to the
Servicer's financial statements.
(E) The Servicer shall take such action as may from time to time
be necessary to maintain its good standing as a FNMA approved seller/servicer.
(F) The Servicer shall indemnify the Lender and hold it harmless
from any loss, damage or expense that the Lender may sustain as a result of any
failure on the part of the Servicer properly to perform its services, duties
and obligations under this Agreement.
(G) The Servicer shall attempt to make personal contact with
delinquent Borrowers as soon as possible in order to achieve a solution which
will bring the Loan current as soon as possible. In the event a Borrower is
delinquent in two installment payments, then that Installment Loan shall be
referred to Lender for collection.
5. SERVICER'S REPRESENTATIONS AND WARRANTIES. The Servicer hereby
represents and warrants that:
(a) The Servicer is a corporation duly organized and validly
existing and in good standing under the laws of Michigan and is existing and
has the power and authority, corporate and other, to own its properties and
carry on its business as now being conducted, and is duly qualified to do such
business in each state where it is doing business.
<PAGE> 4
(b) The Servicer is not under any cease and desist order or other
order of a similar nature, temporary or permanent, of any Federal or state
authority, nor are there any proceedings presently in progress or to its
knowledge contemplated which would, if successful, lead to the issuance of any
such order;
(c) The Servicer is an approved seller and servicer of mortgage loans
to and for FNMA.
(d) This Agreement is a valid and binding agreement of the Servicer
enforceable according to its terms, the making and performance of which has
been duly authorized by all necessary corporate and other action and will not
constitute a violation of any law, any requirement imposed by any judicial,
arbitral body or governmental instrumentality, or the charter or by-laws of the
Servicer, or a default under any agreement or instrument by which it is bound
or affected.
(e) Neither the execution and delivery of this Agreement nor the
performance of the transactions contemplated by this Agreement by the Servicer
requires the consent or approval of any governmental instrumentality or, if
such consent or approval is required, it has been obtained.
The representations and warranties contained in this Section 5 shall be
true and correct when made and, by performance as the Servicer hereunder shall
be deemed to be repeated by the Servicer continuously throughout the term hereof
and shall be true and correct throughout the term hereof.
6. MUTUAL AGREEMENTS. The Servicer and the Lender agree with each other
as follows:
(a) This Agreement shall be effective upon the date of delivery of the
Loans and shall extend to and include the date on which the entire amount of
principal and interest on all Loans is paid in full, unless this Agreement is
sooner terminated with respect to any Loan in accordance with paragraph (b) of
this Section, is terminated by mutual agreement of the parties, or is
terminated by the Lender as provided in paragraph (c) of this Section.
(b) The Lender may assign its interest in any Loan which is in default
according to its terms, in which event the Lender may, at its option and
without any penalty, (i) terminate this Agreement with respect to such Loan by
a notice in writing to the Servicer, or (ii) assign the Lender's rights and
obligations under this Agreement with respect to such Loan to the assignee of
such Loan.
<PAGE> 5
(c) Notwithstanding anything to the contrary herein contained, the
Lender may terminate servicing by the Servicer with respect to any Loan or all
Installment Loans at any time with or without cause upon ninety days written
notice; provided, however, that if such termination is without cause and the
termination occurs prior to ten years from the date of commencement of
servicing by the Servicer with respect to any Loan for which servicing is being
terminated, the Lender shall pay to the Servicer an amount equal to three
months servicing fees. It is specifically agreed, by and between the parties
hereto, that the termination fee herein provided shall not be payable by the
Lender to the Servicer in the event of termination as provided in paragraph (b)
of this Section.
(d) Upon termination of this Agreement, or upon termination of
servicing with respect to any Loan, the Servicer shall promptly supply all
reports, documents, and information requested by the Lender, to any person or
entity designated by the Lender, and shall use its best efforts to effect the
orderly and efficient transfer of servicing to a new Servicer designated by the
Lender, including preparation of accounting statements in the form requested by
the Lender, and delivery to the Lender, or its designated assignee, of all
money held and all papers and records pertaining to such Loans, and the Lender
shall reimburse the Servicer for any amounts advanced by the Servicer and
required to be reimbursed by the Lender hereunder.
(e) The Lender shall have the right to require the Servicer to furnish
such documents as the Lender, in its sole discretion and from time to time,
deems necessary in order to determine whether the provisions of this Agreement
have been complied with.
(f) It is agreed that Servicer shall have no responsibility with
respect to insurance of any security for the Loans. Lender is solely
responsible for enforcing and monitoring all insurance provisions of its Loan
documentation.
(g) The provisions of this Agreement cannot be waived or modified
unless such waiver or modification be in writing and signed by the party to be
charged with such waiver or modification.
(h) Invalidation of any one of the provisions of this Agreement, by
judgment or court order, shall in no away affect any other provisions herein
contained, which provisions shall remain in full force and effect.
(i) This Agreement shall be governed by the laws of the State of
Michigan.
(j) This Agreement shall not be assignable by the Servicer without the
written consent of the Lender, its successors or assigns and in the event of
any attempted assignment thereof without such written consent, the Lender may,
at its option, terminate this Agreement, without payment of the termination fee
provided for in subsection (c) of Section 6.
(k) This Agreement and all obligations and rights arising hereunder
shall bind and inure to the benefit of the Lender and the Servicer and their
respective successors in interest and permitted assigns.
<PAGE> 6
(l) This Agreement may be executed in one or more counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date hereof.
ST. JAMES SERVICING CORPORATION
By: [SIG]
-----------------------------
Kenneth A. Neal, President
MANUFACTURED HOME LENDING
CORPORATION
By: [SIG]
-----------------------------
<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, except for Note 6 as to which the date
is September 30, 1997 on our audit 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
October 13, 1997
