<PAGE> 1
As filed with the Securities and Exchange Commission on July 11, 1996
Registration No. 333-1822
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
SUN COMMUNITIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENT)
<TABLE>
<S><C>
MARYLAND 38-2730780
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
</TABLE>
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GARY A. SHIFFMAN
PRESIDENT
31700 MIDDLEBELT ROAD
SUITE 145
FARMINGTON HILLS, MICHIGAN 48334
(810) 932-3100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------
Copies of all correspondence to:
JEFFREY L. FORMAN, ESQ.
JAFFE, RAITT, HEUER & WEISS, P.C.
ONE WOODWARD AVENUE
SUITE 2400
DETROIT, MICHIGAN 48226
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
______
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. / X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. _____
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. _____ .
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Amount of
Title of Each Class of Securities Aggregate Offering Registration Fee
Price (1)
<S> <C> <C>
Debt Securities, Preferred Stock, $.01 par value, Common $100,000,000 $34,482.76 (2)
Stock, $.01 par value, Securities Warrants
</TABLE>
(1) In United States dollars or the equivalent thereof in any other currency,
currency unit or units, or composite currency or currencies.
(2) In addition to the securities registered hereby, pursuant to Rule 429 of
the Securities Act of 1933, the Prospectus included herein also covers
$200,000,000 of Debt Securities, Preferred Stock, Common Stock, and Securities
Warrants from a previous registration statement (No. 33- 95694), as to which a
registration fee of $68,966.00 was paid.
__________________________________
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS INCLUDED
HEREIN ALSO RELATES TO $200,000,000 PRINCIPAL AMOUNT OF DEBT SECURITIES,
PREFERRED STOCK, COMMON STOCK, AND SECURITIES WARRANTS REGISTERED UNDER
REGISTRATION STATEMENT 33-95694, WHICH WAS DECLARED EFFECTIVE ON NOVEMBER 7,
1995. IN THE EVENT ANY OF SUCH PREVIOUSLY REGISTERED DEBT SECURITIES,
PREFERRED STOCK, COMMON STOCK, AND SECURITIES WARRANTS ARE OFFERED PRIOR TO THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, THEY WILL NOT BE INCLUDED IN ANY
PROSPECTUS HEREUNDER. THE AMOUNT OF DEBT SECURITIES, PREFERRED STOCK, COMMON
STOCK, AND SECURITIES WARRANTS BEING REGISTERED, TOGETHER WITH THE DEBT
SECURITIES, PREFERRED STOCK, COMMON STOCK, AND SECURITIES WARRANTS REGISTERED
UNDER REGISTRATION STATEMENT 33-95694, REPRESENTS THE MAXIMUM AMOUNT OF DEBT
SECURITIES, PREFERRED STOCK, COMMON STOCK, AND SECURITIES WARRANTS WHICH ARE
EXPECTED TO BE OFFERED FOR SALE.
__________________________________
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> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAD 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 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
Prospectus dated June 28, 1996
PROSPECTUS
$300,000,000
SUN COMMUNITIES, INC.
DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK
AND SECURITIES WARRANTS
Sun Communities, Inc. (the "Company") may from time to time
offer in one or more series of (i) unsecured debt securities
("Debt Securities"), (ii) shares of its preferred stock, par
value $0.01 per share (the "Preferred Stock"), (iii) shares of
its common stock, $.01 par value (the "Common Stock"), and
(iv) warrants exercisable for Debt Securities, Preferred
Stock, or Common Stock ("Securities Warrants"), with an
aggregate public offering price of up to $300,000,000 (or its
equivalent based on the exchange rate at the time of sale) in
amounts, at prices and on terms to be determined at the time
of offering. The Debt Securities, Preferred Stock, Common
Stock and Securities Warrants (collectively, the "Securities")
may be offered, separately or together, in separate series in
amounts, at prices and on terms to be described in one or more
supplements to this Prospectus (a "Prospectus Supplement").
With respect to the Debt Securities, the specific title,
aggregate principal amount, form (which may be registered or
bearer, or certificated or global), maturity, rate (or manner
of calculation thereof) and time of payment of interest, terms
for redemption at the option of the Company or repayment at
the option of the holder, any sinking fund provisions and any
conversion provisions will be set forth in the applicable
Prospectus Supplement. The terms of the Preferred Stock,
including the specific designation and stated value per share,
any dividend, liquidation, redemption, conversion, voting and
other rights, and all other specific terms of the Preferred
Stock will be set forth in the applicable Prospectus
Supplement. In the case of the Common Stock, the specific
number of shares and issuance price per share will be set
forth in the applicable Prospectus Supplement. In the case of
the Securities Warrants, the duration, offering price,
exercise price and detachability, if applicable, will be set
forth in the applicable Prospectus Supplement. In addition,
such specific terms may include limitations on direct or
beneficial ownership and restrictions on transfer of the
Securities, in each case as may be appropriate to preserve the
status of the Company as a real estate investment trust
("REIT") for United States federal income tax purposes. The
applicable Prospectus Supplement will also contain
information, where applicable, about material United States
federal income tax considerations relating to, and any listing
on a securities exchange of, the Securities covered by such
Prospectus Supplement.
The Securities may be offered directly by the Company,
through agents designated from time to time by the Company, or
to or through underwriters or dealers. If any agents or
underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price,
fee, commission or discount arrangement with, between or among
them, will be set forth, or will be calculable from the
information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Securities may be
sold without delivery of a Prospectus Supplement describing
the method and terms of the offering of such Securities.
SEE "RISK FACTORS" ON PAGE 4 FOR CERTAIN FACTORS RELATING TO AN INVESTMENT IN
THE SECURITIES.
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.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is June 28, 1996.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
in accordance therewith, files, reports and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected at the Public Reference
Section maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the following regional offices of the Commission:
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the Company's Common Stock is listed on the New York Stock Exchange
and such reports, proxy statements and other information concerning the Company
can be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement"), of which this Prospectus is a
part, under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby. This Prospectus does not contain
portions of the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations
of the Commission. Statements contained in this Prospectus as to the contents
of any contract or other documents are not necessarily complete, and in each
instance, reference is made to the copy of such contract or documents filed as
an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference and the exhibits and schedules thereto. For
further information regarding the Company and the Securities, reference is
hereby made to the Registration Statement and such exhibits and schedules which
may be obtained from the Commission at its principal office in Washington, D.C.
upon payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are incorporated herein by reference.
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1995 (the "10-K"), filed with the Commission on March 18, 1996, as
amended by Form 10-K/A, filed with the Commission on April 18, 1996, and
as amended by Form 10-K/A, filed with the Commission on May 3, 1996.
2. The Company's current report on Form 8-K dated March 20, 1996 and filed
with the Commission on March 26, 1996.
3. The Company's current report on Form 8-K dated April 2, 1996 and filed
with the Commission on April 4, 1996.
4. The Company's current report on Form 8-K dated April 24, 1996 and filed
with the Commission on April 27, 1996.
5. The Company's current report on Form 8-K dated May 1, 1996 and filed with
the Commission on May 3, 1996.
6. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, filed with the Commission on May 3, 1996.
7. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated November 23, 1993, No. 1-12616.
All documents filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document.
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<PAGE> 5
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in
this Prospectus (in the case of a statement in a previously filed document
incorporated or deemed to be incorporated by reference herein), in any
accompanying Prospectus Supplement relating to a specific offering of
Securities or in any other subsequently filed document that is also
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or any accompanying Prospectus Supplement. Subject to the
foregoing, all information appearing in this Prospectus and each accompanying
Prospectus Supplement is qualified in its entirety by the information appearing
in the documents incorporated by reference.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon their
written or oral request, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference in such documents).
Written requests for such copies should be addressed to Jeffrey P. Jorissen,
the Company's Senior Vice President and Chief Financial Officer at 31700
Middlebelt Road, Suite 145, Farmington Hills, Michigan 48334, telephone number
(810) 932-3100.
As used herein, the term "Company" includes Sun Communities, Inc., a
Maryland corporation, and one or more of its subsidiaries (including
Sun Communities Operating Limited Partnership, Sun Communities Finance Limited
Partnership (the "Financing Partnership"), Sun Home Services, Inc., and Sun
Management, Inc.).
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THE COMPANY
The Company owns and operates manufactured housing communities
concentrated in the midwestern and southeastern United States. The Company is
a fully integrated real estate company which, together with its affiliates and
predecessors, has been in the business of acquiring, operating, and expanding
manufactured housing communities since 1975. As of May 1, 1996, the Company
owned and managed a portfolio of 79 manufactured housing community properties
(the "Properties") located in twelve states and Canada containing an aggregate
of 28,512 developed sites and approximately 2,864 potential expansion sites.
Consistent with the Company's strategy of growth through acquisitions, the
Company has acquired 48 of the Properties since its initial public offering in
December 1993 (the "IPO"). The Company believes that it is the largest United
States owner of manufactured housing communities (by number of communities).
The Company is the sole general partner of, and, as of May 1, 1996, held
approximately 88% of the interests in, Sun Communities Operating Limited
Partnership, a Michigan limited partnership (the "Operating Partnership").
Substantially all of the Company's assets are held by or through the Operating
Partnership. The ownership and management of the Properties is allocated among
the Subsidiaries; however, subject to the tax and other risks discussed in the
section entitled "Risk Factors": (i) the Company controls the management of all
the Properties either directly or through a management contract with Sun
Management, Inc., a Michigan corporation ("Sun Management") cancelable upon 30
days written notice; and (ii) stockholders in the Company achieve substantially
the same economic benefits as direct ownership, operation, and management of
the Properties, except that 5% of the cash flow from operating activities of
Sun Home Services, Inc., a Michigan corporation ("Home Services") and Sun
Management (estimated to be an aggregate of no greater than approximately
$2,000 in 1996) will be distributed to Gary A. Shiffman, Milton M. Shiffman
(Gary A. Shiffman and Milton M. Shiffman are sometimes hereinafter collectively
referred to as the "Principals"), and Jeffrey P. Jorissen, each an officer of
the Company, as the holders of all the common stock of Home Services and Sun
Management. There is no assurance that such distributions will not increase in
the future. As sole general partner of the Operating Partnership, the Company
has the exclusive power to manage and conduct the business of the Operating
Partnership, subject to certain limited exceptions.
The Company's executive and principal property management office is
located at 31700 Middlebelt Road, Suite 145, Farmington Hills, Michigan
48334, and its telephone number is (810) 932-3100. The Company has regional
property management offices in Elkhart, Indiana and Tampa, Florida.
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below.
CONFLICTS OF INTEREST
Failure to Enforce Terms of Management Contract. Through their ownership of
all of the common stock of Sun Management, the Principals and Jeffrey P.
Jorissen, an officer of the Company (the Principals and Jeffrey P. Jorissen are
sometimes hereinafter collectively referred to as the "Subsidiary
Shareholders") have a 5% interest in Sun Management. Sun Management has
entered into a management contract with the Financing Partnership with respect
to each of the Properties subject to the Mortgage Debt (as defined below),
which was not negotiated on an arm's length basis. The Subsidiary Shareholders
will have a conflict of interest with respect to their obligations as officers
and/or directors of the Company to enforce the terms of the management
contract. The failure to enforce the material terms of this agreement could
have an adverse effect on the Company. The Operating Partnership, on account
of its ownership of the preferred stock of Sun Management, and the Subsidiary
Shareholders, on account of their ownership of the common stock of Sun
Management, are entitled to 95% and 5%, respectively, of cash flow from
operating activities of Sun Management.
Failure to Enforce Terms of Home Services Agreement. Through their
ownership of all of the common stock of Home Services, the Subsidiary
Shareholders have a 5% interest in Home Services. Home Services has entered
into an agreement with the Operating Partnership for sales, brokerage, and
leasing services, which was not negotiated on an arm's length basis. The
Subsidiary Shareholders will have a conflict of interest with respect to their
obligations as officers and/or directors of the Company to enforce
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<PAGE> 7
the terms of the services agreement. The failure to enforce the material terms
of this agreement could have an adverse effect on the Company. The Operating
Partnership, on account of its ownership of the preferred stock of Home
Services, and the Subsidiary Shareholders, on account of their ownership of the
common stock of Home Services, are entitled to 95% and 5%, respectively, of the
cash flow from operating activities of Home Services.
Tax Consequences Upon Sale of Properties. Prior to the redemption of
partnership interests in the Operating Partnership ("OP Units") for Common
Stock, the Principals will have tax consequences different from those of the
Company and its public stockholders upon the sale of any of the 24 Properties
acquired from partnerships previously affiliated with the Principals (the "Sun
Partnerships") and, therefore, the Principals and the Company, as partners in
the Operating Partnership, may have different objectives regarding the
appropriate pricing and timing of any sale of those Properties. Consequently,
the Principals may influence the Company not to sell those Properties even
though such sale might otherwise be financially advantageous to the Company.
PRINCIPALS' ABILITY TO EXERCISE INFLUENCE
As of May 1, 1996, the Principals owned, in the aggregate, approximately 7%
of the Common Stock (assuming redemption of all outstanding OP Units) and are
exempt from certain limitations on ownership. See "-- Ownership Limits and
Limits on Change in Control." Accordingly, the Principals will have
substantial influence on the Company and on the outcome of any matters
submitted to the Company's stockholders for approval, which influence might not
be consistent with the interests of other stockholders. In addition, although
there is no current agreement, understanding, or arrangement for the
Principals, as stockholders, to act together on any matter, the Principals
would be in a position to exercise significant influence over the affairs of
the Company if they were to act together in the future.
ADVERSE CONSEQUENCES OF DEBT FINANCING
The Company is subject to the risks normally associated with debt financing,
including the risk that the Company's cash flow will be insufficient to meet
required payments of principal and interest, the risk that existing
indebtedness will not be able to be refinanced, or that the terms of such
refinancing will not be as favorable as the terms of such indebtedness and the
risk that necessary capital expenditures for such purposes as renovations and
other improvements will not be able to be financed on favorable terms or at
all. If a property is mortgaged to secure payment of indebtedness and the
Company is unable to meet mortgage payments, the property could be transferred
to the mortgagee with a consequent loss of income and asset value to the
Company.
As of May 1, 1996, the Company had outstanding $30.8 million of indebtedness
that is collateralized by mortgage liens on five of the Properties (the
"Mortgage Debt"). If the Company fails to meet its obligations under the
Mortgage Debt, the lender would be entitled to foreclose on all or some of the
Properties securing such debt, which could have a material adverse effect on
the Company and its ability to make expected distributions and could threaten
the continued viability of the Company.
The Company has a one-time right to obtain the release of one Property from
the lien of the Mortgage Debt. In the event the Company desires to obtain the
release of a Property from the lien of such debt, such release may only be
obtained by satisfaction of each of the following: (i) prepayment of such debt
in an amount equal to 125% of the loan amount allocated to the Property being
released; (ii) payment of certain prepayment expenses that may be incurred by
the lender in connection with a partial prepayment of such debt; and (iii)
satisfaction of a specified debt service coverage ratio with respect to the
remaining four Properties not being released. In the event the Company is
unable to obtain the release of a Property from any such lien, it would be
unable to consummate a sale of such Property which might otherwise be in the
best interest of the Company.
CHANGES IN INVESTMENT AND FINANCING POLICIES WITHOUT STOCKHOLDER APPROVAL
The investment and financing policies of the Company, and its policies with
respect to certain other activities, including its growth, debt,
capitalization, distributions, REIT status, and operating policies, are
determined by the Board of Directors. Although the Board of Directors has no
present intention to do so, these policies may be amended or revised from time
to time at the discretion of the Board of Directors
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<PAGE> 8
without notice to or a vote of the stockholders of the Company. Accordingly,
stockholders may not have control over changes in policies of the Company and
changes in the Company's policies may not fully serve the interests of all
stockholders.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of its executive officers,
particularly the Principals. While the Company believes that it could find
replacements for these key personnel, the loss of their services could have a
temporary adverse effect on the operations of the Company. The Company does
not currently maintain or contemplate obtaining any "key-man" life insurance on
the Principals.
OWNERSHIP LIMIT AND LIMITS ON CHANGES IN CONTROL
9.8% Ownership Limit; Inapplicability to Founders. In order to qualify and
maintain its qualification as a REIT, not more than 50% of the outstanding
shares of the capital stock of the Company may be owned, directly or
indirectly, by five or fewer individuals. Thus, ownership of more than 9.8% of
the outstanding shares of Common Stock by any single stockholder has been
restricted, with certain exceptions, for the purpose of maintaining the
Company's qualification as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"). Such restrictions in the Company's charter do not apply
to the Principals and Robert B. Bayer, a former director and officer of the
Company (Robert B. Bayer and the Principals are sometimes hereinafter
collectively referred to as the "Founders"), who may acquire additional shares
of Common Stock through the redemption of OP Units, through the Stock Option
Plan, from other stockholders or otherwise, but in no event will they be
entitled to acquire additional shares such that the five largest beneficial
owners of the Company's stock hold more than 50% of the total outstanding
stock. Additionally, the Company's charter allows certain transfers of such
shares without the transferees being subject to the 9.8% ownership limit,
provided such transfers do not result in an increased concentration in the
ownership of the Company. The Company's Board of Directors, upon receipt of a
ruling from the Internal Revenue Service (the "Service"), an opinion of counsel
or other evidence satisfactory to the Board of Directors and upon such other
conditions as the Board of Directors may direct, may also exempt a proposed
transferee from this restriction. See "Description of Common Stock --
Restrictions on Ownership."
The 9.8% ownership limit, as well as the ability of the Company to issue
additional shares of Common Stock or shares of other stock (which may have
rights and preferences over the Common Stock), may discourage a change of
control of the Company and may also: (i) deter tender offers for the Common
Stock, which offers may be advantageous to stockholders; and (ii) limit the
opportunity for stockholders to receive a premium for their Common Stock that
might otherwise exist if an investor were attempting to assemble a block of
Common Stock in excess of 9.8% of the outstanding shares of the Company or
otherwise effect a change of control of the Company.
Staggered Board. The Board of Directors of the Company has been divided
into three classes of directors. The term of one class will expire each year.
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 were in the stockholders' interest.
Preferred Stock. The Company's charter authorizes the Board of Directors to
issue up to 10,000,000 shares of preferred stock and to establish the
preferences and rights (including the right to vote and the right to convert
into shares of Common Stock) of any shares issued. See "Description of
Preferred Stock." The power to issue preferred stock could have the effect of
delaying or preventing a change in control of the Company even if a change in
control were in the stockholders' interest.
REAL ESTATE INVESTMENT CONSIDERATIONS
General. Income from real property investments, and the Company's resulting
ability to make expected distributions to stockholders, may be adversely
affected by the general economic climate, local conditions such as oversupply
of manufactured housing sites or a reduction in demand for manufactured housing
sites in an area, the attractiveness of the Properties to tenants, zoning or
other regulatory restrictions, competition from other available manufactured
housing sites and alternative forms of housing (such as apartment buildings and
site-built single-family homes), the ability of the Company to provide
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<PAGE> 9
adequate maintenance and insurance, and increased operating costs (including
insurance premiums and real estate taxes). The Company's income would also be
adversely affected if tenants were unable to pay rent or sites were unable to
be rented on favorable terms. If the Company were unable to promptly relet or
renew the leases for a significant number of the sites, or if the rental rates
upon such renewal or reletting were significantly lower than expected rates,
then the Company's funds from operations and ability to make expected
distributions to stockholders could be adversely affected. In addition,
certain expenditures associated with each equity investment (such as real
estate taxes and maintenance costs) generally are not reduced when
circumstances cause a reduction in income from the investment. Furthermore,
real estate investments are relatively illiquid and, therefore, will tend to
limit the ability of the Company to vary its portfolio promptly in response to
changes in economic or other conditions.
Competition. All of the Properties are located in developed areas that
include other manufactured housing community properties. The number of
competitive manufactured housing community properties in a particular area
could have a material effect on the Company's ability to lease sites and on
rents charged at the Properties or at any newly acquired properties. The
Company may be competing with others that have greater resources than the
Company and whose officers and directors have more experience than the
Company's officers and directors. In addition, other forms of multi-family
residential properties, such as private and federally funded or assisted
multi-family housing projects and single-family housing, provide housing
alternatives to potential tenants of manufactured housing communities.
Changes in Laws. Costs resulting from changes in real estate tax laws
generally may be passed through to tenants and will not affect the Company.
Increases in income, service or other taxes, however, generally are not passed
through to tenants under leases and may adversely affect the Company's funds
from operations and its ability to make distributions to stockholders.
Similarly, changes in laws increasing the potential liability for environmental
conditions existing on properties or increasing the restrictions on discharges
or other conditions may result in significant unanticipated expenditures, which
would adversely affect the Company's funds from operations and its ability to
make distributions to stockholders.
Investments in Mortgages. Although the Company currently has no plans to
invest in mortgages other than an approximately $4.0 million mortgage loan it
has made to an entity that operates two manufactured housing communities in
Alberta, Canada (the "Canadian Mortgage"), the Company may invest in additional
mortgages in the future. By virtue of its investment in the Canadian Mortgage
and if the Company were to invest in additional mortgages, it is and would be
subject to the risks of such investment, which include the risk that borrowers
may not be able to make debt service payments or pay principal when due, the
risk that the value of mortgaged property may be less than the amounts owed,
and the risk that interest rates payable on the mortgages may be lower than the
Company's costs of funds. If any of the above occurred, funds from operations
and the Company's ability to make expected distributions to stockholders could
be adversely affected.
Development of New Communities. The Company is not restricted from engaging
in the development of new communities in the future. The manufactured housing
community development business involves significant risks in addition to those
involved in the ownership and operation of established manufactured housing
communities, including the risks that financing may not be available on
favorable terms for development projects, that construction and lease-up may
not be completed on schedule resulting in increased debt service expense and
construction costs, that long-term financing may not be available upon
completion of construction, and that sites may not be leased on profitable
terms. If the Company entered the manufactured housing community development
business, and if any of the above occurred, the Company's ability to make
expected distributions to stockholders could be adversely affected.
Rent Control Legislation. State and local rent control laws in certain
jurisdictions may limit the Company's ability to increase rents and to recover
increases in operating expenses and the costs of capital improvements.
Enactment of such laws has been considered from time to time in other
jurisdictions. Certain of the Properties are located, and the Company may
purchase additional properties, in markets that are either subject to rent
control or in which rent-limiting legislation exists or may be enacted.
Environmental Matters. Under various Federal, state and local laws,
ordinances and regulations, an owner of real estate is liable for the costs of
removal or remediation of certain hazardous or toxic substances on or in such
property. Such laws often impose such liability without regard to whether the
owner knew of, or was responsible for, the presence of such hazardous or toxic
substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's
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<PAGE> 10
ability to sell or rent such property or to borrow using such property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation of
such substances at a disposal or treatment facility, whether or not such
facility is owned or operated by such person. Certain environmental laws
impose liability for release of asbestos-containing materials ("ACMs") into the
air and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In connection with the
ownership (direct or indirect), operation, management, and development of real
properties, the Company or the Operating Partnership, as the case may be, may
be considered an owner or operator of such properties or as having arranged for
the disposal or treatment of hazardous or toxic substances and, therefore,
potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and injuries to persons and
property. All of the Properties have been subject to a Phase I or similar
environmental audit (which involves general inspections without soil sampling
or ground water analysis) completed by independent environmental consultants.
These environmental audits have not revealed any significant environmental
liability that would have a material adverse effect on the Company's business.
No assurances can be given that existing environmental studies with respect to
any of the Properties reveal all environmental liabilities, that any prior
owner of a Property did not create any material environmental condition not
known to the Company, or that a material environmental condition does not
otherwise exist as to any one or more Properties.
Uninsured Loss. The Company maintains comprehensive liability, fire, flood
(where appropriate), extended coverage, and rental loss insurance with respect
to the Properties with policy specifications, limits, and deductibles
customarily carried for similar properties. Certain types of losses, however,
may be either uninsurable or not economically insurable, such as losses due to
earthquakes, riots, or acts of war. Should an uninsured loss occur, the
Company could lose both its investment in and anticipated profits and cash flow
from a property.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Taxation as a Corporation. The Company expects to qualify and has made an
election to be taxed as a REIT under the Code, commencing with the calendar
year beginning January 1, 1994. Although the Company believes that it is
organized and will operate in such a manner, no assurance can be given that the
Company is organized or will be able to operate in a manner so as to qualify or
remain so qualified. Qualification as a REIT involves the satisfaction of
numerous requirements (some on an annual and quarterly basis) established under
highly technical and complex Code provisions for which there are only limited
judicial or administrative interpretations, and involves the determination of
various factual matters and circumstances not entirely within the Company's
control.
If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to Federal income tax (including any applicable
alternative minimum tax) on its taxable income at corporate rates. Moreover,
unless entitled to relief under certain statutory provisions, the Company also
would be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost. This treatment would
reduce the net earnings of the Company available for investment or distribution
to stockholders because of the additional tax liability to the Company for the
years involved. In addition, distributions to stockholders would no longer be
required to be made.
Other Tax Liabilities. Even though the Company qualifies as a REIT, it is
subject to certain Federal, state and local taxes on its income and property.
In addition, the management operations relating to the Properties subject to
the mortgages granted in connection with the Mortgage Debt and the Company's
sales operations, which are conducted through Sun Management and Home Services,
respectively, generally will be subject to Federal income tax at regular
corporate rates.
ADVERSE EFFECT OF DISTRIBUTION REQUIREMENTS
The Company may be required from time to time, under certain circumstances,
to accrue as income for tax purposes interest and rent earned but not yet
received. In such event, the Company could have taxable income without
sufficient cash to enable the Company to meet the distribution requirements of
a REIT. Accordingly, the Company could be required to borrow funds or liquidate
investments on adverse terms in order to meet such distribution requirements.
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ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A PARTNERSHIP
The Company believes that the Operating Partnership and the Financing
Partnership have each been organized as partnerships and will qualify for
treatment as such under the Code. If the Operating Partnership and the
Financing Partnership fail to qualify for such treatment under the Code, the
Company would cease to qualify as a REIT, and the Operating Partnership and the
Financing Partnership would be subject to Federal income tax (including any
alternative minimum tax) on their income at corporate rates.
ADVERSE EFFECT ON PRICE OF SHARES AVAILABLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices
for shares. The Principals hold 943,456 shares of Common Stock. In addition,
up to 3,252,887 shares of Common Stock may be issued in the future to the
Principals, the general partners of the Sun Partnerships other than the
Principals (the "Former General Partners"), and the sellers of certain
properties as a result of the potential redemption of their outstanding OP
Units. Except in certain limited circumstances or with the prior written
consent of Lehman Brothers Inc. and the Company, the Principals and the Former
General Partners may not sell more than one-third of such holder's shares prior
to December 15, 1995 or two-thirds of such holders' shares prior to December
15, 1996. After December 15, 1996, the Principals and the Former General
Partners may sell remaining unsold shares pursuant to registration rights or an
available exemption from registration. Also, the former owner of one of the
Properties will be issued OP Units with an aggregate value of $10.85 million
over the 11-year period beginning in January 1997 and continuing on an annual
basis through 2007. In addition, 750,000 shares have been reserved for
issuance pursuant to the Company's Stock Option Plan and 1993 Non-Employee
Director Stock Option Plan (of which 353,997 shares were issued to the
Principals upon the exercise of options pursuant to the Company's Stock Option
Plan), and the Principals' employment agreements provide for incentive
compensation payable in shares of Common Stock. These shares may be sold
without the consent of Lehman Brothers Inc. and the Company. No prediction can
be made regarding the effect that future sales of shares of Common Stock will
have on the market price of shares.
ADVERSE EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK
One of the factors that may influence the price of the Company's shares in
the public market will be the annual distributions to stockholders relative to
the prevailing market price of the Common Stock. An increase in market interest
rates may tend to make the Common Stock less attractive relative to other
investments, which could adversely affect the market price of Common Stock.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to invest, contribute or otherwise transfer the net proceeds of
any sale of Securities to the Operating Partnership, which would use such net
proceeds for general business purposes, including the development and
acquisition of additional properties and other acquisition transactions, the
payment of certain outstanding debt and improvements to certain properties in
the Company's portfolio.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earning to fixed charges for the years ended December
31, 1991, 1992, 1993, 1994, 1995 and the three months ended March 31, 1996 was
0.95:1, 1.05:1, 1.05:1, 2.79:1, 3.03:1, and 2.62:1, respectively. The ratios
of earnings to fixed charges for the years ended December 31, 1991 and 1992
relate to the Predecessor Business (such term having the meaning assigned to it
in the Company's financial statements filed with the 10-K).
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which this Prospectus and any applicable Prospectus
Supplement may relate. The particular terms of the Debt Securities being
offered and the extent to which such general provisions may apply will be set
forth
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<PAGE> 12
in the applicable Indenture or in one or more indentures supplemental thereto
and described in a Prospectus Supplement relating to such Debt Securities. The
Forms of the Senior Indenture (as defined herein) and the Subordinated
Indenture (as defined herein) have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Debt Securities will be issued
under one or more indentures (the "Indentures"). Senior Securities and
Subordinated Securities will be issued pursuant to separate indentures
(respectively, a "Senior Indenture" and a "Subordinated Indenture"), in each
case between the Company and a trustee (a "Trustee"). The Indentures will be
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made under this heading relating to the Debt Securities
and the Indentures are summaries of the anticipated provisions thereof, do not
purport to be complete and are qualified in their entirety by reference to the
Indentures and such Debt Securities. All section references appearing herein
are to sections of each Indenture unless otherwise indicated and capitalized
terms used but not defined below shall have the respective meanings set forth
in each Indenture.
The indebtedness represented by Subordinated Securities will be subordinated
in right of payment to the prior payment in full of the Senior Debt (as defined
below) of the Company as described under "--Subordination."
Except as set forth in the applicable Indenture or in one or more indentures
supplemental thereto and described in a Prospectus Supplement relating thereto,
the Debt Securities may be issued without limit as to aggregate principal
amount, in one or more series, in each case as established from time to time in
or pursuant to authority granted by a resolution of the Board of Directors of
the Company or as established in the applicable Indenture or in one or more
indentures supplemental to such Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series
may be reopened, without the consent of the Holders of the Debt Securities of
such series, for issuances of additional Debt Securities of such series.
It is anticipated that each Indenture will provide that there may be more
than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may
be appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any
other Trustee, and, except as otherwise indicated herein, any action described
herein to be taken by each Trustee may be taken by each such Trustee with
respect to the one or more series of Debt Securities for which it is Trustee
under the applicable Indenture.
The Prospectus Supplement relating to any series of Debt Securities being
offered will contain the specific terms thereof, including, without limitation:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;
(3) The percentage of the principal amount at which such Debt Securities will
be issued and, if other than the principal amount thereof, the portion of
the principal amount thereof payable upon declaration of acceleration of
the maturity thereof;
(4) If convertible in whole or in part into Common Stock or Preferred Stock,
the terms on which such Debt Securities are convertible, including the
initial conversion price or rate (or method for determining the same),
the portion that is convertible and the conversion period, and any
applicable limitations on the ownership or transferability of the Common
Stock or Preferred Stock receivable on conversion;
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<PAGE> 13
(5) The date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) The date or dates, or the method for determining such date or dates, from
which any such interest will accrue, the dates on which any such interest
will be payable, the regular record dates for such interest payment
dates, or the method by which such dates shall be determined, the persons
to whom such interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve 30-day
months;
(8) The place or places where the principal (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for conversion or registration of
transfer or exchange and where notices or demands to or upon the Company
in respect of such Debt Securities and the applicable Indenture may be
served;
(9) The period or periods within which, the price or prices at which and the
other terms and conditions upon which such Debt Securities may be
redeemed, in whole or in part, at the option of the Company, if the
Company is to have such an option;
(10) The obligation, if any, of the Company to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a Holder thereof, and the period or periods within
which or the date and dates on which, the price or prices at which and
the other terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(11) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with
reference to a index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency
unit or units or composite currency or currencies) and the manner in
which such amounts shall be determined;
(13) Any additions to, modifications of or deletions from the terms of such
Debt Securities with respect to Events of Default or covenants set forth
in the applicable Indenture;
(14) Whether such Debt Securities will be issued in certificate or book-entry
form;
(15) Whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
(16) The applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the applicable Indenture;
(17) Whether and under what circumstances the Company will pay any additional
amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option
to redeem such Debt Securities in lieu of mailing such payment; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301).
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<PAGE> 14
In addition, the Prospectus Supplement relating to any series of Debt
Securities that provides for redemption, prepayment, or conversion upon the
occurrence of certain events (i.e. a change of control) at the option of the
Holder thereof will disclose the following to the extent applicable:
(1) the effect that such provisions may have in deterring certain mergers,
tender offers or other takeover attempts, as well as any possible
adverse effect on the market price of the Company's securities or the
ability to obtain additional financing in the future;
(2) the Company's compliance with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934 and any other applicable securities laws
in connection with such provisions and any related offers by the
Company;
(3) whether the occurrence of the specified events may give rise to
cross-defaults on other indebtedness such that payment on the Debt
Securities may be effectively subordinated;
(4) any limitations on the Company's financial or legal ability to
repurchase the Debt Securities upon the triggering of an event risk
provision requiring such a repurchase or offer to repurchase;
(5) the impact, if any, under the governing instrument of the failure to
repurchase, including whether such failure to make any required
repurchases in the event of a change of control will create an Event of
Default with respect to the Debt Securities or will become an Event of
Default only after the continuation of such failure for a specified
period of time after written notice is given to the Company by the
Trustee or to the Company and the Trustee by the holders of a specified
percentage in aggregate principal amount of the Debt Securities
outstanding;
(6) to the extent true, that there can be no assurance that sufficient funds
will be available at the time of the triggering of an event risk
provision to make any required repurchases;
(7) if the Debt Securities are to be subordinated to other obligations of
the Company or its subsidiaries that would be accelerated upon the
triggering of a change in control, fundamental change or poison put
feature, the material effect thereof of a triggering of the change in
control, fundamental change or poison put feature with respect to the
Debt Securities;
(8) if there is any anti-takeover device relating to the Company's equity
securities, any material effects thereof on the Company's debt
securities, including the Debt Securities;
(9) to the extent that there is a definition of "Change in Control" that
includes the concept of "all or substantially all," how such term will
be quantified or, in the alternative, the established meaning of the
phrase under the applicable governing law of the Indenture will be
provided. If an established meaning for the phrase is not available,
then disclosure as to the effects of such an uncertainty on the ability
of a holder of the Debt Securities to determine when a "Change of
Control" has occurred will be provided;
(10) if applicable, the ramifications and limitations of the "Change of
Control" definition will be described in a manner that clearly states
whether the "Change of Control" provisions will be triggered if a
change in control of the Board of Directors occurs as a result of a
proxy contest involving the solicitation of revocable proxies.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Material
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<PAGE> 15
federal income tax, accounting and other considerations applicable to Original
Issue Discount Securities will be described in the applicable Prospectus
Supplement.
Except as set forth in the applicable Indenture or in one or more indentures
supplemental thereto, the applicable Indenture will not contain any provisions
that would limit the ability of the Company to incur indebtedness or that would
afford Holders of Debt Securities protection in the event of a highly leveraged
or similar transaction involving the Company or in the event of a change of
control. Restrictions on ownership and transfers of the Company's Common Stock
and Preferred Stock are designed to preserve its status as a REIT and,
therefore, may act to prevent or hinder a change of control. See "Description
of Preferred Stock -- Restrictions on Ownership" and "Description of Common
Stock -- Restrictions on Ownership." Reference is made to the applicable
Prospectus Supplement for information with respect to any deletions from,
modifications of or additions to the Events of Default or covenants of the
Company that are described below, including any addition of a covenant or other
provision providing event risk or similar protection. The applicable
Prospectus Supplement will disclose the nature and scope of any provisions or
covenants providing event risk or similar protection, including the specific
types of events protected against and not protected against. Such Prospectus
Supplement will also disclose the extent to which such provisions or covenants
are applicable or may be waived by the Company's board of directors or the
Trustee and whether the covenant or provision may have limited applicability in
the event of a leveraged buyout initiated or supported by the Company, the
management of the Company, or any affiliate of either party.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
the address of which will be stated in the applicable Prospectus Supplement;
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States (Sections 301,
305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest")
will forthwith cease to be payable to the Holder on the applicable regular
record date and may either be paid to the person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to the Holder of such Debt
Security not less than ten days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described
in the Indenture (Section 307).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee
referred to above. In addition, subject to certain limitations imposed upon
Debt Securities issued in book-entry form, the Debt Securities of any series
may be surrendered for conversion or registration of transfer or exchange
thereof at the corporate trust office of the applicable Trustee. Every Debt
Security surrendered for conversion, registration of transfer or exchange must
be duly endorsed or accompanied by a written instrument of transfer. No
service charge will be made for any registration of transfer or exchange of any
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith. If
the applicable Prospectus Supplement refers to any transfer agent (in addition
to the applicable Trustee) initially designated by the Company with respect to
any series of Debt Securities, the Company may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent in each place of payment for such series.
The Company may at any time designate additional transfer agents with respect
to any series of Debt Securities (Section 1002).
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<PAGE> 16
Neither the Company nor any Trustee shall be required to (i) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed
in part; or (iii) issue, register the transfer of or exchange any Debt Security
that has been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Company will be permitted to consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity provided that (a) either the Company shall be the continuing entity, or
the successor entity (if other than the Company) formed by or resulting from
any such consolidation or merger or which shall have received the transfer of
such assets shall expressly assume payment of the principal of (and premium, if
any) and interest on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
each Indenture; (b) immediately after giving effect to such transaction and
treating any indebtedness that becomes an obligation of the Company or any
Subsidiary as a result thereof as having been incurred by the Company or
Subsidiary at the time of such transaction, no Event of Default under the
Indentures, and no event which, after notice or the lapse of time, or both,
would become such an Event of Default, shall have occurred and be continuing;
and (c) an officer's certificate and legal opinion covering such conditions
shall be delivered to each Trustee (Sections 801 and 803).
CERTAIN COVENANTS
Existence. Except as described above under "Merger, Consolidation or Sale",
the Company will be required to do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, rights (charter and
statutory) and franchises; provided, however, that the Company shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities.
Maintenance of Properties. The Company will be required to cause all of its
material properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times (Section 1007).
Insurance. The Company will be required to, and will be required to cause
each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
insurers of recognized responsibility and, if described in the applicable
Prospectus Supplement, having a specified rating from a recognized insurance
rating service (Section 1008).
Payment of Taxes and Other Claims. The Company will be required to pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of
the Company or any Subsidiary, and (ii) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien upon the property of
the Company or any Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings (Section 1009).
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will be
required, to the extent permitted under the Exchange Act, to file with the
Commission the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to such
Sections 13 or 15(d) if the Company were so subject (the "Financial
Information"), such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been
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<PAGE> 17
required so to file such documents if the Company were so subject. The Company
also will be required in any event (x) within 15 days of each Required Filing
Date (i) to transmit by mail to all Holders of Debt Securities, as their names
and addresses appear in the Security Register, without cost to such Holders,
copies of the Financial Information and (ii) to file with the Trustee copies of
the Financial Information, and (y) if filing such documents by the Company with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, to
supply copies of such documents to any prospective Holder (Section 1010).
ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
Any additional covenants of the Company and/or modifications to the
covenants described above with respect to any Debt Securities or series
thereof, including any covenants relating to limitations on incurrence of
indebtedness or other financial covenants, will be set forth in the applicable
Indenture or an indenture supplemental thereto and described in the Prospectus
Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture will provide that the following events are "Events of
Default" with respect to any series of Debt Securities issued
thereunder: (i) default for 30 days in the payment of any installment of
interest on any Debt Security of such series; (ii) default in the payment of
principal of (or premium, if any, on) any Debt Security of such series at its
maturity; (iii) default in making any sinking fund payment as required for any
Debt Security of such series; (iv) default in the performance or breach of any
other covenant or warranty of the Company contained in the applicable Indenture
(other than a covenant added to the Indenture solely for the benefit of a
series of Debt Securities issued thereunder other than such series), continued
for 60 days after written notice as provided in the applicable Indenture; (v)
default in the payment of an aggregate principal amount exceeding $10,000,000
of any indebtedness of the Company or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such
indebtedness is secured, such default having occurred after the expiration of
any applicable grace period and having resulted in the acceleration of the
maturity of such indebtedness, but only if such indebtedness is not discharged
or such acceleration is not rescinded or annulled; (vi) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or any Significant Subsidiary or either of
its property; and (vii) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501).
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in
every such case the applicable Trustee or the Holders of not less than 25% of
the principal amount of the Outstanding Debt Securities of that series will
have the right to declare the principal amount (or, if the Debt Securities of
that series are Original Issue Discount Securities or indexed securities, such
portion of the principal amount as may be specified in the terms thereof) of
all the Debt Securities of that series to be due and payable immediately by
written notice thereof to the Company (and to the applicable Trustee if given
by the Holders). However, at any time after such a declaration of acceleration
with respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under any Indenture, as the case may be) has been made, but before
a judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the Holders of not less than a majority in principal amount
of Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) may rescind and
annul such declaration and its consequences if (a) the Company shall have
deposited with the applicable Trustee all required payments of the principal of
(and premium, if any) and interest on the Debt Securities of such series (or of
all Debt Securities then Outstanding under the applicable Indenture, as the
case may be), plus certain fees, expenses, disbursements and advances of the
applicable Trustee and (b) all events of default, other than the non- payment
of accelerated principal (or specified portion thereof), with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) have been cured or waived as provided
in such Indenture (Section 502). Each Indenture also will provide that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (x) in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or (y) in respect of a covenant or provision contained
in the applicable Indenture that cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security affected thereby
(Section 513).
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Each Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if specified responsible officers
of such Trustee consider such withholding to be in the interest of such Holders
(Section 601).
Each Indenture will provide that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the cases of failure of the
applicable Trustee, for 60 days, to act after it has received a written request
to institute proceedings in respect of an Event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of
such series, as well as an offer of indemnity reasonably satisfactory to it
(Section 507). This provision will not prevent, however, any Holder of Debt
Securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest on such Debt Securities at the
respective due dates thereof (Section 508).
Subject to provisions in each Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under an Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under such Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602). The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series (or of all Debt
Securities then Outstanding under an Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the applicable Trustee, or of exercising any trust or
power conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the applicable Indenture, which
may subject such Trustee to personal liability or which may be unduly
prejudicial to the Holders of Debt Securities of such series not joining
therein (Section 512).
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the applicable Indenture and, if so, specifying each such default
and the nature and status thereof (Section 1011).
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the Holders of not less than a majority in
principal amount of all Outstanding Debt Securities issued under such Indenture
which are affected by such modification or amendment; provided, however, that
no such modification or amendment may, without the consent of the Holder of
each such Debt Security affected thereby, (a) change the stated maturity of the
principal of, or any installment of interest (or premium, if any) on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security,
or reduce the amount of principal of an Original Issue Discount Security that
would be due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect any right of
repayment of the Holder of any such Debt Security; (c) change the place of
payment, or the coin or currency, for payment of principal or premium, if any,
or interest on any such Debt Security; (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any such Debt
Security; (e) reduce the above-stated percentage of Outstanding Debt Securities
of any series necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
applicable Indenture; or (f) modify any of the foregoing provisions or any of
the provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the Holder of such Debt Security (Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities of each series affected thereby will have the right to waive
compliance by the Company with certain covenants in such Indenture (Section
1013).
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Modifications and amendments of an Indenture will be permitted to be made by
the Company and the respective Trustee thereunder without the consent of any
Holder of Debt Securities for any of the following purposes: (i) to evidence
the succession of another person to the Company as obligor under such
Indenture; (ii) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Debt Securities or to surrender any right or
power conferred upon the Company in the Indenture; (iii) to add Events of
Default for the benefit of the Holders of all or any series of Debt Securities;
(iv) to add or change any provisions of an Indenture to facilitate the issuance
of, or to liberalize certain terms of, Debt Securities in bearer form, or to
permit or facilitate the issuance of Debt Securities in uncertificated form,
provided that such action shall not adversely affect the interests of the
Holders of the Debt Securities of any series in any material respect; (v) to
change or eliminate any provisions of an Indenture, provided that any such
change or elimination shall become effective only when there are no Debt
Securities Outstanding of any series created prior thereto which are entitled
to the benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series, including the
provisions and procedures, if applicable, for the conversion of such Debt
Securities into Common Stock or Preferred Stock; (viii) to provide for the
acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under an Indenture by more than one Trustee; (ix)
to cure any ambiguity, defect or inconsistency in an Indenture, provided that
such action shall not adversely effect the interests of Holders of Debt
Securities of any series issued under such Indenture in any material respect;
or (x) to supplement any of the provisions of an Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of
such Debt Securities, provided that such action shall not adversely effect the
interests of the Holders of the Debt Securities of any series in any material
respect (Section 901).
Each Indenture will provide that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an indexed security that shall be deemed Outstanding shall
be the principal face amount of such indexed security pursuant to the
applicable Indenture, and (iv) Debt Securities owned by the Company or any
other obligor upon the Debt Securities or any affiliate of the Company or of
such other obligor shall be disregarded.
Each Indenture will contain provisions for convening meetings of the Holders
of Debt securities of a series (Section 1501). A meeting will be permitted to
be called at any time by the applicable Trustee, and also, upon request, by the
Company or the Holders of at least 10% in principal amount of the Outstanding
Debt Securities of such series, in any such case upon notice given as provided
in the Indenture. Except for any consent that must be given by the Holder of
each Debt Security affected by certain modifications and amendments of an
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in the principal amount of the Outstanding Debt
Securities of that series; provided, however, that, except as referred to
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the Holders of a specified percentage, which is less than a majority,
in principal amount of the Outstanding Debt Securities of a series may be
adopted at a meeting or adjourned meeting or at which a quorum is present by
the affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Debt Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of Debt Securities of any
series duly held in accordance with an Indenture will be binding on all Holders
of Debt Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders
of not less than a specified percentage in principal amount of the Outstanding
Debt Securities of a series, the persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities of such
series will constitute a quorum.
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<PAGE> 20
Notwithstanding the foregoing provisions, each Indenture will provide that
if any action is to be taken at a meeting of Holders of Debt Securities
of any series with respect to any request, demand, authorization, direction,
notice, consent, waiver and other action that such Indenture expressly provides
may be made, given or taken by the Holders of a specified percentage in
principal amount of all Outstanding Debt Securities affected thereby, or the
Holders of such series and one or more additional series: (i) there shall be no
minimum quorum requirement for such meeting, and (ii) the principal amount of
the Outstanding Debt Securities of such series that vote in favor of such
request, demand, authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been
made, given or taken under such Indenture.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Company to make payment of the principal and interest on such
Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest will be permitted
to be made on Subordinated Securities at any time if a default on Senior Debt
exists that permits the Holders of such Senior Debt to accelerate its maturity
and the default is the subject of judicial proceedings or the Company receives
notice of the default (Section 1602 of the Subordinated Indenture). After all
Senior Debt is paid in full and until the Subordinated Securities are paid in
full, Holders will be subrogated to the right of Holders of Senior Debt to the
extent that distributions otherwise payable to Holders have been applied to the
payment of Senior Debt (Section 1607 of the Subordinated Indenture). By reason
of such subordination, in the event of a distribution of assets upon
insolvency, certain general creditors of the Company may recover more, ratably,
than Holders of Subordinated Securities.
Senior Debt will be defined in the Subordinated Indenture as the principal
of and interest on, or substantially similar payments to be made by the
Company in respect of, the following; whether outstanding at the date of
execution of the applicable Indenture or thereafter incurred, created or
assumed: (i) indebtedness of the Company for money borrowed or represented by
purchase money obligations, (ii) indebtedness of the Company evidenced by
notes, debentures, or bonds or other securities issued under the provisions of
an indenture, fiscal agency agreement or other agreement, (iii) obligations of
the Company as lessee under leases of property either made as part of any sale
and leaseback transaction to which the Company is a party or otherwise, (iv)
indebtedness of partnerships and joint ventures which is included in the
consolidated financial statements of the Company, (v) indebtedness, obligations
and liabilities of others in respect of which the Company is liable
contingently or otherwise to pay or advance money or property or as guarantor,
endorser or otherwise or which the Company has agreed to purchase or otherwise
acquire, and (vi) any binding commitment of the Company to fund any real estate
investment or to fund any investment in any entity making such real estate
investment, in each case other than (1) any such indebtedness, obligation or
liability referred to in clauses (i) through (vi) above as to which, in the
instrument creating or evidencing the same pursuant to which the same is
outstanding, it is provided that such indebtedness, obligation or liability is
not superior in right of payment to the Subordinated Securities or ranks pari
passu with the Subordinated Securities, (2) any such indebtedness, obligation
or liability which is subordinated to indebtedness of the Company to
substantially the same extent as or to a greater extent than the Subordinated
Securities are subordinated, and (3) the Subordinated Securities.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will contain the approximate
amount of Senior Debt outstanding as of the end of the Company's most recent
fiscal quarter. As of May 1, 1996, the Company had $187.1 million of
outstanding indebtedness. The Company may incur additional indebtedness in the
future in connection with the acquisition of additional properties.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company may be permitted under the applicable Indenture to discharge
certain obligations to Holders of any series of Debt Securities issued
thereunder that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the
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<PAGE> 21
applicable Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium, if any) and interest to the
date of such deposit (if such Debt Securities have become due and payable) or
to the stated maturity or redemption date, as the case may be.
Each Indenture will provide that, if the provisions of Article Fourteen are
made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities, and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("defeasance") (Section 1402) or (b) to be released from its obligations
with respect to such Debt Securities under certain specified sections of
Article Ten of such Indenture as specified in the applicable Prospectus
Supplement and any omission to comply with such obligations shall not
constitute an Event of Default with respect to such Debt Securities ("covenant
defeasance") (Section 1403), in either case upon the irrevocable deposit by the
Company with the applicable Trustee, in trust, of an amount, in such currency
or currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are payable at stated maturity, or Government
Obligations (as defined below), or both, applicable to such Debt Securities
which through the scheduled payment of principal and interest in accordance
with their terms will provide money in an amount sufficient without
reinvestment to pay the principal of (and premium, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the applicable Trustee an opinion
of counsel (as specified in the applicable Indenture) to the effect that the
Holders of such Debt Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of
counsel, in the case of defeasance, will be required to refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable U.S.
federal income tax law occurring after the date of the Indenture (Section
1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the timely payment of which is unconditionally guaranteed as a full faith and
credit obligation of the United States of America or such government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the Holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the Holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101 of each
Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the applicable Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security, or (b) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Debt Security will be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes
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<PAGE> 22
payable as a result of such election or such cessation of usage based on the
applicable market exchange rate. "Conversion Event" means the cessation of use
of (i) a currency, currency unit or composite currency both by the government
of the country which issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or (iii) any currency unit or composite
currency other than the ECU for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all payments
of principal of (and premium, if any) and interest on any Debt Security that is
payable in a foreign currency that ceases to be used by its government of
issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable
because of the occurrence of any Event of Default other than the Event of
Default described in clause (iv) under "Events of Default, Notice and Waiver"
with respect to certain specified sections of Article Ten of each Indenture
(which sections would no longer be applicable to such Debt Securities as a
result of such covenant defeasance) or described in clause (vii) under "Events
of Default, Notice and Waiver" with respect to any other covenant as to which
there has been covenant defeasance, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their stated maturity but
may not be sufficient to pay amounts due on such Debt Securities at the time of
the acceleration resulting from such Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the
Holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of
such Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
REDEMPTION OF SECURITIES
The Indenture provides that the Debt Securities may be redeemed at any
time at the option of the Company, in whole or in part, at the
Redemption Price, except as may otherwise be provided in connection with any
Debt Securities or series thereof.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and
the only right of the Holders of the Debt Securities will be to receive payment
of the Redemption Price.
Notice of any optional redemption of any Debt Securities will be given to
Holders at their addresses, as shown in the Security Register, not more than 60
nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Debt Securities held by such Holder to be redeemed.
If the Company elects to redeem Debt Securities, it will notify the
Trustee at least 45 days prior to the redemption date (or such shorter
period as satisfactory to the Trustee) of the aggregate principal amount of
Debt Securities to be redeemed and the redemption date. If less than all the
Debt Securities are
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to be redeemed, the Trustee shall select the Debt Securities to be redeemed pro
rata, by lot or in such manner as it shall deem fair and appropriate.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that
will be deposited with, or on behalf of, a depository identified in the
applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depository arrangement with respect
to a series of Debt Securities, including the terms under which the depository
may take any action permitted to be taken by an owner or holder of the Debt
Securities, will be described in the applicable Prospectus Supplement relating
to such series.
DESCRIPTION OF COMMON STOCK
The Company has the authority to issue 100,000,000 shares of capital stock,
of which 90,000,000 are Common Stock, par value $0.01 per share, and
10,000,000 are Preferred Stock, par value $0.01 per share. As of May 1, 1996,
the Company had outstanding 14,910,628 shares of Common Stock and no shares of
Preferred Stock.
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus
Supplement may relate, including a Prospectus Supplement providing that Common
Stock will be issuable upon conversion of Debt Securities or Preferred Stock of
the Company or upon the exercise of the Securities Warrants issued by the
Company. The statements below describing the Common Stock are in all respects
subject to and qualified in their entirety by reference to the applicable
provisions of the Company's Amended Articles of Incorporation (the "Articles")
and Bylaws.
GENERAL
Holders of the Company's Common Stock will be entitled to receive dividends
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor. Payment and declaration of dividends on the Common
Stock and purchases of shares thereof by the Company will be subject to certain
restrictions if the Company fails to pay dividends on the Preferred Stock. See
"Description of Preferred Stock." Upon any liquidation, dissolution or winding
up of the Company, holders of Common Stock will be entitled to share equally
and ratably in any assets available for distribution to them, after payment or
provision for payment of the debts and other liabilities of the Company and the
preferential amounts owing with respect to any outstanding Preferred Stock or
senior debt securities. The Common Stock will possess ordinary voting rights
for the election of directors and in respect of other corporate matters, each
share entitling the holder thereof to one vote. Holders of Common Stock will
not have cumulative voting rights in the election of directors. Upon receipt
by the Company of lawful payment therefor, the Common Stock will, when issued,
be fully paid and nonassessable, and will not be subject to redemption except
(as described in the Articles) as necessary to preserve the Company's status as
a REIT. A stockholder of the Company has no preemptive rights to subscribe for
additional shares of Common Stock or other securities of the Company except as
may be granted by the Board of Directors.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, the Common Stock must
be beneficially owned by 100 or more persons during at least 335 days
of a taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. Also, not more than 50% of the
value of the issued and outstanding shares of capital stock may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities such as qualified private pension plans) during the
last half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year.
Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the charter, subject to certain exceptions,
provides that no holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.8% (the "Ownership Limit") of
the value
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of the issued and outstanding shares of the Company's stock. The Board of
Directors may exempt a person from the Ownership Limit if evidence satisfactory
to the Board of Directors and the Company's tax counsel is presented that the
proposed transfer of stock to the intended transferee will not then or in the
future jeopardize the Company's status as a REIT. As a condition of such
exemption, the intended transferee must give written notice to the Company of
the proposed transfer and must furnish such opinions of counsel, affidavits,
undertakings, agreements, and information as may be required by the Board of
Directors no later than the fifteenth day prior to any transfer which, if
consummated, would result in the intended transferee owning shares in excess of
the Ownership Limit. The foregoing restrictions on transferability and
ownership will not apply if the Board of Directors determines that it is no
longer in the best interests of the Company to attempt to qualify or to
continue to qualify as a REIT. Any transfer of shares of Common Stock that
would: (i) create a direct or indirect ownership of shares of stock in excess
of the Ownership Limit; (ii) result in the shares of stock being owned by fewer
than 100 persons; or (iii) result in the Company being "closely held" within
the meaning of Section 856(h) of the Code, shall be null and void, and the
intended transferee will acquire no rights to the shares.
The Company's charter excludes the Principals and any brother, sister,
spouse, ancestor, or lineal descendant of a Principal from the
Ownership Limit. These persons may acquire additional shares of stock through
the redemption of OP Units, through the Stock Option Plan, from other
stockholders or otherwise, but in no event will they be entitled to acquire
additional shares such that the five largest beneficial owners of the Company's
stock hold more than 50% of the total outstanding stock.
Shares purported to be transferred in excess of the Ownership Limit that are
not otherwise permitted as provided above will constitute excess shares
("Excess Shares"), which will be transferred by operation of law to the Company
as trustee for the exclusive benefit of the person or persons to whom the
Excess Shares are ultimately transferred, until such time as the intended
transferee retransfers the Excess Shares. While these Excess Shares are held
in trust, they will not be entitled to vote or to share in any dividends or
other distributions. Subject to the Ownership Limit, the Excess Shares may be
retransferred by the intended transferee to any person who may hold such Excess
Shares at a price not to exceed the price paid by the intended transferee, at
which point the Excess Shares will automatically be exchanged for the stock to
which the Excess Shares are attributable. In addition, such Excess Shares held
in trust are subject to purchase by the Company. The purchase price of any
Excess Shares shall be equal to the lesser of the price paid for the stock by
the intended transferee and the fair market value of such shares of stock
reflected in the closing sales price for the shares of stock, if then traded on
the New York Stock Exchange, or the last reported sales price for the shares of
stock on any exchange or quotation system over which the Shares may be traded,
or, if such quotation is not available, the fair market value as determined by
the Board of Directors in good faith, on the last trading day immediately
preceding the day on which notice of such proposed purchase is sent by the
Company. From and after the intended transfer to the intended transferee of
the Excess Shares, the intended transferee shall cease to be entitled to
distributions, voting rights, and other benefits with respect to such shares of
the stock except the right to payment of the purchase price for the shares of
stock or the transfer of shares as provided above. Any dividend or
distribution paid to a proposed transferee on Excess Shares prior to the
discovery by the Company that such shares of stock have been transferred in
violation of the provisions of the Company's charter shall be repaid to the
Company upon demand. If the foregoing transfer restrictions are determined to
be void or invalid by virtue of any legal decision, statute, rule, or
regulation, then the intended transferee of any Excess Shares may be deemed, at
the option of the Company, to have acted as an agent on behalf of the Company
in acquiring such Excess Shares and to hold such Excess Shares on behalf of the
Company.
All certificates representing shares of stock will bear a legend referring
to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions
of the Code, more than 5% of the value of the outstanding shares of stock of
the Company must give a written notice to the Company containing the
information specified in the Company's charter by January 31 of each year. In
addition, each stockholder shall upon demand be required to disclose to the
Company in writing such information with respect to the direct, indirect and
constructive ownership of shares of Common Stock as the Board of Directors
deems necessary to comply with the provisions of the Code applicable to a REIT,
to comply with the requirements of any taxing authority or governmental agency
or to determine any such compliance.
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These ownership limitations could have the effect of discouraging a takeover
or other transaction in which holders of some, or a majority of, shares of
Common Stock might receive a premium for their shares over the then prevailing
market price or which such holders might believe to be otherwise in their best
interest.
The registrar and transfer agent for the Common Stock is State Street Bank
and Trust Company.
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Articles (including the Articles Supplementary relating to each
series of the Preferred Stock) which will be filed with the Commission and
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part at or prior to the time of the issuance of such
series of the Preferred Stock.
GENERAL
The Company is authorized to issue 10,000,000 shares of preferred stock, par
value $0.01 per share, of which no shares of Preferred Stock were outstanding
as of May 1, 1996.
Under the Company's Articles, the Board of Directors (without further
stockholder action) may from time to time establish and issue one or more
series of Preferred Stock with such designations, powers, preferences or rights
of the shares of such series and the qualifications, limitations or
restrictions thereon.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference
is made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the
designation and stated value per share of such Preferred Stock and the number
of shares offered; (ii) the amount of liquidation preference per share; (iii)
the initial public offering price at which such Preferred Stock will be issued;
(iv) the dividend rate (or method of calculation), the dates on which dividends
shall be payable and the dates from which dividends shall commence to
accumulate, if any; (v) any redemption or sinking fund provisions; (vi) any
conversion rights; and (vii) any additional voting, dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions. The Preferred Stock will, when issued for lawful
consideration, be fully paid and nonassessable and will have no preemptive
rights.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of
Common Stock and to all equity securities ranking junior to such Preferred
Stock; (ii) on a parity with all equity securities issued by the Company the
terms of which specifically provide that such equity securities rank on a
parity with the Preferred Stock; and (iii) junior to all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank senior to the Preferred Stock. As used in the Articles for
these purposes, the term "equity securities" does not include convertible debt
securities. The rights of the holders of each series of the Preferred Stock
will be subordinate to those of the Company's general creditors.
DIVIDENDS
Holders of shares of the Preferred Stock of each series shall be entitled to
receive, when, as and if declared by the Board of Directors of the Company, out
of assets of the Company legally available for payment, cash dividends at such
rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Such rate may be fixed or variable or both. Each such dividend
shall be payable to holders of record as they appear on the stock transfer
books of the Company on such record dates as shall be fixed
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by the Board of Directors of the Company, as specified in the Prospectus
Supplement relating to such series of Preferred Stock.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable Prospectus Supplement. If the Board of Directors of the
Company fails to declare a dividend payable on a dividend payment date on any
series of the Preferred Stock for which dividends are noncumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series are declared payable on
any future dividend payment date. Dividends on shares of each series of
Preferred Stock for which dividends are cumulative will accrue from the date on
which the Company initially issues shares of such series.
So long as the shares of any series of the Preferred Stock shall be
outstanding, the Company may not declare or pay any dividends, make a
distribution, or purchase, acquire, redeem, pay monies to the holders of in
respect of, or set aside or make funds available for a sinking or other
analogous fund for the purchase or redemption of, any shares of Common Stock of
the Company or any other stock of the Company ranking as to dividends or
distributions of assets junior to such series of Preferred Stock (the Common
Stock and any such other stock being herein referred to as "Junior Stock"),
whether in cash or property or in obligations or stock of the Company, other
than Junior Stock which is neither convertible into, nor exchangeable or
exercisable for, any securities of the Company other than Junior Stock, unless
(i) full dividends (including if such Preferred Stock is cumulative, dividends
for prior dividend periods) shall have been paid or declared and set apart for
payment on all outstanding shares of the Preferred Stock of such series and all
other classes and series of Preferred Stock of the Company (other than Junior
Stock, as defined below); and (ii) all sinking or other analogous fund payments
and amounts for the repurchase or other mandatory retirement of any shares of
Preferred Stock of such series or any shares of any other Preferred Stock of
the Company of any class or series (other than Junior Stock) have been paid or
duly provided for.
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due
with respect to shares of such series which remains payable.
REDEMPTION
A series of Preferred Stock may be redeemable, in whole or from time to time
in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series. Shares of the Preferred Stock redeemed by the Company
will be restored to the status of authorized but unissued shares of Preferred
Stock.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Stock of any series is payable only from
the net proceeds of the issuance of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such capital stock shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, such Preferred Stock shall
automatically and mandatorily be converted into shares of the applicable
capital stock of the Company pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
So long as any dividends on shares of any series of the Preferred Stock or
any other series of preferred stock of the Company ranking on a parity
as to dividends and distribution of assets with such series of the Preferred
Stock are in arrears, no shares of any such series of the Preferred Stock or
such other series of Preferred Stock of the Company will be redeemed (whether
by mandatory or optional redemption) unless all such shares are simultaneously
redeemed, and the Company will not purchase or
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<PAGE> 27
otherwise acquire any such shares; provided, however, that the foregoing will
not prevent the purchase or acquisition of such shares pursuant to a purchase
or exchange offer made on the same terms to holders of all such shares
outstanding.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or
optional redemption, the number of shares to be redeemed will be determined by
lot or pro rata (subject to rounding to avoid fractional shares) as may be
determined by the Company or by any other method as may be determined by the
Company in its sole discretion to be equitable. From and after the redemption
date (unless default shall be made by the Company in providing for the payment
of the redemption price plus accumulated and unpaid dividends, if any),
dividends shall cease to accumulate on the shares of the Preferred Stock called
for redemption and all rights of the holders thereof (except the right to
receive the redemption price plus accumulated and unpaid dividends, if any)
shall cease.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Junior Stock, the holders of each series of
Preferred Stock shall be entitled to receive out of assets of the Company
legally available for distribution to stockholders, liquidating distributions
in the amount of the liquidation preference per share (set forth in the
applicable Prospectus Supplement), plus an amount equal to all dividends
accrued and unpaid thereon (which shall not include any accumulation in respect
of unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Preferred
Stock will have no right or claim to any of the remaining assets of the
Company. In the event that upon any such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of the Company are insufficient
to pay the amount of the liquidating distributions on all outstanding shares of
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of capital stock of the Company ranking on a parity with the
Preferred Stock in the distribution of assets, then the holders of the
Preferred Stock and all other such classes or series of capital stock shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
shares of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of Junior Stock, according to their respective
rights and preferences and in each case according to their respective number of
shares. For such purposes, the consolidation or merger of the Company with or
into any other corporation, or the sale, lease or conveyance of all or
substantially all of the property or business of the Company, shall not be
deemed to constitute a liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Except as indicated below or in a Prospectus Supplement relating to a
particular series of the Preferred Stock, or except as required by applicable
law, holders of the Preferred Stock will not be entitled to vote for any
purpose.
So long as any shares of the Preferred Stock of a series remain outstanding,
the consent or the affirmative vote of the holders of at least 66-2/3% of the
votes entitled to be cast with respect to the then outstanding shares of such
series of the Preferred Stock together with any Other Preferred Stock (as
defined below), voting as one class, either expressed in writing or at a
meeting called for that purpose, will be necessary (i) to permit, effect or
validate the authorization, or any increase in the authorized amount, of any
class or series of shares of the Company ranking prior to the Preferred Stock
of such series as to dividends, voting or upon distribution of assets; and (ii)
to repeal, amend or otherwise change any of the provisions applicable to the
Preferred Stock of such series in any manner which adversely affects the
powers, preferences, voting power or other rights or privileges of such series
of the Preferred Stock. In case any series of the Preferred Stock would be so
affected by any such action referred to in clause (ii) above in a different
manner than one or more series of the Other Preferred Stock which will be
similarly affected, the holders of such series of Preferred Stock will be
entitled to vote as a class, and the Company will not take such action without
the consent or affirmative vote, as above provided, of at least 66-2/3% of the
total number of votes entitled to be cast with respect to each such series of
the Preferred Stock and
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<PAGE> 28
the Other Preferred Stock then outstanding, in lieu of the consent or
affirmative vote hereinabove otherwise required.
With respect to any matter as to which the Preferred Stock of any series is
entitled to vote, holders of the Preferred Stock of such series and any other
series of Preferred Stock of the Company ranking on a parity with such series
of the Preferred Stock as to dividends and distributions of assets and which by
its terms provides for similar voting rights (the "Other Preferred Stock") will
be entitled to cast the number of votes set forth in the Prospectus Supplement
with respect to that series of Preferred Stock. As a result of the provisions
described in the preceding paragraph requiring the holders of shares of a
series of the Preferred Stock to vote together as a class with the holders of
shares of one or more series of Other Preferred Stock, it is possible that the
holders of such shares of Other Preferred Stock could approve action that would
adversely affect such series of Preferred Stock, including the creation of a
class of capital stock ranking prior to such series of Preferred Stock as to
dividends, voting or distribution of assets.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Common Stock will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
the number of shares of Common Stock into which the Preferred Stock is
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders of the Preferred Stock or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion.
RESTRICTIONS ON OWNERSHIP
See "Description of Common Stock -- Restrictions on Ownership" for a
discussion of the restrictions on capital stock (Common Stock and Preferred
Stock) ownership necessary for the Company to qualify as a REIT under the Code.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock or Common Stock. Securities Warrants may
be issued independently or together with any other Securities offered by any
Prospectus Supplement and may be attached to or separate from such Securities.
Each series of Securities Warrants will be issued under a separate warrant
agreement (each, a "Warrant Agreement") to be entered into between the Company
and a warrant agent specified in the applicable Prospectus Supplement (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Securities Warrants of such series and will not assume
any obligation or relationship of agency or trust for or with any holders or
beneficial owners of Securities Warrants. The following summaries of certain
provisions of the Securities Warrant Agreement and the Securities Warrants do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Securities Warrant
Agreement and the Securities Warrant certificates relating to each series of
Securities Warrants which will be filed with the Commission and incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part at or prior to the time of the issuance of such series of Securities
Warrants.
If Securities Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Securities Warrants, including, in the
case of Securities Warrants for the purchase of Debt Securities, the following
where applicable: (i) the offering price; (ii) the denominations and terms of
the series of Debt Securities purchasable upon exercise of such Securities
Warrants; (iii) the designation and terms of any series of Debt Securities with
which such Securities Warrants are being offered and the number of such
Securities Warrants being offered with such Debt Securities; (iv) the date, if
any, on and after which such Securities Warrants and the related series of Debt
Securities will be transferable separately; (v) the principal amount of the
series of Debt Securities purchasable upon exercise of each such
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<PAGE> 29
Securities Warrant and the price at which such principal amount of Debt
Securities of such series may be purchased upon such exercise; (vi) the date on
which the right to exercise such Securities Warrants shall commence and the
date on which such right shall expire (the "Expiration Date"); (vii) whether
the Securities Warrants will be issued in registered or bearer form; (viii) any
special United States federal income tax consequences; (ix) the terms, if any,
on which the Company may accelerate the date by which the Securities Warrants
must be exercised; and (x) any other material terms of such Securities
Warrants.
In the case of Securities Warrants for the purchase of Preferred Stock or
Common Stock, the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
offering price; (ii) the aggregate number of shares purchasable upon exercise
of such Securities Warrants, the exercise price, and in the case of Securities
Warrants for Preferred Stock, the designation, aggregate number and terms of
the series of Preferred Stock purchasable upon exercise of such Securities
Warrants; (iii) the designation and terms of any series of Preferred Stock with
which such Securities Warrants are being offered and the number of such
Securities Warrants being offered with such Preferred Stock; (iv) the date, if
any, on and after which such Securities Warrants and the related series of
Preferred Stock or Common Stock will be transferable separately; (v) the date
on which the right to exercise such Securities Warrants shall commence and the
Expiration Date; (vi) any special United States federal income tax
consequences; and (vii) any other material terms of such Securities Warrants.
Securities Warrant certificates may be exchanged for new Securities Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal, premium,
if any, or interest, if any, on such Debt Securities or to enforce covenants in
the applicable indenture. Prior to the exercise of any Securities Warrants to
purchase Preferred Stock or Common Stock, holders of such Securities Warrants
will not have any rights of holders of such Preferred Stock or Common Stock,
including the right to receive payments of dividends, if any, on such Preferred
Stock or Common Stock, or to exercise any applicable right to vote.
EXERCISE OF SECURITIES WARRANTS
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or number of shares of Preferred Stock or
Common Stock, as the case may be, at such exercise price as shall in each case
be set forth in, or calculable from, the Prospectus Supplement relating to the
offered Securities Warrants. After the close of business on the Expiration
Date (or such later date to which such Expiration Date may be extended by the
Company), unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities Warrant
Agent payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Debt Securities, Preferred Stock or Common Stock, as
the case may be, purchasable upon such exercise together with certain
information set forth on the reverse side of the Securities Warrant
certificate. Securities Warrants will be deemed to have been exercised upon
receipt of payment of the exercise price, subject to the receipt within five
(5) business days, of the Securities Warrant certificate evidencing such
Securities Warrants. Upon receipt of such payment and the Securities Warrant
certificate properly completed and duly executed at the corporate trust office
of the Securities Warrant agent or any other office indicated in the applicable
Prospectus Supplement, the Company will, as soon as practicable, issue and
deliver the Debt Securities, Preferred Stock or Common Stock, as the case may
be, purchasable upon such exercise. If fewer than all of the Securities
Warrants represented by such Securities Warrant certificate are exercised, a
new Securities Warrant certificate will be issued for the remaining amount of
Securities Warrants.
AMENDMENTS AND SUPPLEMENTS TO WARRANT AGREEMENT
The Warrant Agreements may be amended or supplemented without the consent of
the holders of the Securities Warrants issued thereunder to effect changes that
are not inconsistent with the provisions of the Securities Warrants and that do
not adversely affect the interests of the holders of the Securities Warrants.
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COMMON STOCK WARRANT ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by, a
Common Stock Warrant are subject to adjustment in certain events, including (i)
payment of a dividend on the Common Stock payable in capital stock and stock
splits, combinations or reclassification of the Common Stock; (ii) issuance to
all holders of Common Stock of rights or warrants to subscribe for or purchase
shares of Common Stock at less than their current market price (as defined in
the Warrant Agreement for such series of Securities Warrants); and (iii)
certain distributions of evidences of indebtedness or assets (including
securities but excluding cash dividends or distributions paid out of
consolidated earnings or retained earnings or dividends payable other than in
Common Stock) or of subscription rights and warrants (excluding those referred
to above).
No adjustment in the exercise price of, and the number of shares of Common
Stock covered by, a Common Stock Warrant will be made for regular quarterly or
other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from consolidated earnings or
retained earnings. No adjustment will be required unless such adjustment would
require a change of at least 1% in the exercise price then in effect. Except
as stated above, the exercise price of, and the number of shares of Common
Stock covered by, a Common Stock Warrant will not be adjusted for the issuance
of Common Stock or any securities convertible into or exchangeable for Common
Stock, or carrying the right or option to purchase or otherwise acquire the
foregoing, in exchange for cash, other property or services.
In the event of any (i) consolidation or merger of the Company with or into
any entity (other than a consolidation or a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock); (ii) sale, transfer, lease or conveyance of all or substantially
all of the assets of the Company; or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value or from par value to no par value), then any holder of a Common Stock
Warrant will be entitled, on or after the occurrence of any such event, to
receive on exercise of such Common Stock Warrant the kind and amount of shares
of stock or other securities, cash or other property (or any combination
thereof) that the holder would have received had such holder exercised such
holder's Common Stock Warrant immediately prior to the occurrence of such
event. If the consideration to be received upon exercise of the Common Stock
Warrant following any such event consists of common stock of the surviving
entity, then from and after the occurrence of such event, the exercise price of
such Common Stock Warrant will be subject to the same anti-dilution and other
adjustments described in the second preceding paragraph, applied as if such
common stock were Common Stock.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax considerations to the
Company is based on current law, is for general information only, and is not
tax advice. The tax treatment of a holder of any of the Securities will vary
depending upon the terms of the specific securities acquired by such holder, as
well as his particular situation, and this discussion does not attempt to
address any aspects of federal income taxation relating to holders of
Securities.
EACH INVESTOR IS ADVISED TO CONSULT HIS OWN TAX ADVISOR, REGARDING THE TAX
CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND SALE OF THE SECURITIES,
INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH
ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.
TAXATION OF THE COMPANY AS A REIT
General. The Company has elected to be taxed as a real estate investment
trust under Sections 856 through 860 of the Code, commencing with its taxable
year ended December 31, 1994. The Company believes that, commencing with its
taxable year ended December 31, 1994 it was organized and has been operating in
such a manner as to qualify for taxation as a REIT under the Code and the
Company intends to continue to operate in such manner, but no assurance can be
given that it will operate in a manner so as to qualify or remain qualified.
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These sections of the Code are highly technical and complex. The following
sets forth the material aspects of the sections that govern the federal income
tax treatment of a REIT. This summary is qualified in its entirety by the
applicable Code provisions, rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof.
In the opinion of Jaffe, Raitt, Heuer & Weiss, Professional Corporation,
commencing with the Company's taxable year which ended December 31, 1994, the
Company has been organized in conformity with the requirements for
qualification as a REIT, and its method of operation enabled it to meet the
requirements for qualification and taxation as a REIT under the Code. It must
be emphasized that this opinion is based on various assumptions and is
conditioned upon certain representations made by the Company as to factual
matters. In addition, such qualification and taxation as a REIT depends upon
the Company's ability to meet, through actual annual operating results,
distribution levels, diversity of stock ownership, and the various
qualification tests imposed under the Code discussed below, the results of
which have not been and will not be reviewed by Jaffe, Raitt, Heuer & Weiss,
Professional Corporation. Accordingly, no assurance can be given that the
actual results of the Company's operation in any particular taxable year will
satisfy such requirements. See "Taxation of the Company -- Failure to
Qualify".
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are met, entities, such as the Company, that invest primarily
in real estate and that otherwise would be treated for Federal income tax
purposes as corporations, are generally not taxed at the corporate level on
that portion of their ordinary income or capital gain that is currently
distributed to stockholders. This treatment substantially eliminates the
"double taxation" (at both the corporate and stockholder levels) that generally
results from the use of corporate investment vehicles.
If the Company fails to qualify as a REIT in any year, however, it will be
subject to Federal income tax as if it were a domestic corporation, and its
stockholders will be taxed in the same manner as stockholders of ordinary
corporations. In this event, the Company could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to its stockholders would be reduced.
The Company has elected REIT status for the taxable year beginning January
1, 1994. The Board of Directors of the Company intends that the Company will
operate in a manner that permits it to continue qualification as a REIT in each
taxable year thereafter. There can be no assurance, however, that this
expectation will be fulfilled, since qualification as a REIT depends on the
Company continuing to satisfy numerous asset, income and distribution tests
described below, which in turn will be dependent in part on the Company's
operating results.
TAXATION OF THE COMPANY
General. In any year in which the Company qualifies as a REIT, in general it
will not be subject to Federal income tax on that portion of its ordinary
income or capital gain which is distributed to stockholders. The Company may,
however, be subject to tax at normal corporate rates upon any taxable income or
capital gain not distributed.
If the Company should fail either the 75% or the 95% gross income tests (as
discussed below), and nonetheless maintains its qualification as a REIT because
certain other requirements are met, it will be subject to a 100% tax on the
greater of the amount by which the Company fails either the 75% or the 95%
test, multiplied by a fraction intended to reflect the Company's profitability.
The Company will also be subject to a tax of 100% on net income from any
"prohibited transaction," as described below. In addition, if the Company
should fail to distribute during each calendar year at least the sum of: (i)
85% of its REIT ordinary income for such year; (ii) 95% of its REIT capital
gain net income for such year; and (iii) any undistributed taxable income from
prior years, the Company would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed. The Company
may also be subject to the corporate "alternative minimum tax," as well as tax
in certain situations and on certain transactions not presently contemplated.
The Company will use the calendar year both for Federal income tax purposes and
for financial reporting purposes.
In order to qualify as a REIT, the Company must meet, among others, the
following requirements:
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<PAGE> 32
Share Ownership Test. The Company's Common Stock must be held by a minimum
of 100 persons for at least approximately 92% of the days in each
taxable year. In addition, at all times during the second half of each taxable
year, no more than 50% in value of the capital stock of the Company may be
owned, directly, or indirectly and by applying certain constructive ownership
rules, by five or fewer individuals. For this purpose, a pension and other
exempt trusts will generally not be treated as a single individual. Rather,
based upon a look through approach, the beneficial owners of the trust will be
treated as owners of the REIT in proportion to their actuarial interests in the
trust.
In order to ensure compliance with these requirements, the Company has
placed certain restrictions on the transfer of the Common Stock to
prevent further concentration of stock ownership. Moreover, to evidence
compliance with these requirements, the Company must maintain records which
disclose the actual ownership of its outstanding Common Stock. In fulfilling
its obligations to maintain records, the Company must and will demand written
statements each year from the record holders of designated percentages of its
Common Stock disclosing the actual owners of such Common Stock. A list of those
persons failing or refusing to comply with such demand must be maintained as a
part of the Company's records. A stockholder failing or refusing to comply with
the Company's written demand must submit with his tax returns a similar
statement disclosing the actual ownership of Common Stock and certain other
information. In addition, the Company's charter provides restrictions regarding
the transfer of its shares that are intended to assist the Company in
continuing to satisfy the share ownership requirements. See "Description of
Common Stock -- Restrictions on Ownership."
Asset Tests. At the close of each quarter of the Company's taxable year, the
Company must satisfy two tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by
interests in real property, interests in mortgages on real property, shares in
other REITs, cash, cash items and government securities. Second, although the
remaining 25% of the Company's assets generally may be invested without
restriction, securities in this class may not exceed either: (i) 5% of the
value of the Company's total assets as to any one non-government issuer; or
(ii) 10% of the outstanding voting securities of any one issuer. Where the
Company invests in a partnership, it will be deemed to own a proportionate
share of the partnership's assets. See "Federal Income Tax Considerations --
Tax Aspects of the Company's Investment in the Operating Partnership --
General." The Company's investment in the Properties through its interest in
the Operating Partnership will constitute a qualified asset for purposes of the
75% asset test.
Gross Income Tests. There are three separate percentage tests relating to
the sources of the Company's gross income which must be satisfied for
each taxable year. For purposes of these tests, where the Company invests in a
partnership, the Company will be treated as receiving its share of the
proportionate income and loss of the partnership, and the gross income of the
partnership will retain the same character in the hands of the Company as it
has in the hands of the partnership. See "Federal Income Tax Considerations --
Tax Aspects of the Company's Investment in the Operating Partnership --
General" below.
1. The 75% Test. At least 75% of the Company's gross income for the taxable
year must be "qualifying income." Qualifying income generally includes: (i)
rents from real property (except as modified below); (ii) interest on
obligations collateralized by mortgages on, or interests in, real property;
(iii) gains from the sale or other disposition of interests in real property
and real estate mortgages, other than gain from property held primarily for
sale to customers in the ordinary course of the Company's trade or business
("dealer property"); (iv) dividends or other distributions on shares in other
REITs, as well as gain from the sale of such shares; (v) abatements and refunds
of real property taxes; (vi) income from the operation, and gain from the sale,
of property acquired at or in lieu of a foreclosure of the mortgage
collateralized by such property ("foreclosure property"); and (vii) commitment
fees received for agreeing to make loans collateralized by mortgages on real
property or to purchase or lease real property.
Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% gross income test described
below) if the Company, or an owner of 10% or more of the Company, directly or
constructively owns 10% or more of such tenant (a "Related Party Tenant"). In
addition, if rent attributable to personal property, leased in connection with
a lease of real property, is greater than 15% of the total rent received under
the lease, then the portion of rent attributable to such personal property will
not qualify as rents from real property. Moreover, an amount received or
accrued will not qualify as rents from real property (or as interest income)
for purposes of the 75% and 95% gross income tests if it is based in whole or
in part on the income or profits of any person. Finally, for rents
- 30 -
<PAGE> 33
received to qualify as rents from real property, the Company generally must not
operate or manage the property or furnish or render services to tenants, other
than through an "independent contractor" from whom the Company derives no
revenue. The "independent contractor" requirement, however, does not apply to
the extent that the services provided by the Company are "usually or
customarily rendered" in connection with the rental of space for occupancy
only, and are not otherwise considered "rendered to the occupant."
The Company, through the Operating Partnership (which is not an independent
contractor), provides certain services with respect to the Properties and any
newly acquired manufactured housing community properties. The Company believes
that the services provided by the Operating Partnership are usually or
customarily rendered in connection with the rental of space for occupancy only,
and therefore that the provision of such services will not cause the rents
received with respect to the Properties to fail to qualify as rents from real
property for purposes of the 75% and 95% gross income tests. The Company does
not anticipate charging rent that is based in whole or in part on the income or
profits of any person. The Company does not anticipate deriving rent
attributable to personal property leased in connection with real property that
exceeds 15% of the total rent. Finally, the Company does not anticipate
receiving rent from Related Party Tenants.
2. The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the
taxable year must be derived from the above-described qualifying income, or
from dividends, interest, or gains from the sale or disposition of stock or
other securities that are not dealer property. Dividends and interest on any
obligations not collateralized by an interest in real property are included for
purposes of the 95% test, but not for purposes of the 75% test.
For purposes of determining whether the Company complies with the 75% and
95% income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property,
excluding certain dealer property held by the Company for at least four years
and foreclosure property. See "Federal Income Tax Considerations -- Taxation of
the Company -- General" and "-- Tax Aspects of the Company's Investment in the
Operating Partnership -- Sale of the Properties."
The Company's investment in the Properties through the Operating Partnership
will in major part give rise to rental income qualifying under the 75% and 95%
gross income tests. Gains on sales of the Properties, or of the Company's
interest in the Operating Partnership, will generally qualify under the 75% and
95% gross income tests. The Company anticipates that income on its other
investments will not result in the Company failing the 75% or 95% gross income
test for any year.
Even if the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may still qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) the Company's failure to comply
was due to reasonable cause and not to willful neglect; (ii) the Company
reports the nature and amount of each item of its income included in the tests
on a schedule attached to its tax return; and (iii) any incorrect information
on this schedule is not due to fraud with intent to evade tax. If these relief
provisions apply, the Company will, however, still be subject to a special tax
upon the greater of the amount by which it fails either the 75% or 95% gross
income test for that year. No similar mitigation provision provides relief if
the Company fails the 30% income test, and in such case, the Company will cease
to qualify as a REIT.
3. The 30% Test. The Company must derive less than 30% of its gross income
for each taxable year from the sale or other disposition of: (i) real
property held for less than four years (other than foreclosure property and
involuntary conversion); (ii) stock or securities held for less than one year;
and (iii) property in a prohibited transaction. The Company does not anticipate
that it will have any substantial difficulty in complying with this test.
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain
dividends) to its stockholders each year in an amount at least equal to: (i)
the sum of: (a) 95% of the Company's REIT taxable income (computed without
regard to the dividends paid deduction and the REIT's net capital gain); and
(b) 95% of the net income (after tax), if any, from foreclosure property; minus
(ii) the sum of certain items of non-cash income. Such distributions must be
paid in the taxable year to which they relate, or in the following taxable year
if declared before the Company timely files its tax return for such year and if
paid on or before the first regular dividend payment after such declaration. To
the extent that the Company does not distribute all of its net capital gain
- 31 -
<PAGE> 34
or distributes at least 95%, but less than 100%, of its REIT taxable income, as
adjusted, it will be subject to tax on the undistributed amount at regular
capital gains or ordinary corporate tax rates, as the case may be. Moreover, if
the Company should fail to distribute during each calendar year at least the
sum of: (i) 85% of its ordinary income for that year; (ii) 95% of its capital
gain net income for that year; and (iii) any undistributed taxable income from
prior periods, the Company would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed. In addition,
during its Recognition Period (defined below), if the Company disposes of any
asset subject to the Built-In Gain Rules, the Company will be required,
pursuant to guidance issued by the Service, to distribute at least 95% of the
Built-In Gain (after tax), if any, recognized on the disposition of the asset.
The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements. In this regard, the partnership agreement of
the Operating Partnership authorizes the Company, as general partner, to take
such steps as may be necessary to cause the Operating Partnership to distribute
to its partners an amount sufficient to permit the Company to meet these
distribution requirements. It is possible that the Company may not have
sufficient cash or other liquid assets to meet the 95% distribution requirement,
due to timing differences between the actual report of income and actual payment
of expenses on the one hand, and the inclusion of such income and deduction of
such expenses in computing the Company's REIT taxable income on the other hand.
To avoid any problem with the 95% distribution requirement, the Company will
closely monitor the relationship between its REIT taxable income and cash flow,
and if necessary, will borrow funds (or cause the Operating Partnership or other
affiliates to borrow funds) in order to satisfy the distribution requirement.
If the Company fails to meet the 95% distribution requirement as a result
of an adjustment to the Company's tax return by the Service, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
Failure to Qualify. If the Company fails to qualify for taxation as a REIT
in any taxable year and the relief provisions do not apply, the Company will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to stockholders in any year in
which the Company fails to qualify will not be deductible by the Company, nor
will they be required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company also
will be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances the Company would be entitled to such
statutory relief.
TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE OPERATING PARTNERSHIP
General. The Company holds a direct interest in the Operating Partnership,
and an indirect interest in certain other Partnerships, including the Financing
Partnership (collectively, the "Partnerships"). In general, partnerships are
"pass-through" entities which are not subject to Federal income tax. Rather,
partners are allocated their proportionate shares of the items of income, gain,
loss, deduction, and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. The Company will include its proportionate share of the foregoing
partnership items for purposes of the various REIT income tests and in the
computation of its REIT taxable income. See "Federal Income Tax Considerations
- -- Taxation of the Company -- General" and "-- Gross Income Tests." Any
resultant increase in the Company's REIT taxable income will increase its
distribution requirements (see "Federal Income Tax Considerations -- Taxation of
the Company -- Annual Distribution Requirements"), but will not be subject to
Federal income tax in the hands of the Company provided that such income is
distributed by the Company to its stockholders. Moreover, for purposes of the
REIT asset tests (see "Federal Income Tax Considerations -- Taxation of the
Company -- Asset Tests"), the Company includes its proportionate share of assets
held by the Partnerships.
Entity Classification. The Company's interests in the Partnerships involve
special tax considerations, including the possibility of a challenge by the
Service of the status of each Partnership as a partnership (as opposed to an
association taxable as a corporation) for Federal income tax purposes. If the
Operating Partnership or the Financing Partnership were to be treated as an
association, it would be taxable as a corporation and therefore subject to an
entity-level tax on its income. In such a situation, the character of the
Company's assets and items of gross income would change, which would preclude
the
- 32 -
<PAGE> 35
Company from satisfying the asset tests and possibly the income tests (see
"Federal Income Tax Considerations -- Taxation of the Company -- Asset Tests"
and "-- Gross Income Tests"), and in turn would prevent the Company from
qualifying as a REIT. See "Taxation of the Company -- Failure to Qualify" above
for a discussion of the effect of the Company's failure to meet such tests for
a taxable year. Based on certain representations of the Company, in the opinion
of Jaffe, Raitt, Heuer & Weiss, Professional Corporation, each Partnership will
be treated for Federal income tax purposes as a partnership (and not as an
association taxable as a corporation). Such opinion, however, is not binding on
the Service, and no assurance can be given that the Service will not challenge
the tax status of any Partnership.
Tax Allocations with Respect to the Properties. Pursuant to Section 704(c)
of the Code, income, gain, loss, and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership (such as the Properties deemed contributed by the
Principals and the Former General Partners), must be allocated in a manner such
that the contributing partner is charged with, or benefits from, respectively,
the unrealized gain, or unrealized loss associated with the property at the time
of the contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of contributed
property at the time of contribution, and the adjusted tax basis of such
property at the time of contribution (a "Book-Tax Difference"). Such allocations
are solely for Federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners. The
Operating Partnership was formed with contributions of appreciated property
(including the Properties deemed contributed by the Principals and the Former
General Partners). Consequently, the partnership agreement will require such
allocations to be made in a manner consistent with Section 704(c) of the Code.
In general, the Principals, the Former General Partners, and certain other
persons and entities that contributed Properties to the Partnerships will be
allocated less depreciation, and increased taxable gain on sale of certain
Properties. This will tend to eliminate the Book-Tax Difference. However, the
special allocation rules of Section 704(c) do not always rectify the Book-Tax
Difference on an annual basis or with respect to a specific taxable transaction
such as a sale. Under the applicable Treasury Regulations, such special
allocations of income and gain and depreciation deductions must be made on a
property-by-property basis. Depreciation deductions resulting from the carryover
basis of a contributed property are used to eliminate the Book-Tax Difference by
allocating such deductions to the non-contributing partners (i.e., the REIT) up
to the amount of their share of book depreciation. Any remaining tax
depreciation for the contributed property would be allocated to the partners who
contributed the property. Each Partnership has elected the traditional method of
rectifying the Book-Tax Difference under the applicable Treasury Regulations,
pursuant to which, if depreciation deductions are less than the non-contributing
partners' share of book depreciation, then the non-contributing partners lose
the benefit of these deductions ("ceiling rule"). When the property is sold, the
resulting tax gain is used to the extent possible to eliminate the Book-Tax
Difference (reduced by any previous book depreciation). Even under the
traditional method, it is possible that the carryover basis of the contributed
assets in the hands of a Partnership may cause the Company to be allocated lower
depreciation and other deductions. This may cause the Company to recognize
taxable income in excess of cash proceeds, which might adversely affect the
Company's ability to comply with the REIT distribution requirements. See
"Federal Income Tax Considerations -- Taxation of the Company -- Annual
Distribution Requirements."
With respect to any property purchased by the Operating Partnership
subsequent to the admission of the Company to the Operating Partnership, such
property will initially have a tax basis equal to its fair market value and
Section 704(c) of the Code will not apply.
Sale of the Properties. The Company's share of any gain realized by the
Operating Partnership on the sale of any dealer property generally will be
treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "Federal Income Tax Considerations -- Taxation of the Company
- -- General" and "-- Gross Income Tests -- The 95% Test." Under existing law,
whether property is dealer property is a question of fact that depends on all
the facts and circumstances with respect to the particular transaction. The
Partnerships intend to hold the Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating the Properties and other manufactured housing communities,
and to make such occasional sales of the Properties as are consistent with the
Company's investment objectives. Based upon such investment objectives, the
Company believes that in general the Properties should not be considered dealer
property and that the amount of income from prohibited transactions, if any,
will not be material.
- 33 -
<PAGE> 36
TAX CONSEQUENCES OF CONVERSION TO REIT STATUS
The Company elected to be taxed as a REIT by filing such an election with
its United States Federal income tax return for the taxable year beginning
January 1, 1994. The Code provides that, in the case of an entity such as the
Company, such corporation is eligible to be taxed as a REIT for a taxable year
only if, as of the close of such year, it has no earnings and profits
accumulated in any non-REIT year. Under the Code, in order to distribute all
earnings and profits accumulated as of the end of a prior taxable year it is
necessary to distribute all earnings and profits accumulated in the current
taxable year. Although calculations of earnings and profits are complex and it
is possible for divergences of opinion with respect to the amount of accumulated
earnings and profits, the Company believes that its pre-1995 distributions have
satisfied the special distribution requirements of the Code in a timely fashion.
If during the 10-year period (the "Recognition Period") beginning on the
first day of the first taxable year for which the Company qualified as a REIT,
the Company recognizes gain on the disposition of any asset held by the Company
as of the beginning of such Recognition Period, then, to the extent of the
excess of: (i) the fair market value of such asset as of the beginning of such
Recognition Period; over (ii) the Company's adjusted basis in such asset as of
the beginning of such Recognition period (the "Built-in Gain"), such gain will
be subject to tax at the highest regular corporate rate to the extent of the
Company's net Built-in Gain as of the beginning of such Recognition Period,
pursuant to regulations that have not yet been promulgated by the Service.
Furthermore, if the Company acquires any asset from a corporation in a
transaction in which the basis of the asset in the Company's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the transferor, and the Company recognizes gain on the disposition of such asset
during the Recognition Period beginning on the date on which such asset was
acquired by the Company, then, pursuant to regulations that have not yet been
promulgated by the Service, to the extent of the Built-in Gain, such gain will
be subject to tax at the highest regular corporate rate.
These provisions regarding the potential taxation of Built-in Gains would
not be applicable to the Properties and would only be applicable to the assets
owned by the Company prior to January 1, 1994, the first day of the first year
that the Company elected to be taxed as a REIT. Accordingly, the Company does
not expect this provision to have any significant effect.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Direct sales to investors may be accomplished through
subscription rights distributed to the Company's stockholders. In connection
with the distribution of subscription rights to stockholders, if all of the
underlying Securities are not subscribed for, the Company may sell such
unsubscribed Securities directly to third parties or may engage the services of
an underwriter to sell such unsubscribed Securities to third parties. Any
underwriter or agent involved in the offer and sale of the Securities will be
named in the applicable Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, or at prices related to the
prevailing market prices at the time of sale or at negotiated prices (any of
which may represent a discount from the prevailing market prices). The Company
also may, from time to time, authorize underwriters acting as the Company's
agents to offer and sell the Securities upon the terms and conditions as are set
forth in the applicable Prospectus Supplement. In connection with the sale of
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Securities for whom they may act as
agent. Underwriters may sell Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters,
- 34 -
<PAGE> 37
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Securities sold pursuant to
Contracts shall be not less nor more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Securities covered by its Contracts
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject; and (ii)
if the Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of the Securities less the
principal amount thereof covered by the Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
Subsidiaries in the ordinary course of business.
LEGAL MATTERS
The legality of the Debt Securities, the Preferred Stock, the Common Stock
and the Securities Warrants offered hereby will be passed upon for the Company
by Ober, Kaler, Grimes & Shriver, Baltimore, Maryland. Jaffe, Raitt, Heuer &
Weiss, Professional Corporation, has acted to counsel for the Company on tax and
certain other matters.
EXPERTS
The consolidated financial statements and consolidated financial statement
schedules of the Company as of December 31, 1995 and 1994, and for the years
ended December 31, 1995, 1994, and 1993 included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 have been incorporated herein
in reliance on the report of Coopers & Lybrand L.L.P., independent certified
public accountants, and upon the authority of said firm as experts in accounting
and auditing.
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<PAGE> 38
No dealer, salesperson or other individual has been authorized to
give any information or to make any representations not contained or
incorporated by reference in this Prospectus in connection with any
offering to be made by the Prospectus. If given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the Securities, in any jurisdiction where,
or to any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any offer or sale
made hereunder shall, under any circumstance, create an implication that
there has been no change in the facts set forth in this Prospectus or
in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<S> <C>
Page
----
Available Information . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . 9
Ratios of Earnings to Fixed Charges . . . . . . . . . 9
Description of Debt Securities . . . . . . . . . . . 9
Description of Common Stock . . . . . . . . . . . . 21
Description of Preferred Stock . . . . . . . . . . 23
Description of Securities Warrants . . . . . . . . 26
Federal Income Tax Considerations . . . . . . . . . 28
Plan of Distribution . . . . . . . . . . . . . . . 34
Legal Matters . . . . . . . . . . . . . . . . . . . 35
Experts . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
SUN COMMUNITIES, INC.
$300,000,000
--------------
PROSPECTUS
--------------
JUNE 28, 1996
<PAGE> 39
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and distribution of the securities being
registered.
<TABLE>
<S> <C>
Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,483
Fees of Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Printing and Duplicating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Blue Sky Fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414,483
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's charter authorizes the Company to obligate itself to indemnify
its present and former directors and officers and to pay or reimburse expenses
for such individuals in advance of the final disposition of a proceeding to the
maximum extent permitted from time to time by Maryland law. The Company's
bylaws obligate it to indemnify and advance expenses to present and former
directors and officers to the maximum extent permitted by Maryland law. The
MGCL permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those
capacities unless it is established that: (i) the act or omission of the
director or officer was material to the matter giving rise to the proceeding;
and (a) was committed in bad faith or, (b) was the result of active and
deliberate dishonesty; (ii) the director or officer actually received an
improper personal benefit in money, property, or services; or (iii) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful.
The MGCL permits the charter of a Maryland corporation to include a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, except to the extent that:
(i) it is proved that the person actually received an improper benefit or profit
in money, property or services; or (ii) a judgment or other final adjudication
is entered in a proceeding based on a finding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. The Company's
charter contains a provision providing for elimination of the liability of its
directors or officers to the Company or its stockholders for money damages to
the maximum extent permitted by Maryland law from time to time.
The partnership agreement of the Operating Partnership also provides for
indemnification of the Company and its officers and directors to the same
extent indemnification is provided to officers and directors of the Company in
its charter, and limits the liability of the Company and its officers and
directors to the Operating Partnership and its respective partners to the same
extent the liability of the officers and directors of the Company to the
Company and its stockholders is limited under the Company's charter.
II-1
<PAGE> 40
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4.1 Form of Senior Indenture (Incorporated by reference from Exhibit 4.1
to Amendment No. 1 to Form S-3 filed by the Company on October 23,
1995, File No. 33-95694)
4.2 Form of Subordinated Indenture (Incorporated by reference from
Exhibit 4.2 to Amendment No. 1 to Form S-3 filed by the Company on
October 23, 1995, File No. 33-95694)
4.3 Form of Common Stock Certificate (Incorporated by reference from
Exhibit 2 to Amendment No. 1 to Form S-11 filed by the Company on
November 5, 1993, File No. 33-69340)
4.4 Articles VI and VII of the Company's Amended and Restated Articles
of Incorporation (Incorporated by reference from Exhibit 3.1 to
Amendment No. 1 to Form S-11 filed by the Company on November 5,
1993, File No. 33-69340)
**4.5 Form of Debt Security
**4.6 Form of Securities Warranty Agreement
**4.7 Form of Articles Supplementary for Preferred Stock
**4.8 Form of Preferred Stock Certificate
*5.1 Opinion of Ober Kaler, Grimes & Shriver as to legality of securities
*8.1 Opinion of Jaffe, Raitt, Heuer & Weiss, P.C. as to certain tax
matters
***12.1 Calculation of Ratios of Earnings to Fixed Charges
***23.1 Consent of Coopers & Lybrand L.L.P., independent accountants
*23.2 Consent of Jaffe, Raitt, Heuer & Weiss, P.C. (included in Exhibit
8.1)
*23.3 Consent of Ober Kaler, Grimes & Shriver (included in Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of this
Registration Statement)
**25.1 Statement of Eligibility of Trustee on Form T-1 (filed under
separate cover)
</TABLE>
*Previously filed.
**To be filed by amendment or incorporated by reference in connection with the
offering of the Securities.
***Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-2
<PAGE> 41
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table set forth in this registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the Securities offered herein, and the
offering of such Securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the termination
of the offering.
The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement 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; and
insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted against the registrant 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 Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, 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 a part of this Registration Statement as of the
time it was declared effective.
The undersigned Registrant hereby undertakes, in connection with
securities to be offered pursuant to warrants, to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriters, and the terms of any subsequent reoffering thereof. If any
public offering by the underwriters is to be made on terms differing from those
II-3
<PAGE> 42
set forth on the cover page of the prospectus, a post-effective amendment will
be filed to set forth the terms of such offering.
The undersigned Registrant hereby undertakes to file an application for
purposes of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-4
<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Farmington Hills, State of Michigan, on June 28,
1996.
SUN COMMUNITIES, INC.,
a Maryland corporation
By: /s/ Jeffrey P. Jorissen
--------------------------------------
Jeffrey P. Jorissen, Senior Vice President
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
Milton M. Shiffman* Chairman of the Board of Directors June 28, 1996
- -------------------------------- ---
Milton M. Shiffman
Gary A. Shiffman*
- --------------------------------
Gary A. Shiffman President, Chief Executive Officer, and Director June 28, 1996
---
/s/ Jeffrey P. Jorissen Chief Financial Officer, Senior Vice President, June 28, 1996
- -------------------------------- ---
Jeffrey P. Jorissen Secretary, and Principal Accounting Officer
Carl R. Weinert* Director June 28, 1996
- -------------------------------- ---
Carl R. Weinert
Paul D. Lapides* Director June 28, 1996
- -------------------------------- ---
Paul D. Lapides
Ted J. Simon* Director June 28, 1996
- -------------------------------- ---
Ted J. Simon
Clunet R. Lewis* Director June 28, 1996
- -------------------------------- ---
Clunet R. Lewis
Director June , 1996
- -------------------------------- ---
Ronald Piasecki
*By: /s/ Jeffrey P. Jorissen
Jeffrey P. Jorissen
Attorney-in-fact
</TABLE>
II-5
<PAGE> 44
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Description Numbered Page
- --------- ----------- -------------
<S> <C> <C>
4.1 Form of Senior Indenture (Incorporated by reference from Exhibit 4.1 to
Amendment No. 1 to Form S-3 filed by the Company on October 23, 1995,
File No. 33-95694)
4.2 Form of Subordinated Indenture (Incorporated by reference from Exhibit
4.2 to Amendment No. 1 to Form S-3 filed by the Company on October 23,
1995, File No. 33-95694)
4.3 Form of Common Stock certificate (Incorporated by reference from Exhibit
4.1 to Amendment No. 1 to Form S-11 filed by the Company on November 5,
1993, File No. 33-69340)
4.4 Articles VI and VII of the Company's Amended and Restated Articles of
Incorporation (Incorporated by reference from Exhibit 3.1 to Amendment
No. 1 to Form S-11 filed by the Company on November 5, 1993, File
No. 33-69340)
**4.5 Form of Debt Security
**4.6 Form of Securities Warranty Agreement
**4.6 Form of Articles Supplementary for Preferred Stock
**4.7 Form of Preferred Stock Certificate
*5.1 Opinion of Ober, Kaler, Grimes & Shriver as to legality of securities
*8.1 Opinion of Jaffe, Raitt, Heuer & Weiss, P.C. as to certain tax matters
***12.1 Calculation of Ratios of Earnings to Fixed Charges
***23.1 Consent of Coopers & Lybrand L.L.P., independent accountants
*23.2 Consent of Jaffe, Raitt, Heuer & Weiss, P.C. (included in Exhibit 8.1)
*23.3 Consent of Jaffe, Raitt, Heuer & Weiss, P.C. (included in Exhibit 5.1)
*24.1 Power of Attorney (included on the signature page of this Registration
Statement)
**25.1 Statement of Eligibility of Trustee on Form T-1 (filed under separate
cover)
*Previously filed
**To be filed by amendment or incorporated by reference in connection
with the offering of the Securities.
***Filed herewith.
</TABLE>
II-6
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The ratio of earnings to fixed charges for the Company (including its
predecessor-in-interest, Sundance Enterprises, Inc., the partnerships
affiliated with Sundance Enterprises, Inc., and the Company's subsidiaries and
majority-owned partnerships) presents the relationship of the Company's
earnings to its fixed charges. "Earnings" as used in the computation, is based
on net income (loss) from continuing operations (which includes a charge to
income for depreciation and amortization expense) before income taxes, plus
fixed charges. "Fixed charges" is comprised of (i) interest charges, whether
expensed or capitalized, and (ii) amortization of loan costs and discounts or
premiums relating to indebtedness of the Company and its subsidiaries and
majority-owned partnerships, excluding in all cases items which would be or are
eliminated in consolidation.
<TABLE>
<CAPTION>
YEAR ENDED
3 MONTHS DECEMBER 31,
ENDED --------------------------------------
3/31/96 1995 1994 1993 1992 1991
-------- ------- ------- ------ ------ ------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) $3,456 $13,591 $ 8,924 $ 288 $ 272 $ (314)
Add fixed charges other
than capitalized interest 2,038 6,420 4,894 5,280 5,522 5,825
------ ------- ------- ------ ------ ------
$5,494 $20,011 $13,818 $5,568 $5,794 $5,511
====== ======= ======= ====== ====== ======
Fixed Charges:
Interest expense $2,038 $ 6,420 $ 4,894 $5,280 $5,522 $5,825
Capitalized interest 60 192 58 -- -- --
------ ------- ------- ------ ------ ------
Total fixed charges $2,098 $ 6,612 $ 4,952 $5,280 $5,522 $5,825
====== ======= ======= ====== ====== ======
Ratio of Earnings to
Fixed Charges: 2.62:1 3.03:1 2.79:1 1.05:1 1.05:1 0.95:1
</TABLE>
13
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
registration statement on Form S-3 (File No. 333-1822) of our report dated
February 23, 1996, on our audits of the consolidated financial statement and
financial statement schedule of Sun Communities, Inc. which report is
incorporated by reference from the Annual Report on Form 10-K for the year
ended December 31, 1995.
We also consent to the incorporation by reference in this Amendment No. 1 to
the registration statement on Form S-3(File No. 333-1822) of our report dated
February 14, 1996, on our audits of the historical summaries of combined gross
income and direct operating expense of the Aspen Properties for the years ended
December 31, 1995, 1994 and 1993 which report is incorporated by reference from
the March 20, 1996 Form 8-K of Sun Communities, Inc.
We also consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
- ---------------------------------
Coopers & Lybrand L.L.P.
Detroit, Michigan
July 5, 1996
