UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
SUN COMMUNITIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
SUN COMMUNITIES, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 2004
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To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Sun
Communities, Inc. (the "Company") will be held at the Embassy Suites, 28100
Franklin Road, Southfield, MI 48034, on Thursday, May 20, 2004, at 11:00 a.m.,
local time, for the following purposes:
(1) To elect two Directors to serve until the Annual Meeting of
Shareholders to be held in 2007 or until their successors shall have been
duly elected and qualified;
(2) To approve the 2004 Non-Employee Director Option Plan; and
(3) To transact such other business as may properly come before the
meeting.
A Proxy Statement containing information relevant to the Annual Meeting
appears on the following pages.
Only holders of Common Stock of record at the close of business on April 9,
2004 are entitled to notice of and to vote at the meeting or any adjournments.
If you do not plan to attend the meeting and you wish to vote in accordance
with the Board of Director's recommendations, it is not necessary to specify
your choices; merely sign, date, and return the enclosed Proxy Card. If you
attend the meeting, you may withdraw your Proxy and vote your own shares.
By Order of the Board of Directors
/s/ Jeffrey P. Jorissen
JEFFREY P. JORISSEN
Secretary
Dated: April 19, 2004
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE ENCOURAGED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE.
SUN COMMUNITIES, INC.
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PROXY STATEMENT/ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 2004
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PROXIES AND SOLICITATIONS
This Proxy Statement is furnished to shareholders in connection with the
solicitation of proxies by the Board of Directors (the "Board") of Sun
Communities, Inc. ("Sun" or the "Company") to be used at the Annual Meeting of
Shareholders (the "Annual Meeting") and at any adjournments. If received in time
for the Annual Meeting, the shares represented by a valid proxy will be voted in
accordance with the specifications, if any, contained in such executed proxy. If
no instructions are given, proxies will be voted: (a) FOR election of the two
nominees for the Board; (b) for approval of the 2004 Non-Employee Director
Option Plan; and (c) at the discretion of Gary A. Shiffman and Arthur A. Weiss,
the Board's designated representatives for the Annual Meeting, with respect to
such other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof. A proxy executed in the enclosed form may
be revoked by the person signing it at any time before it is exercised. Proxies
may be revoked by filing with the Secretary of the Company, any time prior to
the time set for commencement of the Annual Meeting, a written notice of
revocation bearing a later date than the proxy, or by attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute revocation of a proxy).
In addition to the use of mails, proxies may be solicited by personal
interview, telephone and telegram, by directors, officers and employees of the
Company. Arrangements may also be made with brokerage houses or other
custodians, nominees and fiduciaries to forward solicitation material to the
beneficial owners of shares of the Company's common stock (the "Common Stock")
held of record by such persons, and the Company may reimburse such persons for
reasonable out-of-pocket expenses incurred in forwarding material. The Company
anticipates that fees and expenses for the foregoing parties will not exceed
$1,000. The costs of all proxy solicitation will be borne by the Company.
The executive offices of the Company are located at 27777 Franklin Road,
Suite 2000, Southfield, Michigan 48034. The approximate date of mailing of this
Proxy Statement and the enclosed Proxy materials to the Company's shareholders
is April 21, 2004.
TIME AND PLACE OF MEETING
The Annual Meeting will be held at the Embassy Suites, 28100 Franklin Road,
Southfield, MI 48034, on Thursday, May 20, 2004, at 11:00 a.m., local time.
VOTING RIGHTS AND
PRINCIPAL HOLDERS OF VOTING SECURITIES
Only shareholders of record at the close of business on April 9, 2004 are
entitled to notice of and to vote at the Annual Meeting or at any adjournments.
As of that date, the Company had 19,050,283 shares of Common Stock issued,
outstanding and entitled to vote held by 593 holders of record. Each outstanding
share entitles the record holder to one vote. Shares cannot be voted at the
Annual Meeting unless the holder is present in person or represented by proxy.
Each share of Common Stock outstanding on the Record Date entitles the holder
thereof to one vote upon each matter to be voted upon at the Annual Meeting.
If your shares are held in "street name," your brokerage firm, under
certain circumstances, may vote your shares for you if you do not return your
proxy. Brokerage firms have authority under the rules of the New York Stock
Exchange to vote customers' unvoted shares on some routine matters. If you do
not give a proxy to your brokerage firm to vote your shares, your brokerage firm
may either vote your shares on routine matters or leave your shares unvoted. The
election of directors (Proposal One) is considered a routine matter. Approval of
the
Company's 2004 Non-Employee Director Option Plan (Proposal Two) is not
considered a routine matter so your brokerage firm cannot vote your shares on
that proposal if you do not return your proxy. Shares held by brokers as to
which voting instructions have not been received from the beneficial owners with
respect to non-routine matters are referred to as "broker non-votes." We
encourage you to provide voting instructions to your brokerage firm by returning
your completed proxy. This ensures your shares will be voted at the meeting
according to your instructions. You should receive directions from your
brokerage firm about how to submit your proxy to them at the time you receive
this proxy statement.
The presence, in person or by proxy, of outstanding shares of Common Stock
representing a majority of the total votes entitled to be cast is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Shares that reflect abstentions or broker non-votes will be counted for purposes
of determining whether a quorum is present for the transaction of business at
the Annual Meeting.
With respect to Proposal 1, the directors will be elected by a plurality of
all votes cast at the Annual Meeting. Accordingly, abstentions and broker
non-votes as to the election of directors will have no effect on the results of
the vote.
Approval of the Company's 2004 Non-Employee Director Option Plan requires
the affirmative vote of a majority of all the votes cast at the Annual Meeting.
Abstentions and broker non-votes as to this proposal will not be counted as
votes cast and will have no effect on the results of the vote.
If there is not a quorum at the Annual Meeting, the shareholders entitled
to vote at the Annual Meeting, whether present in person or represented by
proxy, shall only have the power to adjourn the Annual Meeting until such time
as there is a quorum. The Annual Meeting may be reconvened without notice to the
shareholders, other than an announcement at the prior adjournment of the Annual
Meeting, within 120 days after the Record Date, and a quorum must be present at
such reconvened Annual Meeting.
If a proxy in the form enclosed is duly executed, dated and returned, and
it has not been revoked in accordance with the instructions set forth therein,
the shares of Common Stock represented thereby will be voted by Gary A. Shiffman
and Arthur A. Weiss, the Board's proxy agents for the Annual Meeting, in
accordance with the specifications made thereon by the shareholder. If no such
specifications are made, such proxy will be voted (i) for the election of the
two nominees for director to the Board, (ii) for the approval of the 2004
Non-Employee Director Option Plan, and (iii) at the discretion of Messrs.
Shiffman and Weiss with respect to such other business as may properly come
before the Annual Meeting or any adjournment or postponement thereof.
Information concerning principal holders of the Common Stock is discussed
under "Security Ownership of Certain Beneficial Owners and Management."
INCORPORATION BY REFERENCE
To the extent this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the sections of this Proxy Statement entitled "Report of the
Audit Committee," "Report of the Compensation Committee on Executive
Compensation" and "Shareholder Return Performance Presentation" shall not be
deemed to be so incorporated unless specifically otherwise provided in any such
filing.
ANNUAL REPORT
Shareholders are concurrently being furnished with a copy of the Company's
2003 Annual Report which contains its audited financial statements as of
December 31, 2003. In addition, copies of the Company's Annual Report on Form
10-K for the year ended December 31, 2003, as filed with the Securities and
Exchange Commission (the "SEC"), will be sent to any shareholder, without
charge, upon written request to Sun Communities Investor Services, 27777
Franklin Road, Suite 2000, Southfield, Michigan 48034.
2
SHAREHOLDERS' PROPOSALS
Any and all shareholder proposals for inclusion in the proxy materials for
the Company's next Annual Meeting of Shareholders must comply with the rules and
regulations promulgated under the Exchange Act and must be received by the
Company, at its offices at 27777 Franklin Road, Suite 2000, Southfield, Michigan
48034, not later than December 22, 2004. Such proposals should be addressed to
the Company's Secretary.
The Company's Bylaws also contain certain provisions which affect
shareholder proposals. The Company's Bylaws provide that: (a) with respect to an
annual meeting of shareholders, nominations of persons for election to the Board
of Directors and the proposal of business to be considered by shareholders may
be made only (i) pursuant to the Company's notice of the meeting, (ii) by the
Board of Directors, or (iii) by a shareholder who is entitled to vote at the
meeting and has complied with the advance notice procedures set forth in the
Bylaws; and (b) with respect to special meetings of shareholders, only the
business specified in the Company's notice of meeting may be brought before the
meeting of shareholders, and nominations of persons for election to the Board of
Directors may be made only (i) by the Board of Directors, or (ii) provided that
the Board of Directors has determined that directors shall be elected at such
meeting, by a shareholder who is entitled to vote at the meeting and has
complied with the advance notice provisions set forth in the Bylaws.
ELECTION OF DIRECTORS
(PROPOSAL ONE)
The first matter to be considered at the Annual Meeting will be the
election of two directors. It is proposed that these positions be filled by
persons nominated to the Board by management. Each director shall be elected by
a plurality of the votes cast at the Annual Meeting. Therefore, if a quorum is
present, abstentions and broker non-votes will have no effect on the election of
directors. Proxies will be tabulated by the Company's transfer agent. The
Inspector of Elections appointed at the Annual Meeting will then combine the
proxy votes with the votes cast at the Annual Meeting. Each director elected at
the Annual Meeting will serve for a term commencing on the date of the Annual
Meeting and continuing until the Annual Meeting of Shareholders to be held in
2007 or until his successor is duly elected and qualified. In the absence of
directions to the contrary, proxies will be voted in favor of the election of
the two nominees listed below.
If either of the nominees named below are unavailable to serve for any
reason, then a valid proxy may be voted for the election of such other persons
as the person or persons voting the proxy may deem advisable in accordance with
their best judgment. Management has no present knowledge that either of the
persons named will be unavailable to serve. In any event, the enclosed proxy can
be voted for only the two nominees named in this Proxy Statement or their
substitutes.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED BELOW. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD OR TO THE CONTRARY ARE GIVEN.
The following list identifies each incumbent director and nominee for
election to the Board at the Annual Meeting and describes each person's
principal occupation for the past five years. Each of the directors has served
continuously from the date of his election to the present time.
NAME AGE OFFICE
---- --- ------
Gary A. Shiffman.......................... 49 Chairman, Chief Executive Officer, President
and Director
Paul D. Lapides........................... 49 Director
Clunet R. Lewis........................... 57 Director (Nominee)
Ronald L. Piasecki........................ 65 Director
Ted J. Simon.............................. 73 Director
Arthur A. Weiss........................... 55 Director (Nominee)
3
Gary A. Shiffman is the Chairman, President and Chief Executive Officer,
and has been an executive officer of Sun since its inception. He has been
actively involved in the management, acquisition, construction and development
of manufactured housing communities and has developed an extensive network of
industry relationships over the past 19 years. He has overseen the land
acquisition, rezoning, development and marketing of numerous manufactured home
expansion projects. Mr. Shiffman is also the President and a director of Sun
Home Services, Inc. ("Sun Home Services") and all other corporate subsidiaries
of the Company.
Paul D. Lapides has been a director since December 1993. Mr. Lapides is
Director of the Corporate Governance Center in the Michael J. Coles College of
Business at Kennesaw State University, where he is an assistant professor of
management and entrepreneurship. A certified public accountant, Mr. Lapides is
the author or co-author of more than 100 articles and twelve books on real
estate, management and directors' responsibilities. Mr. Lapides is a member of
the Advisory Board of the National Association of Corporate Directors and served
on the NACD's Blue Ribbon Commission on Audit Committees (1999). His real estate
experience includes managing a $3 billion national portfolio of income-producing
real estate consisting of 42,000 multi-family units and 16 million square feet
of commercial space.
Clunet R. Lewis has been a director since December 1993. Mr. Lewis also
serves as President of CRL Enterprises, Inc. a private consulting firm. From
1995 until 2000, Mr. Lewis served in various positions with Eltrax Systems,
Inc., a Nasdaq National Market System company, including Secretary, General
Counsel, member of the Board of Directors and Chief Financial Officer. From 1989
until 1994, Mr. Lewis served as Secretary and General Counsel of Military
Communications Center, Inc., a privately held company that provided retail
telecommunications services to members of the United States Armed Services. From
1990 through 1991, Mr. Lewis was Managing Director of MCC Communications, Inc.,
a privately held company that provided international telecommunications services
to members of the United States Armed Services serving in the Persian Gulf area
during the Gulf War. Prior to 1993, Mr. Lewis was a shareholder at the Detroit
law firm of Jaffe, Raitt, Heuer & Weiss, Professional Corporation.
Ronald L. Piasecki has been a director since May 1996, upon completion of
the Company's acquisition of twenty-five manufactured housing communities (the
"Aspen Properties") owned by affiliates of Aspen Enterprises, Ltd. ("Aspen").
Mr. Piasecki is the executive vice president and a director of Aspen, which he
co-founded in 1973. Prior to the Company's acquisition of the Aspen Properties,
Aspen was one of the largest privately-held developers and owners of
manufactured housing communities in the U.S. Mr. Piasecki serves as chairman of
the board of directors of Kurdziel Industries, Inc., the world's largest
producer of counter weights for the material handling industry, and Mr. Piasecki
is a director of USOL Holdings, Inc. (Nasdaq: USOL), a provider of integrated
telecommunications services.
Ted J. Simon has been a director since December 1993. Since February 1999,
Mr. Simon has been affiliated with Grand Sakwa Properties LLC, a real estate
development company located in Farmington Hills, Michigan. From 1981 until
January 1999, Mr. Simon was the Vice President -- Real Estate (Midwest Group) of
The Great Atlantic & Pacific Tea Company, Inc. and Mr. Simon was a Vice
President -- Real Estate and a director of Borman's Inc., a wholly owned
subsidiary of The Great Atlantic & Pacific Tea Company, Inc. Mr. Simon is also a
director of Clarkston State Bank, a wholly-owned subsidiary of Clarkston
Financial Corporation (OTC BB: CKSB.OB).
Arthur A. Weiss has been a director since October 1996. Since 1976, Mr.
Weiss has practiced law with the law firm of Jaffe, Raitt, Heuer & Weiss,
Professional Corporation ("JRH&W"), which represents the Company in various
matters. Mr. Weiss is currently a shareholder of JRH&W.
To the best of the Company's knowledge, there are no material proceedings
to which any nominee is a party, or has a material interest, adverse to the
Company. To the best of the Company's knowledge, there have been no events under
any bankruptcy act, no criminal proceedings and no judgments or injunctions that
are material to the evaluation of the ability or integrity of any nominee during
the past five years.
4
BOARD OF DIRECTORS AND COMMITTEES
Pursuant to the terms of the Company's charter, the directors are divided
into three classes. The class up for election at the Annual Meeting will hold
office for a term expiring at the annual meeting of shareholders to be held in
2007. A second class will hold office for a term expiring at the annual meeting
of shareholders to be held in 2005 and a third class will hold office for a term
expiring at the annual meeting of shareholders to be held in 2006. Each director
will hold office for the term to which he is elected and until his successor is
duly elected and qualified. Clunet R. Lewis and Arthur A. Weiss have terms
expiring at the Annual Meeting and are nominees for the class to hold office for
a term expiring at the annual meeting of shareholders to be held in 2007. Gary
A. Shiffman and Ronald L. Piasecki have terms expiring at the annual meeting of
shareholders to be held in 2005 and Ted J. Simon and Paul D. Lapides have terms
expiring at the annual meeting of shareholders to be held in 2006. At each
annual meeting of the shareholders of the Company, the successors to the class
of directors whose terms expire at such meeting will be elected to hold office
for a term expiring at the annual meeting of shareholders held in the third year
following the year of their election.
The Board met eleven (11) times during 2003 and took various actions
pursuant to resolutions adopted by unanimous written consent. All directors
attended at least 75% of the meetings of the Board and each committee on which
they served.
Several important functions of the Board may be performed by committees
that are comprised of members of the Board. The Company's Bylaws authorize the
formation of these committees and grant the Board the authority to prescribe the
functions of each committee and the standards for membership of each committee.
In addition, the Board appoints the members of each committee. The Board has
five standing committees: an Audit Committee, a Compensation Committee, a
Nominating and Corporate Governance Committee, an Indemnification Committee and
an Executive Committee. You may find copies of the charters of the Audit
Committee, the Compensation Committee and the Nominating and Corporate
Governance Committee under the "Shareholder Info" section of our website at
www.suncommunities.com.
The Audit Committee operates pursuant to a charter that was approved by the
Board in January 2004, which is attached as Appendix A to this proxy statement.
The Audit Committee, among other functions, (1) has the sole authority to
appoint, retain, terminate and determine the compensation of the Company's
independent accountants, (2) reviews with the Company's independent accountants
the scope and results of the audit engagement, (3) approves professional
services provided by the Company's independent accountants, and (4) reviews the
independence of the Company's independent accountants. The current members of
the Audit Committee are Messrs. Paul D. Lapides, Clunet R. Lewis and Ronald L.
Piasecki, all of whom are "independent" as that term is defined in the rules of
the SEC and applicable rules of the New York Stock Exchange ("NYSE"). The Audit
Committee held four (4) formal meetings and several informal meetings during the
fiscal year ended December 31, 2003. The Board has determined that Mr. Lapides
is an "audit committee financial expert," as defined by SEC rules. See "Report
of the Audit Committee."
The Compensation Committee operates pursuant to a charter that was approved
by the Board in March 2004. A copy of the Compensation Committee Charter is
available on the Company's website at www.suncommunities.com. The Compensation
Committee, among other functions, (1) reviews and approves corporate goals and
objectives relevant to the compensation of the Chief Executive Officer and such
other executive officers as may be designated by the Chief Executive Officer,
evaluates the performance of such officers in light of such goals and
objectives, and determines and approves the compensation of such officers based
on these evaluations, (2) approves the compensation of the Company's other
executive officers, (3) recommends to the Board for approval the compensation of
the non-employee directors and (4) oversees the Company's incentive-compensation
plans and equity-based plans. The current members of the Compensation Committee
are Messrs. Ted J. Simon, Clunet R. Lewis and Ronald L. Piasecki, all of whom
are independent directors under the NYSE rules. During the fiscal year ended
December 31, 2003, the Compensation Committee held two (2) formal meetings and
took various actions pursuant to resolutions adopted by unanimous written
consent. See "Report of the Compensation Committee on Executive Compensation."
5
On March 11, 2004, the Board formed the Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee operates pursuant
to a charter that was approved by the Board in March 2004. A copy of the
Nominating and Corporate Governance Committee Charter is available on the
Company's website at www.suncommunities.com. The Nominating and Corporate
Governance Committee, among other functions, is responsible for (1) identifying
individuals qualified to become Board members, consistent with criteria approved
by the Board, (2) recommending that the Board select the committee-recommended
nominees for election at each annual meeting of stockholders, (3) developing and
recommending to the Board a set of corporate governance guidelines applicable to
the Company, and (4) periodically reviewing such guidelines and recommending any
changes, and overseeing the evaluation of the Board. The current members of the
Nominating and Corporate Governance Committee are Clunet R. Lewis, Paul D.
Lapides and Ted J. Simon, all of whom are independent under the NYSE rules. In
accordance with its charter, the Nominating and Corporate Governance Committee
is currently in the process of establishing a policy with regard to the
consideration of director candidates recommended by shareholders.
The Indemnification Committee was established to: (i) perform such duties
as provided in Article XII of the Company's Bylaws; and (ii) perform such other
duties as may be delegated to it by the Board. The current members of the
Indemnification Committee are Messrs. Ted J. Simon and Clunet R. Lewis. The
Indemnification Committee did not hold any formal meetings in 2003.
The Executive Committee was established to generally manage the day-to-day
business and affairs of the Company between regular Board meetings. In no event
may the Executive Committee, without the prior approval of the Board acting as a
whole: (i) recommend to the shareholders an amendment to the Company's Charter;
(ii) amend the Company's Bylaws; (iii) adopt an agreement of merger or
consolidation; (iv) recommend to the shareholders the sale, lease or exchange of
all or substantially all of the Company's property and assets; (v) recommend to
the shareholders a dissolution of the Company or a revocation of a dissolution;
(vi) fill vacancies on the Board; (vii) fix compensation of the directors for
serving on the Board or on a committee of the Board; (viii) declare dividends or
authorize the issuance of the Company's stock; (ix) approve or take any action
with respect to any related party transaction involving the Company; or (x) take
any other action which is forbidden by the Company's Bylaws. All actions taken
by the Executive Committee must be promptly reported to the Board as a whole and
are subject to ratification, revision and alteration by the Board, except that
no rights of third persons created in reliance on authorized acts of the
Executive Committee can be affected by any such revision or alteration. The
current members of the Executive Committee are Messrs. Gary A. Shiffman and Ted
J. Simon. The Executive Committee did not hold any formal meetings during the
fiscal year ended December 31, 2003 but took various actions pursuant to
resolutions adopted by unanimous written consent.
COMMUNICATIONS WITH THE BOARD
If you wish to communicate with any of the directors of the Board or the
Board as a group, you may do so by writing to them at [Name(s) of
Director(s)/Board of Directors of Sun Communities, Inc.], c/o Compliance
Officer, Sun Communities, Inc., 27777 Franklin Road, Suite 200, Southfield, MI
48034.
If you wish to contact the Audit Committee to report complaints or concerns
regarding accounting, internal accounting controls or auditing matters, you may
do so by writing to the Chairman of the Audit Committee of Sun Communities,
Inc., c/o Compliance Officer, Sun Communities, Inc., 27777 Franklin Road, Suite
200, Southfield, MI 48034. You are welcome to make any such report anonymously
but the Company prefers that you identify yourself so that the Company may
contact you for additional information if necessary or appropriate.
If you wish to communicate with our non-management directors as a group,
you may do so by writing to Non-Management Directors of Sun Communities, Inc.,
c/o Compliance Officer, Sun Communities, Inc., 27777 Franklin Road, Suite 200,
Southfield, MI 48034.
The Company recommends that all correspondence be sent via certified U.S.
mail, return receipt requested. All correspondence received by the Compliance
Offer will be forwarded by the Compliance Officer promptly to the addressee(s).
6
INDEPENDENCE OF NON-EMPLOYEE DIRECTORS
The NYSE rules require that a majority of the Board consist of members who
are independent. There are different measures of director
independence -- independence under New York Stock Exchange rules, under Section
16 of the Securities Exchange Act of 1934 and under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Board has reviewed
information about each of the Company's non-employee directors and determined
that Paul D. Lapides, Clunet R. Lewis, Ronald L. Piasecki and Ted J. Simon are
independent directors.
REPORT OF THE AUDIT COMMITTEE
The Board maintains an Audit Committee comprised of three of the Company's
directors. The directors who serve on the Audit Committee are all "independent"
for purposes of the New York Stock Exchange listing standards. The Audit
Committee held four (4) formal meetings and several informal meetings during the
2003 fiscal year.
The SEC has promulgated, and the New York Stock Exchange has adopted, new
audit committee rules in response to the passage by the United States Congress
in July 2002 of the Sarbanes-Oxley Act. In response to these recent
developments, the Board adopted an amended and restated charter for the Audit
Committee in January 2004, a copy of which is attached as Appendix A to this
proxy statement.
In accordance with its written charter, the Audit Committee assists the
Board with fulfilling its oversight responsibility regarding the quality and
integrity of the accounting, auditing and financial reporting practices of the
Company. In discharging its oversight responsibilities regarding the audit
process, the Audit Committee:
- reviewed and discussed the audited financial statements with management
and Grant Thornton, LLP, the Company's independent auditors, for the
fiscal year ended December 31, 2003;
- discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Codification of
Statements on Auditing Standards); and
- reviewed the written disclosures and the letter from the independent
auditors required by the Independence Standards Board's Standard No. 1
(Independence Discussions with Audit Committees), and discussed with the
independent auditors any relationships that may impact their objectivity
and independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003, as filed with the Securities and Exchange Commission.
In 2003, the Audit Committee approved a policy concerning the pre-approval
of audit and non-audit services to be provided by the Company's independent
auditors. The policy requires that all services provided by the independent
auditor to the Company, including audit services, audit-related services, tax
services and other services, must be pre-approved by the Audit Committee. In
some cases, pre-approval is provided by the full Audit Committee for up to a
year, and relates to a particular category or group of services and is subject
to a particular budget. In other cases, specific pre-approval is required. The
Audit Committee approved all audit and non-audit related services provided to
the Company by Grant Thornton LLP during the 2003 fiscal year.
The Audit Committee has considered and determined that the level of fees of
Grant Thornton LLP's for provision of services other than the audit services is
compatible with maintaining the auditor's independence.
Respectfully Submitted,
Members of the Audit Committee:
Paul D. Lapides
Clunet R. Lewis
Ronald L. Piasecki
7
APPROVAL OF 2004 NON-EMPLOYEE DIRECTOR OPTION PLAN
(PROPOSAL TWO)
The second matter to be considered at the Annual Meeting will be the
approval of the 2004 Non-Employee Director Option Plan (the "2004 Plan"). The
Company's Amended and Restated 1993 Non-Employee Director Stock Option Plan (the
"Original Plan") was adopted by the Board on May 20, 1996 and was approved by
the Company's shareholders at the Annual Meeting of Shareholders held on July
23, 1996. There are only 5,500 shares of common stock available for issuance
under the Original Plan and, accordingly, the Board adopted the 2004 Plan on
April 16, 2004. The purpose of the 2004 Plan is to enhance the Company's ability
to attract and retain the services of experienced and knowledgeable independent
directors who are not officers or employees of the Company ("Non-Employee
Directors") and to provide an additional incentive for such directors to
continue to work for the best interests of the Company and its shareholders.
The following discussion is intended to summarize and highlight certain
important provisions of the 2004 Plan and is qualified in its entirety by the
more detailed information contained in the 2004 Plan itself. A copy of the Plan
is attached as Appendix B to this proxy statement.
The operation of the 2004 Plan is automatic and awards are granted pursuant
to a formula set forth in the 2004 Plan.
The 2004 Plan provides that, on the date of each of the Company's annual
shareholder meetings, each Non-Employee Director automatically will be granted
an option to purchase 1,500 shares of the Company's Common Stock or, at the
election of a Non-Employee Director, 1,500 partnership units in Sun Communities
Operating Limited Partnership (the "Automatic Option") if, on that date, he or
she has served on the Board for at least six (6) months. The purchase price of
each share/unit which may be purchased upon exercise of Automatic Options
granted under the 2004 Plan will be the fair market value of the Common Stock on
the date of grant.
In addition to the Automatic Option, each Non-Employee Director that has
continuously served the Company for the entire fiscal year shall automatically
receive an option (the "Performance Option") to purchase the following number of
shares of the Company's Common Stock or, at the election of a Non-Employee
Director, the following number of partnership units in Sun Communities Operating
Limited Partnership:
(i) if the Company's funds from operations per weighted average number
of outstanding shares of Common Stock ("Per Share FFO") for such fiscal
year, as determined by reference to the Company's audited financial
statements, increased by less than 5% as compared to Per Share FFO for the
previous fiscal year, 0 shares/units;
(ii) if Per Share FFO for such fiscal year increased by 5% or more but
less than 6% as compared to Per Share FFO for the previous fiscal year, 250
shares/units;
(iii) if Per Share FFO for such fiscal year increased by 6% or more
but less than 7% as compared to Per Share FFO for the previous fiscal year,
500 shares/units;
(iv) if Per Share FFO for such fiscal year increased by 7% or more but
less than 8% as compared to Per Share FFO for the previous fiscal year, 750
shares/units;
(v) if Per Share FFO for such fiscal year increased by 8% or more but
less than 9% as compared to Per Share FFO for the previous fiscal year,
1,000 shares/units;
(vi) if Per Share FFO for such fiscal year increased by 9% or more but
less than 10% as compared to Per Share FFO for the previous fiscal year,
1,250 shares/units; or
(vii) if Per Share FFO for such fiscal year increased by 10% or more
as compared to Per Share FFO for the previous fiscal year, 1,500
shares/units
The per share/unit exercise price for the Performance Option will be the average
of the closing sales prices of the Common Stock as quoted on the New York Stock
Exchange for the ten (10) business day period
8
immediately preceding and including June 30th of the year for which the
Performance Option was earned. For each year in which Performance Options are
earned, such Performance Options will be granted as soon as practicable after
the Company's audited financial statements for such year are issued.
No grants have been made under the 2004 Plan. The table below indicates the
options which would have been granted for the year ended December 31, 2003 if
the 2004 Plan was in effect.
2004 NON-EMPLOYEE DIRECTOR OPTION PLAN BENEFITS TO DATE
NUMBER OF SHARES OF
NAME AND POSITION DOLLAR VALUE($) COMMON STOCK UNDERLYING OPTIONS
----------------- --------------- -------------------------------
Gary A. Shiffman........................... N/A -0-
Chairman, Chief Executive Officer and
President
Jeffrey P. Jorissen........................ N/A -0-
Executive Vice President, Treasurer,
Chief Financial Officer and Secretary
Brian W. Fannon............................ N/A -0-
Executive Vice President and
Chief Operating Officer
Jonathan M. Colman......................... N/A -0-
Executive Vice President
All current executive officers as a
group.................................... N/A -0-
All current directors who are not executive
officers as a group...................... (1) 7,500
All employees who are not executive
officers as a group...................... N/A -0-
---------------
(1) The 7,500 Automatic Options (as defined above) would have been granted at
the fair market value of the Common Stock on the date of grant and no
Performance Options would have been granted.
The options awarded under the 2004 Plan will be in addition to, and not in
lieu of, the Non-Employee Director's annual retainer fee, meeting fees, or other
compensation payable as a result of his or her service on the Company's Board of
Directors.
No option granted under the 2004 Plan may be exercised prior to one year
from the date of grant. Each option under the 2004 Plan will become exercisable
with respect to 1/3 of the shares/units one year from the date of grant, with
respect to another 1/3 of the shares/units two years from the date of grant and
with respect to the final 1/3 of the shares/units three years from the date of
grant. Each option under the 2004 Plan shall terminate after ten years from the
date of grant or, if earlier, three months after the optionee ceases to be a
director of the Company, except in the case of death. If a Non-Employee Director
dies while a director, the right to exercise all unexercised options would be
accelerated and could be exercised by the director's beneficiary within one year
of the director's death. If a Non-Employee Director dies within the three month
period after he or she ceases to be a director, the Non-Employee Director's
beneficiary may exercise his or her options, to the extent exercisable on the
date of death, within one year after the Non-Employee Director's death.
The options granted to Non-Employee Directors under the 2004 Plan may not
be assigned or transferred other than by will or the laws of descent and
distribution except that a Non-Employee Director can transfer options to his or
her spouse, lineal ascendants, lineal descendants, or to a trust for the benefit
of one or more such individuals. All rights to receive options under the 2004
Plan will terminate immediately in the event a Non-Employee Director ceases to
serve as a director.
The total number of shares of Common Stock which may be granted under the
2004 Plan (including shares of Common Stock issuable upon the exchange of
partnership units of Sun Communities Operating Limited Partnership granted under
the 2004 Plan) may not exceed 100,000 shares, subject to adjustments for
9
stock dividends, split-ups, consolidation or similar capital adjustments, and
may be authorized and unissued shares or issued shares which have been
reacquired by the Company.
The 2004 Plan will remain in effect until remaining shares available are
insufficient to grant the options provided hereunder, or until earlier
terminated by action of the Board of Directors. The Board of Directors may amend
the 2004 Plan at any time without shareholder approval, except as required by
applicable law.
The options granted under the 2004 Plan will be nonqualified options
(options which are not Incentive Stock Options within the meaning of Section 422
of the Code) and the grant of such an option will have no income tax
consequences for either the Company or the participant (unless the option is
freely transferable and has a readily ascertainable market value). Upon the
exercise of a stock option by a participant, the participant will recognize
ordinary income and the Company will be entitled to a deduction in an amount
equal to the excess of the fair market value of the Common Stock purchased over
the purchase price. Such ordinary income is not subject to withholding of tax by
the Company. The subsequent sale or exchange of the Common Stock acquired
pursuant to the exercise of an option would generally give rise to capital gain
or loss. Upon the exercise of a unit option by a participant, the participant
will recognize ordinary income and Sun Communities Operating Limited Partnership
will be entitled to a deduction in an amount equal to the excess of the fair
market value of the partnership units purchased over the purchase price. Such
ordinary income is not subject to withholding of tax by Sun Communities
Operating Limited Partnership. The subsequent sale or exchange of the
partnership units acquired pursuant to the exercise of an option would generally
give rise to capital gain or loss.
The 2004 Plan will be approved if it receives the affirmative vote of a
majority of all the votes cast at the Annual Meeting. Abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
result of the vote on the proposal.
THE BOARD RECOMMENDS A VOTE "FOR" THE 2004 PLAN. PROXIES SOLICITED BY THE
BOARD WILL BE VOTED "FOR" THE 2004 PLAN UNLESS INSTRUCTIONS TO WITHHOLD OR TO
THE CONTRARY ARE GIVEN.
MANAGEMENT AND COMPENSATION
EXECUTIVE OFFICERS
The persons listed below are the current executive officers of the Company.
Each is annually appointed by, and serves at the pleasure of, the Board.
NAME AGE OFFICE
---- --- ------
Gary A. Shiffman............... 49 Chairman, Chief Executive Officer and President
Jeffrey P. Jorissen............ 59 Executive Vice President, Treasurer, Chief Financial
Officer and Secretary
Brian W. Fannon................ 55 Executive Vice President and Chief Operating Officer
Jonathan M. Colman............. 48 Executive Vice President
Background information for Gary A. Shiffman is provided under "Election of
Directors," above. Background information for the other three executive officers
is set forth below.
Jeffrey P. Jorissen has been Chief Financial Officer, Secretary and
Treasurer since December 1993 and became an Executive Vice President in March
2003. As a certified public accountant, he was with the international accounting
firm of Coopers & Lybrand for sixteen years, including eight years as a partner.
During his tenure at Coopers & Lybrand, Mr. Jorissen specialized in real estate
and directed financial statement examinations of numerous public companies. Mr.
Jorissen is also the Chief Financial Officer and Secretary of Sun Home Services
and all other corporate subsidiaries of the Company.
Brian W. Fannon joined the Company in May 1994 as Senior Vice
President-Operations and became Chief Operating Officer in 1995 and an Executive
Vice President in March 2003. Prior to joining the
10
Company, he worked for Lautrec, Ltd., then the largest manufactured housing
community owner-operator in the United States, where he was responsible for
operations comprising 25,000 sites and 300 employees, and Quality Homes, Inc.,
its sales and marketing division. He joined that organization in 1978 as a
regional manager and became President in 1986. Mr. Fannon was appointed by
Governor Milliken to the Michigan Mobile Home Commission in 1977, the year of
its inception. Subsequent appointments by Governors Blanchard and Engler have
enabled Mr. Fannon to serve on such commission, including serving as its
chairman from 1986 to 1994, and Mr. Fannon has again been serving as the
chairman of the Michigan Mobile Home Commission since 1998. In 2002, Mr. Fannon
was elected to the Board of Directors of the Manufactured Housing Institute and
Mr. Fannon was elected to the RV/MH Hall of Fame in 2003. Mr. Fannon is also the
Chief Executive Officer of Sun Home Services and a Vice President of all other
corporate subsidiaries of the Company.
Jonathan M. Colman joined the Company in 1994 as Vice
President-Acquisitions and became a Senior Vice President in 1995 and an
Executive Vice President in March 2003. A certified public accountant, Mr.
Colman has over eighteen years of experience in the manufactured housing
community industry. He has been involved in the acquisition, financing and
management of over 75 manufactured housing communities for two of the 10 largest
manufactured housing community owners, including Uniprop, Inc. during its
syndication of over $90 million in public limited partnerships in the late
1980s. Mr. Colman is also a Vice President of all corporate subsidiaries of the
Company.
To the best of the Company's knowledge, there have been no events under any
bankruptcy act, no criminal proceedings and no judgments or injunctions that are
material to the evaluation of the ability or integrity of any executive officer
during the past five years.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid to the Chief Executive
Officer and each executive officer whose remuneration from the Company exceeded
$100,000 during the fiscal year ended December 31, 2003.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION RESTRICTED
------------------------------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) AWARDS ($) COMPENSATION ($)
--------------------------- ---- ---------- --------- ----------- ------------ ----------------
Gary A. Shiffman,.......... 2003 $425,000 0 0 0 $4,000(3)
Chairman, Chief Executive 2002 $401,950 0 0 $2,767,100(1) $4,000(3)
Officer and President 2001 $388,336 $97,085 25,000 $ 933,636(2) $3,400(3)
Jeffrey P. Jorissen,....... 2003 $281,250 0 0 0 $4,000(3)
Executive Vice President, 2002 $271,300 0 0 0 $4,000(3)
Treasurer, Chief 2001 $262,080 $65,520 2,250 $1,263,570(4) $3,400(3)
Financial Officer and
Secretary
Brian W. Fannon,........... 2003 $367,350 0 0 0 $4,000(3)
Executive Vice President 2002 $367,350 0 0 0 $4,000(3)
and Chief Operating 2001 $354,900 $88,725(5) 2,250 $ 660,000(6) $3,400(3)
Officer
Jonathan M. Colman,........ 2003 $151,900 0 0 0 $3,038(3)
Executive Vice President 2002 $146,950 0 0 0 $3,677(3)
2001 $141,960 $36,910 4,000 $ 341,220(7) $2,839(3)
---------------
(1) On July 15, 2002, the Company issued Mr. Shiffman 70,000 shares of Common
Stock, which are subject to the terms and conditions of a Restricted Stock
Award Agreement. 35% of these restricted shares vest on July 15, 2006, 35%
of these shares vest on July 15, 2007, 20% of these shares vest on July 15,
2008, 5% of these shares vest on July 15, 2009 and 5% of these shares vest
on July 15, 2012. As of December 31, 2003, the value of such restricted
shares (as determined in accordance with the rules promulgated by the
11
Securities and Exchange Commission) was $2,709,000. Mr. Shiffman receives
any dividends paid on such restricted shares.
(2) On March 30, 2001, the Company issued Mr. Shiffman 28,292 shares of Common
Stock, which are subject to the terms and conditions of a Restricted Stock
Award Agreement. 35% of these restricted shares vest on March 30, 2005, 35%
of these shares vest on March 30, 2006, 20% of these shares vest on March
30, 2007, 5% of these shares vest on March 30, 2008 and 5% of these shares
vest on March 30, 2011. As of December 31, 2003, the value of such
restricted shares (as determined in accordance with the rules promulgated by
the Securities and Exchange Commission) was $1,094,900. Mr. Shiffman
receives any dividends paid on such restricted shares.
(3) Matching contributions made by the Company under its 401(k) plan.
(4) On March 30, 2001, the Company issued Mr. Jorissen 38,290 shares of Common
Stock, which are subject to the terms and conditions of a Restricted Stock
Award Agreement. 35% of these restricted shares vest on March 30, 2005, 35%
of these shares vest on March 30, 2006, 20% of these shares vest on March
30, 2007, 5% of these shares vest on March 30, 2008 and 5% of these shares
vest on March 30, 2011. As of December 31, 2003, the value of such
restricted shares (as determined in accordance with the rules promulgated by
the Securities and Exchange Commission) was $1,481,823. Mr. Jorissen
receives any dividends paid on such restricted shares.
(5) Mr. Fannon's bonus was paid partially by the Company and partially by Sun
Home Services, Inc.
(6) On March 30, 2001, the Company issued Mr. Fannon 20,000 shares of Common
Stock, which are subject to the terms and conditions of a Restricted Stock
Award Agreement. 35% of these restricted shares vest on March 30, 2005, 35%
of these shares vest on March 30, 2006, 20% of these shares vest on March
30, 2007, 5% of these shares vest on March 30, 2008 and 5% of these shares
vest on March 30, 2011. As of December 31, 2003, the value of such
restricted shares (as determined in accordance with the rules promulgated by
the Securities and Exchange Commission) was $774,000. Mr. Fannon receives
any dividends paid on such restricted shares.
(7) On March 30, 2001, the Company issued Mr. Colman 10,340 shares of Common
Stock, which are subject to the terms and conditions of a Restricted Stock
Award Agreement. 35% of these restricted shares vest on March 30, 2005, 35%
of these shares vest on March 30, 2006, 20% of these shares vest on March
30, 2007, 5% of these shares vest on March 30, 2008 and 5% of these shares
vest on March 30, 2011. As of December 31, 2003, the value of such
restricted shares (as determined in accordance with the rules promulgated by
the Securities and Exchange Commission) was $400,158. Mr. Colman receives
any dividends paid on such restricted shares.
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR-END OPTION/SAR VALUES TABLE
VALUE OF UNEXERCISED
NO. OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED ON ------------------------- -------------------------
EXERCISE IN VALUE NOT NOT
NAME 2003 RECEIVED EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
---- ----------- -------- ----------- ----------- ----------- -----------
Gary A. Shiffman(2)....... 50,000 $935,750 375,000 0 $3,701,313 0
Jeffrey P. Jorissen(3).... 20,000 $401,700 104,750 0 $1,198,364 0
Brian W. Fannon(4)........ 15,000 $255,750 22,250 0 $ 218,320 0
Jonathan M. Colman(5)..... 10,000 $157,494 39,000 0 $ 427,218 0
---------------
(1) Assumes a value equal to the difference between the closing sales price on
December 31, 2003, which was $38.70 per share, and the exercise price of
in-the-money options.
(2) Includes: (a) 25,000 stock options granted March 11, 1996 pursuant to the
Employee Option Plan with an exercise price of $26.625 per share, which
options must be exercised by March 11, 2006; (b) 275,000 stock options
granted October 28, 1996 pursuant to the Employee Option Plan with an
exercise price of
12
$28.6375 per share, which options must be exercised by October 28, 2006; (c)
25,000 stock options granted January 14, 1998 pursuant to the Employee
Option Plan with an exercise price of $33.75 per share, which options must
be exercised by January 14, 2008; (d) 25,000 stock options granted December
15, 1999 pursuant to the Employee Option Plan with an exercise price of
$30.03 per share, which options must be exercised by December 15, 2009; and
(e) 25,000 stock options granted April 12, 2001 pursuant to the Employee
Option Plan with an exercise price of $27.03 per share, which options must
be exercised by April 12, 2011.
(3) Includes: (a) 35,000 stock options granted May 23, 1995 pursuant to the
Employee Option Plan with an exercise price of $22.00 per share, which
options must be exercised by May 23, 2005; (b) 15,000 stock options granted
February 26, 1996 pursuant to the Employee Option Plan with an exercise
price of $27.00 per share, which options must be exercised by February 26,
2006; (c) 22,500 stock options granted October 28, 1996 pursuant to the
Employee Option Plan with an exercise price of $28.6375 per share, which
options must be exercised by October 28, 2006; (d) 20,000 stock options
granted January 14, 1998 pursuant to the Employee Option Plan with an
exercise price of $33.75 per share, which options must be exercised by
January 14, 2008; (e) 10,000 stock options granted December 15, 1999
pursuant to the Employee Option Plan with an exercise price of $30.03 per
share, which options must be exercised by December 15, 2009; and (f) 2,250
stock options granted April 12, 2001 pursuant to the Employee Option Plan
with an exercise price of $27.03 per share, which options must be exercised
by April 12, 2011.
(4) Includes: (a) 10,000 stock options granted February 26, 1996 pursuant to the
Employee Option Plan with an exercise price of $27.00 per share, which
options must be exercised by February 26, 2006; (b) 5,000 stock options
granted October 28, 1996 pursuant to the Employee Option Plan with an
exercise price of $28.6375 per share, which options must be exercised by
October 28, 2006; (c) 5,000 stock options granted January 14, 1998 pursuant
to the Employee Option Plan with an exercise price of $33.75 per share,
which options must be exercised by January 14, 2008; and (d) 2,250 stock
options granted April 12, 2001 pursuant to the Employee Option Plan with an
exercise price of $27.03 per share, which options must be exercised by April
12, 2011.
(5) Includes: (a) 10,000 stock options granted July 18, 1994 pursuant to the
Employee Option Plan with an exercise price of $22.50 per share, which
options must be exercised by July 18, 2004; (b) 7,500 stock options granted
February 26, 1996 pursuant to the Employee Option Plan with an exercise
price of $27.00 per share, which options must be exercised by February 26,
2006; (c) 5,000 stock options granted October 28, 1996 pursuant to the
Employee Option Plan with an exercise price of $28.6375 per share, which
options must be exercised by October 28, 2006; (d) 7,500 stock options
granted January 14, 1998 pursuant to the Employee Option Plan with an
exercise price of $33.75 per share, which options must be exercised by
January 14, 2008; (e) 5,000 stock options granted December 15, 1999 pursuant
to the Employee Option Plan with an exercise price of $30.03 per share,
which options must be exercised by December 15, 2009; and (f) 4,000 stock
options granted April 12, 2001 pursuant to the Employee Option Plan with an
exercise price of $27.03 per share, which options must be exercised by April
12, 2011.
13
EQUITY COMPENSATION PLAN INFORMATION
The following table reflects information about the securities authorized
for issuance under the Company's equity compensation plans as of December 31,
2003. This table does not include the additional shares that may be issuable
under the proposed 2004 Non-Employee Director Option Plan that is the subject of
Proposal Two of this Proxy Statement.
(B) (C)
(A) NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
------------- -------------------- -------------------- -------------------------
Equity compensation plans
approved by shareholders... 723,094 $29.04 364,513
Equity compensation plans not
approved by
shareholders(1)............ 87,657 $32.75 0
------- ------ -------
TOTAL 810,751 $29.44 364,513
======= ====== =======
---------------
(1) On May 29, 1997, the Company established a Long Term Incentive Plan (the
"LTIP") pursuant to which all full-time salaried and full-time commission
only employees of the Company, excluding the Company's officers, are
entitled to receive options to purchase shares of the Company's common stock
at $32.75 per share (i.e., the average of the highest and lowest selling
prices for the common stock on May 29, 1997), on January 31, 2003. In
accordance with the terms of the LTIP, (a) the Company granted the eligible
participants options to purchase 167,918 shares of common stock; and (b)
each eligible participant received an option to purchase a number of shares
of common stock equal to the product of 167,918 and the quotient derived by
dividing such participant's total compensation during the period beginning
on January 1, 1997 and ending on December 31, 2001 (the "Award Period") by
the aggregate compensation of all of the eligible participants during the
Award Period.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
POLICY OF EXECUTIVE OFFICER COMPENSATION
The executive compensation program is administered by the Compensation
Committee of the Board, which is currently comprised of Ted J. Simon, Clunet R.
Lewis and Ronald L. Piasecki. None of the members of the Compensation Committee
are employees of the Company and each of them is an independent director for
purposes of the requirements of the NYSE rules. The executive compensation
program supports the Company's commitment to providing superior shareholder
value. It is designed to attract and retain high-quality executives, to
encourage them to make career commitments to the Company, and to accomplish the
Company's short and long term objectives. The Committee attempts to structure a
compensation program for the Company that will reward its top executives with
bonuses and stock and option awards upon attainment of specified goals and
objectives while striving to maintain salaries at reasonably competitive levels.
The Committee reviews the compensation (including salaries, bonuses and stock
options) of the Company's Chairman and CEO as well as the Company's other
executive officers, administers the Company's incentive and equity based
compensation plans and performs such other duties as may be delegated to it by
the Board. The Committee held two (2) formal meetings during the fiscal year
ended December 31, 2003 and took action pursuant to resolutions adopted by
unanimous written consent.
In reviewing the compensation to be paid to the Company's executive
officers during the fiscal year ended December 31, 2003, the Committee sought to
ensure that executive officers were rewarded for long term strategic management,
for increasing the Company's value for its shareholders, and for achieving
internal goals established by the Board.
The key components of executive officer compensation are salary, bonuses,
restricted stock awards and stock option awards. Salary is generally based on
factors such as an individual officer's level of responsibility,
14
prior years' compensation, comparison to compensation of other officers in the
Company, and compensation provided at competitive companies and companies of
similar size. Bonuses, restricted stock awards and stock option awards are
intended to reward exceptional performances. Benchmarks for determining base
salary and bonus levels include targeted funds from operations levels, strength
of the balance sheet and creation of shareholder value. Restricted stock awards
and stock option awards are also intended to increase an officer's interest in
the Company's long-term success as measured by the market and book value of its
Common Stock. Stock awards may be granted to officers and directors of the
Company and its subsidiaries and to certain employees who have managerial or
supervisory responsibilities under the Company Stock Option Plan. Stock awards
may be stock options, stock appreciation rights, restricted share rights or any
variation thereof.
The Chief Executive Officer makes recommendations to the Compensation
Committee with respect to the compensation of all executive officers. In
addition, the Compensation Committee bases its decisions on the most recent
publicly available compensation data for senior executive officers of comparable
REITs, as well as various compensation studies and surveys, to ensure that
compensation packages are in line with our peer group and the real estate
industry in general. While benchmarks and comparative market data are valuable
tools to assist the Compensation Committee in setting reasonable and fair
compensation for the Company's executive officers, the stated philosophy of the
Company's executive compensation program is to recognize individual
contributions to the performance of the Company and to create a link between the
performance of the Company's stock and executive compensation.
CEO COMPENSATION
During the fiscal year ended December 31, 2003, Gary A. Shiffman served in
the capacity of Chief Executive Officer of the Company. As of December 31, 1996,
the Company entered into an employment agreement with Mr. Shiffman which
governed the salary and bonus paid to Mr. Shiffman during the fiscal year ended
December 31, 2003. Pursuant to this employment agreement (which was amended in
July 2002), Mr. Shiffman was paid a salary of $425,000. Based upon market
studies of pay levels for chief executive officers of publicly traded REITs
(conducted by the National Association of Real Estate Investment Trusts), the
Committee believes that Mr. Shiffman's total compensation in 2003 was
competitive with the appropriate level for his position, particularly in view of
his performance. See "Certain Transactions."
Respectfully submitted,
Members of the Compensation Committee:
Ted J. Simon
Clunet R. Lewis
Ronald L. Piasecki
EMPLOYMENT AGREEMENTS
GARY A. SHIFFMAN
The Company has entered into an employment agreement with Gary A. Shiffman
pursuant to which Mr. Shiffman serves as Chief Executive Officer and President
of the Company. Mr. Shiffman's employment agreement is for an initial term
ending December 31, 2006 and is automatically renewable for successive one year
terms thereafter unless either party timely terminates the agreement. Pursuant
to his employment agreement, commencing January 1, 2003, Mr. Shiffman is paid an
annual base salary of $425,000, which will be increased by an annual cost of
living adjustment beginning with calendar year 2004. In addition to his base
salary and in accordance with the terms of his employment agreement, Mr.
Shiffman is entitled to incentive compensation of up to 50% of his then base
salary in accordance with the incentive compensation formula set forth in the
employment agreement. A copy of Mr. Shiffman's employment agreement is attached
as an exhibit to the Company's periodic filings under the Exchange Act.
The non-competition clauses of Mr. Shiffman's employment agreement preclude
him from engaging, directly or indirectly: (a) in the real estate business or
any ancillary business of the Company during the
15
period he is employed by the Company; and (b) in the manufactured housing
community business or any ancillary business of the Company for a period of
eighteen months following the period he is employed by the Company. However, Mr.
Shiffman's employment agreement does allow him to make passive investments
relating to real estate in general or the housing industry in particular (other
than in manufactured housing communities) during the period he is employed by
the Company.
JEFFREY P. JORISSEN
The Company has entered into an employment agreement with Jeffrey P.
Jorissen pursuant to which Mr. Jorissen serves as Chief Financial Officer of the
Company. Under such employment agreement, the term of Mr. Jorissen's employment
will expire on December 31, 2004 but the term is automatically renewable for
successive one year terms thereafter unless either party timely terminates the
agreement. Pursuant to his employment agreement, Mr. Jorissen must devote his
entire productive time, ability and attention to the Company and, in
consideration for his services, Mr. Jorissen will be paid an annual base salary
of $240,000, which will be increased by an annual cost of living adjustment
beginning with calendar year 2000. In addition to this base salary, Mr. Jorissen
is entitled to incentive compensation of up to 50% of his then base salary in
accordance with the incentive compensation formula set forth in the employment
agreement. A copy of Mr. Jorissen's employment agreement is attached as an
exhibit to the Company's periodic filings under the Exchange Act.
The non-competition clauses of Mr. Jorissen's employment agreement preclude
him from engaging, directly or indirectly, in the real estate business or any
ancillary business of the Company during the period he is employed by the
Company and for a period of eighteen months thereafter.
BRIAN W. FANNON
The Company has entered into employment agreements with Brian W. Fannon
pursuant to which Mr. Fannon serves as Chief Operating Officer of the Company
and Chief Executive Officer of Sun Home Services. Each of Mr. Fannon's
employment agreements is for an initial term of three years ending December 31,
2005 and is automatically renewable for successive one year terms thereafter
unless either party timely terminates the agreement. Pursuant to his employment
agreements, Mr. Fannon must devote his entire productive time, ability and
attention to the Company and Sun Home Services. In consideration for his
services, Mr. Fannon will be paid an annual base salary of $100,000 from the
Company and Mr. Fannon will be paid an annual base salary of $267,000 from Sun
Home Services. In addition to this base salary, Mr. Fannon may be entitled to
incentive compensation of up to 50% of his then base salary in accordance with
an executive bonus plan to be established by the Company. Copies of Mr. Fannon's
employment agreements are attached as exhibits to the Company's periodic filings
under the Exchange Act.
The non-competition clauses of Mr. Fannon's employment agreements preclude
him from engaging, directly or indirectly, in the real estate business or any
ancillary business of the Company during the period he is employed by the
Company and for a period of between twelve and twenty-four months thereafter.
OUTSIDE DIRECTOR COMPENSATION
Directors who are not employees of the Company are entitled to an annual
retainer fee of $35,000. For services during the fiscal year ended December 31,
2003, Ted J. Simon, Paul D. Lapides, Clunet R. Lewis and Ronald L. Piasecki each
earned directors' fees of $35,000. Although Arthur A. Weiss earned director's
fees of $35,000 for services during the fiscal year ended December 31, 2003, he
declined such fees.
16
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Common Stock against the
cumulative total return of a broad market index composed of all issuers listed
on the New York Stock Exchange and an industry index comprised of thirty-three
publicly traded real estate investment trusts, for the five year period ending
on December 31, 2003. This line graph assumes a $100 investment on December 31,
1998, a reinvestment of dividends and actual increase of the market value of the
Company's Common Stock relative to an initial investment of $100. The
comparisons in this table are required by the SEC and are not intended to
forecast or be indicative of possible future performance of the Company's Common
Stock.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG SUN COMMUNITIES, INC.,
NYSE MARKET INDEX AND MG GROUP INDEX
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------
FISCAL YEAR ENDING: 1998 1999 2000 2001 2002 2003
--------------------------------------------------------------------------------
SUN COMMUNITIES,
INC 100.00 96.88 107.63 127.44 132.90 149.78
MG GROUP INDEX 100.00 110.11 145.71 160.35 152.05 192.26
NYSE MARKET INDEX 100.00 109.50 112.11 102.12 83.42 108.07
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Company's capital stock to file reports of ownership and changes of
ownership with the SEC and the New York Stock Exchange. Based solely on its
review of the copies of such reports received by it, and written representations
from certain reporting persons, the Company believes, that during the year ended
December 31, 2003, its directors, executive officers and beneficial owners of
more than 10% of the Company's Common Stock have complied with all filing
requirements applicable to them.
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2004, the shareholdings of:
(a) each person known to the Company to be the beneficial owner of more than
five percent (5%) of the Common Stock; (b) each director of the Company; (c)
each executive officer listed in the Summary Compensation Table; and (d) all
executive officers and directors of the Company as a group, based upon
information available to the Company.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES(1)
------------------------------------ -------------------- ---------------------
Gary A. Shiffman............................... 1,579,149(2) 7.97%
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
Jeffrey P. Jorissen............................ 319,832(3) 1.66%
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
Brian W. Fannon................................ 68,322(4) *
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
Jonathan M. Colman............................. 61,023(5) *
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
Ted J. Simon................................... 19,500(6) *
28470 Thirteen Mile Road
Suite 220
Farmington Hills, Michigan 48334
Paul D. Lapides................................ 16,000(7) *
1000 Chastain Road
Kennesaw, Georgia 30144
Clunet R. Lewis................................ 46,600(8) *
10557 E. Tamarisk Way
Scottsdale, Arizona 85262
Ronald L. Piasecki............................. 262,785(9) 1.36%
PMB 260 101 Washington Street
Grand Haven, Michigan 49417
Arthur A. Weiss................................ 813,073(10) 4.09%
One Woodward Avenue
Suite 2400
Detroit, Michigan 48226
Cohen & Steers Capital Management, Inc.(11).... 2,398,255 12.59%
757 Third Avenue
New York, New York 10017
T. Rowe Price Associates, Inc.(12)............. 1,529,600 8.03%
100 E. Pratt Street
Baltimore, Maryland 21202
Heitman Real Estate Securities, LLC(13)........ 1,036,364 5.44%
191 North Wacker Drive, Suite 2500
Chicago, Illinois 60606
All current executive officers and directors as
a group (9 persons).......................... 3,186,284(14) 15.37%
18
---------------
* Less than one percent (1%) of the outstanding shares.
(1) In accordance with SEC regulations, the percentage calculations are based
on 19,049,999 shares of Common Stock issued and outstanding as of March 31,
2004 plus shares of Common Stock which may be acquired pursuant to options
exercisable, or limited partnership interests in the Operating Partnership
("Common OP Units") that are convertible into Common Stock, within sixty
days of March 31, 2004 by each individual or group listed.
(2) Includes 391,617 Common OP Units convertible into shares of Common Stock
and 375,000 shares of Common Stock which may be acquired pursuant to
options exercisable within sixty days of March 31, 2004. Mr. Shiffman
disclaims beneficial ownership of 3,000 Common OP Units convertible into
shares of Common Stock held by other family members because he does not
have a pecuniary interest therein.
(3) Includes 100,000 Common OP Units convertible into shares of Common Stock
and 104,750 shares of Common Stock which may be acquired pursuant to
options exercisable within sixty days of March 31, 2004. Mr. Jorissen
disclaims beneficial ownership of 10,000 shares of Common Stock held by
other family members because he does not have a pecuniary interest therein.
(4) Includes 20,000 Common OP Units convertible into shares of Common Stock.
(5) Includes 7,500 Common OP Units convertible into shares of Common Stock and
29,000 shares of Common Stock which may be acquired pursuant to options
exercisable within sixty days of March 31, 2004.
(6) Includes 15,500 shares of Common Stock which may be acquired pursuant to
options exercisable within sixty days of March 31, 2004.
(7) Includes 13,000 shares of Common Stock which may be acquired pursuant to
options exercisable within sixty days of March 31, 2004. Includes 2,700
shares of Common Stock held by a corporation in which Mr. Lapides owns a
33% equity interest. Mr. Lapides disclaims beneficial ownership of these
2,700 shares except to the extent of his proportionate pecuniary interest
therein.
(8) Includes 20,000 Common OP Units convertible into shares of Common Stock and
3,000 shares of Common Stock which may be acquired pursuant to options
exercisable within sixty days of March 31, 2004. Mr. Lewis disclaims
beneficial ownership of 5,600 shares of Common Stock held by other family
members because he does not have a pecuniary interest therein.
(9) Includes : (a) 34,874 Common OP Units convertible into shares of Common
Stock and 212,411 Preferred OP Units convertible into Common OP Units
(which are convertible into shares of Common Stock), all of which are
attributable to Mr. Piasecki because of his ownership interests in various
entities; and (b) 15,500 shares of Common Stock which may be acquired
pursuant to options exercisable within sixty days of March 31, 2004.
(10) Includes 6,938 Common OP Units convertible into shares of Common Stock and
15,500 shares of Common Stock which may be acquired pursuant to options
exercisable within sixty days of March 31, 2004. Includes (a) 311,794
Common OP Units convertible into shares of Common Stock and 453,841 shares
of Common Stock held by the Milton M. Shiffman Spouse's Marital Trust for
which Mr. Weiss is a Co-Trustee, and (b) 25,000 shares of Common Stock held
by the 1997 Shiffman Charitable Remainder Unitrust for which Mr. Weiss is a
Co-Trustee. Mr. Weiss does not have a pecuniary interest in either the
Milton M. Shiffman Spouse's Marital Trust or the 1997 Shiffman Charitable
Remainder Unitrust and, accordingly, Mr. Weiss disclaims beneficial
ownership of the 311,794 Common OP Units and 453,841 shares of Common Stock
held by the Milton M. Shiffman Spouse's Marital Trust and the 25,000 shares
of Common Stock held by the 1997 Shiffman Charitable Remainder Unitrust.
(11) According to the Schedule 13G filed with the SEC for calendar year 2003,
Cohen & Steers Capital Management, Inc., in its capacity as investment
advisor, beneficially owns 2,398,255 shares of Common Stock which are held
of record by clients of Cohen & Steers Capital Management, Inc.
(12) According to the Schedule 13G filed with the SEC for calendar year 2003, T.
Rowe Price Associates, Inc., in its capacity as investment advisor,
beneficially owns 1,529,600 shares of Common Stock which
19
are held of record by clients of T. Rowe Price Associates, Inc., including
T. Rowe Price Small-Cap Value Fund, Inc.
(13) According to the Schedule 13G filed with the SEC for calendar year 2003,
Heitman Real Estate Securities, LLC, in its capacity as investment advisor,
beneficially owns 1,036,364 shares of Common Stock which are held of record
by clients of Heitman Real Estate Securities, LLC.
(14) Includes (1) 892,723 Common OP Units convertible into shares of Common
Stock and 212,411 Preferred OP Units convertible into Common OP Units
(which are convertible into Common Stock); and (2) 570,750 shares of Common
Stock which may be acquired pursuant to options exercisable within sixty
days of March 31, 2004.
CERTAIN TRANSACTIONS
RELATIONSHIP WITH ORIGEN
In October 2003, Origen Financial, Inc. completed a $150 million equity
financing. In this transaction, the Company purchased 5,000,000 shares of common
stock (representing approximately one-third of the issued and outstanding shares
of common stock as of December 31, 2003) of Origen Financial, Inc. for $50
million. Gary A. Shiffman, the Chairman of the Board, Chief Executive Officer
and President of the Company currently serves as a director of Origen Financial,
Inc. and Shiffman Origen LLC (an entity owned by Mr. Shiffman, the Estate of
Milton M. Shiffman and members of their family) purchased 1,025,000 shares of
common stock of Origen Financial, Inc. for $10.25 million in the financing
transaction.
LEASE OF PRINCIPAL EXECUTIVE OFFICES
On November 1, 2002, the Company leased approximately 31,300 rentable
square feet of office space from American Center LLC and the Company relocated
its principal executive offices to this office space in the second quarter of
2003. Gary A. Shiffman, together with certain family members, indirectly own
approximately a 21% equity interest in American Center LLC. This lease is for an
initial term of five years and the Company has the right to extend the lease for
an additional five year term. The annual base rent under this lease begins at
$19.25 per square foot (gross) for the first lease year and increases $0.50 per
square foot for each successive year of the initial term.
LOANS TO EXECUTIVE OFFICERS
In 1995, the Company issued Gary A. Shiffman, its Chief Executive Officer
and President, 400,000 shares of common stock for $8,650,000 (the "Purchase
Price"). The Purchase Price is evidenced by three (3) separate 10-year
promissory notes that bear interest at a rate equal to six months' LIBOR plus
175 basis points, with a maximum interest rate of 9% per annum and a minimum
interest rate of 6% per annum (the "Promissory Notes"). Two of the Promissory
Notes (with an initial aggregate principal amount of approximately $7.6 million)
are secured by approximately 270,000 shares of common stock of the Company held
by Mr. Shiffman (the "Secured Shares") and/or 128,000 common partnership units
in Sun Communities Operating Limited Partnership (the "Secured Units") and the
last Promissory Note (with an initial principal amount of approximately $1.0
million) is unsecured but fully recourse to Mr. Shiffman. Mr. Shiffman's
personal liability on the secured Promissory Notes is limited to all accrued
interest on such notes plus fifty percent (50%) of the deficiency, if any, after
application of the proceeds from the sale of the Secured Shares and/or the
Secured Units to the then outstanding principal balance of the Promissory Notes.
The Promissory Notes provide for quarterly interest only payments and provide
that all cash distributions and dividends paid to Mr. Shiffman on the Secured
Shares and the Secured Units (the "Distributions") will first be applied toward
the accrued and unpaid interest under the Promissory Notes and sixty percent
(60%) of the remainder of the Distributions, if any, will be applied toward the
outstanding principal balance of the Promissory Notes.
In April 1997, the Company loaned Mr. Shiffman an additional $2,600,391 on
terms substantially identical to the terms of the other loan to Mr. Shiffman, as
described above, and such loan is secured by
20
80,000 shares of common stock of the Company held by Mr. Shiffman (the
promissory notes evidencing this loan, together with the Promissory Notes, are
hereinafter referred to as the "Shiffman Notes"). On July 15, 2002, the due date
of the Shiffman Notes was extended such that one-third of the principal balance
becomes due on December 31, 2008, an additional one-third of the principal
balance becomes due on December 31, 2009 and the balance of the Shiffman Notes
becomes due on December 31, 2010. The largest aggregate indebtedness outstanding
under the Shiffman Notes since January 1, 2003 was approximately $10,450,000. As
of March 31, 2004, the amount outstanding under the Shiffman Notes was
approximately $10,135,000.
On April 8, 1996, the Company completed a $122.8 million public offering of
4.7 million shares of its common stock (the "Equity Offering"). Jeffrey P.
Jorissen, the Company's Executive Vice President, Treasurer, Chief Financial
Officer and Secretary, purchased shares of common stock in the Equity Offering
at the public offering price of $26.125 per share. This purchase was financed
with a loan from the Company on terms substantially identical to the terms of
our loans to Mr. Shiffman described above. The largest aggregate indebtedness
outstanding under Mr. Jorissen's notes since January 1, 2003 was approximately
$229,000. Mr. Jorissen has repaid, in full, his loan from the Company.
LEGAL COUNSEL
During 2003, the law firm of Jaffe, Raitt, Heuer & Weiss, P.C. acted as the
Company's general counsel and represented the Company in various matters. Arthur
A. Weiss, a director of the Company, is a shareholder of such firm. For its
fiscal year ended January 31, 2004, Jaffe, Raitt, Heuer & Weiss, P.C. received
approximately $1.2 million in fees from the Company and approximately $1.1
million in fees from Origen Financial, Inc. and Origen Financial, L.L.C.
GENERAL INFORMATION
INDEPENDENT PUBLIC ACCOUNTANTS
On July 8, 2003, upon the unanimous recommendation of the Audit Committee,
the Company's Board of Directors decided to engage Grant Thornton LLP effective
immediately as the Company's independent auditor for the fiscal year ending
December 31, 2003, and decided to no longer engage PricewaterhouseCoopers LLP as
the Company's independent auditor. Representatives of Grant Thornton, LLP are
expected to be present at the Annual Meeting, and will have the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions. The Audit Committee has selected Grant Thornton, LLP to serve as the
Company's independent auditors for 2004.
Aggregate fees for professional services rendered by Grant Thornton, LLP,
the Company's independent auditors, for the fiscal year ended December 31, 2003
were as follows:
- Audit Fees: For professional services rendered for the audit of the
Company's 2003 financial statements and the reviews of the quarterly
financial statements -- $160,500;
- Audit-Related Fees: For professional services rendered for accounting
assistance for new accounting standards and potential
transactions -- $22,000;
- Tax Fees: $0; and
- All Other Fees: $0.
21
Aggregate fees for professional services rendered by PricewaterhouseCoopers
LLP for the fiscal years ended December 31, 2003 and December 31, 2002,
respectively, were as follows:
CATEGORY FYE 12/31/2003 FYE 12/31/2002
-------- -------------- --------------
Audit Fees: For professional services rendered for the
audit of the Company's financial statements, the
reviews of the quarterly financial statements,
comfort letters and consents $175,000 $212,500
Audit-Related Fees: For professional services rendered
for accounting assistance with new accounting
standards and potential transactions 0 $ 14,500
Tax Fees 0 0
All Other Fees 0 0
During the Company's fiscal years ended December 31, 2002 and 2001, and the
subsequent interim period through July 8, 2003, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused it
to make reference to the subject matter of such disagreement in their reports on
the financial statements for such years. The reports of PricewaterhouseCoopers
LLP on the Company's financial statements for each of the fiscal years ended
December 31, 2002 and 2001 did not include any adverse opinion or disclaimer of
opinion, or any qualification or modification as to uncertainty, audit scope or
accounting principles.
During the Company's fiscal years ended December 31, 2002 and 2001, and the
subsequent interim period through July 8, 2003, there have been no "reportable
events" (as defined in Item 304(a)(1)(v) of Regulation S-K) involving
PricewaterhouseCoopers LLP.
During the Company's fiscal years ended December 31, 2002 and 2001, and the
subsequent interim period through July 8, 2003, Grant Thornton LLP was not
engaged as an independent accountant to audit the financial statements of the
Company, nor was it consulted regarding the application of accounting principles
to any specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial statements, or any
matter that was the subject of a disagreement or reportable event.
OTHER MATTERS
Management knows of no matters which will be presented for consideration at
the Annual Meeting other than those stated in the Notice of Meeting. However, if
any other matters do properly come before the Annual Meeting, the person or
persons named in the accompanying proxy form will vote the proxy in accordance
with their best judgment regarding such matters, including the election of a
director or directors other than those named in this Proxy Statement should an
emergency or unexpected occurrence make the use of such discretionary authority
necessary, and also regarding matters incident to the conduct of the meeting.
Shareholders are requested to date, sign and return the enclosed proxy in
the enclosed postage-paid envelope. So that the presence, in person or by proxy,
of the holders of a majority of the shares entitled to vote at the meeting may
be assured, prompt execution and return of the proxy is requested.
By Order of the Board of Directors
/s/ Jeffrey P. Jorissen
JEFFREY P. JORISSEN
Secretary
Dated: April 19, 2004
22
APPENDIX A
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
SUN COMMUNITIES, INC.
JANUARY 2004
I. PURPOSE
The Audit Committee is appointed by the Board of Directors (the "Board") to
assist the Board in fulfilling its oversight responsibilities. The Audit
Committee's primary duties and responsibilities include: (a) monitoring (1) the
integrity of the financial statements of Sun Communities, Inc. (the "Company"),
(2) the independent auditor's qualifications and independence, (3) the
performance of the Company's internal audit function and independent auditors,
(4) the compliance by the Company with legal and regulatory requirements; (b)
preparing the report required to be included annually in the Company's proxy
statement as required by the rules of the Securities and Exchange Commission
(the "SEC"); (c) providing an avenue of communication among the independent
auditor, management and the Board; and (d) appointing, overseeing, evaluating
and, if necessary, replacing the independent auditor.
II. COMMITTEE MEMBERSHIP
The Audit Committee shall consist of no fewer than three (3) members, each
of whom shall be a member of the Board, and shall otherwise be independent. The
members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act"), the Sarbanes-Oxley Act of 2002 (the
"SOX Act"), and the rules and regulations of the SEC, as may be interpreted by
the Board in its business judgment. Each member of the Audit Committee must be
financially literate and at least one member of the Audit Committee shall be
determined by the Board to be an "audit committee financial expert" as defined
by the SEC.
The members of the Audit Committee shall be elected by the Board and shall
serve until their successors shall be duly elected and qualified or until their
earlier resignation or removal. Audit Committee members may be removed by the
Board at any time with or without cause. Unless a Chair is elected by the Board,
the members of the Audit Committee may designate a Chair by majority vote of the
full Audit Committee membership.
III. MEETINGS
The Audit Committee shall meet as often as it determines, but not less
frequently than once per fiscal quarter. The Audit Committee shall meet
separately, periodically with the Company's management, its Chief Financial
Officer and controller, and with the Company's independent auditor.
Additionally, the Audit Committee may request that any officer or employee of
the Company, the Company's outside counsel, or the independent auditor attend a
meeting of the Audit Committee, or meet with any members of, or consultants to,
the Audit Committee. The Audit Committee shall report regularly to the Board.
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
A. The following power and authority is delegated to the Audit Committee by
the Board in accordance with the SOX Act, the Exchange Act, and the rules and
regulations promulgated thereunder, and the rules and requirements of the New
York Stock Exchange (the "NYSE"):
1. The Audit Committee shall have the sole authority and
responsibility to select, evaluate and, when warranted, replace the
Company's independent auditor. The Audit Committee shall be directly
responsible for the compensation and oversight of the work of the
independent auditor (including resolution of disagreements between
management and the independent auditor regarding financial
A-1
reporting) for the purpose of preparing or issuing an audit report or
related work. The independent auditor shall report directly to the Audit
Committee.
2. The Audit Committee shall have the authority to approve in advance
all audit services to be provided by the independent auditor. An audit
service within the scope of the engagement approved by the Audit Committee
shall be deemed to be approved in advance.
3. a) The Audit Committee shall have the authority to review and
approve all engagements of the independent auditor to provide permitted
non-audit services that the Audit Committee determines do not impair the
independence of the auditor, either by: (I) pre-approving all permitted
non-audit services (including the fees and terms thereof), subject to the
de minimis exceptions for non-audit services described in Section 10A(i) of
the Exchange Act which are approved by the Audit Committee prior to the
completion of the audit, or (II) developing, implementing and overseeing
policies and procedures for the engagement of the independent auditor to
perform permitted non-audit services based on pre-approved fee levels or
budgeted amounts, which policies and procedures shall be reviewed and
adjusted annually.
b) A permitted non-audit service shall not include any of the
following:
i) Bookkeeping or other services related to the accounting records
or financial statements of the Company;
ii) Financial information systems design and implementation;
iii) Appraisal or valuation services, fairness opinions, or
contribution-in-kind reports;
iv) Actuarial services;
v) Internal audit outsourcing services;
vi) Management services or human resources;
vii) Broker or dealer, investment adviser or investment banking
services;
viii) Legal services and expert services unrelated to the audit;
and
ix) Any other service that is deemed impermissible by rule or
regulation of the SEC or the Public Company Accounting Oversight Board.
The independent auditor is prohibited from providing any of services
listed in this Section 3(b) to the Company.
4. In discharging its oversight role, the Audit Committee has the
power to conduct or to authorize investigations into any matter brought to
its attention with full access to all books, records, facilities and
personnel of the Company, including the independent auditor. The Audit
Committee shall have the resources and authority appropriate to discharge
its duties and responsibilities.
5. The Audit Committee shall have the authority, to the extent it
deems necessary or appropriate, to retain independent legal, accounting or
other advisors.
6. The Audit Committee shall have the authority to establish
procedures to receive and address complaints regarding the Company's
accounting and audit-related matters.
B. In connection with implementing the authority granted to the Audit
Committee herein, the Audit Committee shall have the responsibility and duty, to
the extent the Audit Committee deems necessary or appropriate, to:
1. Financial Statement and Disclosure Matters
a) Review and discuss with management and the independent auditor the
annual consolidated financial statements of the Company, including
disclosures made in Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A"), and the results of the
A-2
independent auditor's audit of the financial statements, and recommend to
the Board whether the audited financial statements should be included in
the Company's Form 10-K.
b) Review and discuss with management and the independent auditor the
Company's quarterly consolidated financial statements prior to the filing
of its Form 10-Q, including the disclosures made in MD&A, the results of
the independent auditor's review of the quarterly financial statements, and
recommend to the Board whether the financial statements should be included
in the Company's Form 10-Q.
c) Discuss with management and the independent auditor significant
accounting and financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements, including:
- any significant changes in the Company's selection or application
of accounting principles;
- any off-balance sheet structures or transactions, their effect on
the financial statements of the Company, and the adequacy of the
disclosure of such off-balance sheet transactions or structures;
- the effect of the use of alternative GAAP measures on the financial
statements, and the adequacy of the disclosures made in relation
thereto;
- any complex or unusual transactions, or other areas requiring the
application of judgments or estimations by management in the
preparation of the Company's financial statements;
- any major issues, significant deficiencies or material weaknesses
as to the adequacy or effectiveness of the Company's internal
control over financial reporting or the Company's disclosure
controls and procedures; and
- any changes or corrective action adopted in light of any problems,
material weaknesses, or significant deficiencies in the Company's
internal control over financial reporting or the Company's
disclosure controls and procedures.
d) Discuss with management the Company's earnings press releases,
including the use of "pro forma" or other non-GAAP information, as well as
financial information and earnings guidance provided to analysts and rating
agencies.
e) Discuss with management the Company's major financial risk
exposures and the steps management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management
policies.
f) On an annual basis, discuss with the independent auditor the
matters required to be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, including any difficulties
encountered in the course of the audit work, any restrictions on the scope
of activities or access to requested information, and any significant
disagreements with management.
g) Review and discuss the disclosures made to the Audit Committee by
the Company's Chief Executive Officer and Chief Financial Officer during
the preparation of their certification for the Form 10-K and Forms 10-Q as
to any significant deficiencies or material weaknesses in the design or
operation of the Company's internal control over financial reporting, and
any fraud involving management or other employees of the Company who have a
significant role in the Company's internal control over financial
reporting.
h) The Audit Committee shall report to the Company's shareholders
annually by preparing the report required under SEC rules and regulations
to be included in the Company's annual proxy statement.
A-3
2. Oversight of the Company's Relationship with the Independent
Auditor
a) Review and approve the terms of the engagement of the independent
auditor, the scope of their audit, and personnel qualifications.
b) Approve in advance all audit services to be provided by the
independent auditor (an audit service within the scope of the engagement
approved by the Audit Committee shall be deemed approved in advance), and
review and approve all engagements of the independent auditor to provide
permissible non-audit services, either in advance of the provisions of such
services, or pursuant to the policies and procedures developed by the Audit
Committee in respect of such services.
c) Evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the auditor's quality
controls are adequate and the provision of permitted non-audit services is
compatible with maintaining the auditor's independence, taking into account
the opinions of management, the Chief Financial Officer and controller.
d) Ensure the rotation of the audit partners as required by the SOX
Act or any rule or regulation promulgated thereunder.
e) Review and evaluate the lead partner of the independent auditor
team.
f) Develop policies for the Company's hiring of employees or former
employees of the independent auditor who participated in any capacity in
the audit of the Company.
g) Obtain and review a report from the independent auditor at least
annually regarding:
- the independent auditor's internal quality-control procedures;
- any material issues raised by the most recent internal
quality-control review, or peer review, of the independent auditor,
or by any inquiry or investigation by governmental or professional
authorities within the preceding five years with respect to one or
more independent audits carried out by the independent auditor;
- any steps taken to deal with any such issues; and
- all relationships between the independent auditor and the Company.
The Audit Committee shall present a copy of this report to the
Board.
h) Review and discuss reports from the independent auditor on:
- All critical accounting policies and practices to be used;
- All alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent auditor; and
- Other material written communications between the independent
auditor and management, such as any management letter or schedule
of unadjusted differences.
i) Discuss with the independent auditor issues raised by management as
to audit quality and consistency.
3. Oversight of the Company's Internal Control and Internal Audit
Function
a) Review and discuss with management and the independent auditor the
adequacy and effectiveness of the Company's internal controls over
financial reporting, and any recommendations of the Company's internal
audit department or the independent auditor.
b) Review with the Company's Chief Executive Officer and Chief
Financial Officer the results of their evaluation of the effectiveness of
the Company's internal control over financial reporting and the
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internal control report prepared by management in connection with the
Company's Form 10-K, pursuant to the SOX Act, the Exchange Act, and the
rules and regulations promulgated thereunder.
c) Discuss with the independent auditor any issues or concerns raised
by the evaluation or the internal control report described in paragraph
3(b) above which may affect the independent auditor's attestation report on
management's internal control over financial reporting.
d) At least annually, discuss with the Company's management and
independent auditor the procedures, responsibilities, activities, staffing,
and organizational structure of the Company's internal audit function, or
the equivalent internal structure which implements the Company's internal
control over financial reporting, and any recommendations in connection
therewith.
4. Compliance Oversight Responsibilities
a) Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
b) Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any published
reports which raise material issues regarding the Company's financial
statements or accounting policies.
c) Discuss with the Company's outside counsel any legal matters,
including material litigation, that may have a material impact on the
financial statements or the Company's compliance policies.
d) Conduct or authorize investigations into any matters within the
scope of the Audit Committee's responsibilities.
e) Report regularly to the Board about Audit Committee activities and
issues that arise with respect to the quality or integrity of the Company's
financial statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the independent auditor,
and the performance of the Company's internal audit function.
f) The Audit Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the Board for
approval.
g) The Audit Committee shall perform other activities related to this
Charter and the authority and responsibility delegated to the Audit
Committee herein, as may be requested by the Board from time to time.
h) The Audit Committee shall annually review the Audit Committee's own
performance.
V. LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
VI. FUNDING
The Company shall provide for appropriate funding, as determined by the
Audit Committee, for payment of: (a) compensation to the independent auditor for
the purpose of rendering or issuing an audit report or performing other audit,
review or attest services or any permitted non-audit services approved pursuant
to Section IV(A)(3) above, (b) compensation to any advisors retained by the
Audit Committee, and (c) ordinary administrative expenses of the Audit Committee
that are necessary or appropriate in carrying out its duties.
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APPENDIX B
SUN COMMUNITIES, INC.
2004 NON-EMPLOYEE DIRECTOR OPTION PLAN
ARTICLE I.
PURPOSE AND ADOPTION OF THE PLAN
1.01 Purpose. The purpose of the Sun Communities, Inc. Non-Employee
Director Stock Option Plan is to attract and retain the services of experienced
and knowledgeable independent directors of Sun Communities, Inc. (the "Company")
and to provide an additional incentive for such directors to continue to work
for the best interests of the Company and its stockholders.
1.02 Adoption and Term. The Plan was approved by the Board on April 16,
2004, subject to approval of the Company's stockholders on or before April 15,
2005, and will remain in effect until all securities authorized under the terms
of the Plan have been issued, unless earlier terminated or abandoned by action
of the Board.
ARTICLE II.
DEFINITIONS
2.01 Annual Option has the meaning described in Section 5.01(a).
2.02 Average Price means the average of the closing sales prices of the
Company Common Stock as quoted on the New York Stock Exchange for the ten (10)
business day period immediately preceding and including June 30th of the year
for which the Performance Option was earned.
2.03 Beneficiary means (a) an individual, trust or estate who or which, by
will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of the Non-Employee Director under the Plan and Option
Agreement upon the Non-Employee Director's death; or (b) an individual, who by
designation of the Non-Employee Director, succeeds to the rights and obligations
of the Non-Employee Director under the Plan and Option Agreement upon the
Non-Employee Director's death.
2.04 Board means the Board of Directors of the Company.
2.05 Code means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section.
2.06 Company means Sun Communities, Inc., a Maryland corporation.
2.07 Company Common Stock means the Common Stock of the Company, par value
$0.01 per share.
2.08 Corporate Transaction means: (a) a dissolution or liquidation of the
Company; (b) a sale of all or substantially all of the Company's assets; or (c)
a merger, consolidation or other capital reorganization of the Company with or
into another entity as a result of which the stockholders of the Company
immediately prior to such transaction hold (either by the voting securities
remaining outstanding or by their being converted into voting securities of the
surviving entity) less than 50% of the total voting power represented by the
voting securities of the Company, or such surviving entity, outstanding
immediately after such transaction.
2.09 Date of Grant means (a) for purposes of the Annual Option, the date
of the annual meeting of the Company's stockholders, and (b) with respect to
Performance Options, March 31(st) of the year following the year for which the
Performance Option was earned.
2.10 Director means a member of the Board of Directors of the Company.
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2.11 Employee means any person, including any officer or Director,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
2.12 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.13 Expiration Date means the date specified in an Option Agreement as
the expiration date of such Award.
2.14 Fair Market Value means, on any given date, the closing price
reported for the Company Common Stock on the New York Stock Exchange or, if no
sales were reported for such date, for the last date preceding such date for
which a sale was reported.
2.15 Non-Employee Director means a Director who is not an Employee.
2.16 Non-Qualified Option means an option which is not an Incentive Stock
Option as described in Section 422 of the Code.
2.17 Option means a Non-Qualified Option granted at any time under the
Plan.
2.18 Option Agreement means a written agreement between the Company (for
itself or in its capacity as the sole general partner of SCOLP) and the
optionholder evidencing the grant of an Option and setting forth the terms and
conditions of the Option.
2.19 Optionee means a Non-Employee Director who receives an Option.
2.20 OP Units means OP Units in SCOLP.
2.21 Parent means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
2.22 Performance Option has the meaning set forth in Section 5.01(b).
2.23 Per Share FFO means, with respect to any fiscal year, the Company's
funds from operations per weighted average number of outstanding shares of
Company Common Stock for such fiscal year, as determined by reference to the
Company's audited financial statements.
2.24 Plan means the Sun Communities, Inc. 2004 Non-Employee Director
Option Plan, as described herein and as it may be amended from time to time.
2.25 Purchase Price, with respect to Options, has the meaning set forth in
Section 5.02.
2.26 Rule 16b-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in effect
and as it may be amended from time to time, and any successor rule.
2.27 SCOLP means Sun Communities Operating Limited Partnership, a Michigan
limited partnership.
2.28 Subsidiary means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
ARTICLE III.
SECURITIES ISSUABLE PURSUANT TO THE PLAN
3.01 Securities Issuable. Shares to be issued under the Plan may be
authorized and unissued shares or issued shares which have been reacquired by
the Company. OP Units to be issued under the Plan may be authorized and unissued
OP Units or issued OP Units which have been reacquired by SCOLP. Except as
provided in Section 3.03, the Options granted under the Plan shall be limited so
that all shares issued upon the exercise of outstanding Options granted under
the Plan (together with all shares of Company Common Stock issuable upon
exchange of OP Units issued upon the exercise of outstanding Options granted
under the Plan) shall never exceed 100,000 shares of Company Common Stock.
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3.02 Securities Subject to Terminated Options. In the event that any
Option at any time granted under the Plan shall be surrendered to the Company,
be terminated or expire before it shall have been fully exercised, then all
shares/OP Units formerly subject to such Option as to which such Option shall
not have been exercised shall be available for any Option subsequently granted
in accordance with the Plan.
3.03 Adjustments to Reflect Capital Changes.
(a) Recapitalization. The number and kind of shares subject to outstanding
Options, the Purchase Price for such shares, and the number and kind of shares
available for Options subsequently granted under the Plan shall be appropriately
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination or classification of Company Common Stock or any other increase or
decrease in the number of issued shares of Company Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." The number and kind of OP Units
subject to outstanding Options, the Purchase Price for such OP Units, and the
number and kind of OP Units available for Options subsequently granted under the
Plan shall be appropriately adjusted to reflect any unit split, reverse unit
split, combination or classification of OP Units or any other increase or
decrease in the number of issued OP Units effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." The Board shall have the power to determine
the amount of the adjustment to be made in each case and the Board's
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or Purchase Price of shares of Company Common Stock subject to an Option.
Except as expressly provided herein, no issuance by SCOLP of partnership units
of any class, or securities convertible into partnership units of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or Purchase Price of OP Units subject to an Option.
(b) Corporate Transactions. In the event of a Corporate Transaction,
outstanding Options may be assumed or equivalent options may be substituted by
the successor corporation or a Parent or Subsidiary thereof (the "Successor
Corporation"). If an Option is assumed or substituted for, the Option or
equivalent option shall continue to be exercisable in accordance with this Plan
for so long as the Optionee serves as a Director or a director of the Successor
Corporation. Following such assumption or substitution, if the Optionee's status
as a Director or director of the Successor Corporation, as applicable, is
terminated other than upon a voluntary resignation by the Optionee, the Option
or option shall become fully exercisable, including as to shares/OP Units for
which it would not otherwise be exercisable. Thereafter, the Option or option
shall remain exercisable in accordance with Section 5.04.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to shares/OP Units for which it would not otherwise be
exercisable. In such event, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 3.03(b), an Option shall be considered
assumed, if at the time of issuance of the stock or other consideration upon
such Corporate Transaction, each Optionee would be entitled to receive upon
exercise of an Option the same number and kind of shares of stock or the same
amount of property, cash or securities as the Optionee would have been entitled
to receive upon the occurrence of such transaction if the Optionee had been,
immediately prior to such transaction, the holder of the number of shares of
Company Common Stock or OP Units subject to the Option at such time (after
giving effect to any adjustments in the number of shares or OP Units covered by
the Option as provided for in Section 3.03(a)); provided, however, that if such
consideration received in the Corporate Transaction is not solely common stock
of the Successor Corporation, the Board may, with the consent of the Successor
Corporation, provide for the consideration to be received upon exercise of the
Option, for each share of Company Common Stock or OP Units subject to the
Option, to be solely common stock of the Successor
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Corporation equal in fair market value to the per share consideration received
by holders of Company Common Stock in the Corporate Transaction.
ARTICLE IV.
PARTICIPATION
4.01 Eligible Individuals. All Non-Employee Directors of the Company
shall be eligible to receive Options under the Plan.
ARTICLE V.
OPTION AWARDS
5.01 Grant of Options. All grants of Options to Non-Employee Directors
under this Plan shall be automatic and non-discretionary and shall be made
strictly in accordance with the following provisions:
(a) Annual Options. Each Non-Employee Director shall automatically
receive a Non-Qualified Option to purchase 1,500 shares of Company Common
Stock or, at the election of a Non-Employee Director, 1,500 OP Units,
subject to adjustment in accordance with Section 3.03 (the "Annual
Option"), on the date of each annual meeting of the Company's stockholders
commencing with the date of the annual meeting at which the Company's
stockholders approve the Plan in accordance with Section 1.02, provided he
or she is then a Non-Employee Director and, as of such date, he or she has
served on the Board for at least six (6) months prior to the date of such
annual meeting. All Options granted under this Section 5.01(a) shall be
evidenced by an Option Agreement.
(b) Performance Options. With respect to each fiscal year of the
Company, each of the Company's Non-Employee Directors that has continuously
served the Company for the entire fiscal year shall automatically receive a
Non-Qualified Option (the "Performance Option") to purchase the following
number of shares of Company Common Stock, or, at the election of a
Non-Employee Director, the following number of OP Units, subject to
adjustment in accordance with Section 3.03:
(i) if Per Share FFO for such fiscal year increased by less than 5%
as compared to Per Share FFO for the previous fiscal year, 0 shares of
Company Common Stock/OP Units;
(ii) if Per Share FFO for such fiscal year increased by 5% or more
but less than 6% as compared to Per Share FFO for the previous fiscal
year, 250 shares of Company Common Stock/OP Units;
(iii) if Per Share FFO for such fiscal year increased by 6% or more
but less than 7% as compared to Per Share FFO for the previous fiscal
year, 500 shares of Company Common Stock/OP Units;
(iv) if Per Share FFO for such fiscal year increased by 7% or more
but less than 8% as compared to Per Share FFO for the previous fiscal
year, 750 shares of Company Common Stock/OP Units;
(v) if Per Share FFO for such fiscal year increased by 8% or more
but less than 9% as compared to Per Share FFO for the previous fiscal
year, 1,000 shares of Company Common Stock/OP Units;
(vi) if Per Share FFO for such fiscal year increased by 9% or more
but less than 10% as compared to Per Share FFO for the previous fiscal
year, 1,250 shares of Company Common Stock/OP Units; or
(vii) if Per Share FFO for such fiscal year increased by 10% or
more as compared to Per Share FFO for the previous fiscal year, 1,500
shares of Company Common Stock/OP Units.
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The Performance Options, if any, shall be granted as soon as possible after
issuance of the Company's audited financial statements. Each Performance Option
shall be evidenced by an Option Agreement.
5.02 Purchase Price of Options. The Purchase Price of each share of
Company Common Stock or OP Unit which may be purchased upon exercise of an
Annual Option granted under the Plan shall be 100% of the Fair Market Value on
the Date of Grant. The Purchase Price of each share of Company Common Stock or
OP Unit which may be purchased upon exercise of any Performance Option granted
under the Plan shall be the Average Price.
5.03 Vesting of Options. No Option may be exercised prior to the date one
(1) year after the Date of Grant. An Option shall become exercisable with
respect to one-third (1/3) of the shares/OP Units on the first anniversary of
the Date of Grant, with respect to an additional one-third (1/3) of the
shares/OP Units on the second anniversary of the Date of Grant and with respect
to the final one-third (1/3) of the shares/OP Units on the third anniversary of
the Date of Grant.
5.04 Duration of Options. Options granted under the Plan shall terminate
after the first to occur of the following events:
(a) Ten years from the Date of Grant.
(b) Three months after the Optionee ceases to be a Director, except in
the case of death, as described in (c) below.
(c) In the event of the death of an Optionee while a Director, the
right to exercise all unexpired Options shall be accelerated and shall
accrue as of the date of death, and the Optionee's Options may be exercised
by his Beneficiary at any time within one year after the date of the
Optionee's death. In the event of the death of an Optionee within the
ninety day period after he or she ceases to be a Director, the Optionee's
Beneficiary may exercise his or her Options, to the extent exercisable on
the date of death, within one year after the date of the Optionee's death.
5.05 Exercise Procedures. Each Option granted under the Plan may be
exercised by written notice to the Company which must be received by the
Secretary of the Company on or before the Expiration Date of the Option. An
Option may not be exercised for a fraction of a share of Company Common Stock or
OP Unit. The Purchase Price of shares/OP Units purchased upon exercise of an
Option granted under the Plan shall be paid by the Optionee at the time of
exercise in the form of (a) cash, (b) check, (c) other shares which (i) have
been owned by the Optionee for more than six (6) months on the date of surrender
and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate Purchase Price of shares purchased upon exercise of the Option, (d)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, (e) any combination of
the foregoing methods of payment, and/or (f) any other consideration or method
of payment as shall be permitted under applicable corporate law.
5.06 Rights as a Stockholder or Partner. The Optionee or any transferee
of an Option pursuant to Section 5.04(c) or Section 5.09 shall have no rights as
a stockholder with respect to any shares of Company Common Stock covered by an
Option until the Optionee or transferee shall have become the holder of record
of any such shares, and no adjustment shall be made for dividends and cash or
other property or distributions or other rights with respect to any such shares
of Company Common Stock for which the record date is prior to the date on which
the Optionee or a transferee of the Option shall have become the holder of
record of any such shares covered by the Option. The Optionee or any transferee
of an Option pursuant to Section 5.04(c) or Section 5.09 shall have no rights as
a partner with respect to any OP Units covered by an Option until the Optionee
or transferee shall have become the holder of record of any such OP Units, and
no adjustment shall be made for distributions and cash or other property or
distributions or other rights with respect to any such OP Units for which the
record date is prior to the date on which the Optionee or a transferee of the
Option shall have become the holder of record of any such OP Units covered by
the Option.
5.07 Plan Provisions Control Option Terms. The terms of the Plan shall
govern all Options granted under the Plan. In the event any provision of any
Option granted under the Plan shall conflict with any term in
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the Plan as constituted on the Date of Grant of such Option, the term in the
Plan as constituted on the Date of Grant of such Option shall control. Except as
provided in Section 3.03, (i) the terms of any Option granted under the Plan may
not be changed after the granting of such Option without the express approval of
the Optionee and (ii) no modification may be made to an Option granted under the
Plan except in compliance with Rule 16b-3.
5.08 Taxes. The Company shall be entitled, if the Company deems it
necessary or desirable, to withhold (or secure payment from the Non-Employee
Director in lieu of withholding) the amount of any withholding or other tax
required by law to be withheld or paid by the Company with respect to any
shares/ OP Units issuable upon exercise of an Option, and the Company may defer
issuance of the stock/OP Units upon exercise unless indemnified to its
satisfaction against any liability for such tax.
5.09 Limitations on Transfer. An Optionee's rights and interest under the
Plan may not be assigned or transferred other than by will or the laws of
descent and distribution. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee may transfer Options to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust for the benefit
of one or more of these individuals. Options so transferred may thereafter be
transferred only to the Optionee who originally received the Options or to an
individual or trust to whom the Optionee could have initially transferred the
Option pursuant to this Section 5.09. Options which are transferred pursuant to
this Section 5.09 shall be exercisable by the transferee according to the same
terms and conditions as applied to the Optionee.
ARTICLE VI.
GENERAL PROVISIONS
6.01 Amendment and Termination of Plan.
(a) Amendment. The Board shall have complete power and authority to amend
the Plan at any time as it deems necessary or appropriate and no approval by the
stockholders of the Company or by any other person, committee or entity of any
kind shall be required to make any amendment; provided, however, that the Board
shall not, without the requisite affirmative approval of stockholders of the
Company, make any amendment which requires stockholder approval under any
applicable law, including Rule 16b-3 or the Code, unless such compliance, if
discretionary, is no longer desired. No termination or amendment of the Plan
may, without the consent of the Non-Employee Director to whom any Option shall
theretofore have been granted under the Plan, adversely affect the right of such
individual under such Option. For the purposes of this section, an amendment to
the Plan shall be deemed to have the affirmative approval of the stockholders of
the Company if such amendment shall have been submitted for a vote by the
stockholders at a duly called meeting of such stockholders at which a quorum was
present and the majority of votes cast with respect to such amendment at such
meeting shall have been cast in favor of such amendment, or if the holders of
outstanding stock having not less than a majority of the outstanding shares
consent to such amendment in writing in the manner provided under the Company's
bylaws.
(b) Termination. The Board shall have the right and the power to terminate
the Plan at any time. If the Plan is not earlier terminated, the Plan shall
terminate when all shares authorized under the Plan have been issued. No Option
shall be granted under the Plan after the termination of the Plan, but the
termination of the Plan shall not have any other effect and any Option
outstanding at the time of the termination of the Plan may be exercised after
termination of the Plan at any time prior to the expiration date of such Option
to the same extent such award would have been exercisable if the Plan had not
been terminated.
6.02 No Right To Continue as Director. Neither the Plan nor any action
taken hereunder shall be construed as giving any Non-Employee Director any right
to be retained as a Director, or to limit in any way the right of the
stockholders of the Company to remove such person as a Director.
6.03 Securities Law Restrictions. The shares of Company Common Stock and
OP Units issuable pursuant to the terms of any Options granted under the Plan
may not be issued by the Company without registration or qualification of such
shares/OP Units under the Securities Act of 1933, as amended, or under
B-6
various state securities laws or without an exemption from such registration
requirements. Unless the shares/ OP Units to be issued under the Plan have been
registered and/or qualified as appropriate, the Company shall be under no
obligation to issue shares of Company Common Stock or OP Units upon exercise of
an Option unless and until such time as there is an appropriate exemption
available from the registration or qualification requirements of federal or
state law as determined by the Company in its sole discretion. The Company may
require any person who is granted an award hereunder to agree with the Company
to represent and agree in writing that if such shares are issuable under an
exemption from registration requirements, the shares/ OP Units will be
"restricted" securities which may be resold only in compliance with applicable
securities laws, and that such person is acquiring the shares/OP Units issued
upon exercise of the Option for investment, and not with the view toward
distribution.
6.04 General Restriction. Notwithstanding anything to the contrary
herein, the Company shall have no obligation or liability to deliver any shares
of Company Common Stock or OP Units under the Plan or to make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws, rules and regulations, including, without
limitation, the Securities Act of 1933, as amended, and the Exchange Act.
6.05 Non-Exclusivity of the Plan. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock, OP Units or options
otherwise than under the Plan.
6.06 Captions. The captions (i.e., all section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
6.07 Severability. Whenever possible, each provision in the Plan and
every Option at any time granted under the Plan shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Option at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Option at any time granted under the Plan shall remain
in full force and effect.
6.08 Choice of Law. All determinations made and actions taken pursuant to
the Plan shall be governed by the laws of Michigan and construed in accordance
therewith.
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SUN COMMUNITIES, INC.
c/o EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] PLEASE MARK | ZSUNC1
VOTES AS IN | 3373
THIS EXAMPLE. |______
----------------------------------------------------
1. Election of Directors. SUN COMMUNITIES, INC.
(01) CLUNET R. LEWIS ----------------------------------------------------
(02) ARTHUR A. WEISS
FOR AGAINST ABSTAIN
2. 2004 Non-Employee [ ] [ ] [ ]
Director Option Plan.
3. The appointed proxies are authorized to vote
FOR [ ] [ ] WITHHOLD upon all matters incidental to the conduct of
ALL FROM ALL the Annual Meeting and such other business as
NOMINEES NOMINEES may properly come before the Annual Meeting
in accordance with their best judgment.
FOR
ALL
EXCEPT [ ]
-----------------------------------------------
(INSTRUCTION: To withhold authority to vote for
any individual nominee, write that nominee's
name in the space provided above.)
Mark box at right if an address change or [ ]
comment has been noted on the reverse side
of this card.
Please be sure to sign and date this Proxy.
Shareholder Co-owner
sign here:__________________________________ Date:________________ sign here: ____________________________ Date: ________________
SUN COMMUNITIES, INC.
Dear Shareholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are issues related to the management and operation of the Corporation that
require your immediate attention and approval. These are discussed in detail in
the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then, sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, May 20,
2004.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Sun Communities, Inc.
[3373 - SUN COMMUNITIES, INC.] [FILE NAME: ZSUNC2.ELX] [VERSION - (2)]
[04/15/04] [ORIG. 04/15/04]
ZSUNC2
DETACH HERE
SUN COMMUNITIES, INC.
27777 FRANKLIN ROAD, SUITE 2000
SOUTHFIELD, MICHIGAN 48034
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON MAY 20, 2004
The undersigned hereby appoints Gary A. Shiffman and Arthur A. Weiss, or either
of them, as attorneys and proxies of the undersigned shareholder, with full
power of substitution, to vote of behalf of the undersigned and in his or her
name and stead, all shares of the common stock of Sun Communities, Inc. (the
"Company") which the undersigned would be entitled to vote if personally
present at the Company's Annual Meeting of Shareholders to be held at the
Embassy Suites, 28100 Franklin Road, Southfield, Michigan 48034 on Thursday, May
20, 2004, and at any adjournments thereof.
The undersigned shareholder acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement dated April 19, 2004.
The giving of this Proxy does not affect the right of the undersigned
shareholder to vote in person should the undersigned shareholder attend the
Annual Meeting. This Proxy may be revoked at any time before it is voted.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH
PROPOSAL.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OF AMERICA.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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