As filed with the Securities and Exchange Commission on September 15, 1999
Registration No. 333-13571
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 5 TO
FORM S-11
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CHARTHOUSE SUITES VACATION OWNERSHIP, INC.
(Exact name of registrant as specified in governing instrument)
250 PATRICK BOULEVARD
BROOKFIELD, WISCONSIN 53045
(414) 792-9200
(Address of principal executive offices)
Jeffrey L. Keierleber
c/o Charthouse Suites Vacation Ownership, Inc.
250 Patrick Boulevard
Brookfield, Wisconsin 53045
(414) 792-9200
(Name and address of agent for service)
Copy to:
Conrad G. Goodkind, Esq.
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 277-5000
CALCULATION OF REGISTRATION FEE
/* WordPerfect WARNING - Table Must Be Modified For EDGAR Compliance */
<TABLE>
<ROW>
<CELL>Title of Securities
being registered
<CELL>Amount
being
registered
<CELL>Proposed maximum offering price per Interest
<CELL>Proposed maximum aggregate offering price
<CELL>Amount of registration fee
<ROW>
<CELL>Vacation Interests Classes A-F, with Rental Pool Arrangement
<CELL>150 Interests, with Rental Pool Arrangement
<CELL>$18,500 (A) - $60,000 (F)
<CELL>$4,248,000
<CELL>$1,288*
*Fee of $1,273 paid with the filing of Form S-11 on October 7, 1996 and the
balance of the filing fee was paid on July 28, 1997.<PAGE> Approximate date
of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act Registration Statement Number of the earlier
effective Registration Statement for the same offering.&WP4-38;
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement Number of the earlier effective Registration Statement
for the same offering.&WP4-38;
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box.&WP4-38;
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine. If the filing fee is calculated
pursuant to Rule 457(o) under the Securities Act, only the title of the class
of securities to be registered, the proposed maximum aggregate offering price
for that class of securities and the amount of registration fee need to appear
in the Calculation of Registration Fee table. Any difference between the
dollar amount of securities registered for such offerings and the dollar
amount of securities sold may be carried forward on a future Registration
Statement pursuant to Rule 429 under the Securities Act.
<PAGE>CHARTHOUSE SUITES VACATION OWNERSHIP, INC.
Cross Reference Sheet
Showing location in Prospectus of information required to be included in
Prospectus in response to items of Form S-11.
Item Number and Caption Heading in Prospectus
1.Forepart of Registration Statement and Outside Cover Page of Prospectus
Front Cover Page of Prospectus
2.Inside Front and Outside Back Cover Pages of Outside Back Cover of
Prospectus
Prospectus
3. Summary Information, Risk Factors and Ratio Summary; Risk Factors
of Earnings to Fixed Charges
4. Determination of Offering Price Determination of Offering Price
5. Dilution Not Applicable
6. Selling Security Holders Not Applicable
7. Plan of Distribution Plan of Distribution
8. Use of Proceeds Use of Proceeds
9. Selected Financial Data Management's Discussion and Analysis of
Financial Condition and Results of Operation
10. Management's Discussion and Analysis of Management's Discussion
and Analysis of
Financial Condition and Results of Operations Financial Condition and
Results of Operations
11. General Information as to Registrant The Company
12. Policy with Respect to Certain Activities The Company
13. Investment Policies of Registrant The Company
14. Description of Real Estate Description of The Chart House Suites
Hotel
15. Operating Data Chart House Results
16. Tax Treatment of Registrant and its Security Certain Federal
Income Tax Considerations;
Holders Certain Florida Tax Matters
<PAGE>17. Market Price of and Dividends on the Registrant's Not applicable
Common Equity and Related Stockholder Matters
18. Description of Registrant's Securities The Interests
19. Legal Proceedings Legal Matters
20. Security Ownership of Certain Beneficial Owners
and Management Management
21. Directors and Executive Officers Management
22. Executive Compensation Management
23. Certain Relationships and Related Transactions Conflicts of
Interest of Management and
Affiliates
24. Selection, Management and Custody of Registrant's
Conflicts of Interest of Management and
Investments Affiliates
25. Policies with Respect to Certain Transactions Conflicts of
Interest of Management and
Affiliates
26. Limitations of Liability The Interests
27. Financial Statements and Information Financial Statements and
Related Information
28. Interest of Named Experts and Counsel Experts
29. Disclosure of Commission Position on Liability and Indemnification
of Officers
Indemnification for Securities Act Liabilities and Directors<PAGE>
SUPPLEMENT #2
SUPPLEMENT DATED SEPTEMBER 15, 1999
TO PROSPECTUS DATED OCTOBER 17, 1997.
CHARTHOUSE SUITES VACATION OWNERSHIP, INC.
This Supplement No. 2 should be read in conjunction with the Prospectus
dated October 17, 1997, and where the Supplement and the Prospectus conflict,
this Supplement (as amended by any later supplements) shall control.
Capitalized, but undefined, terms have the meaning set forth in the
Prospectus.
STATUS OF OFFERING
To date two Charthouse Suites Vacation Interests, with Rental Pool
Arrangement (the "Interests") have been sold and the proceeds are currently
held in escrow.
GUARANTEED RENTAL ARRANGEMENT OR CASH DISCOUNT PROGRAM
As an incentive to early purchasers of the Interests, Holders may elect
to receive guaranteed rental payments, at varying rates for each Class of
Interest, for their Unit Weeks for a specified number of weeks. Under this
guaranteed rental arrangement, Holders who purchase prior to April 1, 1999 may
designate six Unit Weeks and receive a guaranteed rental rate for the Unit
Week. Holders purchasing between April 1, 1999 and June 30, 1999 may
designate four Unit Weeks and receive a guaranteed rental rate. Holders
purchasing between July 1, 1999 and September 30, 1999 may designate two Unit
Weeks. Holders purchasing after September 30, 1999 are not eligible to
participate in this guaranteed rental arrangement. The guaranteed rental rate
paid under this arrangement is a walk-in, nightly off-season rate that has
been arbitrarily selected by the Company and is set forth at page 39 of the
Prospectus. See "Guaranteed Rental Agreement" for a description of the arrangem
ent, the guaranteed rates and certain conditions. The guaranteed rental
arrangement must be exercised by October 17, 2002.
In lieu of the guaranteed rental arrangement, early Holders may elect to
receive a cash discount to the subscription price by surrendering rights to
the guaranteed rental arrangement. Holders purchasing between April 1, 1999
and June 30, 1999 may elect to receive a 3% discount from the purchase price
of an Interest. Holders purchasing between July 1, 1999 and September 30,
1999 may elect to receive a 1-1/2% discount from the purchase price of an
Interest. Holders purchasing after September 30, 1999 may not participate in
this cash discount program. See "Guaranteed Rental Arrangement."
NO MINIMUM
There is no requirement that any minimum number of Interests be sold in
the offering. However, if fewer than 76 Interests are sold by October 1,
1999, the Company has the right to cancel the Interests upon the repayment of
the paid subscription amount to the Holders, less amounts for certain payments
or benefits received by the Holder. See "Plan of Distribution" for a
description. The 76 Interest minimum was arbitrarily selected by the
Company. If the Interests are canceled, a written notice on or before
November 30, 1999, will be sent to all Holders. With that notice, Holders
will receive the net amount of any refund and an accounting of that
calculation as to benefits. The sole shareholder of the Company, Jeffrey
Keierleber, has agreed to invest additional funds in the Company if it is
necessary in order to repay any such amounts. Affiliates of the Company may
purchase Interests without limitation as to amount. See "Plan of
Distribution."
HOTEL
Upon purchase of the Chart House Hotel, the Company will own both the
hotel (described on pages 17-18 of the prospectus) and the attached marina.
The marina will not be part of the rental pool and its results are not
described below or in the prospectus.
On June 30, 1997, the Company entered into an agreement to acquire the
Hotel and marina from Decade Properties, Inc. for approximately $1.8 million.
The purchase is contingent upon the offering achieving the sale of the 76
interests. Decade Properties, Inc. will provide financing for the whole
purchase price of approximately $1.8 million through an unsecured demand note
payable with interest only payable monthly at 8% and the anticipated net
proceeds raised in the offering will be used by the Company to pay the note on
the Hotel.
The following is updated performance results as if the Rental Pool had
been operating for the periods set forth below.
Revenue from the Chart House Hotel, which the Company intends to
purchase, for the six month period ended June 30, 1999 is not necessarily
indicative of the results that may be expected for the year ended December 31,
1999 because of the seasonal nature of the hotel operations.
DERIVED AVERAGE UNIT WEEK RENTAL REVENUE
For
the Six Months
Ended
June 30, 1999 For the Years Ended December 31
1998 1997
1996 1995
Rental Income (Actual) $251,387
$410,252 $457,495 $465,244 $328,232
Pro Forma Rental Pool Fee (5%) (12,569)
(20,513) (22,875) (23,262) (16,412)
Pro Forma Net Rental Revenue (95%) $238,818 $389,739
$434,620 $441,982 $311,820
Number of Unit Weeks
26 52 52
52 52
Number of Hotel Suites
25 25 25
25 25
Pro Forma Average Unit Week Rental
Revenue $
367 $ 300 $ 334 $ 340 $ 240
RENTAL POOL
PRO FORMA STATEMENT OF RENTAL POOL REVENUES
(UNAUDITED)
For
the Six Months
Ended
June 30, 1999 For the Years Ended December 31
1998 1997
1996 1995
Rental Income (Actual) $251,387
$410,252 $457,495 $465,244 $328,232
Less Property Management Fee (5.0%) (12,569)
(20,513) (22,875) (23,262) (16,412)
Total Revenues $238,818
$389,739 $434,620 $441,982 $311,820
*Other income (i.e. interest income, vending income and telephone income) is
not included in the pro forma computation of rental pool revenues because all
such income generated shall not be included in the rental pool. Other income
shall be used to the expenses of the Chart House Hotel, thereby reducing the
amount of expense to be assessed in the annual dues. The above example
assumes that 100% of the Unit Weeks are placed into the rental pool at all
times and such income will be distributed to Rental Pool participants under
that assumption.
ALLOCATION OF RENTAL POOL REVENUES ON AVERAGE AMONG
CLASSES OF INTERESTS
(Unaudited)
Pro
Forma
Off For the
Total Season
Daily Six
Number Annual Nightly Gross Months
of Rental Walk-
Potential Ended
Rooms/ Days Per In Rental
June 30, For the Years Ended December 31,
Suites Class Rate
Income 1999 1998
1997 1996 1995
Class A 6 2,190 $70 $420
$ 42,056 $ 68,633 $ 76,537 $ 77,833
$ 54,912
Class B 4 1,460 $75 $300
$ 30,040 $ 49,024 $ 54,669 $ 55,595
$ 39,223
Class C 6 2,190 $85 $510
$ 51,068 $ 83,341 $ 92,938 $ 94,512
$ 66,679
Class D 6 2,190 $120 $720 $
72,096 $117,657 $131,206 $133,428 $
94,134
Class E 2 730 $130 $260
$ 26,035 $ 42,487 $ 47,380 $ 48,183
$ 33,993
Class F 1 365 $175 $175
$ 17,523 $ 28,597 $ 31,890 $ 32,431
$ 22,880
25 9,125
$2,385 $238,818 $389,739 $434,620
$441,982 $311,821
PRO FORMA DISTRIBUTIONS PER INTEREST FOR EACH CLASS OF INTERESTS
(AVERAGE INCLUDING OTHER INCOME)
Class
Total
Per Interest
For
the Years Ended December 31,
For the Years Ended December 31,
For the
Six
For
the
Months
Number Six Months 1998
1997 1996 1995 Ended
of Ended (48 Unit
(48 Unit (48 Unit (48 Unit June 30,
Interests June 30, 1999 Weeks)
Weeks) Weeks) Weeks) 1999 1998
1997 1996 1995
Class A 36 $ 42,056 $ 63,354 $
70,649 $ 71,846 $ 50,688 $1,168 $1,760
$1,962 $1,996 $1,408
Class B 24 $ 30,040 $ 45,253 $
50,464 $ 51,319 $ 36,206 $1,252 $1,886
$2,103 $2,138 $1,509
Class C 36 $ 51,068 $ 76,930 $
85,789 $ 87,242 $ 61,549 $1,419 $2,137
$2,383 $2,423 $1,710
Class D 36 $ 72,096 $108,606
$121,114 $123,164 $ 86,893 $2,003 $3,017
$3,364 $3,421 $2,414
Class E 12 $ 26,035 $ 39,219 $
43,735 $ 44,476 $ 31,378 $2,170 $3,268
$3,645 $3,706 $2,615
Class F 6 $ 17,523 $ 26,397 $
29,437 $ 29,936 $ 21,120 $2,921 $4,400
$4,906 $4,989 $3,520
150 $238,818 $359,759
$401,188 $407,983 $287,834
CERTAIN OCCUPANCY INFORMATION
The following unaudited information sets forth the financial results and
percentage occupancy for the six months ended June 30, 1999, and for the years
ended December 31, 1998, 1997, 1996 and 1995, respectively.
CHART HOUSE SUITES HOTEL
RESULTS BY CLASS OF INTERESTS
For the Six
Months Ended
June
30, For the Years
Ended December 31,
Average Occupancy
1999 1998
1997 1996 1995
Class A
61%
67% 71% 77%
63%
Class B
58%
54% 63% 69%
58%
Class C
55%
64% 63% 69%
51%
Class D 53%
41% 38%
45% 38%
Class E
58%
59% 58% 61%
59%
Class F*
70%
76% 80% 91%
97%
All Units
58%
60% 66% 65%
54%
The occupancy levels presented above have been adjusted to eliminate the
effect of the hotel studios and suites that were not available for rent
because they were deposited with the RCI Exchange Program.
Average Unit Week Rental Amount
(Collected)
Class A $284
$232 $258 $263 $185
Class B $304
$248 $277 $281 $198
Class C $345
$281 $314 $319 $225
Class D $486
$397 $443 $450 $318
Class E $527
$430 $480 $488 $344
Class F* $709
$579 $646 $656 $463
*Primarily rented on a monthly basis in 1995 and 1996.
See the Form 10-KSB for year ended December 31, 1998 and the Form 10-QSB
for the period ended June 30, 1999, which are attached to the Supplement and inc
orporated by reference hereby for additional information and the audited
financial statements.<PAGE>PROPERTY MANAGEMENT FEE
Effective November 1, 1999, the Company anticipates amending its Property
Management Agreement with Decade Properties, Inc. to provide that the monthly
fee will be $2,500 a month (such fee to increase by CPI index increase on the
first of each year beginning January 1, 2000). Prior to the amendment, the
fee was $2,500 a month increased by the CPI index increase on the first of
each year beginning January 1, 1998.
<PAGE>PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 30. Other Expenses of Issuance and Distributions
Set forth below is a current estimate of the approximate amount of the fees
and expenses (other than sales commissions) payable by the Registrant in
connection with the issuance and distribution of the Interests:
<ROW>
<CELL>Type of Fee
<CELL>Amount
<ROW>
<CELL>Registration Fee
<CELL>$ 1,288
<ROW>
<CELL>NASD Filing Fee
<CELL>750
<ROW>
<CELL>Florida Time Share Filing Fee
<CELL>2,400
<ROW>
<CELL>Printing (estimate)
<CELL>18,000
<ROW>
<CELL>Legal Fees (estimate)
<CELL>247,000
<ROW>
<CELL>Accounting Fees (estimate)
<CELL> 75,000
<ROW>
<CELL>Blue Sky Fees and Expense (estimate)
<CELL>5,000
<ROW>
<CELL>Marketing Expenses (estimate)
<CELL>100,000
<ROW>
<CELL>Miscellaneous (estimate)
<CELL> 6,562
<ROW>
<CELL>Total
<CELL>$456,000
Item 31. Sales to Special Parties
None.
Item 32. Recent Sale of Unregistered Securities
The Company has sold 100 shares of stock to Jeffrey Keierleber, in April,
1996, as part of its organizational activities that were exempt from
registration, pursuant to Regulation D and Section 4(2) of the Securities Act
of 1933, as amended.
Item 33. Indemnification of Director and Officers
The Company's Officers and Director are, and will be, indemnified to the
fullest extent permitted under Florida law, against certain liabilities,
pursuant to the Articles and Bylaws of the Company and certain indemnification
agreements to be entered into with the Company, and the Articles and Bylaws
require the Company to indemnify the Director and Officers, among others,
against claims and liabilities and reasonable expenses actually incurred by
them in connection with any such claim or liability by reason of their
services in those or other capacities, unless it is established that the act
or omission of the director or officer was material to the matter giving rise
to the proceeding and was committed in bad faith, or was the result of active
and deliberate dishonesty, or the director or officer actually received an
improper personal benefit, or in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission
was unlawful.
The Company will enter into indemnification agreements with each of the
Company's officers and the director. The indemnification agreements will
require, among other things, that Charthouse indemnify its Director and
Officers to the fullest extent permitted by law and advance to the director
and officers all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Under these
agreements, Charthouse also must indemnify and advance all expenses incurred
by the officers and the director seeking to enforce their rights under the
indemnification agreement and cover the officers and the director under the
Company's liability insurance, if any. Although the form of indemnification
agreement offers substantially the same scope of coverage afforded by
provisions in the Articles and Bylaws, it provides greater assurance to the
director and officers that indemnification will be available because, as a
contract, it cannot be modified unilaterally in the future by the director or
to eliminate the rights it provides.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors
or officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Securities and Exchange Commission (the "Commission"), such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Item 34.Treatment of Proceeds from Interests being Registered
Not Applicable.
Item 35.Financial Statements and Exhibits
A.Financial statements included in the Prospectus and incorporated herein by
reference to section titled "Financial Statements and Related Information."
B.Exhibits - see exhibit index on pages following signature page of this
Registration Statement, which index is incorporated herein by reference.
Item 36.Undertakings
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the Plan of
Distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) That all post-effective amendments shall comply with the applicable
forms, rules and regulations of the Commission in effect at the time such
post-effective amendments are filed.
(4) To remove from registration by means of a post-effective amendment
any of the Interests being registered which remain unsold at the termination
of the offering.
(b) The Company undertakes to send to each Holder at least on an annual
basis a detailed statement of any transactions with the Company and its
affiliates, and of fees, commissions, compensation and other benefits paid, or
accrued to the Company and its affiliates for the calendar year completed,
showing the amount paid or accrued to each recipient and the services
performed.
(c) The Company undertakes to provide to the Holders the financial
statements required by Form 10-K for the first full fiscal year of operations
of Company and to send to Holders, within 45 days after the close of each
quarterly fiscal period, the information specified by the Form 10-Q, if such
report is required to be filed with the Commission.
(d) The Company undertakes to file a sticker supplement pursuant to Rule
424(c) under the Act during the distribution period describing each property
not identified in the Prospectus at such time as there arises a reasonable
probability that such property will be acquired and to consolidate all such
stickers into a post-effective amendment filed at least once every three
months, with the information contained in such amendment provided
simultaneously to the existing Holders. Each sticker supplement should
disclose all compensation and fees received by the Company and its affiliates
in connection with any such acquisition. The post-effective amendment shall
include audited financial statements meeting the requirements of Rule 3-14 of
Regulation S-X only for properties acquired during the distribution period.
(e) The Company also undertakes to file, after the end of the
distribution period, a current report on Form 8-K containing the financial
statements and any additional information required by Rule 3-14 of Regulation
S-X, to reflect each commitment (i.e., the signing of a binding purchase
agreement) made after the end of the distribution period involving the use of
10% or more (on a cumulative basis) of the net proceeds of the offering and to
provide the information contained in such report to the Holders at least once
each quarter after the distribution period of the offering has ended.
(f) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to the Company and its affiliates and
controlling persons of Company pursuant to the foregoing provisions, or
otherwise, Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the even that a claim for
indemnification against such liabilities (other than the payment by Company of
expenses incurred or paid by a Company and its affiliates or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such Company and its affiliate or controlling
person in connection with the securities being registered, Company will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on an amendment to Form S-11 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, the City of Brookfield, State of
Wisconsin, on September 15, 1999.
CHARTHOUSE SUITES VACATION OWNERSHIP, INC.
By /s/ Jeffrey L. Keierleber
Jeffrey L. Keierleber
Pursuant to the requirements of the Securities Act of 1933 this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated above.
/s/ Jeffrey L. Keierleber
Jeffrey L. Keierleber
<PAGE>CHARTHOUSE SUITES VACATION OWNERSHIP, INC.
* * * * *
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM S-11
/* WordPerfect WARNING - Table Must Be Modified For EDGAR Compliance */
<ROW>
<CELL>Exhibit
Number
<CELL>Description
<ROW>
<CELL>1.1
<CELL>Form of Underwriting Agreement**
<ROW>
<CELL>1.2
<CELL>Form of Soliciting Dealer Agreement**
<ROW>
<CELL>3.1
<CELL>Specimen of Certificates for Interests (not applicable)**
<ROW>
<CELL>3.2
<CELL>Charthouse Suites Vacation Ownership, Inc. Articles of Incorporation**
<ROW>
<CELL>3.3
<CELL>Charthouse Suites Vacation Ownership, Inc. By-laws**
<ROW>
<CELL>4.1
<CELL>Subscription and Purchase Agreement (attached as an Annex and filed
herewith)**
<ROW>
<CELL>4.2
<CELL>Form of License Plan (attached as an Annex and filed herewith)**
<ROW>
<CELL>4.3
<CELL>Rules and Regulations for Chart House Suites Hotel (attached as an
Annex)**
<ROW>
<CELL>4.4
<CELL>Time Share Public Offering Statement**
<ROW>
<CELL>5.1
<CELL>Opinion re: Legality of Interests**
<ROW>
<CELL>8.1
<CELL>Tax Opinion**
<ROW>
<CELL>10.1
<CELL>Property Management Agreement**
<ROW>
<CELL>10.2
<CELL>Form of Non-Disturbance and Notice to Creditors**
<ROW>
<CELL>10.3
<CELL>Form of Guaranteed Rental Arrangement Agreement**
<ROW>
<CELL>10.4
<CELL>RCI Agreement**
<ROW>
<CELL>10.5
<CELL>Schedule of Weeks (attached as an Annex)**
<ROW>
<CELL>10.6
<CELL>Escrow Agreement between William Atkinson and Charthouse Suites Vacation
Ownership, Inc.**
<ROW>
<CELL>10.7
<CELL>Form of Non-Exclusive Easement**
<ROW>
<CELL>10.8
<CELL>Form of Private Letter Ruling Request**
<ROW>
<CELL>10.9
<CELL>Form of Revised IRS Private Letter Ruling Request, dated July 16, 1997**
<ROW>
<CELL>10.10
<CELL>Real Estate Sales and Purchase Agreement**
<ROW>
<CELL>10.11
<CELL>Personal Property Purchase and Subscription Agreement**
<ROW>
<CELL>10.12
<CELL>Escrow Agreement**
<ROW>
<CELL>10.13
<CELL>Quit Claim Deed**
<ROW>
<CELL>10.14
<CELL>Form of Letter Withdrawing IRS Private Letter Ruling Request, dated
September 9, 1997**
<ROW>
<CELL>10.15
<CELL>Ernst & Young LLP letter dated October 3, 1997**
<ROW>
<CELL>10.16
<CELL>Artistic Renderings (attached as an Annex)**
<ROW>
<CELL>10.17
<CELL>Amended Property Management Agreement**
<ROW>
<CELL>23.1
<CELL>Consent of Quarles & Brady LLP (included in Exhibits 5.1 and 8.1)**
<ROW>
<CELL>23.2
<CELL>Consent of Virchow, Krause & Company, LLP
**Previously filed
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated September 8, 1997 (except for Note 7 as to which the
date is October 15, 1997), January 9, 1997, February 17, 1998, and March 18,
1999, in Post-Effective Amendment No. 5 to the Registration Statement (Form
S-11 No. 333-13511) and related prospectus of Charthouse Suites Vacation
Ownership, Inc. for the Registration of 150 vacation ownership interests.
VIRCHOW, KRAUSE & COMPANY, LLP
Waukesha, Wisconsin
September 15, 1999
150 Charthouse Suites Vacation Interests,
with Rental Pool Arrangement
Holders of Charthouse Suites Vacation Interests, with Rental Pool
Arrangement (the "Interests") have the rights and responsibilities
set forth in the Charthouse Suites Vacation License Plan (the
"License Plan"), including the right to rent or use a certain
studio or suite category in the Chart House Suites hotel in
Clearwater Beach, Florida, for two weeks of every Spring, Summer,
Fall and Winter in each year until December 31, 2040. See "The
Interests."
The Interests are transferable, although the sale, assignment or
transfer of partial Interests is subject to certain restrictions
and the consent of Charthouse Suites Vacation Ownership, Inc.
(the "Company"). See "The Interests--Transferability of
Interests." There is no minimum subscription amount. See
"Plan of Distribution." Funds will be escrowed for at
least 10 days pursuant to Chapter 721, Florida Statutes,
and available for refund upon cancellation during that period;
otherwise, there are no arrangements to place any
proceeds in escrow, trust or a similar arrangement.
SEE "RISK FACTORS" AT PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
_________________________________________________________________
In addition to the other matters discussed in the Prospectus, a
potential purchaser should consider:
> There is a lien or lien right against each Interest to
secure the payment of assessments or other fees for the use,
maintenance, upkeep, operation or repair of the Chart House
Suites hotel and the License Plan. An Interest Holder's failure
to make these payments will result in cancellation of the Interest
and the right to use the Unit Weeks. See "Annual Dues and Special
Assessments."
> The Company has the right to retain control of the
License Plan, even after a majority of the Interests have been
sold, although Holders by majority vote will have the right to
approve certain increases in annual dues or special assessments.
See "The Interests."
> If purchasing solely for personal use, the purchase of an
Interest should be based upon its value as a vacation experience
or for spending leisure time, and not considered for purposes of
acquiring an appreciating investment, or with an expectation that
the Interest may be resold. See "The Interests."
> The IRS has informally indicated that Interests will
constitute a "dwelling unit" within the meaning of Section
280A and the use of Interests held by other Holders (perhaps,
only other Holders of the same class of Interests) would be
aggregated with the use by a Holder, with the result that even
a Holder who nuver uses an Interest for personal purposes would,
nevertheless, have othertwise ddeductible expenses reduced by
Section 280A for tax purposes. See "Certain Federal Income
Tax Considerations."
> An investor can cancel his purchase without any penalty
or obligation within ten days from the date of signing the
contract, and until ten days after receiving the Time Share
Public Offering Statement, whichever is later. See "License
Payment Options."
> If fewer than 76 Interests are sold by October 31, 1998,
Company has the right to cancel the underlying licenses and return
the entire paid subscription amount, reduced by certain payments
and benefits received, to Holders.
> The Company and its affiliates will have several conflicts
of interest in connection with transactions contemplated hereby.
See "Conflicts of Interest of Management and Affiliates."
Substantial compensation and fees will be received by the Company
and its affiliates from the sale of the Interests and the
operation of the Chart House Suites hotel. See "Management" and
"Decade Properties, Inc."
> Pursuant to Chapter 721, Florida Statutes, the purchase
of an Interest includes a right to cancel if the accommodations
or facilities are no longer available. The License Plan
contemplates that Chart House Suites hotel may not be available
from time to time in order to maintain, repair or update the
Units. In such event, and on an interim basis, the Company will
obtain, at its own expense, equivalent accommodations for a
purchaser.
> Any resale of the Interest must be accompanied by certain
disclosures in accordance with Section 721.065, Florida Statutes.
See "The Interests" and the Time Share Public Offering Statement.
> This Prospectus and the related Time Share Public
Offering Statement attached as Annex C contain important matters
to be considered in acquiring an Interest. The statements
contained herein are only summary in nature. A prospective
purchaser should refer to the referenced annexes, exhibits and
the License Plan. You should not rely upon oral representations
as being correct. Refer to this document and accompanying
annexes and exhibits for correct representations other than those
contained in the contract and this Prospectus.
> Under the Internal Revenue Code of 1986, as amended,
deductions for expenses incurred in connection with the Rental Pool
will depend upon the particular factual circumstances of a Holder
and may be limited. See "Certain Federal Income Tax Considerations"
and "Certain Florida Tax Matters."
> There is no market for the Interests being offered, and no
Public market is expected to develop as a result of this Offering.
There can be no assurance that the Interests can be resold for
the offering price, if at all. Accordingly, Interests should be
purchased only as a long-term investment since Holders may not be
able to sell the Interests in the event of an emergency, or for
any other reasons, and must also commit to pay certain annual
dues and special assessments, if any. See "Summary -- Annual
Dues and Special Assessments."
_________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_________________________________________________________________
<CAPTION>
Per
Interest
Price to the
Sales Proceeds to
Public
Commissions(1) the Company(2)
<S> <C>
<C> <C>
A Class - Standard Studio (36 Interests) $ 18,500 $
1,295 $ 17,205
B Class - King Bed Studio (24 Interests) $ 21,500 $
1,505 $ 19,995
C Class - Large Studio (36 Interests) $ 25,500 $
1,785 $ 23,715
D Class - 1 Bedroom Suite (36 Interests) $ 36,500 $
2,555 $ 33,945
E Class - 1 Bedroom Suite (With lanai)
(12 Interests) $ 39,500 $
2,765 $ 36,735
F Class - Penthouse - (6 Interests) $ 60,000 $
4,200 $ 55,800
Total Maximum Offering (150 Interests) $4,248,000
$297,360 $3,950,640
/TABLE
<PAGE>
(1) The Company has agreed to indemnify the Underwriter and
broker-dealers who are selling the Interests on a best
efforts basis against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
See "Plan of Distribution."
(2) Before deducting offering expenses payable by the Company
estimated at $361,000.
_________________________________________________________________
Decade Securities Corp.
As of the date of this Prospectus, Interests are only
available for offer and sale in the States of Florida and
Wisconsin.
The date of this Prospectus is October 17, 1997.
Until January 17, 1998, all dealers effecting transactions in the
Interests, whether or not participating in this distribution, may
be required to deliver a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus when acting as
Underwriter.
No dealer, salesperson or any other person has been
authorized to give any information or make any representations
other than those contained in this Prospectus and supplemental
literature authorized by the Company and referred to in this
Prospectus, and, if given or made, such information and
representations must not be relied upon. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such offer. Neither the
delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has
been no change in the affairs of the Company since the respective
dates at which information is given herein, or the date hereof.
However, if any material change in the affairs of the Company
shall occur during the time when a copy of this Prospectus is
required to be delivered, the Company will amend or supplement
this Prospectus to reflect such change.
<PAGE>
<PAGE>
TABLE OF CONTENTS
(The Annexes and Glossary of Terms Constitute
a Part of the Prospectus)
Page
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 12
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF THE CHART HOUSE SUITES HOTEL. . . . . . . . . . 18
THE INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . 20
CHART HOUSE RESULTS. . . . . . . . . . . . . . . . . . . . . . 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . 25
CERTAIN RENTAL POOL FINANCIAL INFORMATION. . . . . . . . . . . 30
CERTAIN OCCUPANCY INFORMATION. . . . . . . . . . . . . . . . . 34
ANNUAL DUES AND SPECIAL ASSESSMENTS. . . . . . . . . . . . . . 34
DIFFERENCES IN ALLOCATING RENTAL POOL AND ANNUAL DUES
AND SPECIAL ASSESSMENTS. . . . . . . . . . . . . . . . . . . . 36
PRO FORMA RESULTS WITH VARIOUS ASSUMED OCCUPANCY LEVELS. . . . 38
GUARANTEED RENTAL ARRANGEMENT. . . . . . . . . . . . . . . . . 42
LICENSE PAYMENT OPTIONS. . . . . . . . . . . . . . . . . . . . 44
SUMMARY OF INCOME AND COSTS TO HOLDERS . . . . . . . . . . . . 44
DETERMINATION OF OFFERING PRICE. . . . . . . . . . . . . . . . 46
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . 47
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 47
HOW TO SUBSCRIBE . . . . . . . . . . . . . . . . . . . . . . . 48
SUMMARY OF PROMOTIONAL AND SALES MATERIAL. . . . . . . . . . . 48
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . 49
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 49
DECADE PROPERTIES, INC.. . . . . . . . . . . . . . . . . . . . 51
CONFLICTS OF INTEREST OF MANAGEMENT AND AFFILIATES . . . . . . 51
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS. . . . . . . . . . . 52
CERTAIN FLORIDA TAX MATTERS. . . . . . . . . . . . . . . . . . 65
PRIOR PERFORMANCE OF JEFFREY KEIERLEBER AND AFFILIATES . . . . 68
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS. . . . 77
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 77
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
FINANCIAL STATEMENTS AND RELATED INFORMATION . . . . . . . . .F-1
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . .F-2
ANNEX A - CHARTHOUSE SUITES VACATION LICENSE PLAN . . . Annex A-1
ANNEX B - RULES AND REGULATIONS FOR CHART HOUSE
SUITES HOTEL . . . . . . . . . . . . . . . . . . . . . .Annex B-1
ANNEX C - TIME SHARE PUBLIC OFFERING STATEMENT . . . . .Annex C-1
ANNEX D - SUBSCRIPTION AGREEMENT . . . . . . . . . . . .Annex D-1
ANNEX E - SCHEDULE OF WEEKS. . . . . . . . . . . . . . .Annex E-1
ANNEX F - ANNUAL DUES BUDGET INFORMATION . . . . . . . .Annex F-1
ANNEX G - ANNEX G ARTISTIC RENDERINGS. . . . . . . . . .Annex G-1
<PAGE>
<PAGE>
SUMMARY
Charthouse Suites Vacation Interests
with Rental Pool Arrangement
The following Summary is qualified in its entirety by
reference to the more detailed information contained elsewhere in
this Prospectus and the glossary of terms (the "Glossary"),
annexes and exhibits which are attached. Capitalized terms used,
but not defined in this Summary, are defined elsewhere in this
Prospectus, including the Glossary and annexes. Prospective
purchasers are urged to read and evaluate this Prospectus and the
Glossary, annexes and exhibits in their entirety. This
Prospectus contains forward-looking statements which involve
risks and uncertainties. The Charthouse Rental Pool's actual
results may differ significantly from the results discussed in
the Prospectus. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk
Factors."
Charthouse Suites Vacation Ownership, Inc., a Florida
corporation (the "Company"), hereby offers (the "Offering") Class
A, Class B, Class C, Class D, Class E and Class F Interests
(collectively, hereafter, the "Interests") for sale to investors.
The purchaser of an Interest (a "Holder") will have the right to
rent or use for two specific and consecutive weeks of every
Spring, Summer, Fall and Winter season in each year until
December 31, 2040, a category of studio or suite (collectively,
referred to as "suite") in the Chart House Suites hotel located
in Clearwater Beach, Florida. A Holder will receive rental
income from the rental of the suite through the Charthouse Rental
Pool, or upon 30 days notice to the Company, have the right to
withdraw and use one or more of the eight weeks ("Unit Weeks")
each year, or join RCI and utilize the RCI Exchange Program to
exchange Unit Weeks at the Chart House Suites hotel for vacation
weeks at approximately 2,000 RCI affiliated resorts located
around the world. No level of income from the Rental Pool is
guaranteed. See "Charthouse Results" and "Certain Charthouse
Rental Pool Financial Information."
The Interests The 150 Interests are vacation licenses issued
pursuant to the Charthouse Suites Vacation
License Plan ("Licnese Plan") which consist
of 36 A Interests for $18,500 each, 24 B
Interests for $21,500 each, 36 C Interests
for $25,500 each, 36 D Interests for $36,500
each, 12 E Interests for $39,500 each and
six F Interests for $60,000 each. Each class
of Interests entitles a Holder to rental
proceeds from the Charthouse Rental Pool or,
upon request, use of a corresponding Class of
Unit Weeks in the Chart House Suites hotel.
In addition to the purchase price of the
Interests, Holders are required to pay
annual dues and, if any, special assessments
associated with the hotel operations. See
"The Interests."
Chart House Suites The Chart House Suites hotel is a four-story
Hotel hotel located on Clearwater Bay at 850 Bayway
Boulevard, Clearwater Beach, Florida 34630.
The hotel consists of 25 suites and features
a heated swimming pool, attached marina
(which is separately owned and operated by
the Company and which will not be part of the
Charthouse Rental Pool), laundry room, and
access to white sand beaches, recreation,
dining, nightlife and shopping. See
"Description of the Chart House Suites
Hotel."
Rights of Holders Pursuant ot the License Plan, Holders of the
Interests will acquire a license right to
rent or use Unit Weeks corresponding to
a certain category of a suite in the Chart
House Suites hotel. See "The Company." Holders
will not acquire an ownership or equity
interest in the Company or the Resort Facility.
A Interests Rights The ownership of A Interests allows a Holder
use of a standard studio (with private
bathroom) overlooking the marina and
Clearwater Bay for two weeks in each season
until December 31, 2040. The A Interest
studios are approximately 360 square feet and
contain two queen-sized beds with room for up
to four adults. See "The Interests."
B Interests Rights The ownership of B Interests allows a Holder
use of a king bed studio (with private
bathroom) overlooking the marina and
Clearwater Bay for two weeks in each season
until December 31, 2040. The B Interest
studios are approximately 360 square feet and
contain a king-sized bed with room for up to
two adults. See "The Interests."
C Interests Rights The ownership of C Interests allows a Holder
use of a large studio (with private bathroom)
overlooking the marina and Clearwater Bay or
the southern exposure for two weeks in each
season until December 31, 2040. The C
Interest studios are approximately 430 square
feet and contain two queen-sized beds with
room for up to four adults. See "The
Interests."
D Interests Rights The ownership of D Interests allows a Holder
use of a large one-bedroom suite (with
private bathroom) overlooking the marina and
Clearwater Bay or the swimming pool or
southern exposure for two weeks in each
season until December 31, 2040. The D
Interest suites are approximately 638 to 869
square feet and contain two queen-sized beds
with room for up to four adults. See "The
Interests."
E Interests Rights The ownership of E Interests allows a Holder
use of a large one-bedroom suite (with
private bathroom and a lanai) with a view of
the marina and Clearwater Bay for two weeks
in each season until December 31, 2040. The
E Interest suites are approximately 815 to
982 square feet and contain two queen-sized
beds with room for up to four adults. See
"The Interests."
F Interests Rights The ownership of F Interests allows a Holder
use of a two-bedroom penthouse suite, with a
fully equipped kitchen, living room, den,
dining room, two full baths (one with a
jacuzzi) and a large balcony overlooking the
Charthouse marina and Clearwater Bay for two
weeks in each season until December 31, 2040.
The F Interest suite is approximately 1,875
square feet and has two queen-sized and one
king-sized beds with room for up to six
adults. See "The Interests."
Unit Weeks Retained Because each Interest has the right to eight
by Company Unit Weeks in each year, and there are 52 or
53 weeks in a year, four Unit Weeks (or five
Unit Weeks in certain years where there are
53 weeks in a year) of each suite shall
remain the property of the Company.
Therefore, the Company will have 100 (or, in
certain years, 125) Unit Weeks annually and
be responsible for the annual dues and
special assessments, if any, arising from
those retained Unit Weeks, as well as the
right to income from the Charthouse Rental
Pool or exchange in the RCI Exchange Program
for those Unit Weeks. See "The Interests."
The dates of the Unit Weeks that will be
retained by the Company are shown in Annex E.
License Rights The licensee rights obtained by a Holder upon
purchase of the Interests are set forth in
the License Plan and the Rules and
Regulations for Chart House Suites Hotel,
which are set forth as Annexes A and B,
respectively. See "The Interests" for a
summary of the terms of the License Plan.
Payment of Purchase Holders may pay for the Interests either in
Price cash upon subscription or pay in installments
over part of the License term. If paying by
installment, a minimum of 30% of the purchase
price is due upon acceptance of a
Subscription Agreement (after any applicable
cash discounts). All initial subscription
payments will be placed in escrow for at
least 10 days, during which time the money
will be held and purchasers will have a right
to rescind their investment. Under the
installment payment program, the remaining
balance on the Interest will be payable in up
to 360 monthly installments before the first
day of each month, and the unpaid balance on
each license payment increases by up to 9%
annually (which has the effect of up to 9%
interest on the unpaid balance). See
"License Payment Options."
If a Holder pays on the installment method
with a 9% rate and the minimum down payment
of 30% (exclusive of any discounts, including
discounts for early purchases), the following
amounts would be due:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Total Total
Payments Payment
Total For Per Rental Day
of
All Interest (if Interest is
Monthly Per Paid In
30% Down Maximum
Payments Rental Full At Time
Offering Payment Balance Monthly (Over
360 Total Total Day (43 Of
Class Price Due Due Payment
Months) Interest Payments Years)* Subscription)*
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
A $18,500 $5,550 $12,950 $104.20
$37,511.51 24,561.51 $43,061.51 $17.88 $7.68
B 21,500 6,450 15,050 121.10
43,594.45 28,544.45 50,044.45 20.78 8.93
C 25,500 7,650 17,850 143.63
51,705.05 35,855.05 59,355.05 24.65 10.59
D 36,500 10,950 25,550 205.50
74,009.19 48,459.19 84,959.19 35.28 15.16
E 39,500 11,850 27,650 222.48
80,092.14 52,442.14 91,942.14 38.18 16.40
F 60,000 18,000 42,000 337.94
121,658.94 79,658.94 139,658.94 58.00 24.92
</TABLE>
<PAGE>
* Assumes purchase as of January 1, 1998 and
use over the entire term and for the column
assuming financing the financing as shown in
the above table with the minimum down
payment.
For details, see "License Payment Options."
A Holder who chooses to make installment
payments must be current on all monthly
licensing payments and annual dues and, if
any, special assessments, in order to rent,
use or exchange the Unit Weeks. If not
current on all payments, a Holder will
forfeit all rights to the Unit Weeks, and if
such default continues for more than six
months or if there are more than three
defaults of any duration, the Company may
reacquire and cancel the Interest, pursuant
to the terms of the License Plan. Upon
cancellation for failure to pay, a Holder
will have no further rights to use or rent of
suites in the Chart House Suites hotel or
refund for past amounts paid. A purchaser
will be liable for all amounts due under the
License Plan, unless the Interest is
reacquired by the Company and canceled. See
"License Payment Options."
Charthouse Rental Each Unit Week will automatically be placed
Pool in the Rental Pool, but upon 30 days written
notice to the Company, a Holder may withdraw
any or all of the Holder's allotted Unit
Weeks from the Rental Pool. Unless otherwise
permitted by the Company, a Holder may only
withdraw entire Unit Weeks from the Rental
Pool. Under the Rental Pool, Charthouse will
attempt to rent the suite to others on a
daily or other basis, and the Holder will
share pro rata (utilizing various rental pool
allocations for each Class of Interests) in
the rentals of all Unit Weeks that are placed
in the Rental Pool.
Under the License Plan, Holders of Interests
who participate in the Rental Pool will
receive income based upon ratios developed by
the Company. The ratios are based upon the
Company's assumed off-season nightly walk-in
rate for each Class of suites and upon the
actual number of Unit Weeks of each Class
that are participating in the Rental Pool.
The assumed walk-in nightly rental rates
represent the Company's estimate of
approximate suite rental value rates for each
Class of Interests and are fixed for all
Rental Pool allocations until December 31,
2040. These rates, however, have been
determined arbitrarily. Because Holders may
personally use the Interests or exchange them
in RCI's Exchange Program rather than leaving
them in the Rental Pool, actual participation
rental percentages will vary each Unit Week.
Assuming every Interest remains in the Rental
Pool, the following allocation percentages
would apply:
<PAGE>
<TABLE>
<CAPTION>
Off Total %
Number Season
Gross Total % Per
of Number Nightly Potential Total
% Per Unit Interest (8
Studios/ of Walk-in Daily Total %
Per Week (52 Unit
Suites Interests Rate Revenue Per Class
Suite Weeks) Weeks)
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
A 6 36 $70 $420 17.6101%
2.9350% 0.0564% 0.4515%
B 4 24 $75 $300 12.5786%
3.1447% 0.0605% 0.4838%
C 6 36 $85 $510 21.3836%
3.5639% 0.0685% 0.5483%
D 6 36 $120 $720 30.1887%
5.0314% 0.0968% 0.7741%
E 2 12 $130 $260 10.9015%
5.4507% 0.1048% 0.8386%
F 1 6 $175 $175 7.3375%
7.3375% 0.1411% 1.1289%
25 150 $2,385 100.000%
/TABLE
<PAGE>
If the Rental Pool had been operating for the
past three years and all Unit Weeks remained
in the Rental Pool for all Unit Weeks, the
following results (average among all Unit
Weeks in each class), after deduction of the
5% Rental Pool fee would have been:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
For the Year
Ended November 30,
For the Nine Months Ended
1996 1995 1994
August 31, 1997 (Average
of (Average of 39
Unit
39 Unit Weeks Among 52
Unit Weeks Among 52
Unit
Weeks in a Year on a
Per Weeks in a
Year on a
Interest Basis)* (Eight Unit Weeks) (Eight
Unit Weeks) Per Interest Basis*)
<S> <C> <C>
<C> <C>
Class A $1,692
$2,007 $1,466 $331
Class B $1,812
$2,151 $1,571 $354
Class C $2,054
$2,437 $1,781 $401
Class D $2,900
$3,441 $2,514 $567
Class E $3,142
$3,728 $2,723 $614
Class F $4,229
$5,018 $3,666 $826
/TABLE
<PAGE>
* Depending upon the schedule, Holders would have between 4 and
6 Unit Weeks during this period. This amount is the average of
all Unit Weeks.
See "Certain Financial Charthouse Rental Pool
Information" for more information as to the
assumptions utilized in the above
calculations.
For managing the Rental Pool there is a fee
payable to Decade Properties, Inc., an
affiliate of the Company, equal to 5% of
the Rental Pool revenue. Under the License
Plan, annual dues will reimburse Decade
Properties, Inc. for its actual costs
for operating the Rental Pool, even if a
Holder does not use the Rental Pool. The
Company intends to place its retained Unit
Weeks in the Rental Pool, although it
reserves the right to use or exchange the
Unit Weeks in the RCI Exchange Program. If
all interests have been sold, the Company
will annually have 100 Unit Weeks in
the Rental Pool and, after consideration
of the 5% fee, would have earned
approximately $28,818 for the nine months
ended August 31, 1997 (arising from 75 Unit
Weeks), and approximately $34,196, $24,982
and $5,631 for the years ended November 30,
1996, 1995 and 1994, respectively (with 100
Unit Weeks, annually except for the year
ended Movenber 30, 1994 which included
62 Unit Weeks in the partial year). See
"The Interests."
The Company The Charthouse Suites Vacation Ownership,
Inc.'s offices are at 250 Patrick Blvd.,
Suite 140, Brookfield, Wisconsin 53045-5864,
Telephone 414-792-9200. The Company is
owned by Jeffrey Keierleber, who is also
the sole director and President of the
Company. Affiliates of the Company owned
by Jeffrey Keierleber will provide management
and consulting services to the Company
and administer the Rental Pool, pursuant
to agreements with the Company. See
"The Company."
Decade Decade Properties, Inc., an affiliate of the
Properties, Company, provides property management and
Inc. Rental Pool services pursuant to an agreement
with the Company. Decade Properties, Inc. is
owned by Jeffrey Keierleber and has provided
property management services to various
entities since 1980. As the property manager,
it will receive $2,500 a month (increasing
annually by annual CPI increases), plus
all expenses payable from annual dues. See
"Decade Properties, Inc." Additional
background information concerning Decade
Properties, Inc. is enclosed in the
Prospectus. See "Decade Properties, Inc."
and "Conflicts of Interest of Management and
Affiliates."
Guaranteed Rental As an incentive to early purchasers, Holders
Arrangement or may elect to receive guaranteed rental
Cash Discount payments, at varying rates for each Class,
Program for their Unit Weeks for a specified number
of weeks. Under this guaranteed rental
arrangement, Holders who purchase prior to
April 17, 1998 may designate six Unit Weeks
and receive a guaranteed rental rate.
Holders purchasing between April 18, 1998 and
July 17, 1998 may designate four Unit Weeks
and receive a guaranteed rental rate.
Holders purchasing between July 18, 1998 and
October 17, 1998 may designate two Unit
Weeks. Investors purchasing after
October 17, 1998 are not eligible to
participate in this guaranteed rental
arrangement. The guaranteed rental rate paid
under this arrangement is a walk-in, nightly
off-season rate that has been arbitrarily
selected by the Company. See "Guaranteed
Rental Agreement" for a description of the
arrangement, the guaranteed rates and certain
conditions.
In lieu of the guaranteed rental arrangement,
early Holders may elect to receive a cash
discount to the subscription price by
surrendering rights to the guaranteed rental
arrangement. Holders purchasing before April
17, 1998 may elect to receive a 5% discount
from the purchase price of an Interest.
Holders purchasing between April 17, 1998 and
July 17, 1998 may elect to receive a 3% cash
discount from the purchase price of an
Interest. Holders purchasing between July
18, 1998 and October 17, 1998 may elect to
receive a 1-1/2% discount from the purchase
price of an Interest. Investors purchasing
after October 18, 1998 may not participate in
this cash discount program. See "Guaranteed
Rental Arrangement."
Annual Dues Holders will be responsible for a
and Special proportionate share of the annual maintenance
Assessments and other related costs, expenses and
reserves of the Chart House Suites hotel.
For the year ended December 31, 1997 and
1998, the dues for each Unit Week of the
Interests (each Interest has eight Unit
Weeks) will be $190 for Class A Interests,
$190 for Class B Interests, $205 for Class C
Interests, $285 for Class D Interests, $305
for Class E Interests and $365 for Class F
Interests. The amount of annual dues
thereafter will be set by the Company based
upon the expenses of operating the hotel and
the Rental Pool and providing services, and
will be proportionately allocated to Holders
as set forth in the License Plan, and cannot
increase annually by more than 10% of the
prior year's dues (exclusive of the allocable
percentage of the property tax and insurance)
without an affirmative vote of Unit Weeks
representing a majority of the Interests.
The License Plan provides for special
assessments under limited circumstances, which
would be assessed in order to fund any
capital deficits. In connection with a vote
for increases in annual dues or special
assessments, the Company will vote the Unit
Weeks for the unissued Interests or the
Unit Weeks for canceled Interests and will
be responsible for its proportionate share
of such costs. Until a majority of Unit
Weeks are held by Holders, the Company may
approve increases, without limitation. See
"Annual Dues and Special Assessments."
Failure to Pay The License Plan provides that a Holder must
Annual Dues and pay his or her pro rata annual dues (and, if
Special applicable, special assessments) prior to
Assessments renting or using the Unit Week or exchanging
them in the RCI Exchange Program. If a
Holder has not paid his or her share of
annual dues or special assessments, if any,
the Company will have the right to use, rent
through the Rental Pool, or exchange the Unit
Weeks and retain all of the proceeds, if any,
and such income received by the Company, if
any, will not reduce the amount of annual
dues (and special assessments, if any) owed
by the Holder. See "Annual Dues and Special
Assessments."
RCI Membership As of the date of this Prospectus, Holders
and Exchange may enroll in the RCI Exchange Program, upon
Program payment of membership fees to RCI. Upon
purchase of an Interest, the Company will pay
the costs of a Holder's one year membership
in RCI and any initiation fees. The RCI
Exchange Program allows members to deposit
one or more Unit Weeks and request an
exchange for a comparable week or weeks at
another participating resort located around
the world. Under the RCI Exchange Program, a
Holder deposits a Unit Week up to 24 months
in advance and requests an exchange to an
RCI-affiliated resort. As of the date of
this Prospectus, there are approximately
2,000 RCI-affiliated resorts around the
world. Under this program a Holder may
exchange Unit Weeks, whether or not the
deposited Unit Week is used by another RCI
member.
As of the date of this Prospectus, the cost
of membership in RCI is $74 for one year,
$135 for two years, $199 for three years and
$315 for five years. In addition, and as of
the date of this Prospectus, RCI charges a
$103 exchange fee ($135 for international
exchanges) for each Unit Week exchanged
through the RCI Exchange Program. Under the
terms of the RCI Exchange Program, a Holder
must have paid his or her annual dues (and
special assessments, if any) for the Unit
Week and, if paying for the Interest on an
installment basis, the Interest installment
payment associated with the deposited Unit
Week in order to utilize the RCI Exchange
Program.
The RCI Exchange Program is not affiliated
with the Company or any affiliate of the
Company (other than through a contractual
agreement, which expires on August 15, 2002).
The Company assumes no liability or
responsibility to RCI's Exchange Program or
performance. RCI has informed Charthouse
that all of the Unit Weeks will be considered
"red" weeks under the terms of its RCI
Exchange Program, the seasonal designation
indicating greatest member demand, although
it reserves the right to change the
designation or adopt a new or different
system of designation. See "The Interests-
Use Options."
Management of The Company will be responsible for
Charthouse management decisions of the Chart House
Suites hotel and advertising the hotel. An
advisory committee, composed of Holders and
their representatives, may be consulted for
advice as to the operation of the Chart House
Suites hotel, although their decisions will
not be binding upon the Company. See
"Management."
Distributions The Company will not make annual or other
distributions to Holders, nor does the
Interest give rise to a distribution right,
although Holders may derive revenue from
renting the Unit Week through the Rental
Pool, or otherwise, although there can be no
assurances that a Holder will realize any
rental revenue. See "The Interests--Use
Options" and "Charthouse Results."
Tax Considerations Tax consequences will vary depending upon a
Holder's use of the Interests, and deductions
for costs of the Interests, annual dues and
special assessments, if any, may be limited.
An investment in the Interests is not
intended to be a tax advantaged investment.
Upon subscription, certain Florida
documentary taxes will be due and payable.
See "Certain Federal Income Tax
Considerations" and "Certain Florida Tax
Considerations."
Lack of Market No market is expected to develop for trading
of the Interests as a result of this
Offering. Holders may sell, transfer or
assign Interests or may sell, transfer or
assign partial Interests (i.e. Unit Weeks),
subject to certain conditions, including the
Company's consent and payment of license
costs (i.e., cost of the Unit Week) for the
corresponding Unit Week. There can be no
assurances that Interests can be sold at a
profit, or at all. The Interests should be
purchased for personal use or as a long-term
investment since Holders may not be able to
sell the Interests to raise cash for
emergencies or for any other reason, and
Holders must commit to pay certain annual
dues and special assessments, if any. See
"The Interests--Transferability of
Interests."
Conflicts of The Company will control the operations of
Interest the Chart House Suites hotel and has retained
Decade Properties, Inc. to operate the Rental
Pool and act as property manager. None of
their agreements was determined by arm's
length negotiations, and Holders should
consider the conflicts of interest that could
arise over the terms of the agreements.
Jeffrey Keierleber is the sole shareholder,
sole director and President of both the
Company and Decade Properties, Inc. and the
sole shareholder, sole director and Vice-
President and Secretary of Decade Securities
Corp. See "Conflicts of Interest of
Management and Affiliates."
Risk Factors An investment in the Interests involves
certain risks, including uncertainties
associated with the tax consequences, which
depend upon the Holder's individual
circumstances and uncertain revenue from the
Rental Pool. See "Risk Factors."
Purchase Under Chapter 721 of the Florida Statutes, a
Cancellation Holder may cancel a purchase, without penalty
Rights or obligation, within 10 days of the later of
the date of the execution of the Subscription
Agreement or receipt of the Florida Time
Share Public Offering Statement. Under
certain limited conditions and under the
Florida Statutes, a Holder may also cancel if
the accommodations or facilities, as
promised, are not available to Holders of any
states. See "Cancellation Rights."
Escrow Provisions Under the Escrow Agreement, funds received
for subscriptions of Interests will be held
in escrow by William Atkinson, an
unaffiliated Florida real estate broker,
until the purchase cancellation rights
(described above) have expired. During the
escrow period, funds will be maintained in a
financial institution and available for
refund upon a request for cancellation. See
"The Interests." After the purchase
cancellation rights have expired, the funds
will be remitted to the Company and used as
described in the "Use of Proceeds." There
is no limitation on the use by the Company.
Minimum There is no requirement that any minimum
Subscriptions number of Interests be sold in the offering.
However, if fewer than 76 Interests are sold
by October 31, 1998, the Company has the right
to cancel the Interests upon the repayment of
the paid subscription amount to the Holders,
less amounts for certain payments or benefits
received by the Holder. The 76 Interest
minimum was arbitrarily selected by the
Company. If the Interests are canceled,
a written notice on or before November 30,
1998, will be sent to all Holders. With that
notice, Holders will receive the net amount
of any refund and an accounting of that
calculation as to benefits. The sole
shareholder of the Company has agreed to
invest additional funds in the Company
if it is necessary in order to repay any
such amounts. Affiliates of the
Company may purchase Interests without
limitation as to amount. See "License Plan
of Distribution."
Use of Proceeds The net proceeds of this Offering will be
used to pay offering costs, the costs of the
guaranteed rental arrangement, amounts owed
to Decade Properties, Inc. for the purchase
of the Chart House Suites hotel, amounts
retained for working capital purposes and
initial membership in RCI for the Holders.
See "Use of Proceeds."
Plan As of the date of the Prospectus, the
of Offering Interests are only available for sale in the
states of Florida and Wisconsin.
Suitability Potential purchasers should evaluate the
Standards benefits of the Interests, including the
ability to use or exchange the Unit Weeks,
and the costs, including the costs of the
Interests and annual dues and special
assessments, if any. The Company does not
intend to establish minimum suitability
standards. Broker-dealers participating in
the offering may implement suitability
standards, and Decade Securities Corp. has
informed the Company that it will not solicit
investments from purchasers unless they have
either (1) a net worth of more than $30,000
(exclusive of the value of home and
furnishings), or (2) annual income of more
than $30,000.
How to Subscribe In order to purchase Interests, a
Subscription Agreement (including acceptance
by the Holder of terms and conditions of the
License Plan, the Rules and Regulations for
Chart House Suites Hotel and the Rental Pool
agreement) must be executed. All
subscriptions are subject to acceptance by
the Company. See "How to Subscribe."
ORGANIZATIONAL CHART
CHARTHOUSE SUITES
Organizational Structure
Management
Jeffrey Keierleber, Director
Charthouse Suites Jeffrey Keierleber, President Decade Properties,
Vacation Michael Sweet, Secretary Inc.
Ownership, Inc. Ownership* |
| Jeffrey Keierleber 100% |
| |
| |
| ___________________________________|
|__________________ |
| | |
Chart House Chart House Property Hotel Manager
Marina Hotel_____________Management_______and Employees
| Agreement
|
|
|
Charthouse Suites
Vacation Interests
* Jeffrey Keierleber owns all the outstanding share of Decade
Properties, Inc., Charthouse Suites Vacation Ownership, Inc.
and Decade Securities Corp.
<PAGE>
<PAGE>
RISK FACTORS
An investment in Interests involves certain risks.
Prospective investors should consider the following factors,
including the material risks set forth below, in addition to the
factors set forth elsewhere in this Prospectus, before making an
investment decision.
Certain statements in this Prospectus that are not
historical fact constitute "forward-looking statements".
Discussions containing such forward-looking statements may be
found in the material set forth under "Summary," "Use of
Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Pro forma Results," as
well as within the Prospectus generally. In addition, when used
in the Prospectus, the words "believes," "anticipates," "expects"
and similar expressions are intended to identify forward-looking
statements. Such statements are subject to a number of risks and
uncertainties. Actual results could differ materially from those
projected in the forward-looking statements as a result of the
risk factors set forth below, this inherent uncertainty of
estimates and assumptions utilized in preparing forward looking
information, and other matters set forth in the Prospectus
generally. Except as required by the securities laws, the
Company does not intend to provide any updates to these
forward-looking statements.
Uncertainty of Deductibility of Expenses From Rental. If
the Holder of an Interest rents all or part of the Unit Weeks to
a third party, including rentals through the Rental Pool, the
extent to which he may deduct expenses incurred in connection
with the renting of such Unit Weeks will depend upon the
particular factual circumstances of the Holder and: (1) whether
the rental activity is engaged in with the intent of making a
profit (Section 183 of the Internal Revenue Code of 1986, as
amended ("Code")); (2) whether the expenses are incurred in
connection with the production of income or for the management,
conservation or maintenance of property held for the production
of income (Code Section 212) or whether the expenses are incurred
in connection with a trade or business (Code Section 162);
(3) whether an Interest is a "dwelling unit" (Code Section 280A);
(4) whether the rental activity is a "passive activity" (Code
Section 469), and (5) whether the "at-risk" rules apply (Code
Section 465). If a Holder does not meet these tax conditions,
the rental expenses will not be deductible, even though the
rental income will be taxable. See "Certain Federal Income Tax
Considerations." Costs and expenses incurred in connection with
personal use on most rental use are not deductible.
Uncertainty Concerning Entity Status of Charthouse Rental
Pool. In the opinion of Quarles & Brady, the Company's tax
counsel, it is more likely than not that the Rental Pool
under the License Plan will constitute a partnership for
federal income tax purposes consisting of those Holders
that utilize the Rental Pool and the Company if it places
unsold Unit Weeks that it owns in the pool. Accordingly,
Holders that participate in the Rental Pool and the Company
will receive appropriate tax forms showing their allocation
of Rental Pool income, gains, losses and deductions.
This conclusion is not binding upon the Internal Revenue Service
("IRS"), and, if the IRS were to successfully challenge the
classification of the Rental Pool as a partnership, and the
Rental Pool were to be taxed as an association, the Company, the
Rental Pool, a Holder or Decade Properties, Inc. could owe
additional taxes, and a Holder's income or loss amounts could be
subject to adjustment or other limitations. See "Certain Federal
Income Tax Considerations."
Tax Risks and Deductibility Limitations. The Interests are
subject to various tax risks and uncertainties, including, but
not limited to, the entity classification of the Rental Pool, the
characterization of an interest as a vacation license, the
treatment of personal use of Unit Weeks, and numerous limitations
on the deductibility of expenses. The Interests are not intended
to be a tax advantaged investment. Except as noted with respect
to characterization of an Interest as a dwelling unit under Code
Section 280A as discussed in "Certain Federal Income Tax
Considerations", no rulings have been or will be sought from the
IRS with respect to the transactions described herein. The
ruling request that was submitted was withdrawn after the IRS
informally indicated it would issue a ruling that the rights
afforded a Holder under a License constitute a "dwelling unit"
within the meaning of Section 280A. Furthermore, there can be no
assurances that the IRS will not challenge the opinions expressed
herein and thus, the tax treatment of a Holder could be
materially different If an Interest is "dwelling unit,"
Interests held by other Holders (perhaps, only other Holders of
the same class of Interest) would be aggregated with the Interest
held by a particular Holder, with the result that even a Holder
that never uses an Interest for personal purposes would,
nevertheless, have otherwise deductible expenses reduced pursuant
to Code Section 280A, possibly causing such Holder to be unable
to offset fully rental income by allocable expenses. Potential
purchasers are encouraged to seek qualified tax advice prior to
investing in the Interests and should consider their individual
factual circumstances. See "Certain Federal Income Tax
Considerations" and "Certain Florida Tax Considerations."
Limited Deductibility of Expenses For Corporate Investors.
Corporations that purchase Interests, subject to limited
exceptions, may not be able to deduct payments for the Interests,
the annual dues or special assessments, if any. See "Certain
Federal Income Tax Considerations." A corporate Holder that
purchases an Interest solely in lieu of renting hotel rooms for
business (and not social) purposes may, under limited
circumstances, be able to deduct certain expenses, but should
seek qualified tax counsel before investing for this purpose.
See "Certain Federal Income Tax Considerations."
Right to Cancel Upon Incomplete Offering. If fewer than 76
Interests are sold by October 31, 1998, Charthouse may cancel
this Offering and repurchase all Interests for their initial
subscription price (exclusive of payments of annual dues, special
assessments and Florida documentary taxes) less amounts received
from the guaranteed rental arrangement or renting or use of the
Unit Weeks or for benefits from using the Unit Weeks, as set
forth in the License Plan. This right to cancel shall lapse on
October 31, 1998 or earlier if 76 Interests are sold. The sole
shareholder, Jeffrey Keierleber, has agreed to invest additional
funds for the Company as required to fund any such repurchase.
If Mr. Keierleber does not invest sufficient funds, and the
Company does not have sufficient funds, to repay amounts due
upon cancellation, Holders may not receive a return of their
invested funds. See "Plan of Distribution."
Lack of Tangible Assets. By the purchase of an Interest,
Holders will acquire a license to rent through the Rental Pool
or, upon notice, use a suite in the Chart House Suites hotel on
the terms and conditions of the License Plan. Holders will not
acquire any real property or a real estate interest in the Chart
House Suites hotel. In the event of a catastrophic destruction
of the Chart House Suites hotel, Holders have no independent
security for their Interests and no management or control over
the Company or the Chart House Suites hotel, other than as set
forth in the License Plan and the Chapter 721, Florida Statutes,
which allows Holders to cancel their Interests if the hotel is
destroyed and cannot be rebuilt in a timely manner. The Company
intends to purchase insurance to cover the loss or damage to the
hotel, although if it is impossible to rebuild the hotel, a
Holder have a right to a partial share of the proceeds of
insurance policy. See "The Interests" and the License Plan
attached as Annex A.
Nature of the Hotel Market. The real estate market and the
hotel rates in Florida have historically been quite volatile.
Many factors, including the economy, interest rates, competition,
weather patterns and events, transportation costs, seasonality
and others, may affect the ultimate appreciation or depreciation
of the Interests and any income derived from a Holder's
participation in the Rental Pool. The real estate market,
especially the market for seasonal rental properties, is highly
competitive, and there can be no assurances as to any level of
rental income. Further, the value of improved income-producing
real property may be affected by a variety of factors, including
the business and management ability of the Company, state laws
regulating the purchase and sale of time share interests, changes
in the real estate tax rates and/or assessments, adverse changes
in general or local economic or market conditions or in the
supply of or demand for properties of the type owned by the
Company, decreases in real personal income, changes in real
estate operating expenses, competitive factors, fuel shortages,
changing consumer habits, demographics or traffic patterns,
condemnation or uninsured losses, potential liabilities under the
Comprehensive Environmental Response Compensation and Liability
Act or other federal and state laws imposing liability on
property owners for environmental contamination, and other
factors that are beyond the control of the Company. Such factors
could affect the resale price and the amount that must be paid
for annual dues or special assessments, if any. See "Annual Dues
and Special Assessments" and "Description of the Chart House
Suites Hotel."
Absence of Market for Interests. There is not now, nor is
there ever expected to be, any organized market for the
Interests. There can be no assurance that Interests can be
resold for their original purchase price, if at all. Holders of
Interests may not be able to sell the Interests in the event of
an emergency, or for any other reasons, and the Interests may not
be readily accepted as collateral for a loan.
Risks Associated with the Rental Pool. The demand for
lodging in Clearwater, Florida is typically seasonal in nature.
Therefore, certain Unit Weeks are not necessarily of equal value
as those in other seasons, and certain Interest Classes may have
higher demand and, therefore, higher rental revenue. The Company
believes that the months of September, November and May will have
the lowest occupancy and lowest value in the Rental Pool, or
otherwise. The months of February, March and April tend to have
higher occupancy, although the Company cannot assure any level of
rental income. See "Certain Occupancy Information." If a Holder
expects to rent the Unit Week through the Rental Pool, there can
be no assurances of any level of Rental Pool revenue. The costs
of operating the Rental Pool are a common expense covered by
annual dues and, therefore, a Holder will pay for the costs of
operating the Rental Pool even if not using it. Under the
License Plan, purchasers of partial Interests (i.e., Unit Week or
Unit Weeks) will not have an automatic right to participate in
the Rental Pool, but must pay for its cost as part of the annual
dues for their Unit Weeks. See "The Interests."
General Economic Conditions; Concentration in Time Share
Industry; Geographic Concentration of Investments. Any downturn
in economic conditions or any price increases (e.g., airfares)
related to the travel and tourism industry could depress
discretionary consumer spending and have an adverse effect on the
demand for and rental rates of the Units. Because the Company's
operations are conducted solely within the vacation industry, any
adverse changes affecting the vacation industry, such as an
oversupply of vacation units, a reduction in demand for vacation
units, changes in travel and vacation patterns, changes in
governmental regulations of the vacation industry and increases
in construction costs or taxes, as well as negative publicity for
the vacation industry, could have an adverse effect on the Rental
Pool. See "The Company."
Past Results. The Chart House Suites hotel has only been in
operation for approximately three years and is, therefore, in the
start-up phase of operations. On a pro rata basis, and for the
year ending November 30, 1996, Charthouse's average Unit Week of
rental income was $359 at 65% occupancy (average of Class A
through Class F Units). Weather and seasonality could affect the
results of the Rental Pool. While there can be no assurances,
the Company believes that the Unit Week rental income may
increase above $359 per Unit Week at 65% occupancy (on an average
basis of all Classes of Interests) because Chart House Suites
hotel is experiencing repeat business, and its marketing has
resulted in increased customer demand. However, Holders should
not assume any level of rental income or occupancy in deciding
whether to purchase an Interest. See "Chart House Results."
No Distributions or Dividends. The Interests are not income
producing in that they do not provide for distributions or
dividends. Although a Holder may realize revenue through rental
of a Unit Week or sale of an Interest, the amount of such
revenue, if any, is entirely speculative and, therefore, Holders
should not assume any rate of rental income or resale of an
Interest for any amount. See "The Interests."
Chart House Suites Hotel Not Affiliated with Any National
Chain. The Chart House Suites hotel is not affiliated with a
national chain, but competes with national hotels located in
Clearwater Beach, Florida, including hotels with more resources
and amenities, such as restaurants, bars and beach-related
services. The absence of a national affiliation and additional
amenities has an adverse affect on the hotel's competitive
position and rates. See "Description of Chart House Suites
Hotel."
Limited Resources. The Company has limited resources to
meet its obligations, but has received an oral commitment by its
sole shareholder to provide additional capital or financing, if
required to meet its obligations under the guaranteed rental
arrangement and to pay for the Company's share of annual dues and
special assessments, if any. See "Financial Statements."
RCI Exchange Program. RCI's Exchange Program is an
independent entity, which has no connection or financial interest
in the Chart House Suites hotel or the Company. The RCI Exchange
Program is a vacation exchange program offered by RCI. The
Company's agreement with RCI extends until August, 2002 and
provides for additional extensions, but is terminable earlier
under certain circumstances. There can be no assurances that the
Company's agreement will continue in effect or that RCI will
continue to exist or renew the agreement with the Company. Chart
House Suites hotel cannot guarantee that RCI will always accept
weeks of vacation in the Chart House Suites hotel for trade, nor
can Chart House Suites hotel assure that RCI will continue to
exist for the entire life of License Plan or the existence of the
Interests. For these reasons, Holders utilizing RCI's services
and the RCI Exchange Program do so at their own risk. See "The
Interests--The RCI Exchange Program."
Vote of Unit Weeks. Under the License Plan, annual dues
cannot increase by more than 10% of the prior year's dues
exclusive of the allocable percentage of property tax and
insurance, without an affirmative vote of a majority of the Unit
Weeks. Special assessments in excess of certain limits cannot be
made without a vote of Unit Weeks. The Company will vote all
Unit Weeks represented by unsold Interests or the Unit Weeks
reacquired upon a default of an Interest. Until, and unless, a
majority of Units Weeks are held by others, the Company will be
able to approve annual dues increases or special assessments
without limitation, provided, however, that such vote would not
change the guaranteed level of annual dues for the period
through December 31, 1998, and provided that the Company would
have to bear its proportionate share of any such increase.
See "Annual Dues and Special Assessments."
Reliance on Management. Pursuant to the terms of the
License Plan, Holders have no authority to control the management
and operations of the Chart House Suites hotel or the Company.
Control of management and operations of the Chart House Suites
hotel and the License Plan resides solely in the Company. In
order to protect the property and the operations, the Company has
the authority to amend Charthouse policies and the Rules and
Regulations governing the Chart House Suites hotel without a vote
of Holders, provided such amendment is consistent with the terms
of the License Plan. Accordingly, Holders will have no control
over changes in policies of Charthouse. The Company intends to
create an Advisory Board composed of Holders, but the Company has
ultimate responsibility for policies of Charthouse. See "The
Company." Until a majority of Interests are held by Holders,
the Company may increase annual dues or special assessments
under the License Plan without limitation, provided that
expense attributable to unsold Interests will be born by the
Company. For further information, see License Plan and the
Rules and Regulations for Chart House Suites Hotel, attached
as Annexes A and B, respectively.
Absence of Independent Underwriter and Appraiser. No
appraisals or other independent valuations have been obtained for
purposes of determining the value of the Interests. The value of
the Interests has been determined solely by the Company on the
basis of its subjective evaluation of marketing considerations.
See "Determination of Offering Price."
Risks Associated With Customer Default. The Company bears
the risk of defaults by buyers who purchase their Interests on an
installment basis. If a buyer of an Interest defaults on the
purchase of such Interest during the payment schedule, the
Company will reacquire the Interest. In connection with the
Company taking back any such Interest, the associated marketing
costs will not have been recovered by the Company, and they must
be incurred again after the Interest has been returned to the
Company for resale. In addition, although the Company may have
recourse against the defaulted buyer of the Interest, no
assurances can be given that the Interest purchase price or any
commissions will be fully or partially recovered in the event the
buyer defaults under such financing arrangements. Although the
Company will bear the risks of default, Holders may be adversely
affected if these costs limit the Company's ability to fulfill
its obligations. See "The Interests."
Competition. The Company is subject to significant
competition from other entities engaged in the business of resort
development, sales and operation, including interval ownership,
condominiums, hotels and motels. Many of the world's most
recognized lodging, hospitality and entertainment companies have
begun to develop and sell vacation interests in resort
properties. Other major companies that now operate or are
developing or planning to develop vacation interest resorts
include Marriott Ownership Resorts, The Walt Disney Company,
Hilton Hotels Corporation, Hyatt Corporation, Four Seasons Hotels
& Resorts and Inter-Continental Hotels and Resorts. Many of
these entities possess significantly greater financial,
marketing, personnel and other resources than those of the
Company and may be able to generate greater rental results or
returns.
Regulation of Marketing and Sales of Vacation Interests;
Other Laws. The Company's marketing and sales of Interests and
other operations are subject to extensive regulation by the
federal government, Florida and by the states in which Interests
are marketed and sold. On a federal level, the Federal Trade
Commission has taken the most active regulatory role through the
Federal Trade Commission Act, which prohibits unfair or deceptive
acts or competition in interstate commerce. Other federal
requirements to which the Company is or may be subject appears in
the Truth-in-Lending Act and Regulation Z and the Equal
Opportunity Credit Act. In addition, many states have adopted
specific laws and regulations regarding the sale of interval
ownership programs. The laws of Florida require the Company to
file with a designated state authority for its approval a
detailed offering statement describing the Company and all
material aspects of the project and sale of Interests. The
Company is required to deliver an offering statement or public
report to all prospective purchasers of an Interest, together
with certain additional information concerning the terms of the
purchase. The Company believes that it is in material compliance
with all federal, state, local and foreign laws and regulations
to which it is currently subject. However, no assurances can be
given that the Company is, in fact, in compliance with all
applicable federal, state, local and foreign laws and
regulations. Any failure to comply with applicable laws or
regulations could have a material adverse effect on the Company.
Compliance with the laws or regulations, of any sort, will be a
common expense recovered from Interest Holders through annual
dues. See "Annual Dues and Special Assessments."
Dependence on Key Personnel. The Chart House Suites hotel
will be controlled by the Company, Decade Securities Corp. and
Decade Properties, Inc. The loss of the services of Jeffrey
Keierleber, sole owner of the Company and Decade Properties,
Inc., could have serious adverse effects on the operations
of Chart House Suites hotel. The Company intends to
prepare a succession plan. See "Management."
Americans with Disabilities Act. Under the Americans with
Disabilities Act ("ADA"), all public accommodations are required
to meet certain federal requirements related to physical access
and use by disabled persons. A determination that the Chart
House Suites hotel is not in compliance with the ADA could result
in imposition of fines, injunctive relief, damages and attorneys'
fees. If the Company was required to make modifications to
comply with the ADA, Charthouse's cash reserves could be depleted
and annual dues could increase significantly, adversely affecting
Holders. A finding of non-compliance could also endanger the
ability to use the Rental Pool to rent Interests to non-Holders.
Absence of Operating History of the Company. The Company is
a recently formed Florida corporation and has no operating
history. See "Chart House Results." The Company's anticipated
operations and business plan are subject to all of the risks
inherent in the establishment of a new enterprise in a
competitive and volatile industry such as the Florida hotel
operations. See "The Company."
Lack of Arm's Length Negotiation in the Property Management
and Other Agreements. None of the agreements with affiliates,
including the property management agreement, was determined by
arm's length negotiations, and no independent approval will be
sought. The property management agreement provides for a monthly
fee of $2,500, subject to increases based upon CPI and a 5%
Rental Pool fee, plus reimbursement of all expenses. It is
impossible to estimate how much Decade Properties, Inc. would
earn because it cannot estimate the 5% rental pool fee. However,
the $2,500 monthly fee would total $1,290,000 (exclusive of CPI
increases) over the 43 year term. If the Rental Pool generated
$500,000 a year, Decade Properties, Inc. would earn $25,000 a
year or $1,075,000 over the 43 year term. See "Decade
Properties, Inc." The License Plan provides that Holders will
reimburse, as a common expense covered by annual dues, the costs
and fees of the property manager for its services, whether or not
they use the Rental Pool. See "Conflicts of Interest of
Management and Affiliates."
Conflicts of Interest Arising From Benefits to Affiliates of
the Company. The Company intends to use essentially all of the
net proceeds from sale of the Interests to pay offering expenses,
amounts under the guaranteed rental arrangement, amounts owed to
Decade Properties, Inc., costs of initial membership in RCI and
then for working capital. The Company has contractual duties
under the License Plan and will act as a fiduciary for the Holders
in managing the License Plan and safeguarding the annual dues
assessments. See "Use of Proceeds." Affiliates of the Company
may also benefit from the property management agreements,
Charthouse Rental Pool fees and other fees. There are no
established conflict resolution procedures. See "Conflicts
of Interest of Management and Affiliates."
Company Control. The Company will control the operations of
the Chart House Suites hotel and the Charthouse Rental Pool, and
it has contracted with Decade Properties, Inc. to be the property
manager and Rental Pool operator. The property management
agreement provides that Decade Properties, Inc. can only be
removed for cause and upon payment of all amounts that would have
been received during the term of the agreement (discounted at
8%), which, by its terms, expires on December 31, 2040. As
discussed earlier, the Company cannot estimate what fee would
be owed. However, the effect of this provision is to make it
unlikely that Decade Properties, Inc. could be removed as
property manager. See "Decade Properties, Inc."
Weekly Fluctuations in Rental Pool Results. The lodging
industry is seasonal in nature. Weekly Unit Week earnings in the
Rental Pool may be adversely affected by events beyond the
Company's control, such as poor weather conditions, economic
factors and other considerations affecting travel.
Resale of Interests. A Holder selling whole or partial
Interests (i.e., Unit Weeks) may face competition from the
Company as it sells the Interests, including Interests which have
been reacquired. The future value of Interests is uncertain, and
there can be no assurances that a Holder will be able to sell his
Interests at an appreciated amount, or even at the offering
price, if at all. There could be difficulties in trying to find
a real estate broker or other person to sell Interests or Unit
Weeks. A Holder will also have to pay the entire cost of the
Unit Week and obtain the consent of the Company, which will not
be unreasonably withheld, before being able to sell partial
Interests and Unit Weeks. The Company may review potential
purchasers and evaluate whether they will be able to pay annual
dues as they become due. The Company does not intend to withhold
consent if a potential purchaser agrees to follow the License
Plan and the rules and regulations. In addition, a seller of
a partial Interest (i.e., a Unit Week) will have to pay the
cost of License Payments for the Unit Week before being able
to sell or transfer the partial Interest. See "Plan of
Distribution."
THE COMPANY
Charthouse Suites Vacation Ownership, Inc. is a Florida
corporation formed on April 16, 1996, and solely owned by Jeffrey
Keierleber. The Company was organized to facilitate the sale and
distribution of the Interests and ultimately own and manage the
Chart House Suites hotel. The Company has limited financial
resources, although it has received an oral commitment from its
sole shareholder to provide additional resources. See "Financial
Statements" and "Risk Factors--Limited Resources."
The Company will be responsible for managing the License
Plan and the Charthouse Rental Pool, as well as advertising the
hotel and overseeing its operations, although it will delegate
and subcontract the operational duties to Decade Properties, Inc.
See "Decade Properties, Inc." The Company will have a fiduciary
duty to manage the time share program and safeguard the annual
dues funds. In carrying out the duty, the Company intends to
maintain annual dues in a separate account for the benefit of
Holders.
The Company currently has not issued, and has no plans to
issue, senior securities. The Company plans to borrow money only
to the extent necessary to fund its portion of offering expenses
and fund the operation of the Company in the ordinary course of
business. The Company does not plan to make loans to other
persons, although it will allow Holders to pay licensing payments
on an installment basis over 360 months. See "The Interests."
The Company does not plan to invest in securities of other
issuers for the purpose of exercising control. The Company has
no plans to engage in underwriting securities for other issuers
and has no plans to engage in the purchase and sale of
investments, except for those in the ordinary course of
maintaining its reserves and the common maintenance fund. The
Company has no plans to offer securities in exchange for property
and has no plans, except under the limited circumstances
described in the License Plan, to repurchase or reacquire the
Interests. Except in connection with the purchase and use of the
Chart House Suites hotel, the Company does not plan to make
investments in real estate or interests in real estate, real
estate mortgages, securities of or interests in persons primarily
engaged in real estate activities, or investments in other
securities. However, subject to the limitations described in the
License Plan underlying the Interests, the Company has sole
control over the policies and operations of Charthouse and may
from time to time consider expanding the operations and scope of
Chart House Suites hotel and sell additional Interests or
reacquired Interests.
Charthouse plans to provide Holders an annual report (which,
if in accordance with the securities laws, may contain unaudited
financial statements) which describes the financial condition of
the Rental Pool and the source and use of annual dues and, if
any, special assessments. During the pendency of the Offering,
the Company will file a Form 10-K which will contain audited
financial statements.
DESCRIPTION OF THE CHART HOUSE SUITES HOTEL
The Chart House Suites hotel is located in Clearwater Beach,
Florida and has been owned by an affiliate of the Company since
1992. It is a four-story hotel overlooking Clearwater Bay,
Florida, bought in 1992 for approximately $600,000 and then
completely refurbished. Unless the offering is terminated (see
"Plan of Distribution"), the hotel will be purchased by the
Company for approximately $1,796,000, upon the earlier of the
sale of 76 Interests or by October 31, 1998. No appraisal has
ever been obtained. Attached to the Chart House Suites hotel
grounds is a marina that was also owned by Decade Properties, Inc.
Holders will have no rights to the Charthouse Marina, which is
owned by Decade Properties, Inc. or the Company, once the sale is
complete. The Chart House Suites hotel contains on its grounds a
heated in-ground 20 by 25 foot pool and laundry room facilities,
which may be used by Holders. As described below, the hotel's
location provides easy access to white sand public beaches,
recreational facilities, restaurants, entertainment and shopping
in Clearwater Beach. The Tampa Bay, Florida airport is
approximately 20 miles away, and St. Petersburg's airport is
approximately 12 miles away.
The Chart House Suites hotel is comprised of 25 rental units
located in one four-story building containing approximately
20,000 enclosed square feet. The attached marina has 27 boat
slips. The building and most of its improvements were built in
1971 as a common area for a nearby condominium and then converted
to a restaurant. In 1993, the building was converted to a hotel
and was completely updated and remodeled. The property is
rectangular in shape, contains approximately .66 acres and is
located on the North side of Bayway Boulevard, Clearwater Beach,
Florida. Each suite contains sleeping accommodations, private
bathroom facilities and limited cooking facilities (varying from
room). The hotel has a parking lot with 46 spaces, which Holders
may use at no additional charge. Each suite comes equipped with
locked doors, a bed or beds, hotel-like furniture, one or more
bathrooms and one or more televisions, including access to cable
television. The Chart House Suites hotel has a manager or front
desk staff available 24 hours a day and provides maid service.
Approximately 10 employees work at the Chart House Suites hotel.
Except as described above, there are no additional security
measures for the Holders.
As of June 30, 1997, the Company orally entered into an
agreement with Decade Properties, Inc. to acquire the Chart House
Suites hotel, which was confirmed in writing on September 29,
1997. Under the irrevocable terms of the written agreement,
Charthouse will pay approximately $1,796,000 for the hotel,
personal property and marina. As provided in the License Plan,
if the Company does not sell 76 Interests by October 31, 1998,
it reserves the right to cancel the Interests and return the
paid-in amount (less amounts for certain benefits received or
used). The Company and Decade Properties, Inc. have agreed
to escrow the title until the sale of 76 Interests or October
31, 1998 unless the Offering is canceled. Accordingly, the
Company has contractual rights to acquire the Chart House
Suites hotel, but will not complete the sale until 76 Interests
have been sold or until this requirement has been waived. If
the Agreement is breached, the Florida Time Share Bureau will
have the power to enforce the terms of the Agreement.
The Chart House Suites hotel is conveniently located within
a short stroll of a beautiful Clearwater public beach (one beach
on Clearwater Pass is located approximately two blocks away, and
the main Clearwater Beach is approximately six blocks away),
quaint shops and restaurants. The hotel is located on Bayway
Boulevard, a central street in Clearwater Beach and one block
from the main (and busy) street. The Chart House Suites hotel is
in close proximity with other hotels and shops and adjacent to a
yacht club and other condominiums. The hotel is approximately a
90 minute drive from Walt Disney World and Cypress Gardens and
approximately 35 miles from Busch Gardens, Florida.
As of the date of this Prospectus, there are no known
environmental contaminations on the Chart House Suites hotel
grounds which would materially affect the value of Interests or
the ability of Holders to rent or use their suites.
The Company intends to provide quality hotel services to
Holders of the Interests or the renters in the Rental Pool. The
Company believes that its location in Clearwater Beach, Florida
and its competitive licensing payments and annual dues rates will
be attractive to Investors who desire to fix the costs of
vacations, pass a gift to future generations or retain for
possible income.
In order to ensure the comfort and enjoyment of the Chart
House Suites hotel and its amenities by all Holders, guests and
other allowed users, Charthouse has promulgated certain rules and
regulations. These rules and regulations are intended to
preserve the quiet enjoyment of the Chart House Suites hotel for
all users, but also to ensure that the appearance of the Chart
House Suites hotel is generally uniform and does not detract from
its value. Certain other requirements are established in the
Subscription Agreement and the Rules and Regulations for Chart
House Suites Hotel, attached as Annexes D and B, respectively.
Competition. Clearwater Beach, Florida contains numerous
hotels and motels, with various size facilities and with a total
of approximately 4,000 rooms and suites. The Company believes
that room charges for the hotels in Clearwater Beach generally
range from between $40 and $350 a night, although rates will vary
depending upon season and demand. National hotel chains, such as
Sheraton and Marriott, compete with the Chart House Suites hotel
in Clearwater Beach. The Company believes that the proximity of
the marina offers competitive advantages, as boaters often stay
at the Chart House Suites hotel. Lengths of stay affect the
results, and the Company strives to rent the penthouse (Class F
Units) for a minimum of two nights. The Company believes the
Chart House Suites hotel competes with other rental
accommodations on the bases of location, view and room quality,
as well as rental rates. Seasonability has, and will, affect the
occupancy of the hotel and the Rental Pool results.
<PAGE>
<PAGE>
THE INTERESTS
The following is a summary of the material terms of the
License Plan, and references to the License Plan are qualified in
their entirety to the text of the License Plan, which is attached
as Annex A.
Ownership of an Interest entitles purchasers to the right,
subject to the terms and conditions of the License Plan, to rent
or use the Chart House Suites hotel for eight weeks of each year
until December 31, 2040. Holders are entitled to two consecutive
weeks of time for each season (e.g. Spring, Summer, Fall and
Winter). The Unit Weeks will be assigned pursuant to the
schedule in Annex E. Upon subscription, a potential Holder
should submit his or her preference. All Unit Weeks (including
those owned by the Company) will automatically be placed in the
Rental Pool. The Company will attempt to rent the Unit Weeks and
will remit net rent proceeds, if any, to the Holder on a
quarterly basis. Holders will have the right, upon at least 30
days written notice (unless waived by the Company), to use the
Unit Weeks or to join the RCI Exchange Program and exchange Unit
Weeks in the Chart House Suites hotel for another location in a
participating RCI resort. The Holders will not obtain title or
any interest in the Resort Facility. No certificates will be
issued for the Interests.
The Company is offering Interests that, in the aggregate,
will provide the Holders the right to rental income from the
Rental Pool, if any, or the right to use one of the 25 suites for
48 weeks out of every year. The Company does not intend to offer
the Chart House Suites hotel for sale to third parties, although
it reserves the right to do so, and such sale would be subject to
the rights of Holders under the License Plan. The Company will
continue to have the right to use, rent or exchange the remaining
four Unit Weeks (one Unit Week in every season or five total Unit
Weeks in years with 53 weeks) or sell those Unit Weeks as partial
Interests, upon compliance with legal and regulatory
requirements. The Company intends to place the unsold Unit Weeks
it continues to hold in the Rental Pool, although, similar to all
Holders' rights, it reserves the right to use the Unit Weeks and
exchange these weeks in RCI Exchange Bank, even if there is
demand for these Unit Weeks in the Rental Pool, as well.
According to a March, 1997 article in Hotels, vacation
ownership is a $6 billion industry in the U.S. The Company
believes that purchase of Interests will offer Holders a
manner of participating in this market.
Types of Interests Available. Class A-F Interests are being
offered by the Company. A description of each Interest is as
follows:
A Interest: Ownership of an A Interest allows a Holder use
of a standard studio (with private bathroom) overlooking the
marina and Clearwater Bay for two consecutive weeks in each
season until December 31, 2040. There are 36 A Interests
available in this offering for a cost of $18,500 per Interest.
The A Interest studios are approximately 360 square feet and
contains two queen-sized beds with room for four persons.
B Interest: Ownership of a B Interest allows a Holder use
of a king bed studio (with private bathroom) overlooking the
marina and Clearwater Bay for two weeks in each season until
December 31, 2040. There are 24 B Interests available in this
offering for a cost of $21,500 per Interest. The B Interest
studios are approximately 360 square feet in size and have room
for two persons.
C Interest: Ownership of a C Interest allows a Holder use
of a large studio (with private bathroom) overlooking the marina
and Clearwater Bay, or southern exposure (looking south over the
bay and other condominiums) for two consecutive weeks in each
season until December 31, 2040. There are 36 C Interests
available in this offering for a cost of $25,500 per Interest.
The C Interest studios are approximately 430 square feet and have
room for four persons.
D Interest: Ownership of a D Interest allows a Holder use
of a one bedroom, one private bathroom suite overlooking the
marina and Clearwater Bay or the swimming pool or the southern
exposure for two consecutive weeks in each season until December
31, 2040. There are 36 D Interests available in this offering
for a cost of $36,500 per Interest. The D Interest suites are
approximately 638-869 square feet and have room for four persons.
E Interest: Ownership of an E Interest allows a Holder use
of a one bedroom suite with one private bathroom (with a lanai),
and a view of the marina and the Clearwater Bay for two
consecutive weeks in each season until December 31, 2040. There
are 12 E Interests available in this offering at a cost of
$39,500 per Interest. The E Interest suites are approximately
815-982 square feet and have room for four persons.
F Interest: Ownership of an F Interest allows a Holder use
of the approximately 1,875 square foot, two bedroom penthouse
suite, with a fully equipped kitchen, living room, den, dining
room, two full baths (one with a jacuzzi), and a large private
balcony overlooking Clearwater Bay and marina for two consecutive
weeks in each season until December 31, 2040. There are 6 F
Interests in this Offering at a cost of $60,000 per Interest and
have room for six persons.
At the time of subscription, the Holder will be assigned
eight specific Unit Weeks for the category of the suite
corresponding to the Class of Interests purchased. Preferences
for suites and weeks will be considered on a first come first
serve basis, but assignment of Unit Weeks and suites within a
Class of Interests is in the sole discretion of the Company.
For purposes of the License Plan, the Winter season
constitutes weeks 46-52 and 1-6, Spring is weeks 7-19, Summer is
weeks 20-32, and Fall is weeks 33-45. Occupancy rights begin at
4:00 p.m. on the applicable date of the week and end at 10:00
a.m. on the same day of the immediately following week.
Use Options. The following summarizes the ways in which
Holders, as of the date of the Prospectus, may utilize their
eight Unit Weeks per Interest:
Rental. If a Holder takes no action, Charthouse will seek
to rent the Holder's Unit Weeks through the Rental Pool. Holders
may also withdraw their Unit Weeks from the Rental Pool and seek
to rent the Unit Weeks to others, either personally or through
rental agents. Unless waived by the Company, Holders must give
the Company at least 30 days notice prior to the start of the
Unit Week of their desire to remove their Unit Week from the
Rental Pool. Rental Pool proceeds will be allocated
proportionately among Holders of all Classes of Interests that
have Unit Weeks in the Rental Pool using the formula shown below.
The ability of the Rental Pool to rent pooled Unit Weeks will
depend on many factors, among which are seasonal demand, weather
conditions, travel patterns and economic conditions. There is no
guarantee that all or any contributed Unit Weeks will be rented
or that rental proceeds will be received. An affiliate of the
Company will be paid a rental fee of 5% of all rental charges
collected, and part of the common expenses for Holders will
include the reimbursement of any costs incurred in providing
Rental Pool services. Holders can contract individually with an
affiliate of the Company, or another rental agent, for separate
rental of their individual suite, although their share of annual
dues will continue to include the costs of operating the
Charthouse Rental Pool. See "Charthouse Results" and "Certain
Charthouse Rental Pool Financial Pro Forma Information."
Personal Use. A Holder may, upon 30 days written notice to
Charthouse (unless waived), withdraw entire Unit Weeks from the
Rental Pool, and Holders are free to use, assign, grant, gift or
otherwise use their eight Unit Weeks per Interest of reserved
vacation suites and services at the Chart House Suites hotel.
Unless waived by the Company, only entire Unit Weeks may be
withdrawn for personal use. Pursuant to the License Plan and the
Rules and Regulations for the Chart House Suites Hotel, Holders
are responsible for their conduct and liable for any resulting
damages due as a result of their use or the use by their
permitted users, including any rental arranged other than through
the Rental Pool. License Plan and Rules and Regulations for
Chart House Suites Hotel, attached as Annexes A and B,
respectively.
RCI Exchange Program. As of April 1997, Chart House Suites
hotel has qualified as an affiliated resort of the RCI Exchange
Program. As long as the Holder remains a member of the RCI
Exchange Program, such Holder may use the RCI Exchange Program.
Holders may join RCI for the cost and fees determined by RCI and
obtain the privileges attached to such membership. The Company
will pay for the initiation and first year membership fees for
each purchaser of an Interest. RCI is not an affiliate of the
Company or any of its affiliates and has not reviewed or passed
upon the validity of this Offering. RCI is a independent entity
that facilitates the exchange of vacation time share interests.
Nothing contained in this summary should be construed as an
endorsement or advertisement for this Offering or the Chart House
Suites hotel by RCI or any of its affiliates. The Company and
its affiliates have no financial or other interest in RCI.
Under the terms of the Agreement with RCI, the RCI Exchange
Program allows Holders to deposit one or more Unit Weeks of
vacation time at the Chart House Suites hotel into the RCI
Exchange Program. This Agreement expires August, 2002. The
deposit may be made between two weeks and two years before the
use of the Unit Week. The Holder must pay all annual fees
associated with the deposited Unit Week (i.e., annual dues and
special assessments, if any, and, if paying on the installment
basis, the license payment directly to the Company) before
submitting an RCI request. Deposited Unit Weeks can be withdrawn
from RCI Exchange Program if the Holder has not made an exchange
against that week and no other RCI member has been assigned the
Holder's Unit Week at Chart House Suites hotel. After depositing
weeks in the RCI Exchange Program, members may request use of
weeks deposited at any of RCI's approximately 2,000 worldwide
affiliated resorts. Requested weeks must be comparable to those
deposited. All the Charthouse's weeks have been designated
"red," or the seasonal designation indicating greatest member
demand, although RCI has reserved the right to reconsider the
designation or change systems. RCI members can request exchanges
for only that period in which their subscription to RCI Endless
Vacation is prepaid. As of the date of this Prospectus,
membership in RCI costs $74 for one year, $135 for two years,
$199 for three years and $313 for five years. There is also a
$200 initiation fee which, if charged, will be paid for by the
Company. The Company will also pay the first-year membership
fee. As of the date of this Prospectus, RCI charges $103 for
each domestic exchange and $133 for each international exchange.
Rates are subject to change. Other fees may apply, and all fees
are determined solely by RCI. Neither the Company nor any of its
affiliates will receive any remuneration from RCI.
In addition, RCI members can obtain RCI Guest Certificates
for non-members to use the exchanged weeks. Guest Certificates
currently cost an additional $40. RCI has advised the Company
that RCI currently has approximately 2,000,000 members. The
terms and conditions of membership are defined an agreement that
is entered between RCI and its members. Participation in RCI by
a Holder is voluntary.
Under the terms of the agreement with RCI, the Agreement is
terminable, at RCI's option, upon 60 days notice if the Company
does not attain and maintain 50 RCI members. Therefore, the
ability to exchange properties through RCI may be canceled if a
sufficient number of Holders do not maintain their RCI
membership. The RCI Agreement is also terminable by RCI if the
Company (i) becomes insolvent, (ii) initiates a bankruptcy
proceeding, (iii) becomes a party to reorganization for its
debts, (iv) has a receiver appointed, (v) is a party to a
dissolution or liquidation proceeding, (vi) transfers a
controlling ownership interest in the Company without RCI's
consent, (vii) attempts to assign or sublease all or a portion of
its rights or duties, or (viii) the Company materially breaches
its agreement with RCI or any representation or warranty of the
Company to RCI ceases to be true.
Transferability of Interests. A Holder may transfer his
entire Interest without the prior consent of the Company,
provided the Holder is current on payment of all dues,
assessments and installment license payments. A purchaser of an
entire Interest may automatically participate in the Rental Pool.
Under applicable Florida Law, a Holder will have to provide
disclosure required by Section 721.065 in order to resell
Interests. This disclosure requires information concerning
annual dues and a copy of the License Plan.
A Holder may also transfer partial Interests in increments
of one or more Unit Weeks with the consent of the Company (which
will not unreasonably withheld) provided the Holder is current on
all payment of all annual dues, special assessments and license
installment payments for that Unit Week are fully paid. The
transferor of a partial Interest must also make a prepayment of
the estimated annual dues (and special assessments, if any) of
one year for the specific Unit Week before the transfer is
allowed.
A transferee of partial Interests (i.e., one or more Unit
Weeks) may not automatically participate in the Rental Pool,
although annual dues will include the costs of operating the
Rental Pool. However, the Holder of a partial Interest may enter
into a contract with Decade Properties, Inc. to provide rental
services for its own rental program. The Company reserves the
right to specify other terms or conditions in connection with the
transfer of a partial Interest. See License Plan attached as
Annex A.
Cancellation. Each Holder is given the right, pursuant to
Chapter 721, Florida Statutes, to cancel the Holder's
subscription without any penalty or obligation within ten days
from the date the Subscription Agreement is signed, or until ten
days after receipt of the Time Share Public Offering Statement,
whichever is later. A Holder must notify Charthouse in writing
of his/her intent to cancel. A notice of cancellation is
effective on the date sent and shall be sent to Charthouse at 250
Patrick Boulevard, Brookfield, Wisconsin 53045. Any attempt to
obtain a waiver of the Holder's cancellation rights is unlawful.
While the Holder may execute all closing documents in advance,
Charthouse's use of the subscription amount by Charthouse before
the expiration of the ten-day cancellation period is prohibited.
Each Holder may also cancel the License Plan at any time
after the accommodations or facilities are no longer available,
as provided in the License Plan and the Time Share Public
Offering Statement, attached as Annexes A and C, respectively.
The License Plan contemplates that Holders may have the
accommodation unavailable on a temporary basis in order to
facilitate repairs, maintenance or emergencies, and the Company
will provide alternative accommodations. Such events shall not
give rise to a right to cancel the Interest. In the event of any
temporary unavailability, the Company will promptly send a
written notice of the temporary unavailability notifying Holders
of their alternatives.
Under the License Plan, upon cancellation a Holder will only
have the right to receive the amount of the purchase price
actually paid less any benefits received, rental revenue from the
Rental Pool, and any guaranteed rental arrangement payments. In
order to avoid controversies, the Company will use the following
rates for calculating benefits on a per-day basis:
Total for One
Assumed Benefit Unit Week
A Standard Studio $ 70.00 per night $490
B King Bed Studio $ 75.00 per night $525
C Studio $ 85.00 per night $595
D 1 Bedroom $120.00 per night $840
E 1 Bedroom $130.00 per night $910
F Penthouse $175.00 per night $1,225
Therefore, once Holders have held the Interests after a
certain period of time, the cancellation right under the
License Plan will result in a return of no proceeds.
Under the License Plan, Holders' cancellation rights
will expire as follows:
Class Expiration Date After Purchase
A 4.72 yr.
B 5.12 yr.
C 5.36 yr.
D 5.43 yr.
E 5.43 yr.
F 6.12 yr.
Holders should not assume that the Charthouse Rental Pool
will return these rates.
Under the License Plan, the Company may rescind the License
Plan and return the net proceeds if 76 Interests are not sold by
October 31, 1998. See "Plan of Distribution."
<PAGE>
<PAGE>
CHART HOUSE RESULTS
The following is a summary of the results of the Chart House
Suites hotel.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
For the Nine
Months Ended For the Years Ended November 30
August 31, 1997 1996 1995
1994
(unaudited) (audited) (audited)
(audited)
<S> <C> <C> <C> <C>
Rental Income $379,931 $452,981 $327,031 $
72,687
Other Income 13,698 14,220 14,090
4,154
Total Operating Revenues $393,629 $467,201 $341,121 $
76,841
Total Salaries 101,480 127,377 93,648
38,243
Total Direct Expenses 117,619 150,287 141,411
111,056
Total Maintenance
and Repair Expenses 11,607 25,114 37,570
30,917
Total Expenses $230,706 $302,778 $272,629
$180,216
Excess (Deficiency)
of Operating
Revenues Over
Certain Expenses $162,923 $164,423 $ 68,492
$(103,375)
Derived Rental Unit Week Rental Revenue
Rental Income
(Actual $379,931 $452,981 $327,031 $
72,687
Pro Forma Rental
Pool Fee (5%) (18,997) (22,649) (16,3352)
(3,634)
Pro Forma Net Rental
Revenue (95%) $360,934 $430,332 $310,679 $
69,053
Number of Unit
Weeks 39 52 52
52
Number of Hotel
Suites 25 25 25
25
Pro Forma Average $ 370 $ 331 $ 239 $
86
Unit Week Rental
Revenue
/TABLE
<PAGE>
The above summary for operating revenues and certain
expenses reflect income and expenses that are directly
attributable to the operations of the Chart House
Suites hotel since it opened in 1994, and that are
not dependent upon a particular owner of the property. As a
result, certain expenses which are included in the accounting
records of the property are not included in the accompanying
financial statements. These expenses are depreciation,
amortization, and certain office and administrative expenses.
Based upon the current level of total expenses for the nine
months ended August 31, 1997, the break-even rate for the Company
is $33.68 per suite per day (on average). Because rates vary, a
break even rate in occupancy cannot be determined.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations The financial statements included
herein present the Chart House Suites hotel operations for
approximately 40 months, from its opening on April 21, 1994,
through August 1997. The comparative presentation of
operations reflects the operation of 25 Studios/Suites during
each period presented.
Operating revenues for the initial 7.3 (32 weeks) months
ended November 30, 1994, averaged $105 per Suite per Unit Week.
The average Unit Week operating revenue increased to $262
during the year ended November 30, 1995; $359 during the year
ended November 30, 1996, and $404 during the nine months (39 weeks)
ended August 31, 1997. The 1997 increase, however, was achieved
primarily during the Winter and Spring months when hotel rates
and occupancy are generally expected to be higher than at other
times of the year, and therefore, such results are not expected
to be indicative of those to be achieved for an entire year
ended November 30, 1997.
The increases in operating revenues from inception are
attributable to both increases in the rental revenues charged for
occupied rental units and increased occupancy. The average daily
rental unit revenue for occupied Studios/Suites increased from
$52 in 1994 to $66 in 1995, to $77 in 1996, to $86 in 1997.
The average occupancy during these periods increased from 39%
in 1994, to 52% in 1995, to 65% in 1996 and to 65% in 1997.
Expenses for the initial 7.3 months in 1994 averaged $225
per Unit Week. The average Unit Week expenses decreased to $210
in 1995, and then increased to $233 in 1996 and $237 in 1997. A
large part of this increase was due to the average salary expense
per Unit Week, which increased from $53 in 1994 to $72 in 1995,
$98 in 1996 and $104 in 1997. The housekeeping staff, certain
front desk expenses and management fees are variable expenses.
Consequently, salary expenses generally increase as occupancy
increases.
Average direct expenses per Unit Week were $152 in 1994,
decreased to $109 in 1995, then increased to $116 in 1996 and
$121 in 1997. The direct expenses during the initial 1994 period
include costs associated with opening and initially higher
advertising expense for the hotel, which resulted in higher
average expenses than those experienced in the other periods.
Repair and maintenance expenses averaged $42 per Unit Week
in 1994, compared to $29 in 1995, $19 in 1996 and $12 in 1997.
Many costs associated with furniture, equipment and other
interior items were incurred in stages after the opening of the
hotel and have decreased over each period.
As a result of the foregoing, the operating expenses
exceeded operating revenue by $141 per Unit Week in 1994. In
1995, operating revenue exceeded operating expenses by $53 per
Unit Week, increasing to $126 in 1996 and $167 in 1997.
<PAGE>
<PAGE>
The daily revenue for hotel studios and suites by class for
the comparative periods was:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
1997
1996 1995
Type of Low Average High Low Average High
Low Average High
Unit
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C>
Class A $45 $69 $119 $44 $63 $100
$38 $57 $98
Class B $45 $71 $119 $45 $63 $100
$40 $61 $104
Class C $50 $73 $119 $45 $67 $115
$43 $56 $110
Class D $70 $107 $165 $50 $96 $155
$50 $80 $150
Class E $75 $117 $165 $55 $118 $155
$50 $101 $155
Class F* $73 $110 $250 $68 $87 $200
$65 $82 $194
All Classes $85
$77 $66
(Average)
*Primarily rented on a monthly basis.
/TABLE
<PAGE>
The average daily occupancy for hotel studios and suites by
class for the comparative periods was:
Type of Unit 1997 1996 1995
Class A 75% 77% 63%
Class B 70% 69% 58%
Class C 69% 69% 51%
Class D 45% 45% 38%
Class E 57% 61% 59%
Class F 86% 91% 97%
All Classes (Average) 65% 65% 54%
<PAGE>
<PAGE>
The average daily revenue collected for occupied studios and
suites fluctuates throughout the year. The range of the average
daily revenue by class of rental unit by week fluctuated as
follows:
Type of Unit 1997 1996 1995
Class A $56-92 $49-79 $49-75
Class B $61-89 $55-96 $53-81
Class C $63-89 $51-75 $31-78
Class D $95-126 $86-113 $67-102
Class E $104-134 $105-128 $84-129
Class F $73-176 $68-143 $67-131
All Classes $76-105 $67-95 $567-90
(Average)
The average monthly occupancy range for each class of hotel
rental unit was:
Type of Unit 1997 1996 1995
Class A 66-93% 35-92% 31-88%
Class B 49-92% 52-94% 37-84%
Class C 51-92% 41-95% 21-82%
Class D 28-75% 14-91% 19-73%
Class E 33-84% 30-95% 34-93%
Class F 63-100% 58-100% 84-100%
All Classes 52-87% 42-90% 31-81%
(Average)
Occupancy data for 1994 by type of rental unit is not available.
The difference in occupancy levels is primarily related to seasonal
fluctuations.
<PAGE>
<PAGE>
Historical average occupancy levels at the Chart House
Suites hotel were as follows:
Month 1997 1996 1995 1994
January 62% 53% 51%
February 87% 90% 81%
March 85% 90% 80%
April 63% 74% 58%
May 57% 66% 51%
June 53% 72% 44% 13%
July 66% 66% 58% 41%
August 55% 61% 42% 26%
September 63% 39% 36%
October 54% 51% 42%
November 54% 43% 75%
December 52% 42% 31%
Liquidity
The Chart House Suites hotel operating revenue exceeded
operating expenses in every period, except for the initial period
ended November 30, 1994. The Chart House Suites hotel was not
subject to any mortgage debt during all periods presented,
although once the Company buys the hotel, it will owe
approximately $1.8 million, which will be covered by payments
for the Interests. Day-to-day operating expenses were
paid from operating revenue collected. Future operating expenses
of the hotel are anticipated to be met by the annual dues paid by
the Holders of the Interests.
There are no long-term material capital expenditures,
obligations or other demands or commitments that might impair the
liquidity of the hotel or its costs.
Capital Resources
As of September 30, 1997, no material commitments existed to
make major capital expenditures, other than the purchase of the
hotel. Pursuant to the terms of the License Plan, Holders will
be subject to special assessment for any capital expenditures,
but will not be responsible for amounts arising from the purchase
of the Chart House hotel.
Prospective Forward-Looking Information
It is reasonably likely that historical financial
information will not necessarily be indicative of future
operating results. To the extent that Unit Weeks are removed
from the Rental Pool and used by Holders, there likely will
be an increased future revenue per Unit Week available for
rental because fewer rooms will be available for rental.
In addition, it is anticipated that the average daily
collected revenue per Unit Week in the Rental Pool will increase
over the historically reported collected revenue to the extent
that owners of Interests removed their Unit Weeks from the
Rental Pool (this assumes that the public demand to rent hotel
units remains constant). With fewer hotel units available for
rent each day, it would be more likely that a higher room rent
could be charged for the inventory of hotel studios and suites
available each day. A lower supply of hotel studios and suites
creates less pressure to discount room in order to obtain
occupancy.
The historically reported financial information indicates
that a trend towards higher collected revenue for hotel studios
and suites and a trend towards higher occupancy. Management
believes that these trends will continue from repeat customers
and word-of-mouth advertising.
Environmental Matters
The Company and the hotel results are subject to various
laws and governmental regulation concerning environmental matters
and employee safety and health in the United States. U.S.
federal environmental legislation having particular impact on the
hotel includes the Toxic Substances Control Act; the Resources
Conservation and Recovery Act; the Clean Air Act; the Clean Water
Act; the Safe Drinking Water Act and the Comprehensive
Environmental Response, Compensation and Liability Act (also
known as Superfund). The Company and the Chart House Suites
hotel are also subject to the Occupational Safety and Health
Administration ("OSHA") concerning employee safety and health
matters. The United States Environmental Protection Agency
("EPA"), OSHA and other federal agencies have the authority to
promulgate regulations that have an impact on the hotel's
operations.
In addition to these federal activities, various states have
been delegated certain authority under the federal statutes.
Many state and local governments have adopted environmental and
employee safety and health laws and regulations, some of which
are similar to federal requirements. State and federal
authorities may seek fines and penalties for violation of these
laws and regulations.
Management of the hotel is committed to a long-term
environmental protection program that reduces emissions of
hazardous materials into the environment, as well as to the
remediation of identified existing environmental concerns.
Management is not aware of any hidden or unapparent
conditions of the property, subsoil or structural conditions
which would render the Chart House Suites hotel more or less
valuable. Management is not aware of the existence of
potentially hazardous materials used in the construction or
maintenance of the building, such as urea-formaldehyde foam
insulation and/or the toxic waste. Management is not aware of
any groundwater contamination, underground methane gas or radon
gas. Management believes that the hotel does not produce air
emissions or waste water of environmental concern. Management is
not aware of any underground storage tanks. Management is not
aware of any incidents of spills, dumping or discharges at the
property or the presence of hazardous substances. The hotel did
not have any expenditures in 1994, 1995 or 1996 for environmental
capital projects or for operation and maintenance of
environmental protection facilities. Management estimates that
during 1997 and 1998 no material amount will be spent on capital
projects for environmental protection.
Impact of Inflation
Although inflation has slowed in recent years, it is still a
factor in the economy, and the Company continues to seek ways to
mitigate its impact. To the extent permitted by competition, in
general, the hotel passes increased costs on by increasing asking
hotel rates over time. Management believes that the ability to
increase rental rates should offset any adverse effects from
inflation on the hotel's cost of operations. Operating revenue
reported on the hotel's financial statements have varied in the
last three years from $77,000 in 1994 (partial year), to $341,000
in 1995, and $467,000 in 1996. The increasing revenue is due to
increases in the hotel rates collected and in the occupancy rate.
Inflation had no material effect on the results of
operations in 1996, 1995 and 1994.
CERTAIN RENTAL POOL FINANCIAL INFORMATION
The following summary unaudited financial information sets
forth the summary financial information of the Company as
adjusted to give effect to the operation of the Rental Pool. The
only additional expense assumed is the assumed Rental Pool fee of
5%. The summary unaudited financial information does not purport
to be indicative of the results that would have been obtained,
results that may be obtained, or the per Interest average
results. Actual results will vary week by week. The following
should be read in conjunction with the financial information and
accompanying notes.
RENTAL POOL
PRO FORMA STATEMENT OF RENTAL POOL REVENUES (UNAUDITED)
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
For
the For the
Nine Seven
Months For the Years
Ended November 30, Months
Ended November 30
August 31, 1997
1996 1995 1994
<S> <C>
<C> <C> <C>
Rental Income $379,931
$452,981 $327,031 $72,687
Less Property Management Fee (5.0%) (18,997)
(22,649) (16,352) (3,634)
360,934
430,332 310,679 69,053
Other Income* 13,698
14,220 14,090 4,154
Total Revenues $374,632
$444,552 $324,769 $73,207
</TABLE>
* Other income (i.e., interest income, vending income
and telephone income) in included in the pro forma
computation of rental pool revenues because the above
example assumes that 100% of the Unit Weeks are
placed into the rental pool at all times and such
income will be distributed to Rental Pool participants
under that assumption.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ALLOCATION OF RENTAL REVENUES ON AVERAGE
AMONG
CLASSES OF INTERESTS
Allocated
Income (Using Off-Season Rates and
Gross
Potential Income) (Unaudited)
For
the Nine For the Seven
Total Off
Months For the Years Ended Months
Annual Season Daily
Ended November 30, Ended
Number Rental Nightly Gross
August 31, November 30,
of Days Walk- Potential
1997 1996 1995 1994
Rooms/ Per In Rental (39
Unit (52 Unit (52 Unit (32 Unit
Suites Class Rate Income
Weeks) Weeks) Weeks) Weeks)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Class A 6 2,190 $70 $420
$65,973 $78,286 $57,192 $12,892
Class B 4 1,460 $75 $300
$47,124 $55,918 $40,852 $9,208
Class C 6 2,190 $85 $510
$80,110 $95,061 $69,448 $15,654
Class D 6 2,190 $120 $720
$113,097 $134,204 $98,044 $22,100
Class E 2 730 $130 $260
$40,840 $48,463 $35,404 $7,981
Class F 1 365 $175 $175
$27,489 $32,620 $23,829 $5,372
25 9,125 $2,385
$374,632 $444,552 $324,769 $73,207
</TABLE>
The table below sets forth the pro forma average cash
distribution per Interest for each class of Interest from the
Rental Pool using historic results. The computations are based
upon the preceding table which allocates the pro forma rental
pool revenues among the six classes of Interests. The following
table then the pro forma rental pool revenue allocated to the six
classes of Interests after eliminating the pro forma revenue
allocated to the Company for its retained Unit Weeks included in
the rental pool. For the years ended November 31, 1996 and 1995
the Company has 4 Unit Weeks for each Suite. For the partials
year ending November 30, 1994, and for the Nine Months Ended
August 31, 1997, the amounts are averaged so as to exclude an
average amount for Unit Weeks retained by the Company.
<TABLE>
<CAPTION>
DISTRIBUTION PER INTEREST FOR EACH CLASS OF
INTERESTS (AVERAGE)
___________Class Total (Unaudited)__________
______________Per Interest_____________
For the For the For
the For the
Number Nine Months Seven Months Nine
Months Seven Months
of Ended For the Years Ended Ended
Ended For the Years Ended Ended
Interests August 31, November 30, November 30
August 31, November 30, November 30,
1997 1996 1995 1994
1997 1996 1995 1994
Average of Average of
(39 Unit (48 Unit (48 Unit (32 Unit
Weeks) Weeks) Weeks) Weeks)
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Class A 36 $60,898 $72,264 $52,793 $11,900
$1,692 $2,007 $1,466 $331
Class B 24 $43,499 $51,617 $37,709 $8,500
$1,812 $2,151 $1,571 $354
Class C 36 $73,948 $87,749 $64,105 $14,450
$2,054 $2,437 $1,781 $401
Class D 36 $104,397 $123,881 $90,502 $20,400
$2,900 $3,441 $2,514 $567
Class E 12 $37,699 $44,735 $32,681 $7,367
$3,142 $3,728 $2,723 $614
Class F 6 $25,374 $30,110 $21,997 $4,958
$4,221 $5,018 $3,666 $826
150 $345,815 $410,356 $299,787
$67,575
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATING REVENUES AND CERTAIN EXPENSES
(UNAUDITED)
For the
For
the Seven Months
Nine
Months Ended
Ended For the Years Ended
November 30, November 30,
August 31, 1997 1996
1995 1994
(Unaudited) (Audited)
(Audited) (Audited)
<S> <C> <C>
<C> <C>
Rental Income $379,931 $452,981
$327,031 $ 72,687
Other Income 13,698 14,220
14,090 4,154
Total Revenues 393,629 467,201
341,121 76,841
Total Salaries 101,480 127,377
93,648 38,243
Total Direct Expenses 117,619 150,287
141,411 111,056
Total Maintenance and Repair Expenses 11,607 25,114
37,570 30,917
230,706 302,778
272,629 180,216
Excess (Deficiency) of Operating
Revenues Over Certain Expenses $162,923 $164,423 $
68,492 ($103,375)
</TABLE>
The preceding condensed statements of operating revenues and
certain expenses reflect income and expenses that are directly
attributable to the operations of the hotel complex, and that are
not dependent upon a particular owner of the property. As a
result, certain expenses which arte included in the accounting
records of the property are not included in the accompanying
financial statements. These expenses are depreciation,
amortization, mortgage interest, and certain office and
administrative expenses.
<PAGE>
Allocation Week-by-Week
For example, if only two Unit Weeks are left in the Rental
Pool, one Class A and one Class E, and the total rental revenue
was $1,000 (after consideration of the 5% Rental Pool fee), the
following allocation would result:
Off Season Percentage of
Nightly Rental Pool for
Category Walk-in Rate the Unit Week Total Rental Allocation
Class A 70 35% $ 350
Class E 130 65% 650
200 100% $1,000
This amount would then be paid after the end of the quarter to
the particular Holders.
CERTAIN OCCUPANCY INFORMATION
The following unaudited information sets forth the financial
results and percentage occupancy for the nine months ended August 31,
1997, and for the years ended November 30, 1996 and 1995,
respectively. The Company's records do not allow it to present
occupancy information and weekly rate information for the year
ended November 30, 1994. The Company does not believe the 1994
information or results are material as the Chart House Suites
hotel was only beginning operations and did not have any prior
operating history.
CHART HOUSE SUITES HOTEL
RESULTS BY CLASS OF INTERESTS
For the Nine
Months Ended For the Years Ended
August 31, November 30,
1997 1996 1995
Average Occupancy
Class A 75% 76% 63%
Class B 70% 69% 58%
Class C 69% 69% 51%
Class D 45% 45% 38%
Class E 57% 61% 59%
Class F* 86% 91% 97%
Average Unit Week
Rental Amount
(Collected)
Class A $482 $438 $397
Class B $497 $470 $426
Class C $513 $440 $390
Class D $748 $670 $563
Class E $821 $823 $709
Class F* $771 $608 $574
*Primarily rented on a monthly basis.
ANNUAL DUES AND SPECIAL ASSESSMENTS
Each Holder will be responsible for a proportionate share of
the annual dues based upon a formula allocating fixed and
variable costs (collectively, "Common Expenses") to their
category of suites. For the year ended December 31, 1997, annual
dues per Unit Week will be $190 for A and B Interests (or $1,520
annually for each Interest), $205 for C Interests (or $1,640
annually for each Interest), $285 for D Interests (or $2,280
annually for each Interest), $305 for E Interests (or $2,440
annually for each Interest) and $365 for F Interests (or $2,920
annually for each Interest). As of the date of the Prospectus,
no special assessments are contemplated.
The amounts paid for each expense in the last three years
is set forth in the following table:
CHART HOUSE SUITES
CERTAIN EXPENSES RELATED TO THE OPERATION OF THE HOTEL
For the Year Ended November 30,
1996 1995 1994
Salaries: $127,377 $93,648 $38,234
Direct Expenses:
Insurance 12,492 11,048 12,488
Maintenance Services/
Supplies 11,922 8,532 5,108
Electricity 15,868 14,613 9,115
Propane Gas 4,020 1,272 --
Water/Sewer 9,432 8,287 7,286
Trash Removal 2,067 1,681 1,004
Cable Television 3,741 3,084 1,870
Grounds 2,575 1,238 1,725
Sales and Marketing 19,659 24,246 21,858
Telephone 10,201 9,646 5,218
Laundry/Cleaning
Supplies 8,976 8,641 12,280
Real Estate Tax 27,595 24,867 15,114
Administrative Expenses: 21,739 24,436 17,450
Total Direct Expenses: 150,287 141,411 111,056
Repairs and Maintenance
Expenses 25,114 37,570 30,917
Total Expenses $302,778 $272,629 $180,216
Under the License Plan, future annual dues and special
assessments (unless assessed against a specific or group of
Holders as set forth in the License Plan,) will be allocated
based upon the following formula:
Total Per
Interest
(Eight Unit
Weeks)* Total
Class A Interest .5027% 19.6045%
(all Unit Weeks)
Class B Interest .5027% 13.0696%
(all Unit Weeks)
Class C Interest .5424% 21.1522%
(all Unit Weeks)
Class D Interest .7540% 29.4067%
(all Unit Weeks)
Class E Interest .8069% 10.4901%
(all Unit Weeks)
Class F Interest .9657% 6.2769%
(all Unit Weeks)
Total 4.0744% 100.0000%
* The Company will bear a proportionate share of the annual
dues and special assessments attributable to any unsold or
reacquired Interests and the Unit Weeks retained by it.
Each Holder shall be responsible for a portion of the annual
dues based upon the above formula.
The amount of annual dues will be set by the Company and
cannot increase annually more than 10% of the prior year's dues,
exclusive of property taxes and insurance, without an affirmative
vote of Holders representing ownership of a majority of Unit
Weeks (including weeks owned by the Company). For purposes of
such a vote, the Company will vote Unit Weeks associated with
unissued Interests or Unit Weeks canceled and reacquired by the
Company. An Advisory Committee composed primarily of Holders may
be consulted for advice regarding certain management decisions
relevant to establishing annual dues. The Company is not bound
to follow the advice or recommendations offered therefrom. The
Company anticipates that if it acquires the hotel, property taxes
may increase by $12,231 (or approximately $75 per Interest).
The Company will maintain separate accounts for operating
and capital expenses. Annual dues shall be based upon the Chart
House Suites hotel's requirements for all expenses relating to
the operation of Chart House Suites hotel, such as accounting
costs, front desk costs, maid service and cleaning, maintenance,
repair and replacement of suites and furnishings and all other
costs of operating the vacation ownership program (including the
Rental Pool and reserves for capital expenses). See Annex G for
information on the annual dues budget. Expenses may also
include, among other things, expenses for cleaning,
maintaining, repairing and replacing furnishings in all suites;
any deficit from a previous period; creation of a reasonable
contingency reserve, surplus and/or sinking fund; payment of real
property taxes and any other expenses or liabilities which may be
incurred in accordance with the License Plan. See the License
Plan attached as Annex A.
In addition, Charthouse may levy special assessments, as set
forth in the License Plan, generally for the purpose of defraying
unexpected repairs, costs, expenses or purchases or shortfalls in
the collection of assessments from the Holders. Special
assessments must be approved by the vote or written assent of a
majority of Unit Weeks, unless (a) the assessment, other than a
special assessment to restore or rebuild because of damage or
destruction to the Chart House Suites hotel does not exceed 5% of
the budgeted gross expenses of Chart House Suites hotel for the
calendar year; (b) the assessment is a special assessment for the
repair or rebuilding of the Chart House Suites hotel, which does
not exceed 10% of the budgeted gross expenses of the Chart House
Suites hotel for the calendar year in which the assessment is
levied; or (c) the assessment is a special assessment against a
Holder for the purpose of reimbursing the Company for costs
incurred in bringing the Holder into compliance with the
provisions of the governing instruments for Chart House Suites
hotel.
As discussed above, any capital deficits will be met by
special assessments. A Holder will not be allowed to use or
receive rental income from the Charthouse Rental Pool if he
fails to timely pay annual dues, special assessments, or
installment payments, and, under the License Plan, Charthouse
will may rent the suite and retain all income. Under such
circumstances, any income received will not offset payments
due from the Holder, and the Holder will not be allowed to
rent or use the suite until the complete shortfall, with
interest, is paid to the Company.
DIFFERENCES IN ALLOCATING RENTAL POOL AND ANNUAL DUES
AND SPECIAL ASSESSMENTS
Under the License Plan, Holders who participate in the
Rental Pool will receive income based upon ratios based upon the
Company's arbitrary off-season nightly walk-in rate for each
Class of suite and upon the actual number of Unit Weeks for each
Class that is participating in the Rental Pool. While arbitrary,
these ratios represent the Company's estimate of approximate
rental value rates for each Class of Interests, and the relative
percentages are fixed for all Rental Pool allocations until
December 31, 2040. Because Holders may personally use the
Interests or exchange them in RCI's Exchange Program, actual
participation rental percentages will vary. Assuming every
Interest remains in the Rental Pool for the entire year, the
following allocation percentages would apply:
<PAGE>
<TABLE>
<CAPTION>
Off Total %
Number Season
Gross Total % Per
of Number Nightly
Potential Total % Per Unit Interest
Studios/ of Walk-in Daily Total
% Per Week (52 (Eight
Suites Interests Rate Revenue Per
Class Room Weeks) Unit Weeks)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Class A 6 36 $70 $420
17.6101% 2.9350% 0.0564% 0.4515%
Class B 4 24 $75 $300
12.5786% 3.1447% 0.0605% 0.4838%
Class C 6 36 $85 $510
21.3836% 3.5639% 0.0685% 0.5483%
Class D 6 36 $120 $720
30.1887% 5.0314% 0.0968% 0.7741%
Class E 2 12 $130 $260
10.9015% 5.4507% 0.1048% 0.8386%
Class F 1 6 $175 $175
7.3375% 7.3375% 0.1411% 1.1289%
25 150 $2,385
100.000%
</TABLE>
<PAGE>
The actual percentage allocation among Classes of Interests will
vary in relation to how many suites are actually placed into the
Rental Pool each Unit Week.
Under the License Plan, annual dues are based upon rates
established by the Company's arbitrary conclusion as to what it
costs to clean, maintain and operate the suite. For example, the
Company believes that the costs will be similar for Class A and B
Interests, although, on average and historically, B Interests
suites have generated greater per night rental income.
Accordingly, the annual dues and special assessments, if any,
will be allocated as follows:
<PAGE>
<TABLE>
<CAPTION>
Total %
Total Total % Per
Number
Annual Per Total % Interest
of Number Annual Dues Total %
Per Room Per Week (Eight
Studios/ of Dues Per (52 Unit Class
(52 (52 Unit (52 Unit Unit
Suites Interests Week Weeks) Unit
Weeks) Weeks) Weeks) Weeks)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Class A 6 36 $190 $59,280
19.6045% 3.2674% 0.0628% 0.5027%
Class B 4 24 $190 $39,520
13.0696% 3.2674% 0.0628% 0.5027%
Class C 6 36 $205 $63,960
21.1522% 3.5254% 0.0678% 0.5424%
Class D 6 36 $285 $88,920
29.4067% 4.9011% 0.0943% 0.7540%
Class E 2 12 $305 $31,720
10.4901% 5.2451% 0.1009% 0.8069%
Class F 1 6 $365 $18,980
6.2769% 6.2769% 0.1207% 0.9657%
25 150 $302,380
100.000%
</TABLE>
<PAGE>
As a result of these formulas, the allocation of income will
vary week by week depending upon whether Holders leave their Unit
Weeks in the Rental Pool. The annual dues will remain a fixed
ratio. For comparison, and assuming all Interests remained in
the Rental Pool, the following average income and annual dues
allocations would result:
<PAGE>
<TABLE>
<CAPTION>
Rental Pool Participation Annual
Dues Allocations
Interest (all Eight Unit Weeks) (all
Eight Unit Weeks)
Total %
Per
Interest Total %
Total % Eight Unit Total
% Per Interest
Per Class Weeks Per
Class Eight Unit Weeks
<S> <C> <C>
<C> <C>
Class A 17.6101% 0.4515%
19.6045% 0.5027%
Class B 12.5786% 0.4838%
13.0696% 0.5027%
Class C 21.3836% 0.5483%
21.1522% 0.5424%
Class D 30.1887% 0.7741%
29.4067% 0.7540%
Class E 10.9015% 0.8386%
10.4901% 0.8069%
Class F 7.3375% 1.1289%
6.2769% 0.9657%
100.0000% 4.225%
100.000% 4.074%
</TABLE>
<PAGE>
<PAGE>
PRO FORMA RESULTS WITH VARIOUS ASSUMED OCCUPANCY LEVELS
The following tables set forth different levels of pro forma
income to Holders, assuming all Unit Weeks are in the Rental Pool
and the suites are rented for the established off-season, nightly
walk-in rate, assuming different levels of occupancy. The
Company does not know what rate will be obtained, what occupancy
or what will be distributed. Based upon past results, the "off-
season, nightly walk-in rate" has not been consistently obtained
because of seasonality, discounts and corporate rates.
The following tables do not represent a prediction of actual
results and may not be relied on for that purpose.
<PAGE>
<TABLE>
<CAPTION>
CHARTHOUSE SUITES VACATION OWNERSHIP,
INC.
PRO FORMA REVENUE FROM RENTAL POOL
________________ASSUMED 100% OCCUPANCY PER
WEEK________________
Off
Allocated Allocated
Number Rental Season Gross
Rental Rental
of Total Pool Nightly Revenue
Income Income
Studios/ Rental Occupancy Walk-In In Rental by
Unit Eight Unit
Suites Days 100.00% Rate Pool by
Class Weeks
<S> <C> <C> <C> <C> <C>
<C> <C>
Class A 6 42 42 $70 $2,940.00
$490.00 $3,920.00
Class B 4 28 28 $75 $2,100.00
$525.00 $4,200.00
Class C 6 42 42 $85 $3,570.00
$595.00 $4,760.00
Class D 6 42 42 $120 $5,040.00
$840.00 $6,720.00
Class E 2 14 14 $130 $1,820.00
$910.00 $7,280.00
Class F 1 7 7 $175 $1,225.00
$1,225.00 $9,800.00
25 175 175 $16,695.00
</TABLE>
<TABLE>
<CAPTION>
CHARTHOUSE SUITES VACATION OWNERSHIP,
INC.
PRO FORMA REVENUE FROM RENTAL POOL
________________ASSUMED 90% OCCUPANCY PER
WEEK________________
Off
Allocated Allocated
Number Rental Season Gross
Rental Rental
of Total Pool Nightly Revenue
Income Income
Studios/ Rental Occupancy Walk-In In Rental by
Unit Eight Unit
Suites Days 90.00% Rate Pool by
Class Weeks
<S> <C> <C> <C> <C> <C>
<C> <C>
Class A 6 42 37.80 $70 $2,646.00
$441.00 $3,528.00
Class B 4 28 25.20 $75 $1,890.00
$472.50 $3,780.00
Class C 6 42 37.80 $85 $3,213.00
$535.50 $4,284.00
Class D 6 42 37.80 $120 $4,536.00
$756.00 $6,048.00
Class E 2 14 12.60 $130 $1,638.00
$819.00 $6,552.00
Class F 1 7 6.30 $175 $1,102.50
$1,102.50 $8,820.00
25 175 157.50 $15,025.50
</TABLE>
<TABLE>
<CAPTION>
CHARTHOUSE SUITES VACATION OWNERSHIP,
INC.
PRO FORMA REVENUE FROM RENTAL POOL
________________ASSUMED 80% OCCUPANCY PER
WEEK________________
Off
Allocated Allocated
Number Rental Season Gross
Rental Rental
of Total Pool Nightly Revenue
Income Income
Studios/ Rental Occupancy Walk-In In Rental by
Unit Eight Unit
Suites Days 80.00% Rate Pool by
Class Weeks
<S> <C> <C> <C> <C> <C>
<C> <C>
Class A 6 42 33.60 $70 $2,352.00
$392.00 $3,136.00
Class B 4 28 22.40 $75 $1,680.00
$420.00 $3,360.00
Class C 6 42 33.60 $85 $2,856.00
$476.00 $3,808.00
Class D 6 42 33.60 $120 $4,032.00
$672.00 $5,376.00
Class E 2 14 11.20 $130 $1,456.00
$728.00 $5,824.00
Class F 1 7 5.60 $175 $980.00
$980.00 $7,840.00
25 175 140.00
$13,356.00
</TABLE>
<TABLE>
<CAPTION>
CHARTHOUSE SUITES VACATION OWNERSHIP,
INC.
PRO FORMA REVENUE FROM RENTAL POOL
________________ASSUMED 70% OCCUPANCY PER
WEEK________________
Off
Allocated Allocated
Number Rental Season Gross
Rental Rental
of Total Pool Nightly Revenue
Income Income
Studios/ Rental Occupancy Walk-In In Rental by
Unit Eight Unit
Suites Days 70.00% Rate Pool by
Class Weeks
<S> <C> <C> <C> <C> <C>
<C> <C>
Class A 6 42 29.40 $70 $2,058.00
$343.00 $2,744.00
Class B 4 28 19.60 $75 $1,470.00
$367.50 $2,940.00
Class C 6 42 29.40 $85 $2,499.00
$416.50 $3,332.00
Class D 6 42 29.40 $120 $3,528.00
$588.00 $4,704.00
Class E 2 14 9.80 $130 $1,274.00
$637.00 $5,096.00
Class F 1 7 4.90 $175 $857.50
$857.50 $6,860.00
25 175 122.50
$11,686.50
</TABLE>
<TABLE>
<CAPTION>
CHARTHOUSE SUITES VACATION OWNERSHIP,
INC.
PRO FORMA REVENUE FROM RENTAL POOL
________________ASSUMED 50% OCCUPANCY PER
WEEK________________
Off
Allocated Allocated
Number Rental Season Gross
Rental Rental
of Total Pool Nightly Revenue
Income Income
Studios/ Rental Occupancy Walk-In In Rental by
Unit Eight Unit
Suites Days 50.00% Rate Pool by
Class Weeks
<S> <C> <C> <C> <C> <C>
<C> <C>
Class A 6 42 21.00 $70 $1,470.00
$245.00 $1,960.00
Class B 4 28 14.00 $75 $1,050.00
$262.50 $2,100.00
Class C 6 42 21.00 $85 $1,785.00
$297.50 $2,380.00
Class D 6 42 21.00 $120 $2,520.00
$420.00 $3,360.00
Class E 2 14 7.00 $130 $910.00
$455.00 $3,640.00
Class F 1 7 3.50 $175 $612.50
$612.50 $4,900.00
25 175 87.50
$8,347.50
</TABLE>
<TABLE>
<CAPTION>
CHARTHOUSE SUITES VACATION OWNERSHIP,
INC.
PRO FORMA REVENUE FROM RENTAL POOL
________________ASSUMED 25% OCCUPANCY PER
WEEK________________
Off
Allocated Allocated
Number Rental Season Gross
Rental Rental
of Total Pool Nightly Revenue
Income Income
Studios/ Rental Occupancy Walk-In In Rental by
Unit Eight Unit
Suites Days 25.00% Rate Pool by
Class Weeks
<S> <C> <C> <C> <C> <C>
<C> <C>
Class A 6 42 10.50 $70 $735.00
$122.50 $980.00
Class B 4 28 7.00 $75 $525.00
$131.25 $1,050.00
Class C 6 42 10.50 $85 $892.50
$148.75 $1,190.00
Class D 6 42 10.50 $120 $1,260.00
$210.00 $1,680.00
Class E 2 14 3.50 $130 $455.00
$227.50 $1,820.00
Class F 1 7 1.75 $175 $306.25
$306.25 $2,450.00
25 175 43.75
$4,173.75
</TABLE>
<PAGE>
The Company does not know what rates will be obtained or
distributed. Based upon past results, the "off-season nightly
walk-in rate" has not been consistently obtained because of
discounts, seasonality and otherwise. The above does not
consider the 5% Rental Pool fee.
<PAGE>
<PAGE>
GUARANTEED RENTAL ARRANGEMENT
The following is condensed information concerning the material
terms of the Guaranteed Rental Arrangement by Charthouse.
References to the provisions of the Guaranteed Rental Arrangement
are qualified in their entirety by reference to the text of the
Payment and Guarantee Agreement, a form of which has been filed
as an exhibit to the Registration Statement of which this
Prospectus forms a part.
General
As an incentive for early purchasers, Investors who purchase
an Interest by prior to April 17, 1998 will receive the right to
exchange six Unit Weeks of their Chart House Suites hotel use
with the Company and receive the applicable Guaranteed Rental
Rate (hereafter "Guaranteed Rates"). Investors who purchase
between April 18, 1998 and July 17, 1998 will receive the right
to put four weeks over the life of the Interests to the Company
and receive the Guaranteed Rates, subject to the terms and
conditions of the Guaranteed Rental Arrangement. Investors who
purchase between July 18, 1998 and October 17, 1998 will have the
right to put two weeks over the life of the Interests to the
Company and receive the Guaranteed Rates. Under the terms of the
Guaranteed Rental Arrangement, the Investors put right must be
exercised by October 7, 2002 and is subject to certain terms and
conditions. Payments under the incentive agreement are subject
to the terms and conditions of the Guaranteed Rental Arrangement
described below. Investors purchasing after October 17, 1998
will not be able to participate in the Guaranteed Rental
Arrangement.
Guaranteed Rates
The Company agrees to pay the following rates under the
Guaranteed Rental Arrangement. Such amounts will be paid within
45 days of the end of the quarter for the particular Unit Week.
These rates are the off-season nightly walk-in rates (as of the
date of this Prospectus):
<PAGE>
<TABLE>
<CAPTION>
Guaranteed Total (Assuming Total (Assuming Total
(Assuming
Rate Six Weeks) Four Weeks) Two
Weeks)
<S> <C> <C> <C> <C>
Class A $ 70.00 per night $2,940 $1,960
$980
Class B $ 75.00 per night $3,150 $2,100
$1,050
Class C $ 85.00 per night $3,570 $2,380
$1,190
Class D $120.00 per night $5,040 $3,360
$1,680
Class E $130.00 per night $5,460 $3,640
$1,820
Class F $175.00 per night $7,350 $4,900
$2,450
</TABLE>
<PAGE>
Holders should not assume that the Rental Pool will generate
such rates. The Rental Pool could return higher or lower rates,
due to factors such as discounts, corporate rental rates, the 5%
rental agent charge and seasonality. The Company does not know
what rate will be obtained, what occupancy or what will be
distributed. Based upon past results, the "off-season nightly
walk-in rate" has not been consistently obtained, taking
discounts, corporate rates, and season fluctuations into
accounts.
Terms and Conditions of Guaranteed Rental Arrangement
The Guaranteed Rental Arrangement is subject to the
following terms and conditions:
(1) Holders must give the Company at least 30 days written
notice of their intent to put the weeks pursuant to the
Guaranteed Rental Arrangement. Thereafter, the Holder may not
withdraw the "put" weeks without the consent of the Company.
(2) The Holders must put entire Unit Weeks to the Company
and have paid the corresponding annual dues for the Unit Week.
(3) The Company will have the exclusive right to use,
exchange or rent the suite for the designated Unit Weeks and may
collect and retain all revenue arising therefrom.
(4) Unless waived by the Company, no more than five suites
may be put to the Company from all Investors in any one week. In
case more than five suites are put to the Company, the Company
will accept put requests in the order in which written requests
are received. Investors whose put rights are not accepted will
be notified within one week of receipt of a letter request.
(5) All puts must be exercised by October 17, 2002.
(6) There must be no action threatened, pending or taken,
which makes the Rental Pool or the Guaranteed Rental Arrangement
unlawful, or otherwise restricts or prohibits the ability of
Charthouse to use the suite.
(7) The Rental Pool fee of 5% will be owed, and all amounts
shown above are exclusive of the rental management fee.
(8) Holders must elect whether to accept the Rental
Guarantee or the Cash Discount (described below) at the time of
subscription to purchase the Interests.
Cash Discount
The Cash Discount allows Holders to elect to receive cash to
be used as payment towards the subscription at the time of
subscription in lieu of the Guaranteed Rental Arrangement. Under
the terms of the Cash Discount, Holders who purchase prior to
April 17, 1998 may elect to receive a 5% discount on the
subscription amount in lieu of the Guaranteed Rental Arrangement.
Investors who purchase between April 18, 1998 and July 17, 1998
may elect to receive a 3% discount on the subscription amount in
lieu of the Guaranteed Rental Arrangement. Holders who purchase
between July 18, 1998 and October 17, 1998 may elect to receive a
1-1/2% discount on the subscription amount in lieu of the
Guaranteed Rental Arrangement.
_________Cash Discount_________
Class 5% 3% 1-1/2%
A $ 925 $ 555 $277.50
B $1,075 $ 645 $322.50
C $1,275 $ 765 $382.50
D $1,825 $1,095 $547.50
E $1,975 $1,185 $592.50
F $3,000 $1,800 $900.00
<PAGE>
<PAGE>
Right to Amend
The Company reserves the right to amend the Guaranteed
Rental Arrangement and Cash Discount, provided that any amendment
does not reduce the cash benefit to a Holder.
LICENSE PAYMENT OPTIONS
Holders have the option to pay for their Interests either
by:
Payment in Full. Holders may pay for their Interests in
full at the time of subscription by check or by wire transfer,
which will be placed in escrow for the 10-day statutory period.
Holders can also use financing from other parties to pay for the
Interests.
Installment Payments. Holders may also pay in installments
up to 360 months. Holders utilizing this option must pay at
least 30% of the net subscription price (after any discounts) at
the time of acceptance of the subscription and agree that
installment license payments will be paid before the first day of
each month with an increased license payment of up to 9% per year
on the unpaid balance owing for the Interest (which has the
affect of up to 9% interest on the unpaid balance). The Company
will offer rates below 9% to Qualifying Decade Investors. See
"Plan of Distribution." If a Holder fails to make any
payment when due, then such Holder will be in default, and to the
extent such default continues, he or she will forfeit all rights,
use or otherwise, in the Chart House Suites hotel suite or studio
and the Interest. If a Holder is in default on any license
payment for a cumulative period of more than six months or has
more than three events of default (of any duration), the Company
may acquire and cancel the Interest, pursuant to the terms of the
License Plan. Because the payments will vary depending upon the
amount invested, a schedule of required payments will be provided
upon acceptance of subscriptions and after the ten-day
cancellation period has been completed.
<PAGE>
<TABLE>
<CAPTION>
Example of Amounts of Installment
Payments
Cash
Total Price
Total Payments Per
30.00% Maximum of
All Per Rental Rental
Cash Down Balance Monthly
Monthly Total Total Day 43 Day 43
Class Price Payment Due Payment
Payments Interest Payments Years Years
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
A $18,500 $5,550 $12,950 $104.20
$37,511.51 $24,561.51 $43,061.51 $17.88 $7.68
B 21,500 6,450 15,050 121.10
43,594.45 28,544.45 50,044.45 20.78 8.93
C 25,500 7,650 17,850 143.63
51,705.05 35,855.05 59,355.05 24.65 10.59
D 36,500 10,950 25,550 205.58
74,009.19 48,459.19 84,959.19 35.20 15.16
E 39,500 11,850 27,650 222.48
80,092.14 52,442.14 91,942.14 38.18 16.40
F 60,000 18,000 42,000 337.94
121,658.94 79,658.94 139,658.94 58.00 24.91
</TABLE>
<PAGE>
SUMMARY OF INCOME AND COSTS TO HOLDERS
Upon subscription, a Holder will have to pay (1) at least
30% of the purchase price of the Interest, and (2) the
corresponding Florida taxes due, including an additional Florida
documentary tax for indebtedness due if the installment method is
utilized and the Subscription Agreement is executed in Florida.
See "Certain Florida Tax Considerations." Assuming no cash
discounts are applicable adn that if the installment method
is used, the Subscription Agreement is not executed in Florida,
the following will be due upon subscription:
Purchase Plan
Class of Interest Minimum Due Florida Taxes
A $18,500 $5,550 $129.50
B 21,500 6,450 150.50
C 25,500 7,650 178.50
D 36,500 10,950 255.50
E 39,500 11,850 276.50
F 60,000 18,000 420.00
In order to use the Unit Weeks, a Holder will also have to
be current on all annual dues and, if applicable, special
assessments and installment payments for the Interests. See
"Annual Dues and Special Assessments." Under the Subscription
Agreement, Holders agree to pay the annual dues on a monthly
basis. Annual dues until December 31, 1998 will be as follows:
Annual Dues per Total Annual Dues Monthly Annual
Class Unit Week (Per Interest) Dues
A $190 $1,520 $126.67
B 190 1,520 126.67
C 205 1,640 136.67
D 285 2,280 190.00
E 305 2,440 203.33
F 365 2,920 243.33
The Company intends to provide Holders the option to have
monthly annual dues amounts withdrawn from his or her checking
account. If applicable, special assessments could also be
assessed.
If a Holder pays for his or her Interest on the installment
method, there will also be monthly installment payments due.
Assuming the Holder pays installment payments with 9% interest
factor submits the minimum down payment and has no cash
discounts, the following monthly payment would be due:
30% Cost For
Down Maximum Interest Per
Offering Payment Balance Monthly Rental Day
Class Price Due Due Payment (43 Years)
A $18,500 $5,550 $12,950 $104.20 $17.88
B 21,500 6,450 15,050 121.10 20.78
C 25,500 7,650 17,850 143.63 24.65
D 36,500 10,950 25,550 205.50 35.28
E 39,500 11,850 27,650 222.48 38.18
F 60,000 18,000 42,000 337.94 58.00
* Assumes purchase on January 1, 1998, and continued
ownership until December 31, 2040.
A Holder may be able to generate rental from the Rental Pool
and, if appropriate, the Guaranteed Rental Arrangement. Based
upon past results, the following would have been distributed on
average:
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Average of Distributions per Interest
Guaranteed For the Nine For the Years Ended November 30,
Rental Months Ended
Arrangement August 31, 1997
1994
(Average (Average
(Per Unit of 39 1996 (Eight 1995 (Eight of 32
Class Week) Unit Weeks)* Unit Weeks) Unit Weeks) Unit
Weeks)
<S> <C> <C> <C> <C> <C>
A $490 $1,692 $2,007 $1,466 $331
B $520 $1,812 $2,151 $1,571 $354
C $595 $2,054 $2,437 $1,781 $401
D $840 $2,900 $3,441 $2,514 $567
E $910 $3,142 $3,728 $2,723 $614
F $1,225 $4,421 $5,018 $3,666 $826
</TABLE>
<PAGE>
* Depending upon the schedule, Holders would have between
four and six Unit Weeks during this eight month period. This
amount is the average of all Unit Weeks.
The Company is unable to forecast what results will actually
be obtained, and different results may occur. The foregoing
example is based on historical Chart House results and does not
include the 5% Rental Pool fee. Actual results may differ
significantly.
<PAGE>
<PAGE>
DETERMINATION OF OFFERING PRICE
The offering price per Interest has been determined solely
by the Company on the basis of its belief of the price at which
the Interests will be marketable. It has not been calculated
based upon any method considering net worth, earnings, appraisals
or other established investment criteria of value. Accordingly,
there can be no assurances that the Interests offered hereby can
be resold at or in excess of the offering price, if at all.
There is no organized market for the trading of the Interests
offered herein, and none is expected to develop.
USE OF PROCEEDS
Assuming that the maximum number of Interests offered hereby
are sold, the gross proceeds from the sale will be approximately
$4,248,000 (exclusive of offering expenses estimated at $361,000
and sales commissions of $297,300). Guaranteed Rental
Arrangement payments are estimated to be a maximum of $601,020
(assuming everyone purchases in the first six months and does not
select the cash discount). The Company intends to pay this
obligation from rental income generated from the Charthouse
Rental Pool for the Unit Weeks it has available for rental. In
the event those funds are not sufficient, the Company believes it
still will have sufficient working capital to meet its
obligations. Its sole shareholder intends to invest additional
funds in order to pay offering costs or to fund the Guaranteed
Rental Arrangement or the amounts due upon cancellation of the
Interests, if necessary. Charthouse plans to use all of
the remaining net proceeds of this Offering to pay for the
property and retain as working capital.
The Company intends to use the net proceeds in the following
order: (i) to pay offering, RCI membership and other costs
(estimated at $650,000), (ii) to pay taxes on taxable revenue
from the sale of the Interests (the Company cannot estimate this
amount because it depends upon when amounts for Interests are
received), (iii) to repay the cost of the Chart House Suites
hotel (estimated at approximately $1,800,000) and (iv) to use for
working capital.
PLAN OF DISTRIBUTION
As of the date of this Prospectus, the Interests are
available only for purchase in the States of Florida and
Wisconsin. Retirement plans and individual retirement accounts
may not purchase the Interests.
The Interests are being offered by the Company through
Decade Securities Corporation, an affiliate of the Company, on a
best-efforts basis. The minimum subscription is one Interest,
although the Company reserves the right to issue fractional
Interests. Decade Securities Corporation will receive a
commission of 7% of the offering price on all sales of Interests.
Decade Securities Corporation may authorize certain other
broker-dealers ("Soliciting Dealers") who are members of the
National Association of Securities Dealers, Inc. ("NASD") to
sell Interests. In the event of sale by such Soliciting Dealers,
Decade Securities Corporation will pay them from its own
commission a negotiated commission, not to exceed 7% of the gross
proceeds of such sales. These arrangements are set forth more
fully in the Soliciting Dealer Agreement filed as an exhibit to
the Registration Statement of which this Prospectus is a part.
All subscriptions are subject to approval by the Company, and the
Company does not intend to impose any minimum suitability
standards, although Decade Securities Corporation will only
accept purchasers from Holders with either (1) a net worth in
excess of $30,000, or (2) an annual income in excess of $30,000.
All funds received by Decade Securities Corporation will be held
in escrow, pursuant to the escrow agreement with William
Atkinson, a Florida real estate broker, until the Section
721 F.S. cancellation period ends. During this period, a
purchaser will have the right to rescind the transaction and
receive a return of all monies (less amounts for any benefits).
No wholesaling fees will be paid. After the escrow period, funds
will be remitted to the Company for its use. See "Use of
Proceeds." Under the Underwriting Agreement and the Soliciting
Dealer Agreement. The Company is offering sales representatives
bonus Unit Weeks for the sale of three Interests or more which
will be deemed part of the commission and further provided that
the 7% commission plus the incentives will not exceed 10%
of the sales price.
The Company has reserved the right to cancel all Interests
if fewer than 76 Interests are sold by October 31, 1998.
The Company is not obligated to exercise this right, and the
number 76 is an arbitrary number selected by the Company. If the
Company exercises this right, Holders will be refunded all of
their licensing payments paid to the Company, less any amounts
received under the Guaranteed Rental Arrangement and amounts
received from renting the Unit Week or using the Unit Week.
Holders will also be refunded any prepayments for annual dues
for periods after October 31, 1998. If the Company exercises
the right, it will send written notice to the Holders by
November 30, 1998 and forward any amounts owing, along with
an unaudited schedule of the calculated net amounts owing to
Holders.
The Company has agreed to indemnify Decade Securities Corpo-
ration and the Soliciting Dealers against certain liabilities,
including liabilities under the Securities Act of 1933, provided,
however, that any indemnification by the Company of Soliciting
Dealers shall be limited to expenses incurred in a successful
adjudication on the merits of each count involving alleged
securities laws violations or in defense of a claim dismissed
with prejudice on the merits by a court of competent
jurisdiction, and the court approves indemnification of such
expenses. The Soliciting Dealers have severally agreed to
indemnify the Company against certain such liabilities.
Interests may be purchased by Qualifying Decade Investors
net of any sales charge and/or, if utilizing the installment
method for Interests, at a lower rate of assumed interest. A
Qualifying Decade Investor means a person who owns a partnership
interest in an entity in which Jeffrey Keierleber is an affiliate
of or the general partner.
HOW TO SUBSCRIBE
The Interests are being offered by Decade Securities Corpo-
ration, an affiliate of the Company, and by certain Soliciting
Dealers. Decade Securities Corporation and certain Soliciting
Dealers may be compensated with up to 7% commission for each
Interest sold. See "Plan of Distribution."
In order to acquire an Interest, interested parties must
execute a Subscription Agreement and agree to be bound under the
License Plan and the Rules and Regulations for Chart House Suites
Hotel adopted by the Company. All subscribers are subject to the
review, approval and acceptance by the Company, whose decision
shall be final. Upon subscription, a potential purchaser must
pay at least 30% of the net subscription for the Interests, after
consideration of all discounts, plus any applicable taxes.
SUMMARY OF PROMOTIONAL AND SALES MATERIAL
Sales materials may be used in connection with this Offering
only when accompanied or preceded by the delivery of this
Prospectus. Such sales materials may include a booklet, slides,
films, "fact" sheets, articles, publications and brochures
describing the Offering, the Company and the Chart House Suites
hotel. The Company may also provide information, which has been
provided by RCI. The offering is made only by means of the
Prospectus (including all annexes) and the Time Share Public
Offering Statement.
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the
Company, as of June 30, 1997. The table should be read in
conjunction with the Company's financial statements, including
the related notes thereto, appearing elsewhere in this
Prospectus.
Long-Term Debt $0
Shareholder's Equity:
Common Stock 1
Paid In Capital 99,999
Less: Stock Subscription
Receivable (90,000)
Retained Earnings ---
$ 10,000
The Company believes that it will have sufficient funds to
provide the services through the receipt of annual dues and
special assessments, if any. For additional information on the
Company see the enclosed financial statements and footnotes.
MANAGEMENT
Directors and Executive Officers
Following is information with respect to directors and
executive officers of the Company.
Name Age Position with the Company
Jeffrey Keierleber 44 President, Treasurer and Sole
Director
Michael G. Sweet 47 Secretary
The following provides additional information on officers
and others who may provide services to the Company pursuant to
agreements. It is anticipated that officers will not spend more
than 10% of their time on matters relating to the Company.
Jeffrey Keierleber, (age 44) President, Treasurer and sole
Director of the Company, graduated with a B.B.A. in 1975 and an
M.B.A. in 1977 from the University of Wisconsin system. Since
that time, Mr. Keierleber has worked in the real estate field and
has been actively involved in property management, real estate
syndication, investment, acquisitions, liquidations, limited
partnership management and broker/dealer relations. Mr.
Keierleber holds Series 22 and 63 securities licenses from the
NASD. Over the past 20 years, Mr. Keierleber has been involved
in acquisitions of investment property having a market value of
over $150,000,000, and has assisted in the structuring of more
than 35 limited partnerships, both private placements and public
offerings. These partnerships have invested in real estate
located in the Midwest and the Southeast of the United States.
Mr. Keierleber is a licensed real estate broker and securities
agent. He is on the board of directors of the corporate general
partner for various limited partnerships and serves as general
partner in limited partnerships sponsored by affiliates of Decade
Companies. Mr. Keierleber is the sole owner of the Company and
is the president and treasurer of Decade Properties, Inc. He is
the principal and managing general partner of Decade Companies, a
partnership that manages other limited partnerships.
Michael G. Sweet, (age 47) Secretary of the Company, is a
Certified Public Accountant and is the Secretary of the Decade
corporate entities. Mr. Sweet has a BS degree with an accounting
major from Marquette University in Milwaukee. Prior to joining
Decade in 1982, Mr. Sweet spent ten years in public accounting.
Among other certifications, Mr. Sweet holds a Series 27 and 39
licenses. He is a member of both the American Institute of
Certified Public Accountants and the Wisconsin Institute of
Certified Public Accountants.
Steven Cooper (age 53), is a Certified Property Manager and
has served as Vice-President of Decade Properties, Inc. Mr.
Cooper has over 18 years of property management experience and
has had responsibility for over 100 multi-family properties
containing over 22,000 units located in 14 states. During the
seven years prior to joining Decade in 1989, he served as Vice-
President of Jacques-Miller, Inc. in Nashville, Tennessee from
July, 1986 to December, 1988, including serving as President of
Harvey Freeman and Sons, Inc. from January, 1987 to December,
1988; he was Vice-President of New Homes Management Services Inc.
of Tampa, Florida from September, 1982 to May 1986. He received
a BS Degree from Purdue University in Lafayette, Indiana.
Joseph Lawlor (age 32), is the General Manager of Holiday
Inn Harborside Landing Hotel/Marina (also owned by an affiliate
of Jeffrey Keierleber) in Indian Rocks Beach, Florida and Chart
House marina in Clearwater Beach, Florida. He supervises and
manages the day-to-day operations of both Holiday Inn Harborside
and Chart House. Mr. Lawlor joined Decade Properties, Inc. in
January 1995 and has more than eight years experience in the
hotel management and operations field.
R. Wayne Shaw (age 49) is Regional Manager of Florida
properties for Decade Properties, Inc. In this capacity, he is
responsible for income and expense budgeting and implementation,
supervision and training of on-site management staffs and
inspection of residential acquisitions in the area. Before
joining Decade in November 1988, Mr. Shaw served as
President/Operations Manager of Home America Property Services,
Inc. in Tampa, Florida from 1983 to 1987, where he supervised
operation of 1,500 residential apartment units. He is a member
of the Institute of Real Estate Management (IREM), and he
recently held the position of Director of the Tampa Apartment
Association. Mr. Shaw received an Associates Degree in Business
Management from Lake City Junior College in 1967. He also holds
a Florida real estate license.
Executive Compensation
None of the Company's officers or directors receive any
compensation from the Company. They are compensated by Decade
Properties, Inc. They will devote such time to Company matters
as necessary (estimated at not more than 10% of their time),
but will also be engaged in a variety of other real estate
projects and businesses.
Advisory Committee
The Company will establish an Advisory Committee, composed
of five to nine Holders, which will review the Company's annual
dues and advise on hotel operations. Such advice is solely for
the benefit of the Company and is not binding upon it. Costs of
operating the Advisory Committee will be part of the annual dues.
As of the date of this Prospectus, no members of the committee
have been selected. It is intended that all members will serve
for one-year terms, without compensation, and that they may be
reappointed without limitation.
DECADE PROPERTIES, INC.
Decade Properties, Inc., a Wisconsin corporation, was formed
in 1980 and is solely owned by Jeffrey Keierleber. Mr.
Keierleber is also the sole director and President of Decade
Properties, Inc. Michael G. Sweet, Secretary of the Company, is
also secretary of Decade Properties, Inc. See " Management."
Decade Properties, Inc. will be property manager for the Company
and operate the Rental Pool, pursuant to agreements with the
Company.
Decade Properties, Inc. is property manager to 17 apartment
complexes, consisting of approximately 2,600 apartment units,
located in Florida and Wisconsin. Decade Properties, Inc.
currently manages two hotels located in Florida, Chart House
Suites hotel, located in Clearwater, Florida and Holiday Inn
Hotel and Suites Harborside (formerly known as Hamlin's Landing),
located in Indian Rocks Beach, Florida. For financial
information on Chart House Suites hotel see the financial
statements herein. Holiday Inn Hotel and Suites Harborside
has 164 rental units, two restaurants, and a 46 boat slip
marina. The property was purchased in December 1993, with
84 rental units which were remodeled during 1994 and 1995.
Another 80 rental units were constructed during 1996-1997.
Operating rental revenue from the hotel and restaurant was
approximately $867,000 in 1994, $1,019,000 in 1995, and
$1,367,000 in 1996. Net losses, after depreciation and debt
service, of the entire hotel/marina operation were
approximately $845,000 in 1994, $642,000 in 1995, and
$785,000 in 1996. The loss incurred in 1996 includes
a one-time demolition expense of approximately $408,000.
The Company has entered into an agreement with Decade
Properties, Inc. for the management of the Chart House Suites
hotel until December 31, 2040 for a fee of $2,500 a month (such
fee to increase by the CPI index increase on the first of each
year beginning January 1, 1998) plus reimbursement of expenses.
Decade Properties, Inc. will also manage the Rental Pool for a
fee equal to 5% of the rental revenue plus, as part of the annual
dues, reimbursement of its expenses in operating the Rental Pool.
See "The Interests." Decade Properties, Inc. may also enter into
individual property management agreements with Holder of partial
Interests.
CONFLICTS OF INTEREST OF MANAGEMENT AND AFFILIATES
Services To Be Provided by Decade Properties Inc.
Decade Properties Inc., is a licensed real estate broker and
is engaged in real estate management business. Decade
Properties, Inc. will be providing rental pool and property
management services.
Services Which May be Provided by DPI Construction &
Engineering Corp.
DPI Construction & Engineering Corp. ("DPIC&E"), an affiliate
of the Company, is engaged in the general contracting business.
The Company may enter into Agreements with DPIC&E whereby DPIC&E
will provide services in connection with renovation and remodeling
work on the Chart House Suites hotel. Any such services will be
at rates comparable to those charged for comparable services by
unaffiliated contractors in the same geographic area.
Reimbursable Expenses
All expenses of the Company and Chart House Suites hotel
will be billed directly to and paid by the Company to the extent
practicable. Decade Properties, Inc. and affiliates will be
reimbursed for the cost of goods and materials used by or for the
Company and Chart House Suites hotel including the following
general functions of the Company: Company operations and
accounting, investor communications, and documentation, legal and
tax services, computer services, risk management (insurance), and
other expenses, and other operational and administrative expenses
necessary for the prudent operation of the Company. The
reimbursed costs will be at actual prices, including allocations
of overhead of Decade Properties, Inc. and its affiliates. The
Company intends to have an annual audit of the annual dues and
reimbursed expenses, as required by Chapter 721, F.S. and
believes that these services will be at rates comparable to those
charged by others for similar services. There are no limits on
the amount of reimbursement.
Charthouse
The Company will only receive revenue or income up to
payments for its Interests, including installment payments for
Holders that decide to pay over up to 360 months, and any revenue
from the Charthouse Rental Pool for its Unit Weeks or the sale of
its Unit Weeks. The Company will have a fiduciary duty to
manage the time share paln and safeguard the annual dues.
Competition
Affiliates of the Company own another hotel, affiliated with
Holiday Inns, which might compete with the Chart House Suites
hotel. The Company believes that each hotel attracts a different
class of tourist, with Chart House attracting individuals who
want to rent in Clearwater Beach and the others who will lodge
approximately 5 miles from Clearwater Beach in a larger
nationally affiliated hotel. It is probable that the two hotels
could compete, and Investors should consider the possible
conflicts of interest that arise from operating two hotels within
5 miles.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a summary of certain federal income tax
considerations related to the offering. In the opinion of Quarles &
Brady, in its capacity as tax counsel to the Company, the discussion
which follows summarizes the material United States federal income tax
consequences of the purchase, ownership and disposition of Interests.
Except as otherwise stated in the summary that follows, tax counsel has
rendered an opinion on each specific federal income tax consequence.
This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), and on judicial decisions, U.S. Treasury
regulations (the "Regulations"), and IRS rulings and other
administrative materials interpreting the Code, all of which are subject
to change, possibly on a retroactive basis. The authorities on which
this summary is based are subject to various interpretations, and the
opinions of tax counsel are not binding on the IRS or the courts, either
of which could take a contrary position. Except as noted with respect
to Section 280A of the Code, no rulings have been or will be sought
from the IRS with respect to the transactions described herein.
Accordingly, there can be no assurance that the IRS will not
challenge the opinions expressed herein or that a court will not
sustain such a challenge.
The discussion below is general and does not address all federal
income tax considerations that may be relevant to a particular Holder of
an Interest. In addition, except as specifically stated herein, this
summary does not address the federal income tax consequences of the
purchase, ownership or disposition of Interests by foreign investors or
by investors that may be subject to special tax treatment (such as
banks, thrift institutions, real estate investment trusts, regulated
investment companies, insurance companies, other financial institutions
and tax-exempt organizations). In addition, taxes other than federal
income taxes, such as foreign, state and local taxes, and federal estate
and gift taxes, may affect a Holder's investment in an Interest.
Controversy and uncertainty exist in many areas of the federal income
tax law which may affect the structure and operation of the Company and
a Holder acquiring and holding an Interest. Accordingly, there can be
no assurance that some of the views expressed herein will not be
challenged by the IRS.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT, AND MUST DEPEND UPON, THEIR
OWN TAX ADVISERS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF INTERESTS WITH SPECIFIC REFERENCE TO THEIR
OWN TAX SITUATIONS AND POTENTIAL CHANGES IN APPLICABLE LAW, INCLUDING
THE APPLICATION OF STATE AND LOCAL, FOREIGN AND OTHER TAX
CONSIDERATIONS.
Entity Status of License Plan
Subject to the discussion below of "Entity Status of Rental Pool,"
in the opinion of tax counsel, it is more likely than not that the
license that a Holder will acquire from the License Plan (the "License")
creates a separate contractual relationship between the Company and each
Holder, and the sum of such separate relationships does not create an
entity for federal income tax purposes.
A separate entity exists for tax purposes under Section 301.7701-
1(a)(2) of the Regulations if the participants in a joint venture or
other contractual arrangement (1) carry on a trade, business, financial
operation, or venture, and (2) divide the profits therefrom. Holders
may keep their Unit Weeks in the Rental Pool, withdraw their Unit Weeks
and use them personally, withdraw their Unit Weeks and directly rent
them to others, or withdraw their Unit Weeks and rent them to others
through a rental agent. In addition, certain Holders who purchase
Interests during the applicable time period may elect the Guaranteed
Rental Arrangement. Annual dues and other related costs, expenses and
reserves incurred in connection with Chart House Suites hotel will be
charged proportionately to all Holders, regardless of how their Unit
Weeks are utilized. Subject to the discussion below of "Entity Status
of Rental Pool," in the opinion of tax counsel, it is more likely than
not that the license that a Holder will acquire from the License Plan
creates a separate contractual relationship between the Company and each
Holder, and the sum of such separate relationships does not create an
entity for federal income tax purposes.
Entity Status of Rental Pool
The Rental Pool involves a sharing of gross revenues (less the 5%
rental fee) among various Holders. The IRS may contend that the Rental
Pool constitutes a joint venture or other contractual arrangement
engaged in a trade, business, financial operation or venture for joint
profit whose participants consist of those Holders that utilize the pool
and the Company if it places unsold Unit Weeks that it owns in the
rental pool. Although the issue is not free of doubt, tax counsel is of
the opinion that it is more likely than not that the IRS could
successfully make such a contention.
If an entity is created by the Rental Pool, the federal income tax
consequences to a Holder of an Interest will depend on whether the
entity is classified as a corporation or a partnership. If the entity
is classified as a partnership for federal income tax purposes and is
not a "publicly traded partnership," it will not be subject to any
federal income tax. Instead each Holder that participates in the Rental
Pool will be subject to tax on his or her allocable share of the
entity's income and gain. However, deduction of expenses related to a
Holder's Interest is subject to many important limitations discussed
below.
If the deemed entity is classified as a corporation or as a
"publicly traded partnership," each Holder that participates in the
rental pool will be treated as a shareholder of a corporation and (1)
the taxable income of the entity will be subject to the federal income
tax imposed on corporations, (2) items of income, gain, loss and
deduction will not flow through to the Holders to be accounted for on
their individual federal income tax returns, and (3) distributions, if
any, will be treated as corporate distributions to Holders, some or all
of which might be taxable as dividends. Certain "publicly traded
partnerships" are taxable as corporations. A publicly traded
partnership for these purposes is a partnership whose interests are
traded on an established securities market or are readily tradeable on
a secondary market or its economic equivalent. No Interests, including
Interests held by Holders that participate in the Rental Pool, will be
traded on an established securities market. Furthermore, it is not
expected that any Interests will be readily tradeable on a secondary
market or its economic equivalent. However, due to the factual nature
of such a determination, no assurances can be given that such a market
may not develop.
An entity engaged in a trade or business for profit is classified
as partnership if (1) it has at least two members, and (2) it is not
classified as a corporation. An entity is classified as a corporation
if it is described as a corporation under federal or state law. In
addition, an entity may elect to be taxed as an association taxable as
a corporation if the entity has at least two members.
The Company does not intend to seek a ruling from the IRS that the
relationships created by the Rental Pool create an entity engaged in a
trade, business, financial operation or venture for joint profit for
federal income tax purposes. In addition, the Company does not intend
to file an election to treat the relationships created by the Rental
Pool as an association taxable as a corporation. Consequently, in the
opinion of tax counsel, any deemed entity will be taxed as a
partnership. No assurance can be given that the IRS will not
successfully challenge the tax status of the relationships in connection
with an audit of the returns of the Company, any of the Holders or the
Rental Pool, or that changes in the tax laws will not significantly
modify the statements expressed herein. Prospective Holders should
consult with, and must depend on, their own tax advisor concerning
detailed application of partnership tax rules to their specific tax
situations.
Returns of Rental Pool
The Rental Pool will file annually a partnership information return
on IRS Form 1065 and provide to each Holder that participates in the
pool a Schedule K-1 indicating such Holder's allocable share of the
rental pool's income, gains, losses, and deductions as determined for
federal income tax purposes. If the information returns filed by the
Rental Pool are audited, any adjustments to items will be made to the
Rental Pool level in unified proceedings before the IRS and the courts,
rather than in separate proceedings involving each Holder. There can be
no assurance that the rental pool will not be audited and that
adjustments will not be made.
Income Tax Characterization of Interests
The IRS has declined to issue a ruling on whether an Interest will
be classified as a license, a lease or a conveyance of real property for
federal income tax purposes.
In a previous, nonbinding administrative ruling, the IRS has
characterized a vacation license as a contract to provide future
services much like that of a hotel reservation, but for a much longer
period of time. In distinguishing a vacation license from a lease or
conveyance of real property, the IRS noted that a vacation license
holder has the right to receive future hotel-like services and generally
does not have a right to occupy specific premises during a determinable
period of time. In contrast, the IRS noted that both a conveyance of
real property and a lease grant a right to occupy a defined physical
area or specific premises for a fixed or determinable time.
Because of the uncertainty of the law in this area and because
characterization of an Interest may vary depending upon the type of
Interest purchased, tax counsel is unable to express an opinion as to
whether an Interest will be classified as a license, a lease or a
conveyance of real property. However, tax counsel believes it is
unlikely that the IRS would characterize an Interest as a
conveyance of real property. Holders must consult with, and depend
upon, their own tax advisors with specific reference to their own tax
situations in determining the characterization of an Interest.
Taxation of Holders
Regardless of whether an Interest is characterized as a license,
lease or conveyance of real property, each Holder will be liable for
federal and applicable state and local income taxes on any income earned
by his or her Interest, including any allocable share of income from the
Rental Pool. A Holder's right to deduct, and the extent to which he or
she may deduct, expenses associated with ownership of an Interest,
including any allocable share of deductions and losses from the Rental
Pool, will vary and may depend on (1) how the Interest is used by the
Holder, and (2) how similar Interests are used by other Holders.
Personal Use of Interest
Generally, if a Holder makes personal use of his or her Interest,
any expenses incurred in connection with the acquisition, ownership, and
disposition of the Interest will not be deductible for federal income
tax purposes regardless of whether the Interest is characterized as a
license, a lease or conveyance of real property. In certain
circumstances, as discussed in the immediately succeeding paragraphs, a
Holder may be allowed a deduction for interest expense incurred in
connection with the acquisition of an Interest.
Generally, a Holder who finances the acquisition of an Interest
that will be used for personal purposes will not be entitled to deduct
the interest expense associated with the debt regardless of whether the
Interest is characterized as a license, lease or conveyance of real
property because such interest will be characterized as "personal
interest" under Code Section 163(h). The interest expense, however,
will be deductible as "qualified residence interest" under Code Section
163(h) if an Interest is treated as a "qualified residence." If an
Interest is a license or a lease for income tax purposes, it will not be
treated as a "qualified residence." If an Interest is characterized as
a conveyance of real property for income tax purposes, it may be treated
as a "qualified residence" under certain circumstances. However, tax
counsel believes it is unlikely that the IRS would characterize an
Interest as a conveyance of real property. Holders should consult with
and must depend upon their own tax advisors in determining whether an
Interest is a "qualified residence" for purposes of Section 163(h).
If a Holder finances the acquisition of an Interest with
debt qualifying as "home equity indebtedness" under Code Section
163(h), the interest expense associated with such debt will be
deductible for tax purposes regardless of whether an Interest is
characterized as a license, lease or conveyance of real property.
Generally, home equity indebtedness is all debt (other than debt
incurred to acquire a qualified residence) that is secured by a
qualified residence to the extent the amount of such debt does
not exceed the fair market value of the qualified residence. For
purposes of determining the fair market value of the residence,
any debt incurred to acquire such residence reduces such fair
market value. Interest on home equity indebtedness is deductible
even if the debt proceeds are used for personal expenditures.
Tax counsel is unable to express an opinion as to whether any
debt obtained by a Holder to finance the acquisition of in
Interest will be qualified "home equity indebtedness." The
determination of whether debt is qualified "home equity
indebtedness" depends on the specific factual circumstances of a
particular Holder, including the nature of a Holder's residence.
Holders should consult with and must depend upon their own tax
advisors in determining whether any debt used to acquire an
Interest is "home equity indebtedness" under the Code.
If an Interest is held for investment purposes by a Holder,
interest expense associated with debt used to finance the
acquisition of such Interest may be deductible as investment
interest expense under Code Section 163(d). The deduction,
however, is limited to a taxpayer's net investment income for the
year. Tax counsel is unable to express an opinion as to whether
any debt obtained by a Holder to finance the acquisition of in
Interest will be deductible as investment interest expense. This
determination depends on the specific factual circumstances of a
particular Holder. Holders should consult with and must depend
upon their own tax advisors in determining whether an Interest is
held as an investment and whether any debt used to acquire such
Interest is deductible as investment interest expense under Code
Section 163(d).
A Holder may elect to pay for his or her Interest in
installments up to 360 months. Under the terms of the License, a
Holder choosing this option must pay at least 30% of the net
subscription price (after any discounts) at the time of
acceptance of the subscription and agree to make monthly
installment license payments. A Holder that elects to pay for
his or her Interest in installments will pay an increased license
payment of up to 9 percent per year on the unpaid balance owing
for the Interest. Because the increased license payment could be
deemed the economic equivalent of the payment of interest, it is
possible that the IRS would impute interest in connection with
the installment payment of license payments and characterize the
increased portion of such payments as interest expense. If
characterized as interest expense, such amounts would not be
deductible by a Holder as "qualified residence interest" or as
"home equity indebtedness." Such amounts may be deductible as
investment interest pursuant to the rules discussed in the
immediately preceding paragraph. Holders should consult with and
must depend upon their own tax advisors in determining whether
increased license payments would be characterized as interest
expense and, if characterized as interest expense, whether such
amounts are deductible.
Rental Arising From Unit Weeks
If a Holder rents all or part of his or her Unit Weeks, including
rentals through the Rental Pool, to a third party, the extent to which
he or she may deduct expenses incurred in connection with the renting of
such Unit Weeks will depend upon: (1) whether the rights obtained under
an Interest constitute a "dwelling unit" (Code Section 280A); (2)
whether the rental activity is engaged in with the intent of making a
profit (Code Section 183); (3) whether the expenses are incurred in
connection with the production of income or for the management,
conservation, or maintenance of property held for the production of
income (Code Section 212) or whether the expenses are incurred in
connection with a trade or business (Code Section 162); (4) whether an
Interest is an entertainment facility (Code Section 274); (5) whether the
rental activity is a "passive activity" (Code Section 469); and (6)
whether the "at-risk" rules apply (Code Section 465). The impact of the
characterization of an Interest as a license, lease or conveyance of
real property on these determinations is separately discussed with
respect to each limitation rule in the succeeding sections.
Section 280A.
Code Section 280A, which applies to a "dwelling unit" used by a
taxpayer as a residence, limits the deduction of allocable expenses
(other than those expenses that are otherwise deductible even if an
Interest is used for personal use) to rental income from the "dwelling
unit." If a "dwelling unit" is not used as a residence, the taxpayer
may use his or her deductions to offset other income to the extent such
expenses exceed rental income. Code Section 280A applies to
individuals, partnerships, trusts, estates, and S corporations. Code
Section 280A does not apply to a regular corporation, except in its
capacity as a member of a partnership or as a beneficiary of a trust
or estate.
Code Section 280A also establishes an expense allocation fraction
to be used in apportioning deductions between personal and business use
of a property to which Code Section 280A applies. The expense
allocation formula permits deduction of the fraction of the expenses
associated with the property (other than those that are otherwise
deductible even if a property is used for personal use). The
numerator of the fraction is the days the property is actually
used for business, and the denominator is the total of the days
the property is actually used (either for business or personal
use). With respect to time sharing arrangements, all owners usage
is aggregated in determining the numerator and denominator of the
fraction. This allocation formula applies if a property is used
for personal use on even one day. If an Interest is a "dwelling
unit," Interests held by other Holders (perhaps only other
Holders of the same class of Unit Week) would be aggregated
with the Interest held by a particular Holder, with the result
that even a Holder that never uses an Interest for personal
purposes would, nevertheless, have otherwise deductible expenses
reduced pursuant to Code Section 280A causing such Holder to be
unable to fully offset rental income by allocable expenses.
Code Section 280A only applies to "dwelling units." A "dwelling
unit" is defined by the Code and related Regulations as a house,
apartment, condominium, mobile home, boat or similar property, that
provides basic living accommodations such as sleeping space, toilet and
cooking facilities. The Code Section 280A definition of "dwelling unit"
is broad and characterization of property for purposes of Code Section
280A is not affected by local law which classifies property as other
than a "dwelling unit." Further, it is unlikely that the determination
of what constitutes a "dwelling unit" is dependent upon the
characterization of an Interest as a license, lease or conveyance of
real property.
Because of the uncertainty in characterizing an Interest
as a license, lease or conveyance of real property and because of the
uncertainty of the law in connection with Code Section 280A, the Company
requested a ruling from the IRS that an Interest and the rights
afforded a Holder under a License do not constitute a "dwelling unit"
under Code Section 280A. Prior to issuing a ruling, the IRS
informally advised the Company that it would rule that the rights
afforded a Holder under a License constitute a "dwelling unit"
within the meaning of Code Section 280A. The Company subsequently
withdrew its ruling request. Holders must consult with and must
depend upon their own tax advisors in determining whether an
Interest constitutes a "dwelling unit" under Code Section 280A.
However, even if an Interest and the accompanying rights under
the License do not constitute a "dwelling unit" within the meaning
of Code Section 280A, a Holder may still be unable to deduct expenses
incurred in connection with the renting of all or part of his or her
Unit Weeks. Deduction of such expenses may be further limited
depending upon: (1) whether the rental activity is engaged in with
the intent of making a profit (Code Section 183); (2) whether the
expenses are incurred in connection with the production of income
or for the management, conservation, or maintenance of property
held for the production of income (Code Section 212) or whether
the expenses are incurred in connection with a trade or business
(Code Section 162); (3) whether the rental activity is a "passive
activity" (Code Section 469); and (4) whether the "at-risk" rules
apply (Code Section 465).
Section 183
Regardless of whether an Interest is characterized as a
license, lease or conveyance of real property if an Interest
constitutes a "dwelling unit," subject to the limitations
imposed by Code Section 280A, Code Section 183 will allow a
Holder to deduct losses incurred in connection with the renting
of his or her Unit Weeks, including rentals through the Rental
Pool, only if the renting of the Unit Weeks is engaged in with
the intent and reasonable expectation that the activity will
produce a taxable profit within a reasonable period of time. If
the rental activity is not engaged in for profit (so-called "hobby
losses"), expenses associated with the activity are deductible only to
the extent of income produced by the activity (and are also subject to
the Code Section 280A limitations as previously described if an Interest
constitutes a "dwelling unit"). Losses disallowed under Section 183 are
not merely suspended but are permanently denied.
Those expenses, if any, that are deductible even if an Interest is
used for personal use are deductible regardless of whether they exceed
the revenue produced by renting an Interest. (See "Personal Use of
Interest" for a discussion of those expenses that may otherwise be
deductible.) These expenses, however, reduce the amount of hobby income
against which other hobby expenses can be offset. To the extent there
is remaining hobby income after reduction for these expenses, other
expenses may be deducted to the extent of remaining hobby income. These
deductions must be adjusted for personal use, however, and are subject
to the two-percent limitation on miscellaneous itemized deductions under
Code Section 67(a). The Regulations under Code Section 183 provide
rules for (1) allocation of expenses to the specific categories of
expenses described in this paragraph, and (2) adjustment of certain
expenses for personal use.
In determining whether an activity is engaged in for profit,
Section 1.183-2 of the Regulations provides that all facts and
circumstances are to be taken into account and no one factor or adding
up of factors is to be determinative. The Regulations list nine factors
that should normally be taken into account, but caution that other
factors may also be considered. The nine factors listed in the
Regulations are:
1. The manner in which the taxpayer carries on the activity,
i.e., whether it is businesslike, whether complete and accurate books
and records are maintained, and whether it is carried on in a manner
that is substantially similar to activities of the same nature carried
on by others at a profit.
2. The expertise of the taxpayer or his advisors.
3. The time and effort expended by the taxpayer. The fact that
the taxpayer devotes a limited amount of time to an activity does not
necessarily indicate a lack of profit motive where the taxpayer employs
competent and qualified persons to carry on the activity.
4. The expectation that assets used in the activity may
appreciate in value. If the taxpayer seeks to rely on asset
appreciation as a basis for determining that renting is engaged in for
profit, the holding of an Interest for appreciation and the renting of
it may well be deemed two separate activities, thereby disallowing any
deductions for maintenance and operating expenses, but allowing
deduction of expenses directly attributable to holding an Interest.
However, if the rental income exceeds the operating, maintenance, and
other costs not directly attributable to the holding of an Interest so
as to reduce the net costs of holding the Interest for appreciation, a
single activity of owning and operating the Interest should be
recognized. The Regulations under Code Section 183 provide rules for
allocating expenses between activities in circumstances in which such
allocation is required.
5. The success of the taxpayer in carrying on other similar or
dissimilar activities.
6. The taxpayer's history of income or losses with respect to the
activity. A series of losses during the initial or start-up stage of an
activity may not necessarily be an indication that the activity is not
engaged in for profit, particularly where the realization of profit
within a reasonable time occurs.
7. The amount of occasional profits, if any, which are earned.
8. The financial status of taxpayer, i.e., whether or not he or
she has substantial income against which operating losses can be offset,
generating a tax benefit, which factor normally will be adverse to the
taxpayer, especially if there are personal or recreational elements
involved.
9. Elements of personal pleasure or recreation. The presence of
personal motives in carrying on of an activity may indicate that the
activity is not engaged in for profit, especially where there are
recreational or personal elements involved. On the other hand, a profit
motivation may be indicated where an activity lacks any appeal other
than profit. It is not, however, necessary that an activity be engaged
in with the exclusive intention of deriving a profit or with the
intention of maximizing profits. An activity will not fail the profit
motive test merely because the taxpayer has purposes or motivations
other than solely to make a profit. Also, the fact that the taxpayer
derives personal pleasure from engaging in the activity is not
sufficient to cause the activity to be classified as not engaged in for
profit if the activity is in fact engaged in for profit as evidenced by
other factors.
Code Section 183 creates a presumption in favor of the
determination that the activity is engaged in for profit if a profit
(without regard to operating loss carry forwards) is realized in three
out of five consecutive years. On the other hand, failure to meet this
test apparently does not create a contrary presumption. In order to
allow the presumption to work, a Holder is given an election to postpone
the determination of whether the presumption applies until the end of
the fourth taxable year following the taxable year in which he or she
first purchased his or her Interest and engaged in rental activity. A
Holder may wish to make an election as prescribed in the Regulations
under Code Section 183 to preserve the ability to take advantage of this
presumption and the delay in determining its application. However, a
Holder should note that the Company makes no assurances or
representations concerning whether a Holder can expect a profit for
renting an Interest within four years.
Tax counsel is unable to express an opinion as to whether the
renting of an Interest is an activity engaged in for profit. The
activities, operation and usage of a particular Holder determine whether
an Interest is held for profit or whether the renting of an Interest is
an activity engaged in for profit.
Sections 162 and 212.
If a Holder establishes that his or her Interest is held with the
intent of making a profit, thereby avoiding the disallowance rules of
Code Section 183, a Holder will be able to deduct from income the
expenses incurred in connection with acquiring, holding and renting
an Interest, subject to the Code Section 280A disallowance rules if
an Interest constitutes a "dwelling unit" and subject to the limitations
discussed below. Except as otherwise noted, the limitations apply
regardless of the characterization of an Interest as a license, lease
or conveyance of real property. Expenses, other than those which are
deductible even if the Interest is used for personal use, must be reduced
proportionately by the extent of the personal use of the Interest by the
Holder.
Under Code Sections 162 and 62(a), ordinary and necessary expenses
attributable to a trade or business carried on by a taxpayer may be
deducted in computing adjusted gross income. Similarly, under Code
Section 62(a)(4), a taxpayer may deduct, in computing adjusted gross
income, expenses relating to the production of income under Code Section
212 where such expenses are attributable to property held for the
production of rents or royalties. Consequently, if an Interest is
treated as property held for use in a trade or business or property
held for the production of rents or royalties, a Holder is entitled
to deduct in computing adjusted gross income expenses incurred in
connection with acquiring, holding and renting an Interest, regardless
of whether the Interest is characterized as a license, lease or
conveyance of real property.
There is no judicial or administrative guidance available
concerning what constitutes "property held for the production of rents
and royalties." However, in general legal terms, "rents" are payments
for the use of property and "royalties" are payments for the use of
intangible property. Because of the uncertainty in this area, there can
be no assurance that an Interest will be characterized as property held
for the production of rents and royalties and that the IRS will not be
able to successfully challenge a Holder's treatment of an Interest as
such and consequently disallow the deduction of certain expenses.
If an Interest, which is not held for personal use or for use in a
trade or business, is not treated as property held for the production of
rents or royalties, the deductions of a Holder who holds an Interest for
the production of income under Code Section 212 will be limited.
Although Code Section 212 allows a deduction for all expenses incurred
in connection with the production or collection of income and for the
management and maintenance of property held for the production of
income, Code Section 67(b) characterizes such expenses as miscellaneous
itemized deductions. Under Code Section 67(a), miscellaneous itemized
deductions are deductible only to the extent that all of an individual
taxpayer's miscellaneous deductions exceed two percent of his or her
adjusted gross income.
This two percent limitation applies only if a Holder acquires and
holds an Interest for the production of income. If a Holder acquires
and holds an Interest for use in a trade or business or for the
production of rents or royalties, expenses incurred in connection
therewith (except to the extent such expenses are allocated to personal
use of the Holder) are not subject to the two percent limitation. Thus,
the determination of whether an Interest is held for the production of
income, for the production of rents or royalties, or for use in a trade
or business has significant tax consequences. Unfortunately, this
determination is not easily made since no bright line test has been
used by the IRS or the courts in making this determination. Rather, the
particular factual situation of a taxpayer is determinative. Tax
counsel is therefore unable to express an opinion concerning the
determination of whether a Holder's Interest is held for use in a trade
or business, held for the production of rents or royalties or held for
the production of income. Holders are advised to consult with and must
rely upon their individual tax advisors for assistance in making this
determination.
Entertainment Facilities
Code Section 274(a)(1) specifically disallows any deduction
relating to an "entertainment facility." Judicial decisions indicate
that any expenses attributable to the upkeep of such property, or for
the continuing enjoyment of the property (i.e. depreciation,
maintenance, insurance, etc.) are nondeductible, regardless of whether
they are attributable to the business use of the property. In other
words, the cases emphasize that no deduction really means no deduction,
even where facilities are used both for business and entertainment. The
term "entertainment facility" has been broadly interpreted and tax
counsel believes it is likely that if an Interest is used for
entertainment, the Interest will be held to be an "entertainment
facility" within the meaning of Code Section 274 regardless of its
characterization as a license, a lease or a conveyance
of real property.
Code Section 274(e) does provide for certain exceptions to the
entertainment facility disallowance rule. Expenses incurred in
connection with an entertainment facility, but that are treated as
compensation to an employee, are not disallowed. Similarly, expenses
incurred by a taxpayer that are directly related to business meetings of
the taxpayer's employees, stockholders, agents or directors are not
disallowed. While this exception will apply to bona fide business
meetings even though some social activities are provided, it will not
apply to meetings which are primarily for social or nonbusiness purposes
rather than for the transaction of the taxpayer's business.
Passive Activity Income and Loss
In addition to the limitations imposed by Code Sections 280A, 183,
162 and 212, the Code further limits the deductibility of losses in
certain circumstances by providing that passive activity losses incurred
by an individual, estate, trust, or personal service corporation or,
with modifications, certain closely held corporations may not be used to
offset non-passive activity income. In general, passive activity losses
can be used only to offset passive activity income, not wages or
portfolio income (such as dividends, interest, annuities and royalties).
Any passive activity losses in excess of passive activity income in one
year may be used to offset passive activity income in future years. Upon
disposition of the investor's entire interest in the passive activity,
all suspended losses from such activity are specifically allowable by
reason of the disposition.
In general, a passive activity is one which: (1) is a trade or
business activity in which the taxpayer does not materially participate;
or (2) is a rental activity.
For purposes of the passive loss rules, the term "trade or
business" is more expansive than under the general standard of Code
Section 162. Under Section 1.469-1T(e)(2)(ii) of the Regulations, a
trade or business activity includes an activity that is engaged in for
the production of income. Thus, expenses that are otherwise deductible
under Code Section 212 may be subject to disallowance under the passive
activity loss rules.
Trade or business activities are treated as passive unless the
taxpayer materially participates in the activity. Under Code Section
469, a taxpayer is not treated as materially participating in an
activity unless his or her involvement in the operation of the activity
is regular, continuous, and substantial. The Regulations interpret this
standard by providing that a taxpayer materially participates in an
activity if and only if the taxpayer meets any one of seven tests. The
first six tests are quantitative, whereas the seventh test involves a
consideration of the facts and circumstances of a taxpayer's involvement
in an activity.
Tax counsel believes that it is very unlikely that a Holder will be
treated as materially participating under any of these seven tests in
any activity associated with a business use of an Interest whether the
Interest is characterized as a license, lease or conveyance of real
property because, under the terms of the License Plan, sole authority
for the management and operation of Chart House Suites hotel resides in
the Company. Therefore, income or loss generated by a Holder's use of
an Interest will likely be passive income or loss.
Under the passive loss rules, rental activities are treated as
passive without regard to whether they involve the conduct of a trade or
business or whether the taxpayer has materially participated. A rental
activity is any activity where payments are principally for the use of
tangible property. If an Interest is characterized as a lease or
conveyance of real property, it is likely that the renting of an
Interest will be considered a rental activity because payments will be
received principally for the use of tangible property. If an Interest
is characterized as a license rather than a lease or a conveyance of
real property, it initially appears that the renting of an Interest
should not be considered a rental activity because the Interest is not
tangible property, but rather an intangible asset. However, the
Regulations provide that where the actual or prospective customers'
payments are principally for the use of tangible property, the activity
is a rental activity, even if payments are made pursuant to a service
contract or other arrangement that is not denominated as a lease.
There are several exceptions provided by the Regulations to
treatment as a rental activity. They include:
1. The average customer use for such taxable year is seven
days or less.
2. The average period of customer use is 30 days or less,
and significant personal services are provided by or on
behalf of the owner of the property in connection with
making the property available for use by customers.
3. Extraordinary personal services are provided by or on
behalf of the owner of the property in connection with
making the property available to customers (i.e.
hospitals).
4. The rental activity is incidental to nonrental activities
of the taxpayer.
5. The activity involves customarily making property
available during defined business hours for nonexclusive
use by customers (i.e. golf courses and health clubs).
6. The activity involves the provision of property to a
pass-through entity or joint venture in which the
taxpayer owns an interest.
7. An activity that involves the rental of a dwelling unit
used by the taxpayer as residence, as determined under
Code Section 280A, is not a rental activity.
Under certain of the exceptions, it appears that, if renting of an
Interest were within the meaning of a rental activity, that it would
nevertheless be excluded under the exceptions. For example, average
customer use might be 30 days or less and significant personal services
are provided. It is unclear, however, how to apply these tests in the
context of time-sharing arrangements as no administrative or judicial
guidance is available.
In the final analysis, it is unlikely that it will matter if the
renting of an Interest is a rental activity or not. In any event, it
will be passive. If it is a rental activity, it is per se passive. If
it is not a rental activity, it will be a passive activity if a Holder
does not materially participate. As previously indicated, tax counsel
believes that it is unlikely that any Holder will materially participate
in any activity connected to his or her Interest.
"At Risk" Rules
In addition to the above limitations imposed upon the deductibility
of losses, Code Section 465 further limits the deductibility of losses
by individual taxpayers from a given activity to the amount which the
taxpayer is "at risk" in the activity. Losses which cannot be deducted
by a taxpayer because of the "at risk" rules may be carried over to
subsequent years until such time as they are allowable. In determining
the amount of loss disallowed, if any, under Code Section 465, Code
Sections 280A and 183 are applied prior to the application of Code
Section 465 and Code Section 469 is applied after any limitation under
Code Section 465 is determined.
A taxpayer will initially be considered to be "at risk" in an
activity to the extent of (1) the amount of money and the adjusted basis
of other property contributed to the activity by the taxpayer;
(2) amounts borrowed by the taxpayer for use in the activity, except as
described below, provided the taxpayer is personally liable for the
repayment of such borrowed amounts or has pledged property (other than
property used in the activity) as security for the repayment of such
borrowed amounts; and (3) the taxpayer's share of any "qualified
nonrecourse financing" which is secured by real property used in the
activity. A taxpayer is not considered to be "at risk" to the extent he
or she is protected against loss through nonrecourse financing,
guarantees, stop loss agreements, or similar agreements.
Code Section 465 generally applies to any activity engaged
in by the taxpayer in carrying on a trade or business or for the
production of income. Consequently, regardless of whether an
Interest is characterized as a license, a lease or a conveyance
of real property, Code Section 465 will likely apply and may
further limit deduction of losses by a Holder.
Depreciation/Amortization
Code Section 167 allows a depreciation deduction for property used
in a taxpayer's trade or business or for property held by the taxpayer
for the production of income. Under Section 1.167(a)-3 of the
Regulations, an intangible asset may be the subject of a depreciation
deduction if the intangible asset has a limited and ascertainable useful
life. Code Section 197 provides that the acquisition cost of certain
intangible assets is amortized over a 15 year period. An Interest is
not a "Section 197 intangible."
As stated above, tax counsel believes it is unlikely that an
Interest would be characterized as a conveyance of real property.
However, if an Interest is characterized as a conveyance of real
property, a Holder who uses his or her Interest in a trade or business
or for the production of income will be entitled to a depreciation
deduction based upon acquisition cost and determined under the Modified
Accelerated Cost Recovery System ("MACRS") in accordance with Code
Section 168. Any deduction, however, will be subject to disallowance
under the limitations previously described herein pursuant to Code
Sections 280A, 183, 162, 212, 469 and 465 and subject to reduction for
any personal use of the Interest by the Holder.
MACRS is mandatory for most tangible (real and personal)
depreciable property placed in service after December 31, 1986. Under
MACRS, the cost of eligible property is depreciated over a 3, 5, 7, 10,
15, 20, 27.5, 31.5, or 39 year period depending upon the type of
property, by using statutory recovery methods and conventions. The cost
of residential rental and nonresidential real property is recovered
using the straight-line method and the mid-month convention.
Residential rental property is depreciated over 27.5 years and
nonresidential real property is depreciated over 39 years.
If an Interest is characterized as a license or a lease, a Holder
who uses his or her Interest in a trade or business or for the
production of income, will be entitled to a depreciation deduction based
on the acquisition cost of the Interest. Any deduction, however, will
be subject to disallowance under the limitations previously described
herein concerning Code Sections 280A, 183, 162, 212, 469 and 465. A
ratable portion of the acquisition cost will be amortized each tax year
over the life of the Interest, adjusted each year for any personal use
of the Interest by the Holder.
Code Section 179 allows a taxpayer (other than trusts, estates, and
certain noncorporate lessors) to expense certain depreciable business
assets in the year of acquisition by electing to treat the cost of new
property as an expense rather than as a capital expenditure subject to
depreciation. The deductions for which the election is made are allowed
for the tax year in which the Code Section 179 property is placed in
service and are in lieu of a depreciation deduction. Generally, a
taxpayer may elect to expense only tangible personal property under Code
Section 179. Therefore, regardless of whether an Interest is a license,
a lease or a conveyance of real property, a Holder will not be able to
expense acquisition costs under Code Section 179.
Gain or Loss on Sale of Interest
No loss will be allowed in connection with the sale of an
Interest held for personal use. A Holder will be liable for
federal and applicable state and local income taxes on any gain
realized on the sale or other disposition of his or her Interest
regardless of whether the Interest is held for personal use, held
for use in a trade or business or held for the production of
income. Provided the Interest is a capital asset or a Section
1231 asset in the hands of the Holder, any resulting gain will be
taxed at a maximum individual capital gain rate of 28% if the
interest is disposed of after a one-year holding period or 20
percent if it is disposed of after an eighteen month holding
period. A Holder should consult his or her own tax advisors in
determining whether his or her Interest is a capital asset or a
Section 1231 asset.
If an Interest is held partly for personal use and partly for use
in a trade or business or partly for the production of income, an
apportionment of the gain or loss will be required and each portion will
be taxed in accordance with the principles stated herein.
Alternative Minimum Tax
Taxpayers are subject to an alternative minimum tax ("AMT") if the
AMT exceeds the income tax otherwise payable by the taxpayer for the
year. Due to the complexity of the AMT calculations, investors should
consult with their tax advisers as to whether the purchase of an
Interest might create or increase their potential AMT liability.
Corporate Investors
Code Section 280A does not apply to a corporation other than
an S corporation. Code Section 183 does not apply to corporate
Holders. The "ordinary and necessary expenses" requirement of
Code Section 162(a) and the entertainment facility limitations of
Code Section 274(a)(1) apply to all taxpayers, including
corporate Holders. Code Section 469 applies only to certain
closely held C corporations and personal service corporations.
The discussion contained herein is not a complete treatise
on the ownership of an Interest by a corporation. There are
numerous issues involved in corporate ownership and corporations
should obtain advice from their own tax counsel before purchasing
an Interest.
Registration of Tax Shelters
In general, certain persons who sell interests in a "tax shelter"
to investors are required to register the tax shelter with the IRS. It
is not expected that an investment in an Interest will constitute a
"tax shelter" for purposes of the registration requirements and
therefore, the Company will register with the IRS.
Upon registration of a tax shelter, the IRS assigns the
shelter a tax shelter registration number. The Company will be
required to register with the IRS no later than the day on which
the first Interest is offered for sale. The Company will furnish
the assigned registration number to a Holder at the time of
purchase or, if later, within 20 days after the Company receives
the number. The number will be furnished in a written statement
which identifies the tax shelter's name and taxpayer
identification number and will also include a prominent legend in
bold and conspicuous type which states that the registration
number must be included on any return on which a Holder claims
any tax benefit from the shelter. This written statement will
also be furnished to a Holder at the time of purchase even if
the tax shelter registration number has not yet been received.
A Holder that claims a deduction, loss, credit, or other tax
benefit in connection with his or her Interest must report the
tax shelter registration number on Form 8271 (Investor Reporting
of Tax Shelter Registration Number) and attach the form to his or
her income tax return. If a Holder fails to include the tax
shelter registration number on his or her return and claims a tax
benefit from the shelter, the Holder is subject to a $250
penalty.
Tax-Exempt Investors
The tax consequences of the purchase, ownership and disposition of
an Interest by tax-exempt entities (collectively, "Exempt Holders") may
result in the Exempt Holder recognizing "unrelated business taxable
income" ("UBTI") which would be subject to federal income taxation and
result in certain other adverse tax consequences. UBTI is income (with
specific exemptions) derived from an activity regularly carried on by a
tax-exempt entity (or by a partnership or other entity of which it is a
member) that is not substantially related to the entity's exempt
purpose. Thus, to the extent the purchase, ownership or disposition of
an Interest is unrelated to an Exempt Holder's exempt purpose, income
derived from an Interest may constitute UBTI. Notwithstanding the
foregoing, income that is interest income, dividend income or gain from
the sale or exchange of property is generally excluded from UBTI, except
to the extent that such income is derived from debt-financed property.
It has generally been the position of the IRS, however, that interest,
dividends, or rents earned by a partnership may not be excluded from
UBTI by an exempt organization even though such items of income (if
earned directly by the exempt organization) would be excluded from UBTI.
In general, debt-financed property is any property which is held to
produce income and with respect to which there is an "acquisition
indebtedness" at any time during the taxable year or during the
preceding 12 months if the property is disposed of during the tax year.
In considering the purchase of an Interest, an exempt organization
should consider whether the investment complies with the documents and
instruments governing the Exempt Holder, whether the investment will
result in UBTI to the Exempt Holder, whether the investment provides
sufficient liquidity to the Exempt Holder, especially given the fact
that there will not be a market in which the Interests can be sold or
otherwise transferred, and whether the investment is prudent.
The discussion contained herein is not a complete treatise on the
ownership of an Interest by a tax-exempt entity. There are numerous
issues involved and consequently, tax-exempt entities should consult
with and must rely upon their own tax advisors concerning the
application of federal income tax laws.
Foreign Investors
Federal income taxation of foreign Holders (including foreign
corporations) is a highly complex matter that may be affected by many
considerations, including any applicable tax treaty provisions.
Generally, any foreign Holder who participates in the Rental Pool will
be required to file a federal income tax return and will be subject to
U.S. federal income tax on the share of income allocated to him or her
less reductions for allowable deductions. Furthermore, the Code
requires the Company to withhold income tax from a foreign Holder's
share of rental pool gross receipts.
The discussion contained herein is not a complete treatise on the
ownership of an Interest by a foreign Holder. There are numerous issues
involved in ownership by a foreign Holder and consequently, foreign
Holders should consult with and must rely upon their own tax advisors
concerning the application of federal income tax laws.
Future Developments
The President and Congress and various states continue to discuss
and propose additional changes to the tax laws which could impact the
tax consequences to Holders. Holders are urged to consult with their
own tax advisers and counsel.
State and Local Taxes
In addition to the federal income tax considerations described
above, investors should consider potential state and local tax
consequences of the purchase of an Interest. Prospective investors
should consult with, and must depend upon their own tax advisors for a
complete evaluation of the state and local tax considerations relating
to the purchase of an Interest.
CERTAIN FLORIDA TAX MATTERS
Set forth below is a summary of certain Florida tax considerations
related to the offering. In the opinion of Quarles & Brady, in its
capacity as Florida tax counsel to the Company, the discussion which
follows summarizes the material provisions of the state and local taxes
specifically enumerated.
This summary is based on the Florida Statutes (the "Statutes"), the
Florida Administrative Code (the "Code") and on judicial and
administrative authorities interpreting the Statutes and the Code, all
of which are subject to change, possibly on a retroactive basis. The
authorities on which this summary is based are subject to various
interpretations, and the opinions of tax counsel are not binding on the
State of Florida Department of Revenue (the "Department") or the courts,
either of which could take a contrary position. Furthermore, except as
noted herein, no rulings have been or will be sought from the Department
or from local taxing authorities with respect to the transactions
described herein. Accordingly, there can be no assurance that the
Department or local taxing authorities will not challenge the opinions
expressed herein or that a court will not sustain such a challenge.
This summary covers only the state and local taxes specifically
enumerated and is not intended to be a comprehensive discussion of all
state and local tax consequences of the purchase of an Interest.
Holders should consult with and must depend upon their own tax advisors
concerning the application of state and local tax laws with reference to
their own tax situations.
Excise Taxes on Documents.
Excise Tax on Transfers of Real Estate. Under Florida law, an
excise tax is imposed at the rate of 70 cents for each $100 of
consideration paid on deeds and other instruments that transfer
interests in real property. The Department has advised that this excise
tax will apply at the time of the sale of an Interest because an
Interest transfers an interest in a hotel room under Florida law. The
tax will be imposed on the full subscription price of an Interest (less
any sales discounts). The Company will be required to collect the tax
at the time an Interest is sold on the full subscription price
regardless of whether a Holder elects to pay for an Interest over the
term of the Interest. The purchaser of an Interest will be liable for
this excise tax as follows:
Tax Payable (Exclusive
Subscription Price ____of Any Discounts)___
Class A Interest $18,500 $129.50
Class B Interest 21,500 150.50
Class C Interest 25,500 178.50
Class D Interest 36,500 255.50
Class E Interest 39,500 276.50
Class F Interest 60,000 420.00
Excise Tax on Stock Certificates. Under Florida law, an excise tax
is imposed at the rate of 35 cents on each $100 of face value on
certificates of stock or shares evidencing an ownership interest in any
corporation. The tax is imposed on securities issued in the state of
Florida. The Company has advised tax counsel that it intends to
accept and issue all subscription agreements for the purchase of
Interests in Wisconsin. The Department has advised tax counsel
that this excise tax will not be imposed on the subscription price
of an Interest if the subscription agreement for the Interest is
accepted by the Company in Wisconsin.
Excise Tax on Promissory Notes. Florida also imposes an
excise tax on promissory notes at the rate of 35 cents per $100
of indebtedness evidenced by the promissory note. The tax is
imposed on written obligations to pay money that are made,
executed or delivered in Florida. It also taxes security
agreements that are recorded in Florida. The Subscription and
Purchase Agreement contains a written promise to pay for those
Holders that choose to pay for an Interest over time. Provided
that the written promise to pay is neither made, executed nor
delivered in Florida, the sale of an Interest will not be subject
to excise tax unless the Interest is recorded in Florida. The
Company has advised that it will not record the Interests in
Florida.
Because of the complexity and uncertainty in this area, the
Company has received a ruling from the Department concerning the
application of the excise taxes described in this section to the
purchase of an Interest by a Holder. The Department advised the
Company in a ruling that the sale of an Interest which is not
recorded in Florida is not subject to this excise tax if the
written promise to pay is not fixed and absolute at the time of
execution. However, certain facts concerning the offering of
Interests have changed since the ruling was issued by the
Department. Furthermore, the Department issued the ruling to
the Company. Consequently, the ruling is limited in application
to the Company and Holders may not rely on the ruling. The
Company will resubmit the ruling request to confirm that the
terms of the License Plan and the Company's stated position
that it will cancel the Interest upon a default render the
financing not fixed and absolute for Florida excise tax purposes
and will request that the Department reissue the ruling to
both the Company and, if acceptable, Holders of Interests.
Sales Taxes.
Under state and local law in Florida, a combined sales tax of
eleven percent is imposed on the rental, leasing, letting or granting of
a license for the use of real property or transient living
accommodations located in Pinellas County. The eleven percent tax is
comprised of the following: (1) a Florida state sales tax of six
percent, (2) a discretionary county surtax of one percent, and (3) a
tourist development tax of four percent. The Department has advised tax
counsel that the purchase of an Interest will not be subject to the
combined sales tax because there is no provision in the Florida sales
tax that taxes the sale of a security. With respect to annual dues, the
Department has advised that such amounts will not be considered rental
consideration and therefore not subject to the combined sales tax
because the purchase of an Interest is a payment for the purchase of an
interest in real property and for a right to receive rental income and
is not a lease or license to use real property within the meaning of the
Florida sales tax provisions.
The Department has also advised tax counsel that the rental of a
Holder's allotted Unit Weeks under the Rental Pool will be the rental of
transient accommodations subject to the combined sales tax. The
Department has advised that the Company, as agent for the Holder of an
Interest, may register as a dealer and remit the applicable Florida
state sales tax and the discretionary county surtax due on behalf of
individual Holders on receipts from the rental of suites in the Rental
Pool. However, the tourist development tax is administered by Pinellas
County and must be remitted directly to the county tax collector. It is
uncertain whether Pinellas County will allow the Company to collect and
remit the tourist development tax on behalf of individual Holders on
receipts from the rental of suites in the Rental Pool.
Because of the complexity and uncertainty in this area, the
Company has received a ruling from the Department (1) that the
sale of an Interest and the payment of annual dues will not be
subject to the combined sales tax, and (2) that the Company,
acting as rental agent, may collect and remit the Florida state
sales tax and the discretionary county surtax on payments
collected in connection with the rental of Holders' suites under
the Rental Pool. In providing its ruling, the Department relied
on facts concerning the offering of Interests as disclosed by the
Company in its ruling request. Since issuance of the ruling by
the Department, certain facts concerning the offering of
Interests have changed. Furthermore, the Department issued
the ruling to the Company. Consequently, the ruling is limited
in application to the Company and Holders may not rely on the
ruling. The Company will resubmit the ruling request to reflect
the change in facts and will request that the Department confirm
its ruling (1)that the sale of an Interest and the payment of
annual dues will not be subject to the combined sales tax, and
(2) that the Company, acting as rental agent, may collect and
remit the Florida state sales tax and the discretionary county
surtax on payments collected in connection with the rental of
Holders' suites under the Rental Pool and will request that the
Department reissue the ruling to both the Company and, if
acceptable, Holders of Interests. In the opinion of tax counsel
the change in facts is not material and therefore, tax counsel
believes that the Department will affirm the conclusions
contained in its original ruling. However, there can be no
assurance that the Department will not modify the opinions
provided in the original ruling. The Company, has not received
a ruling that would allow the Company to collect and remit the
tourist development tax directly to the Pinellas County tax
collector on behalf of participants in the Rental Pool.
Upon proper notice, a Holder may use one or more of his or her
allotted Unit Weeks for personal use. In the opinion of tax counsel,
because the Interests are treated as securities, the personal use of a
suite by a Holder will not be subject to the combined sales tax.
However, the law is uncertain in this area and no assurance can be given
that the Department could not successfully assert that a Holder is
liable for the combined sales tax on the personal use of a suite.
Holders must consult with, and must depend upon the advice of their own
tax advisors. The Company does not intend to seek a ruling from the
Department that the personal use of a suite for one or more weeks by the
Holder is not subject to the combined sales tax.
Upon proper notice, a Holder may also rent one or more of his or
her allotted Unit Weeks to a third party. Tax counsel has advised that
the rental of one or more of a Holder's allotted Unit Weeks will be the
rental of transient accommodations subject to the combined sales tax.
The Holder will be required to collect and remit the combined sales tax
on the gross rental proceeds to the appropriate taxing authorities.
<PAGE>
<PAGE>
PRIOR PERFORMANCE OF JEFFREY KEIERLEBER AND AFFILIATES
Since 1980, Jeffrey Keierleber and/or affiliates have
sponsored a number of limited partnerships formed to develop, own
and operate a variety of residential and commercial properties.
Units of limited partnership interest in the partnerships have
been sold both in public and private offerings.
Jeffrey Keierleber and/or affiliates served as general
partner of 28 limited partnerships formed to invest primarily in
residential and commercial real property and to make junior
mortgage loans secured by real estate. From April 1980 to August
1989 these programs in the aggregate raised approximately
$66,136,060 from a total of approximately 6,179 individual and
corporate investors and have purchased 33 properties for
aggregate cash and debt of approximately $124,913,000.
Approximately 97% of the properties, based on cost represents
investments in residential properties (4,479 rental units) and
approximately 3% represents investments in shopping centers,
office buildings and undeveloped land. Twenty-two of the
properties (53% based on the cost), are located in Wisconsin; 10
of the properties (42% based on cost) are located in Florida; and
one property (5% based on cost) is located in Georgia. All of
the properties were existing when purchased. As of September 1,
1997, 47% of the properties (based on purchase price) have
been sold.
None of the partnerships described above have investment
objectives similar to those of the Interests offered hereby.
The information presented in this section represents the
historical experience of the real estate programs managed by
Jeffrey Keierleber and his affiliates during the last ten years.
INVESTORS IN CHARTHOUSE SUITES VACATION INTERESTS SHOULD NOT
ASSUME THAT THEY WILL EXPERIENCE RETURNS SIMILAR TO THOSE
EXPERIENCED BY INVESTORS IN THE PRIOR REAL ESTATE PROGRAMS
DESCRIBED BELOW. (See also the "Prior Performance Tables").
Jeffrey Keierleber and/or his affiliates are general
partners of three partnerships, which sold real estate limited
partnership interests from 1986 through 1989: Decade's Land
Opportunity Fund ("DLOF"), Decade Companies Income Properties - a
limited partnership ("DCIP") and Decade's Monthly Income &
Appreciation Fund - a limited partnership ("DMIAF").
DCIP and DMIAF were formed to invest in equity ownership
primarily of residential and commercial real property. As of
September 1, 1997, these programs, in the aggregate, had raised
approximately $24,063,810 from approximately 2,577 individual and
corporate investors and have purchased six properties, all of
which are apartment complexes, during the last ten years for
aggregate cash and debt of approximately $41,304,000. Four of
the properties owned by these partnerships are located in
Florida, and two of the properties are located in Wisconsin. All
of the properties were existing when purchased. Three of these
properties have since been exchanged for other properties.
One non-public partnership, Decade's Land Opportunity Fund,
was formed to invest in a 38-acre parcel of undeveloped land in
New Berlin, Wisconsin. This program raised $1,000,000 from 52
individual investors and purchased the parcel of land for cash in
the amount of $522,500.
Neither Jeffrey Keierleber nor any of his affiliates, have,
within the past five years, been the subject of any criminal
conviction or pending proceeding, any order preventing them from
engaging in securities distributions or certain business
practices, or any conviction for violation of federal or state
securities laws, or except as indicated in this paragraph, any
bankruptcy or insolvency proceeding.
Set forth below is a summary as of July 1, 1997, of the
three prior real estate limited partnerships which sold Interests
in the last 10 years.
Public Nonpublic
Real Estate Real Estate
Programs Programs Total
Total Amount
of Money Raised
from Investors $24,063,810 + $1,000,000 = $25,063,810
Total Number
of Investors 2,577 + 52 = 2,629
Aggregate
Purchase Price
of Property
Acquired $41,304,000 + $ 522,500 = $41,826,500
All three of the prior real estate programs sponsored by the
affiliates of Jeffrey Keierleber in the last ten years have
invested in various forms of real estate. The following are
analyses by location and by types of properties purchased by
prior programs.
Existing properties constitute 100% of the properties by
purchase price, acquired by prior public and programs. The
nonpublic program purchase unimproved land. As of September 1,
1997, three properties owned by a public partnership have been
sold or exchanged for other properties.
In February, 1990, the 235-unit apartment complex known as
Laguna Vista Apartments purchased by DCIP in December, 1996 for
$5,200,000 was exchanged with a nonaffiliated buyer for Town
Place Apartments with an exchange value of $6,220,000, resulting
in an economic gain of approximately $1,020,000.
In August, 1993, the 168-unit apartment complex known as
Woodbridge Apartments purchased by DCIP in June, 1992 for
$4,400,000 was exchanged with a nonaffiliated buyer for Pelican
Sound Apartments with an exchange value of $5,400,000, resulting
in an economic gain of approximately $1,000,000.
In April, 1994, the 200-unit apartment complex known as
Ashley Pointe Apartments purchased by DCIP in January, 1990 for
$4,493,000 was sold to a nonaffiliated buyer for cash totaling
$3,070,000, resulting in an economic gain of approximately
$1,423,000.
Of the three programs sponsored by the General Partner and
Affiliates in the last ten years to acquire or finance the
acquisition of real estate, two can be considered public programs
under federal securities laws.
The following table sets forth summary information regarding
property acquisitions of public and nonpublic programs sponsored
by the General Partner or Affiliates within the last ten years.
None of these had investment objectives identical to those of
Charthouse Suites Vacation Ownership, Inc.
Property Purchased by Location
Number of Properties
Public Nonpublic Percent
Programs Programs Total of Total
Midwest 2 1 3 43%
Southeast 4 0 4 57%
Total 6 1 7 100%
Purchase Price of Properties
Public Nonpublic Percent
Programs Programs Total of Total
Midwest $12,801,000 $522,500 $13,323,500 32%
Southeast $28,503,000 $ 0 $28,503,000 68%
Total $41,304,000 $522,500 $41,826,500 100%
The following information concerns limited partnerships
previously sponsored by Mr. Keierleber and/or Affiliates and
formed to invest in or to finance the acquisition or refinance
the ownership of real estate.
The information set forth below is provided in a format
complying with regulatory requirements and is not necessarily
comparable from one partnership to another, as a result of the
varying order of priority of investment objectives, changes
inherent in the real estate market and changes in the tax laws
and the application thereof. In considering the following
discussion, prospective investors should note that persons who
purchase Interests will not acquire any ownership interest in the
partnerships to which the following relates, and its inclusion in
this Prospectus does not imply or indicate in any manner that the
Company will make any investment comparable to those discussed.
Because the primary investment will be in the license right to
Unit Weeks in a hotel, the cash flow, income tax treatment and
distributions and returns will differ substantially from those of
the partnerships discussed below.
Affiliates of Mr. Keierleber are general partners of the
following described partnerships, whose securities were not
registered under the Securities Act of 1933 as amended (except
for DCIP and DMIAF), and all of which (with the exception of
DLOF) are engaged in the business of investing in and operating
apartment complexes properties. As a general partner, the
Affiliates are contingently liable for the obligations of the
partnerships, except to the extent that such obligations are
non-recourse debt have recourse only to the property by which the
debt is secured. The presently existing obligations of the prior
partnerships for which Mr. Keierleber and/or Affiliates has
contingent responsibility are primarily normal operating
expenses, and it is not believed that these responsibilities will
materially affect his ability to satisfy his responsibilities to
the Company and the Holders of the Interests.
THE INFORMATION IN THIS SECTION REPRESENTS THE HISTORICAL
EXPERIENCE OF PROGRAMS MANAGED BY MR. KEIERLEBER AND/OR
AFFILIATES. INVESTORS IN THE CHARTHOUSE SUITES VACATION
INTERESTS SHOULD NOT ASSUME THAT THEY WILL EXPERIENCE RETURNS
SIMILAR TO THOSE EXPERIENCED BY INVESTORS IN THE PRIOR REAL
ESTATE PROGRAMS DESCRIBED BELOW. NONE OF THE PRIOR PARTNERSHIPS
ARE HOLDING UNINVESTED FUNDS OTHER THAN AS NECESSARY OPERATING
RESERVES.
DECADE'S LAND OPPORTUNITY FUND is a $1,000,000 Wisconsin
limited partnership formed on April 20, 1989 to acquire a 38-acre
parcel of land in New Berlin, Wisconsin. An Affiliate of Jeffrey
Keierleber is the general partner of this partnership, which has
52 partners who each made an investment of at least $10,000. The
land was acquired for a total cost of $522,500.
Of the aggregate price of the properties acquired by
partnerships through private offerings of which Mr. Keierleber
and/or Affiliates was a sponsor in the last ten years, 100% was
undeveloped land.
The two other partnerships organized under the "Decade" name
are both Wisconsin limited partnerships with virtually identical
investment objectives. Decade Companies, an affiliate of Mr.
Keierleber, is the general partner of each. Unless otherwise
stated, a minimum purchase of three units representing a $3,000
investment was required of each limited partner. None of the
partnerships listed below, nor any partnerships or joint ventures
in which Mr. Keierleber is personally involved independently of
the partnerships, has acquired from or sold property to the
General Partner or any associates or Affiliate thereof.
Decade Companies Income Properties ("DCIP") is an
$18,000,000 Wisconsin limited partnership formed on June 6, 1985
with 1,879 limited partners. Individual limited partners were
required to invest $3,000, IRA limited partners were required to
invest $2,000 and pension/profit-sharing plan limited partners
were required to invest at least $25,000 in the program. The
partnership owns a 379-unit apartment complex known as Pelican
Sound in St. Petersburg, Florida, for which it paid $12,000,000
(of which $5,400,000 was provided through the exchange of
Woodbridge Apartments), a 316-unit apartment complex known as The
Meadows II in Madison, Wisconsin, for which it paid $10,050,000
and a 200-unit apartment complex known as Town Place in
Clearwater, Florida, for which it paid $7,610,000 (of which
$6,220,000 was provided through the exchange of Laguna Vista
Apartments).
Decade's Monthly Income & Appreciation Fund ("DMIAF") is a
$6,058,810 Wisconsin limited partnership formed on August 11,
1987 with 698 limited partners. Individual limited partners were
required to invest $3,000, IRA limited partners are required to
invest $2,000 and pension/profit sharing plan limited partners
were required to invest at least $25,000 in the program. The
partnership owns an 88-unit apartment complex known as The
Meadows I in Madison, Wisconsin, for which it paid $2,751,000.
The purchase price of the properties purchased by the
foregoing public partnerships total $23,411,000, of which 100%
was devoted to the purchase of residential properties.
The following table summarizes the results to investors in
the two partnerships, which have either sold their assets,
liquidated investments or refinanced property. The returns shown
include tax benefits and liabilities at the highest applicable
federal tax bracket, and all distributions of each. No
assurances can be given that purchases of Interests will receive
returns similar to those shown below.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PROPERTY LIQUIDATIONS
Purchase
Computed
Price Sales Price
Economic Gain
Partnership Property and Date and Date
(Loss)
<S> <C> <C> <C> <C>
DCIP Laguna Vista $5,200,000 $6,220,000
$1,020,000
Apartments-235 units 12/86 02/90
DCIP Woodbridge $4,400,000 $5,400,000
$1,000,000
Apartments-168 units 06/92 08/93
DCIP Ashley Pointe $4,493,000 $3,070,000
($1,423,000)
Apartments-200 units 01/90 04/94
</TABLE>
<TABLE>
<CAPTION>
REFINANCING
Purchase Date
Tax-Free
Partnership Property Date Refinanced
Distribution
<S> <C> <C> <C> <C>
DCIP The Meadows II Apartments 01/89 11/89 0%
316 Units
DCIP Town Place Apartments 02/90 06/92 0%
240 Units
DMIAF The Meadows I Apartments 01/89 11/95 0%
88 Units
DCIP Town Place Apartments 02/90 05/96 0%
240 Units
</TABLE>
<PAGE>
PRIOR PERFORMANCE TABLES
See also the narrative disclosure at "Prior Performance of
Jeffrey Keierleber and Affiliates" in the Prospectus for
additional information regarding the partnerships.
The information presented in this section provides selected
information as to the public and non-public real estate programs
managed by Jeffrey Keierleber and affiliates.
HOLDERS OF INTERESTS SHOULD NOT ASSUME THAT THEY WILL
EXPERIENCE RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY
INVESTORS IN SUCH PRIOR REAL ESTATE PROGRAMS. HOLDERS OF
INTERESTS WILL NOT ACQUIRE ANY OWNERSHIP INTEREST IN ANY OF THE
PARTNERSHIPS TO WHICH THE FOLLOWING TABLES RELATE.
THE INCLUSION IN THIS PROSPECTUS OF THE FOLLOWING TABLES
DOES NOT IMPLY OR INDICATE IN ANY MANNER THAT THE COMPANY WILL
MAKE ANY INVESTMENTS COMPARABLE TO THOSE DISCUSSED IN THE TABLES
WITH RESPECT TO THE TYPE OF PROPERTY, CASH FLOW, INCOME TAX
DEDUCTIONS AVAILABLE TO INVESTORS OR OTHER FACTORS; NOR DOES IT
IMPLY OR INDICATE THAT THEY WILL EXPERIENCE RETURNS, IF ANY,
COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN THE PARTNERSHIPS
REFERRED TO HEREIN.
NONE OF THE PARTNERSHIPS, PUBLIC OR NON-PUBLIC, TO WHICH
THESE TABLES RELATE, HAD THE SAME INVESTMENT OBJECTIVE AS THE
VACATION INTERESTS.
TABLE I, EXPERIENCE IN RAISING AND INVESTING FUNDS. If
relevant, this table would set forth general information as of
December 31, 1996, for the last three years relating to the
experience of Jeffrey Keierleber and/or Affiliates in raising
funds, such as the gross amount of capital raised, the length of
time required to raise the stated amount, and information with
respect to the experience of Jeffrey Keierleber and/or Affiliates
in investing funds. In this regard, information is given as to
the amount of offering expenses, acquisition expenses, percent of
capital invested in properties, and other matters. Table I is
not applicable because Jeffrey Keierleber and Affiliates have not
raised funds during the last three years and therefore Table I is
omitted.
TABLE II, COMPENSATION TO SPONSOR, sets forth the various
fees paid to Jeffrey Keierleber and/or Affiliates from the
proceeds raised in each offering and from operations for the last
three years as of December 31, 1996.
TABLE III, OPERATING RESULTS OF PRIOR PROGRAMS. If
relevant, this table would set forth the yearly unaudited
operating results of prior partnerships including a Summary of
Operations, Computation of Tax Basis, Computation of Cash
Generated and Distribution Data per $1000 Investment for each of
the partnerships completing their offerings during the last five
years as of December 31, 1996. Table III is omitted because no
offerings were completed during the last five years.
TABLE IV, RESULTS OF COMPLETED PROGRAMS, describes the
results of five non-public real estate limited partnerships that
have completed operations during the last five years ended
September 1, 1997. None of these partnerships had the same
investment objectives as the Interests.
TABLE V, SALES OR DISPOSALS OF PROPERTIES, describes the
disposition of nine properties held by four non-public
partnerships in the last three years ended September 1, 1997.
<PAGE>
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
Other Programs
(Fourteen)
Date offering commenced Various
Dollar amount raised $44,328,810
Amount paid to sponsor from
proceeds of offering:
Underwriting fees $0
Acquisition fees $0
Dollar amount of cash generated
from operations before deducting
payments to sponsor $16,977,341
Amount paid to sponsor from operations:
Property management fees $ 2,910,308
Partnership management fees $ 99,445
Reimbursements $ 6,928,901
Leasing commissions $ 0
Interest Expense $ 644,920
Dollar amount of property sales and refinancing
before deducting payments to sponsor
-- cash $28,376,341
-- notes $ 0
Amount paid to sponsor from property sales
and refinancing:
Real estate commissions $ 0
Incentive fees $ 0
Acquisition Fees $ 242,237
Mortgage Brokerage Fees $ 232,600
Closing Cost Reimbursement $ 7,200
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE IV
RESULTS OF COMPLETED PROGRAMS
Decade Decade
Wisconsin Sunbelt
Decade Decade
Decade Properties Properties
Program Name 80-II 80-III
80-XII III Largo
<S> <C> <C>
<C> <C> <C>
Dollar Amount Raised $600,000 $850,000
$2,500,000 $1,116,220 $1,890,000
Number of Properties
Purchased 16 28
1 1 1
Date of Closing of
Offering 02/13/81 05/18/81
12/31/84 07/29/82 11/25/83
Date of First Sale
of Property 11/10/89 03/28/90
12/03/93 06/30/94 08/11/93
Date of Final Sale
of Property 04/08/96 09/04/92
12/03/93 06/30/94 08/11/93
Tax and Distribution Data per $1,000 Investment
Federal Income Tax Results:
Ordinary Income (Loss)
--From Operations ($3,027) ($1,851)
($1,236) ($1,533) ($2,336)
--From Recapture $119 $149
$207 $265 $221
Capital Gain (Loss) $1,908 $1,747
$1,312 $2,030 $1,115
Deferred Gain $0 $0
$0 $0 $0
Capital $0 $0
$0 $0 $0
Ordinary $0 $0
$0 $0 $0
Cash Distributions to Investors
Source (On GAAP Basis)
--Investment Income $0 $45
$283 $762 $0
--Return of Capital $0 $1,000
$530(1) $1,000 $0
Source (On Cash Basis)
--Sales $0 $1,045
$813 $1,700 $0
--Refinancing $0 $0
$0(1) $62 $0
--Operations $0 $0
$0$0 $0
--Other $0 $0
$0 $0 $0
Receivable on Net Purchase
Money Financing $0 $0
$0 $0 $0
_________________________
(1) A distribution of limited partner interests in Decade Companies Income
Properties to Holders of Decade 80-XII was
made with $470 of refinancing proceeds treated as a return of capital.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
SELLING PRICE, NET OF CLOSING COSTS
AND GAAP ADJUSTMENTS
CASH
MORTGAGE PURCHASE ADJUSTMENTS
DATE RECEIVED
BALANCE MONEY RESULTING
OF NET OF
AT TIME MORTGAGE FROM
DATE SALE CLOSING
OF TAKEN BY APPLICATIONS
PROPERTY ACQUIRED (1) COSTS
SALE PROGRAM OF GAAP TOTAL
<S> <C> <C> <C>
<C> <C> <C> <C>
2 RESIDENTIAL UNITS,
MILWAUKEE, WI 01/31/81 08/31/94 $81,089
$0 $0 $0 $81,089(2)
2 RESIDENTIAL UNITS,
MILWAUKEE, WI 01/31/81 07/28/95 $77,473
$0 $0 $0 $77,473(3)
2 RESIDENTIAL UNITS,
HARTLAND, WI 12/31/80 04/08/96 $76,248
$0 $0 $0 $76,248(4)
2 RESIDENTIAL UNITS,
MILWAUKEE, WI 04/30/82 09/30/94 $149,921
$0 $0 $0 $149,921(5)
2 RESIDENTIAL UNITS,
MILWAUKEE, WI 04/30/82 10/17/94 $79,883
$0 $0 $0 $79,883(6)
2 RESIDENTIAL UNITS,
MILWAUKEE, WI 03/31/82 11/29/94 $76,945
$0 $0 $0 $76,945(7)
2 RESIDENTIAL UNITS,
MILWAUKEE, WI 04/30/82 12/12/95 $77,235
$0 $0 $0 $77,235(8)
2.5 UNDEVELOPED ACRES,
NEW BERLIN, WI 08/16/89 08/20/96 $49,145
$0 $0 $0 $49,145(9)
76 APARTMENT UNITS,
MIDDLETON, WI 06/30/82 06/30/94 $2,569,545
$1,061,165 $0 $0 $3,630,710(10)
</TABLE>
<TABLE>
<CAPTION>
COST OF PROPERTIES INCLUDING CLOSING AND
RELATED COSTS
EXCESS
TOTAL (DEFICIENCY) OF
ACQUISITION PROPERTY OPERATING
ORIGINAL COST,
CAPITAL CASH RECEIPTS
MORTGAGE IMPROVEMENT,
CLOSING OVER CASH
PROPERTY FINANCING AND SOFT COSTS
TOTAL EXPENDITURES
<S> <C> <C>
<C> <C>
2 RESIDENTIAL UNITS, MILWAUKEE, WI $87,878 $676
$88,554 ($7,465)
2 RESIDENTIAL UNITS, MILWAUKEE, WI $70,944 $14,999
$85,943 ($8,470)
2 RESIDENTIAL UNITS, HARTLAND, WI $80,000 $2,088
$82,088 ($5,840)
2 RESIDENTIAL UNITS, MILWAUKEE, WI $74,601 $4,958
$79,559 $70,362
2 RESIDENTIAL UNITS, MILWAUKEE, WI $73,387 $10,749
$84,136 ($4,253)
2 RESIDENTIAL UNITS, MILWAUKEE, WI $73,213 $10,923
$84,136 ($7,191)
2 RESIDENTIAL UNITS, MILWAUKEE, WI $75,719 $15,173
$90,892 ($13,657)
2.5 UNDEVELOPED ACRES, NEW BERLIN, WI $0 $42,915
$42,915 $6,230
76 APARTMENT UNITS, MIDDLETON, WI $1,450,000 $1,266,658
$2,716,658 $914,052
(1) NO SALES OF PROPERTIES ARE RELATED TO PARTIES
(2) OF THE $55,183 OF GAIN RECOGNIZED, $53,602 WAS CAPITAL GAIN AND $2,121
WAS ORDINARY INCOME
(3) OF THE $57,157 OF GAIN RECOGNIZED, $56,602 WAS CAPITAL GAIN AND $1,095
WAS ORDINARY INCOME
(4) OF THE $54,911 OF GAIN RECOGNIZED, $52,607 WAS CAPITAL GAIN AND $2,304
WAS ORDINARY INCOME
(5) OF THE $133,547 OF GAIN RECOGNIZED, $125,869 WAS CAPITAL GAIN AND $7,678
WAS ORDINARY INCOME
(6) OF THE $65,234 OF GAIN RECOGNIZED, $60,144 WAS CAPITAL GAIN AND $5,090
WAS ORDINARY INCOME
(7) OF THE $64,580 OF GAIN RECOGNIZED, $59,637 WAS CAPITAL GAIN AND $4,943
WAS ORDINARY INCOME
(8) OF THE $63,817 OF GAIN RECOGNIZED, $54,151 WAS CAPITAL GAIN AND $9,666
WAS ORDINARY INCOME
(9) ALL OF THE $6,585 OF GAIN RECOGNIZED WAS CAPITAL GAIN
(10) OF THE $1,442,706 OF GAIN RECOGNIZED, $1,280, 799 WAS CAPITAL GAIN AND
$161,907 WAS ORDINARY INCOME
</TABLE>
<PAGE>
<PAGE>
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Certain indemnification agreements to be entered into with
Charthouse and the Company's Articles of Incorporation and Bylaws
require the Company to indemnify the director and officers, among
others, against claims and liabilities and reasonable expenses
actually incurred by them in connection with any claim or
liability by reason of their services in those or other
capacities, unless it is established that the act or omission of
the director or officer was material to the matter giving rise to
the proceeding and was committed in bad faith, or was the result
of active and deliberate dishonesty, or the director or officer
actually received an improper personal benefit, or in the case of
any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful.
The Company will enter into indemnification agreements with
its director and each of its officers. The indemnification
agreements will require, among other things, that the Company
indemnify its director and officers to the fullest extent
permitted by law and advance to the director and officers all
related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. Under these
agreements, the Company also must indemnify and advance all
expenses incurred by its director and officers seeking to enforce
their rights under the indemnification agreement and cover the
director and officers under the Company's liability insurance.
Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by provisions
in the Articles and Bylaws, it provides greater assurance to the
director and officers that indemnification will be available
because, as a contract, it cannot be modified unilaterally in the
future by the director or by the Holders to eliminate the rights
it provides.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to the director, officers or
persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of
the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Prior to seeking court approval for indemnification, the Company
will cause the party seeking indemnification to apprise the court
of the position of state administrators and the Securities and
Exchange Commission with respect to indemnification for
securities laws violations and to submit to such court the
question whether such indemnification is or is not against public
policy, as expressed in the Securities Act (in light of the
position of the state administrators and the Securities and
Exchange Commission).
LEGAL MATTERS
Quarles & Brady, Milwaukee, Wisconsin, has passed upon the
validity of the issuance of the Interests offered, pursuant to
this Prospectus and on certain tax matters as described under
"Federal Income Tax Considerations" and "Certain Florida Tax
Considerations." Quarles & Brady has in the past represented and
is presently representing the Company and Decade Properties, Inc.
in certain other matters. Holders with specific tax
considerations not discussed above or special circumstances
should seek the advice of qualified and independent legal
counsel.
There are currently no pending legal proceedings which would
have a materially adverse effect on the Company, nor are there
any proceedings in process, or known to be contemplated by any
governmental authority, which would have a material effect on the
Company.
EXPERTS
The balance sheet of the Company, dated as of August 31,
1997 and statements of operating revenues and certain expenses of
Chart House Suites hotel for the fiscal years ending November 30,
1994 through 1996 have been audited by Virchow, Krause & Company,
LLP, independent auditors, and they are included in reliance upon
such report given upon the authority of such firm as experts in
accounting and auditing.
On September 8, 1997, the Company approved the engagement of
Virchow, Krause & Company, LLP as its independent auditors for
the balance sheet dated August 31, 1997, to replace the firm of
Ernst & Young LLP, who were dismissed as auditors of the Company
The decision to change the Company's independent auditors
was due to reduce costs and administrative reasons.
The reports of Ernst & Young LLP on the Company's balance
sheets dated December 31, 1996 and June 30, 1997, did not contain
an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or
accounting principles.
In connection with the audits of the Company's balance
sheets as of December 31, 1996 and June 30, 1997, and in the
subsequent interim period, there were no disagreements with Ernst
& Young LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of Ernst & Young LLP
would have caused Ernst & Young LLP to make reference to the
matter in their report.
<PAGE>
//<PAGE>
FINANCIAL STATEMENTS AND RELATED INFORMATION
CHART HOUSE SUITES
Clearwater, Florida
STATEMENT OF OPERATING REVENUES
AND CERTAIN EXPENSES
For the nine months ended August 31, 1997
(unaudited)
TABLE OF CONTENTS
For the nine months ended August 31, 1997
(unaudited)
Statement of Operating Revenues and Certain Expenses 3
Note to Financial Statement 5
STATEMENT OF OPERATING REVENUES AND CERTAIN EXPENSES
For the nine months ended August 31, 1997
(unaudited)
OPERATING REVENUES
Total rental income 379,931
OTHER INCOME
Telephone 6,159
Miscellaneous/other 3,220
Sales tax income 515
Interest income 3,804
Total Other Income 13,698
Total Operating Revenues 393,629
CERTAIN EXPENSES
Salaries
Salaries-administration 4,393
Salaries-housekeeping 17,698
Manager on-site 20,307
Operations/front desk 21,695
Salaries-maintenance/grounds 15,137
Payroll taxes (included above) ----
Management fee 22,250
Total Salaries 101,480
Direct Expenses
Insurance 9,369
Maintenance services/supplies 6,393
Electric-units 11,433
Propane gas 4,040
Water/sewer 10,806
Trash removal 2,047
Cable television 2,628
Grounds 1,753
Sales and marketing 18,422
Telephone 6,273
Laundry/cleaning supplies 7,325
Real estate tax 20,700
Administrative miscellaneous 16,430
Total Direct Expenses 117,619
REPAIR AND MAINTENANCE EXPENSES
Furniture 1,974
Locks and keys 1,214
Pool maintenance 1,093
Telephone equipment 1,015
Electrical/mechanical 1,014
Roof 892
Elevators 850
Other maintenance 3,555
Total Repair and Maintenance Expenses 11,607
Total Expenses 230,706
EXCESS OF OPERATING REVENUES
OVER CERTAIN EXPENSES $162,923
NOTE TO FINANCIAL STATEMENT
For the nine months ended August 31, 1997
(unaudited)
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Chart House Suites is a 25 unit hotel complex located in
Clearwater, Florida. The hotel opened for business on April 21,
1994.
Basis of Accounting
The accompanying statement of operating revenues and certain
expenses reflects income and expenses that are directly
attributable to the operations of the hotel complex, and that are
not dependent upon a particular owner of the property. As a
result, certain expenses which are included in the accounting
records of the property are not included in the accompanying
financial statements. These expenses are depreciation,
amortization, mortgage interest, and certain office and
administrative expenses.
Repairs and Maintenance
Ordinary maintenance and repairs are charged to operations when
incurred, while expenditures which significantly increase asset
lives or values are capitalized.
<PAGE>
Charthouse Suites
Vacation Ownership, Inc.
Balance Sheet
August 31, 1997
with Report of Independent Auditors
Charthouse Suites Vacation Ownership, Inc.
Balance Sheet
August 31, 1997
Contents
Report of Independent Auditors............................... 1
Balance Sheet.................................................2
Notes to Balance
Sheet.....................................................3 - 9
Report of Independent Auditors
The Board of Directors
Charthouse Suites Vacation Ownership, Inc.
We have audited the accompanying balance sheet of Charthouse
Suites Vacation Ownership, Inc. (the Company) as of August 31,
1997. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the balance sheet is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the
balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of the
Company at August 31, 1997, in conformity with generally accepted
accounting principles.
VIRCHOW, KRAUSE & COMPANY, LLP
Waukesha, Wisconsin
September 8, 1997, except for Note 7 as to which the
date is October 15, 1997
Charthouse Suites Vacation Ownership, Inc.
Balance Sheet
August 31, 1997
Assets
Cash 936
Prepaid expenses 9,064
Total assets 10,000
Shareholder's equity
Common stock, par value $.01 per share, authorized
10,000 shares, issued 100 shares 1
Paid-in-capital 99,999
100,000
Less: Stock subscription receivable 90,000
Total shareholder's equity 10,000
Charthouse Suites Vacation Ownership, Inc.
Notes to Balance Sheet
August 31, 1997
1. Organization, Description of Business, and Planned Offering
Charthouse Suites Vacation Ownership, Inc., a Florida Corporation
(the Company) was formed on April 16, 1996, to facilitate the
sale of interests (through an Offering) to rent or use the Chart
House Suites Hotel (the Hotel) located in Clearwater, Florida.
The Company intends to sell, A, B, C, D, E and F Class Interests
(the Interests). Purchasers of the Interests will have the right
to use for two specific consecutive weeks of every Spring,
Summer, Fall and Winter season until December 31, 2040, a hotel
suite of a certain category in the Hotel. Owners of the
Interests do not acquire an ownership or equity interest in the
Company, but pursuant to the Charthouse Suites Vacation License
Plan, will acquire a license right to utilize a suite in the
Hotel.
The Company plans to offer for sale the following Interests:
Number of Price Per
Class of Interest Interests Interest
A Interest 36 $18,500
B Interest 24 21,500
C Interest 36 25,000
D Interest 36 36,500
E Interest 12 39,500
F Interest 6 60,000
Amounts received by the Company in connection with the sale of
the license interests will be recorded as income over the
contractual life of the license agreement, using the straight-line
method. Assuming the maximum number of Interests are sold,
the gross proceeds from the sale will be approximately $4,248,000
exclusive of offering expenses. If fewer than 76 Interests are
sold by September 30, 1998, the Company has an option to cancel
the licenses and return the entire subscription amount, reduced
by certain payments or benefits received, to investors.
Holders of Interests will be required to share in the annual
maintenance and other related costs, expenses and reserves of
providing the Hotel services and property and equipment for their
respective Unit Weeks in the Hotel. Holders will be assigned a
proportionate share of such expenses based upon a defined formula
pursuant to a Charthouse Suites Vacation License Plan with Decade
Properties, Inc. (Decade, an affiliate of the Company) allocating
fixed and variable costs to their respective class of Interests.
An investor may finance the purchase of an Interest through the
Company by paying at least 30% of the subscription price and
entering into a subscription agreement for the remainder of the
subscription price to be payable over a maximum of 360 monthly
installments with increased licensing payments up to a maximum of
9% per year which have the effect of an interest charge on the
amounts outstanding.
Under a Guaranteed Rental Agreement, developed as an incentive to
early purchasers of Interests, the Company has guaranteed that
investors purchasing Interests within one year of the effective
date of the planned offering, will receive guaranteed rental
payments, as defined, at varying rates, in exchange for the use
of unit weeks of Hotel suites. All rights exchanged for the use
of the Hotel suites must be exercised no later than five years
after the effective date of the offering. Alternatively,
investors purchasing Interests within one year of the effective
date of the offering may elect to receive a cash discount ranging
from 1.5% to 5% applicable to the subscription price (depending
on the date an Interest is purchased) in lieu of the Guaranteed
Rental Arrangement.
2. Shareholder's Equity
On April 16, 1996, the Company's sole shareholder entered into a
subscription agreement to purchase 100 shares of the Company's
common stock for $1,000 per share or an aggregate subscription
price of $100,000. As of August 31, 1997, the sole shareholder
had paid $10,000 of the subscribed amount.
3. Transactions with Related Parties
Affiliates of the Company will provide management and consulting
services to the Company including the rental services pursuant to
agreements with the Hotel.
Decade will sell the hotel to the Company (see Note 7) and be
employed by the Company to provide property management services
to the Hotel. The Company has entered into a Property Management
Agreement with Decade whereby Decade will manage the Hotel until
December 31, 2040, for a fee of $2,500 a month (such fee to
increase by the CPI index increase on the first of each year
beginning January 1, 1998) plus reimbursement of defined
expenses. The Property Management Agreement provides for a
payment to Decade equal to the present value (using an 8%
discount rate) of the remaining future payments to be received in
the event Decade is removed, in part or whole, as the property
manager.
Holders of the Interests may utilize the Company's rental
services if they do not want to or cannot use one or more of
their allotted weeks of each year. Decade will provide rental
services for a fee equal to 5% of the rental revenue. Interest
holders may also seek to have Decade enter into individual
property management agreements.
DPI Construction & Engineering Corp. ("DPIC&E"), an affiliate of
the Company, is engaged in the general contracting business. The
Company may enter into agreements with DPIC&E whereby DPIC&E will
provide services in connection with renovation and remodeling
work on the Hotel.
Decade and affiliates will be reimbursed for the actual cost of
goods and materials used by or for the Company, including the
following general functions of the Company: Company operations,
Company accounting, investor communications, investor
documentation, legal services, tax services, computer services,
risk management, Company organizational and offering expenses,
and any other related operational and administrative expenses
necessary for the organization and operation of the Company.
4. Offering Costs
As of August 31, 1997, $194,459 of legal and accounting fees had
been incurred by Decade related to the planned offering discussed
in Note 1. The Company has agreed to indemnify and reimburse
Decade for such costs only if the planned offering occurs and
sufficient funds become available. At that time, the Company
will record such amounts in its financial statements.
5. Income Taxes
The Company is taxed on its income for federal and state income
taxes under the laws of subsection "C" of the Internal Revenue
Code. No provision for income taxes was recorded as of August
31, 1997, and the Company has not commenced operations.
6. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
7. Pro Forma Acquisition (Unaudited)
On June 30, 1997, the Company entered into an agreement to
acquire the Hotel from Decade for approximately $1.8 million.
The purchase is contingent upon the Offering achieving the sale
of the 76 interests. Decade will provide financing for the whole
purchase price of approximately $1.8 million through an unsecured
demand note payable with interest only payable monthly at 8%.
The following unaudited pro forma balance sheet as of August 31,
1997, reflects the acquisition of the Hotel from Decade that will
occur subsequent to August 31, 1997, as if such transactions had
occurred as of August 31, 1997. The pro forma presentation shows
the possible scope of the change in the historical financial
position caused by the transaction.
The following pro forma statements of operations for the nine
months ended August 31, 1997, and the year ended November 30,
1996, give effect to the hotel acquisition as if it were
consummated as of the first day of the respective periods. The
pro forma presentation shows the possible scope of the change in
the historical results of operations by presenting the income
from continuing operations with the hotel. The pro forma
statements of operations reflect that historical rental income is
received by the Company on behalf of the rental pool and,
therefore, is subject to a fee for rental services equal to 5% of
the rental revenues. The pro forma statements of operations
include the historical property management fee as part of the
salary expense category. Under the Property Management Agreement
described in footnote 3 herein, a fee of $2,500 per month is due,
and such amount is not materially different from the actual
property management fee incurred during the pro forma periods
shown. Therefore, no adjustment to the historical results was
made.
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet
August 31,
1997
(unaudited)
Historical Pro-Forma
Charthouse Charthouse
Suites
Vacation Suites Vacation
Ownership, Inc.
Acquisition Ownership, Inc.
<S> <C>
<C> <C>
Assets
Cash
936 936
Prepaid expenses
9,064 9,064
Investment in real estate
1,811,900(A) 1,811,900
Total assets 10,000 1,811,900
1,821,900
Liabilities and Shareholder's equity
Note payable to affiliate
1,811,900(A) 1,811,900
Common stock, par value $.01 per
share, authorized 10,000 shares,
issued 100 shares
1 1
Paid-in-capital
99,999 99,999
100,000 100,000
Less: Stock subscription receivable
90,000 90,000
Total shareholder's equity
10,000 10,000
Total liabilities and shareholder's equity 10,000
1,811,900 1,821,900
</TABLE>
(A) To reflect the acquisition of the Charthouse Hotel and the
financing provided from Decade Properties, Inc.
<TABLE>
<CAPTION>
Condensed Statement of
Operations
For the year ended
November 30, 1996
(Unaudited)
Pro Forma
Adjustments
Due to
Acquisition
Historical
Historical Pro Forma
Charthouse Suites
Charthouse Charthouse
Vacation Suites
Hotel Other Suites Vacation
Ownership, Inc. Operations
Adjustments Ownership, Inc.
<S> <C> <C>
<C> <C>
Operating Revenues
Total rental income 0 452,981
(22,649)(D) 430,332
Other Income 0
14,220 0 14,220
Total Operating Revenues 0 467,201
(22,649) 444,552
Expenses
Salaries 0
127,377 0 127,377
Direct Expenses 0
150,287 0 150,287
Repair and Maintenance 0
25,114 0 25,114
Total 0
302,778 0 302,778
Excess of Operating Revenues
Over Expenses 0 164,423
(22,649) 141,774
Interest Expense 0 0
(144,000)(B) (144,000)
Depreciation 0 0
(44,000)(C) (44,000)
Net Income (loss) 0 164,423
(210,649) (46,226)
</TABLE>
(B) To reflect interest expense of the acquisition at an
interest rate of 8% per annum.
(C) To reflect depreciation expense of the acquisition
using straight line depreciation over 40 years for the
building and 7 years for furniture and equipment.
(D) To reflect fee for rental services equal to 5% of
the rental revenues.
<TABLE>
<CAPTION>
Condensed Statement of
Operations
For the nine months ended
August 31, 1997
(Unaudited)
Pro Forma
Adjustments
Due To
Acquisition
Historical
Historical Pro Forma
Charthouse Suites
Charthouse Charthouse
Vacation Suites
Hotel Other Suites Vacation
Ownership, Inc. Operations
Adjustments Ownership, Inc.
<S> <C> <C>
<C> <C>
Operating Revenues
Total rental income 0 379,931
(18,997)(D) 360,934
Other Income 0
13,698 0 13,698
Total Operating Revenues 0 393,629
(18,997) 374,632
Expenses
Salaries 0
101,480 0 101,480
Direct Expenses 0
117,619 0 117,619
Repair and Maintenance 0
11,607 0 11,607
Total 0
230,706 0 230,706
Excess of Operating Revenues
Over Expenses 0 162,923
(18,997) 143,926
Interest Expense 0 0
(108,000)(B) (108,000)
Depreciation 0 0
(33,000)(C) (33,000)
Net Income (loss) 0 162,923
(159,997) 2,926
</TABLE>
(B) To reflect interest expense of the acquisition at an
interest rate of 8% per annum.
(C) To reflect depreciation expense of the acquisition using
straight line depreciation over 40 years for the building
and 7 years for furniture and equipment.
(D) To reflect fee for rental services equal to 5% of the
rental revenues.
<PAGE>
<PAGE>
CHART HOUSE SUITES
NOTE TO FINANCIAL STATEMENT
For the nine months ended August 31, 1997
(unaudited)
NOTE 1 - Nature of Business and Significant Accounting Policies
Nature of Business
Chart House Suites is a 25 unit hotel complex located in
Clearwater, Florida. The hotel opened for business on
April 21, 1994.
Basis of Accounting
The accompanying statements of operating revenues and certain
expenses reflects income and expenses that are directly
attributable to the operations of the hotel complex, and that are
not dependent upon a particular owner of the property. As a
result, certain expenses which are included in the accounting
records of the property are not included in the accompanying
financial statements. These expenses are depreciation,
amortization, mortgage interest, and certain office and
administrative expenses.
Repairs and Maintenance
Ordinary maintenance and repairs are charged to operations when
incurred, while expenditures which significantly increase asset
lives or values are capitalized.
<PAGE>
<PAGE>
CHART HOUSE SUITES
Clearwater, Florida
STATEMENTS OF OPERATING REVENUES
AND CERTAIN EXPENSES
Including Independent Accountants' Report
November 30, 1996, 1995 and 1994
<PAGE>
<PAGE>
CHART HOUSE SUITES
TABLE OF CONTENTS
November 30 1996, 1995 and 1994
Independent Accountants' Report 1
Statements of Operating Revenues and Certain Expenses 2
Note to Financial Statements 3
<PAGE>
<PAGE>
Virchow, Krause & Company, LLP
Certified Public Accountants & Consultants
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Decade Properties, Inc.
Brookfield, Wisconsin
We have audited the accompanying statements of operating revenues
and certain expenses of Chart House Suites for the years ended
November 30, 1996, 1995 and 1994. The financial statements are
the responsibility of the Partnership's management. Our
responsibility to express an opinion on the accompanying
statements of revenues and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the accompanying revenues and certain expenses
for the years ended November 30, 1996, 1995 and 1994, presents
fairly, in all material respects, the operating revenues and
certain expenses, exclusive of those described in Note 1, of
Chart House Suites for the years ended November 30, 1996, 1995
and 1994, in conformity with the basis of accounting described in
Note 1 to the accompanying schedules.
This report is intended solely for purposes of compliance with
form S-11, Registration Statement under the Securities Act of
1933, and should not be used for any other purposes.
VIRCHOW, KRAUSE & COMPANY, LLP
Waukesha, Wisconsin
January 9, 1997
<PAGE>
<PAGE>
CHART HOUSE SUITES
STATEMENTS OF OPERATING REVENUES AND CERTAIN EXPENSES
For the Years Ended November 30, 1996, 1995 and 1994
1996 1995 1994
OPERATING REVENUES
Total rental income $452,981 $327,031 $72,687
OTHER INCOME
Telephone 10,412 9,840 3,328
Miscellaneous/other 1,663 2,901 349
Sales tax income 650 582 152
Interest income 1,495 767 325
Total Other Income 14,220 14,090 4,154
Total Operating Revenues 467,201 341,121 76,841
CERTAIN EXPENSES
Salaries
Salaries-administration 6,221 5,161 -
Salaries-housekeeping 27,361 24,698 7,620
Manager on-site 24,056 17,226 8,321
Operations/front desk 27,386 17,226 8,321
Salaries-maintenance/grounds 15,174 13,026 13,981
Payroll taxes (included above) - - -
Management fee 27,179 16,311 -
Total Salaries 127,377 93,648 38,243
Direct Expenses
Insurance 12,492 11,048 12,488
Maintenance services/supplies 11,922 8,352 5,108
Electric-units 15,868 14,613 9,115
Propane gas 4,020 1,272 -
Water/sewer 9,432 8,287 7,286
Trash removal 2,067 1,681 1,004
Cable television 3,741 3,084 1,870
Grounds 2,575 1,238 1,725
Sales and marketing 19,659 24,246 21,858
Telephone 10,201 9,646 5,218
Laundry/cleaning supplies 8,976 8,641 12,820
Real estate tax 27,595 24,867 15,114
Administrative miscellaneous 21,739 24,436 17,450
Total Direct Expenses $150,287 $141,411 $111,056
<PAGE>
<PAGE>
1996 1995 1994
REPAIR AND MAINTENANCE EXPENSES
Roof $ - $ - $ -
Painting 1,943 470 510
Furniture/equipment/interior 18,219 31,744 10,949
Pool maintenance 758 3,554 -
Pavement - - 13,792
Reserved for others 4,194 1,802 5,666
Total Repair and 25,114 37,570 30,917
Maintenance Expenses
Total Expenses 302,778 272,629 180,216
EXCESS OF OPERATING REVENUES
OVER CERTAIN EXPENSES $ 164,423 $ 68,492 $(103,375)
See Accountants' Report.
Page 2
<PAGE>
<PAGE>
CHART HOUSE SUITES
NOTE TO FINANCIAL STATEMENT
November 30, 1996, 1995 and 1994
NOTE 1 - Nature of Business and Significant Accounting Policies
Nature of Business
Chart House Suites is a 25 unit hotel complex located in
Clearwater, Florida. While the hotel was owned for the whole
year in 1994, it opened for business on April 21, 1994.
Basis of Accounting
The accompanying statements of operating revenues and certain
expenses reflect income and expenses that are directly
attributable to the operations of the hotel complex, and that are
not dependent upon a particular owner of the property. As a
result, certain expenses which are included in the accounting
records of the property are not included in the accompanying
financial statements. These expenses are depreciation,
amortization, mortgage interest, and certain office and
administrative expenses.
Repairs and Maintenance
Ordinary maintenance and repairs are charged to operations when
incurred, while expenditures which significantly increase asset
lives or values are capitalized.
Page 3
<PAGE>
<PAGE>
GLOSSARY
"Annual Assessment" means the share of funds required for
the payment of Common Expenses, which is assessed annually
against a Licensee by the Company.
"Articles" means the Articles of Incorporation of the
Company.
"Assigned Unit" means the Unit of a certain category of
hotel suite or studio assigned to a Licensee by the Company at
the time of conveyance of a License, which the Licensee may
occupy during the Licensee's "Assigned Unit Week" (as hereinafter
defined).
"Assigned Unit Week" means the Unit Week assigned to a
Licensee by the Company at the time of conveyance of a License.
"Board" means the Board of Directors of the Company.
"By-Laws" means the By-Laws of the Company.
"Charthouse Rental Pool" means the income generated from the
rental of Unit Weeks placed in pool the plus miscellaneous income
from operating the Chart House Suites hotel such as telephone
income.
"Common Amenities" means the Resort Facility's swimming
pool, administrative office and laundry facilities. The Common
Amenities may be expanded from time to time, in the sole
discretion of the Company, in the manner provided for in the
License Plan. Licensees of the Resort Facility do not acquire
any direct ownership in the Common Amenities. However, the
Common Amenities are available for reasonable use by Licensees.
"Common Areas" means those portions of the Resort Facility
which are not included in the Units or Common Amenities.
"Common Expenses" means costs incurred in the operation of
the Resort Facility, the Common Amenities, and Common Areas and
includes:
1. Costs relating to or incurred in the operation,
maintenance, repair or replacement of the Units, the Common
Areas and the Common Amenities, including, but not limited
to, real estate taxes, costs of carrying out the powers and
duties of the Company and costs of fire and extended
coverage insurance; and
2. Any other expenses designated as "Common Expenses"
in accordance with applicable law by the Company, in its
sole discretion, or as set forth in the License Plan.
"Company" means Charthouse Suites Vacation Ownership, Inc.,
a Florida corporation, its grantees, successors and assigns.
"Holder" means the owner of a License, as reflected on the
books and records of the Company.
"Interests" means Class A, B, C, D, E and/or F Charthouse
Suites Vacation Interests described in the Prospectus and the
License Plan.
"License" means the ownership of a time share license which
is an estate for years, terminating on December 31, 2040 as
described in the Plan.
"Licensee" means a person to whom the Company has conveyed
of record of a License, his heirs, successors and assigns.
"License Plan" means the Charthouse Suites Vacation License
Plan, as amended from time to time. See Annex A.
"Resort Facility" means the property described on Exhibit
"A" attached to the License Plan, and all improvements thereon
(including the Units and the Common Areas and all furniture,
furnishings and fixtures therein) and all easements and rights
appurtenant thereto intended for use in connection therewith, but
does not include the attached marina, which remains the sole and
exclusive property of Decade Properties, Inc., or its grantees,
successors and assigns.
"Rental Pool" means the arrangement under which rental and
certain other revenues attributable to Units available for rental
in a Unit Week are aggregated and shared among Licensee making
their Units available for rental during that Unit Week through
the Rental Pool.
"Rules and Regulations" means the Rules and Regulations for
Chart House Suites Hotel. See Annex B.
"Service Period" means that period of time designated by
Charthouse Suites Vacation Ownership, Inc., in its sole
discretion, commencing at the end of each Unit Week and ending at
the beginning of the next Unit Week, or as necessary, to be used
by the Company to clean, service and maintain a Unit and the
Common Areas. The Service Period shall initially run for six
hours from 10:00 a.m. until 4:00 p.m. However, it may be changed
by the Company in its sole discretion; provided, however, that
the Service Period will not normally be less than three hours nor
more than seven hours.
"Special Assessment" means a share of funds required for the
payment of Common Expenses which, from time to time, is assessed
against a Licensee in addition to the Annual Assessment.
"Suite" means a suite or studio at the Chart House Suites
hotel as described in detail in the License Plan.
"Unit" means a part of the Resort Facility which is subject
to exclusive possession of a Licensee.
"Unit Week" means a period of use of a Unit which shall
consist of seven days. Unit Weeks are computed as follows:
Unit Week No. 1 is the seven days commencing on the
first Friday, Saturday or Sunday in each year.
Unit Week No. 2 is the seven days succeeding.
Additional Unit Weeks, up to, and including Unit Week
No. 51, are computed in a like manner.
Unit Week No. 52 contains the seven days succeeding the
end of Unit Week No. 51, without regard to the month or
year. Unit Weeks run from 12:00 p.m. on the first
Sunday of the Unit Week to 12:00 p.m. on the last
Saturday of the Unit Week, and include the service
period as defined in Article I (V) hereof. Any excess
days not otherwise assigned shall remain the property
of Decade Properties, Inc.
<PAGE>
<PAGE>
ANNEX A
LICENSE PLAN
THIS INSTRUMENT PREPARED BY:
Mary Neese Fertl, Esq.
Quarles & Brady
411 East Wisconsin Avenue
Suite 2900
Milwaukee, WI 53202
VACATION LICENSE PLAN
FOR
CHARTHOUSE SUITES
This Vacation License Plan (the "Plan") for Charthouse
Suites is made this ____ day of __________, 1997, by CHARTHOUSE
SUITES VACATION OWNERSHIP, INC., a Florida corporation (the
"Developer").
WHEREAS, the Developer has the right to acquire the real
property described on Exhibit A (the "Property") and the current
owner which owns in fee simple of the real property has agreed to
sell the property to the Developer; and
WHEREAS, the Developer desires to sell Vacation Interests,
with Rental Pool Arrangement (the "Interests"), which shall
entitle the holder to the income arising from rental or, upon
the proper notice, the license right to use for eight weeks in
each calendar year (two weeks in each season), a studio or
suite of a certain category in Charthouse Suites located upon
the Property, until December 31, 2040, pursuant to the terms
of a Subscription and Purchase Agreement for Charthouse Suites
Vacation Interests between the Developer and the purchaser; and
WHEREAS, the Developer desires to provide for the
preservation of the values and the amenities which are available
for use by the purchasers of Interests, and to this end does
hereby establish this Vacation License Plan as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the Developer hereby declares that
the Property shall be owned, held, used, transferred, sold,
conveyed, demised and occupied, subject to the conditions,
covenants, restrictions, easements, reservations, regulations and
burdens hereinafter set forth, until this Plan is terminated as
provided herein.
ARTICLE I
DEFINITIONS
The following words and phrases when used in the Plan
(unless the context should clearly reflect another meaning) shall
have the following meanings:
A. "Advisory Committee" means the board of Licensees
selected by the Developer pursuant to the terms of this Plan.
B. "Annual Assessment" means the share of funds required
for the payment of Common Expenses, which is assessed annually
against a Licensee.
C. "Assigned Unit Weeks" means the Unit Weeks assigned to
a Licensee by the Developer pursuant to the Subscription
Agreement executed by such Licensee and the Developer or assigned
by the Managing Entity.
D. "Common Elements" means the studios or suites, the
four-story hotel structure, including, without limitation, the
hallways, elevators, mechanical equipment, heated swimming pool,
the parking areas and the laundry room.
E. "Common Expenses" means the costs incurred in the
operation of the Resort Facility, as more particularly set forth
in this Plan.
F. "Developer" means Charthouse Suites Vacation Ownership,
Inc., its grantees, successors and assigns. A "Licensee" (as
hereinafter defined) shall not by reason of the purchase of a
"License" (as hereinafter defined) be deemed a grantee, successor
or assign of the Developer's rights or obligations under the
Plan, unless such Licensee acquires the Interests for purposes of
resale or is specifically so designated as a successor or assign
of the Developer's rights or obligations in the respective
instrument of conveyance or other instruments executed by the
Developer. Nothing herein shall be deemed to contradict the
definition of Developer in the Act with regard to the sale of
Licenses.
G. "Interest" or "License" means a right to collect
revenues, if any, arising from rental or, upon proper notice, the
right to occupy a certain category of suite in Charthouse Suites
for the Weeks assigned to the Licensee under a Subscription
Agreement, which License, if not sooner terminated, shall
terminate on December 31, 2040, which right is neither coupled
with a freehold interest nor coupled with an estate for years
with a future interest in a property, as described in
the Plan.
H. "Licensee" means a person to whom the Developer has
entered into a Subscription Agreement, his heirs, successors or
assigns.
I. "Managing Entity" means Charthouse Suites Vacation
Ownership, Inc., its grantees, successors or assigns, or such
other entity designated by the Developer from time to time to
serve as such Managing Entity, which party has acknowledged in
writing it has accepted the duties and obligations of serving as
Managing Entity.
J. "Plan" or "Vacation License Plan" means this Vacation
License Plan, as amended from time to time.
K. "Resort Facility" means the Chart House Suites hotel
property described on attached Exhibit A, all improvements
thereon (including the suites, the Common Elements and all
furniture, furnishings and fixtures therein) and all easements
and rights appurtenant thereto intended for use in connection
therewith. The Resort Facility does not include the Marina or
its successor operations.
L. "Rules and Regulations" means the Rules and Regulations
established and promulgated from time to time by the Managing
Entity with respect to the use of the Resort Facility.
M. "Service Period" means that period of time commencing
at the end of each Unit Week and ending at the beginning of the
next Unit Week to be used by the Managing Entity to clean,
service and maintain a Unit.
N. "Special Assessment" means a share of funds required
for the payment of Common Expenses, which from time to time is
assessed against a Licensee in addition to the Annual Assessment.
O. "Unit" means one of the 25 suites in the Resort Facility.
"Units" means more than one Unit.
P. "Unit Week" or "Week" means a period of use of a Unit,
which shall consist of seven (7) days. Unit Weeks are computed
as follows:
Unit Week No. 1 is the Seven (7) Days
commencing on the first Friday, Saturday or
Sunday in each calendar year.
Unit Week No. 2 is the Seven (7) Days
succeeding.
Additional Unit Weeks, up to and including
Unit Week No. 52, are computed in a like
manner.
Occupancy shall begin at 4:00 P.M. on the
Start Day and end at 10:00 A.M. on the same
day of the immediately following week. Any
excess days not otherwise assigned shall
remain the property of the Developer.
ARTICLE II
DESCRIPTION OF IMPROVEMENTS AND TIME SHARING PLAN
A. Description of Resort Facility.
The Resort Facility includes a four-story hotel
containing 25 studios or suites located at 850 Bayway Boulevard,
Clearwater Beach, Florida, together with certain common
amenities, as exist from time to time, including the heated
swimming pool, parking areas, laundry room and administrative
office. The Resort Facility is owned in fee simple by Decade
Properties, Inc. which has agreed to sell the property to the
Developer. The Resort Facility does not include the Marina. The
Developer has been formed to facilitate the sale of Interests to
use the Resort Facility.
B. Vacation License Plan.
The Developer shall enter into a License with each
Licensee, whereby such Licensee is granted the right to receive
rental revenue arising from rental of the Unit, if any, or, upon
written request, to occupy a particular category of suite for
eight weeks each calendar year (two weeks in each season)
terminating on December 31, 2040. Winter is Weeks 46-52 and 1-6,
Spring is Weeks 7-19, Summer is Weeks 20-32 and Fall is Weeks 33-
45. The Developer and/or Managing Entity shall establish the
annual Schedule, in its sole discretion, whose decision as to the
Weeks assigned to a Licensee each calendar year shall be final.
The particular Unit to which the Licensee's Weeks shall be
applicable shall be assigned by the Developer and/or the Managing
Entity in the category of the Class of Interest purchased by the
Licensee. The category of suite or studio that may be used by a
Licensee shall be determined by the Class of Interest purchased
by the Licensee. The Classes of Interests are as follows:
Class A The ownership of A Interests allows the
Interests"Standard Licensee use of a standard studio with
Studio: two queen-sized beds overlooking the
marina and Clearwater Bay, for two weeks
in each season until December 31, 2040.
Units 201, 202, 301, 302, 401 and 402 in
Chart House Suites hotel are the studios
applicable to the Class A Interests.
Class B The ownership of B Interests allows the
Interest"King Licensee use of a spacious king studio
Studio: with one king-sized bed overlooking the
marina and Clearwater Bay, for two weeks
in each season until December 31, 2040.
Units 103, 104, 105 and 106 in Chart
House Suites hotel are the studios
applicable to the Class B Interests.
Class C The ownership of C Interests allows the
Interests"Large Licensee use of a large studio with two
Studio: queen-sized beds overlooking Clearwater
Bay, the marina or southern exposure,
for two weeks in each season until
December 31, 2040. Units 101, 102, 206,
207, 305 and 306 in Chart House Suites
hotel are the studios applicable to the
Class C Interests.
Class D Interests" The ownership of D Interests allows the
1 Bedroom Suite: Licensee use of a one-bedroom suite
overlooking the marina, Clearwater Bay,
the swimming pool or southern exposure
for two weeks in each season until
December 31, 2040. Units 204, 303, 304,
307, 403 and 404 in Chart House Suites
hotel are the suites applicable to the
Class D Interests.
Class E Interests" The ownership of E Interests allows the
1 Bedroom Suite Licensee use of a one-bedroom suite,
(with lanai): with lanai, with a view of Clearwater
Bay, for two weeks in each season until
December 31, 2040. Units 203 and 205 in
Chart House Suites hotel are the suites
applicable to the Class E Interests.
Class F Interest" The ownership of F Interests allows the
Penthouse: Licensee use of a two-bedroom penthouse
suite, with a fully equipped kitchen,
living room, den, dining room, two full
baths (one with a jacuzzi) and a large
private balcony overlooking Clearwater
Bay, for two weeks in each season until
December 31, 2040. Unit 405 in Chart
House Suites hotel is the suite
applicable to the Class F Interest.
The remainder interest shall be vested in the Developer
and their heirs, successors and assigns, as their interests
may appear. A Licensee may be the Licensee of more than one (1)
License or more than one (1) Interest. The Licensee shall be
entitled to the exclusive use of a Unit in the Class of Interest
purchased, the specific Unit to be designated by the Managing
Entity, which use shall only be during the Assigned Unit Weeks
and to no other Unit or during any other Unit Weeks. A Licensee
should expect to occupy different suites available within the
Class of Interest purchased for each of the Licensee's Unit
Weeks. During the Assigned Unit Weeks, the Licensee shall also
have the right to the non-exclusive use of the common areas of
the Resort Facility. A Licensee shall not have the right to the
use of the Resort Facility, except during such Licensee's
Assigned Unit Weeks.
ARTICLE III
MANAGEMENT OF THE RESORT FACILITY
A. Maintenance and Management of the Resort Facility. The
Managing Entity shall manage and operate the Resort Facility.
The Managing Entity shall be responsible for supervising the
maintenance, repair and replacement of the entire Resort
Facility, the costs of which to be a Common Expense. The
Managing Entity may enter into an agreement(s) with such firms or
companies as it may determine to provide certain management,
services and maintenance with respect to the Resort Facility as
the Managing Entity deems advisable and for such period of time
and on such basis as it determines. The fee for such services
shall be deemed a Common Expense and included in the regular
maintenance assessment.
B. Duties of the Managing Entity. The Managing Entity
shall have the following duties:
1. Repair and Maintenance of Resort Facility: The
Managing Entity shall be responsible for supervising the
maintenance, repair and replacement of all of the Resort
Facility.
2. Color Schemes: The Managing Entity shall
determine the interior color scheme, decor and furnishings of
each Unit in the Resort Facility, as well as the proper times for
redecorating and replacements thereof. In addition, the Managing
Entity shall determine the color scheme of the buildings and all
exteriors and the interiors thereof and shall be responsible for
the maintenance thereof. The Managing Entity shall maintain and
keep all portions of the Resort Facility managed in a condition
substantially similar to the architectural design or such change
in design as the Developer may determine from time to time,
unless the Developer consents in writing to such structural
changes or improvements.
3. Utilities: The Managing Entity shall acquire
water, sewer, garbage disposal, electrical, telephone, gas and
other necessary utility services for the Resort Facility.
4. Insurance: The Managing Entity shall obtain,
maintain and enforce the policies of insurance as obtained by the
Managing Entity from time to time.
5. Rules and Regulations: The Managing Entity shall
make, establish, promulgate, amend and repeal rules and
regulations with respect to the use of Units and the Resort
Facility.
6. Enforcement of Restrictions and Rules: The
Managing Entity shall perform such other acts, whether or not
expressly authorized by the Plan, as may be reasonably necessary
to enforce any of the provisions of the Plan and the Rules and
Regulations, subject to its reasonable discretion.
7. Compliance with Act: The Managing Entity shall
perform all duties of a managing entity to the extent required by
the Laws. In addition to such requirements, the Managing Entity
shall:
(a) Provide, each year, to all Licensees an
itemized Annual Budget, which shall include all estimated
revenues and expenses;
(b) Maintain all books and records concerning
the Resort Facility. The books and records, with respect to the
Resort Facility, shall be kept separately from any other project
of the Managing Entity. All such books and records shall be
reasonably available for inspection by any Licensee or the
authorized agent of any Licensee.
(c) Maintain among its records, and provide to
the Time Share Bureau upon request, a complete list of the names
and addresses of all Licensees in the Vacation License Plan. The
Managing Entity shall update this list no less frequently than
quarterly;
(d) Make available for inspection by the
Time Share Bureau, the books and records of the Plan, upon request
of the Time Share Bureau;
(e) Schedule the occupancy of Units and assign
the Unit Weeks in the Resort Facility to the Licensees in
accordance with their Licenses; and
(f) Perform any and all other functions and
duties which are necessary and proper to maintain, operate and
manage the Resort Facility.
C. Powers and Authority of the Managing Entity.
In addition to such other powers as may be set forth in
the Plan, the Managing Entity shall have the power to do and
perform any and all lawful things which may be authorized,
required or permitted to be done by the Managing Entity under
this Plan or by law and to do and perform any and all acts which
are necessary or proper for or incidental to the operation of the
Resort Facility (the costs of which shall be Common Expenses),
including without limitation:
1. Assessments: To levy assessments on the Licensees
and to enforce payments of such assessments.
2. Right of Entry and Enforcement: To enter upon any
portion of the Resort Facility for the purpose of enforcing by
peaceful means any provisions of this Plan, or for the purpose of
maintaining, replacing or repairing any such area, if, for any
reason whatsoever, maintenance, replacement or repair is required
thereto.
3. Employment of Agents: To employ the services of
any person or corporation as Manager, or other employees, to, as
may be directed by the Managing Entity, manage, conduct and
perform the business, obligations and duties of the Managing
Entity, and to enter into contracts for such purpose. Such agent
shall have the right to ingress and egress over such portions of
the Resort Facility as is necessary for the performance of such
business, duties and obligations.
4. Employment of Professional Advisors: To employ
professional council and advisors from persons, firms or
corporations as determined by the Managing Entity, such as, but
not limited to, landscape architects, recreation experts,
planners, lawyers and accountants.
5. Miscellaneous: To make and enter into contracts,
leases or concessions.
6. Personal Liability: Neither the Developer nor the
Managing Entity nor any of their respective officers, directors
or employees shall be personally liable to any Licensee or to any
other party, for any damage, loss or prejudice suffered or
claimed on account of any act, omission, error or negligence of
the Managing Entity, or Developer or any other representative or
employee of the Managing Entity, or the Developer, provided that
such person, firm or entity has, upon the basis of such
information as may be possessed by him at such time, acted in
good faith, without willful or intentional misconduct.
7. Books and Records: To keep separate the books and
records for the Resort Facility.
8. Occupancy: To prohibit occupancy of a Unit in
accordance with applicable law.
9. Charthouse Rental Pool: To operate the Charthouse
rental pool and pay all costs of the rental pool.
ARTICLE IV
ASSESSMENTS FOR COMMON EXPENSES
A. Affirmative Covenant to Pay Expenses.
In order to (1) fulfill the covenants in the Plan; (2)
to preserve the Units and the Resort Facility for the recreation,
safety, welfare and benefit of the Licensees and their invitees,
guests, family members and lessees; and (3) to provide for
improvement, maintenance and preservation of the Units and the
Resort Facility and the services and amenities provided for
herein, there is hereby imposed upon the Licensees, the
affirmative covenant and obligation to pay the Common Expenses as
defined, and more particularly set forth, in this Plan. The
Managing Entity shall prepare and adopt an Annual Budget setting
forth the Common Expenses for the operation and management of the
Resort Facility.
The Managing Entity shall assess each Licensee in the
Resort Facility its share of the Common Expenses, which share
shall be assessed annually as an Annual Assessment, and the
Managing Entity shall collect said sums. The Assessment shall be
determined as follows: Each Licensee shall be responsible for a
proportionate share of the Common Expenses attributable to the
Unit Weeks which are licensed to the Licensee. It is understood
that the total Common Expenses shall be allocated to the
respective Classes of Interests as follows:
Total
Per Interest
Total By Class
Per Class (8 Unit Weeks)
Class A Interest - 19.6045% .5027%
Class B Interest - 13.0696% .5027%
Class C Interest - 21.1522% .5424%
Class D Interest - 29.4067% .7540%
Class E Interest - 10.4901% .8069%
Class F Interest - 6.2769% .9657%
Total 100% 4.0744%
Each Licensee shall be responsible for a uniform portion of the
Common Expenses allocated to the Class of Interest under such
License, with the numerator being the number of Assigned Unit
Weeks licensed to the Licensee and the denominator being the
total number of Unit Weeks included in that particular class.
For the period through and including December 31, 1998, the
Developer guarantees that the Annual Assessment per Unit Week
shall not exceed the amounts per Class of Interest as set forth
below:
Class A - $190.00
Class B - $190.00
Class C - $205.00
Class D - $285.00
Class E - $305.00
Class F - $365.00
Thereafter, such Annual Assessment shall not increase
annually by more than 10% per annum determined on a compounded
basis (except for the portion of the assessment relating to real
estate taxes and insurance) without the affirmative vote of a
majority in interest of the total Unit Weeks. For purposes of
the vote of Unit Week Holders, the Developer will be allowed to
vote the Unit Week of unissued Interests or defaulted Interests.
An Advisory Committee, as described in subsection C below, may be
consulted for advice regarding certain management decisions
relevant to establishing the Annual Assessment. The Licensee
shall not have the right to use of a suite or studio during such
Licensee's assigned Unit Weeks if the Licensee is not current in
the payment of Annual Assessments or payments for Interests due
by the Licensee as determined by the Managing Entity. If the
Licensee participates in an Exchange Program, then prior to any
transfer of a Unit Week to which the Licensee is entitled, all
assessments which will be applicable for all periods prior to the
Unit Week(s) to be transferred shall be due and must be paid in
full prior to any transfer. Any transfer without such
assessments being paid in full shall be void, and neither the
Managing Entity nor the Developer shall be bound to honor same.
B. Special Assessments. Notwithstanding the foregoing,
each Licensee shall be obligated to pay such Special Assessments
as shall be levied, in addition to the Annual Assessments by the
Managing Entity for that year only, as a result of (a)
extraordinary items of expense; (b) nonrecurring capital
expenditures; (c) any sums expended by the Managing Entity for
the repair or replacement of a Unit or the Resort Facility
damaged by a Licensee, its family, guests or any person claiming
by, through or under the Licensee; (d) any sums expended by the
Managing Entity for the addition or alteration of a Unit or the
Resort Facility made by a Licensee in violation of the provisions
of the Plan and/or Rules and Regulations, or (e) such other
reason or basis determined by the Managing Entity in its sole
discretion. Notwithstanding the foregoing, special assessments
arising under subparagraphs (a), (b) and (e) above shall not be
made unless approved by an affirmative vote of a majority in
interest of the total number of Unit Weeks, unless (a) such
assessment (other than a special assessment to restore or rebuild
because of damage or destruction to a Unit(s) or to the Resort
Facility) does not exceed 5% of the budgeted gross expenses for
the calendar year; or (b) such assessment is a special assessment
for the repair or rebuilding of a Unit(s) or the Resort Facility
which does not exceed 10% of the budgeted gross expenses for the
calendar year in which the assessment is levied. For purposes of
the vote of Unit Week Holders, the Company will be allowed to
vote the Unit Week of unissued Interests. The Managing Entity
may, to the extent possible, allocate Special Assessments to the
Licensee applicable when the special assessment is for the
purpose of reimbursing the Managing Entity for costs incurred in
bringing a Licensee or its License into compliance with the
provision of this Plan, the Rules and Regulations, or the
License. In addition, special assessments may be levied against
individual Licensees for sums expended for repairs or
replacements relating to damage caused by such Licensee or its
family members, guests, lessees and any sums expended for
violations by a Licensee of the provisions of the Plan, Rules and
Regulations, and the License.
C. Advisory Committee. At the Managing Entity's option,
the Managing Entity may appoint from time to time, an Advisory
Committee of Licensees, or officers, directors or principals of
Licensees, consisting of between five and nine members. Advice
may be sought by the Managing Entity from the Advisory Committee
as to the amount of Annual and/or Special Assessments and other
matters with respect to the operation of the Resort Facility as
determined by the Managing Entity. The advice sought from the
Advisory Committee is strictly advisory in nature, and the
Managing Entity shall not be bound by advice from the Advisory
Committee.
D. Liability. Until the Licensee relinquishes his License
to the Developer, the record Licensee(s) of each License in the
Resort Facility shall be personally liable, jointly and
severally, to the Managing Entity for the payment of the Annual
Assessments or any Special Assessment (hereinafter, collectively
referred to as "Assessments") levied by the Managing Entity
against the Licensees and for all costs of collecting such
Assessments, including interest, delinquent assessments and
attorneys' fees at all trial and appellate levels. Until the
Licensee relinquishes his License to the Developer, the
Assessments, together with interest thereon, and the costs of
collection, including attorneys fees at all trial and appellate
levels, shall be a lien upon such Licensee's License, but shall
not encumber the property, real or personal, of any other person.
E. Cancellation Rights and Allocation of Income. In the
event a Licensee has cancellation rights under Chapter 721, F.S.
or the Plan is canceled because 76 Interests are not sold by
October 31, 1998, and the Developer, in its sole discretion
decides to cancel the Plan in order to calculate the benefit
for calculating the anticipated return, the amount shall be:
Dollar Amount Benefit
Per Night
Interest A $ 70.00
Interest B $ 75.00
Interest C $ 85.00
Interest D $120.00
Interest E $130.00
Interest F $175.00
In allocating the Charthouse Rental Pool Income for the Unit
Weeks that are not removed from the rental pool, the Income shall
be allocated to participating Unit Weeks, based upon 52 weeks in
a year, as follows:
<PAGE>
<TABLE>
<CAPTION>
Off
Season Gross
Number Number Nightly Potential
Total % Total % Per
of of Walk-in Daily Total % Total % Per
Week Interest 8
Class Rooms Interests Rate Revenue Per Class Per Suite (52
Weeks) Weeks
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
A Interest 6 36 $70 $420 17.6101% 2.9350%
0.0564% 0.4515%
B Interest 4 24 $75 $300 12.5786% 3.1447%
0.0605% 0.4838%
C Interest 6 36 $85 $510 21.3836% 3.5639%
0.0685% 0.5483%
D Interest 6 36 $120 $720 30.1887% 5.0314%
0.0968% 0.7741%
E Interest 2 12 $130 $260 10.9015% 5.4507%
0.1048% 0.8386%
F Interest 1 6 $175 $175 7.3375% 7.3375%
0.1411% 1.1289%
</TABLE>
<PAGE>
<PAGE>
The Developer or Managing Partner shall calculate the results and
forward the net funds collected on a quarterly basis to holders
of the Interests.
ARTICLE V
REMEDIES OF ENFORCEMENT
A. Intent of Operation of Plan. It is intended that this
Plan be operated in a manner so that if a Licensee fails to pay
the cost of the Interest Assessments (Annual and Special) due by
such Licensee hereunder as they become due, that the Licensee
shall be deprived of use of such Licensee's Unit Weeks (in
addition, any income from the rental pool, will become the
Developer's property) until any delinquencies are paid in full.
The Developer shall have the right to proceed against the
Interest holder at law or in equity for amounts owing or unpaid
as due.
B. Enforcement of Plan.
1. The covenants and restrictions herein contained
may be enforced by the Developer or the Managing Entity in any
judicial proceeding seeking any relief recognizable at law or in
equity, including damages, injunction, and other mandatory relief
against any person, persons, firm or entity violating or
attempting to violate any covenant or restriction. The failure
either by the Developer or the Managing Entity to enforce any
covenant or restriction herein contained shall, in no event, be
deemed a waiver of the right to do so thereafter. The prevailing
party in any such litigation shall be entitled to reasonable
attorneys' fees and court costs, including costs and fees at all
trial and appellate levels.
2. All rights, remedies or relief of whatsoever
nature or kind provided herein in favor of the Developer or the
Managing Entity shall be cumulative and non-exclusive, and none
shall exclude, jointly or severally, any other right, remedy or
relief permitted by law or otherwise available to the Developer
or the Managing Entity.
3. In addition to any other remedies which Developer
or Managing Entity may have, in the event a Licensee shall be in
default of any of the provisions of the Plan, the License or the
Rules and Regulations, the Developer and the Managing Entity may
levy a fine as determined, from time to time, by the Managing
Entity against such Licensee, which shall continue until such
default shall be remedied by the defaulting Licensee.
C. Other Remedies in the Event of Non-payment of
Assessments.
1. In the event a Licensee shall fail to pay any
Assessment or payment for the Interest after the same becomes
due, then during such period of default the Licensee will be
denied possession of a Unit for such Licensee's Assigned Unit
Weeks (and any income from the rental pool, which will forever
become the Developer's sole property). Such denial of use shall
also extend to those parties claiming under the Licensee
(including any exchange programs, if applicable). The Developer
shall have the right to the use or rent of the Unit Weeks for
such periods that the Licensee shall be deprived of use thereof,
and the Developer shall be entitled to all income derived
therefrom. Any income received by the Developer, however, shall
not reduce the amount of Assessments owed by the Licensee.
2. Delinquent Assessments shall bear interest at up
to the highest rate permitted by law. In addition, the Managing
Entity may, in its sole discretion, impose an administrative late
fee in an amount not to exceed $25.00 for each delinquent
assessment.
3. In addition, in the event a Licensee shall fail to
pay any Assessment and such default continues for more than six
(6) months or there are more than three (3) defaults of any
duration, then the Developer may cancel the License of a
Licensee. Upon cancellation of the Licensee's interest, the
Interest shall belong to the Developer, and the Licensee shall
forfeit all payments made previously.
4. If the Licensee remains in possession of the Unit
after his License has been canceled, the Licensee shall pay a
rental fee for the Unit equal to the daily posted rate in the
suite, which is applicable to the suite in the Class of Interest
purchased as determined by the Managing Entity or the Developer
from time to time.
5. The remedies provided herein shall be non-
exclusive and cumulative and shall not exclude any other remedies
available to the Developer of this Plan, law, the License or
otherwise.
D. Failure of Licensee to Vacate.
In the event any Licensee of a License fails to vacate
a Unit at the expiration of his Assigned Unit Weeks, or at such
earlier time as may be fixed by the Rules and Regulations adopted
by the Managing Entity from time to time, he shall be deemed a
"Holdover Licensee." It shall be the responsibility of the
Managing Entity to take such steps as may be necessary to remove
such Holdover Licensee from the Unit and to assist the Licensee
of a License entitled to occupy a subsequent Assigned Unit Week,
who may be affected by the Holdover Licensee's failure to vacate,
to find alternative accommodations during such holdover period.
In addition to such other remedies as may be available
to it, the Managing Entity shall secure, at its expense,
alternate accommodations for any Licensee who may not occupy a
Unit during his Assigned Unit Week due to the failure to vacate
of any Holdover Licensee. Such accommodations shall be as near
in value to the Licensee's category of Interest as possible. The
Holdover Licensee shall be charged the rack rate applicable to
such suite or studio for the period of the holdover, the cost of
such alternative accommodations for the Licensee who was not able
to use such Licensee's Unit Week because of the holdover, any
other costs incurred due to such Holdover Licensee's failure to
timely vacate and an administrative fee of Fifty ($50.00) Dollars
per day during his period of holding over. In the event it is
necessary that the Managing Entity contract for a period greater
than the actual period of holding over in order to secure
alternative accommodations as set forth above, the entire period
shall be the responsibility of the Holdover Licensee, although
the Fifty ($50.00) Dollars per day administrative fee shall cease
upon actual vacating by the Holdover Licensee.
The Managing Entity shall submit a bill to the Holdover
Licensee in accordance with this paragraph, which must be paid
immediately or the Holdover Licensee shall be in default and
subject to the provisions of this Article.
The foregoing provisions shall not abridge the Managing
Entity's right to take such other action as is provided by law or
equity.
ARTICLE VI
GUARANTEE OF ASSESSMENTS
The Developer may guarantee the Common Expenses as may be
permitted by law and, during any such period of guarantee, the
Developer shall not be required to pay any assessments levied
with respect to Unit Weeks owned by the Developer, provided,
however, during such period of the Developer's guarantee,
Developer shall be obligated to pay for any amount required to
pay the Common Expenses not receivable from Licensees of Licenses
other than the Developer.
ARTICLE VII
COMMON EXPENSES
The following expenses are declared to be Common Expenses,
which the Licensees are obligated to pay as provided herein.
A. Maintenance Fees. All expenses for the repair and
upkeep of a Unit for normal wear and tear, repair and replacement
of furniture, fixtures, appliances, carpeting and utilities.
B. Utility Charges. All charges levied for utilities
providing services for any portion of the Resort Facility,
whether they are supplied by a private or public firm. It is
contemplated that this obligation will include all charges for
water, electricity, gas, sprinkler systems, sprinkler pumps,
telephone, sewer, sewage pumps, garbage removal, pest control,
cable, elevators and any other type of utility or any other
type of service charge.
C. Liability Insurance. The premiums on the policy or
policies of insurance as described in Article IX of this Plan.
D. Fire, Windstorm and Other Casualty Insurance. The
premiums for insurance as described in Article X of this Plan.
E. Destruction of Buildings or Improvements. Any sums
necessary to repair or replace, construct or reconstruct damages
caused by the destruction of any portion of the Resort Facility
by fire, windstorm or other casualty in excess of the insurance
proceeds available with respect to said damage or destruction.
F. Repair, Replacement and Maintenance. All expenses
necessary to keep and maintain, repair and replace any portion of
the Resort Facility, including, but not limited to, personal
property, furniture, fixtures and equipment, in a manner
consistent with the development of the Resort Facility and in
accordance with the covenants and restrictions contained herein
and in conformity with all orders, ordinances, rulings and
regulations of any and all federal, state and city governments
having jurisdiction thereof, as well as the statutes and laws of
the State of Florida and the United States.
G. Operational Expenses. The costs of administration and
operation of the Resort Facility, including but not limited to
accounting costs, employee costs, front desk costs, management
fees, maid service, deficits from any prior period, costs
associated with operating the reservation system and rental pool,
and all other costs of operating the Vacation License Plan.
H. Maintenance Costs under the Non-exclusive Easement.
All costs for maintenance, replacement and repair of Common Areas
due by the Developer under the Non-exclusive Easement granting to
the Developer rights to use certain Common Areas of the Property.
I. Indemnification. Indemnification against any and all
claims, suits, actions, damages and/or causes of action arising
from any personal injury, loss of life, and/or damage to
property, sustained on the Resort Facility and from and against
all costs, counsel fees, expenses and liabilities incurred in
connection with any such claim, the investigation thereof or the
defense of any action or proceeding brought thereon and from and
against any orders, judgments and/or decrees which may be entered
thereon. Included in the foregoing provisions of indemnification
are any expense that the Developer may be compelled to incur in
bringing suit for the purpose of enforcing rights hereunder or
for the purpose of compelling the specific enforcement of the
provisions, conditions and covenants to be kept and performed by
the Licensees.
J. Reserve Funds. Amounts to establish adequate reserve
funds and/or sinking funds for replacement and/or capital
refurbishment and/or capital improvements of all or any portion
of the Resort Facility determined proper and sufficient by the
Managing Entity. Each Licensee acknowledges, understands and
consents that no Licensee shall have any interest, claim or right
to any such reserves.
K. Taxes. Any and all taxes levied or assessed at any and
all times by any and all taxing authorities, including all taxes,
charges, assessments and impositions and liens for public
improvements, special charges and assessments in water drainage
districts and in general, all taxes and tax liens which may be
assessed against the Resort Facility and against any and all
personal property and improvements which are now or which may
hereinafter be placed thereon, including any interest, penalties
or other charges which may be included thereon.
L. Miscellaneous Expenses. The cost of all items or
expenses pertaining to or for the benefit of the Resort Facility
and any improvements now or hereafter located thereon or any part
thereof and the operation of the Vacation License Plan not herein
specifically enumerated.
ARTICLE VIII
MANAGEMENT OF RESORT FACILITY
The Managing Entity has entered into a management agreement
with Decade Properties, Inc. to provide management services with
respect to the Resort Facility and the operation of the Vacation
License Plan. The Managing Entity may enter into such other
management agreements as the Managing Entity may determine in its
sole discretion (including agreements with the Developer or its
affiliate(s)), whereby it contracts for management services which
are required to discharge its duties under this Plan and for the
management, operation and maintenance of the Resort Facility and
the Vacation License Plan. All costs associated with such
management, exclusive of the 5% rental pool fee payable to the
rental agent, shall be assessed as a Common Expense against the
Licensees.
ARTICLE IX
LIABILITY INSURANCE
The Managing Entity shall obtain liability insurance with
such coverage and in such amounts as it may determine from time
to time for the purpose of providing liability insurance coverage
for the Resort Facility. Premiums for such insurance shall be
part of the Common Expenses. Such insurance shall also include
public liability, workmen's compensation and hired automobile
coverage.
ARTICLE X
CASUALTY INSURANCE AND DESTRUCTION OF IMPROVEMENTS
A. The Managing Entity shall obtain casualty insurance
with such coverage and in such amounts as it may determine from
time to time for the purpose of providing casualty insurance
coverage for the Resort Facility, including fire and extended
coverage insurance, vandalism and malicious mischief insurance,
and rent loss coverage, all of which insurance shall insure all
of the insurable improvements on and within the Resort Facility,
including personal property owned by the Managing Entity, in a
company acceptable to the Managing Entity in an amount equal to
the full insurable replacement value as determined from time to
time by the Managing Entity. The premiums for such coverage and
other expenses in connection with such insurance shall be charged
to the Licensees as part of the Common Expenses. The company or
companies with which the Managing Entity shall place its
insurance coverage, as provided in this Plan, and the insurance
agent or agents placing such insurance must be authorized to do
business in the State of Florida. Such insurance shall name the
Developer as insureds as their respective interests may appear.
B. Where a loss or damage occurs to any part of the Resort
Facility it shall be obligatory upon the Managing Entity to
repair or restore the damage caused by said loss, subject to the
provisions below.
1. The Managing Entity shall promptly obtain reliable
and detailed estimates of the cost of repairing and
reconstruction of such damaged property for the purpose of
determining whether the available insurance proceeds are
sufficient to pay for the same.
2. If the insurance proceeds are sufficient to pay
for the estimated cost of restoration and repair, the Managing
Entity shall have the right and obligation to cause the damage to
be repaired and restored.
3. If the net proceeds of the insurance are
insufficient to pay for the estimated cost of restoration and
repair (or for the actual cost thereof, if the work has actually
been done), the Managing Entity shall promptly, upon
determination of the deficiency, determine the amount of the
Special Assessment which will be necessary to obtain the
necessary funds to repair and to restore such damaged
improvements. If the Special Assessment is 10% or less of the
budgeted gross expenses for the calendar year in which the
assessment is levied, then the Managing Entity shall levy such
Assessment against the Licensees and shall upon receipt of
adequate funds proceed to have the repairs and reconstruction
completed. Each Licensee shall be responsible for a
proportionate share of the Assessment attributable to the Unit
Weeks which are licensed to the Licensee in the same manner that
the Annual Assessment is allocated.
4. If the Special Assessment exceeds 10% of the
budgeted gross expenses for the calendar year in which the
assessment is levied, then the damage or destruction shall not be
repaired or reconstructed without the affirmative vote of a
majority in interest of the total number of Unit Weeks. If the
affirmative vote is obtained, then the Managing Entity shall levy
such Special Assessment against the Licensees and shall upon
receipt of adequate funds proceed to have the repairs and
reconstruction completed. If the affirmative vote is not
obtained, then in such event and only in such event, the damage
and destruction shall not be repaired and this Plan and all
Licenses shall terminate. The entire insurance proceeds shall be
allocated between the Developer and the holders of the Unit Weeks
in the Resort Facility with the holders of the right to use Unit
Weeks being entitled to that portion of the proceeds equal to a
ratio the numerator of which is the remaining number of years
from the date of the damage to December 31, 2040 and the
denominator is 43. The Developer shall be entitled to the
balance of the proceeds. The proceeds due to the holders of the
right to use Unit Weeks shall be allocated in the percentages and
manner in which Common Expenses are allocated, provided that if a
particular Licensee has not paid the entire purchase price and
all payments for the License, then such Licensee shall have the
option of (a) paying the balance due on such License, in which
event such Licensee shall receive the pro rata share of insurance
proceeds allocated to such Licensee's Unit Weeks as provided
above, or (b) not paying such balance due on the purchase price
of the License, in which event the insurance proceeds allocated
to such Licensee's Unit Weeks shall be paid to the Developer.
C. Notwithstanding any provision to the contrary, during
such time that the Resort Facility or the Unit(s) are
untenantable because of such damage or destruction, the Managing
Entity shall notify the holders of the affected Unit Weeks and
such holders shall not be permitted to use said Unit Weeks. Such
affected holders shall not be entitled to any compensation for
such loss of use, unless the Managing Entity is able to obtain
and does obtain loss of use insurance coverage, in which event
the affected holders shall only be entitled to the portion of
loss of use insurance proceeds applicable to the Unit Weeks in
which the Licensee was not able to occupy a suite because of such
damage or destruction.
ARTICLE XI
CONDEMNATION
The taking of the Resort Facility by condemnation shall
be deemed to be a casualty and the awards for that taking shall
be deemed to be proceeds from insurance on account of the
casualty. Whether the Resort Facility will be continued after
condemnation will be determined in the manner provided for
determining whether damaged property will be reconstructed and
repaired after casualty. For this purpose, the taking by
condemnation shall be deemed to be a casualty. If the Resort
Facility is terminated after condemnation, the proceeds of the
award shall be divided into two (2) portions, one relating to the
respective value of the Units Weeks until December 31, 2040 and
the other portion to the Developer for the value of the
Developer's remainder interest. Such two portions shall be
calculated in the same manner as provided with respect to the
allocation and payment of proceeds in connection with a casualty.
The portion due to the holders of Unit Weeks shall be allocated
in the same manner as provided with respect to a casualty,
including the provisions relating to the requirement that the
purchase price and all License fees be paid in full before a
Licensee is entitled to receive any part of the award. In the
event of taking of any common area of the Resort Facility (not
including a Unit), the Licensees shall have no right to any part
of the award, and the Developer shall be entitled to the entire
award.
ARTICLE XII
GRANT OF EASEMENTS AND RESERVATION OF EASEMENTS AND RIGHTS
A. Perpetual Non-Exclusive Easement to Common Areas and
Public Ways.
The driveways, walks and other rights-of-way in the
Resort Facility shall be available for ingress and egress on a
non-exclusive basis from the common areas and publicly dedicated
ways for the Developer, the Managing Entity, the Licensees and
all of their family members, guests, licensees, lessees and
invitees and all other parties entitled to use any part of the
Property or the Marina during the term of this Plan.
B. Non-Exclusive Easement.
The Owner has granted to the Developer a Non-exclusive
Easement for the use and enjoyment of those areas designated as
Common Areas in such Non-exclusive Easement Agreement. The
Licensees shall have the right to use such Common Areas during
their Unit Weeks in accordance with this Plan. The expenses for
the maintenance, replacement and repair of such Common Areas
shall be Common Expenses under this Plan.
ARTICLE XIII
RULES AND REGULATIONS
The use of the Resort Facility shall be subject to such
Rules and Regulations as established and promulgated by the
Managing Entity from time to time. All Licensees shall ensure
compliance during their Unit Weeks with such rules and
regulations.
ARTICLE XIV
AMENDMENTS TO THE PLAN
This Plan may be amended with the consent of the Developer
and only by the vote of the holders of a majority in the interest
of the total number of Unit Weeks, including those held by the
Developer.
ARTICLE XV
TERMINATION
A. Notwithstanding any provision to the contrary, in the
event that less than 76 Interests are sold by the Developer by
September 30, 1998, the Developer has the right to reacquire the
Interests sold by refunding to the Licensees the purchase price
paid by the Licensee less any and all income earned by such
Licensee in connection with the ownership of the Interest or
rentals earned for the assigned Unit Weeks. The Developer shall
calculate benefits as provided in Article IV. The Licensees
shall not be entitled to a refund of any Maintenance Fees paid.
Upon such reacquisition, this Plan and the License Agreements
shall be null and void.
B. In the event of the termination of this Plan, the
Resort Facility shall be deemed removed from the provisions of
the Act and all Licenses will be deemed canceled with all
Licensees relinquishing any and all rights under the Plan.
ARTICLE XVI
PARTITION
No Licensee or any other person or entity acquiring any
right, title or interest in a License shall be entitled to seek
or obtain through any legal procedures, judicial partition of the
Resort Facility or sale of the Resort Facility in lieu of
partition. It is understood that the License interest does not
constitute real estate.
ARTICLE XVII
REMAINDER INTEREST
By acceptance of a License subject to this Plan, each
Licensee acknowledges the Developer's remainder interest (the
"Remainder Interest") in that the License to each Licensee
consists of a license which terminates on December 31, 2040, or
such earlier date as provided herein.
The Remainder Interest is transferable by the Developer, in
its sole and absolute discretion. The holder of the Remainder
Interest shall have the following rights under the Declaration:
1. To enforce all provisions of the Declaration against
Licensees, the Managing Entity and the Developer, including, but
not limited to, through an action for specific performance.
2. To be named as an additional insured under all
insurance policies as its interest may appear.
3. To be entitled to share in any award under a
condemnation proceeding as its interest may exist.
4. The consent of the holder of the Remainder Interest
shall be required for any termination of the Plan, any amendment
that adversely affects its interest and any amendment of this
Article.
In any litigation brought by the holder of the Remainder
Interest, the holder of the Remainder Interest shall be entitled
to recover its costs and attorneys' fees in the event it is the
successful party, including such costs and fees on appeal.
Notwithstanding the existence of the Remainder Interest, the
Licensees shall be responsible for all Common Expenses and taxes
for the Resort Facility without any right of contribution against
the holder of the Remainder Interest.
ARTICLE XVIII
TRANSFER OF LICENSE AND UNIT WEEKS
Provided that a Licensee is not in default of any provision
of this Vacation License Plan or the License, such Licensee shall
be permitted to sell, transfer or convey such Licensee's entire
Interest and the License without the consent of the Developer or
the Managing Entity, provided (a) that the entire purchase price
and License Fee has been paid in full, (b) all Assessments are
current, (c) the transferee executes such assumption documents
required by the Seller, (d) the transfer, sale, or conveyance
complies with the federal and state securities laws.
After such permitted transfer, sale or conveyance, the
transferring Licensee shall have no further liability for Common
Expenses under this Plan. Provided that a Licensee is not in
default of any provision of this Vacation Plan or the License,
such Licensee may also sell, transfer, or convey partial
Interests (a right to a certain Unit Week) but only with the
prior written consent of the Managing Entity. The Managing
Entity shall be permitted to impose such conditions as the
Managing Entity determines necessary in its sole discretion in
connection with transfers of partial Interests. With respect to
any permitted transfer, prior to such transfer, the name, address
and such other information as requested by the Managing Entity
shall be delivered to the Managing Entity.
ARTICLE XIX
SEVERABILITY
Invalidation of any one of these covenants or restrictions
or any of the terms and conditions herein contained shall in no
way affect any other provision which shall remain in full force
and effect for such period of time as may be permitted by law.
IN WITNESS WHEREOF, this Plan has been executed by
Developer, this _________ day of ____________________, 1997.
Signed, Sealed and Delivered
In the Presence of: CHARTHOUSE SUITES VACATION
OWNERSHIP, INC.
BY: __________________________
Print Name: ____________________ Its: _________________________
Print Name: __________________
________________________________
Print Name: ____________________
<PAGE>
ACKNOWLEDGMENT
STATE OF )
) SS.
COUNTY OF )
The foregoing instrument was acknowledged before me this
____ day of ___________________________, 1997, by
______________________________, as
_________________________________, of CHARTHOUSE SUITES VACATION
OWNERSHIP, INC., on behalf of the corporation. He/she is
personally known to be or has produced
_____________________________________ as a type of identification
and who did/did not take an oath.
_________________________________
Print Name: _____________________
Notary Public, State of _________
Serial Number, if any: __________
My commission expires: __________
<PAGE>
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
<PAGE>
<PAGE>
ANNEX B
RULES AND REGULATIONS FOR CHART HOUSE SUITES HOTEL
RULES AND REGULATIONS
FOR
CHART HOUSE SUITES HOTEL
1. Unless the context clearly indicates otherwise, the term
"Holder," as used in these Rules and Regulations, shall be
deemed to include not only the purchaser of the Charthouse
Suites Vacation Interest, as defined in the Charthouse
Suites Vacation License Plan, but also each purchaser's
family, servants, employees, agents, renters, lessees,
visitors, exchange guests and licensees. All capitalized
terms used in these Rules and Regulations shall have the
meanings set forth herein or in the Charthouse Suites
Vacation License Plan.
2. No part of the Chart House Suites hotel shall be used for
any purpose except hotel, vacation ownership, vacation
support areas, sales and marketing of the Interests, and the
common recreational purposes for which the hotel was
designed. Each hotel room and suite (hereafter,
collectively, a "Suite") shall be used as accommodations for
Holders. The maximum occupancy for each Suite shall be as
follows:
Suite Type Maximum Occupancy
B Class 2
A, C, D, E Class 4
F Class 6
3. There shall be no obstruction of the Chart House Suites
hotel operations by an Holder, nor shall anything be stored
in the affiliated areas without the prior written consent of
Charthouse Suites Vacation Ownership, Inc. or the property
manager, except as herein provided.
4. Nothing shall be done or kept in any Suite or in any other
part of the Chart House Suites hotel which will increase the
rate of insurance on the Chart House Suites hotel without
the prior written consent of Charthouse Suites Vacation
Ownership, Inc. No Holder shall permit anything to be done
or kept in a Suite, or in any other part of the Chart House
Suites hotel, which will result in the cancellation of
insurance on any of the foregoing, or which would be in
violation of any law.
5. No waste shall be committed of the Chart House Suites hotel
or affiliated areas. Except with respect to the common
areas permitted by the Charthouse Suites Vacation License
Plan, Holders shall not cause or permit anything to be done
or displayed on the outside of windows or placed on the
outside walls or doors of the Chart House Suites hotel, and
no sign (including, but not limited to, "for sale" or "for
lease" signs), awning, canopy, shutter, or radio or
television antenna (except for a master antenna system)
shall be affixed or placed upon the exterior walls or doors,
roofs or any part thereof or exposed on or at any window of
a Suite, or in or on any car, truck, recreational vehicle or
other wheeled conveyance located on the Charthouse or any
other related property.
6. Except as otherwise permitted by the Charthouse Suites
Vacation License Plan (including, but not limited to, guide
dogs for the unsighted or for similar purposes), no animals,
livestock or poultry of any kind shall be permitted or kept
in the Charthouse at any time. Any Holder who violates this
rule shall be assessed a fine of $200 per animal, livestock
or poultry for each day in which the violation exists.
7. No obnoxious or offensive activity shall be carried on in a
Suite or in any other part of the Chart House Suites hotel,
nor shall anything be done therein, either willfully or
negligently, which may be or become an annoyance or nuisance
to any other Holders. No Holder shall make or permit any
disturbing noises in the Chart House Suites hotel, nor do or
permit anything to be done that will interfere with the
rights, comfort or convenience of other Holders. No Holder
shall play any musical instrument in the Chart House Suites
hotel, nor give, nor permit it to be given, vocal or
instrumental instruction at any time; provided, however,
Charthouse Suites Vacation Ownership, Inc. or manager is
authorized to permit the playing of musical instruments in
lobbies and other such areas and facilities as deemed
advisable.
8. Except as authorized by the Charthouse Suites Vacation
License Plan, nothing shall be altered or constructed in or
removed from the Chart House Suites hotel.
9. Nothing shall be done in any Suite or in any other part of
the Chart House Suites hotel which will impair the
structural integrity of the Chart House Suites hotel or
which would structurally change the Chart House Suites
hotel.
10. No clothes, sheets, towels, blankets, laundry or any other
articles shall be hung out of a Suite or be exposed on any
other part of the Chart House Suites hotel. The Chart House
Suites hotel shall be kept free and clear of rubbish, debris
and other unsightly materials.
11. No obstructing personal property shall be placed in the
halls or on the staircase landings, nor shall anything be
hung from the windows, terraces, balconies, patios or placed
upon the window sills, nor shall any rugs or mops be shaken
or hung on any of the windows, door, balconies, patios or
terraces. No clothes, sheets, blankets, laundry or any
other kind of articles shall be hung out of a Suite or
exposed to, any other part of the Chart House Suites hotel.
No personal property shall be permitted on the balconies,
terraces or patios, except that Charthouse Suites Vacation
Ownership, Inc. may place and maintain patio furniture of a
uniform type on balconies, terraces or patios. No Holder
may utilize a grill on the balcony, terrace or patio, as the
case may be.
12. No window, terrace, balcony or patio shall be enclosed or
covered by any awning or otherwise enclosed, except as
permitted by Charthouse Suites Vacation Ownership, Inc. or
manager.
13. No industry, business, trade, occupation or profession of
any kind, commercial, educational or otherwise, designed for
profit or otherwise, shall be conducted, maintained or
permitted on any part of the Chart House Suites hotel, other
than rental of Suites, use of the Suite as sales offices and
for other business purposes permitted by the Charthouse
Suites Vacation License Plan, including, but not limited to,
those business purposes related to the common areas.
14. No public hall of the Chart House Suites hotel shall be
decorated or furnished by any Holder in any matter, except
as permitted by Charthouse Suites Vacation Ownership, Inc.
or manager.
15. Subject to the provisions of the Charthouse Suites Vacation
License Plan, each Holder shall keep any Suite he or she
occupies in a good state of preservation and cleanliness and
shall not sweep or throw or permit to be swept or thrown
therefrom, or from the doors, windows, terraces or balconies
thereof, any dirt or other substance.
16. All radio, television or other electrical equipment of any
kind or nature located in a Suite shall be utilized in
compliance with all rules, regulations, requirements and
recommendations of Charthouse Suites Vacation Ownership,
Inc. and the public authorities having jurisdiction over
Chart House Suites hotel, and the Holder alone shall be
liable for any damage or injury caused by any electrical
equipment improperly utilized by them in such Suite.
17. The agents of Charthouse Suites Vacation Ownership, Inc. and
any contractor or workman authorized by Charthouse Suites
Vacation Ownership, Inc. or manager may enter any Suite in
Chart House Suites hotel at any reasonable hour of the day
after notification (except that in case of emergency, no
notification shall be required) for the purpose of
inspecting such Suite for the presence of any vermin, insect
or other pests, and for the purpose of taking such measures
as may be necessary to control or exterminate any such
vermin, insects or other pests.
18. Any consent or approval given under these Rules and
Regulations may be added to, amended or repealed at any time
by resolution of Charthouse Suites Vacation Ownership, Inc.
19. The parking areas shall be used only for parking of
automobiles, motorcycles and other authorized vehicles. No
Holder may park or store boats, trailers, recreational
vehicles or related or similar vehicles at the Chart House
Suites hotel, except in areas which are specifically
designated for such uses, if any. There is no assurance
that parking for such vehicles will be available. No Holder
shall park any vehicle except in areas authorized for such
parking, and Holders shall obey all parking regulations
applicable to the Chart House Suites hotel. Vehicles
improperly parked may be towed at the Holder's sole cost and
expense. No repair, lubrication or other maintenance of any
kind shall take place in the parking areas, and any
automobile or motorcycle parked therein shall, at all times,
be in running order.
20. No Holder shall, at any time, bring into or keep in their
Suite any flammable, combustible or explosive fluid,
material, chemical or substance.
21. Charthouse Suites Vacation Ownership, Inc. or manager of the
Chart House Suites hotel shall retain a pass key to each
Suite. No Holder shall alter any lock or install a new lock
on any door of a Suite. All Suites shall be on a master key
system to be administered by Charthouse Suites Vacation
Ownership, Inc. or manager of the Chart House Suites hotel.
22. The Chart House Suites hotel may include certain common
facilities, such as a pool. Any use of such facilities
shall be subject to and consistent with all rules and
regulations for the use of such facilities which are
promulgated by Charthouse Suites Vacation Ownership, Inc.,
which rules and regulations may be amended or modified from
time to time without notice. All Holders shall be required
to abide by said rules and regulations, and by any rules and
regulations for common and recreational facilities
associated with the Chart House Suites hotel. Holders shall
only have access to the Chart House Suites hotel during
their confirmed Occupancy Period(s).
23. All window coverings installed as part of the Suites must be
maintained in said windows at all times. All window
coverings shall be determined, installed and maintained by
Charthouse Suites Vacation Ownership, Inc. or manager.
24. Holders shall comply with, and conform to, all applicable
laws and regulations of the United States and the State of
Florida and with all ordinances, rules and regulations of
Pinnelas County, and shall hold Charthouse Suites Vacation
Ownership, Inc., manager and their respective officers and
agents harmless from all fines, penalties, costs or
prosecutions for the violation thereof or noncompliance
therewith.
25. Unless otherwise designated by Charthouse Suites Vacation
Ownership, Inc., the parking spaces will not be assigned,
but are to be used on a first-come first-served basis.
Holders shall be responsible for informing guests of all
parking rules and regulations. No vehicle shall be parked
in such a manner as to impede or prevent ready access to
another parking space, nor shall any vehicle be parked in a
driveway or fire lane. Any Holder who is not residing at a
Suite shall not be entitled to use the parking areas.
26. No Holder shall send any employee of Charthouse Suites
Vacation Ownership, Inc. or manager on any private business
of any Holder.
27. Any complaint regarding the management of the Chart House
Suites hotel or the actions of any other Holder shall be
made in writing to Charthouse Suites Vacation Ownership,
Inc.
28. Bicycles, buggies and wagons shall be stored and parked in
the designated storage areas, and shall not be placed on
balconies or patios, in hallways or other areas of the Chart
House Suites hotel.
29. All Holders shall abide by the Charthouse Suites Vacation
License Plan, the Bylaws, and these Rules and Regulations,
as applicable.
30. Skateboards, rollerblades and roller skates are strictly
prohibited anywhere in the Chart House Suites hotel.
<PAGE>
<PAGE>
ANNEX C
TIME SHARE PUBLIC OFFERING STATEMENT
The Florida Timeshare Public Offering Statement is
available upon request from the Company and will be given
to each purchaser.
<PAGE>
<PAGE>
ANNEX D
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AND PURCHASE AGREEMENT
FOR CHARTHOUSE SUITES VACATION
INTERESTS
With Rental Pool Arrangement
This Agreement is made on the date set forth below by and
between Charthouse Suites Vacation Ownership, Inc., a Florida
corporation, hereinafter referred to as "Charthouse," whose
executive office address is 250 Patrick Boulevard, Brookfield,
Wisconsin 53045, and the undersigned buyer(s), hereinafter referred
to as "Purchaser":
YOU MAY CANCEL THIS AGREEMENT WITHOUT ANY PENALTY OR
OBLIGATION WITHIN TEN (10) DAYS FROM THE DATE YOU SIGN THE
CONTRACT, AND UNTIL TEN (10) DAYS AFTER YOU RECEIVE THE PUBLIC
OFFERING STATEMENT, WHICHEVER IS LATER.
IF YOU DECIDE TO CANCEL THE CONTRACT, YOU MUST NOTIFY
CHARTHOUSE IN WRITING OF YOUR INTENT TO CANCEL. YOUR NOTICE
OF CANCELLATION SHALL BE EFFECTIVE UPON THE DATE SENT AND SHALL
BE SENT TO: CHARTHOUSE SUITES VACATION OWNERSHIP, INC., AT 250
PATRICK BLVD., SUITE 140, BROOKFIELD, WI 53045. ANY ATTEMPT TO
OBTAIN A WAIVER OF YOUR CANCELLATION RIGHTS IS UNLAWFUL. WHILE
YOU MAY EXECUTE ALL CLOSING DOCUMENTS IN ADVANCE, OR OTHER
DOCUMENTS, BEFORE EXPIRATION OF YOUR TEN (10) DAY CANCELLATION
PERIOD, IS PROHIBITED.
YOU MAY ALSO CANCEL THIS CONTRACT AT ANY TIME AFTER THE
ACCOMMODATIONS OR FACILITIES ARE NO LONGER AVAILABLE AS PROVIDED
IN THIS CONTRACT AND THE PUBLIC OFFERING STATEMENT.
Name of Purchaser and Principal Contact (See paragraph 3 of the
attached terms and conditions):
________________________________________________
Purchaser _____________________________________
(sign)
Name of Purchaser _____________________________
(written or typed)
Address _______________________________________
City, State ___________________________________
Zip ___________________________________________
Telephone (Day) _______________________________
Telephone (Night) _____________________________
Fax No. _______________________________________
Social Security Number or
Tax Identification Number* ____________________
Date of Execution of Agreement ________________
________________________________________________
(Complete this box only if there is more than one purchaser)
________________________________________________
Purchaser
(If more than one) ____________________________
(sign)
Name of Purchaser _____________________________
(written or typed)
Address _______________________________________
City, State ___________________________________
Zip ___________________________________________
Telephone (Day) _______________________________
Telephone (Night) _____________________________
Fax No. _______________________________________
Social Security Number or
Tax Identification Number* ____________________
Date of Execution of Agreement ________________
________________________________________________
* Under penalties of perjury, the Purchaser certifies (1) that the
number shown as his or her taxpayer identification number or Social
Security number is his or her correct taxpayer identification
number and (2) that he or she is not subject to backup withholding
either because he or she had not been notified that he or she is
subject to backup withholding as a result of a failure to report
all interest and dividends or because the Internal Revenue Service
has notified him or her that he or she is no longer subject to
backup withholding.
Title Interest to be Held
____ Individual ____ Partnership ____ Joint Tenants With
Right of Survivorship
____ Corporation ____ Trust ____ Tenants in Common
____ Other: ______________________ ____ Marital Survivorship
Property
Class of Interest and Purchase Price (Check one or more):
A (Standard Studio Hotel Room $18,500) _____
B (King Studio Hotel Room $21,500) _____
C (Large Studio Hotel Room $25,500) _____
D (1 Bedroom Suite $36,500) _____
E (1 Bedroom Suite with Lanai $39,500) _____
F (Penthouse $60,000) _____
Weeks Selected (Must be 2 consecutive weeks):
First Choice:
Winter ___________ Spring ________
Summer ___________ Fall __________
Second Choice:
Winter ___________ Spring ________
Summer ___________ Fall __________
Third Choice:
Winter ___________ Spring ________
Summer ___________ Fall __________
If acquiring the Charthouse Suites Vacation
Interest(s) in the appropriate time period (within one
year of the initial prospectus date) and qualifying for the
Guaranteed Rental Arrangement, the Purchaser elects the following:
(select one)
__________ Guaranteed Rental Arrangement Payments
(Right to Put Unit Weeks to Charthouse
for a guaranteed rate)
__________ Cash Discount (Applied to Purchase Price)
Total Purchase Price. Purchaser agrees to pay the total
purchase price for the Charthouse Suites Vacation Interest,
with Rental Pool Arrangement ("Interest") in Charthouse as
follows:
a. Purchase Price of Interest
(from previous page) $_____
b. If applicable, Cash Discount
Applied as part of Down Payment $_____
c. Net Purchase Price $_____
d. Total Minimum 30% of line c $_____
e. Florida State Documentary Taxes
Due on Subscription ($.70 per
$100 of Net Purchase Price) $_____
f. Florida State Documentary Taxes
(If Paying by Installments and
the Subscription Agreement is
Signed in Florida) ($.35 per $100
of Net Purchase Price, line c) $_____
g. Total Due Upon Subscription
(Total of lines d, e, f) $_____
h. Total Remaining Owned for Interests
(line c minus line d) $_____
i. If Installment Method Used, First
Monthly Payment Due Beginning
___________, 199__, in the Amount
of _________, Along With Monthly
Annual Dues for the Interest of
_______, First Payment Due Beginning
____________, 199__. (total monthly
payment) $_____
Purchaser's total obligation includes the purchase price of the
Interest and Annual Dues (and special assessments, if any). Upon
acceptance of the subscription, Charthouse will send a letter
setting forth dates and amounts for annual due payments and, if the
Purchaser pays on an installment basis, the date and amount of monthly
payments. The Purchaser will have the option of having payments
automatically withdrawn for a checking account through automatic
withdraws. In the year of closing, Purchaser shall be responsible
for the prorated portion of the Annual Dues based upon the actual
closing date. For purposes of compliance with the Real Estate
Settlement Procedures Act and regulations promulgated thereunder,
the following constitutes Charthouse's GOOD FAITH ESTIMATE of
closing costs to be paid by Purchaser, exclusive of state taxes, at
closing: $0.00.
<PAGE>
<TABLE>
CAPTION>
<S> <C> <C>
<C> <C>
ANNUAL FINANCE CHARGE Amount Financed Total of
Payments Total Sale Price
PERCENTAGE The Dollar amount The amount of credit The amount
you will The total cost of your
RATE the credit will cost provided to you or on have paid
after you including your down-
The cost of your you. your behalf have made
all payments payment of
credit at a as
scheduled $__________________
yearly rate. $ $ $
____________%
</TABLE>
<PAGE>
You have the right to receive at this time an itemization
of the Amount Financed.
/_/ I want an itemization
/_/ I do not want an itemization
Your payment schedule will be:
Number of Amount of Each Amount of Each When Payments Are Due
payments Monthly Payment Monthly Payment
For Annual Dues* For The Interest
____________ _______________ _______________ First day of each
____________ _______________ _______________ month until _________,
20___.
*Annual dues can vary.
If purchase of the above described Interest is being financed by
the Seller, Licensee hereby acknowledges receipt of the following
Truth-In Lending Disclosure. The Interests have the effect of an
annual percentage cost of up to 9%.
Net Worth and Other Tests. The undersigned acknowledges
receipt of the prospectus and the Florida Time-Share Public
Offering Statement and understands that all license payments for
the Interests and Annual Dues (including Special Assessments)
payments must be made on a timely basis. The undersigned also
acknowledges that he has sufficient resources to pay all amounts
and no need for liquidity in the Interest and understands that a
purchase of an Interest involves risks including the loss of all
amounts paid, and that he or she has the following net worth
(exclusive of home, home furnishings and automobiles) (check one):
__________ (under $30,000)
__________ ($30,001 to $50,000)
__________ ($50,001 to $100,000)
__________ (more than $100,000)
The undersigned also acknowledges that he is in a financial
position to realize the benefits and net worth to sustain risks
inherent in the purchase of an Interest.
Name of Soliciting Dealer Selling Interest ______________________
Address ____________________________________________________
Telephone Number ___________________________________________
Name of Registered Representative _______________________________
(signature)
Name of Registered Representative _______________________________
(written or typed)
Soliciting Dealer Authorized Signature __________________________
CHARTHOUSE SUITES VACATION OWNERSHIP, INC.,
a Florida corporation
By: _____________________________
As its: _________________________
Date: ___________________________
Weeks Accepted: Winter _______ Spring ________
Summer _______ Fall __________
<PAGE>
<PAGE>
ADDITIONAL TERMS TO THE SUBSCRIPTION AGREEMENT
1. Ownership Interest Purchased. Purchaser hereby agrees
to purchase and Charthouse hereby agrees to sell to Purchaser a
Vacation Interest in Chart House hotel more fully described in
the Charthouse Suites Vacation License Plan and the prospectus.
The Interest is not a right to an equity or ownership interest in
Charthouse.
2. Owner of the Underlying Fee. The "owner of the
underlying fee" is Charthouse Suites Vacation Ownership, Inc.
and Decade Properties, Inc., whose address is 250 Patrick Avenue,
Brookfield, Wisconsin, 53045.
3. Charthouse Vacation Interests. As more specifically
described in the prospectus and the Charthouse Suites Vacation
License Plan, the Charthouse hotel is subject to a license plan
known as the Charthouse Suites Vacation License Plan ("Charthouse
Plan"). Pursuant to the Charthouse Plan, holder will acquire no
legal or beneficial interest in the Charthouse hotel, marina or
any affiliates of Charthouse and agrees to abide by and be
subject to the terms and conditions of the Charthouse Plan.
By Purchaser's execution of this Agreement, Purchaser
further agrees to abide by the rules, regulations and
restrictions imposed upon Purchaser by the Agreement, as the same
may be amended from time to time, a copy of which is attached
hereto as Exhibit B of the prospectus. By execution of this
Agreement, Purchaser also hereby designates the person set forth
above as Purchaser's Principal Contact for purposes of receiving
notices on behalf of Purchaser. Purchaser hereby appoints
Purchaser's Principal Contact and all successors thereto as
Purchaser's agent and attorney in-fact for the purposes set forth
herein.
4. License Payments. If Purchaser cannot pay the entire
subscription price, Purchaser agrees to cooperate with all
reasonable requests made by Charthouse in connection with
evaluating Purchaser's ability to pay license payments on an
installment basis, and Purchaser shall furnish to Charthouse upon
request such financial information as Charthouse may from time to
time reasonably request.
5. Furnishings. The suites will have furniture,
appliances, equipment and accent furnishings substantially
similar or of equal quality to those shown in the model and on
the plans and specifications. Since the models and the materials
are for display purposes only, Charthouse reserves the right to
make substitutions, in its sole discretion, of material of equal
or better quality, as determined in its sole discretion.
6. Purchaser's Default. Upon Purchaser's default or
breach of any term or condition of this Agreement, all sums paid
hereunder by Purchaser shall be retained by Charthouse as
liquidated and agreed damages, and not as a penalty, and the
parties hereto shall be relieved from all obligations hereunder.
The parties agree that the damages that may result from a breach
of this Agreement are uncertain and difficult to ascertain, and
that the agreed upon amount is a reasonable estimate of probable
damages. In connection with any litigation arising out of this
Agreement, Charthouse or its affiliates shall be entitled to
recover all costs incurred, including reasonable attorneys' fees,
through and including all appellate levels.
7. Charthouse's Election to Cancel. As set forth in the
Charthouse Plan, Charthouse reserves the right to terminate this
Agreement by refunding amounts paid hereunder less certain
amounts received by a purchaser (including benefits associated
with the use under the Charthouse Plan) if Charthouse does not
sell 76 Interests by October 31, 1998. All notices herein required
shall be in writing and shall be served on the parties at the
address following their names. The mailing of a notice by mail,
shall be sufficient notice.
8. Closing and Title Except as Set Forth in the Charthouse
Plan. Charthouse warrants that title to the Interest is free and
clear of all encumbrances except taxes, the underlying mortgage
to Decade Properties, Inc., and assessments for the year of
closing. The closing will be at such time and place as shall be
specified by Charthouse or by mail, if authorized by Charthouse.
Purchaser, on or prior to closing, shall execute any necessary
documents.
9. Modifications and Changes. Charthouse reserves the
right to make changes in the proposed documents and modifications
to the organizational documents, including the Charthouse Plan
and specifications as may be necessary to conform to applicable
government requirements or to expedite the sale of Interests;
provided, however, that any such amendments, additions, or
changes shall not adversely diminish the Interest of or increase
any obligations of Purchaser to any material degree. Purchaser
agrees that any amendments, additions, or changes so made shall
be at the discretion of Charthouse.
10. Deposit. Purchaser is entitled to a receipt for the
deposit upon request. In the event Purchaser cancels this
Agreement during the 10-day cancellation period, Charthouse will
refund to the Purchaser the total amount of all payments made by
the Purchaser under the Agreement, reduced by the proportion of
any contract benefits the Purchaser has actually received under
the Agreement, if any, prior to the effective date of
cancellation; however, in no event shall the failure to return a
prospectus be deemed a contract benefit. The refund shall be
made within twenty (20) days after receipt of notice of
cancellation, or within five (5) days after receipt of funds from
the Purchaser's cleared check, whichever is later. Any interest
generated by the funds deposited in any account shall be paid to
and retained by Charthouse.
11. Annual Dues. Purchaser understands and agrees that in
accordance with the rules and regulations of Charthouse,
Purchaser will be responsible for Purchaser's share of any and
all expenses incurred in the operation of Chart House hotel,
including special assessments, if any. The estimated Annual Dues
are set forth in the prospectus. Annual Dues will be prorated
over the calendar year in the year of closing based upon the
actual closing date and must be paid in accordance with the
Schedule set forth in the Vacation Plan and Exhibit 1.
12. Agreement. Except as set forth herein, this Agreement
may not be modified or amended except by a writing signed by both
Purchaser and Charthouse. All the terms and provisions of this
Agreement shall survive the closing. Time is of the essence
hereunder, particularly where the obligation to pay money is
concerned. If this Agreement is executed outside of the sales
office of Charthouse located in Brookfield, Wisconsin, it shall
constitute an offer by Purchaser to Charthouse, and shall in all
events be subject to acceptance by Charthouse in Charthouse's
discretion at Charthouse's offices in Brookfield, Wisconsin.
Purchaser authorizes Charthouse or its authorized agent
to insert or change Unit numbers wherever necessary to conform
with the Vacation Plan and to make any changes, insertions or
deletions in this Agreement; provided, however, that any changes
in such documents shall be of an administrative nature only and
shall not materially or adversely alter the reasonable
expectations of Purchaser without Purchaser's consent first being
given in writing.
13. Exchange Program. Pursuant to an agreement, Charthouse
has become a "corporate participant" of Resort Condominiums
International, Inc. ("RCI (registered trademark)"), an Indiana
corporation, whose address is One RCI Plaza, 3502 Woodview Trace,
P.O. Box 80229, Indianapolis, Indiana 46280-0229. This
RCI (registered trademark) agreement presently allows club
members to exchange unit weeks to other RCI (registered trademark)
resorts. During the term of the agreement, Charthouse may at any
time and from time to time enter into an agreement with other
providers of alternative vacation experiences. The RCI (registered
trademark) agreement is for a five year term. Charthouse has the
option, at its election, to extend the term of the RCI (registered
trademark) agreement for up to two additional five (5) year
terms. Charthouse makes no commitment to extend or to renew the
RCI (registered trademark) agreement for any particular length of
time. Neither Charthouse nor RCI (registered trademark) is
obligated to renew the agreement. Upon termination or expiration
of the RCI (registered trademark) agreement, Charthouse, in its
sole discretion, may enter into another agreement of short or
long duration with RCI (registered trademark) or with another
provider of exchange services so that members will have the
opportunity to avail themselves of alternative vacation
opportunities through the duration of Charthouse Plan. There can
be no assurance, however, that Charthouse will be successful in
doing so. Under such circumstances, members may contact
RCI (registered trademark) or another provider of exchange
services directly to establish individual exchange privileges.
There can be no assurance, however, that an individual club
member will be able to satisfy the terms and conditions then
required by RCI (registered trademark) or another provider of
exchange services to participate individually in the
RCI (registered trademark) or other exchange program. If neither
Charthouse nor the individual member is successful in
establishing an agreement with RCI (registered trademark) or
another provider of exchange services, the ability of an
individual club member to request future exchanges outside of the
Charthouse Plan will cease. Charthouse makes no representations
regarding any exchange company or other provider of alternative
vacation experiences, and any and all representations set forth
within the brochures and other literature and documents of an
exchange company or such other provider are the sole
representations of such exchange company or other provider.
14. Charthouse's Representations. Charthouse represents
that the use of the accommodations and facilities of the
Charthouse suites hotel is limited solely to the personal use of
the Purchaser, his approved guests, invitees, exchangers and
renters and for authorized uses by corporations or other similar
entities owning Interests. Purchase and use of Interests for
commercial purposes is expressly prohibited. This Agreement
contains the entire understanding between the Purchasers and
Charthouse relating to the purchase and sale of the Interest
described herein. PURCHASERS SHOULD ALSO UNDERSTAND, HOWEVER,
THAT SINCE THERE CAN BE NO ASSURANCE AS TO THE FEDERAL INCOME
TAX TREATMENT, AS WELL AS THE FACT THAT ACTUAL TAX RESULTS WILL
DEPEND UPON A PURCHASER'S PARTICULAR CIRCUMSTANCES (INCLUDING,
AMONG OTHER FACTORS, WHETHER OR NOT THE PURCHASER ITEMIZES
DEDUCTIONS ON THE PURCHASER'S FEDERAL INCOME TAX RETURN OR
WHETHER THE PURCHASER ALREADY OWNS AN EXISTING VACATION HOME),
CHARTHOUSE MAKES NO REPRESENTATIONS AS TO THE INCOME TAX
CONSEQUENCES OF THE PURCHASE, USE OR EXCHANGE OF ANY INTEREST AND
RELATED RIGHTS AND APPURTENANCES OR AS TO THE DEDUCTIBILITY OF
RELATED EXPENSES SUCH AS INTEREST, TAXES AND DEPRECIATION. EACH
PURCHASER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THESE ISSUES.
AN INTEREST SHOULD NOT BE PURCHASED IN RELIANCE UPON ANY
PARTICULAR KIND OF TAX CONSEQUENCES.
15. Purchaser's Representations. Purchaser represents that
Purchaser is not purchasing an Interest with the intent or desire
to become a legal domiciliary of the State of Florida or any
political subdivision thereof, and Purchaser hereby waives,
releases and remises any such intent or desire. Purchaser also
represents that the Interest is not intended to be and shall not
at any time become the Purchaser's principal dwelling, which
Purchaser shall maintain at all times in another location.
Purchaser also represents to Charthouse that Purchaser has
full authority and capacity to enter into this Agreement in
the manner set forth on the first page hereof. Purchaser
further understands that Charthouse is under no obligation
to associate any additional resorts with Charthouse Plan.
It is the express intent of the parties that the terms of
this paragraph shall survive the closing of this Agreement.
16. Radon Gas. Radon is a naturally occurring radioactive
gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed
to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained
from your county public health unit.
17. Warranty Limitation. EXCEPT FOR THOSE WARRANTIES
REQUIRED BY CHAPTER 714, FLORIDA STATUTES, CHARTHOUSE MAKES NO
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AND CHARTHOUSE HEREBY
DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING BUT NOT LIMITED TO
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE CONSTRUCTION OF THE UNITS
AND THE COMMON ELEMENTS AND WITH RESPECT TO THE PERSONAL PROPERTY
LOCATED WITHIN THE UNITS OR ON THE PROPERTY, AND THE INTEREST
HOLDERS ASSUME ALL RISK AND LIABILITY RESULTING FROM THE USE OF
THIS PROPERTY.
18. Governing Law and Severability. THIS AGREEMENT SHALL
BE GOVERNED UNDER AND INTERPRETED AND ENFORCED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF FLORIDA. THE PARTIES HEREBY
WAIVE ANY RIGHT THEY MAY HAVE UNDER ANY APPLICABLE LAW TO A TRIAL
BY JURY WITH RESPECT TO ANY SUIT OR LEGAL ACTION WHICH MAY BE
COMMENCED BY OR AGAINST ANOTHER PARTY CONCERNING THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR
PERFORMANCE OF THIS AGREEMENT OR ANY OTHER AGREEMENT OR
INSTRUMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT. Wherever
possible, each provision of this Agreement shall be interpreted
in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
19. Rental Pool. The undersigned agrees that Charthouse
may forward the rental proceeds, if any, on a quarterly basis to
the address shown on its records. Charthouse may amend the terms
of the Rental Pool upon a majority vote of all Unit Weeks
outstanding.
20. YOU MAY CANCEL THIS AGREEMENT WITHOUT ANY PENALTY OR
OBLIGATION WITHIN TEN (10) DAYS FROM THE DATE YOU SIGN THE
CONTRACT, AND UNTIL TEN (10) DAYS AFTER YOU RECEIVE THIS PUBLIC
OFFERING STATEMENT, WHICHEVER IS LATER.
IF YOU DECIDE TO CANCEL THE CONTRACT, YOU MUST NOTIFY CHARTHOUSE
IN WRITING OF YOUR INTENT TO CANCEL. YOUR NOTICE OF CANCELLATION
SHALL BE EFFECTIVE UPON THE DATE SENT AND SHALL BE SENT TO:
CHARTHOUSE SUITES VACATION OWNERSHIP, INC., AT 250 PATRICK BLVD.,
SUITE 140, BROOKFIELD, WI 53045. ANY ATTEMPT TO OBTAIN A WAIVER
OF YOUR CANCELLATION RIGHTS IS UNLAWFUL. WHILE YOU MAY EXECUTE
ALL CLOSING DOCUMENTS IN ADVANCE, THE CLOSING, AS EVIDENCED BY
DELIVERY OF THE DEED OR OTHER DOCUMENT, BEFORE EXPIRATION OF YOUR
TEN (10) DAY CANCELLATION PERIOD, IS PROHIBITED.
YOU MAY ALSO CANCEL THIS CONTRACT AT ANY TIME AFTER THE
ACCOMMODATIONS OR FACILITIES ARE NO LONGER AVAILABLE AS PROVIDED
IN THIS CONTRACT AND THE PUBLIC OFFERING STATEMENT.
The following notice is taken substantially from 16 C.F.R.
433.2(b):
Notice
Any holder of this document is subject to all claims and
defenses which the debtor could assert against the seller of
goods and services (if any) obtained with the proceeds hereof.
Recovery hereunder by the debtor shall not exceed amounts paid by
the debtor hereunder.
Charthouse does not believe that applicable law requires the
above notice to be included in this document and reserves the
right not to include such notice in any future document from or
with any borrower.
<PAGE>
<PAGE>
ANNEX E
SCHEDULE OF WEEKS
Each purchase of an Interest entitles the Holder to two
consecutive weeks for each season at the Chart House Suites
hotel. Seasons as set forth in the License Plan are defined as
follows: Winter is weeks 46-52 and 1-6, Spring is weeks 7-19,
Summer is weeks 20-32 and Winter is weeks 33-45. As of the date
of this Prospectus, the occupancy period for Holders begins and
ends on Sundays. Pursuant to the License Plan, weeks may begin
with the first Friday, Saturday or Sunday of each calendar year
and the Company shall establish the annual schedule. Occupancy
shall begin at 4:00 p.m. on the start day and cease at 10:00 a.m.
on that following same day of the next week. The tentative
schedules for 1997 and 1998 are contained in the following
tables. Interest Holders will obtain weeks in an order of
request and Company will strive to meet all the requests, but
there can be no assurances the requested weeks will be available.
Any unassigned weeks shall be rented, traded, and/or assigned at
the sole discretion of the Company.
<PAGE>
<PAGE>
1997
Week Number Sunday to Sunday
1 Jan 5 - Jan 12
2 Jan 12 - Jan 19
3 Jan 19 - Jan 26
4 Jan 26 - Feb 2
5 Feb 2 - Feb 9
6 Feb 9 - Feb 16
7 Feb 16 - Feb 23
8 Feb 23 - Mar 2
9 Mar 2 - Mar 9
10 Mar 9 - Mar 16
11 Mar 16 - Mar 23
12 Mar 23 - Mar 30
13 Mar 30 - Apr 6
14 Apr 6 - Apr 13
15 Apr 13 - Apr 20
16 Apr 20 - Apr 27
17 Apr 27 - May 4
18 May 4 - May 11
19 May 11 - May 18
20 May 18 - May 25
21 May 25 - Jun 1
22 Jun 1 - Jun 8
23 Jun 8 - Jun 15
24 Jun 15 - Jun 22
25 Jun 22 - Jun 29
26 Jun 29 - Jul 6
27 Jul 6 - Jul 13
28 Jul 13 - Jul 20
29 Jul 20 - Jul 27
30 Jul 27 - Aug 3
31 Aug 3 - Aug 10
32 Aug 10 - Aug 17
33 Aug 17 - Aug 24
34 Aug 24 - Aug 31
35 Aug 31 - Sep 7
36 Sep 7 - Sep 14
37 Sep 14 - Sep 21
38 Sep 21 - Sep 28
39 Sep 28 - Oct 5
40 Oct 5 - Oct 12
41 Oct 12 - Oct 19
42 Oct 19 - Oct 26
43 Oct 26 - Nov 2
44 Nov 2 - Nov 9
45 Nov 9 - Nov 16
46 Nov 16 - Nov 23
47 Nov 23 - Nov 30
48 Nov 30 - Dec 7
49 Dec 7 - Dec 14
50 Dec 14 - Dec 21
51 Dec 21 - Dec 28
52 Dec 28 - Jan 4
53 --
<PAGE>
1998
Week Number Sunday to Sunday
1 Jan 4 - Jan 11
2 Jan 11 - Jan 18
3 Jan 18 - Jan 25
4 Jan 25 - Feb 1
5 Feb 1 - Feb 8
6 Feb 8 - Feb 15
7 Feb 15 - Feb 22
8 Feb 22 - Mar 1
9 Mar 1 - Mar 8
10 Mar 8 - Mar 15
11 Mar 15 - Mar 22
12 Mar 22 - Mar 29
13 Mar 29 - Apr 5
14 Apr 5 - Apr 12
15 Apr 12 - Apr 19
16 Apr 19 - Apr 26
17 Apr 26 - May 3
18 May 3 - May 10
19 May 10 - May 17
20 May 17 - May 24
21 May 24 - May 31
22 May 31 - Jun 7
23 Jun 7 - Jun 14
24 Jun 14 - Jun 21
25 Jun 21 - Jun 28
26 Jun 28 - Jul 5
27 Jul 5 - Jul 12
28 Jul 12 - Jul 19
29 Jul 19 - Jul 26
30 Jul 26 - Aug 2
31 Aug 2 - Aug 9
32 Aug 9 - Aug 16
33 Aug 16 - Aug 23
34 Aug 23 - Aug 30
35 Aug 30 - Sep 6
36 Sep 6 - Sep 13
37 Sep 13 - Sep 20
38 Sep 20 - Sep 27
39 Sep 27 - Oct 4
40 Oct 4 - Oct 11
41 Oct 11 - Oct 18
42 Oct 18 - Oct 25
43 Oct 25 - Nov 1
44 Nov 1 - Nov 8
45 Nov 8 - Nov 15
46 Nov 15 - Nov 22
47 Nov 22 - Nov 29
48 Nov 29 - Dec 6
49 Dec 6 - Dec 13
50 Dec 13 - Dec 20
51 Dec 20 - Dec 27
52 Dec 27 - Jan 3
53 --
<PAGE>
1999
Week Number Sunday to Sunday
1 Jan 3 - Jan 10
2 Jan 10 - Jan 17
3 Jan 17 - Jan 24
4 Jan 24 - Jan 31
5 Jan 31 - Feb 7
6 Feb 7 - Feb 14
7 Feb 14 - Feb 21
8 Feb 21 - Feb 28
9 Feb 28 - Mar 7
10 Mar 7 - Mar 14
11 Mar 14 - Mar 21
12 Mar 21 - Mar 28
13 Mar 28 - Apr 4
14 Apr 4 - Apr 11
15 Apr 11 - Apr 18
16 Apr 18 - Apr 25
17 Apr 25 - May 2
18 May 2 - May 9
19 May 9 - May 16
20 May 16 - May 22
21 May 23 - May 30
22 May 30 - Jun 6
23 Jun 6 - Jun 13
24 Jun 13 - Jun 20
25 Jun 20 - Jun 27
26 Jun 27 - Jul 4
27 Jul 4 - Jul 11
28 Jul 11 - Jul 18
29 Jul 18 - Jul 25
30 Jul 25 - Aug 1
31 Aug 1 - Aug 8
32 Aug 8 - Aug 15
33 Aug 15 - Aug 22
34 Aug 22 - Aug 29
35 Aug 29 - Sep 5
36 Sep 5 - Sep 12
37 Sep 12 - Sep 19
38 Sep 19 - Sep 26
39 Sep 26 - Oct 3
40 Oct 3 - Oct 10
41 Oct 10 - Oct 17
42 Oct 17 - Oct 24
43 Oct 24 - Oct 31
44 Oct 31 - Nov 7
45 Nov 7 - Nov 14
46 Nov 14 - Nov 21
47 Nov 21 - Nov 28
48 Nov 28 - Dec 5
49 Dec 5 - Dec 12
50 Dec 12 - Dec 19
51 Dec 19 - Dec 26
52 Dec 26 - Jan 2
53 --
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CHARTHOUSE SUITES SCHEDULE OF
WEEKS
A B
C D E F
1 Bdrm 2 Bdrm
Standard Studio King Studio Large
Studio 1 Bdrm Suite w/ Lanai Penthouse
Season Week 201 202301 202301 402 103 104105 106 206207 305306
101102 204403 404304 303307 205 203 405
<S> <S> <C> <C><C> <C><C> <C> <C> <C><C> <C> <C><C> <C><C>
<C><C> <C><C> <C><C> <C><C> <C> <C> <C>
W 1
I 2 X
X X
N 3
T 4 X X
X X
E 5
R 6 X
X X X
Ends
Approx.
Feb. 15
<S> <S> <C> <C><C> <C><C> <C> <C> <C><C> <C> <C><C> <C><C>
<C><C> <C><C> <C><C> <C><C> <C> <C> <C>
S 7 X
X X X
P 8
R 9 X X
X X
I 10
N 11 X
X X X
G 12
13 X
X X X
14
Ends 15
Approx. 16
May 15 17 X X Z
18
19 X X X X
<S> <S> <C> <C><C> <C><C> <C> <C> <C><C> <C> <C><C> <C><C>
<C><C> <C><C> <C><C> <C><C> <C> <C> <C>
S 20 X
X X
U 21
M 22 X X
X X
M 23
E 24 X
X X X
R 25
26 X
X X X
27
Ends 28 X
X X
Approx. 29
Aug. 15 30 X X X
<S> <S> <C> <C><C> <C><C> <C> <C> <C><C> <C> <C><C> <C><C>
<C><C> <C><C> <C><C> <C><C> <C> <C> <C>
31
32 X
X X
F 33 X
X X X
A 34
L 35 X
X X
L 36
37 X
X X
38
Ends 39 X
X X X
Approx. 40
Nov. 15 41 X
X X
42
43 X X
X X
44
45 X X
X X
<S> <S> <C> <C><C> <C><C> <C> <C> <C><C> <C> <C><C> <C><C>
<C><C> <C><C> <C><C> <C><C> <C> <C> <C>
W 46 X
X X
I 47
N 48 X X
X X
T 49
E 50 X
X X
R 51
52
X X X
Cont.
</TABLE>
<PAGE>
<PAGE>
ANNEX F
ANNUAL DUES BUDGET INFORMATION
CHARTHOUSE SUITES VACATION OWNERSHIP, INC.
ESTIMATED OPERATING BUDGET
from January 1, 1997 to December 31, 1997
Per
(approxi- Interest*
mately) (8 Unit
INCOME YEAR MONTH Weeks)
Maintenance Fees -
Unit Owners $302,380 $25,198 $1,861
Telephone 10,500 875 65
Miscellaneous
(Rentals/
Services/
Fees/etc. 1,500 125 9
TOTAL INCOME $314,380 $26,198 $1,935
EXPENSES
SALARIES
Salaries
Administration 13,512 1,126 83
Salaries
Housekeeping 30,655 2,554 188
Manager on Site 22,560 1,880 138
Pool & Recreation -- -- --
Security -- -- --
Operators/Front
Desk 20,539 1,712 126
Maintenance
Salaries 8,640 720 53
Payroll Taxes
(included above)
Management Fee 30,000 2,500 185
TOTAL SALARIES 125,906 10,492 773
DIRECT EXPENSES
Insurance 13,300 1,108 82
Maintenance
Services/Supplies 8,158 680 50
Electric - Units 15,494 1,291 95
Electric-Club
House/Office/
Recreational 8,670 722 53
Water/Sewer 1,718 143 11
Trash Removal 3,024 252 18
Utilities Cable TV 2,558 213 16
Lawn Maintenance 14,360 1,197 88
Sales & Marketing 9,836 820 61
Telephone 20,828 1,736 128
Laundry/Linen
Supplies 29,116 2,426 179
Real Estate Tax 1,560 130 10
Postage --
Annual T.S.
Division Fee --
Administrative
Misc. 18,283 1,524 113
TOTAL DIRECT
EXPENSES 146,905 12,242 904
RESERVED FOR DEFERRED
EXPENSES
Roof $2,000 $ 156 $ 1
Painting 4,000 333 25
Furniture/Fixtures/ 19,000 1,583 117
Equipments
Pool Maintenance 1,200 100 7
Pavement 1,200 100 7
Reserved for Others 4,569 381 28
TOTAL RESERVES $31,969 $ 2,663 185
TOTAL EXPENSES $295,780 $24,648 $ 1,862
TOTAL INCOME MINUS
MAINTENANCE FEE 12,000 1,000 74
EXPENSES TOTAL 295,780 24,698 1,862
TOTAL MAINTENANCE FEE
(EXPENSES-INCOME) 283,780 23,648 1,788
* Average of All Interests, Classes A - F
<PAGE>
<PAGE>
NOTES TO BUDGET FOR
CHARTHOUSE SUITES VACATION OWNERSHIP, INC.
NOTE 1: By definition, a Budget is an estimate of expenses.
However, actual expenses incurred may be either more or
less than the estimated expenses set forth in the
Budget. The Developer and Charthouse Suites Vacation
Ownership, Inc. cannot and do not make any
representation or warranty that actual expenses will
not increase as a result of inflation, increase in
costs or other such events. Furthermore, if the
estimated expenses in certain categories of the Budget,
for example: water or electricity, are greater than
the actual expenses incurred for those categories, then
the excess will be used to offset deficits occurring in
the categories of the Budget where actual expenses
exceed the estimated expenses.
NOTE 2: The property taxes assessed against the Resort Facility
and/or Time Share Interests will be paid by Charthouse
Suites Vacation Ownership, Inc. or management entity.
NOTE 3: The Board of Directors of Charthouse Suites Vacation
Ownership, Inc. shall purchase insurance for the Resort
Facility in accordance with the insurance provisions of
the Vacation License Agreement.
NOTE 4: The Developer has undertaken to guarantee the Budget
for the Resort Facility as of January 1, 1996 through
December 31, 1996. In this regard, the Developer shall
guarantee that assessments during the guarantee period
shall not be made against any Licensee of a Time Share
Interest, other than the Developer, exclusive of real
estate taxes and insurance, in excess of certain
amounts for each time share interest. The Developer
will pay expenses in excess of those collectible from
purchasers pursuant to Section 721.07(5)(x)(5), Florida
Statutes.
NOTE 5: The following items are required to be in the Budget
pursuant to Florida Statutes, however there is no
budgeted expense as all of these items are "not
applicable":
A. Rent for Recreational Facilities
B. Taxes upon Time Share Property
C. Taxes upon Leased Areas
D. Operating Capital
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE ANALYSIS 1997
EST.
REMAINING 12/31/96 EST.
USEFUL USEFUL RES. REPLACE.
YEARLY
FUND TYPE LIFE LIFE BALANCE COST
ASSESSMENT
<S> <C> <C> <C> <C> <C>
Roof 15 years 15 years 0 30,000
2,000
Painting 7 years 7 years 0 28,000
4,000
Furniture/
Fixtures/
Equipment 7 years 7 years 0 133,000
19,000
Pool
Maintenance 20 years 20 years 0 24,000
1,200
Pavement 20 years 20 years 0 24,000
1,200
Reserved
for Others 10 years 10 years 0 45,690
4,569
</TABLE>
<PAGE>
<PAGE>
ANNEX G
ARTISTIC RENDERINGS
Class A Studio
[drawing of room]
Class B King Studio
[drawing of room]
Class C Large Studio
[drawing of room]
Class D Suite
[drawing of rooms]
Class E Suite
[drawing of rooms]
Class F Penthouse
[drawing of rooms]
<PAGE>
<PAGE>
No person is authorized in connection with any offering made
hereby to give any information or to make any representation not
contained in this Prospectus, an if given or made, such
information or representation must not be relied upon as have
been authorized by the Company or by any security other than the
Interests offered hereby, nor does it constitute an offer to sell
or a solicitation of an offer to buy any of the securities
offered hereby to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation to such person.
Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication
that the information contained herein is correct as of any date
subsequent to the date hereof.
______________
SUMMARY OF TABLE OF CONTENTS
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Description Of The Chart House Suites Hotel. . . . . . . . . . 18
The Interests. . . . . . . . . . . . . . . . . . . . . . . . . 20
Charthouse Results . . . . . . . . . . . . . . . . . . . . . . 24
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 25
Certain Rental Pool Financial Information. . . . . . . . . . . 30
Certain Occupancy Information. . . . . . . . . . . . . . . . . 34
Annual Dues and Special Assessments. . . . . . . . . . . . . . 34
Differences in Allocating Rental Pool and Annual Dues and
Special Assessments. . . . . . . . . . . . . . . . . . . . . . 36
Pro Forma Results With Various Occupancy Levels. . . . . . . . 38
Guaranteed Rental Arrangement. . . . . . . . . . . . . . . . . 42
License Payment Options. . . . . . . . . . . . . . . . . . . . 44
Summary of Income and Costs to Holders . . . . . . . . . . . . 44
Determination of Offering Price. . . . . . . . . . . . . . . . 46
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 47
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . 47
How to Subscribe . . . . . . . . . . . . . . . . . . . . . . . 48
Summary of Promotional and Sales Material. . . . . . . . . . . 48
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 49
Management . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Decade Properties, Inc.. . . . . . . . . . . . . . . . . . . . 51
Conflicts of Interest of Management
and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 51
Certain Federal Income Tax Considerations. . . . . . . . . . . 52
Certain Florida Tax Matters. . . . . . . . . . . . . . . . . . 65
Prior Performance of Jeffrey Keierleber and Affiliates . . . . 68
Liability and Indemnification of Officers and Directors. . . . 77
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . 77
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Financial Statements and Related Information . . . . . . . . .F-1
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . .F-2
Charthouse Suites Vacation License Plan. . . . . . . . .Annex A-1
Rules and Regulations for Chart House Suites Hotel . . .Annex B-1
Time Share Public Offering Statement . . . . . . . . . .Annex C-1
Subscription of Weeks. . . . . . . . . . . . . . . . . .Annex D-1
Schedule of Weeks. . . . . . . . . . . . . . . . . . . .Annex E-1
Annual Dues Budget Information . . . . . . . . . . . . .Annex F-1
Artistic Renderings. . . . . . . . . . . . . . . . . . .Annex G-1
<PAGE>
<PAGE>
CHARTHOUSE VACATION OWNERSHIP
150
Class A-F Interests
___________
PROSPECTUS
___________
October 17, 1997
