<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
JULY 8, 1997
--------------------------------------------------
Date of Report--Date of Earliest Event Reported)
THOUSAND TRAILS, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-19743 75-2138671
- ----------------------------- -------------- --------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2711 LBJ FREEWAY, SUITE 200, DALLAS, TEXAS 75234
---------------------------------------------------
(Address of Principal Executive Offices)
(972) 243-2228
---------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
EXHIBIT INDEX ON PAGE 5.
<PAGE>
ITEM 5. OTHER EVENTS
On June 25, 1997, Thousand Trails, Inc., a Delaware corporation, (the
"Company") accepted for purchase $13.4 million principal amount of its Senior
Subordinated Pay-In-Kind Notes Due 2003 ("PIK Notes"), tendered to it in its
Dutch auction tender offer ("Offer"). The Company funded the Offer through an
amendment to its loan and security agreement (the "Loan Agreement") with
Foothill Capital Corporation ("Foothill").
PURCHASE OF PIK NOTES
- ---------------------
Pursuant to the Offer, which commenced on May 20, 1997, a registered holder
of PIK Notes could tender its PIK Notes at a range of $800 per $1,000 of
principal amount to $900 per $1,000 of principal amount, plus a percentage of
accrued interest equal to the percentage of principal at which such PIK Notes
were tendered. A total of $32.5 million principal amount of PIK Notes were
tendered in the Offer. Of these, the Company purchased $13.4 million principal
amount, at an average price of $897 per $1000 principal amount or an aggregate
price of $12 million, plus $640,000 for accrued interest. Immediately after the
purchase, $29.2 million aggregate principal amount of PIK Notes were
outstanding. To purchase the PIK Notes, the Company borrowed $12,640,000 under
the Loan Agreement. Immediately after the purchase, $13,179,142 principal
amount was outstanding under the Loan Agreement.
LOAN AGREEMENT AMENDMENT
- ------------------------
In order to permit the Company to make the Offer, the Company and Foothill
entered into an amendment to the Loan Agreement. In addition to permitting the
purchases in the Offer, the amendment, among other things, decreased the maximum
availability under the revolving portion of the Loan Agreement from
approximately $23 million to $20 million and decreases the interest rate payable
thereunder from prime plus 2 3/4% per annum to prime plus 1 1/2% per annum.
Certain other fees were also reduced or eliminated; however, an additional one-
time fee of 3/4 of 1% of the amount funded to purchase principal of the PIK
Notes ($90,000) was required and has been paid. The term of the Loan Agreement
continues to expire on July 16, 1999, and the indebtedness thereunder continues
to be secured by substantially all of the assets of the Company and its
subsidiaries other than certain excluded assets.
2
<PAGE>
ITEM 7. EXHIBITS
EXHIBIT NO. DESCRIPTION
10.1 First Amendment to the Loan Agreement, dated as of May 16,
1997, between Thousand Trails, Inc. and Foothill Capital
Corporation.
99.1 Offer to Purchase for Cash Senior Subordinated Pay-In-Kind
Notes Due 2003 of Thousand Trails, Inc., dated as of May 20,
1997, by Thousand Trails, Inc.
99.2 Press release issued by Thousand Trails, Inc. on June 24, 1997.
[SIGNATURE ON THE NEXT PAGE]
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 8, 1997
THOUSAND TRAILS, INC.
By: /s/ Walter B. Jaccard
--------------------------
Walter B. Jaccard
Vice President
4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10.1 First Amendment to the Loan Agreement,
dated as of May 16, 1997, between
Thousand Trails, Inc. and Foothill
Capital Corporation.
99.1 Offer to Purchase for Cash Senior
Subordinated Pay-In-Kind Notes Due 2003
of Thousand Trails, Inc., dated as of
May 20, 1997, by Thousand Trails, Inc.
99.2 Press release issued by Thousand
Trails, Inc. on June 24, 1997.
5
<PAGE>
EXHIBIT 10.1
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
AND PLEDGE AND SECURITY AGREEMENT
---------------------------------
This First Amendment to Loan and Security Agreement and Pledge and Security
Agreement ("Amendment") is entered into as of May 16, 1997, by and among
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), on the one
hand, and NATIONAL AMERICAN CORPORATION, a Nevada corporation ("National
American"), THOUSAND TRAILS, INC., a Delaware corporation, f/k/a USTrails, Inc.,
a Nevada corporation, and New Thousand Trails, Inc., a Delaware corporation
("Thousand Trails"), and the other party borrowers signatory hereto (each,
together with National American and Thousand Trails, individually a "Borrower"
and collectively, jointly and severally, "Borrowers"),on the other hand, in
light of the following:
R E C I T A L S
---------------
FACT ONE: Borrowers, or their predecessors in interest, one of which,
USTRAILS INC., a Nevada corporation ("USTrails") and Foothill have previously
entered into that certain Loan and Security Agreement, dated as of July 10, 1996
(the "Loan Agreement") and that certain Pledge and Security Agreement dated as
of July 10, 1996 ("Pledge Agreement").
FACT TWO: Pursuant to the terms of that certain Agreement and Plan of
Merger, dated as of October 1, 1996, by and between USTrails and New Thousand
Trails (the "Merger Agreement"), USTrails merged with and into New Thousand
Trails, with New Thousand Trails emerging as the surviving corporation.
FACT THREE: New Thousand Trails filed a Restated Certificate of
Incorporation whereby it changed its name to Thousand Trails, Inc..
FACT FOUR: Since the execution of the Loan Agreement and the Pledge
Agreement, one of Borrowers created an additional subsidiary to conduct a
portion of Borrowers' business operations, and that new entity shall become a
borrower hereunder.
FACT FIVE: Borrowers and Foothill desire to amend the Loan Agreement and
the Pledge Agreement to confirm the name changes and mergers and to otherwise
amend other provisions in the Loan Agreement and the Pledge Agreement for and on
the conditions herein.
A G R E E M E N T
-----------------
NOW, THEREFORE, Borrowers and Foothill hereby amend and supplement the Loan
Agreement and Pledge Agreement as follows:
DEFINITIONS. All initially capitalized terms used in this Amendment shall
-----------
have the meanings given to them in the Loan Agreement unless specifically
defined herein.
<PAGE>
AMENDMENT. All references in the Loan Agreement, the Pledge Agreement, and
---------
the Loan Documents to "USTRAILS, INC., a Nevada corporation", shall be amended
as of the date hereof to refer to Thousand Trails, Inc., a Delaware corporation.
The definition of Borrower in the Loan Agreement shall be amended to
include COAST FINANCIAL SERVICES, INC., a Delaware corporation.
Section 1.1 of the Loan Agreement shall be amended to include the following
new definition:
""Amendment Advances" means a single advance or multiple advances of up to
------------------
Twelve Million Dollars ($12,000,000) to be made to Borrower pursuant to the
terms hereof to permit it to pay the principal portion of the cost of
repurchasing some or all of its PIK notes at a cost not to exceed par."
Section 1.1 of the Loan Agreement shall be further amended to include the
following new definition:
"Non-Revolving Portion" means the sum of Six Million Five Hundred Sixty-
---------------------
Five Thousand Dollars ($6,565,000) representing a portion of the advances made
pursuant to Section 3.1, which such sum is non-revolving and remains outstanding
until all of the Obligations are indefeasibly paid in full: The Non Revolving
Portion is evidenced by the Term Note."
Section 1.1 of the Loan Agreement shall be further amended by deleting the
definition of Revolving Maximum Amount and substituting the following in its
place and stead:
"Revolving Maximum Amount" means (a) Twenty Million Dollars ($20,000,000),
------------------------
which such amount is permanently reduced to lower amounts by the sum of: (i)
commencing on June 1, 1997, and on the first day of each and every month
thereafter, $150,000; and (ii) the greater of, (y) the sum of (1) an amount
equal to the aggregate net cash proceeds of all sales of Collateral pursuant to
Section 5.4 (other than the last paragraph thereof), or as otherwise approved by
Foothill, which occur after May 17, 1997; plus (2) 100% of Account collections,
once the Term Note has been fully secured by cash; or (z) the amount set forth
below opposite the applicable date of reduction:
<TABLE>
<CAPTION>
<S> <C>
On or after December 31, 1997 $ 3,750,000
On or after June 30, 1998 $ 7,500,000
On or after December 31, 1998 $11,250,000
On or after June 30, 1999 $15,000,000
</TABLE>
Section 3.1(a) of the Loan Agreement is amended by adding the following
sentence at the end thereof: "In addition to making the Amendment Advances, in
accordance with the terms hereof, Foothill shall also make advances in an amount
which in the aggregate does not exceed
2
<PAGE>
Seven Hundred Fifty Thousand Dollars ($750,000), to permit Borrower to pay the
accrued and unpaid interest on the PIK notes which it repurchases at the time of
repurchase."
Section 3.1(b) of the Loan Agreement is amended by deleting the reference
to Thirty Five Million Dollars ($35,000,000) and substituting in its place and
stead the number Twenty-Six Million Five Hundred Sixty-Five Thousand Dollars
($26,565,000).
Section 3.1(b) of the Loan Agreement is further amended by adding the
following sentence at the end thereof: "Until such time as the Obligations have
been indefeasibly paid in full, the Non-Revolving Portion shall remain
outstanding during the term of the Loan Agreement."
The parenthetical clause in Section 3.3(c) of the Loan Agreement which
reads as follows: "(and shall earn interest thereon at the rate or rates paid
by Norwest Bank Minnesota, national association, from time to time on its
taxable money market fund)" is deleted in its entirety and the following
substituted in its place and stead:
"(and shall earn interest thereon at the rate set forth in Section 3.5
(a))".
Section 3.3(c) of the Loan Agreement is further amended by adding the
following sentence at the end thereof:
"As of May 15, 1997, Foothill was holding the sum of Five Million Five
Hundred Seventeen Thousand Three Hundred Thirty-Nine Dollars and 20/100 Cents
($5,517,339.20) pursuant to this Section 3.3(c)."
Section 3.5(a) of the Loan Agreement is deleted in its entirety and the
following substituted in its place and stead:
1. " Interest Rate. All Obligations shall bear interest, on the actual
Daily Balance, at a per annum rate of one and one half (1 1\2) percentage points
above the Reference Rate."
Section 3.5(b) of the Loan Agreement is deleted in its entirety and the
following substituted in its place and stead:
"(b) Default Rate. All Obligations shall bear interest, from and after
the occurrence and during the continuance of an Event of Default, at a per annum
rate equal to four and one half (4 1\2) percentage points above the Reference
Rate."
Section 3.8(e) of the Loan Agreement is deleted in its entirety.
Section 3.8(h) of the Loan Agreement is deleted in its entirety and the
following substituted in its place and stead:
3
<PAGE>
"(h) Servicing Fee. On the first day of each month during the term of
this Agreement, and thereafter so long as any Obligations are outstanding, a
servicing fee in an amount equal to Six Thousand Dollars ($6,000) per month."
Section 3.8 of the Loan Agreement is further amended by adding a new
section 3.8(i) that reads as follows:
"(i) Amendment Advance Fee. A funding fee equal to three-quarters of one
percent (.75%) of each Amendment Advance, which such sum shall be added to each
Amendment Advance (thereby possibly exceeding the Twelve Million Dollar
($12,000,000) limitation set forth in the Amendment Advance) and become a
portion of the Obligations."
The last sentence of Section 4.5 of the Loan Agreement is deleted in its
entirety.
There shall be added a new Section 4.8 to the Loan Agreement which reads as
follows:
"4.8. Conditions Precedent to the Amendment Advances to Borrower. The
----------------------------------------------------------
obligation of Foothill to make the Amendment Advances upon the request of
Borrower is subject to the fulfillment, to the satisfaction of Foothill and its
counsel, of each of the following conditions on or before the Closing Date:
The Closing Date shall occur on or before August 1, 1997;
Foothill shall have received amendments to the Mortgages, duly executed and
in recordable form, in form reasonably satisfactory to Foothill and its counsel;
The Amendments to Mortgages shall have been duly recorded in each of the
appropriate jurisdictions, or Foothill shall have received assurances from the
Title Company, including gap protection, with respect to any post funding
recordation of same;
Foothill shall have received assurances from Title Company regarding the
post-funding issuance of title insurance policies and or endorsements in form
reasonably satisfactory to Foothill and its counsel;
All other documents and legal matters in connection with the transactions
contemplated by this Amendment shall have been delivered or executed and shall
be in form and substance reasonably satisfactory to Foothill and its counsel.";
and
All Amendment Advances must be made on or before December 31, 1997 and to
the extent that there otherwise would be availability for such an advance; no
such advances will be made after December 31, 1997.
The provisions of Sections 8.4, 8.7, 8.8, 8.14 and 9.12 of the Loan
Agreement are waived to permit the repurchase of the PIK Notes on the terms
contemplated herein. This waiver is a one time waiver only, and Foothill shall
have to right to require future strict compliance with the provisions thereof.
4
<PAGE>
Schedule 5.4 to the Loan Agreement shall be deleted in its entirety and
replaced with Schedule 5.4 (5/97) attached hereto and incorporated by reference
hereby.
Exhibit A to the Pledge Agreement shall be deleted in its entirety and
replaced with Schedule A (5/97) attached hereto and incorporated by reference
hereby.
REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Foothill that
------------------------------
all of Borrower's representations and warranties set forth in the Loan Agreement
and the Pledge Agreement are true, complete and accurate in all material
respects as of the date hereof (except to the extent that such representations
and warranties relate solely to an earlier date).
NO DEFAULTS. Borrower hereby affirms to Foothill that no Event of Default
-----------
has occurred and is continuing as of the date hereof.
CONDITION PRECEDENT. The effectiveness of this Amendment is expressly
-------------------
conditioned upon receipt by Foothill of an executed copy of this Amendment.
LIMITED EFFECT. In the event of a conflict between the terms and
--------------
provisions of this Amendment and the terms and provisions of the Loan Agreement
and the Pledge Agreement, the terms and provisions of this Amendment shall
govern. In all other respects, the Loan Agreement and Pledge Agreement, as
amended and supplemented hereby, shall remain in full force and effect.
COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number
---------------------------
of counterparts and by different parties on separate counterparts, each of which
when so executed and delivered shall be deemed to be an original. All such
counterparts, taken together, shall constitute but one and the same Amendment.
This Amendment shall become effective upon the execution of a counterpart of
this Amendment by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first set forth above.
"FOOTHILL"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
-----------------------------------------
Title:
--------------------------------------
"BORROWERS"
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By:
-----------------------------------------
Title:
--------------------------------------
5
<PAGE>
THOUSAND TRAILS, INC.,
a Delaware corporation, f/k/a USTrails, Inc., a
Nevada corporation, and New Thousand Trails, Inc.,
a Delaware corporation
By:
-----------------------------------------
Title:
--------------------------------------
THOUSAND TRAILS (CANADA) INC.,
a British Columbian corporation
By:
-----------------------------------------
Title:
--------------------------------------
TT OFFSHORE, LTD.,
a Virginia corporation
By:
-----------------------------------------
Title:
--------------------------------------
BEECH MOUNTAIN LAKES CORPORATION,
a Pennsylvania corporation
By:
-----------------------------------------
Title:
--------------------------------------
CAROLINA LANDING CORPORATION,
a South Carolina corporation
By:
-----------------------------------------
Title:
--------------------------------------
CARRIAGE MANOR CORPORATION,
a North Carolina corporation
By:
-----------------------------------------
Title:
--------------------------------------
6
<PAGE>
CHEROKEE LANDING CORPORATION,
a Tennessee corporation
By:
-----------------------------------------
Title:
--------------------------------------
CHIEF CREEK CORPORATION,
a Tennessee corporation
By:
-----------------------------------------
Title:
--------------------------------------
COAST FINANCIAL SERVICES, INC.,
a Delaware corporation
By:
-----------------------------------------
Title:
--------------------------------------
DIXIE RESORT CORPORATION,
a Mississippi corporation
By:
-----------------------------------------
Title:
--------------------------------------
FOXWOOD CORPORATION,
a South Carolina corporation
By:
-----------------------------------------
Title:
--------------------------------------
GL LAND DEVELOPMENT CORPORATION,
an Oklahoma corporation
By:
-----------------------------------------
Title:
--------------------------------------
7
<PAGE>
LAKE ROYALE CORPORATION,
a North Carolina corporation
By:
-----------------------------------------
Title:
--------------------------------------
LAKE TANSI VILLAGE, INC.,
a Tennessee corporation
By:
-----------------------------------------
Title:
--------------------------------------
LML RESORT CORPORATION,
an Alabama corporation
By:
-----------------------------------------
Title:
--------------------------------------
NATCHEZ TRACE WILDERNESS PRESERVE CORPORATION,
a Tennessee corporation
By:
-----------------------------------------
Title:
--------------------------------------
QUAIL HOLLOW PLANTATION CORPORATION,
a Tennessee corporation
By:
-----------------------------------------
Title:
--------------------------------------
QUAIL HOLLOW VILLAGE, INC.,
a Pennsylvania corporation
By:
-----------------------------------------
Title:
--------------------------------------
8
<PAGE>
RECREATION LAND CORPORATION,
a Pennsylvania corporation
By:
-----------------------------------------
Title:
--------------------------------------
RECREATION PROPERTIES, INC.,
a Mississippi corporation
By:
-----------------------------------------
Title:
--------------------------------------
RESORT LAND CORPORATION,
an Arkansas corporation
By:
-----------------------------------------
Title:
--------------------------------------
RESORT PARKS INTERNATIONAL, INC., f/k/a Shorewood
Corporation,
a Georgia corporation
By:
-----------------------------------------
Title:
--------------------------------------
TANSI RESORT, INC.,
a Tennessee corporation
By:
-----------------------------------------
Title:
--------------------------------------
THE KINSTON CORPORATION,
a South Carolina corporation
By:
-----------------------------------------
Title:
--------------------------------------
9
<PAGE>
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By:
-----------------------------------------
Title:
--------------------------------------
WESTERN FUN CORPORATION,
a Texas corporation
By:
-----------------------------------------
Title:
--------------------------------------
WESTWIND MANOR CORPORATION,
a Texas corporation
By:
-----------------------------------------
Title:
--------------------------------------
WOLF RUN MANOR CORPORATION,
a Pennsylvania corporation
By:
-----------------------------------------
Title:
--------------------------------------
UST WILDERNESS MANAGEMENT CORPORATION,
a Nevada corporation
By:
-----------------------------------------
Title:
--------------------------------------
10
<PAGE>
SCHEDULE 5.4 (5/97)
SCHEDULE OF REAL PROPERTY TO BE SOLD
<TABLE>
<CAPTION>
MINIMUM NET
-----------
ASSET PROCEEDS OF SALE
- ------------------------------------------------------------------------------------
<S> <C>
NON-SYSTEM CAMPGROUNDS*
Anza Borrego $ 500,000
SYSTEM CAMPGROUNDS*
Bay Landing $1,328,000
Black Point 1,576,000
Carolina Landing 768,000
Cherokee Landing 456,000
Chestnut Lake 560,000
Colorado River 464,000
Fox River 1,210,000
Galveston 384,000
Indian Point 904,000
Jefferson Lake 880,000
Kenisee Lake 454,400
Natchez Trace **
Wilmington 584,000
</TABLE>
*80% of values from current appraisals (except for Anza Borrego)
**appraised value from new appraisal to be obtained, less expenses of sale, with
minimum net sale proceeds to be approved by Foothill
<TABLE>
<CAPTION>
EXCESS ACREAGE ASSOCIATED WITH CAMPGROUNDS
<S> <C>
Palm Springs Acreage* $1,800,000
Lake of the Springs Acreage 176,000
Mount Vernon Acreage 320,000
Wilderness Lakes Acreage 460,000
*Less unpaid balance of Taylor/Garcia mortgage
RESORT ASSETS
ALPINE BAY
Whole unit condos (2) $ 28,000 each
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
BEECH MOUNTAIN
<S> <C>
Acreage (approx. 1,600 acres) $ 800,000
Common amenities to be conveyed to property owners association
Lake -0-
Clubhouse -0-
Campground -0-
Guardhouse -0-
Laundry Facility -0-
FOXWOOD
Acreage (approximately 19 acres) $ 12,258
Old sales office 60,000
HICKORY HILLS
Rental townhomes $ 400,000
Existing units (6)
Sites for future development of 28 units
LAKE ROYALE
Whole unit condos (6) $ 28,000 each
LAKE TANSI
Laundromat $ 10,000
Acreage (approx. 3 acres) $ 3,000
SOUTH JETTY
Sales Office $ 420,000
TREASURE LAKE
Whole unit condos (3) $ 32,000 each
Timeshare check-in facility 100,000
Acreage (approx. 100 acres) 40,000
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
WESTWIND MANOR
<S> <C>
Whole unit condos (7) $ 28,000 each
MISCELLANEOUS PROPERTIES
- ------------------------
Acreage, Jefferson County, WA $ 20,000
One lot, Pierce County, WA -0-
One lot, Mason County, WA -0-
One lot, Chelan County, WA -0-
One lot, Whitman County, WA -0-
17 lots, Smoketree, OK -0-
One lot, Point Clear, MS -0-
24 lots, Briar Cliff, AK -0-
38 lots, Lake Wynoka, OH -0-
</TABLE>
13
<PAGE>
EXHIBIT A (5/97)
STOCK
<TABLE>
<CAPTION>
===============================================================================
STOCK NO.
CERTIFICATE OF
NAME OF COMPANY NO. SHARES STOCKHOLDER
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
I. Resort Parks 2 5 Thousand Trails, Inc.,
International, Inc. f/k/a f/k/a/ USTrails and New
Shorewood Corporation Thousand Trails
II. National American 4 1,000 Thousand Trails, Inc.,
Corporation f/k/a/ Naco Finance
Corporation, USTrails and
New Thousand Trails
III. UST Wilderness 1 100,000 Thousand Trails, Inc.,
Management f/k/a/ USTrails and New
Thousand Trails
IV. Thousand Trails 2 1 Thousand Trails, Inc.,
(Canada), Inc. f/k/a/ Thousand Trails
Inc., USTrails, and New
Thousand Trails
V. TT Offshore, Ltd. 4 4,000 Thousand Trails, Inc.,
f/k/a/ Thousand Trails
Inc., USTrails, and New
Thousand Trails
VI. TT Offshore, Ltd. 3 6,000 Thousand Trails, Inc.,
f/k/a/ Thousand Trails
Inc., USTrails, and New
Thousand Trails
VII. Coast Financial 1 1,000 Thousand Trails, Inc.
Services, Inc.
================================================================================
</TABLE>
14
<PAGE>
EXHIBIT 99.1
OFFER TO PURCHASE FOR CASH
SENIOR SUBORDINATED PAY-IN-KIND NOTES
DUE 2003 OF THOUSAND TRAILS, INC.
(SUCCESSOR BY MERGER TO USTRAILS, INC.)
AT FROM $800 TO $900, PLUS FROM 80% TO 90% OF ACCRUED INTEREST,
PER $1,000 OF PRINCIPAL AMOUNT
PURSUANT TO THE DUTCH AUCTION PROCEDURES DESCRIBED HEREIN
(UP TO $12,000,000 AGGREGATE PURCHASE PRICE FOR PRINCIPAL)
BY
THOUSAND TRAILS, INC.
- --------------------------------------------------------------------------------
| THIS OFFER WILL TERMINATE AND THE WITHDRAWAL RIGHTS WITH |
| RESPECT HERETO WILL EXPIRE AT 5:00 P.M., EASTERN TIME, |
| ON WEDNESDAY, JUNE 18, 1997, UNLESS EXTENDED. |
- --------------------------------------------------------------------------------
Thousand Trails, Inc., a Delaware corporation and successor by merger to
USTrails Inc. (the "Company"), hereby offers to purchase its Senior Subordinated
Pay-In-Kind Notes Due 2003 (the "Notes") tendered within the Dutch Auction Price
Range (as hereinafter defined) to the extent necessary for the Company to spend
$12,000,000 for principal, plus an amount equal to a portion of accrued interest
on the principal purchased (the "Aggregate Purchase Price"). This offer (this
"Offer") is subject to the terms and conditions set forth herein and in the
Letter of Transmittal enclosed herewith (the "Letter of Transmittal").
A registered holder of Notes (a "Noteholder") may tender its Notes at from
$800 per $1,000 of principal amount to $900 per $1,000 of principal amount, in
integral multiples of $5 of principal amount, plus a percentage of accrued
interest equal to the percentage of principal at which such Notes are tendered
(the "Dutch Auction Price Range"). The Company will begin purchasing the Notes
tendered at the lowest price in the Dutch Auction Price Range and proceed to
each succeedingly higher price within such range until it spends the Aggregate
Purchase Price. The Company does not intend to purchase in this Offer any Notes
tendered at a price above the price within the Dutch Auction Price Range which
would result in the Company's spending only the Aggregate Purchase Price.
Moreover, the Company intends to prorate the purchase of any Notes tendered at
such price if necessary to spend only the Aggregate Purchase Price. Tendering
Noteholders at lower prices will only receive such lower price, but will not be
subject to proration.
Any Noteholder desiring to tender all or some of its Notes should complete
and sign the Letter of Transmittal in accordance with the instructions herein
and therein, and then deliver it along with the certificates for such Notes and
any other required documents to Fleet National Bank (the "Depositary") at one of
the addresses set forth on the back cover of this Offer to Purchase (this "Offer
to Purchase"). If a Noteholder cannot comply with such procedures, it may tender
its Notes through the guaranteed delivery procedures set forth herein. A holder
of Notes registered in the name of a bank, broker, custodian, fiduciary,
nominee, securities dealer, trust company, or other person must contact such
person if it desires to tender its Notes.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
May 20, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SUMMARY............................................................... 1
THE COMPANY........................................................... 6
General.......................................................... 6
Current Business Strategy........................................ 6
Campground Operations............................................ 6
Resort Operations................................................ 9
Asset Sales...................................................... 9
Contracts Receivable............................................. 9
FINANCIAL INFORMATION................................................. 10
Selected Financial AND OTHER Data..................................... 11
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES...................... 12
THE NOTES............................................................. 13
General.......................................................... 13
Principal, Maturity and Interest................................. 13
Subsidiary Guarantee............................................. 14
Ranking.......................................................... 14
Security......................................................... 15
Optional Redemption.............................................. 16
Change of Control Repurchase Offer............................... 16
Trading.......................................................... 16
Covenants........................................................ 16
Events of Default and Remedies................................... 16
Remedies with Respect to Collateral.............................. 17
Modification of the Indenture and Collateral Documents........... 18
Requirements for Certain Actions................................. 18
THE TENDER OFFER...................................................... 18
Terms of this Offer.............................................. 18
Procedure for Tendering Notes.................................... 20
Proration........................................................ 21
Payment for Accepted Notes....................................... 21
Withdrawal Rights................................................ 22
Retirement of the Notes Purchased................................ 23
i
<PAGE>
Page
----
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................. 23
Sale of Notes Pursuant to This Offer............................. 23
Effect of This Offer Upon the Company............................ 24
Non-Tendering Noteholders........................................ 24
Backup Withholding............................................... 24
FUNDING FOR THIS OFFER................................................ 25
CERTAIN TRANSACTIONS.................................................. 25
Possible Participation by Affiliates and Related Persons......... 25
Plans or Proposals............................................... 26
Purchases and Sales of Notes..................................... 26
Arrangements, Contracts, Relationships, or Understandings........ 26
LEGAL MATTERS......................................................... 27
General.......................................................... 27
Federal Reserve Board Regulations................................ 27
EXPENSES.............................................................. 27
AVAILABLE INFORMATION................................................. 27
ADDITIONAL INFORMATION................................................ 27
APPENDIX I--DEFINED TERMS............................................. I-1
ii
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SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information and financial statements appearing elsewhere herein.
Unless the context otherwise requires, the term "the Company" refers to Thousand
Trails, Inc., a Delaware corporation, and its predecessors and successors.
THE COMPANY
The Company and its subsidiaries own and operate a system of 58 membership-
based campgrounds located in 19 states and British Columbia, Canada, serving
123,000 members at March 31, 1997. Through a subsidiary, the Company also
provides a reciprocal use program for members of approximately 300 recreational
facilities.
The Company's operations in the campground business commenced on June 30,
1991, when the Company acquired 100% of the capital stock of National American
Corporation (collectively with its subsidiaries, "NACO," unless the context
otherwise requires) and 69% of the capital stock of Thousand Trails, Inc., a
Washington corporation (collectively with its subsidiaries, "TTI," unless
the context otherwise requires), in connection with the reorganization of the
Company in a proceeding under Chapter 11 of the Bankruptcy Code. The Company
subsequently increased its ownership in TTI to 80% through a tender offer and
acquired the remaining 20% of the capital stock of TTI in a merger. In July
1996, TTI was merged into the Company. Prior to the acquisition of NACO and
TTI, the Company purchased contracts receivable generated principally by NACO
and TTI from the sale of campground memberships and resort interests on the
installment basis.
THE NOTES
Aggregate Principal Amount... $42,590,862 principal amount of Notes currently
outstanding, including (i) $40,218,000 principal
amount issued in the restructuring of the
Company's 12% Secured Notes Due 1998 (the "Secured
Notes") in July 1996 (the "Restructuring") and
(ii) $2,372,862 principal amount issued to pay
interest in January 1997. Additional Notes may be
from time to time issued under the pay-in-kind-
feature of the Notes.
Stated Maturity.............. July 15, 2003.
Interest..................... 17 1/2% per annum through January 15, 1998 and 12%
per annum thereafter. Interest at 5 1/2% per annum
through January 15, 1998 was prepaid in cash on
the date of issuance of the Notes. All remaining
interest has been or will be payable in cash or
additional Notes, at the Company's option, through
July 15, 2000 and in cash thereafter. The
Company's loan and security agreement (the "Loan
Agreement") with Foothill Capital Corporation
("Foothill") requires that interest (other than
the prepaid interest) be paid only in kind while
the indebtedness under the Loan Agreement is
outstanding.
Interest Payment Dates....... January 15 and July 15 of each year.
Subsidiary Guarantee......... The Company's obligations under the Notes are
unconditionally guaranteed, jointly and severally,
by all subsidiaries of the Company
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(other than an immaterial utility subsidiary),
each of which is, directly or indirectly, a
wholly-owned subsidiary of the Company, and all
future wholly-owned subsidiaries.
Ranking...................... The Notes and the Subsidiary Guarantee are
subordinated to the indebtedness under the Loan
Agreement (and certain refinancings and refundings
thereof) and rank pari passu with all existing and
future unsecured indebtedness of the Company and
its subsidiaries and senior to any subordinated
indebtedness of the Company and its subsidiaries.
The Indenture for the Notes permits the Company
and its subsidiaries to incur the indebtedness
under the Loan Agreement and certain additional
secured indebtedness. At March 31, 1997, the
Company and its subsidiaries had $5.9 million in
principal amount of such secured indebtedness
outstanding, including $5.3 million in principal
amount of indebtedness under the Loan Agreement.
However, $18.9 million principal amount of such
secured indebtedness would have been outstanding
at such date after giving effect to additional
borrowings under the Loan Agreement to finance the
purchase of Notes pursuant to this Offer and the
payment of related costs and assuming the
expenditure of the full Aggregate Purchase Price.
Security..................... The Notes and the Subsidiary Guarantee are
currently unsecured. Upon repayment in full of the
indebtedness under the Loan Agreement, the Notes
and the Subsidiary Guarantee will be secured by
the same assets as then secure the indebtedness
under the Loan Agreement, other than cash and cash
equivalents and other assets required to secure
any refinancing or replacement of a portion of the
indebtedness under the Loan Agreement for working
capital purposes. The indebtedness under the Loan
Agreement is presently secured by substantially
all of the assets of the Company and its
subsidiaries other than certain excluded assets.
The Indenture limits a refinancing or replacement
of the indebtedness under the Loan Agreement for
working capital purposes to $10 million in
principal amount.
Optional Redemption.......... The Notes are redeemable at the option of the
Company, in whole or in part, at any time, at 100%
of the principal amount thereof, plus accrued and
unpaid interest to the redemption date. The
Company is not required to make any sinking fund
payments on the Notes.
Change of Control............ In the event of a Change of Control (as defined),
each holder of Notes will have the right, at such
holder's option, subject to the terms and
conditions of the Indenture, to require the
Company to repurchase all or any part of such
holder's Notes at a cash price equal to 101% of
the principal amount thereof, plus accrued and
unpaid interest to the purchase date.
Certain Covenants............ The Indenture restricts, among other things, (i)
the incurrence of additional indebtedness, (ii)
the incurrence of liens, (iii) the payment of
dividends and distributions, (iv) the making of
loans and investments, (v) transactions with
affiliates, (vi) agreements restricting the
ability of certain of the Company's subsidiaries
to pay dividends or make other distributions on
their capital stock, (vii) the Company's ability
to conduct other businesses, (viii) the sale or
other disposition of assets, and (ix) certain
mergers, consolidations and transfers of all or
substantially all of the assets of the Company and
its subsidiaries.
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<PAGE>
THE TENDER OFFER
The Company is seeking to acquire pursuant to this Offer as many Notes as
possible for a total consideration of $12,000,000, plus a portion of accrued
interest on the Notes purchased. The Company will conduct this Offer as a
"Dutch auction." A Noteholder desiring to tender some or all of its Notes must
indicate on its Letter of Transmittal the price within the Dutch Auction Price
Range at which it is tendering such Notes. Indication of such price will be
deemed to indicate a percentage of accrued interest to be paid equal to the
percentage of principal at which such Notes are tendered.
The Company will accept and pay for the Notes tendered at the lowest price
in the Dutch Auction Price Range and each succeedingly higher price until it
spends the Aggregate Purchase Price. The Company does not intend in this Offer
to purchase any Notes tendered at a price above the price within the Dutch
Auction Price Range which would result in the Company's spending only the
Aggregate Purchase Price. Moreover, the Company intends to prorate the purchase
of any Notes tendered at such price if necessary to spend only the Aggregate
Purchase Price.
If the Company does not receive sufficient tenders with respect to this
Offer to spend the entire Aggregate Purchase Price, it may seek thereafter to
purchase additional Notes at prices believed favorable to the Company, in open
market transactions or privately negotiated transactions, by tender offer or
otherwise.
Tender Offer Period......... Any Noteholder may tender some or all of its Notes
to the Depositary during the period commencing on
the date hereof and ending at 5:00 p.m., Eastern
Time, on Wednesday, June 18, 1997 (the "Expiration
Date"). The Company, however, may extend the
Expiration Date on a daily basis or otherwise, in
which event the term "Expiration Date" will mean
the time and date to which the Company has
extended this Offer. See "The Tender Offer--Terms
of this Offer."
Dutch Auction Price Range... On the Letter of Transmittal, a tendering
Noteholder must check the box beside the price per
$1,000 of principal amount of Notes at which it
tenders its Notes. UNLESS OTHERWISE NOTED THEREON,
ALL NOTES WILL BE DEEMED TENDERED AT THE PRICE
INDICATED. The price at which a Noteholder may
tender its Notes will be from $800 per $1,000
principal amount to $900 per $1,000 principal
amount, in integral multiples of $5 of principal
amount, plus a percentage of accrued interest
equal to the percentage of principal at which such
notes are tendered. IF A NOTEHOLDER DOES NOT CHECK
A BOX ON THE LETTER OF TRANSMITTAL INDICATING A
PRICE AT WHICH IT IS TENDERING ITS NOTES, IT SHALL
BE DEEMED TO HAVE TENDERED ALL OF SUCH NOTES AT
$800 PER $1,000 OF PRINCIPAL AMOUNT, PLUS 80% OF
ACCRUED INTEREST. See "The Tender Offer--Terms of
this Offer."
Aggregate Purchase Price.... $12,000,000, plus a portion of accrued interest on
the principal purchased.
Proration................... If Noteholders tender a greater principal amount
of Notes than necessary for the Company to spend
the Aggregate Purchase Price, the Company will
purchase the Notes tendered at the lowest price in
the Dutch Auction Price Range and at each
succeedingly higher price until it spends the
Aggregate Purchase Price. If Noteholders tender
more Notes at the highest applicable price than
necessary for the Company to spend the Aggregate
Purchase Price, the Company intends to request the
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<PAGE>
Depositary to prorate the purchase of the Notes
tendered at such price in proportion to the
aggregate principal amount of the Notes tendered
at such price. Tendering Noteholders at lower
prices will only receive such lower price, but
will not be subject to proration. The Depositary
will return any Notes not accepted as soon as
possible after determining which Notes the Company
has accepted. See "The Tender Offer--Proration."
Letter of Transmittal....... To effectuate a valid tender of Notes, the
Depositary must receive a properly completed
Letter of Transmittal with respect thereto. Only a
registered holder of Notes on the Note register or
a person registered as the holder of Notes on the
records of a Clearing Agency (as hereinafter
defined) that delivers an omnibus endorsement to
the Depositary may complete a Letter of
Transmittal. Such a person (referred to herein as
a Noteholder) must complete the Letter of
Transmittal in accordance with the instructions
contained herein and therein and deliver it along
with the certificates for such Notes and any other
required documents to the Depositary on or before
the Expiration Date. A person that is registered
as the holder of Notes on the records of a
Clearing Agency should ensure that such Clearing
Agency delivers the physical certificates
representing such Notes to the Depositary on or
before the Expiration Date. A beneficial holder of
Notes that is not the registered holder thereof as
described above should instruct the bank, broker,
custodian, fiduciary, nominee, securities dealer,
trust company, or other person that is the
registered holder thereof to tender such Notes on
its behalf if such beneficial holder desires to
tender its Notes pursuant to this Offer. See "The
Tender Offer--Procedure for Tendering Notes."
Guaranteed Delivery......... If a Noteholder cannot deliver a Letter of
Transmittal and its Notes to the Depositary on or
before the Expiration Date, such Noteholder may
tender its Notes through an Eligible Institution
(as hereinafter defined) that guarantees such
Noteholder's delivery thereof. To effect such a
tender, the Eligible Institution must deliver a
Notice of Guaranteed Delivery (a "Notice of
Guaranteed Delivery") substantially in the form
enclosed herewith to the Depositary on or before
the Expiration Date. Within five business days
after delivery thereof, the Eligible Institution
must deliver to the Depositary a properly
completed Letter of Transmittal along with the
Note certificates to which it applies. See "The
Tender Offer--Procedure for Tendering Notes."
Federal Income Tax
Considerations........... A Noteholder who sells a Note to the Company
pursuant to this Offer will recognize gain or loss
in an amount equal to the difference between its
basis in such Note and the cash received upon such
sale, other than cash paid in respect of accrued
interest. Any gain that is not market discount
will constitute capital gain, if the Noteholder
held such Note as a capital asset. Any accrued
market discount that the Noteholder has not
previously elected to include in income will be
taxed as ordinary income. A Noteholder that has
elected to deduct bond premium may deduct any
unamortized bond premium on the sale of its Note
as an ordinary loss. See "Certain Federal Income
Tax Considerations."
Tax Withholding............. Unless the Depositary receives a properly
completed Substitute Form W-9 from a Noteholder,
the Depositary will withhold from the amounts
payable thereto pursuant to this Offer federal
income tax equal to 31% of such amount. For the
convenience of each Noteholder, a blank Substitute
Form W-9 that it can complete is part of the
Letter of
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<PAGE>
Transmittal. See "The Tender Offer--Payment for
Accepted Notes" and "Certain Federal Income Tax
Considerations--Backup Withholding."
Withdrawal of Tendered
Notes..................... A Noteholder may withdraw its tendered Notes at
any time prior to the Expiration Date. To
withdraw Notes, such Noteholder must deliver to
the Depositary a written notice of withdrawal.
See "The Tender Offer--Withdrawal Rights."
Delivery of Letter of
Transmittal and Note
Certificates.............. A Noteholder who desires to tender some or all of
its Notes pursuant to this Offer should deliver
its completed Letter of Transmittal along with its
Note certificates and other required documents to
the Depositary at one of the addresses set forth
below. Delivery of any and all documents to the
Depositary will be deemed to have occurred only
upon the Depositary's actual receipt thereof at
one of these addresses.
Address for Incoming U.S. Postal Mail:
Fleet National Bank
CT OP TO6A
Corporate Trust Operations
Attn: Reorganization
P.O. Box 5080
Hartford, CT 06102-5080
Telephone No. (860) 986-1271
Facsimile No. (860) 986-7908
Address for Incoming Express Mail:
Fleet National Bank
CT OP TO6A
Corporate Trust Operations
Attn: Reorganization
150 Windsor Street
Hartford, CT 06120
Telephone No. (860) 986-1271
Facsimile No. (860) 986-7908
Address for Hand Delivery in New York:
Fleet National Bank
c/o First Chicago Trust Company of New York
14 Wall Street, 8th Floor, Window 2
New York, NY 10015
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<PAGE>
THE COMPANY
GENERAL
The Company and its subsidiaries own and operate a system of 58 membership-
based campgrounds located in 19 states and British Columbia, Canada, serving
123,000 members as of March 31, 1997. Through a subsidiary, the Company also
provides a reciprocal use program for members of approximately 300 recreational
facilities.
CURRENT BUSINESS STRATEGY
The Company's current business strategy is to improve its campground
operations, stabilize its campground membership base, and determine the
appropriate level for its ongoing campground operations. Consistent with this
strategy, the Company intends to downsize its business by implementing cost
reduction measures while its membership base declines. These cost reduction
measures will likely include the closure and disposition of additional
campgrounds and decreases in general and administrative expenditures. At the
same time, the Company intends to expand its sales and marketing efforts with a
view to stopping the membership decline. The Company believes that the ultimate
size of its campground system and the amounts realized from future asset
dispositions will depend principally upon the degree to which the Company can
successfully implement this strategy.
CAMPGROUND OPERATIONS
Campgrounds. The Company and its subsidiaries own and operate a network of
58 membership-based campgrounds located in 19 states and British Columbia,
Canada. The Company owns and operates a network of 35 of these campgrounds under
the Thousand Trails logo, and NACO owns and operates a network of 23 of these
campgrounds under the NACO logo. The 58 campgrounds contain a total of
approximately 19,300 campsites.
Members using the campgrounds may bring their own recreational vehicles
("RVs"), tents or other sleeping equipment, or rent travel trailers or cabins
located at the campgrounds or visit for the day. As of March 31, 1997, there
were approximately 79,000 campground members in the Thousand Trails system and
44,000 campground members in the NACO system. However, approximately 33% of the
NACO campground members and approximately 50% of the Thousand Trails campground
members possess the right to use the campgrounds in both networks. The largest
percentage of campground members reside in California (approximately 37%). Large
numbers of campground members also reside in Florida, Oregon, Texas, and
Washington.
Memberships permit the member's family to use the campgrounds, but do not
convey an ownership interest in the Company or the campgrounds with the
exception of six campgrounds in which members have purchased undivided interests
in the campground. A member also does not possess the right to use a specific
campsite, trailer, or cabin, or the right to control further development or
operation of a campground.
Depending upon member usage, the campgrounds are open year-round or on a
seasonal basis. The campgrounds feature campsites with electrical, water, and
in some cases, sewer
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connections for RVs, restroom and shower facilities, rental trailers or cabins,
and other recreational amenities. At each campground, a manager and staff
provide security, maintenance, and recreational programs that vary by location.
The Company derives other campground revenue from renting trailers, cabins,
and sports equipment to members, selling food and other items to members from
convenience stores located at the campgrounds, and providing the members access
to laundry facilities and game machines. The Company also charges members a fee
for storing recreational vehicles and providing food service.
Membership Sales. Prior to April 1992, the Company sold new campground
memberships on an installment basis at sales prices up to $8,000. In April
1992, the Company suspended the sale of new campground memberships because its
sales program was operating at a loss and with negative cash flow. In the fall
of 1992, the Company began to assist campground members desiring to sell their
memberships in the secondary market. During fiscal 1994, as part of its focus
on ongoing revenues from campground operations, the Company determined that it
should increase its sales and marketing efforts in order to replenish its
campground membership base. As a result, in May 1994, the Company instituted a
new sales program under which it began selling new campground memberships on a
limited basis. In May 1995, the Company introduced new membership products, and
significantly increased its sales and marketing efforts for the summer of 1995.
The Company has focused its membership sales efforts primarily on guests
referred by existing members and RV dealers, whom management believes are more
likely to purchase memberships.
The new membership products offer the consumer a choice of membership
options ranging from the use of one campground to the entire system of
campgrounds with prices ranging from $695 to $2,995. In addition, the new
membership products offer a choice of annual dues levels ranging from $219 for
15 nights of use to $1,095 for 365 nights of use. The member is charged a
nightly fee for camping more days than are included in the dues option selected.
The Company does not finance sales with prices of less than $895. For sales
with prices of $895 and higher, the Company requires a down payment of at least
25% of the sales price and will finance the balance over a period of up to 12
months.
The Company has the capacity to sell approximately 67,000 additional new
campground memberships in the future, assuming the sale of ten memberships for
each existing campsite. Any downsizing of the Company's business would reduce
this capacity.
Dues. Campground members pay annual dues ranging from $60 to $1,095. The
annual dues collected from campground members constitute general revenue of the
Company. Although the Company uses the dues to fund its operating expenses,
including corporate expenses and the maintenance and operation of the
campgrounds, the membership agreements do not require the Company to use the
dues for any specific purpose.
The average annual dues paid by the Company's campground members were $335
for the year ended June 30, 1996. This same average was $329 and $315 for the
years ended June 30, 1995 and 1994, respectively. The increases resulted from
the Company's TTN Alliance Program,
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which was concluded on March 31, 1995, and the regular increase in dues
implemented by the Company each year in accordance with the terms of the
membership agreements. These regular annual increases averaged 2%, 4%, and 6%
per member for the years ended June 30, 1996, 1995, and 1994, respectively.
The membership agreements generally permit the Company to increase annually
the amount of each member's dues by either (i) the percentage increase in the
consumer price index ("CPI") or (ii) the greater of 10% or the percentage
increase in the CPI. The Company, however, may not increase the dues on existing
contracts of senior citizens and disabled members who notify the Company of
their age or disability and request that their dues be frozen. At the present
time, approximately 36% of the members have requested that their dues be frozen
because of their age or disability. The Company estimates that approximately 50%
of the campground members are senior citizens eligible to request that their
dues be frozen. The Company is unable to estimate when or if a significant
number of these members will request that their dues be frozen in the future.
Maintenance and Improvements. The Company's campgrounds require a
significant amount of maintenance, repairs, and improvements, which has been
deferred, in part, as a result of general cost-cutting measures. During fiscal
1996, the Company spent $4.0 million on major maintenance, repairs, and
improvements at the campgrounds. The Company anticipates that it will spend an
additional $4.2 million during fiscal 1997 on such maintenance, repairs, and
improvements.
Reciprocal Use. NACO members and holders of dual-system memberships, which
permit the member to use the campgrounds in both the NACO and Thousand Trails
systems, may join Resort Parks International ("RPI"). A wholly owned subsidiary
of the Company operates the RPI program, which offers a reciprocal program for
members of approximately 300 participating recreational facilities. Members of
these participating facilities pay a fee to RPI that entitles them to use any of
the participating facilities, subject to the limitation that they cannot use an
RPI facility located within 125 miles of their home facility. As of March 31,
1997, there were approximately 85,000 RPI members, of which approximately 61,000
were members of campgrounds that are not affiliated with the Company.
Campground Management. During fiscal 1994, Wilderness Management, a wholly
owned subsidiary of the Company, began to manage public campgrounds for the U.S.
Forest Service. As of March 31, 1997, Wilderness Management had entered into
management contracts covering 40 campgrounds containing a total of approximately
1,500 campsites. Pursuant to these contracts, the Company incurs the expenses
of operating the campgrounds and receives the related revenues, net of a fee
paid to the Forest Service.
RESORT OPERATIONS
Over the past several years, NACO has been selling the assets it owns at
eight resorts located in seven states. NACO currently owns and operates the
resort amenities at one of these locations. NACO's other interest in the
resorts presently consists of approximately 600 residential lots and other
miscellaneous real estate.
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ASSET SALES
The sale of excess assets is a key component of the Company's current
business strategy. During the first three quarters of fiscal 1997, and during
fiscal 1996, 1995, and 1994, the Company sold certain of its real estate assets
and received proceeds of $3.0 million, $7.2 million, $1.1 million, and $10.4
million, respectively. During this period, the Company sold its timeshare
management operations and all of its remaining timeshare inventory at the
resorts, the country club and golf operations at five of the resorts, the seven
utility companies associated with the resorts, and certain other real estate
holdings at the resorts. In addition, the Company sold 11 campgrounds as well
as unused buildings and trailers, certain undeveloped land, and excess acreage
associated with the campgrounds. Over the next several years, the Company
intends to dispose of its remaining assets at the resorts, any campgrounds that
are closed as the Company downsizes, and other undeveloped land and excess
acreage associated with the campgrounds. However, no assurance exists that the
Company will be able to locate a buyer for these assets or that sales on
acceptable terms can be effected. In addition, the disposition of campgrounds
will require addressing the rights of members associated with such campgrounds.
The impact of these rights is uncertain and could adversely affect the
availability or timing of disposition opportunities or the ability of the
Company to realize recoveries from asset dispositions.
CONTRACTS RECEIVABLE
Prior to April 1992, the Company sold substantially all of its campground
memberships and resort interests on the installment basis, creating a portfolio
of contracts receivable. The collection of these contracts receivable is a key
component of the Company's current business strategy.
The Company charges interest on the unpaid balance of the contracts
receivable at fixed rates, which vary depending upon the size of the down
payment and the length of the contract. The contracts receivable bear interest
at rates ranging from 9.5% to 16.0%, with an approximate weighted average stated
interest rate of 13.0% as of March 31, 1997. Monthly installment payments range
from $38 to $182 over the term of the contracts receivable, which can be up to
ten years. The terms of most newer contracts receivable, however, do not exceed
five years and contract terms under the Company's present campground membership
sales program are limited to one year. At March 31, 1997, approximately 96% of
the Company's campground and resort members had paid for their membership or
resort interest in full.
As of March 31, 1997, the Company owned contracts receivable from
campground and resort members with an aggregate principal balance of $14.1
million, consisting of $3.8 million of contracts receivable associated with the
NACO campgrounds, $8.9 million of contracts receivable associated with the
Thousand Trails campgrounds, $1.3 million of contracts receivable associated
with the resorts, and $149,000 of contracts receivable associated with SoPac
Resort Properties, Inc., a former affiliate.
Under the Loan Agreement, all collections on the contracts receivable,
including principal, interest, and fees, must be paid to Foothill and applied to
reduce outstanding borrowings under the Loan Agreement.
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FINANCIAL INFORMATION
The Company reports its financial results on a fiscal year ending June 30.
The Company's annual financial statements for fiscal 1996 are included in its
Annual Report on Form 10-K for the year ended June 30, 1996 (the "Form 10-K")
previously delivered to Noteholders. The Company's interim financial
statements for the nine months ended March 31, 1997 are included in its
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997 (the
"Form 10-Q") delivered with this Offer to Purchase.
Since reorganizing under Chapter 11 on December 31, 1991, the Company's
annualized operating revenues have decreased by $26.3 million (29%). Over the
same period, the Company has decreased its annualized operating expenses by
$52.1 million (46%), and implemented a program under which certain campground
members voluntarily increased their annual dues by an aggregate of $2.1 million.
During this period, the Company has concentrated on increasing continuing
revenues and decreasing continuing expenses. The Company has closed 11
campgrounds and has changed other campgrounds to seasonal operations, reduced
staff, consolidated its administrative functions, deferred maintenance, and
reduced service levels. The Company has also disposed of certain campgrounds
and other non-core assets. However, the Company's membership base has declined
significantly during this period from 167,000 at December 31, 1991 to 123,000 at
March 31, 1997; and the membership base is presently declining at the rate of
approximately 8% per year. The Company attributes this continuing attrition
principally to its aging membership base, approximately 50% of whom are senior
citizens.
During fiscal 1996, the Company stabilized its operations, which it had
been seeking to accomplish since 1991, and achieved a positive contribution from
operations of $4.8 million. For the nine months ended March 31, 1997, the
Company had a positive contribution from operations of $6.5 million, compared
with $4.9 million for the same period last year. For this purpose, the
contribution from operations is defined as operating income before interest
income and expense, gain on asset dispositions, restructuring costs, taxes and
other nonrecurring income and expenses.
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SELECTED FINANCIAL AND OTHER DATA
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
<TABLE>
<CAPTION>
Predecessor
Entity
------------
For the nine months For the six months ended
ended March 31, For the year ended June 30, June 30, December 31,
------------------- -------------------------------------- ------------------------
1997 1996 1996 1995 1994 1993 1992 1991
-------- --------- -------- -------- -------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(1)
STATEMENT OF OPERATIONS DATA:
Total revenue $ 55,694 $ 69,977 $ 91,996 $ 91,546 $100,922 $ 98,189 $ 54,310 $ 63,670
Membership dues 29,700 29,956 39,924 41,175 43,200 39,555 19,170 20,345
Other campground/resort revenues 12,852 16,641 22,288 23,506 23,524 26,856 13,224 13,401
Membership and resort interest sales 2,966 2,798 3,987 4,228 3,975 4,427 6,442 15,140
Interest income 2,875 5,146 6,756 9,935 12,202 16,345 11,780 12,090
Interest expense and amortization 7,321 13,399 17,693 20,960 21,446 22,249 11,947 13,578
Income (loss) from operations before
taxes, minority interest and
extraordinary item 2,505 4,771 488 (11,668) (5,967) (9,781) (23,195) 7,151
Extraordinary gain on debt repurchases -- 1,390 1,390 -- -- 2,507 -- --
Net income (loss) 2,025 6,150 1,837 (11,923) (6,046) (7,582) (21,737) 6,276
Dividends paid (2) -- -- -- -- -- -- -- --
Earnings (loss) per share data (3): (4)
Income (loss) before extraordinary
item .27 1.29 .12 (3.22) (1.81) (2.73) (5.88)
Extraordinary item -- .37 .38 -- .18 .68 --
Net income (loss) .27 1.66 .50 (3.22) (1.63) (2.05) (5.88)
Weighted average number of
shares outstanding 7,469 3,703 3,703 3,703 3,703 3,703 3,697 (4)
BALANCE SHEET DATA:
(AT END OF PERIOD)
Cash and cash equivalents (5) 1,547 36,255 37,403 50,596 50,059 44,359 32,989 43,233
Receivables, net 7,669 15,541 13,219 18,698 32,585 57,731 93,442 119,316
Campground properties 43,057 46,524 45,676 51,327 49,330 47,939 49,582 58,552
Resort properties 1,857 2,977 2,902 5,736 6,612 11,252 11,578 12,530
Total assets 62,786 110,331 109,754 135,886 148,164 170,067 196,788 242,567
Secured Notes, net -- 93,291 94,350 115,490 110,854 115,389 123,511 113,095
Borrowings under Loan Agreement 5,300 -- -- -- -- -- -- --
Pay-in-Kind Notes 42,864 -- -- -- -- -- -- --
Other notes payable 681 1,923 1,102 4,753 5,503 7,558 12,960 29,588
Stockholders' equity (deficit) (22,985) (23,675) (27,991) (29,821) (17,912) (11,793) (4,151) 17,586
PRO FORMA DATA (6):
Interest expense and amortization 6,987
Cash interest expense 8,882
Net income 4,334
Net income per share .58
STATISTICAL DATA:
(AT END OF PERIOD)
Number of operating campgrounds 58 58 58 60 62 65 69 69
Number of campsites 19,100 19,300 19,300 19,400 20,000 20,400 21,600 21,600
Number of members 123,000 131,000 128,000 136,000 149,000 157,000 165,000 167,000
Average annual dues per member $ 344 $ 334 $ 335 $ 329 $ 315 $ 290 $ 246 $ 243
Average cost per camper night $17.46 $17.35 $18.03 $19.69 $ 18.36 $17.29 $16.55 $18.28
- ----------------
</TABLE>
(continued)
11
<PAGE>
(Footnotes continued)
(1) "Fresh Start Reporting" under the provisions of SOP 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code," was
reflected as of December 31, 1991, in the above balance sheet captions. As
a result, information for the years ended June 30, 1996, 1995, 1994 and
1993, the six months ended June 30, 1992, and the nine months ended March
31, 1997 and 1996 was prepared as if the Company is a new reporting entity
and a black line is shown to separate it from prior period information since
it was not prepared on a comparable basis.
(2) The indenture for the Secured Notes, which was discharged in the
Restructuring on July 17, 1996, prohibited the Company from paying any cash
dividends until the Secured Notes were repaid. In addition, the Loan
Agreement prohibits the payment of any cash dividends without the consent of
Foothill until the borrowings under the Loan Agreement are repaid, and the
Indenture for the Notes prohibits the payment of any cash dividends until
the Notes are repaid.
(3) In the Restructuring on July 17, 1996, the Company issued a total of
3,680,550 additional shares of Common Stock, which represent approximately
50% of the shares of Common Stock currently outstanding.
(4) Income (loss) per share is not meaningful due to reorganization and
revaluation entries and the issuance of a material amount of Common Stock in
a stock split and bankruptcy reorganization. At March 31, 1997, there were
7,383,276 shares of Common Stock outstanding, compared with 1,000 shares
immediately before the consummation of the reorganization on December 31,
1991. Outstanding warrants and stock options are excluded from the net loss
per share computation as they would reduce net loss per share, which is
anti-dilutive.
(5) Prior to the Restructuring, cash held by the Company and its wholly owned
subsidiaries, other than that required for operations, was generally
deposited in accounts that were pledged for the benefit of the holders of
the Secured Notes. Under the Loan Agreement, cash held by the Company and
its wholly owned subsidiaries is generally deposited in accounts that are
controlled by, and pledged to, Foothill.
(6) The pro forma data for the nine months ended March 31, 1997 give effect to
the assumed expenditure of the Aggregate Purchase Price to purchase Notes at
the middle price in the Dutch Auction Price Range and the incurrence of
additional indebtedness under the Loan Agreement to pay such price and
related costs, as if they had occurred on July 17, 1996, the date of
issuance of the Notes.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
For purposes of computing the following ratios of earnings to fixed
charges, earnings represent income (loss) from continuing operations before
fixed charges and taxes, and fixed charges represent interest on indebtedness,
amortization of debt discount and one-third of rental expense relating to
operating leases, which management believes is representative of the interest
factor. The following table demonstrates the Company's historic and pro forma
operating coverage and deficiencies as reflected in the consolidated ratios of
earnings to fixed charges.
12
<PAGE>
<TABLE>
<CAPTION>
Six months ended
Year ended June 30, --------------------
Nine months ended ---------------------------------- June 30, Dec. 31,
March 31, 1997 1996 1995 1994 1993 1992(1) 1991 (1)
-----------------------------------------------------------------------------------
Pro forma Historic
--------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings to Fixed Charges Ratio 1.39:1(2) 1.33:1 1.03:1 (3) (3) (3) (3) 1.52:1
Dollar Amount of Deficiency (in
thousands) N/A N/A N/A ($11,668) ($5,967) ($9,781) ($23,195) N/A
</TABLE>
- ----------------
(1) Applying the principles of "fresh start reporting," the Company's operations
for the year ended June 30, 1992 have been separated into two periods, pre-
emergence and post-emergence from bankruptcy. The Company emerged from
bankruptcy proceedings on December 31, 1991.
(2) The pro forma ratio gives effect to the assumed expenditure of the Aggregate
Purchase Price to purchase Notes at the middle price in the Dutch Auction
Price Range and the incurrence of additional indebtedness under the Loan
Agreement to pay such price and related costs, as if they had occurred on
July 17, 1996, the date of issuance of the Notes.
(3) As a result of losses incurred, the Company was unable to fully cover fixed
charges for the six months ended June 30, 1992, and fiscal years 1993
through 1995.
THE NOTES
GENERAL
The Notes were issued pursuant to an Indenture dated as of July 17, 1996
(as supplemented, the "Indenture"), among the Company, the Guarantors and Fleet
National Bank, as Trustee. The Indenture was supplemented on November 20, 1996,
to evidence the assumption of the Indenture, the Notes and the other Note
Documents by the Company, as successor by merger to its predecessor corporation.
The terms of the Notes include those stated in the Indenture and those made a
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
Set forth below is a summary of certain provisions of the Notes and the
Indenture. The summary does not purport to be complete and is qualified in its
entirety by reference to the Notes and the Indenture. The Indenture is
available for inspection at the corporate trust office of the Trustee and as
described under "Additional Information."
Certain capitalized terms used in the following description have the
meanings set forth in the Indenture. References to the Company in this section
of this Offer to Purchase do not include the Company's subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
As of the date hereof, $42,590,862 principal amount of Notes is
outstanding. The Notes mature July 15, 2003. Interest on the Notes accrues at
the rate of 17 1/2% per annum through and including January 15, 1998, and at the
rate of 12% per annum thereafter. Interest at 5 1/2% per
13
<PAGE>
annum for the period through and including January 15, 1998 was prepaid to the
initial holders of the Notes at the time of issuance. All remaining interest
will be payable semi-annually on January 15 and July 15 of each year to holders
of record on the immediately preceding January 1 and July 1, in cash or
additional Notes, at the Company's option, through July 15, 2000 and in cash
thereafter. However, the Indenture requires that interest payments on or prior
to July 15, 2000 be paid only in additional Notes so long as the Senior
Indebtedness is outstanding.
SUBSIDIARY GUARANTEE
The Company's obligations under the Notes and the other Note Documents are
unconditionally guaranteed, jointly and severally, pursuant to the Subsidiary
Guarantee by all existing Subsidiaries of the Company (other than an immaterial
utility subsidiary), each of which is Wholly Owned, and all future Wholly Owned
Subsidiaries of the Company. The Subsidiary Guarantee is limited in amount to
an amount not to exceed the maximum amount that can be guaranteed by each
Guarantor without rendering the Subsidiary Guarantee, as it relates to such
Guarantor, voidable under the United States Bankruptcy Code relating to
fraudulent conveyances or fraudulent transfers or similar state laws.
So long as an Event of Default has not occurred and the Notes have not been
accelerated, the Indenture and the Subsidiary Guarantee provide that Guarantors
may be released from their obligations under the Subsidiary Guarantee without
obtaining any consent or release from the Trustee when they are disposed of in
compliance with the requirements of the Indenture.
RANKING
The indebtedness represented by the Notes is subordinated in right of
payment, as set forth in the Indenture, to the payment in full of the Senior
Indebtedness. Senior Indebtedness is defined as the Indebtedness under the Loan
Agreement and related documents, as the same may be amended, modified, extended,
refinanced or replaced from time to time, provided that the final maturity
thereof is not extended more than one year after the initial final maturity
thereof. The payment of the obligations of the Guarantors under the Subsidiary
Guarantee is also subordinated in right of payment, as set forth in the
Subsidiary Guarantee, to the payment in full of the Senior Indebtedness. The
outstanding principal amount of the Senior Indebtedness was $5.3 million as of
March 31, 1997; however, at such date, $18.3 million principal amount of such
Indebtedness would have been outstanding after giving effect to borrowings under
the Loan Agreement to finance the purchase of Notes pursuant to this Offer and
the payment of related expenses and assuming the expenditure of the Aggregate
Purchase Price.
Only the Senior Indebtedness ranks senior to the Notes or the Subsidiary
Guarantee in accordance with the provisions of the Indenture and the Subsidiary
Guarantee. The Notes and the Subsidiary Guarantee in all respects rank pari
passu with all other Indebtedness of the Company and the Subsidiaries, other
than Subordinated Indebtedness, and rank senior to any Subordinated Indebtedness
permitted by the Indenture. However, the Indenture permits a limited amount of
Permitted Purchase Money Indebtedness, Capitalized Lease Obligations and certain
secured Indebtedness existing on the Issue Date, as well as a Working Capital
Replacement Facility that may refinance or replace up to $10 million of the
Senior Indebtedness for working capital purposes.
14
<PAGE>
The Indenture provides that neither the Company nor a Subsidiary will incur,
directly or indirectly, any Indebtedness, other than the indebtedness permitted
above, which is subordinate or junior in ranking in any respect to the Senior
Indebtedness unless such Indebtedness is expressly subordinated in right of
payment to the Notes.
By reason of such subordination provisions contained in the Indenture and
the Subsidiary Guarantee, in the event of insolvency, creditors of the Company
or the Guarantors who are lenders under the Senior Indebtedness may recover
more, ratably, than the holders of Notes, and creditors of the Company who are
not lenders under the Senior Indebtedness or holders of the Notes may recover
less, ratably, than lenders under the Senior Indebtedness and may recover more,
ratably, than the holders of Notes.
SECURITY
Generally. The Notes and the Subsidiary Guarantee are currently unsecured
obligations of the Company and the Guarantors. Upon repayment in full of the
Senior Indebtedness, the Notes and the Subsidiary Guarantee will be secured by
the same assets as then secure the Senior Indebtedness, other than cash and
other Cash Equivalents and other assets required to secure any Working Capital
Replacement Facility. Currently, the Loan Agreement is secured by substantially
all of the assets of the Company and the Subsidiaries other than (i) certain
leasehold interests and other leased assets, (ii) certain vehicles, trailers and
other equipment; (iii) equipment subject to financing and any newly acquired or
leased assets financed with Permitted Indebtedness and (iv) any agreements,
permits, licenses or the like that cannot be subjected to a Lien without the
consent of third parties, which consent has not been obtained.
Subject to the continuing collateral requirements of any Working Capital
Replacement Facility, the assets available to secure the Notes and the
Subsidiary Guaranty after repayment of the Senior Indebtedness, include, as of
the date hereof, the following: (i) the capital stock of the Company's
subsidiaries, (ii) campgrounds and common amenities at one resort owned by a
Subsidiary, together with related improvements, certain equipment, and certain
other tangible personal property located there to the extent existing mortgages
do not prohibit such Liens, (iii) the closed campgrounds and other real estate
that the Company and the Subsidiaries own and are in the process of selling,
(iv) the contracts receivable that the Company and the Subsidiaries own and (v)
all indebtedness owed to the Company by its Subsidiaries, together with any
related Liens.
Disposition of Collateral. So long as an Event of Default has not occurred
and the Notes have not been accelerated, the Indenture provides that the Company
and the Subsidiaries may dispose of their properties free from the Liens of the
Collateral Documents without obtaining any consent or release from the Trustee;
provided that the Company complies with the requirements of the Indenture and
any applicable appraisal and other requirements of the Trust Indenture Act.
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company, in whole or in part,
at any time upon not less than 30 nor more than 60 days' notice to each holder
of Notes, at the redemption
15
<PAGE>
price of 100% of principal amount, plus accrued interest to the redemption date.
The Company is not required to make sinking fund payments with respect to the
Notes.
CHANGE OF CONTROL REPURCHASE OFFER
In the event that a Change of Control has occurred, each holder of Notes
has the right, at such holder's option, subject to the terms and conditions of
the Indenture, to require the Company to repurchase all or any part of such
holder's Notes at a cash price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the purchase date.
TRADING
An established public trading market for the Notes does not exist. The
Company, however, has filed a shelf registration statement (the "Shelf
Registration Statement") registering the transfer of the Notes on behalf of
certain holders thereof, certain of whom are affiliated with the Company. The
Securities and Exchange Commission (the "Commission") declared the Shelf
Registration Statement effective on February 28, 1997.
The securities laws of some states prohibit or restrict trading in the
Notes. The Company, however, has either registered or obtained exemptions to
permit secondary trading in the Notes in the States of New York, Illinois,
California, Texas, Florida and Wisconsin. Moreover, many other jurisdictions
have statutory exemptions that permit certain institutions to trade the Notes.
COVENANTS
The Indenture restricts, among other things, (i) the incurrence of
additional indebtedness, (ii) the incurrence of Liens, (iii) the payment of
dividends and distributions, (iv) the making of loans and investments, (v)
transactions with affiliates, (vi) agreements restricting the ability of certain
of the Company's subsidiaries to pay dividends or make other distributions on
their capital stock, (vii) the Company's ability to conduct other businesses,
(viii) the sale or other disposition of assets, and (ix) certain mergers,
consolidations and transfers of all or substantially all of the assets of the
Company and its subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
Events of Default. The Indenture defines an Event of Default to include
(i) the failure by the Company to pay any installment of interest on the Notes
as and when due and payable and the continuance of any such failure for 30 days,
(ii) the failure by the Company to pay all or any part of the principal, or
premium, if any, on the Notes when and as the same become due and payable at
maturity, redemption, by acceleration or otherwise, including failure to make
any payment required upon a Change of Control Offer, as and when due, (iii) the
failure by the Company or any Subsidiary to observe or perform any other
covenant or agreement contained in the Note Documents and, subject to certain
exceptions, the continuance of such failure for a period of 30 days after
written notice is given to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 30% in aggregate principal amount of the
Notes outstanding, (iv) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any Material Subsidiary, (v) default
under (a) the Senior Indebtedness or (b) any indenture, loan
16
<PAGE>
agreement, mortgage, bond, promissory note or other agreement or instrument
under which there may be issued or by which there may be secured or evidenced
any other Indebtedness by the Company or any Subsidiary, or the payment of which
is guaranteed by the Company or any Subsidiary, and such default is either (i)
caused by a failure to pay when due principal or interest on such Indebtedness
within any grace period applicable thereto or (ii) results in or requires the
prepayment, repurchase, redemption, or defeasance of any such Indebtedness prior
to its express maturity, or requires that the Company or any Subsidiary offer to
take any of the foregoing actions and, in each case in respect of clause (b),
the principal amount of such indebtedness, together with the principal amount of
any other such indebtedness under which there has been a payment default or with
respect to which there has been an acceleration, aggregates $2,000,000 or more,
(vi) final unsatisfied judgments not covered by insurance aggregating at least
$2,000,000 at any one time rendered against the Company or any of its
Subsidiaries and not stayed, bonded or discharged within 60 days and (vii) the
repudiation by any Subsidiary of its obligations under the Subsidiary Guarantee,
or any judgment or decree by a court or governmental agency of competent
jurisdiction declaring the unenforceability of the payment obligations under the
Subsidiary Guarantee or any of the Collateral Documents (subject to a 10-day
grace period in the case of any Collateral Document).
Acceleration. If an Event of Default occurs and is continuing (other than
an Event of Default specified in clause (iv) above), then in every such case
unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the holders of 30% in aggregate principal amount
of the Notes then outstanding, by notice in writing to the Company, and to the
Trustee if given by such holders, may declare all principal and accrued interest
thereon to be due and payable immediately. If an Event of Default specified in
clause (iv) above relating to the Company or any of its Material Subsidiaries
occurs, all principal and accrued interest will be immediately due and payable
on all outstanding Notes without any declaration or other act on the part of the
Trustee or the holders of Notes. The holders of not less than a majority in
aggregate principal amount of Notes generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal on the Notes that became due as a result of the acceleration, have
been cured or waived.
The holders of a majority in aggregate principal amount of the Notes at the
time outstanding may waive on behalf of all such holders any Default or Event of
Default, except a Default in the payment of principal of or interest on any Note
not yet cured, or a Default or Event of Default with respect to any covenant or
provision that cannot be modified or amended without the consent of the holder
of each outstanding Note affected.
REMEDIES WITH RESPECT TO COLLATERAL
In General. Specific rights and remedies of the Trustee under the
Collateral Documents, once executed, will include the right of the Trustee to
sell any Collateral and to apply the net proceeds to the Notes in accordance
with the terms of the Indenture and the Collateral Documents.
Limitations on Foreclosure. Some states, including California, Oregon and
Washington, have non-disturbance statutes that place limitations on the ability
of the owner of a campground
17
<PAGE>
to close the campground or a lienholder to foreclose its lien. In certain
states, these statutes permit the owner of a campground to close the campground
or a lienholder to foreclose its lien if the holders of memberships at the
campground receive access to a comparable campground. The Mortgages on the
campgrounds included in any Collateral will contain non-disturbance provisions
that limit the ability of the Lienholder to foreclose its Lien unless the
holders of the related memberships receive access to a comparable campground.
The impact of the rights of members under these laws and non-disturbance
provisions is uncertain and could adversely affect the implementation of, and
the benefits or recoveries that may be available from, foreclosures in respect
of such Collateral.
MODIFICATION OF THE INDENTURE AND COLLATERAL DOCUMENTS
The Indenture provides that the Indenture and the Collateral Documents may
be modified by a vote of holders of 66 2/3% in aggregate principal amount of the
Notes, except in certain circumstances that require unanimous consent including,
without limitation, changes with respect to payment of principal, premium and
interest (upon redemption, maturity or otherwise) and the release of Guarantors
or Collateral, except as otherwise provided by the Indenture.
REQUIREMENTS FOR CERTAIN ACTIONS
The Indenture provides that for the purposes of any modification of the
Indenture or the Note Documents, the requisite 66 2/3% in principal amount of
outstanding Notes will take into account Notes held by Affiliates controlling
the Company in the absence of a Default or Event of Default. However, the
majority in principal amount of outstanding Notes required for any waivers or
certain other actions after a Default or Event of Default, and the 30% in
principal amount required for notices of default or acceleration, will disregard
Notes held by Affiliates controlling the Company.
THE TENDER OFFER
TERMS OF THIS OFFER
DUTCH AUCTION PRICE RANGE. Upon the terms and conditions set forth herein,
the Company hereby offers to purchase Notes tendered within the Dutch Auction
Price Range to the extent necessary for the Company to spend up to the Aggregate
Purchase Price. On the Letter of Transmittal, a tendering Noteholder must check
the box beside the price per $1,000 of principal amount of Notes at which it
tenders its Notes. UNLESS OTHERWISE NOTED THEREON, ALL NOTES WILL BE DEEMED
TENDERED AT THE PRICE INDICATED. The price at which a Noteholder may tender its
Notes will be from $800 per $1,000 of principal amount to $900 per $1,000 of
principal amount, in integral multiples of $5 of principal amount, plus a
percentage of accrued interest equal to the percentage of principal at which
such Notes are tendered. IF A NOTEHOLDER DOES NOT CHECK A BOX ON THE LETTER OF
TRANSMITTAL INDICATING THE PRICE AT WHICH IT IS TENDERING ITS NOTES, SUCH
NOTEHOLDER WILL BE DEEMED TO HAVE TENDERED ITS NOTES AT $800 PER $1,000 OF
PRINCIPAL AMOUNT, PLUS 80% OF ACCRUED INTEREST. Interest will accrue on the
Notes purchased through the day when the Company transfers the purchase price
therefor to the Depositary.
18
<PAGE>
EXPIRATION DATE. Only Notes validly tendered on or before the Expiration
Date and not withdrawn will be eligible for purchase pursuant to this Offer. A
Noteholder desiring to tender its Notes pursuant to this Offer may tender such
Notes pursuant to the terms and conditions set forth herein beginning on the
date hereof and ending at 5:00 p.m., Eastern Time, on Wednesday, June 18, 1997,
or if extended, the time and date to which the Company has extended this Offer.
COMPANY'S DETERMINATION FINAL AND BINDING. The Company's interpretation of
the terms and conditions of this Offer is final and binding. The Company, in
its sole discretion, will determine all questions concerning acceptance, form,
time of receipt, validity, withdrawal, and any other matter with respect to this
Offer. Moreover, notwithstanding anything to the contrary herein, on or before
the Expiration Date the Company may abandon this Offer or amend it in any
respect. The tender offer rules under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), however, will limit the Company's ability to
delay paying for any tendered Notes that the Company has accepted. These rules
require the payment of the consideration offered or the return of the tendered
securities promptly after the abandonment or termination of this Offer.
The Company reserves the right to reject any or all tenders of Notes that
it determines are in inappropriate form or the acceptance or payment for which
may be unlawful. The Company also reserves the right to waive any defect or
irregularity in any tender with respect to any particular Notes or any
particular Noteholder. A tender or withdrawal of Notes will not be validly made
until all defects and irregularities have been cured or expressly waived.
Neither the Company nor the Depositary, however, will be obligated to notify a
Noteholder of any defects or irregularities in its tender or withdrawal.
ABANDONMENT OR AMENDMENT. If the Company abandons or amends this Offer,
the Company will promptly publicly announce such abandonment or amendment. If
the Company extends the Expiration Date, the Company will publicly announce such
extension no later than 9:00 a.m., Eastern Time, on the business day immediately
after the previously scheduled Expiration Date. The Company will make such
public announcement of any abandonment, amendment, or extension by making a
release to the Dow Jones News Service. In any public announcement extending the
Expiration Date, the Company will disclose the approximate principal amount of
Notes tendered at that time. If the Company changes this Offer or the
information with respect thereto, the tender offer rules under the Exchange Act
may require the Company to disseminate additional tender offer materials and
extend the Expiration Date to permit adequate dissemination thereof.
CONDITIONS. Notwithstanding anything to the contrary herein, the Company's
obligation to purchase any Notes tendered pursuant hereto shall be subject to
(a) receipt of the funds to pay the purchase price and related costs from
borrowings under the Loan Agreement and (b) the absence of: (i) any pending or
threatened action, claim, or proceeding before any court or other governmental
authority seeking to limit or prohibit the Company's purchase of Notes, or to
make the Company's purchase of Notes pursuant to this Offer illegal, (ii) any
enacted or proposed injunction, order, regulation, or statute that directly or
indirectly limits or prohibits the Company's purchase of Notes or makes the
Company's purchase of Notes pursuant to this Offer illegal, or (iii) any Event
of Default under the Indenture. The occurrence of any of the foregoing items
shall
19
<PAGE>
be in the sole judgment of the Company, which shall be final and binding.
The foregoing conditions are for the sole benefit of the Company and it may
waive any of them at any time, notwithstanding any failure to assert the
existence thereof at any prior time.
PROCEDURE FOR TENDERING NOTES
LETTER OF TRANSMITTAL. To effectuate a valid tender of Notes, the
Depositary must receive a properly completed Letter of Transmittal with respect
thereto at one of the addresses set forth on the back cover hereof, along with
the certificates for the tendered Notes and any other required documents. Only a
registered holder of Notes on the Note register or a person registered as the
holder of Notes on the records of a Clearing Agency that delivers an omnibus
endorsement to the Depositary may complete a Letter of Transmittal. The
Depositary will request Depository Trust Company and its nominee Cede & Co.,
Midwest Securities Trust Company and its nominee Kray & Co., and the
Philadelphia Depository Trust Company and its nominee Philadep & Co.
(collectively, the "Clearing Agencies") to deliver to the Depositary an omnibus
endorsement for the benefit of the persons registered on their records as the
holders on the Expiration Date of the Notes for which they are the registered
holders. If a Clearing Agency delivers such an endorsement, the persons
designated thereon may complete, execute, and deliver a Letter of Transmittal
with respect to the Notes for which such endorsement indicates that they are the
holders as if they were the registered holders thereof. On or before the
Expiration Date, however, such a Clearing Agency must deliver to the Depositary
the Note certificates representing any such Notes.
Unless a Noteholder is an Eligible Institution, such Noteholder must have
its signature guaranteed by an Eligible Institution that is a member of: (i)
the Securities Transfer Agents Medallion Program, (ii) the New York Stock
Exchange Medallion Signature Program, or (iii) the Stock Exchange Medallion
Program (collectively, the "Medallion Programs").
An "Eligible Institution" is: (i) a firm that is a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or (ii) a commercial bank or trust company that has an office or
a correspondent in the United States of America.
When Note certificates are held by joint tenants, both joint tenants should
sign. When signing as administrator, attorney-in-fact, executor, fiduciary,
guardian, officer, trustee, or other person acting in a representative capacity,
the person signing should give such person's full title and deliver evidence to
the Depositary of its authority to execute the Letter of Transmittal. If a
corporation, an authorized officer should sign in the name of the corporation.
If a partnership, a general partner should sign in the name of the partnership.
The method of delivery of all documents is at the election and risk of the
tendering Noteholder. Although a Noteholder may use the enclosed pre-addressed
envelope to send its documents to the Depositary, a tender of Notes will not
occur until the Depositary actually receives all of the documents required to
effectuate the tender at one of the addresses set forth on the back cover
hereof. Accordingly, if a Noteholder mails its documents to the Depositary, the
Depositary recommends that it use certified or registered mail and allow
sufficient time to insure receipt on or before the Expiration Date.
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<PAGE>
GUARANTEED DELIVERY. If a Noteholder cannot deliver a Letter of
Transmittal and its Notes to the Depositary on or before the Expiration Date,
such Noteholder may tender its Notes through an Eligible Institution. To make
such a tender, on or before the Expiration Date the Depositary must receive from
the Eligible Institution a properly completed Notice of Guaranteed Delivery
substantially in the form enclosed herewith. Within five business days after
receipt of the Notice of Guaranteed Delivery, the Depositary must receive from
the Eligible Institution a properly completed Letter of Transmittal, the Note
certificates for the tendered Notes and any other required documents.
PRORATION
If Noteholders validly tender on or before the Expiration Date and do not
withdraw a greater principal amount of Notes than required for the Company to
spend the Aggregate Purchase Price, the Company intends to accept and pay for
Notes as follows: The Company intends to accept and pay for Notes tendered at
the lowest price in the Dutch Auction Price Range and each succeedingly higher
price therein until the Company has accepted sufficient Notes to enable it to
spend the Aggregate Purchase Price. If acceptance of all of the Notes tendered
at the highest applicable price would cause the Company to spend more than the
Aggregate Purchase Price, the Company intends to request the Depositary to
prorate the Notes tendered at such price in proportion to the aggregate
principal amount of all Notes tendered at such price. Tendering Noteholders at
lower prices will only receive such lower price, but will not be subject to
proration. The Company intends to announce the prices at which it has accepted
Notes and any proration factor on the sixth business day after the Expiration
Date.
PAYMENT FOR ACCEPTED NOTES
The Company intends to pay for the accepted Notes on the seventh business
day after the Expiration Date. The Company, however, expressly reserves the
right to delay accepting or paying for tendered Notes to comply with any
applicable law. If such delay contravenes the tender offer rules under of the
Exchange Act, the Company may formally extend the Expiration Date. In all
cases, the Company will pay for accepted Notes only after the Depositary timely
receives the Note certificates for such Notes.
The Company will pay for the accepted Notes by transferring the aggregate
purchase price therefor along with the portion of accrued interest payable
thereon pursuant to the terms of this Offer through the date of such transfer to
the Depositary. Upon the Depositary's receipt thereof, the Company will be
deemed to have purchased the accepted Notes and this Offer will be deemed
consummated for all purposes. At that time, such Notes shall be retired and
cease to be outstanding. The Depositary will act as the agent for the tendering
Noteholders for the purpose of receiving such payment and transmitting the
appropriate portions thereof to them. Under no circumstances will any interest
be owed or paid on such amounts because of any delay in making such payments. A
tendering Noteholder will generally not incur brokerage commissions or transfer
taxes with respect to its Notes that the Company purchases pursuant hereto,
except that a Noteholder may incur transfer taxes if it instructs the Depositary
to pay any amounts owed to it with respect to its accepted Notes to another
person. Moreover, a Noteholder may be subject to backup federal income tax
withholding of 31% of the gross proceeds payable to it.
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<PAGE>
To avoid federal income tax withholding on the amounts payable with respect
to accepted Notes, a Noteholder must complete and return to the Depositary a
Substitute Form W-9. If a Noteholder does not complete and return such form,
the Depositary will pay such Noteholder the amounts owed with respect to its
accepted Notes, less federal income tax equal to 31% of such amount. For the
convenience of each Noteholder, a blank Substitute Form W-9 that it can complete
is part of the Letter of Transmittal.
With respect to tendered Notes that the Company does not accept, as soon as
possible after determining which Notes the Company has accepted, the Depositary
will return the Note certificates for such unaccepted Notes to the registered
holder thereof. If a Note certificate represents both accepted and unaccepted
Notes, the Depositary will cause the cancellation of such certificate and the
issuance of a new certificate for the unaccepted Notes to the registered holder
of the original certificate.
WITHDRAWAL RIGHTS
A Noteholder's tender of Notes pursuant to this Offer will be irrevocable,
except that the Noteholder may withdraw such tendered Notes: (i) on or before
the Expiration Date, and (ii) on or after July 18, 1997, unless the Company has
accepted them before that date. To withdraw tendered Notes, the Depositary must
receive a written notice of withdrawal (a "Notice of Withdrawal ") from the
Noteholder at one of the Depositary's addresses set forth on the back cover
hereof. The Notice of Withdrawal must specify: (i) the name of the person who
tendered the Notes to be withdrawn, (ii) the principal amount of Notes to be
withdrawn, and (iii) the name in which the Note certificates representing such
Notes are registered.
If the Noteholder has delivered or otherwise identified to the Depositary
the Note certificates for the Notes to be withdrawn, prior to the physical
release of those Note certificates the Noteholder must also furnish to the
Depositary the serial numbers for such Note certificates and have the signatures
on the Notice of Withdrawal guaranteed by an Eligible Institution that is a
member of a Medallion Program, unless the person submitting the Notice of
Withdrawal is an Eligible Institution.
A Noteholder may not rescind a withdrawal of tendered Notes. Any withdrawn
Notes will not be validly tendered for purposes of this Offer. A Noteholder may
re-tender withdrawn Notes, however, by again following the procedures described
herein at any time on or before the Expiration Date.
RETIREMENT OF THE NOTES PURCHASED
The Company will retire the Notes that it purchases pursuant to this Offer.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain anticipated federal income tax
considerations with respect to this Offer. This discussion is general in
nature, and does not discuss all aspects of federal income taxation that may be
relevant to a particular Noteholder in light of its particular circumstances, or
to certain types of Noteholders subject to special treatment under federal
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income tax laws, such as individual retirement accounts, insurance companies,
tax-exempt organizations, financial institutions, brokers, dealers, foreign
entities, and taxpayers that are neither citizens nor residents of the United
States. In addition, this discussion does not consider the effect of any
foreign, state, local, or other tax laws, or any United States tax consequences
other than income tax consequences that may apply to a particular Noteholder.
This discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code ") and applicable Treasury Regulations (including proposed
regulations), rulings, administrative pronouncements, and decisions as of the
date hereof, all of which are subject to change or differing interpretations at
any time and in some circumstances with retroactive effect. This discussion
assumes that a Noteholder holds its Notes as "capital assets" within the meaning
of Section 1221 of the Code, which is generally property held for investment.
THE COMPANY URGES EACH NOTEHOLDER TO CONSULT ITS OWN TAX ADVISOR TO
DETERMINE THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES TO IT
OF TENDERING NOTES.
SALE OF NOTES PURSUANT TO THIS OFFER
In general, except as otherwise indicated below, a Noteholder will
recognize gain or loss on the sale of a Note to the Company at the time of such
sale in an amount equal to the difference between the Noteholder's basis in such
Note and the cash received by the Noteholder upon the sale. Subject to the
market discount rules described below, such gain or loss will constitute capital
gain or loss, which will be long-term capital gain or loss if the Noteholder's
holding period for the Note is more than one year on the date of the sale. The
Noteholder's holding period for the Notes will include the holding period of any
debt instrument considered exchanged for such Notes in a transaction qualifying
as a recapitalization under Section 368(a)(1)(E) of the Code.
In the case of a Noteholder who acquired a Note at a market discount, any
gain recognized upon the sale of such Note will represent ordinary income to the
extent of the market discount that accrued during the period such Noteholder
held such Note, unless the Noteholder previously elected to include such accrued
market discount in its income on a current basis. Market discount generally
equals the excess of: (i) the aggregate of the original issue price of the Note
over (ii) the Noteholder's initial tax basis in the Note. A Note may also have
market discount attributable to a debt instrument that the Noteholder exchanged
for such Note in a transaction qualifying as a recapitalization under Section
368(a)(1)(E) of the Code.
If a Noteholder purchased a Note at a price in excess of the stated
redemption price at maturity thereof, and the Noteholder elected to deduct bond
premium, the Noteholder may be permitted to deduct any remaining unamortized
bond premium as an ordinary loss upon the sale of the Note to the Company
pursuant to this Offer.
EFFECT OF THIS OFFER UPON THE COMPANY
The Company will recognize cancellation of indebtedness income with respect
to the Notes purchased pursuant to this Offer in an amount equal to the excess
of: (i) the aggregate of the adjusted issue price of such Notes over (ii) the
amount that the Company paid for the Notes, other than the amount paid in
respect of the portion of accrued interest payable pursuant to the
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<PAGE>
terms of this Offer. The Company believes, however, that any such cancellation
of indebtedness income will not have a material effect upon the Company's
regular federal income tax liability because of the Company's net operating loss
carryforwards.
NON-TENDERING NOTEHOLDERS
This Offer will not affect non-tendering Noteholders. Moreover, this Offer
will not affect tendering Noteholders with respect to their Notes that the
Company does not accept.
BACKUP WITHHOLDING
Under federal income tax law, a person may under certain circumstances be
subject to backup withholding at the rate of 31% with respect to certain
payments, unless such person: (i) is a corporation or otherwise exempt from
backup withholding, and when required demonstrates this fact, or (ii) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding, and otherwise complies with the applicable requirements
of the backup withholding rules. To prevent backup withholding with respect to
the payment of the gross proceeds from the sale of Notes, each tendering
Noteholder should complete a Substitute Form W-9 and return it to the
Depositary. For the convenience of the Noteholders, a blank Substitute Form W-9
that the Noteholders can complete is part of the Letter of Transmittal. Any
tendering Noteholder who does not complete a Substitute Form W-9 and return it
to the Depositary will be subject to federal income tax withholding on the gross
amount of sale proceeds from the sale of any accepted Notes.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS IS
FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
NOTEHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO IT OF TENDERING NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF
STATE, LOCAL, AND FOREIGN TAX LAWS.
FUNDING FOR THIS OFFER
To permit the Company to make this Offer, the Company and Foothill have
entered into an amendment to the Loan Agreement. The amendment, among other
things, permits the Company to purchase Notes in one or more transactions,
including this Offer, provided that not more than $12,000,000 is expended to pay
principal and not more than $750,000 is expended to pay the portion of accrued
interest payable pursuant to the terms of this Offer. The amendment decreases
the maximum availability under the revolving portion of the Loan Agreement from
$23 million to $20 million and decreases the interest rate payable thereunder
from prime plus 2 3/4% per annum to prime plus 1 1/2% per annum. Certain other
fees are also reduced or eliminated; however, the Company is required to pay an
additional one-time fee of 3/4 of 1% of any amount funded to purchase principal
of the Notes. The term of the Loan Agreement continues to expire on July 16,
1999, and the indebtedness thereunder continues to be secured by substantially
all of the assets of the Company and its subsidiaries other than certain
excluded assets.
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<PAGE>
Under the Loan Agreement, the Company must use all collections of principal
and interest on the contracts receivable and all proceeds from asset sales to
reduce borrowings under the Loan Agreement. In addition, the Company must make
specified principal reductions on these borrowings over time based on a monthly
calculation of eligible contracts receivable and an amortization schedule set
forth in the Loan Agreement. The maximum amount of the revolving loan declines
as these principal reductions are made.
Based upon its current business plan, the Company believes that future cash
flows provided from operations, asset sales, and borrowings available under the
revolving loan will be adequate for the Company's operating and other cash
requirements during the remaining term of the Loan Agreement. All cash held by
the Company and its wholly owned subsidiaries is generally deposited in accounts
that are controlled by and pledged to Foothill. The Company's cash flows are
highly seasonal. In addition to the borrowings required to fund the purchase of
the Notes and the payment of related costs, the Company anticipates having
borrowings under the Loan Agreement during the summer months at levels higher
than the level of borrowings at March 31, 1997.
CERTAIN TRANSACTIONS
POSSIBLE PARTICIPATION BY AFFILIATES AND RELATED PERSONS
The Company has been advised that Carl Marks Strategic Investments, L.P.
("CM Strategic") or its affiliated companies may tender Notes in this
Offering. Because the Company is seeking to acquire as many Notes as possible
for the Aggregate Purchase Price, the Company has structured this Offer so that
Notes tendered by its Affiliates (as defined in the Indenture), including CM
Strategic and its affiliates, may be purchased in compliance with the provisions
of the Indenture governing transactions with Affiliates.
The Indenture requires that (i) an Affiliate Transaction (as defined in the
Indenture) must be on terms at least as favorable to the Company as those that
could have been obtained in a comparable transaction with an unaffiliated party;
(ii) in the case of an Affiliate Transaction with a value in excess of
$1,000,000, a majority of the independent members of the Board of Directors
approve the transaction as meeting the foregoing standard; and (iii) in the case
of an Affiliate Transaction with a value in excess of $5,000,000, the Company
obtains a favorable opinion as to the fairness of such transaction to the
Company from a financial point of view from a national or regional independent
investment banking firm. This Offer has been approved by the Special Committee
of the Board of Directors, which has obtained the investment banking opinion
required by the Indenture. As a consequence, purchases from affiliates of the
Company in this Offer will satisfy the provisions of the Indenture related to
Affiliate Transactions.
PLANS OR PROPOSALS
Except as described in this Offer to Purchase, the Company does not have
any plan or proposal concerning any acquisition or disposition of Notes, any
extraordinary corporate transaction involving the Company, any sale or transfer
of a material amount of the Company's assets, any change in the Company's board
of directors or management, any material change in the Company's present policy
on dividends, indebtedness or capitalization, or any other change in the
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<PAGE>
Company's corporate structure or business. Moreover, except as described in
this Offer to Purchase, the Company is unaware of any such plan or proposal
possessed by any director or executive officer of the Company, any person that
directly or indirectly controls the Company, or any person who is a director,
executive officer, or partner of any such controlling person (collectively, the
"Affiliated Persons").
If the Company does not receive sufficient tenders with respect to this
Offer to spend the entire Aggregate Purchase Price, it may seek thereafter to
purchase additional Notes at prices believed favorable to the Company, in open
market transactions or privately negotiated transactions, by tender offer or
otherwise.
PURCHASES AND SALES OF NOTES
The Company has not purchased or sold any Notes during the 40 business days
preceding the date hereof. The Company believes that no Affiliated Person has
purchased or sold any Notes during such period.
ARRANGEMENTS, CONTRACTS, RELATIONSHIPS, OR UNDERSTANDINGS
Except as described in this Offer to Purchase, the Company does not have
any arrangement, contract, relationship, or understanding relating directly or
indirectly to this Offer, including any arrangement, contract, relationship, or
understanding concerning the transfer or the voting of any Notes, any joint
venture, any loan or option arrangement, any put or call, any guarantee of a
loan, any guarantee against loss, or any giving or withholding of any
authorization, consent, or proxy. Moreover, except as described in this Offer
to Purchase, the Company is unaware of any such arrangement, contract,
relationship, or understanding involving any Affiliated Person.
LEGAL MATTERS
GENERAL
The Company is unaware of any approval or other action by any governmental
authority or public body necessary in connection with this Offer. Should this
Offer require any such approval or other action, the Company contemplates that
it would seek to obtain such approval or action.
FEDERAL RESERVE BOARD REGULATIONS
The margin credit regulations of the Federal Reserve Board, which restrict
the extension and maintenance of credit for the purchase of buying or carrying
certain securities, are inapplicable to the purchase of Notes pursuant to this
Offer.
EXPENSES
The Company will bear all costs of this Offer, including the payment of a
fee to the Depositary, counsel and advisors, and the reimbursement of its out-
of-pocket expenses in connection therewith. The Company will also reimburse
banks, custodians, fiduciaries, nominees,
26
<PAGE>
securities dealers, trust companies, and other persons for their expenses in
forwarding this Offer to Purchase, the Letter of Transmittal, and other related
materials to the beneficial owners of the Notes.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy and information statements
and other information with the Commission. The public may inspect and copy (at
prescribed rates) such reports, proxy and information statements and other
information that the Company has filed with the Commission at the public
reference facilities that the Commission maintains at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the Commission's regional offices
located at Room 3190, Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
In addition, the public may obtain such reports, proxy and information
statements and other information concerning the Company from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a site accessible to the public by
computer on the World Wide Web, at http://www.sec.gov, that contains reports,
proxy and information statements and other information regarding the Company,
which files electronically with the Commission.
ADDITIONAL INFORMATION
For further information, reference is hereby made to the Form 10-K
previously delivered and the Form 10-Q delivered with this Offer to Purchase.
The Company will provide without charge to Noteholders who request, in writing
or orally, additional copies of the Form 10-K. Such requests should be directed
to: Thousand Trails, Inc., 2711 LBJ Freeway, Suite 200, Dallas, TX 75234,
telephone number: (972) 243-2228, Attention: Chief Financial Officer.
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APPENDIX I
DEFINED TERMS
I-1
<PAGE>
This appendix lists all of the defined terms in the Offer to Purchase and
indicates the page on which the Offer to Purchase defines them.
Defined Terms Page
Affiliated Persons 22
Aggregate Purchase Price....... Cover Page
Clearing Agencies.............. 17
CM Strategic................... 21
Code........................... 19
Commission..................... 14
Company........................ Cover Page, 1
CPI............................ 7
Depositary..................... Cover Page
Dutch Auction Price Range...... Cover Page
Eligible Institution........... 17
Exchange Act................... 16
Expiration Date................ 3
Foothill....................... 1
Form 10-K...................... 9
Form 10-Q...................... 9
Indenture...................... 12
Letter of Transmittal.......... Cover Page
Loan Agreement................. 1
Medallion Programs............. 17
NACO........................... 1
Noteholder..................... Cover Page
Notes.......................... Cover Page
Notice of Guaranteed Delivery.. 4
Notice of Withdrawal........... 19
Offer.......................... Cover Page
Offer to Purchase.............. Cover Page
Restructuring.................. 1
RPI............................ 7
RVs............................ 6
Secured Notes.................. 1
Shelf Registration Statement... 14
Trust Indenture Act............ 12
TTI............................ 1
<PAGE>
================================================================================
A NOTEHOLDER DESIRING TO TENDER SOME OR ALL OF ITS NOTES PURSUANT TO THIS OFFER
SHOULD COMPLETE THE LETTER OF TRANSMITTAL IN ACCORDANCE WITH THE INSTRUCTIONS
HEREIN AND THEREIN, AND THEN DELIVER IT ALONG WITH THE CERTIFICATES FOR SUCH
NOTES AND ANY OTHER REQUIRED DOCUMENTS TO THE DEPOSITARY. IF A NOTEHOLDER CANNOT
DELIVER A LETTER OF TRANSMITTAL AND ITS NOTES TO THE DEPOSITARY ON OR BEFORE THE
EXPIRATION DATE, SUCH NOTEHOLDER MAY TENDER ITS NOTES THROUGH THE GUARANTEED
DELIVERY PROCEDURES SET FORTH HEREIN. THE COMPANY HAS NOT AUTHORIZED THE
DEPOSITARY OR ANY OTHER PERSON TO GIVE ANY INFORMATION WITH RESPECT TO THIS
OFFER OTHER THAN THE INFORMATION SET FORTH HEREIN. MOREOVER, UNDER NO
CIRCUMSTANCES SHALL THE INFORMATION SET FORTH HEREIN BE CONSIDERED CORRECT OR
UNCHANGED AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. THIS OFFER TO PURCHASE
DOES NOT CONSTITUTE AN OFFER TO PURCHASE NOTES IN ANY JURISDICTION WHERE SUCH AN
OFFER WOULD BE ILLEGAL OR OTHERWISE PROHIBITED.
------
SUMMARY TABLE OF CONTENTS
PAGE
----
Summary................................................ 1
The Company............................................ 6
Financial Information.................................. 9
Selected Financial and Other Data...................... 10
Consolidated Ratios of Earnings to Fixed
Charges.............................................. 11
The Notes.............................................. 12
The Tender Offer....................................... 16
Certain Federal Income Tax Considerations.............. 19
Funding for This Offer................................. 21
Certain Transactions................................... 21
Legal Matters.......................................... 22
Expenses............................................... 23
Available Information.................................. 23
Additional Information................................. 23
Appendix I--Defined Terms.............................. I-1
================================================================================
================================================================================
THOUSAND TRAILS, INC.
OFFER TO PURCHASE
DEPOSITARY:
FLEET NATIONAL BANK
TELEPHONE NO. (860) 986-1271
FACSIMILE NO. (860) 986-7908
ADDRESS FOR INCOMING U.S. POSTAL MAIL:
FLEET NATIONAL BANK
CT OP TO6A
CORPORATE TRUST OPERATIONS
ATTN: REORGANIZATION
P.O. BOX 5080
HARTFORD, CT 06102-5080
ADDRESS FOR INCOMING EXPRESS MAIL:
FLEET NATIONAL BANK
CT OP TO6A
CORPORATE TRUST OPERATIONS
ATTN: REORGANIZATION
150 WINDSOR STREET
HARTFORD, CT 06120
ADDRESS FOR HAND DELIVERY IN NEW YORK:
FLEET NATIONAL BANK
C/O FIRST CHICAGO TRUST COMPANY OF NEW YORK
14 WALL STREET, 8TH FLOOR, WINDOW 2
NEW YORK, NY 10015
MAY 20, 1997
================================================================================
<PAGE>
EXHIBIT 99.2
[Thousand Trails, Inc. logo]
FOR IMMEDIATE RELEASE
---------------------
THOUSAND TRAILS, INC ANNOUNCES
ACCEPTANCE OF SENIOR SUBORDINATED PIK NOTES
IN DUTCH AUCTION TENDER OFFER
Dallas, Texas, June 24, 1997 -- Thousand Trails, Inc. (OTC:TRLS) announced
today that it intends to accept $13.4 million principal amount of its Senior
Subordinated Pay-In-Kind Notes Due 2003 ("Notes") tendered to it in its Dutch
auction tender offer that expired on June 18, 1997. The average price of the
Notes to be accepted for purchase is $897 per $1,000 of principal amount. A
total of $32.5 million principal amount of Notes were tendered. Thousand Trails
intends to accept all Notes tendered at prices less than $900 per $1,000 of
principal amount, and it intends to accept Notes tendered at $900 per $1,000 of
principal amount on a pro rata basis.
The offer commenced on May 20, 1997, pursuant to the offer, a registered
holder of Notes could tender its Notes at from $800 per $1,000 of principal
amount to $900 per $1,000 of principal amount, in integral multiples of $5 of
principal amount, plus a percentage of accrued interest equal to the percentage
of principal at which such Notes were tendered. In the offer, Thousand Trails
offered to spend a total of $12 million to purchase the principal amount of
Notes, plus an amount for accrued interest.
Fleet National Bank, as the Depository for the tender offer, will mail
checks for the accepted Notes and return the unaccepted Notes to the tendering
Noteholders in accordance with the Offer to Purchaser document and no later than
June 25, 1997.
Thousand Trials will borrow $12.6 million under its amended Loan Agreement
with Foothill Capital Corporation to fund its purchase of Notes pursuant to the
offer.
Thousand Trials and its subsidiaries own and operate a system of 58
membership-based campgrounds located in 19 states and British Columbia, Canada,
serving 123,000 members at March 31, 1997. Thousand Trails also provides a
reciprocal use program for members of approximately 300 recreational facilities.
###
For further information contact:
Harry J. White, Jr., (972) 243-2228
54
