<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998
Commission file number 0-19743
THOUSAND TRAILS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-2138671
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2711 LBJ FREEWAY, SUITE 200, DALLAS, TX 75234
- --------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 243-2228
-------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR
VALUE $.01 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------------- ---------------
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
At September 15, 1998, the latest practicable date, the aggregate market value
of voting common stock of the Registrant held by nonaffiliates was $16.1
million.
At September 15, 1998, there were 7,503,208 shares of Common Stock, $.01 par
value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10-13) is incorporated by reference
from the Registrant's definitive Proxy Statement for the Registrant's 1998
Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission (the "SEC") pursuant to Regulation 14A.
Page 2
<PAGE> 3
INDEX TO
ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I
Item 1. Business.............................................................................4
Item 2. Properties..........................................................................13
Item 3. Legal Proceedings...................................................................19
Item 4. Submission of Matters to a Vote of Security-Holders.................................19
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...............20
Item 6. Selected Financial Data.............................................................23
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations....................................................................25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..........................43
Item 8. Financial Statements and Supplementary Data.........................................44
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................................86
PART III
Item 10. Directors and Executive Officers of the Registrant..................................87
Item 11. Executive Compensation..............................................................87
Item 12. Security Ownership of Certain Beneficial Owners and Management......................87
Item 13. Certain Relationships and Related Transactions......................................87
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................88
Signature Page.......................................................................................100
</TABLE>
Page 3
<PAGE> 4
PART I
ITEM 1. BUSINESS
OVERVIEW
GENERAL. Thousand Trails, Inc., a Delaware corporation ("Thousand Trails"), is
the successor by merger to USTrails Inc., a Nevada corporation ("USTrails").
Thousand Trails and its subsidiaries (the "Company") own and operate a system of
53 membership-based campgrounds located in 17 states and British Columbia,
Canada, serving 111,000 members as of June 30, 1998. Through its subsidiaries,
the Company also provides a reciprocal use program for members of approximately
325 recreational facilities and manages 130 public campgrounds for the US Forest
Service. The Company's principal executive office is located at 2711 LBJ
Freeway, Suite 200, Dallas, Texas 75234, its telephone number is (972) 243-2228,
and its home page on the Internet is www.1000trails.com.
The Company entered the membership campground business on June 30, 1991, with
the acquisition of 100% of the capital stock of National American Corporation, a
Nevada corporation (collectively with its subsidiaries, "NACO") and 69% of the
capital stock of Thousand Trails, Inc., a Washington corporation (collectively
with its subsidiaries, "Trails"). The Company subsequently increased its
ownership in Trails to 100% through a tender offer and merger and, on July 16,
1996, Trails was merged into the Company. Prior to acquiring NACO and Trails,
the Company purchased contracts receivable generated by them from the sale of
campground memberships on the installment basis. The Company was incorporated in
1984, NACO was incorporated in 1967, and Trails was incorporated in 1969. On
November 20, 1996, the Company, then known as USTrails, reincorporated in the
state of Delaware and changed its name to Thousand Trails, Inc.
CURRENT BUSINESS STRATEGY. The Company's current business strategy is to improve
its campground operations and stabilize its campground membership base through
increased sales and marketing efforts or the possible acquisition of members
through the purchase of other membership campground operations. The Company
believes there is a viable market for campground memberships and that it has a
significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. The Company also believes that it
may be possible to acquire members through the purchase of other membership
campground operations, many of whom are experiencing financial difficulties.
The Company's membership base has been declining. In response to this decline,
the Company has downsized its business by closing and disposing of campgrounds
and decreasing campground operating costs and general and administrative
expenses. The Company intends to continue to keep the size of its campground
system in an appropriate relation to the size of its membership base. In this
regard, if the membership continues to
Page 4
<PAGE> 5
decline, the Company may close and dispose of additional campgrounds and it will
seek to decrease other expenses. At the same time, the Company intends to expand
its sales and marketing efforts with a view to stopping the membership decline.
The Company also intends to explore the possible acquisition of members through
the purchase of other membership campground organizations. The Company believes
that the ultimate size of its campground system and the amounts realized from
future asset sales will depend principally upon the degree to which the Company
can successfully implement this strategy.
DEBT RESTRUCTURING. On July 17, 1996, the Company consummated a restructuring of
its outstanding debt (see "Liquidity and Capital Resources - Debt Restructuring"
in Item 7). This restructuring provided the Company with a new capital structure
and decreased the Company's outstanding debt to a level the Company believes it
can support under its downsized operations.
CAMPGROUND OPERATIONS
CAMPGROUNDS. The Company and its subsidiaries own and operate a network of 53
membership-based campgrounds located in 17 states and British Columbia, Canada.
The Company owns and operates a network of 32 of these campgrounds under the
Thousand Trails logo, and NACO owns and operates a network of 21 of these
campgrounds under the NACO logo. The 53 campgrounds contain a total of
approximately 9,700 acres and 17,700 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 June 30, 1998, there were
approximately 73,000 campground members in the Thousand Trails system and 38,000
campground members in the NACO system. However, approximately 38% of the NACO
campground members and approximately 54% 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 provide the member's family access to the Company's network of
campgrounds, but do not convey a deeded interest in the campgrounds with the
exception of six campgrounds in which members received deeded 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 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
Page 5
<PAGE> 6
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.
EXISTING MEMBERSHIP. At June 30, 1998, the Company had 111,000 campground
members. The majority of these members have been members for over 10 years. The
Company's membership base has declined significantly over the past five fiscal
years and, net of new sales, the membership base is presently declining at the
rate of approximately 6% per year (excluding 1,800 members lost in connection
with the sale of two campgrounds in fiscal 1998). The Company attributes this
continuing decline principally to its aging membership base, of whom
approximately 50% are senior citizens. In addition, the Company estimates that
the memberships sold in recent fiscal years will have an expected life that is
significantly shorter than the expected life of the memberships previously sold
by the Company. To stop the continuing decline in its membership base, the
Company must significantly increase its campground membership sales over current
levels.
MEMBERSHIP SALES. As noted above, the majority of the Company's existing members
have been members for over 10 years. The Company's membership sales declined
significantly in the early 1990's due to increasing marketing costs and other
factors. 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,
the Company determined that it should increase its sales and marketing efforts
in order to replenish its declining campground membership base, and 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. In recent years, the Company has focused its membership sales
efforts primarily on guests referred by existing members and customers referred
by RV dealers and RV manufacturers, who management believes are more likely to
purchase memberships.
The Company's current 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 $1,595 to $2,995. In addition, the
membership products offer a choice of annual dues levels ranging from $199 for
14 nights of use to $1,200 for up to 365 nights of use. The member is charged a
nightly fee for camping more days than are included in the dues option selected.
During fiscal 1998 and 1997, the Company sold approximately 2,900 and 3,400 new
memberships, respectively. The average sales price was $1,164 in fiscal 1998 and
$707 in fiscal 1997, and the average annual dues level was $377 in fiscal 1998
and $332 in fiscal 1997. During the past two fiscal years, the Company offered
financing for certain of its higher priced sales. The Company required a down
payment of at least 25% of the sales price and would finance the balance for
periods of up to 36 months. The Company estimates that the memberships sold in
recent fiscal years will have an expected life that is significantly shorter
than the expected life of the memberships previously sold by the Company.
Page 6
<PAGE> 7
The Company has the capacity to sell approximately 66,000 additional new
campground memberships in the future, assuming the sale of ten memberships for
each existing campsite. Further downsizing of the Company's business would
reduce this capacity.
MARKETING. The Company's research indicates that camping is a popular and
growing activity in the United States. Camping was the fourth largest
participant sport/activity in the United States in 1997 with approximately 20%
of all households camping at least once a year. Sales of camping equipment
totaled $1.6 billion in 1997, up slightly from $1.5 billion annually in 1996 and
1995. In addition, although RV sales have been relatively flat over the last
several years, a recent study by the University of Michigan Survey Research
Center reported that RV sales revenues are expected to grow 4% annually for at
least the next 10 years. Moreover, the Company believes the aging of the baby
boomers will have a positive effect on sales of camping equipment and RVs, and
lead to further growth in family camping. The Company's campgrounds are located
in markets containing approximately 25% of all camping households in the United
States.
While most campers use national or state parks, the Company believes that it has
a significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. Based on the Company's research,
approximately 35% of campers are "amenity" campers, whose needs match the
benefits provided by the Company's campgrounds, such as pools, lodges, sport
courts, and recreational activities. The Company believes the needs of amenity
campers are not being met by underfunded national and state campgrounds. In
addition, the Company believes that it can differentiate its campgrounds and
services from other campgrounds by emphasizing the quality of its facilities and
the benefits and services available at its campgrounds.
DUES. The Company's campground members currently pay annual dues ranging
generally from $100 to $600. The annual dues collected from campground members
constitute general revenue of the Company. The Company uses the dues to fund its
operating expenses, including corporate expenses and the maintenance and
operation of the campgrounds. However, 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 was $351 for
the year ended June 30, 1998, $344 for the year ended June 30, 1997, and $335
for the year ended June 30, 1996. The increases resulted primarily from the
annual increase in dues implemented by the Company in accordance with the terms
of the membership agreements. In addition, the Company's new members generally
pay annual dues at a higher level than the older members retiring from the
system.
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 35% of the members have requested that their dues be frozen
because of their age or disability. The Company estimates that
Page 7
<PAGE> 8
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 makes annual capital and maintenance
expenditures to maintain and improve the campgrounds. During fiscal 1998, the
Company spent $5.2 million on major maintenance, repairs, and capital
improvements at the campgrounds and anticipates that it will spend an additional
$4.7 million on such items in fiscal 1999. The Company may be required to spend
greater amounts on such items in future years as the facilities age.
RESORT PARKS INTERNATIONAL. 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 a reciprocal program operated by Resort Parks
International, Inc. ("RPI"), a wholly owned subsidiary of the Company. The RPI
program offers members reciprocal use of approximately 325 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 June 30, 1998, there were approximately 96,000 RPI
members, of which approximately 80,000 were members of campgrounds that are not
affiliated with the Company.
CAMPGROUND MANAGEMENT. UST Wilderness Management Corporation ("Wilderness
Management"), a wholly owned subsidiary of the Company, manages 130 public
campgrounds for the US Forest Service containing a total of 3,300 campsites.
Pursuant to its management contracts with the US Forest Service, Wilderness
Management incurs the expenses of operating the campgrounds and receives the
related revenues, net of a fee paid to the US Forest Service. These management
contracts typically have five year terms.
RESORT OPERATIONS
Over the past several years, NACO has been selling the assets it owns at eight
resorts located in seven states. NACO's interest in the resorts presently
consists of approximately 100 residential lots and other miscellaneous real
estate that NACO intends to sell over the next several years.
SEGMENT FINANCIAL INFORMATION
Segment financial information for the campground and resort operations is set
forth in Note 14 to the consolidated financial statements included in Item 8.
ASSET SALES
During fiscal 1998, 1997, and 1996, the Company sold certain of its real estate
assets and received proceeds of $8.6 million, $4.7 million, and $7.2 million,
respectively. During this three-year period, the Company sold the timeshare
operations at the resorts, the country club and golf operations at one resort,
and various other properties at the resorts.
Page 8
<PAGE> 9
In addition, the Company sold or otherwise disposed of various campgrounds and
sold unused buildings and trailers, and excess acreage associated with certain
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, excess acreage associated with the
campgrounds. The sale of campgrounds requires 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 sale opportunities or the
ability of the Company to realize recoveries from asset sales. In addition,
although the Company has successfully sold assets during the past several years,
no assurance exists that the Company will be able to locate a buyer for any of
the remaining assets or that sales on acceptable terms can be effected.
When there are outstanding borrowings under the Credit Agreement (as amended,
the "Credit Agreement"), between the Company and Foothill Capital Corporation
("Foothill"), all proceeds from asset sales must be paid to Foothill and applied
to reduce such borrowings.
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. This portfolio has declined significantly over the past
five fiscal years as the Company has collected the outstanding contracts
receivable. Since April 1992, the Company has sold only a limited number of
campground memberships and resort interests on an installment basis and, as a
result, the portfolio of contracts receivable will continue to decline.
Interest accrues 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 generally
from 9.5% to 16%, with a weighted average stated interest rate of 13% as of June
30, 1998. Monthly installment payments range generally from $34 to $223 over the
term of the contracts receivable, which can be up to ten years. The terms of
most newer contracts receivable, however, have averaged two years or less. At
June 30, 1998, 97% of the campground members and 99% of the purchasers of resort
interests had paid for their membership or resort interest in full, and the
remaining outstanding contracts receivable had an average remaining term of 19
months.
As of June 30, 1998, the Company owned contracts receivable with an aggregate
principal balance of $6.8 million, consisting of $6.4 million of contracts
receivable associated with the campgrounds and $401,000 of contracts receivable
associated with the resorts (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Contracts Receivable " in Item
7).
When there are outstanding borrowings under the Credit Agreement between the
Company and Foothill, all collections on the contracts receivable, including
principal, interest, and fees, must be paid to Foothill and applied to reduce
such borrowings.
Page 9
<PAGE> 10
SEASONALITY
The Company experiences its most significant demand for working capital between
May and October of each year, which period coincides with the highest level of
operating expenses. During the summer, operating expenses increase significantly
because the peak usage of the campgrounds requires seasonal workers and
increased maintenance and operating expenses. In addition, the majority of the
Company's sales and marketing efforts occur during the spring and summer. On the
other hand, most dues collection activity for campground members occurs during
the months of November through April, which is a period of relatively lower
expenses.
GOVERNMENT REGULATION
To operate its campgrounds, the Company must comply with major discretionary
permits or approvals issued by local governments under local zoning ordinances,
master plans for shoreline use, and state environmental policy statutes. The
Company has complied in all material respects with the discretionary permits and
approvals regulating its existing operations.
In addition, to construct improvements at its campgrounds, the Company has
usually been required to obtain permits that are typically non-discretionary and
routinely issued such as building and sanitary sewage permits. The Company has
generally resolved problems concerning the issuance of such permits through
design, operating, or engineering solutions negotiated with local government
officials.
The Company's campgrounds are also subject to a variety of federal and state
environmental statutes and regulations. Certain environmental issues may exist
at some of the campgrounds concerning underground storage tanks, sewage
treatment plants and septic systems, and waste disposal. Management believes
that these issues will not have a material adverse impact on the Company's
operations or financial position, as the Company has conducted environmental
testing to identify and correct a number of these problems, and has removed
substantially all of the underground storage tanks. The Company does not possess
insurance or indemnification agreements with respect to any environmental
liability that it may incur.
Most of the states in which the Company does business have laws regulating
campground membership and lot sales. These laws generally require comprehensive
disclosure to prospective purchasers, and give purchasers the right to rescind
their purchase for three-to-five days after the date of sale. Some states have
laws requiring the Company to register with a state agency and obtain a permit
to market.
In some states, including California, Oregon, and Washington, laws place
limitations on the ability of the owner of a campground to close the campground
unless the members at the campground receive access to a comparable campground.
In these states, members from campgrounds that have been closed by the Company
were reassigned to other campgrounds located in the same general area as the
closed campgrounds. The impact of the rights of members under these laws is
uncertain and could adversely affect the
Page 10
<PAGE> 11
implementation of, and the benefits or recoveries that may be available from,
additional downsizing of the Company's business.
The government authorities regulating the Company's activities have broad
discretionary power to enforce and interpret the statutes and regulations that
they administer, including the power to enjoin or suspend sales activities,
require or restrict construction of additional facilities, and revoke licenses
and permits relating to business activities. The Company monitors its sales
presentations and debt collection activities to control practices that might
violate consumer protection laws and regulations or give rise to consumer
complaints. The Company believes that it has conducted its sales programs and
debt collection activities in substantial compliance with all applicable federal
and state laws and regulations.
Certain consumer rights and defenses that vary from jurisdiction to jurisdiction
may affect the Company's portfolio of contracts receivable. Examples of such
laws include state and federal consumer credit and truth-in-lending laws
requiring the disclosure of finance charges, and usury and retail installment
sales laws regulating permissible finance charges. The Company believes that it
has complied in all material respects with these laws.
In certain states, as a result of government regulations and provisions in
certain of the membership agreements, the Company is prohibited from selling
more than 10 memberships per campsite. At the present time, these restrictions
do not preclude the Company from selling memberships in any state. However,
these restrictions may limit the Company's ability to downsize by closing
campgrounds and reassigning members to other campgrounds. In addition,
membership agreements or understandings, or governmental interpretations
thereof, may limit the Company's ability to expand or modify the type of
business activities conducted at the campgrounds.
In a decision to which the Company was not a party, the Mississippi Supreme
Court ruled that the Mississippi Timeshare Rules apply to the sale of campground
memberships in Mississippi. The Company has discussed the ramifications of this
decision with the Mississippi state agency responsible for the administration of
these rules. The Company does not believe that the agency will require the
Company to rescind any sales of campground memberships because of the decision;
however, the agency has the power to do so. The Company has sold $15.9 million
of campground memberships in Mississippi.
COMPETITION
There are approximately 15,000 privately owned campgrounds in the United States
today, of which approximately 500 are membership campgrounds. The balance of the
campgrounds are generally open to the public and usually charge fees based on
the length of stay. The 500 membership campgrounds have approximately 400,000
members, of which 111,000 are the Company's members.
Several companies compete directly with the Company's campground operations. For
example, Resorts USA, Inc., which does business as Outdoor World, sells
memberships to its system of 14 campgrounds, Travel America, Inc. (formerly All
Seasons Resorts, Inc.
Page 11
<PAGE> 12
and Thousand Adventures, Inc.) sells memberships to its system of 37
campgrounds, and Leisure Time Resorts, Inc. sells memberships to its system of
ten campgrounds. Other companies or individuals operate the balance of the
membership campgrounds. The Company's direct competitors generally offer their
members reciprocal use of other campgrounds through affiliations. Over the past
several years, many of the Company's direct competitors have experienced
financial difficulties, and several competitors have filed for bankruptcy.
The vast majority of the campgrounds in the United States are operated for the
public by Federal, state, and local governments. Although these public
campgrounds are used by most campers, in recent years, many of these public
campgrounds have experienced overcrowding and increased user fees. The Company's
campgrounds also compete indirectly with timeshare resorts and other types of
recreational land developments that do not involve camping.
The Company's campground operations compete on the basis of location and the
quality of facilities and services offered at the campgrounds. The Company
believes it has a significant opportunity to compete for campers interested in
higher quality facilities and a higher level of service than is typically
available at public campgrounds or competing private campgrounds (see
"Marketing").
Wilderness Management competes directly with approximately four other companies
in bidding for contracts to manage public campgrounds for the US Forest Service.
Wilderness Management currently has contracts to manage 130 of the approximately
3,000 campgrounds operated for the US Forest Service by private companies.
Coast to Coast Resorts, RPI's primary competitor and the largest reciprocal use
system, has approximately 370 affiliated campgrounds and more than 250,000
members. Both RPI and Coast to Coast Resorts operate vacation clubs offering
travel and lodging discounts and services to their members.
EMPLOYEES
As of June 30, 1998, the Company had 1,355 full-time equivalent employees. Due
to the seasonal nature of the Company's business, the Company has a greater
number of employees during the summer months. The Company does not have any
collective bargaining agreements with its employees and considers its relations
with employees to be satisfactory.
Page 12
<PAGE> 13
ITEM 2. PROPERTIES
OFFICES. The Company leases office space at 2711 LBJ Freeway, Suite 200, Dallas,
Texas 75234. NACO leases office space at 2325 Highway 90, Gautier, Mississippi
39553. RPI leases office space at 3711 Long Beach Blvd., Suite 110, Long Beach,
California 90807.
CAMPGROUNDS. The Company currently operates 53 campgrounds in 17 states and
British Columbia, Canada. The locations of these campgrounds are shown on the
map on page 15. The amenities presently available at each campground are listed
on the chart on page 16. The Company owns 52 of these campgrounds and leases the
LaConner campground and portions of the Lake Tawakoni and Snowflower
campgrounds. The Company has sold undivided interests to members at six of the
campgrounds. Of the 53 campgrounds, 25 operate all year, 21 operate year-round
but provide only limited services during the off-season, and seven operate
seasonally only.
ENCUMBRANCES. The Company has granted liens on substantially all of its assets
to secure its obligations under the Credit Agreement between the Company and
Foothill. The Company repaid all outstanding borrowings under the Credit
Agreement in January 1998, and it had no outstanding borrowings under the Credit
Agreement as of the date of this report. However, the Company has entered into
an amendment to the Credit Agreement that will provide the Company the
flexibility to borrow up to $35.0 million (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7). All of
the Company's subsidiaries (other than an immaterial utility subsidiary)
(collectively, the "Subsidiary Guarantors") have fully and unconditionally
guaranteed, on a joint and several basis, the Company's obligations under the
Credit Agreement, and subject to certain limitations, have granted liens on
substantially all of their assets to secure their guarantees.
NACO has also granted liens, subject to certain limitations, on substantially
all of its assets to secure the repayment of its indebtedness to the Company,
which totaled approximately $28.0 million as of the date of this report. These
security interests were subordinated to the security interests securing the
guarantees of the Credit Agreement. The indebtedness that these security
interests secure, however, is pledged by the Company to Foothill to secure its
obligations under the Credit Agreement, and these security interests have been
collaterally assigned to Foothill. Furthermore, the subsidiaries of NACO each
guaranteed their parent's indebtedness to the Company and granted security
interests in substantially all of their assets to secure such guarantees.
The Subsidiary Guarantors have also fully and unconditionally guaranteed, on a
joint and several basis, the Company's obligations under the Senior Subordinated
Pay-In-Kind Notes Due 2003 (the "PIK Notes") that were issued on July 17, 1996,
as well as the PIK Notes issued in lieu of cash payment of interest. The PIK
Notes are presently unsecured and will remain unsecured until the amended Credit
Agreement terminates on July 17, 2002. However, if the Company has not repaid in
full or otherwise retired all of the PIK Notes by July 15, 2000, all borrowings
under the amended Credit Agreement in excess of $10.0 million will mature on
July 15, 2000, and up to $10.0 million of borrowings under the amended Credit
Agreement will be refinanced on such date and thereafter be available
Page 13
<PAGE> 14
to the Company for working capital purposes only. This $10.0 million working
capital facility will then become the Working Capital Replacement Facility
defined in the Indenture for the PIK Notes. Upon the termination of the amended
Credit Agreement, the PIK Notes will be secured by the same assets as then
secure the amended Credit Agreement other than cash and cash equivalents and
other assets required to secure a new Working Capital Replacement Facility,
which may provide borrowings for working capital purposes only up to $10.0
million in principal amount. Any new Working Capital Replacement Facility may be
secured by substantially all of the assets of the Company and its subsidiaries
other than certain excluded assets.
Some states, including California, Oregon, and Washington, have nondisturbance
statutes that place limitations on the ability of the owner of a campground to
sell or close, or a lienholder to foreclose a lien on, a campground. In certain
states, these statutes permit sale, closure, or foreclosure if the holders of
related memberships receive access to a comparable campground. The mortgages on
the Company's campgrounds that were granted to secure the Company's obligations
under the Credit Agreement, and any mortgages on the Company's campgrounds that
are granted in the future to secure the Company's obligations under the PIK
Notes, contain or will contain similar nondisturbance provisions. As a
consequence, although the Company may be able to sell or close some of its
campgrounds as it has done in the past, a sale or closure of significant numbers
of campgrounds would likely be limited by state law or the membership contracts
themselves, and a foreclosure of liens on significant numbers of campgrounds
would also likely be limited. The impact of the rights of members under these
laws and nondisturbance provisions is uncertain and could adversely affect the
availability or timing of sale opportunities or the ability of the Company or
lienholder to realize recoveries from asset sales.
OTHER. The Company owns approximately 100 residential lots and other
miscellaneous real estate at eight resorts located in seven states, and various
other parcels of undeveloped real estate, that it intends to sell over time.
Page 14
<PAGE> 15
THOUSAND TRAILS, INC.
CAMPGROUNDS
[A MAP OF THE UNITED STATES OF AMERICA WITH PLOT POINTS DEPICTING THOUSAND
TRAILS AND NACO CAMPGROUND LOCATIONS APPEARS HERE]
<TABLE>
<CAPTION>
* THOUSAND TRAILS CAMPGROUNDS * NACO CAMPGROUNDS
--------------------------- ----------------
<S> <C> <C> <C>
BRITISH COLUMBIA TEXAS WASHINGTON INDIANA
Cultus Lake Medina Lake Birch Bay Indian Lakes
Lake Conroe Little Diamond
WASHINGTON Colorado River Rainier VIRGINIA
LaConner Lake Whitney Long Beach Virginia Landing
Mount Vernon Lake Texoma
Chehalis Lake Tawakoni OREGON NEW JERSEY
Leavenworth South Jetty Chestnut Lakes
MICHIGAN
OREGON Saint Clair CALIFORNIA
Bend Lake Minden
Pacific City INDIANA Russian River
Horseshoe Lakes Snowflower
CALIFORNIA Turtle Beach
Lake of the Springs OHIO Yosemite
Morgan Hill Wilmington Windsor
San Benito Kenissee Lake Rancho Oso
Soledad Canyon Wilderness Lakes
Idyllwild PENNSYLVANIA
Pio Pico Hershey TEXAS
Oakzanita Springs Bay Landing
Palm Springs VIRGINIA
Lynchburg MISSISSIPPI
NEVADA Chesapeake Bay Indian Point
Las Vegas
NORTH CAROLINA SOUTH CAROLINA
ARIZONA Forest Lake Carolina Landing
Verde Valley
TENNESSEE
FLORIDA Natchez Trace
Orlando Cherokee Landing
</TABLE>
Page 15
<PAGE> 16
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CAMPGROUND
FACILITIES AND
AMENITIES ACREAGE RV SITES TENT SITES ADULT LODGE FAMILY CENTER/PAVILION POOL TENNIS COURT ATHLETIC COURT VEHICLE STORAGE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THOUSAND TRAILS:
- ------------------------------------------------------------------------------------------------------------------------------------
BEND 93 300 10 1 1 2 2 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
CHEHALIS 306 278 1 1 2 2 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
CHESAPEAKE BAY 280 373 19 1 1 2 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
COLORADO RIVER 217 128 1 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
CULTUS LAKE 14 185 12 1 1 1 2 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
FOREST LAKE 205 294 12 1 1 2 2 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
HERSHEY 196 310 1 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
HORSESHOE LAKES 202 118 1 2 2 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
IDYLLWILD 181 287 38 1 1 1 3 1
- ------------------------------------------------------------------------------------------------------------------------------------
KENISEE LAKE 159 83 10 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
LACONNER 106 313 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
LAKE CONROE 130 285 1 1 1 2 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
LAKE OF THE SPRINGS 176 541 12 1 1 1 1 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
LAKE TAWAKONI 300 318 1 1 1 2 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
LAKE TEXOMA 198 319 2 1 1 2 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
LAKE WHITNEY 253 244 3 1 1 2 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
LAS VEGAS 11 217 2 1 1 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
LEAVENWORTH 279 275 1 1 2 4 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
LYNCHBURG 150 223 1 1 1 2 6 1
- ------------------------------------------------------------------------------------------------------------------------------------
MEDINA LAKE 260 387 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
MORGAN HILL 62 317 28 1 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
MOUNT VERNON 185 248 3 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
OAKZANITA SPRINGS 118 121 30 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
ORLANDO 269 734 1 1 2 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
PACIFIC CITY 105 305 1 1 1 1 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
PALM SPRINGS 28 392 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
PIO PICO 182 453 12 1 1 2 5 3
- ------------------------------------------------------------------------------------------------------------------------------------
SAN BENITO 200 517 51 1 1 2 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
SOLEDAD CANYON 230 809 9 1 1 2 2 3 1
- ------------------------------------------------------------------------------------------------------------------------------------
SAINT CLAIR 110 110 8 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
VERDE VALLEY 300 333 6 2 1 1 2
- ------------------------------------------------------------------------------------------------------------------------------------
WILMINGTON 109 125 1 1 1 1 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
NACO:
- ------------------------------------------------------------------------------------------------------------------------------------
BAY LANDING 305 257 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
BIRCH BAY 30 215 8 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
CAROLINA LANDING 119 193 1 2 2 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
CHEROKEE LANDING 55 341 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
CHESTNUT LAKE 31 179 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
INDIAN LAKES 545 1202 50 2 1 3 2 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
INDIAN POINT 11 157 1 2 1
- ------------------------------------------------------------------------------------------------------------------------------------
LAKE MINDEN 97 162 161 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
LITTLE DIAMOND 200 541 100 1 4 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
LONG BEACH 17 120 20 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
NATCHEZ TRACE 623 561 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
RAINIER 107 609 300 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
RANCHO OSO 310 118 50 1 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
RUSSIAN RIVER 42 125 30 1
- ------------------------------------------------------------------------------------------------------------------------------------
SNOWFLOWER 720 248 10 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH JETTY 60 162 10 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
TURTLE BEACH 39 72 120 1
- ------------------------------------------------------------------------------------------------------------------------------------
VIRGINIA LANDING 339 210 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
WILDERNESS LAKES 74 523 5 1 1 2 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
WINDSOR 17 95 25 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
YOSEMITE LAKES 387 379 131 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 16
<PAGE> 17
<TABLE>
<CAPTION>
TRAILERS
RESTROOMS/SHOWERS (Seasonal Availability) HORSESHOE PITS CHILDREN'S PLAY AREA TRADING POST MINIATURE GOLF
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THOUSAND TRAILS:
- ---------------------------------------------------------------------------------------------------------------------------------
BEND 6 17 4 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
CHEHALIS 8 9 7 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
CHESAPEAKE BAY 4 45 6 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
COLORADO RIVER 2 10 4 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
CULTUS LAKE 4 5 2 2 1
- ---------------------------------------------------------------------------------------------------------------------------------
FOREST LAKE 3 16 4 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
HERSHEY 3 38 4 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
HORSESHOE LAKES 2 11 4 10 1
- ---------------------------------------------------------------------------------------------------------------------------------
IDYLLWILD 6 35 4 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
KENISEE LAKE 2 2 2 1
- ---------------------------------------------------------------------------------------------------------------------------------
LACONNER 6 18 6 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LAKE CONROE 4 21 8 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LAKE OF THE SPRINGS 12 36 8 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LAKE TAWAKONI 5 22 8 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LAKE TEXOMA 6 17 6 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LAKE WHITNEY 5 22 8 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LAS VEGAS 3 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LEAVENWORTH 8 5 5 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LYNCHBURG 5 5 7 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
MEDINA LAKE 4 34 4 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
MORGAN HILL 7 24 4 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
MOUNT VERNON 6 5 4 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
OAKZANITA SPRINGS 2 13 4 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
ORLANDO 7 33 6 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
PACIFIC CITY 5 18 12 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
PALM SPRINGS 4 35 4 1
- ---------------------------------------------------------------------------------------------------------------------------------
PIO PICO 8 24 12 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
SAN BENITO 7 28 4 4 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
SOLEDAD CANYON 14 53 13 7 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
SAINT CLAIR 3 13 2 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
VERDE VALLEY 3 16 8 3 1
- ---------------------------------------------------------------------------------------------------------------------------------
WILMINGTON 2 13 2 2 1
- ---------------------------------------------------------------------------------------------------------------------------------
NACO:
- ---------------------------------------------------------------------------------------------------------------------------------
BAY LANDING 2 6 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
BIRCH BAY 3 13 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
CAROLINA LANDING 4 4 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
CHEROKEE LANDING 3 3 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
CHESTNUT LAKE 1 16 2 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
INDIAN LAKES 5 8 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
INDIAN POINT 2 3 1 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LAKE MINDEN 3 15 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
LITTLE DIAMOND 5 4 3 3 1
- ---------------------------------------------------------------------------------------------------------------------------------
LONG BEACH 2 6 2 2 1
- ---------------------------------------------------------------------------------------------------------------------------------
NATCHEZ TRACE 5 1 4 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
RAINIER 10 10 8 2 1
- ---------------------------------------------------------------------------------------------------------------------------------
RANCHO OSO 3 4 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
RUSSIAN RIVER 4 10 2
- ---------------------------------------------------------------------------------------------------------------------------------
SNOWFLOWER 11 7 3 1
- ---------------------------------------------------------------------------------------------------------------------------------
SOUTH JETTY 5 15 3 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
TURTLE BEACH 2 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
VIRGINIA LANDING 3 2 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
WILDERNESS LAKES 8 34 6 2 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
WINDSOR 1 7 3 1
- ---------------------------------------------------------------------------------------------------------------------------------
YOSEMITE LAKES 8 24 4 1 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 17
<PAGE> 18
<TABLE>
<CAPTION>
SHUFFLE BOARD SPA VOLLEYBALL BOAT LAUNCH/MARINA LAUNDRY FACILITY CABINS/LODGING
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THOUSAND TRAILS:
- -----------------------------------------------------------------------------------------------------------------
BEND 1 1 1 7
- -----------------------------------------------------------------------------------------------------------------
CHEHALIS 1 1 1 1 4
- -----------------------------------------------------------------------------------------------------------------
CHESAPEAKE BAY 2 1 1 1 1 18
- -----------------------------------------------------------------------------------------------------------------
COLORADO RIVER 1 1 2 1 1
- -----------------------------------------------------------------------------------------------------------------
CULTUS LAKE 2 1 1
- -----------------------------------------------------------------------------------------------------------------
FOREST LAKE 2 2 1 1 18
- -----------------------------------------------------------------------------------------------------------------
HERSHEY 1 1 1
- -----------------------------------------------------------------------------------------------------------------
HORSESHOE LAKES 2 1 1
- -----------------------------------------------------------------------------------------------------------------
IDYLLWILD 2 1 3 4
- -----------------------------------------------------------------------------------------------------------------
KENISEE LAKE 1 1 1 1
- -----------------------------------------------------------------------------------------------------------------
LACONNER 3 1 1 1 1 17
- -----------------------------------------------------------------------------------------------------------------
LAKE CONROE 2 1 2 1 2
- -----------------------------------------------------------------------------------------------------------------
LAKE OF THE SPRINGS 1 1 1 1 3
- -----------------------------------------------------------------------------------------------------------------
LAKE TAWAKONI 8 2 2 1 1
- -----------------------------------------------------------------------------------------------------------------
LAKE TEXOMA 2 2 1 1 1 18
- -----------------------------------------------------------------------------------------------------------------
LAKE WHITNEY 2 1 2 1
- -----------------------------------------------------------------------------------------------------------------
LAS VEGAS 1 1 3
- -----------------------------------------------------------------------------------------------------------------
LEAVENWORTH 4 1 2 8
- -----------------------------------------------------------------------------------------------------------------
LYNCHBURG 2 1 2 1
- -----------------------------------------------------------------------------------------------------------------
MEDINA LAKE 4 1 2 1 1
- -----------------------------------------------------------------------------------------------------------------
MORGAN HILL 4 1 1
- -----------------------------------------------------------------------------------------------------------------
MOUNT VERNON 1 1 1 1
- -----------------------------------------------------------------------------------------------------------------
OAKZANITA SPRINGS 2 1 1 1
- -----------------------------------------------------------------------------------------------------------------
ORLANDO 16 1 1 1 4
- -----------------------------------------------------------------------------------------------------------------
PACIFIC CITY 1 1 1 4
- -----------------------------------------------------------------------------------------------------------------
PALM SPRINGS 2 1 3
- -----------------------------------------------------------------------------------------------------------------
PIO PICO 8 2 2 2
- -----------------------------------------------------------------------------------------------------------------
SAN BENITO 6 2 2 1
- -----------------------------------------------------------------------------------------------------------------
SOLEDAD CANYON 8 1 4 1
- -----------------------------------------------------------------------------------------------------------------
SAINT CLAIR 1 1 1 2
- -----------------------------------------------------------------------------------------------------------------
VERDE VALLEY 2 1 1 1
- -----------------------------------------------------------------------------------------------------------------
WILMINGTON 2 1 1 1
- -----------------------------------------------------------------------------------------------------------------
NACO:
- -----------------------------------------------------------------------------------------------------------------
BAY LANDING 4 1 1 1 19
- -----------------------------------------------------------------------------------------------------------------
BIRCH BAY 1 1
- -----------------------------------------------------------------------------------------------------------------
CAROLINA LANDING 1 1 18
- -----------------------------------------------------------------------------------------------------------------
CHEROKEE LANDING 2 1 1 30
- -----------------------------------------------------------------------------------------------------------------
CHESTNUT LAKE 2 1 1
- -----------------------------------------------------------------------------------------------------------------
INDIAN LAKES 2 3 1 3 54
- -----------------------------------------------------------------------------------------------------------------
INDIAN POINT 1 1 1 16
- -----------------------------------------------------------------------------------------------------------------
LAKE MINDEN 1 1
- -----------------------------------------------------------------------------------------------------------------
LITTLE DIAMOND 2 2 1 1 1
- -----------------------------------------------------------------------------------------------------------------
LONG BEACH 1 1
- -----------------------------------------------------------------------------------------------------------------
NATCHEZ TRACE 1 1 1 58
- -----------------------------------------------------------------------------------------------------------------
RAINIER 1 1 1
- -----------------------------------------------------------------------------------------------------------------
RANCHO OSO 1 2 2
- -----------------------------------------------------------------------------------------------------------------
RUSSIAN RIVER 1 1
- -----------------------------------------------------------------------------------------------------------------
SNOWFLOWER 2 1 1 4
- -----------------------------------------------------------------------------------------------------------------
SOUTH JETTY 2 1 1
- -----------------------------------------------------------------------------------------------------------------
TURTLE BEACH 1 1 1
- -----------------------------------------------------------------------------------------------------------------
VIRGINIA LANDING 2 1 1 1 19
- -----------------------------------------------------------------------------------------------------------------
WILDERNESS LAKES 3 3 1 4
- -----------------------------------------------------------------------------------------------------------------
WINDSOR 1 1
- -----------------------------------------------------------------------------------------------------------------
YOSEMITE LAKES 1 1 2 32
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 18
<PAGE> 19
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain claims and litigation arising in the normal
course of business. Management believes that the eventual outcome of these
claims and litigation will not have a material adverse impact on the Company's
financial position, operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
Page 19
<PAGE> 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET AND TRADING. On November 20, 1996, the Company, then known as USTrails,
reincorporated in the state of Delaware and changed its name to Thousand Trails,
Inc. From 1992 through November 20, 1996, the Company's common stock was
publicly traded in the over-the-counter market under the symbol USTQ. Since
November 20, 1996, the Company's common stock (the "Common Stock") has been
publicly traded in the over-the-counter market under the symbol TRLS. As the
Common Stock does not trade every day and the trading volume is often small, the
Common Stock may not be deemed to be traded in an established public trading
market. The following chart and table set forth for the fiscal periods
indicated, the high and low bid quotations for the Common Stock as quoted
through the NASD OTC Bulletin Board. Such quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
[A CHART WITH PLOT POINTS DEPICTING THE HIGH AND LOW BID QUOTATIONS FOR EACH OF
THE FOUR FISCAL QUARTERS OF 1998 AND 1997 APPEARS HERE]
<TABLE>
<CAPTION>
1998 1997
---------------------------------- -------------------------------
High Bid Low Bid High Bid Low Bid
------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
First Quarter 3 1/8 2 1/8 1 1/8 1/2
Second Quarter 5 3/8 3 1/8 1 5/16 15/16
Third Quarter 4 1/2 3 1/4 1 31/32 1 5/16
Fourth Quarter 4 1/4 3 1/2 2 7/16 1 3/4
</TABLE>
As of September 15, 1998, the Company's Common Stock was held by 97 holders of
record. Moreover, security position listings available to the Company listed
approximately 400 beneficial holders of Common Stock.
ABSENCE OF DIVIDENDS. Since inception, the Company has not paid any dividends.
The Credit Agreement prohibits the payment of any cash dividends on the Common
Stock without the consent of Foothill, until the Credit Agreement is terminated.
In addition, the
Page 20
<PAGE> 21
Indenture for the PIK Notes prohibits the payment of any cash dividends on the
Common Stock until the PIK Notes are repaid.
TRANSFER RESTRICTIONS. The Company's Common Stock is subject to transfer
restrictions designed to avoid an "ownership change" within the meaning of
Section 382 of the Internal Revenue Code of 1986, as amended ("the Code"). These
transfer restrictions are designed to help assure that the Company's substantial
net operating loss carryforwards ("NOLs"), which are estimated to total $26.9
million at June 30, 1998, will continue to be available to offset future taxable
income. Section 382 of the Code limits the use of NOLs and other tax benefits by
a company that has undergone an ownership change.
Such restrictions are set forth in Article IX of the Company's Restated
Certificate of Incorporation. Article IX generally restricts, until June 30,
2011 (or earlier in certain events), direct or indirect transfer of Common Stock
that would without the approval of the Board of Directors of the Company (i)
increase to more than 4.75% the percentage ownership of Common Stock of any
person who at any time during the preceding three-year period did not own more
than 4.75% of the Common Stock, (ii) increase the percentage of Common Stock
owned by any person that during the preceding three-year period owned more than
4.75% of the Common Stock, or by any group of persons treated as a "5 Percent
Shareholder" (as defined in the Code but substituting "4.75%" for "5 Percent"),
or (iii) cause an "ownership change" of the Company. Article IX provides that
any direct or indirect transfer of Common Stock in violation of Article IX is
void ab initio as to the purported transferee, and the purported transferee will
not be recognized as the owner of shares acquired in violation of Article IX for
any purpose, including for purposes of voting and receiving dividends or other
distributions in respect of Common Stock. Any shares purportedly acquired in
violation of Article IX will be transferred to a trustee who will be required to
sell them.
Generally, the transfer restrictions contain several exceptions. For example,
the restrictions will not prevent a transfer if, in the determination of the
Board of Directors of the Company, the transfer does not result in any greater
aggregate increase in Common Stock ownership by 5% shareholders. Also, the
restrictions will not prevent a transfer if the purported transferee obtains the
approval of the Board of Directors of the Company, which approval shall be
granted or withheld in the sole and absolute discretion of the Board of
Directors, after considering all facts and circumstances including, but not
limited to, future events deemed by the Board of Directors to be relevant.
Finally, the transfer restrictions only apply with respect to the amount of
Common Stock purportedly transferred in excess of the threshold established in
the transfer restrictions.
These transfer restrictions (i) may have the effect of impeding the attempt of a
person or entity to acquire a significant or controlling interest in the
Company, (ii) may render it more difficult to effect a merger or similar
transaction even if such transaction is favored by a majority of the
stockholders, and (iii) may serve to make a change in management more difficult.
The purpose of the transfer restrictions is to preserve tax benefits, however,
not to insulate the Company or management from change. The Company believes the
tax benefits of the transfer restrictions outweigh any anti-takeover effect they
may have.
Page 21
<PAGE> 22
The application of these transfer restrictions to any particular stockholder
will depend on the stockholder's ownership of Common Stock, determined after
applying numerous attribution rules prescribed by the Code and related
regulations, and will also depend on the history of trading of the Common Stock.
As a result, stockholders are urged to consult their tax advisors with respect
to any planned purchase or sale of Common Stock.
Page 22
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
The following historical Selected Financial Data has been restated for the
fiscal years indicated because for fiscal 1997 the Company changed its
accounting method to recognize revenue from the sale of campground memberships
that do not convey a deeded interest in real estate on a straight-line basis
over the expected life of the memberships sold (see Note 1 to the consolidated
financial statements included in Item 8).
<TABLE>
<CAPTION>
For the year ended June 30,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- ---------- ----------
(Restated) (Restated) (Restated)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Total revenue $ 76,509 $ 78,413 $ 91,022 $ 91,392 $ 101,697
Campground membership dues 37,330 39,945 39,924 41,175 43,200
Other campground/resort revenues 16,475 17,906 22,288 23,506 23,524
Membership and resort interest sales 3,894 3,477 3,013 4,074 4,750
Interest income 2,635 3,726 6,756 9,935 12,202
Interest expense 4,599 9,084 17,693 20,960 21,446
Income (loss) from operations before taxes,
minority interest and extraordinary item 15,716 7,169 (240) (11,573) (5,338)
Extraordinary gain on debt repurchases -- -- 1,390 -- 671
Net income (loss) 24,879 6,799 1,109 (11,828) (5,417)
Dividends paid (1) -- -- -- -- --
Income (loss) per share data-basic (2):
Income (loss) before extraordinary item 3.36 .94 (.08) (3.19) (1.64)
Extraordinary item -- -- .38 -- .18
Net income (loss) 3.36 .94 .30 (3.19) (1.46)
Weighted average shares 7,407 7,223 3,703 3,703 3,703
Income (loss) per share data-diluted (2):
Income (loss) before extraordinary item 2.96 .88 (.08) (3.19) (1.64)
Extraordinary item -- -- .38 -- .18
Net income (loss) 2.96 .88 .30 (3.19) (1.46)
Weighted average shares 8,398 7,704 3,721 3,703 3,703
BALANCE SHEET DATA (AT END OF YEAR):
Cash and cash equivalents 13,631 1,343 37,403 50,596 50,596
Receivables, net 4,181 7,517 13,219 18,698 32,585
Campground properties 37,991 42,764 46,309 51,960 49,761
Resort properties 1,092 1,530 2,902 5,736 6,612
Total assets 74,262 63,302 111,631 137,517 149,546
PIK Notes, including deferred gain 32,973 29,393 -- -- --
Borrowings under Credit Agreement -- 14,097 -- -- --
Secured Notes, net of discount -- -- 94,350 115,490 110,854
Other notes payable -- 604 1,102 4,753 5,503
Stockholders' equity (deficit) 2,754 (22,168) (31,952) (33,054) (21,240)
STATISTICAL DATA (AT END OF YEAR):
Number of operating campgrounds 53 55 58 60 62
Number of campsites 17,700 18,400 19,300 19,400 20,000
Number of members 111,000 120,000 128,000 136,000 149,000
Average annual dues per member $ 351 $ 344 $ 335 $ 329 $ 315
Average cost per camper night $ 18.23 $ 18.13 $ 18.03 $ 19.69 $ 18.36
</TABLE>
(continued)
Page 23
<PAGE> 24
(continued)
FOOTNOTES
(1) During the periods presented, the Company has been prohibited from paying
any cash dividends by the indentures governing its Secured Notes and PIK
Notes, and by the Credit Agreement with Foothill.
(2) As part of a restructuring of the Company, on July 17, 1996, the Company
issued 3,680,550 additional shares of Common Stock, which represent 49%
of the shares of Common Stock currently outstanding.
Page 24
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In this Management's Discussion and Analysis of Financial Condition and Results
of Operations, and elsewhere in this report, the Company makes certain
statements as to its expected financial condition, results of operations, cash
flows, and business strategies, plans, and conditions for periods after June 30,
1998. All of these statements are forward-looking statements made pursuant to
the safe harbor provisions of Section 21 (E) of the Securities Exchange Act of
1934, as amended. These statements are not historical and involve risks and
uncertainties. The Company's actual financial condition, results of operations,
cash flows, and business strategies, plans, and conditions for future periods
may differ materially due to several factors, including but not limited to the
Company's ability to control costs, campground market conditions and other
factors affecting the Company's sales and marketing plan, the actual rate of
decline in the campground membership base, the actual use of the campgrounds by
members and guests, the effects on members and guests of the Company's efforts
to downsize its business, the Company's success in collecting its contracts
receivable and selling assets, and the other factors affecting the Company's
operations described in this report.
CHANGE IN ACCOUNTING METHOD
During the first quarter of fiscal 1998, the Staff of the Securities and
Exchange Commission (the "SEC") informed the Company that the SEC will now
require the Company, commencing with fiscal 1997, to recognize revenue from the
sale of campground memberships that do not convey a deeded interest in real
estate on a straight-line basis over the expected life of the memberships sold.
This new accounting method differs from the revenue recognition method
historically used by the Company for over 20 years. Accordingly, to show
comparable results for the periods presented, the consolidated statement of
operations for the year ended June 30, 1996, has been restated from that
originally reported to reflect this change in accounting method (see Note 1 to
the consolidated financial statements included in Item 8). The deferral of
historical sales revenues and expenses resulting from this change in accounting
method has no impact on the Company's liquidity or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
CURRENT BUSINESS STRATEGY. The Company's current business strategy is to improve
its campground operations and stabilize its campground membership base through
increased sales and marketing efforts or the possible acquisition of members
through the purchase of other membership campground operations. The Company
believes there is a viable market for campground memberships and that it has a
significant opportunity to compete for campers interested in higher quality
facilities and a higher level of service than is typically available at public
campgrounds or competing private campgrounds. The Company also believes that it
may be possible to acquire members through the purchase of other membership
campground operations, many of whom are experiencing financial difficulties.
Page 25
<PAGE> 26
The Company's membership base has been declining. In response to this decline,
the Company has downsized its business by closing and disposing of campgrounds
and decreasing campground operating costs and general and administrative
expenses. The Company intends to continue to keep the size of its campground
system in an appropriate relation to the size of its membership base. In this
regard, if the membership base continues to decline, the Company may close and
dispose of additional campgrounds and it will seek to decrease other expenses.
At the same time, the Company intends to expand its sales and marketing efforts
with a view to stopping the membership decline. The Company also intends to
explore the possible acquisition of members through the purchase of other
membership campground organizations. The Company believes that the ultimate size
of its campground system and the amounts realized from future asset sales will
depend principally upon the degree to which the Company can successfully
implement this strategy.
DEBT RESTRUCTURING. On July 17, 1996, the Company consummated a restructuring
(the "Restructuring") of its 12% Secured Notes Due 1998 (the "Secured Notes")
whereby all of the $101,458,000 principal amount of Secured Notes outstanding
were retired. The Restructuring provided the Company with a new capital
structure and decreased the Company's outstanding debt to a level the Company
believes it can support under its downsized operations. The Secured Notes were
issued in the Company's 1991 bankruptcy reorganization and in a 1992
restructuring of a subsidiary's debt.
In the Restructuring, the Company purchased $10,070,000 in aggregate principal
amount of Secured Notes pursuant to a tender offer for $780 per $1,000 principal
amount, and exchanged $81,790,000 in aggregate principal amount of Secured Notes
pursuant to a private exchange offer for, in each case per $1,000 in principal
amount: $400 in cash, $492 in principal amount of PIK Notes, and 45 shares of
Common Stock. The remaining $9,598,000 in aggregate principal amount of Secured
Notes were redeemed at 100% of principal amount, plus accrued interest. In
connection with the Restructuring, the Company entered into the Credit Agreement
with Foothill (see "Borrowings").
CASH. On June 30, 1998, the Company had approximately $13.6 million of cash and
cash equivalents, an increase of $12.3 million during fiscal 1998. The Company's
primary sources of cash included $19.4 million provided by operations, $8.6 from
the sale of assets, and $1.1 million from the settlement of insurance claims.
Significant offsetting reductions to cash included $14.7 million of principal
repayments on the Company's outstanding debt and $2.1 million of capital
expenditures.
The Company's principal sources of operating cash for the year included $62.4
million of cash collected from operations, including dues collections, other
campground revenues, RPI membership fees, other operating revenues, and $1.3
million of insurance deposit refunds related to prior years. The Company also
received $5.8 million in principal collections on contracts receivable, $2.4
million in interest on contracts receivable and invested cash, and $3.7 million
from the sale of memberships and lots. The principal uses of operating cash for
fiscal 1998 were $37.9 million in operating expenses, $10.1 million in general
and administrative expenses (including corporate member services costs), and
$4.7 million in sales and marketing expenses. During fiscal 1998, the
Page 26
<PAGE> 27
Company also spent $2.1 million on capital improvements at the campgrounds, and
made principal payments on mortgages and other notes totaling $604,000.
The Company repaid all outstanding borrowings under the Credit Agreement in
January 1998, and it had no outstanding borrowings under the Credit Agreement as
of June 30, 1998, and as of the date of this report. However, the Company has
entered into an amendment to the Credit Agreement that will provide the Company
the flexibility to borrow up to $35.0 million (see "Borrowings - Credit
Agreement with Foothill").
Based upon its current business plan, the Company believes that future cash
flows provided from operations, asset sales, and borrowings available under the
amended Credit Agreement will be adequate for the Company's operating and other
cash requirements during the remaining term of the Credit Agreement.
CONTRACTS RECEIVABLE. As of June 30, 1998, the Company on a consolidated basis
owned $6.8 million of contracts receivable related to the sale of campground
memberships and resort interests (see "Contracts Receivable" in Item 1). Because
of low interest rates available in the marketplace during fiscal 1998, 1997, and
1996, some members chose to prepay their accounts, and the Company received
principal payments of $1.1 million, $1.6 million, and $2.5 million,
respectively, in excess of scheduled payments. The Company may continue to
experience such prepayments in the future, although at a decreasing rate as the
contracts receivable portfolio continues to decline.
Allowance for Doubtful Accounts
- -------------------------------
The Company's allowance for doubtful accounts was 31% of gross contracts
receivable at June 30, 1998, compared with 31% of gross contracts receivable at
June 30, 1997, and 30% at June 30, 1996. The overall cancellation rate as a
percentage of gross contracts receivable was 8% for fiscal 1998, compared with
7% for fiscal 1997 and 8% for fiscal 1996. In fiscal 1998, 1997, and 1996, the
Company reduced the allowance for doubtful accounts on the contracts receivable
by $1.0 million, $1.2 million, and $5.1 million, respectively. These adjustments
were made because the Company experienced lower contract losses than anticipated
in these years.
The allowance for doubtful accounts is an estimate of the contracts receivable
that will cancel in the future and is determined based on historical
cancellation rates and other factors deemed relevant to the analysis. The
Company does not presently anticipate any further adjustments to the allowance
for doubtful accounts on the contracts receivable. However, the allowance and
the rate at which the Company provides for future losses on its contracts
receivable could be increased or decreased in the future based on the Company's
actual collection experience.
Other Allowances
- ----------------
In connection with the purchase of NACO and Trails, the Company recorded an
allowance for interest discount to increase to 14.75% the weighted average yield
on the contracts receivable then owned by NACO and Trails. The allowance for
interest discount is being amortized using the effective interest method over
the respective terms of the contracts. Additionally, in connection with the
purchase of NACO and Trails and the Company's bankruptcy reorganization in 1991,
the Company recorded an allowance
Page 27
<PAGE> 28
for future collection costs, which is being amortized as a reduction of general
and administrative expenses based on cash collected on the related portfolio.
The Company also purchased contracts receivable from certain third parties and
recorded a valuation allowance to record the contracts receivable at the
purchase price. This valuation allowance is being amortized as an increase to
interest income over the respective terms of the contracts.
Change in Receivables
- ---------------------
The net balance of contracts receivable decreased by $3.3 million during fiscal
1998, due primarily to $5.8 million in cash collections on contracts receivable,
offset by new financed sales, a $1.0 million reduction in the allowance for
doubtful accounts, and scheduled amortization of the allowances for interest
discount, collection costs, and valuation discount.
CAMPGROUND AND RESORT PROPERTIES. The Company's campground properties consist of
land, buildings, and other equipment used in administration and operations as
well as land held for sale. Campground properties decreased by $4.8 million in
fiscal 1998, primarily as a result of the sale of several campgrounds and
certain other real estate, and depreciation on property and equipment. The
decrease was partially offset by $2.1 million of capital expenditures.
The Company makes annual capital and maintenance expenditures to maintain and
improve the campgrounds. During fiscal 1998, the Company spent $5.2 million on
major maintenance, repairs, and improvements at the campgrounds. The Company
anticipates that it will spend an additional $4.7 million on such items in
fiscal 1999, which will be funded by existing cash or cash provided by
operations. The Company may be required to spend greater amounts on such items
in future years as the facilities age.
During the periods presented, the Company's resort properties consisted of lot
inventory, buildings and equipment used in operations, and land held for sale.
Resort properties decreased by $438,000 in fiscal 1998, due primarily to the
bulk sale of lots at one of the resorts, the sale of excess acreage and
buildings at certain resorts, and the sale of lots in the normal course of
business. Over the past several years, the Company has been selling the assets
it owns at the resorts.
At June 30, 1998, the Company had obligations to spend $2.8 million in
connection with reports that it filed with the Department of Housing and Urban
Development ("HUD"). Although certain of these HUD obligations remain
substantially incomplete, the Company plans to spend approximately $1.0 million
in fiscal 1999 in fulfilling these obligations, which will be funded by existing
cash or cash provided by operations. A person who purchased a lot when a
particular HUD report was in effect may allege that the failure to make timely
improvements constitutes a breach of his or her agreement with the Company and
could seek damages from the Company or rescission of the lot purchase.
Approximately 1,400 persons purchased lots from the Company when the HUD reports
in effect described improvements that the Company has not yet constructed. An
insignificant number of persons have asserted claims against the Company for the
failure to make these improvements.
Page 28
<PAGE> 29
OTHER ASSETS. Other current assets decreased by $2.2 million during fiscal 1998.
The decrease was due partially to the repayment of a note receivable arising
from the sale of the resort timeshare operations (see Note 4 to the consolidated
financial statements included in Item 8). In addition, in fiscal 1999, the
Company will begin paying insurance premiums monthly rather than annually, which
resulted in a $1.6 million decrease in prepaid insurance between years.
Other assets decreased by $591,000 in fiscal 1998 due primarily to the partial
termination of the Company's Indemnification Trusts (see Note 15 to the
consolidated financial statements included in Item 8).
BORROWINGS. On June 30, 1998, the Company had outstanding $33.0 million of long
term debt, which consisted of $32.8 million principal amount of PIK Notes plus a
deferred gain of $150,000. The PIK Notes were issued in the Restructuring (see
"Debt Restructuring" above). The Restructuring was accounted for as a Troubled
Debt Restructuring, whereby the restructured debt was recorded at the carrying
value of the old debt, and no gain or loss was recorded on the transaction.
During fiscal 1998, the Company repaid all of the outstanding borrowings under
the Credit Agreement totaling $14.1 million and all of the outstanding mortgage
notes totaling $604,000.
Credit Agreement with Foothill
- ------------------------------
In connection with the Restructuring, the Company entered into the Credit
Agreement with Foothill, under which Foothill made term loans to the Company
totaling $13.0 million, and agreed to make revolving loans to the Company in the
maximum amount of $25.0 million, provided that the aggregate borrowings under
the Credit Agreement at any one time could not exceed $35.0 million. The Credit
Agreement originally had a three year term expiring on July 16, 1999. During
fiscal 1997, the Company repaid substantially all of its initial borrowings
under the Credit Agreement, which totaled $32.0 million.
On May 16, 1997, the Company and Foothill entered into an amendment to the
Credit Agreement which significantly modified its original terms. The amendment
reduced the maximum availability under the revolving portion of the Credit
Agreement to $20.0 million, decreased the interest rate payable thereunder from
prime plus 2 3/4% per annum to prime plus 1 1/2% per annum, and reduced or
eliminated certain fees. The amendment also permitted the Company to borrow up
to $12.8 million to repurchase PIK Notes and to pay the accrued interest on the
PIK Notes repurchased. The Company incurred debt issue costs of $3.1 million to
obtain the original Credit Agreement, which were capitalized and were being
amortized as additional interest expense over the life of the Credit Agreement.
However, because of the substantial modifications made to the original Credit
Agreement, the amendment of the Credit Agreement was accounted for as an
extinguishment of debt and the remaining $1.3 million unamortized balance of the
original debt issue costs was charged to expense.
The Company repaid all outstanding borrowings under the Credit Agreement in
January 1998, and it had no outstanding borrowings under the Credit Agreement as
of June 30,
Page 29
<PAGE> 30
1998, and as of the date of this report. However, the Company has entered into
an amendment to the Credit Agreement that, when it becomes effective, will
provide the Company the flexibility to borrow up to $5.0 million for working
capital purposes and up to an additional $30.0 million to use for the possible
purchase of securities. Under the amended Credit Agreement, the first $15.0
million of borrowings will bear interest at prime plus .25% per annum,
borrowings over $15.0 million and up to $25.0 million will bear interest at
prime plus .50% per annum, and borrowings over $25.0 million will bear interest
at prime plus 1.5% per annum. All borrowings under the amended Credit Agreement
will mature on July 17, 2002. However, if the Company has not repaid in full or
otherwise retired all of the PIK Notes by July 15, 2000, all borrowings under
the amended Credit Agreement in excess of $10.0 million will mature on July 15,
2000, and up to $10.0 million of borrowings under the amended Credit Agreement
will be refinanced on such date and thereafter be available to the Company for
working capital purposes only. This $10.0 million working capital facility will
then become the Working Capital Replacement Facility defined in the Indenture
for the PIK Notes and will be secured by substantially all of the assets of the
Company as discussed below. The amendment of the Credit Agreement will become
effective upon the satisfaction of customary conditions.
The Company's ability to borrow under the amended Credit Agreement for working
capital and other purposes is subject to continued compliance by the Company
with the financial covenants and other requirements of the amended Credit
Agreement, including certain covenants respecting minimum earnings before
interest, taxes, depreciation and amortization, and minimum tangible net worth.
The amended Credit Agreement prohibits the Company from borrowing from other
sources in significant amounts except for equipment purchases.
The Company has granted liens on substantially all of its assets to secure its
obligations under the amended Credit Agreement. In addition, the Company's
subsidiaries other than an immaterial utility subsidiary have guaranteed the
Company's obligations under the amended Credit Agreement and, subject to certain
limitations, have granted liens on substantially all of their assets to secure
their guarantees.
The amended Credit Agreement limits the type of investments in which the Company
may invest its available cash, resulting in a relatively low yield. Investments
of cash had a weighted average yield of 6% at June 30, 1998.
PIK Notes
- ---------
In the Restructuring, the Company issued $40.2 million principal amount of PIK
Notes that do not require the cash payment of interest until fiscal 2001 and
mature on July 15, 2003 without earlier scheduled principal payments.
On January 15, 1997, the Company issued an additional $2.4 million principal
amount of PIK Notes as interest. On June 25, 1997, the Company repurchased $13.4
million principal amount of PIK Notes at a cost of $12.6 million, including
accrued interest. The Company made these repurchases at an average price of $897
per $1,000 of principal amount in a Dutch auction available to all holders of
PIK Notes. A gain of $1.2 million was recognized on this transaction. On July
15, 1997, January 15, 1998, and July 15,
Page 30
<PAGE> 31
1998, the Company issued an additional $1.7 million, $1.9 million, and $2.0
million, respectively, of principal amount of PIK Notes as interest.
The Indenture for the PIK Notes provides holders of PIK Notes with the right to
have their notes repurchased at 101% of principal amount, plus interest, in the
event of a Change of Control (as defined). The Indenture also requires the
Company to apply certain asset sale proceeds to the retirement of the PIK Notes
in certain circumstances, subject to the rights of Foothill to repayment in
connection with asset sales. The Indenture does not contain financial covenants,
but it does prohibit the Company from borrowing from other sources in
significant amounts except for the Credit Agreement with Foothill, a $10.0
million Working Capital Replacement Facility, and equipment purchases.
Interest on the PIK Notes is payable in the form of additional PIK Notes until
after July 15, 2000, unless all borrowings under the amended Credit Agreement
are paid in full on or before such date. If all borrowings under the amended
Credit Agreement are paid in full on or before July 15, 2000, the Company has
the option to issue additional PIK Notes in lieu of cash interest through July
15, 2000. After July 15, 2000, interest on the PIK Notes must be paid in cash.
While the Company pays interest in the form of additional PIK Notes, the
principal amount of PIK Notes outstanding will increase at the rate of 12% per
year, compounded semi-annually. The payment-in-kind feature of the PIK Notes
will decrease the Company's cash interest costs during this period. However, the
payment-in-kind feature of the PIK Notes will also decrease the rate at which
the Company is able to retire its total debt outstanding.
All of the Company's debt and equity interests in the Subsidiary Guarantors has
been pledged by the Company to secure its obligations under the Credit
Agreement. In the event of a default and foreclosure under the Credit Agreement,
distributions from, and the assets of, the Subsidiary Guarantors may not be
available to satisfy other obligations of the Company, including the obligations
of the Company to the holders of the PIK Notes.
DEFERRED REVENUES AND EXPENSES. Deferred revenues of $23.4 million and
$23.6 million at June 30, 1998 and 1997, respectively, include $14.8 million and
$15.6 million, respectively, of membership dues collections which relate to
future periods, $6.9 million and $6.3 million, respectively, of campground
membership sales revenues to be recognized in future periods, and other deferred
revenues related primarily to RPI's operations. Deferred membership selling
expenses of $1.6 million and $1.4 million at June 30, 1998 and 1997,
respectively, represent incremental direct selling costs to be recognized in
future periods.
GENERAL LIABILITY INSURANCE. Commencing July 1, 1998, the Company obtained
insurance covering general liability losses up to an annual limit of $27.0
million, with no self-insured deductible. Prior to this date, the Company's
insurance program covered general liability losses up to an annual limit of
$26.8 million, but required the Company to pay the first $250,000 per
occurrence, with an annual aggregate exposure of $2.0 million. The Company has
provided a liability for estimated known and unknown claims related to uninsured
general liability risks based on actuarial estimates. In fiscal 1998, the
Company reduced this liability by $858,000 because the estimated losses were
less than the recorded liability. This adjustment amount is included in
nonrecurring income. At
Page 31
<PAGE> 32
June 30, 1998 and 1997, the Company's recorded liability for estimated losses
related to uninsured general liability claims totaled $1.2 million and $2.0
million, respectively.
PROPERTY INSURANCE. In fiscal 1998, the Company received proceeds of $1.1
million from insurance settlements for flood and fire damage at certain
campgrounds, and recognized a gain of $588,000.
EMPLOYEE HEALTH INSURANCE. The Company provides medical and dental benefits for
its employees under employee benefit plans (collectively, the "Plans") that are
funded primarily through employer and employee contributions. The Company has
purchased stop loss insurance that protects the Plans against claims in excess
of set policy amounts. The Company has provided a liability for estimated
uninsured claims of $828,000 and $1.4 million at June 30, 1998 and 1997,
respectively. This liability is based on actuarial estimates of amounts needed
to fund expected uninsured claims, as well as premium payments and
administrative costs of the Plans.
WORKERS' COMPENSATION INSURANCE. Commencing July 1, 1998, the Company obtained
insurance covering workers' compensation claims with no self-insured deductible.
Prior to this date, the Company's insurance program required the Company to pay
up to $250,000 per occurrence and to deposit funds with the insurance company to
pay claims in excess of the estimated claims that were covered by the amounts
originally paid by the Company. These deposits were generally expensed in the
years the deposits were made because the Company anticipated that the deposits
would be used to cover claims. However, during fiscal 1997, the Company
determined that it was entitled to refunds of $865,000 in future periods for
certain deposits made in previous years. At June 30, 1997, the Company recorded
the refundable amount as an asset, resulting in nonrecurring income of $865,000.
In fiscal 1998, the Company received refunds totaling $1.3 million for certain
other deposits expensed in previous years, which were recorded as nonrecurring
income.
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board (the "FASB")
recently issued several accounting pronouncements that are effective for the
Company in either fiscal 1998 or fiscal 1999. The Company adopted SFAS No. 128,
"Earnings Per Share" in the second quarter of fiscal 1998, which modified the
Company's net income per share calculation and required restatement of prior
period calculations. SFAS No. 130, "Reporting Comprehensive Income", is
effective for the Company in the first quarter of fiscal 1999, and SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information" and SFAS
No. 132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits", are effective for the Company at the end of fiscal 1999. The Company
does not expect the adoption of these statements to have a material impact on
its consolidated financial statements.
MARKET RISK. In 1997, the Securities and Exchange Commission issued new rules
(Item 305 of Regulation S-K), which require disclosure of material risks, as
defined in Item 305, related to market risk sensitive financial instruments. As
defined, the Company currently has market risk sensitive instruments related to
interest rates.
Page 32
<PAGE> 33
The Company does not have significant exposure to changing interest rates on
invested cash, which was $12.0 million at June 30, 1998. The Company invests
available cash in certificates of deposit and investment grade commercial paper
that have maturities of three months or less. As a result, the interest rate
market risk implicit in these investments at June 30, 1998, is low, as the
investments mature within three months.
The Company had $6.8 million of contracts receivable at June 30, 1998, which
have a weighted average stated interest rate of 13% and an average remaining
term of 19 months. The Company does not have significant exposure to changing
interest rates related to the contracts receivable because the interest rates on
the contracts receivable are fixed.
The Company had $32.8 million of PIK Notes at June 30, 1998, which bear interest
at 12% per annum and mature in 2003. The Company does not have significant
exposure to changing interest rates related to the PIK Notes because the
interest rate on the PIK Notes is fixed.
The Company also has the amended Credit Agreement with Foothill that provides
the Company the flexibility to borrow up to $35.0 million at interest rates that
fluctuate with changes in the prime rate (see "Borrowings Credit Agreement with
Foothill"). Although the Company has exposure to changing interest rates related
to the Credit Agreement, the Company had no outstanding borrowings under the
Credit Agreement as of June 30, 1998, and as of the date of this report.
The Company has not undertaken any actions to cover interest rate market risk
and is not a party to any interest rate market risk management activities.
The Company also receives revenues from its Canadian subsidiary and exchanges
them into US Dollars at exchange rates that fluctuate with market conditions;
however, such revenues are not material to the Company's operations.
INTEREST RATE SENSITIVITY. A hypothetical ten percent change in market interest
rates over the next year would not materially impact the Company's earnings or
cash flow as the interest rates on the Company's long term debt are fixed and
its cash investments are short term. A hypothetical ten percent change in market
interest rates would not have a material effect on the fair value of the
Company's contracts receivable, PIK Notes, or its short term cash investments.
RESULTS OF OPERATIONS
The following discussion and analysis are based on the historical results of
operations of the Company for the years ended June 30, 1998, 1997, and 1996, as
restated (see "Change in Accounting Method"). The financial information set
forth below should be read in conjunction with the Company's consolidated
financial statements included in Item 8.
NET INCOME. For the year ended June 30, 1998, the Company reported net income of
$24.9 million or $3.36 per share on revenues of $76.5 million. This compares
with net income of $6.8 million or $.94 per share on revenues of $78.4 million
for the year ended
Page 33
<PAGE> 34
June 30, 1997, and net income of $1.1 million or $.30 per share on revenues of
$91.0 million for the year ended June 30, 1996.
Excluding extraordinary gains, nonrecurring income and expenses, and
restructuring costs, the Company would have had net income of $11.1 million for
fiscal 1998, compared with net income of $5.3 million for fiscal 1997, and a net
loss of $2.8 million for fiscal 1996. Excluding these items, the Company's
results improved in the current fiscal year, despite declining revenues, due
primarily to decreases in expenses, principally campground operating costs,
general and administrative expenses, and interest.
The results for fiscal 1998 include $3.8 million of nonrecurring income from a
$1.0 million reduction in the allowance for doubtful accounts, an $858,000
reduction in certain insurance reserves, a $1.3 million refund of insurance
deposits expensed in prior years, and a $588,000 gain on insurance settlements
for flood and fire damage at certain campgrounds. In addition, the results for
fiscal 1998 include a $10.0 million deferred income tax benefit resulting from a
reduction in the valuation allowance for the Company's net deferred tax assets.
This adjustment will have no effect on current or future income tax payments,
but will result in higher tax provisions in the future in the periods the
related deferred tax assets are realized, which will decrease net income.
The results for fiscal 1997 include $2.7 million of nonrecurring income from a
$1.2 million reduction in the allowance for doubtful accounts and a $1.5 million
reduction in certain insurance reserves. The fiscal 1997 results also include
$1.1 million of restructuring costs related to the Restructuring and $132,000 of
nonrecurring expenses representing the net loss resulting from the amendment of
the Credit Agreement and the repurchase of PIK Notes.
The results for fiscal 1996 include a $1.4 million extraordinary gain from the
repurchase of Secured Notes and $5.9 million of nonrecurring income consisting
of $5.1 million from a reduction in the allowance for doubtful accounts and
$799,000 from the reversal of a contingent liability. The fiscal 1996 results
also include $1.1 million of restructuring costs related to the Company's
efforts to restructure the Secured Notes, and $2.3 million of other nonrecurring
expenses consisting of a $1.0 million charge to record a provision for certain
uncollectible membership dues receivable and a $1.3 million charge to accrue a
one-time bonus for the Company's Chief Executive Officer.
The table on the next page shows separately the results of the campground
operations, RPI's operations, and the resort operations, without any allocation
of corporate expenses, as well as corporate expenses and other revenues and
expenses in the aggregate, for the years ended June 30, 1998, 1997, and 1996, as
restated (see "Change in Accounting Method").
Page 34
<PAGE> 35
THOUSAND TRAILS, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
(Restated)
CAMPGROUND OPERATIONS
<S> <C> <C> <C>
Membership dues $ 37,330 $ 39,945 $ 39,924
Campground revenues 15,955 15,302 15,313
Cost of campground revenues (7,718) (7,608) (7,726)
Operating expenses (30,794) (32,454) (35,211)
---------- ---------- ----------
Contribution from campground operations 14,773 15,185 12,300
---------- ---------- ----------
SALES
Sales revenues 3,227 2,892 1,656
Selling expenses (2,646) (2,654) (3,094)
Marketing expenses (1,700) (1,383) (1,294)
---------- ---------- ----------
Loss on sales (1,119) (1,145) (2,732)
---------- ---------- ----------
RESORT PARKS INTERNATIONAL
Revenues 4,035 4,086 4,579
Expenses (2,132) (1,978) (2,237)
---------- ---------- ----------
Contribution from RPI 1,903 2,108 2,342
---------- ---------- ----------
15,557 16,148 11,910
---------- ---------- ----------
RESORT OPERATIONS
Revenues 1,186 3,189 8,332
Expenses (1,091) (3,218) (8,297)
---------- ---------- ----------
Contribution (loss) from resort operations 95 (29) 35
---------- ---------- ----------
15,652 16,119 11,945
---------- ---------- ----------
Other income 3,083 3,673 4,479
Corporate member services (1,472) (1,532) (1,843)
General and administrative expenses (8,640) (10,100) (10,473)
---------- ---------- ----------
OPERATING INCOME BEFORE INTEREST INCOME AND
EXPENSE, GAIN ON ASSET SALES, NONRECURRING
INCOME AND EXPENSES, RESTRUCTURING COSTS,
TAXES AND EXTRAORDINARY ITEM 8,623 8,160 4,108
---------- ---------- ----------
Interest income 2,635 3,726 6,756
Interest expense (4,599) (9,084) (17,693)
Gain on asset sales 5,287 2,892 4,038
Nonrecurring income 3,770 2,708 5,945
Nonrecurring expenses (132) (2,270)
Restructuring costs (1,101) (1,124)
---------- ---------- ----------
OPERATING INCOME (LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM $ 15,716 $ 7,169 $ (240)
========== ========== ==========
</TABLE>
Page 35
<PAGE> 36
OPERATING INCOME. During the year ended June 30, 1998, the Company achieved a
positive contribution from operations of $8.6 million, an improvement over the
$8.2 million and $4.1 million achieved in the years ended June 30, 1997 and
1996, respectively. For this purpose, the contribution from operations is
defined as operating income before interest income and expense, gain on asset
sales, restructuring costs, nonrecurring income and expenses, taxes, and
extraordinary item. See the table on page 35 for the elements of the
contribution from operations and the Company's operating income (loss) before
taxes and extraordinary item for the historical periods presented.
CAMPGROUND OPERATIONS. The Company's operations are highly seasonal. The Company
receives the majority of the dues revenue from its members during the winter,
which are recognized as income ratably during the year. However, the Company
incurs a higher level of operating expenses during the summer. In addition, a
majority of the Company's sales and marketing efforts occur during the summer.
Campground membership dues revenue was $37.3 million for the year ended June 30,
1998, compared with $39.9 million for the years ended June 30, 1997 and 1996.
Dues revenue declined in fiscal 1998 due primarily to the net loss of 9,000
campground members during the year which included the loss of 1,800 members in
connection with the sale of two campgrounds. This decline was partially offset
by the effect of the annual dues increase. In fiscal 1997, the effect of the
annual dues increase substantially offset the decline in dues revenue caused by
the net loss of members during the year.
Campground revenues were $16.0 million for the year ended June 30, 1998,
compared with $15.3 million for the years ended June 30, 1997 and 1996. The
related expenses were $7.7 million, $7.6 million, and $7.7 million for fiscal
1998, 1997, and 1996, respectively. The increase in campground revenues in
fiscal 1998 was due primarily to modest increases in rental and other service
fees at certain campgrounds and proceeds received from harvesting timber at
selected campgrounds.
Campground operating expenses were $30.8 million for the year ended June 30,
1998, compared with $32.5 million for the year ended June 30, 1997, and $35.2
million for the year ended June 30, 1996. The continuing reduction in expenses
between years was due primarily to the closure and disposition of campgrounds
and to operational changes made at the campgrounds in these periods. In fiscal
1996, the Company closed and disposed of several campgrounds, reduced campground
management and personnel, and changed to seasonal operations at campgrounds with
low usage during off-season periods. In fiscal 1997, the Company closed and
disposed of several additional campgrounds and lengthened the off-season for the
campgrounds with seasonal closures. In fiscal 1998, the Company sold several
additional campgrounds and closed one campground.
The Company intends to continue to keep the size of its campground system in an
appropriate relation to the size of its membership base. In this regard, if the
membership base continues to decline, the Company may close and dispose of
additional campgrounds and it will seek to decrease other expenses. Although the
Company believes that the anticipated changes should result in lower future
operating expenses, no assurance can be given that such changes will not reduce
revenues by an amount in excess of the expense reductions.
Page 36
<PAGE> 37
The Company recognizes revenue from the sale of campground memberships that do
not convey a deeded interest in real estate on a straight-line basis over the
expected life of the memberships sold (see "Change in Accounting Method"). For
the years ended June 30, 1998, 1997, and 1996, the Company recognized campground
membership sales revenues of $3.2 million, $2.9 million, and $1.7 million,
respectively. These amounts include revenues of $2.5 million, $1.7 million, and
$1.1 million, respectively, that were deferred in prior periods. Moreover, for
fiscal 1998, 1997, and 1996, the Company deferred revenues of $3.1 million, $2.1
million, and $2.1 million, respectively, which will be recognized in future
periods.
The increase in sales revenues resulted primarily from the Company's increased
sales and marketing efforts during the past three fiscal years. The Company has
expanded its sales and marketing efforts with a view to stopping the decline in
its membership base. Although the Company's membership sales revenues have
increased, the level of sales in fiscal 1998 did not meet the Company's
expectations. In an effort to improve its membership sales, the Company has been
working to increase the number of prospects that attend its sales presentations.
In this regard, in fiscal 1997, the Company entered into a joint marketing
arrangement with Fleetwood Industries, Inc. ("Fleetwood"), the largest
manufacturer of recreational vehicles ("RVs"). Under this marketing arrangement,
purchasers of Fleetwood RVs receive a temporary membership and are invited to
visit one of the Company's campgrounds. Purchasers of new Fleetwood RVs
accounted for approximately 10% of sales in fiscal 1998. In the fourth quarter
of fiscal 1998, the Company entered into a similar marketing arrangement with a
major RV financing company and it plans to seek other similar alliances. The
Company has also recently entered into reciprocal sales agreements with two
other companies in an effort to increase sales.
Selling expenses directly related to the sale of campground memberships are
deferred and recognized as expenses on a straight-line basis over the expected
life of the memberships sold. All other selling and marketing costs are
recognized as expenses in the period incurred. For the years ended June 30,
1998, 1997, and 1996, the Company recognized selling expenses of $2.6 million,
$2.7 million, and $3.1 million, respectively. These amounts include expenses of
$560,000, $358,000, and $235,000, respectively, that were deferred in prior
periods. Moreover, for fiscal 1998, 1997, and 1996, the Company deferred
expenses of $794,000, $505,000, and $481,000, respectively, which will be
recognized in future periods.
Although the Company's sales results are improving, selling and marketing
expenses exceeded sales revenues by $1.1 million, $1.1 million, and $2.7 million
for the years ended June 30, 1998, 1997, and 1996, respectively. These expenses
exceeded sales revenue because of the increased marketing activity, and the low
volume of sales, which did not cover fixed costs. In addition, the Company
deferred more sales revenues than selling expenses in each of the periods
presented.
The Company's selling and marketing efforts require significant expense, the
majority of which must be expensed in the current period, while the related
sales revenues are deferred and recognized on a straight-line basis over the
expected life of the memberships
Page 37
<PAGE> 38
sold. As a consequence, the Company expects that its selling and marketing
expenses will continue to exceed its campground membership sales revenues. This
disparity will increase as the Company grows campground membership sales.
The Company's selling and marketing efforts during the past three fiscal years
have not produced the level of sales needed to stop the continuing decline in
the Company's membership base. If the Company is not able to significantly
increase its campground membership sales over current levels, the membership
base will continue to decline, which will further decrease the Company's
revenues. Further decreases in revenues that are not offset by sufficient
expense reductions could have a material adverse impact on the Company's
business and results of operations.
CAMPGROUND MANAGEMENT. Wilderness Management, a wholly owned subsidiary of the
Company, manages 130 public campgrounds for the US Forest Service. For the year
ended June 30, 1998, these operations produced revenues of $1.3 million with
related expenses (excluding certain shared administrative costs) of $1.5
million. This compares with revenues for fiscal 1997 of $1.1 million and related
expenses (excluding certain shared administrative costs) of $1.0 million, and
revenues for fiscal 1996 of $853,000 and related expenses (excluding certain
shared administrative costs) of $831,000. The increase in revenues and expenses
between years was due primarily to new contracts entered into in these periods.
The loss in fiscal 1998 was due to start-up costs incurred in connection with
new management contracts entered into in the Spring of 1998, which significantly
increased the number of campgrounds managed.
RESORT PARKS INTERNATIONAL. RPI charges its members a fee for a membership that
entitles them to use any of the campgrounds participating in RPI's reciprocal
use system, subject to certain limitations. For the year ended June 30, 1998,
RPI's operations produced a net contribution of $1.9 million, compared with $2.1
million for the year ended June 30, 1997, and $2.3 million for the year ended
June 30, 1996. The decline in results in fiscal 1998 was due primarily to the
decrease in revenues between periods and costs incurred in fiscal 1998 to
provide directories to new members recently gained through a new program. RPI's
revenues have declined over the three year period as a result of declining sales
in the membership camping industry generally. During this period, however, RPI
has been able to maintain its positive contribution by reducing its expenses. To
maintain its contribution in the future, RPI is working to introduce new
products to increase its revenues; however, there is no assurance that it will
be successful.
RESORT OPERATIONS. During the last five years, the Company sold a substantial
portion of the assets it owned at eight resorts. In fiscal 1998, the sale of
resort assets produced cash proceeds totaling $1.2 million. This compares with
cash proceeds of $1.7 million plus notes receivable of $1.1 million in fiscal
1997, and cash proceeds of $5.0 million in fiscal 1996. The differences between
years were due to the timing of asset sales. As the resort assets were sold, the
revenues and expenses from the resort operations decreased accordingly. The
Company's present operations at the resorts are limited primarily to the sale of
residential lots.
During the year ended June 30, 1998, the resort operations produced a positive
contribution of $95,000, compared with a negative contribution of $29,000 for
the year
Page 38
<PAGE> 39
ended June 30, 1997, and a positive contribution of $35,000 for the year ended
June 30, 1996. The Company expects a minimal contribution from the resort
operations in the future as it continues its efforts to sell the remaining
assets it owns at the resorts. These assets consist of approximately 100
residential lots and other miscellaneous real estate. There is no assurance that
the Company will be able to locate a buyer for any of the remaining resort
assets or that sales on acceptable terms can be effected.
OTHER INCOME. Other income consists principally of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, collections on written-off contracts, subscription fees
received from members who subscribe to the Company's member magazine, and
beginning in fiscal 1997, fees charged to members for making more than five
operator-assisted reservations in a given year.
Other income was $3.1 million for the year ended June 30, 1998, compared with
$3.7 million for the year ended June 30, 1997, and $4.5 million for the year
ended June 30, 1996. Other income was higher in fiscal 1996, compared with the
other years, because in fiscal 1996 the Company increased its use of outside
collection agencies to collect on written-off contracts, which resulted in a
one-time increase in such collections. The decrease between years is directly
related to lower fees and other income received from the declining contracts
receivables portfolio and shrinking membership base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
$8.6 million for the year ended June 30, 1998, compared with $10.1 million for
the year ended June 30, 1997, and $10.5 million for the year ended June 30,
1996. General and administrative costs continued to decline as a result of the
Company's continued efforts to reduce administrative costs. The lower costs in
fiscal 1998 were due primarily to personnel reductions in various administrative
departments, lower legal fees, and reduced depreciation, as certain of the
Company's corporate assets have been fully depreciated. In fiscal 1997, the
Company's lower costs were partially offset by legal fees incurred in connection
with the Company's reincorporation merger and the registration of the PIK Notes.
General and administrative expenses include costs related to collecting the
contracts receivable and membership dues of $2.2 million, $2.4 million, and $3.0
million for the years ended June 30, 1998, 1997, and 1996, respectively. These
collection costs were reduced by $229,000, $314,000, and $513,000, respectively,
as a result of the amortization of the allowance for collection costs related to
the contracts receivable (see "Liquidity and Capital Resources -- Contracts
Receivable"). The Company anticipates that these costs will continue to decrease
as the contracts receivable portfolio declines further.
CORPORATE MEMBER SERVICES. Corporate member services include the reservation and
member support services performed at the corporate office, as well as the costs
incurred to produce the Company's member magazine. These costs were $1.5 million
for the years ended June 30, 1998 and 1997, compared with $1.8 million for the
year ended June 30, 1996. The decrease in costs between fiscal 1996 and fiscal
1997 reflects efficiencies implemented in producing the Company's member
magazine.
Page 39
<PAGE> 40
INTEREST INCOME AND EXPENSE. Interest income decreased by $1.1 million and $3.0
million for the years ended June 30, 1998 and 1997, respectively, from the
previous year. The decrease in fiscal 1998 was due primarily to a decrease in
interest earned on the Company's diminishing portfolio of contracts receivable,
partially offset by an increase in interest earned on higher cash balances. The
decrease in fiscal 1997 was due to a decrease in interest earned on the
contracts receivable, and a decrease in interest earned on lower cash balances.
Also included in interest income is amortization of the allowance for interest
discount and valuation allowance related to the contracts receivable, of which
$293,000 was amortized during fiscal 1998, $379,000 was amortized in fiscal
1997, and $607,000 was amortized in fiscal 1996 (see "Liquidity and Capital
Resources -- Contracts Receivable").
Interest expense decreased by $4.5 million for the year ended June 30, 1998,
from the previous year, due primarily to the repayment of $14.7 million of
outstanding debt during the year, which included the repayment of all
outstanding borrowings under the Credit Agreement with Foothill and all
outstanding mortgage notes. As of the date of this report, the Company's only
outstanding debt was $34.8 million principal amount of PIK Notes. While the
Company pays interest on the PIK Notes in the form of the issuance of additional
PIK Notes, a significant portion of the Company's interest expense will
represent non-cash interest. However, the principal amount of PIK Notes
outstanding will increase at the rate of 12% per year, compounded semi-annually,
which will increase interest expense in the future.
Interest expense decreased by $8.6 million for the year ended June 30, 1997,
from the previous year, due primarily to a net $50.9 million reduction in the
Company's outstanding debt resulting from the Restructuring, subsequent
repayments under the Credit Agreement, and scheduled repayments of mortgage
notes. In addition, the Company repurchased $7.4 million principal amount of
Secured Notes in January 1996, and reduced mortgage notes by $2.5 million in the
Fall of 1995 in connection with the abandonment of two operating campgrounds,
which also contributed to the reduction in outstanding debt and the decrease in
interest expense.
Interest expense for the year ended June 30, 1998, includes amortization of the
deferred gain related to the PIK Notes, which reduced interest expense by
$30,000. Interest expense for the year ended June 30, 1997 includes (i)
amortization of debt issue costs incurred in connection with obtaining the
Credit Agreement in July 1996, which increased interest expense by $1.8 million,
and (ii) amortization of the deferred gain related to the PIK Notes, which
reduced interest expense by $39,000. The remaining unamortized balance of the
debt issue costs and a portion of the deferred gain were eliminated in
connection with the amendment of the Credit Agreement and repurchase of PIK
Notes at the end of fiscal 1997. Interest expense for fiscal 1996 includes
amortization of the discount on the Secured Notes, which increased interest
expense by $4.2 million. The discount on the Secured Notes was recorded to
reduce the carrying value of the Secured Notes to their estimated fair value on
the date of issuance. On July 17, 1996, the unamortized balance of this discount
was eliminated in connection with the retirement of the Secured Notes in the
Restructuring.
Page 40
<PAGE> 41
GAINS ON ASSET SALES. During the years ended June 30, 1998, 1997, and 1996, the
Company sold certain of its real estate assets and recognized related gains of
$5.3 million, $2.9 million, and $4.0 million, respectively. The differences
between years were due to the timing of asset sales. During this three-year
period, the Company sold the timeshare operations at the resorts, the country
club and golf operations at one resort, and various other properties at the
resorts. In addition, the Company sold or otherwise disposed of several
campgrounds and sold unused buildings and trailers and excess acreage associated
with certain campgrounds. Over the next several years, the Company intends to
dispose of the remaining assets it owns at the resorts, any campgrounds that are
closed as the Company downsizes, and other undeveloped, excess acreage
associated with the campgrounds. The sale of campgrounds requires 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 sale
opportunities or the ability of the Company to realize recoveries from asset
sales. In addition, although the Company has successfully sold assets during the
past three years, no assurance exists that the Company will be able to locate a
buyer for any of the remaining assets or that sales on acceptable terms can be
effected.
NONRECURRING INCOME. Nonrecurring income was $3.8 million, $2.7 million, and
$5.9 million for the years ended June 30, 1998, 1997, and 1996, respectively.
Nonrecurring income for fiscal 1998 consists of $1.0 million from a reduction in
the allowance for doubtful accounts related to the contracts receivable,
$858,000 from a reduction in certain insurance reserves, $1.3 million from the
refund of insurance deposits made in prior years, and a $588,000 gain on
insurance settlements for flood and fire damage at certain campgrounds.
Nonrecurring income for fiscal 1997 consists of $1.2 million from a reduction in
the allowance for doubtful accounts related to the contracts receivable and $1.5
million from a reduction in certain insurance reserves. Nonrecurring income for
fiscal 1996 consists of $5.1 million from a reduction in the allowance for
doubtful accounts related to the contracts receivable and $799,000 from the
reversal of a contingent liability.
NONRECURRING EXPENSES. Nonrecurring expenses were $132,000 and $2.3 million for
the years ended June 30, 1997 and 1996, respectively. Nonrecurring expenses for
fiscal 1997 consist of a $1.3 million loss resulting from expensing unamortized
debt issue costs upon significantly modifying the Credit Agreement in May 1997,
reduced by a $1.2 million gain resulting from repurchasing PIK Notes at a
discount (see "Liquidity and Capital Resources-Borrowings"). Nonrecurring
expenses for fiscal 1996 consist of a $1.0 million charge to record a provision
for certain uncollectible membership dues receivable and a $1.3 million charge
to accrue a one-time bonus for the Company's Chief Executive Officer that was
due under his employment agreement (see Note 8 to the accompanying consolidated
financial statements included in Item 8).
RESTRUCTURING COSTS. In fiscal 1997, the Company incurred $1.1 million of costs
in connection with the consummation of the Restructuring. The Company also
incurred $3.1 million of costs in connection with obtaining the Credit Agreement
with Foothill, which were capitalized as debt issue costs. In May 1997, the
unamortized balance of these debt issue costs of $1.3 million was charged to
expense upon amendment of the Credit Agreement (see "Liquidity and Capital
Resources-Borrowings").
Page 41
<PAGE> 42
During the year ended June 30, 1996, the Company incurred $1.1 million of
restructuring costs related to its efforts to restructure the Secured Notes.
INCOME TAXES. The Company's current provision for income taxes was $837,000,
$370,000, and $41,000 for the years ended June 30, 1998, 1997, and 1996,
respectively. The provisions for fiscal 1998 and 1997 include amounts for
federal alternative minimum taxes, as well as amounts for state income taxes
payable in the various states where the Company conducts its operations. The
provision for fiscal 1996 relates primarily to state income taxes. With the
exception of the alternative minimum tax amounts, the Company does not have
federal income taxes payable on a consolidated basis due to its net operating
tax loss carryforwards, which are estimated to total $26.9 million at June 30,
1998, and expire in years 2009 through 2011.
The tax provision for the year ended June 30, 1998, also includes a $10.0
million deferred income tax benefit resulting from a reduction in the valuation
allowance for the Company's net deferred tax assets (see Note 7 to the
consolidated financial statements included in Item 8). The adjustment will have
no effect on current or future income tax payments, but will result in higher
future tax provisions in the periods the related deferred tax assets are
realized.
EXTRAORDINARY ITEM. The $1.4 million extraordinary gain in fiscal 1996 resulted
from a repurchase of Secured Notes in January 1996.
INFLATION. During the past three fiscal years, the Company's results have not
been affected materially by inflation. However, should the rate of inflation
increase in the future, the Company's expenses are likely to increase at a
greater rate than it can increase the annual dues paid by the campground members
because the Company cannot 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 35% of
the members have requested that their dues be frozen because of their age or
disability (see "Campground Operations - Dues").
IMPACT OF YEAR 2000. Based on recent assessments, the Company has determined
that it must modify certain software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter. The Company
presently believes that by modifying existing software, the Company's computer
systems will not experience material operational problems as a result of the
year 2000 issue. However, if such modifications are not made, or are not timely
completed, the year 2000 issue could have a material adverse impact on the
operations of the Company. The most significant disruption would impact member
billings and collections and campground reservations. In addition, although the
Company does not have any significant suppliers whose timely compliance would
impact the Company, the Company utilizes a number of financial institutions that
are highly dependent upon the proper function of their computer systems. The
Company's depository and treasury functions could be disrupted if these
financial institutions do not become year 2000 compliant within the required
timeframe.
Page 42
<PAGE> 43
The Company will primarily utilize internal resources to modify existing
software to address the year 2000 issue. The Company anticipates completing the
year 2000 project by December 31, 1998, which, if timely completed, will avoid
any material impact on its operating systems. The Company currently estimates
that it will cost approximately $100,000 to make the necessary modifications to
its software, which will not significantly impact the Company's financial
position, operations, or cash flows. The Company does not presently have a
formal contingency plan because it believes the necessary modifications will be
completed in the required timeframe. However, should it become evident that the
year 2000 modifications will not be completed on a timely basis, the Company
will explore alternatives to employ until such time as the year 2000
modifications are completed.
The costs of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates
which were derived utilizing numerous assumptions of future events. However,
there can be no assurance that these estimates and timetable will be achieved,
and actual results could differ materially from those anticipated.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A derivative financial instrument includes futures, forwards, interest rate
swaps, option contracts and other financial instruments with similar
characteristics. The Company currently does not have any derivative financial
instruments. However, the Company does have other financial instruments which
contain market risk. Management believes that the market risk associated with
the Company's financial instruments as of June 30, 1998, is not significant.
The information required by Item 305 of S-K is contained in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the headings "Market Risk" and "Interest Rate Sensitivity."
Page 43
<PAGE> 44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants..............................................................45
Consolidated Balance Sheets -- June 30, 1998 and 1997 ................................................46
Consolidated Statements of Operations for the years ended
June 30, 1998, 1997 and 1996.......................................................................47
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended June 30, 1998, 1997 and 1996...................................................48
Consolidated Statements of Cash Flows for the years ended
June 30, 1998, 1997 and 1996.......................................................................49
Notes to Consolidated Financial Statements............................................................51
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts.............................................85
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
Page 44
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Thousand Trails, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Thousand Trails,
Inc. and subsidiaries (the "Company") as of June 30, 1998 and 1997, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended June
30, 1998. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Thousand Trails, Inc. and
subsidiaries as of June 30, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1998, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule II is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not a required part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
s/ Arthur Andersen LLP
Dallas, Texas
September 4, 1998
Page 45
<PAGE> 46
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30,
-------------------------
ASSETS 1998 1997
---------- ----------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 13,631 $ 1,343
Current portion of receivables, net of allowances and
discount of $1.1 million in 1998 and $1.7 million in 1997 2,440 3,134
Current portion of deferred membership selling expenses 538 478
Current portion of net deferred tax assets 2,954
Other current assets 1,890 4,078
---------- ----------
Total Current Assets 21,453 9,033
Restricted cash 1,171 1,407
Receivables, net of allowances and discount of $1.6 million
in 1998 and $3.3 million in 1997 1,741 4,383
Campground and resort land 13,338 13,701
Buildings and equipment, net of accumulated depreciation of
$15.0 million in 1998 and $12.8 million in 1997 21,879 23,211
Land held for sale 3,866 7,382
Deferred membership selling expenses 1,087 913
Net deferred tax assets 7,046
Other assets 2,681 3,272
---------- ----------
Total Assets $ 74,262 $ 63,302
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 2,037 $ 1,864
Accrued interest 1,805 1,693
Other accrued liabilities 6,410 7,485
Current portion of long term debt 5,864
Accrued construction costs 2,845 2,809
Current portion of deferred revenue 18,851 19,455
---------- ----------
Total Current Liabilities 31,948 39,170
Long term debt 32,973 38,230
Deferred revenue 4,588 4,158
Other liabilities 1,999 3,912
---------- ----------
Total Liabilities 71,508 85,470
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value, 1,500,000 shares
authorized, none issued and outstanding
Common Stock, $.01 par value, 15,000,000 shares authorized,
7,437,083 and 7,383,276 shares issued and outstanding in
1998 and 1997 74 74
Additional paid-in capital 20,551 20,502
Accumulated deficit subsequent to December 31, 1991, date
of emergence from bankruptcy (17,734) (42,613)
Cumulative foreign currency translation adjustment (137) (131)
---------- ----------
Total Stockholders' Equity (Deficit) 2,754 (22,168)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 74,262 $ 63,302
========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 46
<PAGE> 47
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
REVENUES (Restated)
<S> <C> <C> <C>
Membership dues $ 37,330 $ 39,945 $ 39,924
Other campground/resort revenue 16,475 17,906 22,288
Membership and resort interest sales 3,894 3,477 3,013
RPI membership fees 4,035 4,086 4,579
Interest income 2,635 3,726 6,756
Gain on asset sales 5,287 2,892 4,038
Nonrecurring income 3,770 2,708 5,945
Other income 3,083 3,673 4,479
---------- ---------- ----------
Total Revenues 76,509 78,413 91,022
---------- ---------- ----------
EXPENSES
Campground/resort operating expenses 39,152 42,860 50,308
Selling expenses 3,098 3,074 4,020
Marketing expenses 1,700 1,383 1,294
RPI membership expenses 2,132 1,978 2,237
Corporate member services 1,472 1,532 1,843
Interest expense and amortization 4,599 9,084 17,693
General and administrative expenses 8,640 10,100 10,473
Nonrecurring expenses 132 2,270
Restructuring costs 1,101 1,124
---------- ---------- ----------
Total Expenses 60,793 71,244 91,262
---------- ---------- ----------
INCOME (LOSS) BEFORE TAXES AND EXTRAORDINARY ITEM 15,716 7,169 (240)
INCOME TAXES
Income tax provision - current (837) (370) (41)
Income tax benefit - deferred 10,000
---------- ---------- ----------
9,163 (370) (41)
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 24,879 6,799 (281)
Extraordinary gain on debt repurchases 1,390
---------- ---------- ----------
NET INCOME $ 24,879 $ 6,799 $ 1,109
========== ========== ==========
BASIC NET INCOME (LOSS) PER SHARE:
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ 3.36 $ .94 $ (.08)
EXTRAORDINARY ITEM .38
---------- ---------- ----------
NET INCOME PER SHARE - BASIC $ 3.36 $ .94 $ .30
========== ========== ==========
DILUTED NET INCOME PER SHARE:
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ 2.96 $ .88 $ (.08)
EXTRAORDINARY ITEM .38
---------- ---------- ----------
NET INCOME PER SHARE - DILUTED $ 2.96 $ .88 $ .30
========== ========== ==========
SHARES USED TO CALCULATE NET INCOME PER SHARE:
BASIC 7,407 7,223 3,703
========== ========== ==========
DILUTED 8,398 7,704 3,721
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 47
<PAGE> 48
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Cumulative
------------------------ Foreign
Additional Currency
Number of Paid-In Accumulated Translation
Shares Amount Capital Deficit Adjustment Total
--------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995
(restated) 3,702,726 $ 37 $ 17,549 $ (50,521) $ (119) $ (33,054)
Foreign currency translation
adjustment (7) (7)
Net income (restated) 1,109 1,109
--------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1996
(restated) 3,702,726 37 17,549 (49,412) (126) (31,952)
Issuance of common shares in
Restructuring 3,680,550 37 2,953 2,990
Foreign currency translation
adjustment (5) (5)
Net income 6,799 6,799
--------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1997 7,383,276 74 20,502 (42,613) (131) (22,168)
Issuance of common shares
from exercises of options
and warrants 53,807 49 49
Foreign currency translation
adjustment (6) (6)
Net income 24,879 24,879
--------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1998 7,437,083 $ 74 $ 20,551 $ (17,734) $ (137) $ 2,754
========= ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 48
<PAGE> 49
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Collections of principal on receivables $ 5,760 $ 7,978 $ 12,251
Interest received 2,371 3,407 6,202
Interest paid (822) (8,107) (14,545)
General and administrative, corporate member
services and restructuring costs (10,123) (14,061) (13,827)
Cash collected from operations, including
deferred revenue 62,353 65,894 73,220
Cash from sales of memberships and resort
interests at the point of sale 3,703 3,705 3,789
Expenditures for property operations (37,908) (40,872) (49,627)
Expenditures for sales and marketing (4,742) (4,472) (5,370)
Expenditures for insurance premiums (772) (1,706) (5,176)
Payment of income taxes (700) (370) (41)
Reduction (establishment) of letter of credit 1,500 (1,500)
Other, net 236 (345) 221
---------- ---------- ----------
Net cash provided by operating activities 19,356 12,551 5,597
---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital and HUD-related expenditures (2,085) (1,046) (1,022)
Proceeds from asset sales 8,550 4,663 7,239
Proceeds from insurance settlements 1,119
Issuance of Common Stock 49
---------- ---------- ----------
Net cash provided by investing activities 7,633 3,617 6,217
---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net repayments under Credit Agreement (14,097) (30,543)
Repayments of notes and mortgages (604) (384) (1,133)
Borrowings under Credit Agreement 44,640
Retirement of Secured Notes (50,169)
Payment of debt issue costs (3,132)
Repurchase of long term debt (12,640) (5,275)
Mandatory redemption of Secured Notes (18,599)
---------- ---------- ----------
Net cash used in financing activities (14,701) (52,228) (25,007)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,288 (36,060) (13,193)
CASH AND CASH EQUIVALENTS:
Beginning of year 1,343 37,403 50,596
---------- ---------- ----------
End of year $ 13,631 $ 1,343 $ 37,403
========== ========== ==========
</TABLE>
(continued)
Page 49
<PAGE> 50
THOUSAND TRAILS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
(Restated)
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Net income $ 24,879 $ 6,799 $ 1,109
---------- ---------- ----------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES-
Depreciation 2,538 3,195 2,866
Amortization of interest yield, collection costs and
valuation allowance (523) (693) (1,120)
Amortization of PIK Note deferred gain (30) (39)
Amortization of debt issue costs, debt discount and
consent fees 1,809 4,565
Gain on asset sales (5,287) (2,892) (4,038)
Net deferral of sales revenues 640 465 974
Net deferral of selling expenses (234) (147) (246)
Reduction of bad debt allowances, net (1,000) (1,232) (4,146)
Reduction of insurance reserves (858) (611) (799)
Increase in insurance deposits (865)
Gain on insurance settlements (588)
Reduction of deferred tax valuation allowance (10,000)
Net loss (gain) on debt restructurings 132 (1,390)
CEO bonus accrual (payment) (1,270) 1,270
Decrease (increase) in restricted cash 236 1,505 (1,283)
Decrease in receivables 4,773 7,592 11,721
Decrease (increase) in other assets 2,843 767 (747)
Increase (decrease) in other liabilities 1,300 (2,077) (3,354)
Other, net 667 113 215
---------- ---------- ----------
Total adjustments (5,523) 5,752 4,488
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 19,356 $ 12,551 $ 5,597
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 50
<PAGE> 51
THOUSAND TRAILS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF FINANCIAL STATEMENT PRESENTATION
Thousand Trails, Inc., a Delaware corporation ("Thousand Trails"), is the
successor by merger to USTrails Inc., a Nevada corporation ("USTrails").
Thousand Trails and its subsidiaries (the "Company") own and operate a system of
53 membership-based campgrounds located in 17 states and British Columbia,
Canada. In addition, the Company provides a reciprocal use program for members
of approximately 325 recreational facilities and manages 130 public campgrounds
for the US Forest Service. Prior to November 21, 1996, the Company also managed
timeshare facilities at eight resorts located in seven states (see Note 4). At
the present time, the Company's only activity at these resorts consists of the
retail sale of approximately 100 lots. The campground business provided 99% of
the Company's operating revenues in fiscal 1998, while the resort business
provided the remaining 1%. Operating revenues consist primarily of membership
dues received from campground members, fee revenue from members of the
reciprocal use program, and management fees, guest fees and other fees and
revenues received from the campground and resort operations.
The accompanying consolidated financial statements include the accounts of
Thousand Trails, Inc. and the following wholly owned subsidiaries: National
American Corporation and its subsidiaries ("NACO"), Resort Parks International,
Inc. ("RPI"), Thousand Trails (Canada), Inc., UST Wilderness Management
Corporation ("Wilderness Management"), Coast Financial Services, Inc. ("Coast"),
and until July 16, 1996, Thousand Trails, Inc., a Washington corporation, and
its subsidiaries ("Trails"). The Company acquired 100% of the capital stock of
NACO and 69% of the capital stock of Trails on June 30, 1991. The Company
subsequently increased its ownership in Trails to 100% through a tender offer
and merger and, on July 16, 1996, Trails was merged into the Company. The
acquisitions of NACO and Trails were accounted for as a purchase with the
purchase price being allocated to the assets acquired and liabilities assumed
based on their estimated fair value on the date of acquisition. RPI was a wholly
owned subsidiary of NACO until September 10, 1992, when it became a direct
subsidiary of the Company. Wilderness Management commenced operations in January
1994 and Coast commenced operations in March 1997.
The Company emerged from proceedings under Chapter 11 of the Bankruptcy Code on
December 31, 1991, pursuant to a confirmed plan of reorganization. Due to the
Company's emergence from bankruptcy, "fresh start reporting," as required by
AICPA Statement of Position ("SOP") 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," was reflected as of December 31, 1991
in the Company's consolidated financial statements. Under fresh start reporting,
a new reporting entity was created and assets and liabilities were restated to
reflect their reorganization value which approximated fair value at the date of
reorganization.
All significant intercompany transactions and balances have been eliminated in
the accompanying consolidated financial statements as of and for the years ended
June 30, 1998, 1997 and 1996.
Page 51
<PAGE> 52
The accompanying consolidated financial statements were prepared in conformity
with generally accepted accounting principles ("GAAP"). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
New Accounting Pronouncements
- -----------------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", which established new standards for computing and presenting earnings
per share. The standard was adopted by the Company in the second quarter of
fiscal 1998, in accordance with the statement provisions (see Note 2).
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 will require the Company to classify items of other comprehensive
income by their nature in its financial statements and to display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of its
consolidated balance sheet. Comprehensive income is meant to include all changes
in equity during a period except those resulting from investments by owners and
distributions to owners, and will include certain items that are now reported
directly through equity as well as net income reported on the income statement.
SFAS No. 130 is effective for the Company commencing with the first quarter of
fiscal 1999. The Company currently has minimal items of other comprehensive
income, and does not anticipate a material impact from the adoption of this
statement.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which establishes standards for the way
that public companies report information about operating segments and related
disclosures in annual and interim financial statements. This statement is
effective for the Company commencing at the end of fiscal 1999. The Company does
not anticipate a material impact from the adoption of this statement.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits," which revises employers'
disclosures about pension and other postretirement benefit plans. This statement
is effective for the Company beginning in fiscal 1999. The Company does not
anticipate a material impact from the adoption of this statement.
Restatement
- -----------
In the first quarter of fiscal 1998, the Staff of the Securities and Exchange
Commission (the "SEC") informed the Company that the SEC will now require the
Company, commencing with fiscal 1997, to recognize revenue from the sale of
campground memberships that do not convey a deeded interest in real estate on a
straight-line basis over the expected life of the memberships sold. The Staff of
the SEC has indicated that it will require all membership-based campground
registrants selling similar memberships to change to this method of accounting.
Page 52
<PAGE> 53
The Company's campground memberships provide the member with access to an
established network of membership-based campgrounds in return for an initial
upfront membership fee (which in certain instances may be financed) and annual
dues. The member's right to use the Company's campgrounds generally continues as
long as the annual dues are paid. Since inception, the Company has recognized
revenue from initial membership fees at the time of sale, while recognizing
revenue from the annual dues ratably over the year of provided service. Under
the new accounting method, revenue from initial membership fees is deferred and
recognized on a straight-line basis over the expected life of the memberships
sold.
This new accounting method differs from the revenue recognition method
historically used by the Company for over 20 years. Accordingly, to show
comparable results for the periods presented, the accompanying consolidated
statement of operations for the year ended June 30, 1996, has been restated from
that originally reported to reflect this change in accounting method. The
deferral of historical sales revenues and expenses resulting from this change in
accounting method had no impact on the Company's liquidity or cash flows.
The following table provides selected summarized information illustrating the
effect of the restatement on the Company's consolidated results of operations
for the year ended June 30, 1996 (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1996
-------------------------
As
As Originally
Restated Reported
---------- ----------
RESULTS OF OPERATIONS:
<S> <C> <C>
Membership and resort interest sales $ 3,013 $ 3,987
Total revenues 91,022 91,996
Income (loss) before extraordinary item (281) 447
Net income 1,109 1,837
Net income per share - basic .30 .50
</TABLE>
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform with the current
year presentation.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
- -------------------
The Company sells campground memberships pursuant to membership contracts that
give purchasers the right to use one or more of the Company's campgrounds, but
do not convey a deeded interest in the campgrounds. Until 1990, the Company also
sold campground memberships that gave purchasers an undivided fractional
interest in one of six campgrounds. A membership requires the payment of an
upfront membership fee and permits the member's family to use one or more of the
Company's campgrounds for an initial period, subject to renewal each year upon
payment of annual dues.
Resort interest sales have historically included interval ownerships
("timeshares") that gave purchasers exclusive use of fully furnished vacation
homes in weekly intervals and fee simple
Page 53
<PAGE> 54
ownership of lots located at the resorts. Resort interest sales are currently
limited to sales of lots as the timeshare operations and timeshare inventory
were sold in November 1996 (see Note 4).
The Company has offered financing on certain campground memberships for a period
of up to 36 months with a down payment of at least 25% of the sales price, and
has offered financing on the sale of resort interests for periods up to five
years with a down payment of at least 10% of the sales price. However, during
the periods presented, the majority of the Company's campground membership and
resort interest sales were not financed beyond a one year period.
Sales revenue from the sale of resort interests and campground memberships that
convey a deeded interest in real estate is recognized upon execution of a sales
contract and receipt of a down payment of at least 10% of the sales price.
Historically, sales revenue from the sale of campground memberships that do not
convey a deeded interest in real estate was recognized in the same manner.
However, as discussed above, the Staff of the SEC has required the Company to
change its accounting method to recognize sales revenue from the sale of
campground memberships that do not convey a deeded interest in real estate on a
straight-line basis over the expected life of the memberships sold. In addition,
costs directly related to the sale of such campground memberships are deferred
and recognized as selling expenses on a straight-line basis over the expected
life of the memberships sold.
The annual dues paid by the campground members are used to fund the Company's
operating expenses, including corporate expenses and the maintenance and
operation of the campgrounds. The membership contracts 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 35% 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. Annual dues are recognized as revenue ratably over 12
months as services are provided, and are recorded net of an allowance to provide
for uncollectible amounts. Dues paid in advance are deferred as unearned
revenue.
Cash and Cash Equivalents
- -------------------------
The Company considers demand accounts and short-term investments with maturities
of nine months or less when purchased to be cash equivalents.
Restricted Cash
- ---------------
Restricted cash generally consists of deposits to collateralize performance
bonds and letters of credit in the ordinary course of business.
Receivables
- -----------
Prior to June 30, 1991, the Company purchased contracts receivable from NACO,
Trails and SoPac Resort Properties, Inc. ("SoPac"), a former affiliate (the
"Selling Companies"). The
Page 54
<PAGE> 55
Company recorded the contracts receivable at the Selling Company's carrying
value. In connection with the Company's acquisition of NACO and Trails and its
emergence from bankruptcy in 1991, the Company recorded the contracts receivable
at their fair value. As a result, the contracts then owned by NACO and Trails
were recorded net of an allowance for interest discount to increase the weighted
average yield on the contracts to 14.75%, the current market yield at the time
of the acquisition. The allowance for interest discount is being amortized using
the effective interest method over the respective terms of the contracts. In
addition, the Company recorded an allowance for future costs associated with the
collection of the contracts receivable portfolio. This allowance is being
amortized as a reduction of general and administrative expense based on cash
collected on the related portfolio. The Company has also recorded a valuation
allowance in connection with purchases of contracts receivable from third
parties, to record the contracts receivable at the purchase price. The valuation
allowance is being amortized over the respective terms of the contracts as an
increase to interest income.
Interest income is recognized on purchased contracts receivable based upon the
effective yield at which they were purchased and on other contacts receivable at
their stated rates based on the outstanding principal balances.
Allowance for Doubtful Accounts
- -------------------------------
The Company provides an allowance for future cancellations of contracts
receivable. The allowance is based on management's estimate of future contract
cancellations considering the Company's historical cancellation rates as well as
other factors deemed relevant to the analysis. The allowance is reviewed on a
periodic basis with changes in management's estimates recognized in the period
known. The Company presently believes that the allowance for doubtful accounts
is adequate. However, if cancellations occur at a different rate than is
presently anticipated, it may be necessary for the Company to revise its
estimates and increase or decrease the allowance, which would affect the
Company's operating results and financial condition.
Campground Land and Lot Inventory
- ---------------------------------
Campground land and lot inventory are recorded at the lower of cost or estimated
net realizable value. While the Company sold campground memberships that
conveyed an undivided interest in the campground property, the related
campground property was charged to cost of sales based on the total number of
memberships available for sale at the campground.
Buildings, Equipment and Depreciation
- -------------------------------------
Buildings and equipment are recorded at cost. The costs of betterments and
improvements which extend the useful life of the asset are capitalized whereas
the costs of maintenance and repairs which do not extend the useful life of the
asset are expensed in the period incurred. Depreciation is recorded using the
straight-line method over the estimated useful lives of the assets which range
from three to thirty years.
Consent Fees
- ------------
In fiscal 1994, to obtain an amendment of the Indenture for the 12% Secured
Notes Due 1998 (the "Secured Notes"), the Company paid aggregate cash consent
fees which were capitalized and, through fiscal 1996, were amortized on the
effective interest method over the remaining term of the Secured Notes. The
remaining unamortized balance of the consent fees was
Page 55
<PAGE> 56
eliminated when the Secured Notes were retired in a restructuring (the
"Restructuring") that was completed on July 17, 1996 (see Note 6).
Income Taxes
- ------------
The Company recognizes certain revenues and expenses in periods which differ for
tax and financial reporting purposes.
Net Income Per Share
- --------------------
SFAS No. 128 replaced the calculation of primary and fully diluted net income
per share with basic and diluted net income per share. Unlike primary net income
per share, basic net income per share excludes any dilutive effects of common
stock equivalents. Diluted earnings per share is similar to the previously
reported fully diluted earnings per share and is computed by dividing net income
by the weighted average number of common and common equivalent shares
outstanding, as determined by the treasury stock method. Net income per share
amounts for all periods have been restated and presented to conform to the SFAS
No. 128 requirements.
Foreign Currency Translation Adjustments
- ----------------------------------------
The Company translates the balance sheet of its Canadian subsidiary into US
dollars at exchange rates in effect as of the balance sheet date. Profit and
loss accounts are translated monthly at exchange rates in effect at that time.
NOTE 3 -- RECEIVABLES
CONTRACTS RECEIVABLE
The components of contracts receivable as of June 30, 1998 and 1997, are
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Contracts receivable --
Memberships/undivided interests $ 6,425 $ 11,293
Timeshares and lots 401 1,069
---------- ----------
6,826 12,362
Allowance for doubtful accounts (2,136) (3,855)
Allowance for interest discount (234) (455)
Allowance for collection costs (234) (464)
Valuation allowance (78) (150)
---------- ----------
4,144 7,438
Interest receivable 37 79
---------- ----------
$ 4,181 $ 7,517
========== ==========
</TABLE>
Contracts Receivable
- --------------------
Contracts receivable bear interest at rates which range generally from 9.5% to
16%, with a weighted average stated rate of 13% at June 30, 1998 and 1997. The
obligor's weighted average equity in the contracts receivable at June 30, 1998
and 1997, was 75% and 70%, respectively. As of June 30, 1998, 97% of the
campground members and 99% of the purchasers of resort interests had paid for
their membership or resort interest in full.
Page 56
<PAGE> 57
The Company has no obligation to refund moneys received or to provide further
services to purchasers in the event a contract is canceled for the purchaser's
nonperformance of contractual obligations. Contracts receivable related to
undivided interests, lot sales and timeshare interests are secured by deeds of
trust on the related real estate. The Company does not require campground
members to provide collateral or other security for related contracts
receivable.
Allowance for Doubtful Accounts
- -------------------------------
In fiscal 1998, 1997 and 1996, the Company reduced the allowance for doubtful
accounts on the contracts receivable by $1.0 million, $1.2 million and $5.1
million, respectively. These amounts are included in nonrecurring income in the
accompanying consolidated statements of operations. These adjustments were made
because the Company experienced lower contract losses than anticipated in these
years.
The allowance for doubtful accounts is an estimate of the contracts receivable
that will cancel in the future and is determined based on historical
cancellation rates and other factors deemed relevant to the analysis. The
Company does not presently anticipate any further adjustments to the allowance
for doubtful accounts on the contracts receivable. However, the allowance and
the rate at which the Company provides for future losses on its contracts
receivable could be increased or decreased in the future based on the Company's
actual collection experience.
Allowance for Interest Discount
- -------------------------------
The allowance for interest discount had a remaining balance of $234,000 and
$455,000 at June 30, 1998 and 1997, respectively. Amortization of the allowance
for interest discount totaled $221,000, $267,000 and $357,000 for the years
ended June 30, 1998, 1997 and 1996, respectively, which increased interest
income.
Allowance for Collection Costs
- ------------------------------
The allowance for collection costs had a remaining balance of $234,000 and
$464,000 at June 30, 1998 and 1997, respectively. Amortization of the allowance
for collection costs totaled $230,000, $314,000 and $513,000 for the years ended
June 30, 1998, 1997 and 1996, respectively, which decreased general and
administrative expense.
Valuation Allowance
- -------------------
The valuation allowance had a balance of $78,000 and $150,000 at June 30, 1998
and 1997, respectively. Amortization of the valuation allowance totaled $72,000,
$112,000 and $250,000 for the years ended June 30, 1998, 1997 and 1996,
respectively, which increased interest income.
Page 57
<PAGE> 58
At June 30, 1998, scheduled future receipts on contracts receivable are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Memberships
and Undivided Timeshares
Interests and Lots Total
------------- ---------- --------
<S> <C> <C> <C>
1999 $ 3,290 $ 220 $ 3,510
2000 2,101 113 2,214
2001 880 47 927
2002 119 18 137
2003 17 1 18
Thereafter 18 2 20
--------- ------- --------
Total $6,425 $ 401 $ 6,826
========= ======= ========
</TABLE>
The Company operates 53 campgrounds located in 17 states and British Columbia,
Canada. The largest volume of campground membership sales occurred at
campgrounds located in California, and that is where the largest percentage of
campground members reside (approximately 37%). As of June 30, 1998, the
Company's contracts receivable from members who purchased memberships in the
state of California totaled approximately $2.9 million.
MEMBERSHIP DUES RECEIVABLE
In fiscal 1996, the Company increased the allowance for uncollectible dues by
$1.0 million, related to certain aged dues accounts that were determined
uncollectible in fiscal 1996. This charge is included in nonrecurring expenses
in the accompanying consolidated statement of operations.
NOTE 4 -- CAMPGROUND AND RESORT PROPERTIES
Campground properties consisted of the following as of June 30, 1998 and 1997
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Land held for sale $ 2,790 $ 6,211
Campground land at campgrounds where
right-to-use memberships are sold 11,257 11,288
Campground land at campgrounds where
undivided interests were sold 2,071 2,071
Property and equipment 36,507 35,826
Construction in progress 319 172
Accumulated depreciation (14,953) (12,804)
---------- ----------
$ 37,991 $ 42,764
========== ==========
</TABLE>
The Company sells campground memberships that give members the right to use one
or more of the Company's campgrounds but do not convey a deeded interest in the
campgrounds.
Page 58
<PAGE> 59
Until 1990, the Company also sold campground memberships that gave members a
deeded undivided interest in one of six campgrounds. At the six campgrounds
where undivided interests were sold, the Company is not required to seek the
consent of the campground members to sell or encumber the Company's interest in
the campgrounds.
Resort properties consisted of the following as of June 30, 1998 and 1997
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Land held for sale $ 1,076 $ 1,171
Lot inventory 10 342
Property and equipment 7 23
Accumulated depreciation (1) (6)
---------- ----------
$ 1,092 $ 1,530
========== ==========
</TABLE>
The campground and resort properties are encumbered by certain borrowings as
described in Note 6.
Over the past several years, the Company has been selling the assets it owns at
the resorts. On November 21, 1996, the Company sold its timeshare management
operations and timeshare inventory at the resorts. The sales price was $850,000,
of which $50,000 was paid in cash at closing with the balance represented by an
$800,000 promissory note which was completely repaid in June 1998. A deferred
gain of $471,000 was recorded in connection with the sale and was being
recognized on the installment method of accounting as payments on the note were
received. The deferred gain was netted against the principal amount of the note,
and the net amount was included in other current assets in the accompanying
consolidated balance sheet as of June 30, 1997.
In June 1998, the Company sold certain amenities it owned at the resorts for
$877,000 and was released of certain contingent liabilities associated with
these amenities totaling $372,000. As a result of this sale and the recognition
of the remaining deferred gain on the above-described note, the Company
recognized a gain of $1.5 million.
NOTE 5 -- DEFERRED REVENUE AND DEFERRED SELLING EXPENSES
Deferred revenue was comprised of the following as of June 30, 1998 and 1997
(dollars in thousands):
<TABLE>
<CAPTION>
June 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Deferred Revenue --
Campground membership sales $ 6,943 $ 6,303
Campground membership dues 14,771 15,611
Other 1,725 1,699
---------- ----------
$ 23,439 $ 23,613
========== ==========
</TABLE>
Page 59
<PAGE> 60
Components of the change in deferred membership selling expenses and deferred
membership sales revenue are as follows (dollars in thousands):
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
(Restated)
<S> <C> <C> <C>
Deferred Membership Selling Expenses, beginning of year $ 1,391 $ 1,244 $ 998
Deferred 794 505 481
Recognized (560) (358) (235)
---------- ---------- ----------
Net change 234 147 246
---------- ---------- ----------
Deferred Membership Selling Expenses,
end of year $ 1,625 $ 1,391 $ 1,244
========== ========== ==========
Deferred Membership Sales Revenue,
beginning of year $ 6,303 $ 5,838 $ 4,864
Deferred 3,100 2,131 2,116
Recognized (2,460) (1,666) (1,142)
---------- ---------- ----------
Net change 640 465 974
---------- ---------- ----------
Deferred Membership Sales Revenue,
end of year $ 6,943 $ 6,303 $ 5,838
========== ========== ==========
</TABLE>
NOTE 6 -- LONG TERM DEBT
SECURED NOTES
At June 30, 1996, the Company had outstanding $101.5 million principal amount of
Secured Notes, which were retired in full on July 17, 1996 (see "Secured Note
Restructuring" below). The original principal amount of the Secured Notes was
recorded net of a discount, to reduce the carrying value of the Secured Notes to
their estimated fair value as of December 31, 1991, the fresh start reporting
date. The discount resulted in an effective interest yield of 18% for the
Secured Notes. During the year ended June 30, 1996, $4.2 million of this
discount was amortized as additional interest expense. The remaining unamortized
balance of this discount was eliminated when the Secured Notes were retired in
the Restructuring.
The Secured Notes bore interest at 12% per annum, payable semi-annually on
January 15th and July 15th of each year. The Company was required to redeem
$18.6 million in principal amount of Secured Notes on each of July 15, 1995,
1996 and 1997, with the remaining unpaid principal due at maturity on July 15,
1998. The Secured Notes were secured by substantially all of the assets of the
Company.
On July 15, 1995, the Company made the mandatory redemption of $18.6 million
principal amount of Secured Notes. On January 31, 1996, the Company repurchased
$7.4 million principal amount of Secured Notes from unrelated sellers for $5.3
million, including accrued interest. The Company recognized a gain of $1.4
million on this transaction, which is presented as an extraordinary item in the
accompanying consolidated statement of operations. No taxes were provided as
cancellation of debt income is not included in taxable income to
Page 60
<PAGE> 61
the extent that the Company's liabilities exceeded the value of its assets
immediately prior to the acquisition of the Secured Notes.
In fiscal 1996, the Company incurred $1.1 million of restructuring costs related
to its efforts to restructure the Secured Notes.
SECURED NOTE RESTRUCTURING
On July 17, 1996, the Company consummated the Restructuring of the Secured
Notes, whereby all of the $101,458,000 principal amount of Secured Notes
outstanding were retired. In the Restructuring, the Company purchased
$10,070,000 in aggregate principal amount of Secured Notes pursuant to a tender
offer for $780 per $1,000 principal amount, and exchanged $81,790,000 in
aggregate principal amount of Secured Notes pursuant to a private exchange offer
for, in each case per $1,000 in principal amount: $400 in cash, $492 in
principal amount of 12% Senior Subordinated Pay-In-Kind Notes Due 2003 ("PIK
Notes") and 45 shares of Common Stock. The remaining $9,598,000 in aggregate
principal amount of Secured Notes were redeemed at 100% of principal amount,
plus accrued interest. In connection with the Restructuring, the Company entered
into the Credit Agreement with Foothill.
The Restructuring was accounted for as a Troubled Debt Restructuring, whereby
the restructured debt was recorded at the carrying value of the old debt and no
gain or loss was recorded on the transaction. A deferred gain of $303,000
recorded in connection with the Restructuring is being amortized as a reduction
of interest expense using the effective interest method over the term of the PIK
Notes.
The Company incurred $1.1 million of costs in fiscal 1997 in connection with the
consummation of the Restructuring.
CREDIT AGREEMENT WITH FOOTHILL
In connection with the Restructuring, the Company entered into the Credit
Agreement with Foothill, under which Foothill made term loans to the Company
totaling $13.0 million, and agreed to make revolving loans to the Company in the
maximum amount of $25.0 million, provided that the aggregate borrowings under
the Credit Agreement at any one time could not exceed $35.0 million. The Credit
Agreement originally had a three-year term expiring on July 16, 1999. During
fiscal 1997, the Company repaid substantially all of its initial borrowings
under the Credit Agreement, which totaled $32.0 million.
On May 16, 1997, the Company and Foothill entered into an amendment to the
Credit Agreement which significantly modified its original terms. The amendment
reduced the maximum availability under the revolving portion of the Credit
Agreement to $20.0 million, decreased the interest rate payable thereunder from
prime plus 2 3/4% per annum to prime plus 1 1/2% per annum, and reduced or
eliminated certain fees. The amendment also permitted the Company to borrow up
to $12.8 million to repurchase PIK Notes and to pay the accrued interest on PIK
Notes repurchased. The Company had incurred debt issue costs of $3.1 million
related to obtaining the original Credit Agreement, which were capitalized and
were being amortized as additional interest expense over the life of the loans.
However, because
Page 61
<PAGE> 62
of the substantial modifications made to the original Credit Agreement, the
amendment of the Credit Agreement was accounted for as an extinguishment of debt
and the remaining $1.3 million unamortized balance of the original debt issue
costs was charged to expense.
The Company repaid all outstanding borrowings under the Credit Agreement in
January 1998, and it had no outstanding borrowings under the Credit Agreement as
of June 30, 1998, and as of the date of this report. However, the Company has
entered into an amendment to the Credit Agreement which, when it becomes
effective, will provide the Company the flexibility to borrow up to $5.0 million
for working capital purposes and up to an additional $30.0 million to use for
the possible purchase of securities. Under the amended Credit Agreement, the
first $15.0 million of borrowings will bear interest at prime plus .25% per
annum, borrowings over $15.0 million and up to $25.0 million will bear interest
at prime plus .50% per annum, and borrowings over $25.0 million will bear
interest at prime plus 1.5% per annum. All borrowings under the amended Credit
Agreement will mature on July 17, 2002. However, if the Company has not repaid
in full or otherwise retired all of the PIK Notes by July 15, 2000, all
borrowings under the amended Credit Agreement in excess of $10.0 million will
mature on July 15, 2000, and up to $10.0 million of borrowings under the amended
Credit Agreement will be refinanced on such date and thereafter be available to
the Company for working capital purposes only. This $10.0 million working
capital facility will then become the Working Capital Replacement Facility
defined in the Indenture for the PIK Notes and will be secured by substantially
all of the assets of the Company as discussed below. The amendment to the Credit
Agreement will become effective upon the satisfaction of customary conditions.
The Company's ability to borrow under the amended Credit Agreement for working
capital and other purposes is subject to continued compliance by the Company
with the financial covenants and other requirements of the amended Credit
Agreement, including certain covenants respecting minimum earnings before
interest, taxes, depreciation and amortization, and minimum tangible net worth.
The amended Credit Agreement prohibits the Company from borrowing from other
sources in significant amounts except for equipment purchases.
The Company has granted liens on substantially all of its assets to secure its
obligations under the amended Credit Agreement. In addition, the Company's
subsidiaries other than an immaterial utility subsidiary have guaranteed the
Company's obligations under the amended Credit Agreement and, subject to certain
limitations, have granted liens on substantially all of their assets to secure
their guarantees.
PIK NOTES AND PIK NOTE REPURCHASES
In the Restructuring, the Company issued $40.2 million principal amount of PIK
Notes which mature on July 15, 2003. The PIK Notes bear interest at (i) 17 1/2%
per annum through January 15, 1998 (the "Initial Period"), and (ii) 12% per
annum thereafter. Upon issuance, the holders of the PIK Notes were paid prepaid
interest in the amount of $40.59 per $1,000 of principal amount (the "Prepaid
Interest") representing the incremental 5 1/2% per annum of interest during the
Initial Period. With the exception of the Prepaid Interest, interest on the PIK
Notes is due semiannually on January 15th and July 15th and is payable in the
form of additional PIK Notes until after July 15, 2000, unless all borrowings
under the amended Credit Agreement are paid in full on or before such date. If
all borrowings under the amended Credit Agreement are paid in full on or before
July 15, 2000, the Company has the
Page 62
<PAGE> 63
option to issue additional PIK Notes in lieu of cash interest through July 15,
2000. After July 15, 2000, interest on the PIK Notes must be paid in cash.
On June 25, 1997, the Company repurchased $13.4 million principal amount of PIK
Notes at a cost of $12.6 million, including accrued interest. The Company made
these repurchases at an average price of $897 per $1,000 of principal amount in
a Dutch auction available to all holders of PIK Notes. The Company borrowed the
$12.6 million it used for these repurchases under the amended Credit Agreement.
Because the Credit Agreement was amended primarily to provide the funding for
the PIK Note repurchases, the $1.2 million gain resulting from the PIK Note
repurchases was netted with the $1.3 million loss on the debt extinguishment
discussed above. The net $132,000 loss has been presented as a nonrecurring
expense in the accompanying consolidated statement of operations.
The Indenture for the PIK Notes provides holders of PIK Notes with the right to
have their notes repurchased at 101% of principal amount plus interest in the
event of a Change of Control (as defined). The Indenture also requires the
Company to apply certain asset sales proceeds to the retirement of the PIK Notes
in certain circumstances, subject to the rights of Foothill to repayment in
connection with asset sales. The Indenture does not contain financial covenants,
but it does prohibit the Company from borrowing from other sources in
significant amounts except for the Credit Agreement with Foothill, a $10.0
million Working Capital Replacement Facility, and equipment purchases.
The PIK Notes were guaranteed by the Company's subsidiaries other than an
immaterial utility subsidiary and are presently unsecured. However, upon
termination of the amended Credit Agreement, the PIK Notes will be secured by
the same assets as then secure the amended Credit Agreement other than cash and
cash equivalents and other assets required to secure any refinancing or
replacement of the borrowings provided by the amended Credit Agreement for
working capital purposes. This replacement credit facility may be secured by
substantially all of the assets of the Company and its subsidiaries other than
certain excluded assets, provided it does not exceed $10.0 million in principal
amount. The mortgages on the Company's campgrounds that were granted to secure
the Company's obligations under the amended Credit Agreement, and any mortgages
on the Company's campgrounds that are granted in the future to secure the
Company's obligations under the PIK Notes, contain or will contain
nondisturbance provisions designed to protect the rights of the campground
members.
NOTES AND MORTGAGES PAYABLE
During fiscal 1998, the Company repaid the remaining balances on its notes and
mortgages payable. At June 30, 1997, the outstanding mortgages totaled $381,000
with interest payable at fixed rates ranging from 7.0% to 12%, and the
outstanding note totaled $223,000 with interest payable at escalating rates
ranging from 8.9% to 10.4%.
Page 63
<PAGE> 64
BALANCE SHEET PRESENTATION
Balance sheet presentation of the current and long term components of the
Company's outstanding debt as of June 30, 1998 and 1997, is reflected below
(dollars in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---------- ----------
<S> <C> <C>
CURRENT PORTION OF LONG TERM DEBT:
Borrowings under Credit Agreement -- $ 5,799
Notes and mortgages payable -- 65
---------- ----------
-- $ 5,864
========== ==========
LONG TERM DEBT:
Borrowings under Credit Agreement -- $ 8,298
PIK Notes, including deferred gain of $.2 million $ 32,973 29,393
Notes and mortgages payable -- 539
---------- ----------
$ 32,973 $ 38,230
========== ==========
Total debt $ 32,973 $ 44,094
========== ==========
</TABLE>
NOTE 7 -- INCOME TAXES
The Company and its subsidiaries have entered into tax sharing agreements,
pursuant to which they file federal income tax returns on a consolidated basis
and allocate tax benefits and liabilities as provided in the agreements. The
agreements provide generally that a subsidiary will reimburse or be reimbursed
by the Company in an amount equal to 100% of any tax amounts that would have
been due or refundable, calculated as if the subsidiary were a stand-alone
taxpayer.
The differences, expressed as a percentage of pretax income, between statutory
and effective federal income tax rates are as follows:
<TABLE>
<CAPTION>
For the years ended June 30,
------------------------------------------
1998 1997 1996
---------- ---------- ----------
(Restated)
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0%
Provision for state income taxes 2.7 3.5 3.6
Alternative minimum taxes 2.6 1.7 --
Deferred tax benefit (63.6) -- --
Unrecorded net operating loss (34.0) (34.0) (34.0)
---------- ---------- ----------
Effective tax rate (58.3)% 5.2% 3.6%
========== ========== ==========
</TABLE>
Page 64
<PAGE> 65
At June 30, 1998, the Company had estimated net operating tax loss carryforwards
("NOL's") of $26.9 million, expiring in years 2009 through 2011, as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Year Ending Amount
June 30, Expiring
----------- ---------
<S> <C>
2009 $ 5,068
2010 16,147
2011 5,656
--------
$ 26,871
========
</TABLE>
The components of deferred income taxes as of June 30, 1998 and 1997 were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net Operating Loss Carryforwards (NOL's) $ 9,136 $ 17,022
Membership sales 1,818 1,670
Alternative Minimum Tax Credit Carryover 526 94
Deferred gain on Secured Note Restructuring 658 788
PIK Note interest 2,862 1,572
Unpaid expenses 2,257 3,454
Restructuring costs 1,508 1,675
Deferred revenue 487 553
Other 350 27
---------- ----------
19,602 26,855
---------- ----------
DEFERRED TAX LIABILITIES:
Property basis differences (2,814) (2,717)
Purchase discount amortization (195) (160)
Bad debt provision (201) (2,017)
---------- ----------
(3,210) (4,894)
---------- ----------
Net Deferred Tax Assets Before Valuation Allowance 16,392 21,961
Valuation Allowance (6,392) (21,961)
---------- ----------
Net Deferred Tax Assets After Valuation Allowance $ 10,000 $ 0
========== ==========
</TABLE>
SFAS No. 109, which provides guidance on reporting for income taxes, requires
the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. The Company has historically provided a
valuation allowance for the amount by which deferred tax assets exceed deferred
tax liabilities. However, the Company periodically assesses the realizability of
its deferred tax assets and considers whether it is more likely than not that
the tax benefits will be realized. The ultimate realization of the deferred tax
assets is dependent upon the Company having future taxable income during the
periods in which the NOL's may be utilized and other deferred tax assets become
deductible. Based on management's current assessment, which considers scheduled
reversals of deferred tax assets and liabilities, projected future taxable
income, and the carryforward periods of the Company's NOL's, management believes
that it is more likely than not that the Company will realize the benefits of a
significant portion of the net deferred tax assets. As a result, the
Page 65
<PAGE> 66
Company reduced the valuation allowance by $10.0 million at June 30, 1998,
resulting in net deferred tax assets after valuation allowance of $10.0 million.
The ultimate realization of these income tax benefits will require aggregate
taxable income of approximately $29.4 million during the carryforward period.
Management believes that it is more likely than not that the Company will
generate taxable income sufficient to realize the net deferred tax assets after
valuation allowance based upon the current estimates of future taxable income.
If the Company is unable to generate sufficient taxable income in the future
through operating results, increases in the valuation allowance will be required
through a charge to expense. However, if the Company achieves sufficient
profitability to utilize a greater portion of the deferred tax benefit, the
valuation allowance will be further reduced through a credit to income.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Lease Commitments
- -----------------
The Company leases equipment and facilities under non-cancelable operating
leases with terms in excess of one year. At June 30, 1998, the Company's future
obligations under non-cancelable operating leases were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Year ending
June 30, Amount
-------------- --------------
<S> <C>
1999 $ 810
2000 329
2001 187
2002 123
2003 110
</TABLE>
Accrued Construction Costs
- --------------------------
At June 30, 1998 and 1997, the Company had a recorded liability of $2.8 million
for amounts necessary to complete certain improvements at the resorts as
provided in registration statements filed with the US Department of Housing and
Urban Development. The costs of such improvements are based upon engineering
estimates and are classified as a current liability in the accompanying
consolidated balance sheets.
CEO Bonus Accrual
- -----------------
In June 1996, the Company's Chief Executive Officer ("CEO") exercised his right
under his employment agreement to receive a one-time bonus of $1.3 million,
which was paid in fiscal 1997. This bonus was accrued as of June 30, 1996, and
is reflected as a nonrecurring expense in the Company's accompanying
consolidated financial statement of operations. The Company obtained an
irrevocable standby letter of credit on which the CEO could draw payment if the
Company failed to pay the bonus after receiving a request from the CEO. The
letter of credit was secured by a $1.5 million cash deposit, which was
subsequently released.
Page 66
<PAGE> 67
CONTINGENCIES
General Liability Insurance
- ---------------------------
Commencing July 1, 1998, the Company obtained insurance covering general
liability losses up to an annual limit of $27.0 million, with no self-insured
deductible. Prior to this date, the Company's insurance covered general
liability losses up to an annual limit of $26.8 million, but required the
Company to pay the first $250,000 per occurrence, with an annual aggregate
exposure of $2.0 million. The Company has provided a liability for estimated
known and unknown claims related to uninsured general liability risks based on
actuarial estimates. In fiscal 1998, the Company reduced this liability by
$858,000 because the estimated losses were less than the recorded liability.
This amount is included in nonrecurring income in the accompanying consolidated
statement of operations. At June 30, 1998 and 1997, the Company's recorded
liability for estimated losses related to uninsured general liability claims
totaled $1.2 million and $2.0 million, respectively, which is included in other
liabilities in the accompanying consolidated balance sheets.
Property Insurance
- ------------------
In fiscal 1998, the Company received proceeds of $1.1 million from insurance
settlements for flood and fire damage at certain campgrounds. The Company
recognized a gain of $588,000 from these settlements, which is included in
nonrecurring income in the accompanying consolidated statement of operations.
Employee Health Insurance
- -------------------------
The Company has employee benefit plans that are funded primarily through
employer and employee contributions (see Note 13).
Workers' Compensation Insurance
- -------------------------------
Commencing July 1, 1998, the Company obtained insurance covering workers'
compensation claims with no self-insured deductible. Prior to this date, the
Company's insurance program required the Company to pay up to $250,000 per
occurrence and to deposit funds with the insurance company to pay claims in
excess of the estimated claims that were covered by the amounts originally paid
by the Company. These deposits were generally expensed in the years the deposits
were made because the Company anticipated that the deposits would be used to
cover claims. However, during fiscal 1997, the Company determined that it was
entitled to refunds of $865,000 in future periods for certain deposits made in
previous years. At June 30, 1997, the Company recorded the refundable amount as
an asset, resulting in nonrecurring income of $865,000. The refundable amount is
included in other assets in the accompanying consolidated balance sheets. In
fiscal 1998, the Company received refunds totaling $1.3 million for certain
other deposits expensed in previous years, which were recorded as nonrecurring
income.
In fiscal 1996, the Company changed its method of determining workers'
compensation premiums, whereby it no longer records the cost of such premiums
based on estimates that are subject to potential audit adjustments at year-end.
As a result, in fiscal 1996, the Company reversed a recorded contingent
liability related to workers' compensation premium audits. The $799,000 reversal
amount is included in nonrecurring income in the accompanying consolidated
statement of operations.
Page 67
<PAGE> 68
Declining Membership Base
- -------------------------
The Company derives a significant portion of its ongoing operating revenue from
its campground members (92% in fiscal 1998). The Company's membership base has
declined significantly over the past five fiscal years, and, net of new sales,
the membership base is presently declining at the rate of approximately 6% per
year (excluding 1,800 members lost in connection with the sale of two
campgrounds in fiscal 1998). The Company attributes this continuing decline
principally to its aging membership base, of whom approximately 50% are senior
citizens. In addition, the Company estimates that the memberships sold in recent
fiscal years will have an expected life that is significantly shorter than the
expected life of the memberships previously sold by the Company. To stop the
continuing decline in the Company's membership base, the Company must
significantly increase its campground membership sales over current levels.
Environmental Issues
- --------------------
Certain environmental issues may exist at some of the Company's campgrounds
concerning underground storage tanks, sewage treatment plants and septic
systems, and waste disposal. Management has reviewed these issues and believes
that they will not have a material adverse impact on the Company's operations or
financial position.
Litigation
- ----------
The Company is involved in certain claims and litigation arising in the normal
course of business. Management believes that the eventual outcome of these
claims and litigation will not have a material adverse impact on the Company's
operations or financial position.
NOTE 9 -- STOCKHOLDERS' EQUITY (DEFICIT)
The Company issued 3,702,726 shares of Common Stock in connection with its
emergence from bankruptcy on December 31, 1991. The Company issued an additional
3,680,550 shares of Common Stock in the Restructuring on July 17, 1996 (see Note
6). Transfer of the Common Stock is subject to transfer restrictions that are
described below.
Transfer of Common Stock is subject to restrictions designed to avoid an
"ownership change" within the meaning of section 382 of the Internal Revenue
Code of 1986, as amended (the "Code"). Such restrictions are set forth in
Article IX of the Company's Restated Certificate of Incorporation. Article IX
generally restricts, until June 30, 2011 (or earlier in certain events), direct
or indirect transfer of Common Stock that would without the approval of the
board of directors of the Company (i) increase to more than 4.75% the percentage
ownership of Common Stock of any person who at any time during the preceding
three-year period did not own more than 4.75% of the Common Stock, (ii) increase
the percentage of Common Stock owned by any person that during the preceding
three-year period owned more than 4.75% of the Common Stock, or by any group of
persons treated as a "5 Percent Shareholder" (as defined in the Code but
substituting "4.75%" for "5 Percent"), or (iii) cause an "ownership change" of
the Company. Article IX provides that any direct or indirect transfer of Common
Stock in violation of Article IX is void ab initio as to the purported
transferee, and the purported transferee will not be recognized as the owner of
shares acquired in violation of Article IX for any purpose, including for
purposes of voting and receiving dividends or other distributions in respect of
Common Stock. Any shares
Page 68
<PAGE> 69
purportedly acquired in violation of Article IX will be transferred to a trustee
who will be required to sell them.
The Company's Restated Certificate of Incorporation provides for the issuance of
15,000,000 shares of Common Stock, par value of $.01 per share. In addition, the
Company's Restated Certificate of Incorporation provides for the issuance of
1,500,000 shares of preferred stock, par value $.01 per share, none of which
have been issued to date.
The Company has issued warrants to acquire shares of Common Stock and has also
granted stock options to the Company's CEO and other key employees and
non-employee directors (see Note 12).
Since inception, the Company has not paid any dividends. The Credit Agreement
prohibits the payment of any cash dividends on the Common Stock without the
consent of Foothill until the Credit Agreement is terminated, and the Indenture
for the PIK Notes prohibits the payment of any cash dividends on the Common
Stock until the PIK Notes are repaid.
NOTE 10 -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of non-cash investing and financing activities required
by SFAS No. 95 "Statement of Cash Flows" are presented below for the years ended
June 30, 1998, 1997 and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Non-cash transactions related to the Restructuring (see Note 6)
--------------------------------------------------------------
Retirement of Secured Notes $ (44,181)
Issuance of PIK Notes 40,521
Issuance of Common Stock 2,990
Write-off of unamortized portion of consent fees 670
Non-cash transactions related to the timeshare sale (see Note 4)
---------------------------------------------------------------
Note receivable from Buyer $ 800
Deferred gain (471)
Book value of timeshare inventory sold (58)
Book value of fixed assets sold (165)
Net receivables written off (156)
Non-cash payments of PIK Note interest
--------------------------------------
PIK Notes issued in lieu of cash interest payment $ 3,610 $ 2,372
Disposition of campgrounds
--------------------------
Abandonment of two operating campgrounds and elimination of
related nonrecourse obligations $ 2,518
</TABLE>
Page 69
<PAGE> 70
NOTE 11 -- DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
an entity to disclose the estimated fair value of its financial instrument
assets and liabilities. Significant estimates and present value calculations
were used by the Company for purposes of this disclosure. The estimated fair
values of the Company's financial instruments as of June 30, 1998 and 1997, as
well as their carrying amounts as reported in the accompanying consolidated
balance sheets, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997
------------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and Cash Equivalents $ 13,631 $ 13,631 $ 1,343 $ 1,343
Restricted Cash 1,171 1,171 1,407 1,407
Contracts Receivable 6,863 12,441
Less: allowances and discount (2,682) (4,924)
---------- ---------- ---------- ----------
4,181 4,300 7,517 7,500
FINANCIAL LIABILITIES:
Borrowings under Credit
Agreement -- -- 14,097 14,097
PIK Notes 32,973 30,690 29,393 26,204
Notes and Mortgages -- -- 604 604
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of the Company's financial instruments as of June 30, 1998 and 1997,
for which it is practical to estimate that value.
Cash and Cash Equivalents, Restricted Cash and Borrowings under Credit Agreement
- --------------------------------------------------------------------------------
The carrying amount approximates fair value because of the short maturity of
these instruments.
Contracts Receivable
- --------------------
The fair value of contracts receivable was estimated by discounting the future
cash flows using the current rates at which the Company estimates a similar loan
portfolio would be purchased by a willing third party, after considering risk
factors regarding collectibility and future collection costs.
PIK Notes
- ---------
The fair value of the PIK Notes as of June 30, 1998, was estimated based on
quotes from securities industry professionals; however, to the Company's
knowledge, the PIK Notes have
Page 70
<PAGE> 71
not traded recently and may not be deemed to be traded in an established trading
market. The fair value of the PIK Notes as of June 30, 1997, was estimated using
the weighted average price the Company paid to repurchase PIK Notes on June 25,
1997, in a Dutch auction.
Notes and Mortgages
- -------------------
The fair value of notes and mortgages as of June 30, 1997, was estimated based
on the borrowing rates available for bank loans with similar terms and average
maturities.
Changes in assumptions or estimation methodologies may have a material effect on
these estimated fair values. Additionally, lack of uniform valuation
methodologies introduces a greater degree of subjectivity to these estimated
values.
The Company did not have any financial instruments as of the balance sheet dates
presented that were held for trading purposes.
NOTE 12 -- STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
CEO Options
- -----------
Upon consummation of the Restructuring, on August 1, 1996, the Company's CEO was
granted options to purchase 664,495 shares of Common Stock at $0.69 per share.
The grant of these options was approved by the Company's stockholders at their
annual meeting. These options are 100% vested and are exercisable for a period
of ten years while the CEO is in the employ of the Company, subject to certain
exceptions. The exercise of the options, however, is subject to restrictions
designed to prevent an "ownership change" for federal tax purposes (see Note 9).
To date, none of these options have been exercised.
1991 Employee Plan
- ------------------
Effective December 31, 1991, the Company adopted the 1991 Employee Stock
Incentive Plan (the "1991 Employee Plan") to enable the Company and its
subsidiaries to attract, retain and motivate their officers, employees and
directors. Awards under the 1991 Employee Plan may take various forms, including
(i) shares of Common Stock, (ii) options to acquire shares of Common Stock
("Options"), (iii) securities convertible into shares of Common Stock, (iv)
stock appreciation rights, (v) phantom stock or (vi) performance units. Options
granted under the 1991 Employee Plan may be (i) incentive stock options
("ISOs"), which have certain tax benefits and restrictions, or (ii)
non-qualified stock options ("Non-qualified Options"), which do not have any tax
benefits and have few restrictions.
The Compensation Committee or, in certain circumstances, the Board of Directors
may grant awards under the 1991 Employee Plan until December 30, 2001. The
recipient of an award duly granted on or prior to such date may thereafter
exercise or settle it in accordance with its terms, although the Company may not
issue any shares of Common Stock pursuant to any award after December 30, 2011.
The Board of Directors may amend or terminate the 1991 Employee Plan at any time
and in any manner, provided that (i) an amendment or termination may not affect
an award previously granted without the recipient's consent, and (ii) an
amendment will not be
Page 71
<PAGE> 72
effective until the stockholders approve it if any national securities exchange
or securities association that lists any of the Company's securities requires
stockholder approval or if Rule 16b-3 requires stockholder approval.
The Company reserved 291,780 shares of Common Stock for issuance under the 1991
Employee Plan. In fiscal 1993, the Company granted 285,000 ISOs to key employees
with an exercise price of $2.50 per share. Of these 285,000 ISOs, 190,000 were
canceled in fiscal 1995 and fiscal 1996 as a result of employees leaving the
Company, and the remaining 95,000 were canceled in fiscal 1996 in connection
with the grant of replacement options issued under the 1993 Stock Option and
Restricted Stock Purchase Plan discussed below. In September 1995, the Company
granted key employees ISOs covering 140,000 shares with an exercise price of
$.625 per share, and in January 1996, the Company granted certain non-employee
directors Non-qualified Options to purchase 20,000 shares with an exercise price
of $.81 per share. In September 1996, the Company granted key employees ISOs
covering 60,000 shares and one non-employee director Non-qualified Options
covering 5,000 shares, each with an exercise price of $.80 per share. In
November 1996, the Company granted certain non-employee directors Non-qualified
Options covering 20,000 shares, each with an exercise price of $1.08 per share.
In November 1997, the Company granted the non-employee directors Non-Qualified
Options covering 20,000 shares with an exercise price of $3.71 per share. To
date, options for 202,500 shares are outstanding under the 1991 Employee Plan,
all of which are vested, and options for 54,999 shares have been exercised. The
options have a term of 10 years from the date of grant.
1993 Employee Plan
- ------------------
On December 2, 1993, the Company adopted the 1993 Stock Option and Restricted
Stock Purchase Plan (the "1993 Employee Plan") in order to enable the Company
and its subsidiaries to attract, retain, and motivate their officers and
employees. Awards under the 1993 Employee Plan are restricted to (i) awards of
the right to purchase shares of Common Stock ("Stock Awards"), or (ii) awards of
Options, which may be either ISOs or Non-Qualified Options. The purchase price
for any Stock Awards and the exercise price for any Non-Qualified Options may be
less than the fair market value of the Common Stock on the date of grant. The
exercise price of any ISOs may not be less than the fair market value of the
Common Stock on the date of grant.
The Compensation Committee or, in certain circumstances, the Board of Directors
may grant awards under the 1993 Employee Plan until October 20, 2003. The
termination of the 1993 Employee Plan, however, will not alter or impair any
rights or obligations under any award previously granted under the plan.
The Board of Directors may amend or terminate the 1993 Employee Plan at any time
and in any manner, provided that (i) an amendment or termination may not affect
an award previously granted without the recipient's consent, (ii) an amendment
will not be effective until the stockholders approve it if any national
securities exchange or securities association that lists any of the Company's
securities requires stockholder approval or if Rule 16b-3 requires stockholder
approval and (iii) the stockholders must approve any amendment decreasing the
minimum exercise price specified in the plan for any ISO granted thereunder.
Page 72
<PAGE> 73
The Company reserved 285,919 shares of Common Stock for issuance under the
1993 Employee Plan. The 1993 Employee Plan, however, limits the number of shares
of Common Stock with respect to which awards can be made in any calendar year to
any one participant to 200,000 shares. In May 1996, the Company granted 95,000
ISOs under the 1993 Employee Plan at an exercise price of $.59 per share,
contingent upon the termination of an equal number of ISOs granted under the
1991 Employee Plan at an exercise price of $2.50 per share. In September 1996,
the Company granted key employees ISOs covering 175,000 shares with an exercise
price of $.80 per share. To date, options for 208,500 shares are outstanding
under the 1993 Employee Plan, all of which are vested, and options for 61,500
shares have been exercised. The options have a term of 10 years from the date of
grant.
Director Plan
- -------------
On December 2, 1993, the Company adopted the 1993 Director Stock Option Plan
(the "Director Plan"), which provides for the grant of Non-Qualified Options to
non-employee directors of the Company. The Company reserved 50,000 shares of
Common Stock for issuance under the Director Plan. In January 1995, the
non-employee directors of the Company were granted Non-Qualified Options
covering 20,000 shares with an exercise price of $.79 per share. In November
1996, the non-employee directors of the Company were granted Non-qualified
Options covering 25,000 shares with an exercise price of $1.08 per share. Prior
to this grant, after approval by the Board of Directors, four of the
non-employee directors had voluntarily terminated options for 20,000 shares that
were granted in December 1994 with an exercise price of $2.75 per share. In
November 1997, the non-employee directors of the Company were granted
Non-Qualified Options covering 5,000 shares with an exercise price of $3.71 per
share. To date, options for 50,000 shares are outstanding under the Director
Plan, all of which are vested, and none have been exercised. The options have a
term of 10 years from the date of grant.
The Director Plan is designed to be a "formula plan," pursuant to which each
non-employee director will automatically receive a grant of Non-Qualified
Options to purchase 5,000 shares of Common Stock on the day immediately after
each annual meeting of the stockholders at which directors are elected,
beginning with the annual meeting held in December 1993. If on any such day, the
number of shares of Common Stock remaining available for issuance under the
Director Plan is insufficient for the grant of the total number of Non-qualified
Options to which all participants would otherwise be entitled, each participant
will receive Non-qualified Options to purchase a proportionate number of the
available number of remaining shares. The exercise price of each Non-Qualified
Option is required to be equal to the fair market value on the date of grant of
such Option as determined under the Director Plan. Generally, the Director Plan
specifies that such fair market value is the average trading price of the Common
Stock during the period beginning 45 days before the date of grant and ending 15
days before the date of grant.
SFAS 123 Disclosures
- --------------------
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") effective for the Company beginning in fiscal 1997.
SFAS 123 defines a fair value method of accounting for employee stock options
which provides for compensation cost to be charged to results of operations at
the grant date. As allowed under SFAS 123, the Company follows the accounting
treatment prescribed by Accounting
Page 73
<PAGE> 74
Pronouncement Bulletin Opinion No. 25 ("APB 25") in accounting for stock options
issued to its employees and directors. Accordingly, no compensation cost was
recognized in connection with the grant of options during the periods presented.
Had compensation cost for the stock options issued been based on the fair value
at the grant dates for those issuances consistent with SFAS 123, the Company's
net income and net income per share for the years ended June 30, 1998, 1997 and
1996, would have been $24.8 million or $3.35 per share, $6.4 million or $.89 per
share and $1.0 million or $.28 per share, respectively.
Pro forma results under SFAS 123 in the years presented are not likely to be
representative of future pro forma results because, for example, additional
awards may be made in future years.
Set forth below is a summary of awards of stock options made by the Company
during the years ended June 30, 1998, 1997 and 1996, and awards outstanding as
of the end of those years:
<TABLE>
<CAPTION>
Years ended June 30,
----------------------------------------------------------------------------------
1998 1997 1996
------------------------- ------------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 1,224,495 $ .71 295,000 $ .78 291,000 $ 2.40
Options granted 25,000 $ 3.71 949,495 $ .74 255,000 $ .63
Options canceled (7,501) $ .63 (20,000) $ 2.75 (251,000) $ 2.50
Options exercised (50,499) $ .70
---------- ---------- ----------
Options outstanding, end
of year 1,191,495 $ .78 1,224,495 $ .71 295,000 $ .78
========== ========== ==========
Options exercisable, end
of year 1,152,332 $ .79 1,131,171 $ .72 155,000 $ .92
========== ========== ==========
Shares available for
grant, end of year 50,200 n/a 67,699 n/a 332,699 n/a
========== ========== ==========
</TABLE>
The weighted-average fair value of stock options granted by the Company during
the years ended June 30, 1998, 1997 and 1996, was $.78, $.38 and $.37,
respectively. The value of each option grant was estimated as of the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: (1) a risk-free interest rate of 5.41% for fiscal
1998, 6.19% for fiscal 1997 and 6.66% for fiscal 1996, (2) an expected life of
three years for fiscal 1998 and 1997, and four years for fiscal 1996, (3)
expected volatility of 54.56% for fiscal 1998, 72.5% for fiscal 1997 and 71.58%
for fiscal 1996, and (4) no dividend yield, as the Company has not paid any
dividends since inception, and both the Credit Agreement and the Indenture for
the PIK Notes prohibit or substantially limit the payment of cash dividends.
Page 74
<PAGE> 75
The following table summarizes information about the Company's stock options
outstanding as of June 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ -------------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding at Contractual Exercise Exercisable Exercise
Prices 6/30/98 Life Price at 6/30/98 Price
- -------------- -------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
OPTION PLANS:
$.59 - $1.08 502,000 7.83 years $ .75 462,837 $ .78
$3.71 25,000 9.38 years $ 3.71 25,000 $ 3.71
CEO OPTIONS:
$.69 664,495 8.08 years $ .69 664,495(1) $ .69
------------ -----------
1,191,495 8.01 years $ .78 1,152,332 $ .79
============ ===========
</TABLE>
(1) As previously discussed, the options granted to the Company's CEO, although
100% vested, are subject to restrictions designed to prevent an "ownership
change" for federal tax purposes.
WARRANTS
On December 31, 1991, the Company issued warrants to acquire 194,521 shares of
Common Stock at $4.24 per share, none of which have been exercised to date.
These warrants expire on June 30, 1999. In June 1992, the Company issued
warrants to acquire 290,314 shares of Common Stock at $4.24 per share, of which
3,308 have been exercised to date. These warrants expire on June 30, 1999. In
March 1994, the Company issued warrants to acquire 10,170 shares of Common Stock
at $1.625 per share, of which 125 have been exercised to date. These warrants
expire on March 31, 1999. To date, a total of 491,572 warrants are outstanding
and 3,433 have been exercised.
The following table summarizes information about the Company's warrants
outstanding as of June 30, 1998:
<TABLE>
<CAPTION>
Warrants Outstanding Warrants Exercisable
------------------------------------------------------ -------------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Outstanding at Contractual Exercise Exercisable Exercise
Prices 6/30/98 Life Price at 6/30/98 Price
- -------------- -------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
$ 4.24 481,527 1 year $ 4.24 481,527 $ 4.24
$1.625 10,170 3/4 year $ 1.625 10,170 $ 1.625
</TABLE>
Page 75
<PAGE> 76
NOTE 13 -- EMPLOYEE BENEFIT PLANS
Flexible Benefits Plan Trust Fund
- ---------------------------------
Effective July 1, 1992, the Company established a trust to fund the Company's
employee benefit plans (the "Trust Fund"). The benefit plans (collectively, the
"Plans") include the Company's medical plan, dental plan, disability plan, life
insurance plan, and accidental death and dismemberment plan and any other
employee welfare benefit plan permissible under Section 3(1) of the Employee
Retirement Income Security Act of 1974. The Company has adopted a flexible
benefits plan established pursuant to Section 125 of the Code to furnish
eligible employees with a choice of receiving cash or certain statutory taxable
or non-taxable benefits under the above benefit plans.
The medical and dental benefits provided to the Company's employees under the
Plans are funded primarily through employer and employee contributions to the
Trust Fund. In addition, the Company has purchased stop loss insurance which
protects the Plans against claims in excess of set policy amounts. The Company
has provided a liability for estimated future claims of $828,000 and $1.4
million at June 30, 1998 and 1997, respectively, which is included in other
liabilities in the accompanying consolidated balance sheets. This liability is
based on actuarial estimates of amounts needed to fund expected claims, as well
as premium payments and administrative costs of the Plans. During fiscal 1997,
the Company determined that its actual claims experience for certain previous
years was significantly below the estimates for those years. As a result, the
Company reduced its liability for estimated future claims by $611,000, which is
reflected as nonrecurring income in the accompanying consolidated statement of
operations for the year ended June 30, 1997.
The Company from time-to-time makes contributions to the Trust Fund, which are
irrevocable. Trust assets may not revert to or inure to the benefit of the
Company. Neither the Company, administrator, nor trustee is responsible for the
adequacy of the Trust Fund.
While the trustee has virtual plenary authority to manage and invest trust
assets, the trustee is required to use trust assets and income exclusively to
provide benefits under the Plans and to defray reasonable expenses of
administering the Plans.
Employees Savings Trust
- -----------------------
Effective July 1, 1994, the Company adopted the Thousand Trails, Inc. Employees
Savings Trust for the purpose of establishing a contributory employee savings
plan exempt under Section 401(k) of the Code. An eligible employee participating
in this plan may contribute up to 10% of his or her annual salary, subject to
certain limitations. In addition, the Company may make discretionary matching
contributions as determined annually by the Company. The Company made matching
contributions totaling $131,000 for the year ended June 30, 1998, and has
committed to make matching contributions for the calendar year ended December
31, 1998, in an amount equal to 45% of the voluntary contributions made by each
participant, up to 4% of the participant's annual compensation (or a maximum of
1.8% of the participant's annual compensation). Employer contributions are
subject to a seven-year vesting schedule.
Page 76
<PAGE> 77
Non-Qualified Deferred Compensation Plan
- ----------------------------------------
Effective April 23, 1998, the Company established the Thousand Trails, Inc.
Non-Qualified Deferred Compensation Plan (the "Non-Qualified Plan") for the
purpose of establishing a deferred compensation plan for certain "highly
compensated" employees of the Company. An eligible employee participating in
this plan may contribute up to 10% of his or her annual salary subject to
certain limitations. In addition, the Company may make discretionary matching
contributions determined solely at the discretion of the Company. The Company
made insignificant matching contributions for the period from plan inception
through June 30, 1998, and has committed to make matching contributions for the
calendar year ended December 31, 1998, in an amount equal to 45% of the combined
voluntary contributions to the Non-Qualified Plan and 401(k) Plan made by each
participant, up to 4% of the participant's annual compensation (or a maximum of
1.8% of the participants annual compensation). Employer contributions are fully
vested at the time the contributions are made.
NOTE 14 -- INDUSTRY SEGMENT INFORMATION
The Company's operations have historically been classified into two business
segments: campgrounds and resorts. Operations within the campground segment
include (i) the sale of memberships which entitle the member to use certain
campground facilities, (ii) the sale of undivided interests related to fee
simple sales of interests in campground facilities, (iii) net revenues earned
from the reciprocal use program operated by RPI, (iv) net revenues earned from
operations at the campgrounds, and (v) net fees earned from the management of
campgrounds owned by third parties. The Company's resort operations have
historically included the sale of timeshare interests in fully furnished
vacation homes, management of the timeshare facilities, and the sale of lots at
certain resorts. In November 1996, the Company sold the timeshare operations and
timeshare inventory at the resorts. The Company's current operations at the
resorts consist solely of the sale of lots which are not material to the
Company's consolidated operations. The Company has sold significant resort
assets in the last three years and plans to dispose of the remaining resort
assets over the next several years.
Operating earnings by business segment are defined as membership dues and other
operating revenue less operating expenses. Sales are separately identified.
Income and expenses not allocated to business segments include interest income,
interest expense, corporate administrative costs, and other income and expenses.
Identifiable assets are those assets used exclusively in the operations of each
business segment. Industry segment information is not presented for the years
ended June 30, 1998 and 1997, because revenues and identifiable assets related
to the resort operations during those years are less than 10% of the related
consolidated amounts. Separate information regarding the Canadian operations is
not presented as revenues and identifiable assets related to the Canadian
operations for the periods presented are less than 10% of the related
consolidated amounts.
Page 77
<PAGE> 78
The following table shows sales, operating earnings (loss) and other financial
information by industry segment for the year ended June 30, 1996, as restated to
reflect a change in accounting method for the recognition of revenue from
campground membership sales (see Note 1) (in thousands):
<TABLE>
<CAPTION>
Year ended June 30, 1996
------------------------------------------------------------------------
Campground Resort Corporate and
Operations Operations Other Consolidated
--------------- --------------- --------------- ---------------
(Restated)
<S> <C> <C> <C> <C>
Operating revenues $ 59,816 $ 6,975 $ 66,791
Sales 1,656 1,357 3,013
Operating earnings (loss) 11,910 35 $ (12,185) (240)
Identifiable assets 66,953 4,705 39,973 111,631
Depreciation 2,209 123 534 2,866
Capital expenditures 621 366 35 1,022
</TABLE>
NOTE 15 -- INDEMNIFICATION ARRANGEMENTS
Under its By-laws, the Company must indemnify its present and former directors
and officers for the damages and expenses that they incur in connection with
threatened or pending actions, suits or proceedings arising because of their
status as directors and officers, provided that they acted in good faith and in
a manner that they reasonably believed to be in or not opposed to the best
interests of the Company (or with respect to any criminal action or proceeding,
provided that they had no reasonable cause to believe that their conduct was
unlawful). In connection with this indemnification obligation, the Company has
entered into indemnification agreements with its directors and officers.
The Company must advance funds to these individuals to enable them to defend any
such threatened or pending action, suit or proceeding. The Company cannot
release such funds, however, until it receives an undertaking by or on behalf of
the requesting individual to repay the amount if a court of competent
jurisdiction ultimately determines that such individual is not entitled to
indemnification. In connection with this obligation, the Company and Trails
established trusts (the "Indemnification Trusts") that will reimburse their
present and former directors and officers for any indemnifiable damages and
expenses that they incur and that will advance to them defense funds. Pursuant
to the trust agreements, interest on the trust estates will become part of the
trust estates. The Indemnification Trusts will terminate on the earlier of (i)
the execution by a majority of the beneficiaries of a written instrument
terminating the trusts, (ii) the exhaustion of the entire trust estates, or
(iii) the expiration of ten years from the establishment of the trusts. The
Indemnification Trusts may not terminate, however, if there is pending or
threatened litigation with respect to a claim by a beneficiary against the
Indemnification Trusts, until (i) a final judgment in such proceeding, (ii) the
execution and delivery of a statement by such beneficiary that assertion of a
threatened claim is unlikely, or (iii) the expiration of all applicable statutes
of limitations. The Company possesses a residuary interest in the trust estates
upon termination of the Indemnification Trusts.
In 1991, the Company and Trails contributed $500,000 and $300,000, respectively,
to the Indemnification Trusts. In fiscal 1998, these trusts were partially
terminated, and a portion of the trust assets were distributed to the Company.
NACO also contributed $200,000 to a trust
Page 78
<PAGE> 79
that was established to reimburse NACO directors and certain officers for any
indemnifiable damages and expenses that they might incur and to advance defense
funds to them. This trust was terminated in fiscal 1998 and the trust assets
were distributed to the Company. The remaining assets in the Indemnification
Trusts totaled $804,000 at June 30, 1998, and are included in other assets in
the accompanying consolidated balance sheets.
NOTE 16 -- CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
All of the Company's wholly owned subsidiaries (other than an inconsequential
utility subsidiary) (collectively, the "Subsidiary Guarantors") have fully and
unconditionally guaranteed, on a joint and several basis, the Company's
obligations under the PIK Notes that were issued on July 17, 1996, as well as
the PIK Notes issued in lieu of cash payment of interest (see Note 6).
The following condensed consolidating balance sheets and statements of
operations present the financial position and results of operations of the
Company ("TTI"), NACO, RPI, Wilderness Management and Coast, and the
eliminations necessary to arrive at the information for the Company on a
consolidated basis, as of and for the years presented. Such financial
information has been restated to reflect a change in accounting method for the
recognition of revenue from campground membership sales (see Note 1). Prior to
July 16, 1996, when Trails was merged into the Company, Trails was a separate
corporation. Therefore, the results of operations of Trails for the year ended
June 30, 1996, have been presented in a separate column. The assets and
operations of Wilderness Management and Coast are not material and have
therefore, been combined with the balances of RPI. The Company has not presented
separate financial statements and other disclosures concerning the Subsidiary
Guarantors because management believes such information is not material to
investors. These condensed consolidating financial statements are presented to
provide additional analysis of, and should be read in conjunction with, the
consolidated financial statements of the Company.
All of the Company's debt and equity interests in the Subsidiary Guarantors have
been pledged by the Company to secure its obligations under the Credit
Agreement. In the event of a default and foreclosure under the Credit Agreement,
distributions from, and the assets of, the Subsidiary Guarantors may not be
available to satisfy other obligations of the Company, including the obligations
of the Company to the holders of the PIK Notes.
Page 79
<PAGE> 80
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
RPI,
WILDERNESS, CONSOLIDATING
TTI NACO AND COAST(e) ENTRIES TOTAL
---------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS --
Cash and cash equivalents $ 12,933 $ 480 $ 218 $ 13,631
Current portion of receivables, net 2,074 366 2,440
Current portion of net deferred tax 528 43 2,383 d 2,954
assets
Due (to) from affiliates (9,092) 8,003 1,625 (536)a
Other current assets 1,467 673 288 2,428
---------- ---------- ---------- ---------- ----------
Total current assets 7,910 9,522 2,174 1,847 21,453
Receivables, net 1,500 241 1,741
Note receivable from subsidiary 28,161 (28,161)b
Real estate and property, net 18,056 20,814 213 39,083
Investment in subsidiaries (9,939) 9,939 c
Net deferred tax assets 3,608 100 3,338 d 7,046
Other assets 3,307 1,270 362 4,939
---------- ---------- ---------- ---------- ----------
Total assets $ 52,603 $ 31,847 $ 2,849 $ (13,037) $ 74,262
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES --
Accounts payable and accrued
liabilities $ 6,963 $ 2,889 $ 936 $ (536)a $ 10,252
Accrued construction costs 2,845 2,845
Current portion of deferred revenue 11,627 5,987 1,237 18,851
---------- ---------- ---------- ---------- ----------
Total current liabilities 18,590 11,721 2,173 (536) 31,948
Note payable to parent 28,161 (28,161)b
Long term debt 32,973 32,973
Other liabilities 4,007 2,567 13 6,587
---------- ---------- ---------- ---------- ----------
Total liabilities 55,570 42,449 2,186 (28,697) 71,508
---------- ---------- ---------- ---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT) (2,967) (10,602) 663 15,660 2,754
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 52,603 $ 31,847 $ 2,849 $ (13,037) $ 74,262
========== ========== ========== ========== ==========
</TABLE>
a Entry to eliminate other intercompany accounts.
b Entry to eliminate intercompany debt.
c Entry to record subsidiaries' results on a consolidated basis.
d Entry to record net deferred tax assets in consolidation that
are not realizable by the subsidiary on a stand-alone basis.
e Includes Wilderness Management assets of $481,000 and Coast
assets of $270,000.
Page 80
<PAGE> 81
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
RPI,
WILDERNESS, CONSOLIDATING
TTI NACO AND COAST(e) ENTRIES TOTAL
----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS--
Cash and cash equivalents $ 767 $ 484 $ 92 $ 1,343
Current portion of receivables, net 2,768 438 $ (72)a 3,134
Other current assets 2,308 2,980 6,356 (7,088)b 4,556
----------- ----------- ----------- ----------- -----------
Total current assets 5,843 3,902 6,448 (7,160) 9,033
Receivables, net 3,812 699 (128)a 4,383
Note receivable from subsidiary 28,154 (28,154)c
Real estate and property, net 20,943 23,254 97 44,294
Investment in subsidiaries (10,638) 10,638 d
Other Assets 3,571 1,782 239 5,592
----------- ----------- ----------- ----------- -----------
Total Assets $ 51,685 $ 29,637 $ 6,784 $ (24,804) $ 63,302
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES--
Accounts payable and accrued liabilities $ 13,896 $ 3,575 $ 859 $ (7,288)a,b $ 11,042
Current portion of long term debt 5,844 20 5,864
Accrued construction costs 2,809 2,809
Current portion of deferred revenue 11,913 6,324 1,218 19,455
----------- ----------- ----------- ----------- -----------
Total current liabilities 31,653 12,728 2,077 (7,288) 39,170
Note payable to parent 28,154 (28,154)c
Long term debt 37,874 356 38,230
Other liabilities 4,326 3,734 10 8,070
----------- ----------- ----------- ----------- -----------
Total liabilities 73,853 44,972 2,087 (35,442) 85,470
----------- ----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT) (22,168) (15,335) 4,697 10,638 (22,168)
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 51,685 $ 29,637 $ 6,784 $ (24,804) $ 63,302
========== =========== =========== =========== ===========
</TABLE>
a Entry to eliminate intercompany dealer holdback.
b Entry to eliminate intercompany accounts.
c Entry to eliminate intercompany debt.
d Entry to record subsidiaries' results on a consolidated basis.
e Includes Wilderness Management assets of $375,000 and Coast
assets of $48,000.
Page 81
<PAGE> 82
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
RPI,
WILDERNESS, CONSOLIDATING
TTI NACO AND COAST(e) ENTRIES TOTAL
----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES
Membership dues and other
campground/resort revenue $ 34,157 $ 18,326 $ 1,322 $ 53,805
Membership and resort interest sales 2,341 1,553 3,894
Interest income 4,382 1,215 59 (3,021)a 2,635
Income from subsidiaries 5,794 (5,794)b
Other income 5,320 7,637 4,160 (942)c 16,175
----------- ----------- ----------- ----------- -----------
Total Revenue 51,994 28,731 5,541 (9,757) 76,509
----------- ----------- ----------- ----------- -----------
EXPENSES
Campground/resort operating
expenses 23,201 14,444 1,507 39,152
Selling and marketing 3,074 1,724 4,798
Interest expense 5,087 2,533 (3,021)a 4,599
General and administrative 4,716 4,687 179 (942)c 8,640
Other expenses 1,181 291 2,132 3,604
----------- ----------- ----------- ----------- -----------
Total Expenses 37,259 23,679 3,818 (3,963) 60,793
----------- ----------- ----------- ----------- -----------
Operating income 14,735 5,052 1,723 (5,794) 15,716
Income tax (provision) benefit 4,423 (319) (662) 5,721 d 9,163
----------- ----------- ----------- ----------- -----------
Net Income $ 19,158 $ 4,733 $ 1,061 $ (73) $ 24,879
=========== =========== =========== =========== ===========
</TABLE>
a Entry to eliminate intercompany interest.
b Entry to record subsidiaries' results on a consolidated basis.
c Entry to eliminate servicing fee income earned on affiliate
receivable portfolios.
d Entry to record a deferred tax benefit in consolidation that
is not realizable by the subsidiary on a stand-alone basis.
e Includes Wilderness Management revenues and expenses of $1.3
million and $1.5 million, respectively, and Coast revenues and
expenses of $1,000 and $179,000, respectively.
Page 82
<PAGE> 83
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
RPI,
WILDERNESS, CONSOLIDATING
TTI NACO AND COAST(d) ENTRIES TOTAL
----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES
Membership dues and other
campground/resort revenue $ 35,243 $ 21,514 $ 1,094 $ 57,851
Membership and resort interest sales 2,090 1,387 3,477
Interest income 5,318 1,093 $ (2,685)a 3,726
Income from subsidiaries 3,280 (3,280)b
Other income 4,959 5,349 4,086 (1,035)c 13,359
----------- ----------- ----------- ----------- -----------
Total Revenue 50,890 29,343 5,180 (7,000) 78,413
----------- ----------- ----------- ----------- -----------
EXPENSES
Campground/resort operating
expenses 24,431 17,408 1,021 42,860
Selling and marketing 2,898 1,559 4,457
Interest expense 9,130 2,639 (2,685)a 9,084
General and administrative 5,880 5,135 120 (1,035)c 10,100
Restructuring costs 1,101 1,101
Other expenses 1,258 406 1,978 3,642
----------- ----------- ----------- ----------- -----------
Total Expenses 44,698 27,147 3,119 (3,720) 71,244
----------- ----------- ----------- ----------- -----------
Operating income 6,192 2,196 2,061 (3,280) 7,169
Income tax (provision) benefit 607 (44) (933) (370)
----------- ----------- ----------- ----------- -----------
Net Income $ 6,799 $ 2,152 $ 1,128 $ (3,280) $ 6,799
=========== =========== =========== =========== ===========
</TABLE>
a Entry to eliminate intercompany interest.
b Entry to record subsidiaries' results on a consolidated basis.
c Entry to eliminate servicing fee income earned on affiliate
receivable portfolios.
d Includes Wilderness Management revenues and expenses of $1.1
million and $1.0 million, respectively, and Coast expenses of
$120,000.
Page 83
<PAGE> 84
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
(Restated)
(Dollars in thousands)
<TABLE>
<CAPTION>
RPI AND CONSOLIDATING
TTI TRAILS NACO WILDERNESS(d) ENTRIES TOTAL
----------- ----------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Membership dues and other
campground/resort revenue $ 34,911 $ 26,481 $ 820 $ 62,212
Membership and resort
interest sales 1,444 1,569 3,013
Interest income $ 6,445 3,446 1,219 267 $ (4,621)a 6,756
Income from subsidiaries 8,526 (8,526)b
Other income 66 4,669 10,977 4,585 (1,256)c 19,041
-------- -------- -------- -------- ----------- --------
Total Revenue 15,037 44,470 40,246 5,672 (14,403) 91,022
-------- -------- -------- -------- ----------- --------
EXPENSES
Campground/resort operating
expenses 25,647 23,865 796 50,308
Selling and marketing 3,504 1,810 5,314
Interest expense 17,346 146 4,822 (4,621)a 17,693
General and administrative 1,604 3,813 6,312 (1,256)c 10,473
Restructuring costs 1,124 1,124
Other expenses 3,721 392 2,237 6,350
-------- -------- -------- -------- ----------- --------
Total Expenses 20,074 36,831 37,201 3,033 (5,877) 91,262
-------- -------- -------- -------- ----------- --------
Operating income (loss) (5,037) 7,639 3,045 2,639 (8,526) (240)
Income tax (provision) benefit 4,756 (3,471) (77) (1,249) (41)
Extraordinary gain 1,390 1,390
-------- -------- -------- -------- ----------- --------
Net Income $ 1,109 $ 4,168 $ 2,968 $ 1,390 $ (8,526) $ 1,109
======== ======== ======== ======== =========== ========
</TABLE>
a Entry to eliminate intercompany interest.
b Entry to record subsidiaries' results on a consolidated basis.
c Entry to eliminate servicing fee income earned on affiliate
receivable portfolios.
d Includes Wilderness Management revenues and expenses of
$826,000 and $796,000, respectively.
Page 84
<PAGE> 85
SCHEDULE II
THOUSAND TRAILS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Valuation and qualifying Balance at the Balance at
accounts deducted from assets beginning of the end of
Year ended the year Additions Deductions the year
- -------------------------------- -------------- --------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful 6/30/98 $ 3,855 $ 86 $ 1,805 a $ 2,136
accounts 6/30/97 6,290 35 2,470 a 3,855
6/30/96 13,806 24 7,540 a 6,290
Allowance for uncollectible 6/30/98 $ 3,568 $ 2,626 $ 2,765 $ 3,429
dues receivable 6/30/97 4,666 3,215 4,313 3,568
6/30/96 4,008 4,754 b 4,096 4,666
Allowance for interest discount, 6/30/98 $ 1,069 $ 0 $ 523 $ 546
collection costs and valuation 6/30/97 1,762 0 693 1,069
discount 6/30/96 2,882 0 1,120 1,762
Deferred tax valuation 6/30/98 $ 21,961 $ 0 $ 15,569 c $ 6,392
allowance (as restated) 6/30/97 25,220 0 3,259 21,961
6/30/96 19,441 $ 5,779 0 25,220
</TABLE>
a Includes a reduction in the allowance for doubtful accounts of
$1,000, $1,232, and $5,146 in fiscal 1998, 1997 and 1996,
respectively.
b Includes an increase in the allowance for uncollectible dues
receivable of $1,000.
c Includes a reduction in the deferred tax valuation allowance
of $10,000.
Page 85
<PAGE> 86
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 86
<PAGE> 87
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be included under the captions
"Proposal I - Election of Directors," "Board of Directors," "Executive
Officers," and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Registrant's definitive Proxy Statement for the Registrant's 1998 Annual Meeting
of Stockholders, which will be filed with the SEC pursuant to Regulation 14A,
and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included under the caption
"Executive Compensation" in the Registrant's definitive Proxy Statement for the
Registrant's 1998 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item will be included under the caption
"Security Ownership" in the Registrant's definitive Proxy Statement for the
Registrant's 1998 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be included under the caption
"Certain Transactions" in the Registrant's definitive Proxy Statement for the
Registrant's 1998 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
Page 87
<PAGE> 88
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) FINANCIAL STATEMENTS
The following documents are filed as part of this Report:
Report of Independent Public Accountants for the years ended June 30, 1998,
1997 and 1996.
Consolidated Balance Sheets as of June 30, 1998 and 1997.
Consolidated Statements of Operations for the years ended June 30, 1998,
1997 and 1996.
Consolidated Statements of Stockholders' Deficit for the years ended June
30, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended June 30, 1998,
1997 and 1996.
Notes to Consolidated Financial Statements.
Schedule II - Valuation and Qualifying Accounts
(b) REPORTS ON FORM 8-K
The Company did not file any Current Reports on Form 8-K during the quarter
ended June 30, 1998.
(c) EXHIBITS
The following documents are filed or incorporated by reference as exhibits to
this report:
Exhibit
Number Description
--------- ---------------
2.1 Plan of Reorganization of the Company (which was formerly
known as NACO Finance Corporation), dated October 15, 1991,
as supplemented (incorporated by reference to Exhibit 2.1 to
the Company's Annual Report on Form 10-K for the year ended
June 30, 1992, File No. 0-19743).
Page 88
<PAGE> 89
2.2 Offer to Purchase for Cash the Company's 12% Secured Notes
due 1998 and Additional Series 12% Secured Notes due 1998 by
the Company, dated June 5, 1996 (the "Offer to Purchase")
(incorporated by reference to Exhibit 99.2 to the Company's
Current Report on Form 8-K filed with the SEC on June 7,
1996, File No. 0-19743).
2.3 Supplement to the Offer to Purchase, dated June 21, 1996
(incorporated by reference to Exhibit 2.5 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
2.4 Private Placement Memorandum by the Company offering to
exchange the Company's 12% Secured Notes due 1998 and
Additional Series 12% Secured Notes due 1998 to certain
holders of such notes, dated June 28, 1996 (the "Private
Placement Memorandum") (incorporated by reference to Exhibit
2.6 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1996, File No. 0-19743).
2.5 Letter of Transmittal pertaining to the transmittal of the
Company's 12% Secured Notes Due 1998 and Additional Series
12% Secured Notes Due 1998 by certain holders of such notes
pursuant to the exchange offer made by the Company in the
Private Placement Memorandum (incorporated by reference to
Exhibit 2.7 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996, File No. 0-19743).
2.6 Supplement to the Private Placement Memorandum, dated July
15, 1996 (incorporated by reference to Exhibit 2.8 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996, File No. 0-19743).
2.7 Agreement and Plan of Merger, dated as of October 1, 1996,
between the Company and USTrails (predecessor in interest to
the Company) (incorporated by reference to the proxy
statement/prospectus filed with the the SEC on October 3,
1996 as part of the Registration Statement on Form S-4,
Registration Statement No. 333-13339, File No.
0-19743 (the "S-4 Registration Statement").
2.8 Offer to Purchase for Cash the Company's 12% Senior
Subordinated Pay-In-Kind Notes due 2003, dated as of May 20,
1997 (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed with the SEC on
July 8, 1997, File No. 0-19743).
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to the proxy statement/prospectus
filed with the SEC on October 3, 1996 as part of the S-4
Registration Statement).
3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Form 8-B filed by the Company
with the SEC on November 27, 1996, File No. 0-19743).
Page 89
<PAGE> 90
4.1 Form of Reorganization Warrant Certificate to purchase shares
of Common Stock and schedule of substantially identical
warrants (incorporated by reference to Exhibit 4.7 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1992, File No. 0-19743).
4.2 Letter Agreement, dated March 19, 1993, between the Company
and Carl Marks Strategic Investments, LP (incorporated by
reference to Exhibit 4.18 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed with
the SEC on January 15, 1993, File No. 0-19743).
4.3 Form of Warrant Certificate to purchase shares of Common
Stock issued pursuant to the Exchange Agreement with certain
holders of Trails' indebtedness (incorporated by reference to
Exhibit 4.3 to the Company's Current Report on Form 8-K filed
with the SEC on June 25, 1992, File No. 0-19743) and schedule
of substantially identical warrants (incorporated by
reference to Exhibit 4.15 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No.
0-19743).
4.4 Warrant Agency Agreement, dated as of March 2, 1994, between
the Company and Shawmut Bank Connecticut, National
Association, as Warrant Agent (incorporated by reference to
Exhibit 4.4 to the Company's Current Report on Form 8-K filed
with the SEC on April 11, 1994, File No. 0-19743).
4.5 Registration Rights Agreement, dated as of June 12, 1992,
regarding the Company's Additional Series Secured Notes and
the shares of Common Stock issuable upon the exercise of
certain warrants (incorporated by reference to Exhibit 4.4 of
the Company's Current Report on Form 8-K filed with the SEC
on June 25, 1992, File No. 0-19743).
4.6 Indemnification Agreement, dated as of January 14, 1993,
between the Company and the selling security holders under
Registration Statement No. 33-571261 (incorporated by
reference to Exhibit 10.44 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed with
the SEC on January 15, 1993, File No. 0-19743).
4.7 Indenture, dated as of July 17, 1996, among the Company,
Fleet National Bank as Trustee, and certain other parties
described therein, pertaining to the Company's Senior
Subordinated Pay-In-Kind Notes Due 2003 (incorporated by
reference to Exhibit 4.36 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No.
0-19743).
90
<PAGE> 91
4.8 Form of Senior Subordinated Pay-In-Kind Note Due 2003
(incorporated by reference to Exhibit 4.37 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
4.9 Registration Rights Agreement, dated as of July 17, 1996,
between the Company and Fleet National Bank as Trustee
(incorporated by reference to Exhibit 4.38 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.1 Credit Agreement, dated as of December 31, 1991, between the
Company and NACO (incorporated by reference to Exhibit 10.27
to the Company's Annual Report on Form 10-K for the year
ended June 30, 1992, File No. 0-19743).
10.2 First Amendment to Credit Agreement, dated as of May 20,
1993, between the Company and NACO (incorporated by reference
to Exhibit 10.48 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1993, File No. 0-19743).
10.3 Second Amendment to Credit Agreement, dated as of November
10, 1994, between the Company and NACO (incorporated by
reference to Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1995, File No.
0-19743).
10.4 Amended and Restated Promissory Note, dated as of November
10, 1994, pursuant to which the Company provides a
$40,000,000 revolving credit facility to NACO (incorporated
by reference to Exhibit 10.4 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1995, File No.
0-19743).
10.5 Amended and Restated Promissory Note, dated as of November
10, 1994, pursuant to which the Company provided a
$10,765,000 term loan to NACO (incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 0-19743).
10.6 Guaranty, dated as of December 31, 1991, pursuant to which
the subsidiaries of NACO guaranteed certain amounts that NACO
owes the Company (incorporated by reference to Exhibit 10.5
to the Company's Registration Statement No. 33-73284 on Form
S-2, originally filed with the SEC on December 22, 1993, File
No. 0-19743).
10.7 Release From Guaranty, dated as of May 31, 1993, among
certain subsidiaries of the Company, the Company, and Shawmut
Bank Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 10.56 to the Company's
Registration Statement No. 33-571261 on Form S-2, originally
filed with the SEC on January 15, 1993, File No. 0-19743).
Page 91
<PAGE> 92
10.8 Release under Credit Agreement and Security Agreement, dated
as of May 31, 1993, among certain subsidiaries of the
Company, the Company, and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by reference to Exhibit
10.57 to the Company's Registration Statement No. 33-571261
on Form S-2, originally filed with the SEC on January 15,
1993, File No. 0-19743).
10.9 Security Agreement, dated as of December 31, 1991, pursuant
to which NACO granted to the Company a security interest in
substantially all of its personal and real property including
the pledge of NACO's stock in its subsidiaries as required by
the credit agreement between the Company and NACO
(incorporated by reference to Exhibit 10.31 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-19743).
10.10 First Supplement and Amendment to Security Agreement, dated
as of May 20, 1993, among NACO and certain of its
subsidiaries, RPI, the Company, and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by reference
to Exhibit 10.53 to the Company's Registration Statement No.
33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993, File No. 0-19743).
10.11 Form of Mortgage from NACO and its subsidiaries to the
Company pursuant to the credit agreement between the Company
and NACO (incorporated by reference to Exhibit 10.32 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1992, File No. 0-19743, and schedule of documents
substantially identical to the Form of Mortgage (incorporated
by reference to Exhibit 10.55 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed with
the SEC on January 15, 1993, File No. 0-19743).
10.12 Form of First Amendment to Mortgage from NACO and its
subsidiaries to the Company amending certain terms of a
Mortgage that previously granted a beneficial security
interest in certain property to the Company pursuant to the
credit agreement between the Company and NACO, and schedule
of documents substantially identical to the Form of First
Amendment to Mortgage (incorporated by reference to Exhibit
10.13 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1995, File No. 0-19743).
10.13 Loan and Security Agreement, dated as of July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
Page 92
<PAGE> 93
10.14 First Amendment to Loan and Security Agreement, dated as of
May 16, 1997, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K filed with the SEC on
July 8, 1997, File No. 0-19743).
10.15 Second Amendment to Loan and Security Agreement dated as of
December 23, 1997, between the Company and Foothill
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1997, File No. 0-19743).
10.16 Third Amendment to Loan and Security Agreement dated as of
January 5, 1998, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 0-19743).
10.17 Fourth Amendment to Loan and Security Agreement, dated as of
June 10, 1998, between the Company and Foothill.
10.18 Secured Promissory Note (Account Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.19 Secured Promissory Note (Term Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.20 Form of Pledge and Security Agreement, dated as of July 10,
1996, between the Company and Foothill Capital Corporation,
and schedule of documents substantially identical to the form
of Pledge and Security Agreement (incorporated by reference
to Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1996, File No. 0-19743).
10.21 Consent and First Amendment to Pledge and Security Agreement,
dated as of October 31, 1997, between certain subsidiaries of
the Company and Foothill Capital Corporation (incorporated by
reference to exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, File No.
0-19743).
Page 93
<PAGE> 94
10.22 Form of Mortgage, dated as of July 10, 1996, to grant liens
to Foothill Capital Corporation to secure the Company's
obligations under the Credit Agreement with Foothill, and
schedule of documents substantially identical to the form of
Mortgage (incorporated by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996, File No. 0-19743).
10.23 Form of Assignment of Indebtedness and Mortgage, dated as of
July 10, 1996, transferring the liens securing certain
indebtedness that NACO owes to the Company to Foothill
Capital Corporation under the Credit Agreement with Foothill,
and schedule of documents substantially identical to the form
of Assignment of Indebtedness and Mortgage (incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No.
0-19743).
10.24 Form of Subordination Agreement, dated as of July 10, 1996,
between the Company and Foothill Capital Corporation,
subordinating the security interests under the credit
agreement between the Company and NACO to the security
interests under the Credit Agreement with Foothill, and
schedule of documents substantially identical to the form of
Subordination Agreement (incorporated by reference to Exhibit
10.25 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1996, File No. 0-19743).
10.25 The Company's 1991 Employee Stock Incentive Plan
(incorporated by reference to Exhibit 10.40 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-19743).
10.26 Amendment No. 1 to the Company's 1991 Employee Stock
Incentive Plan (incorporated by reference to Exhibit 10.8 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, File No. 0-19743).
10.27 The Company's 1993 Stock Option and Restricted Stock Purchase
Plan (incorporated by reference to Exhibit 10.22 to the
Company's Registration Statement No. 33-73284 on Form S-2,
originally filed with the SEC on December 22, 1993, File No.
0-19743).
10.28 Amendment No. 1 to the Company's 1993 Stock Option and
Restricted Stock Purchase Plan (incorporated by reference to
Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, File No. 0-19743).
10.29 The Company's 1993 Director Stock Option Plan (incorporated
by reference to Exhibit 10.23 to the Company's Registration
Statement No. 33-73284 on Form S-2, originally filed with the
SEC on December 22, 1993, File No. 0-19743).
Page 94
<PAGE> 95
10.30 Amendment No. 1 to the Company's 1993 Director Stock Option
Plan (incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 0-19743).
10.31 Stock Option Agreement, dated as of August 1, 1996, between
the Company and William J. Shaw (incorporated by reference to
Exhibit 10.26 to the Form 8-B filed by the Company with the
SEC on November 27, 1996, File No. 0-19743).
10.32 Assumption of Obligations, dated as of November 20, 1996, by
the Company assuming the obligations of USTrails under the
USTrails Inc. 1991 Employee Stock Incentive Plan, as amended;
the USTrails Inc. 1993 Stock Option and Restricted Stock
Purchase Plan, as amended; the USTrails Inc. 1993 Director
Stock Option Plan, as amended; Warrant Certificates
originally issued on December 31, 1991, June 12, 1992, and
March 2, 1994 to May 16, 1995; and the Stock Option
Agreement, dated as of August 1, 1996, between USTrails and
William J. Shaw (incorporated by reference to Exhibit 10.27
to the Form 8-B filed by the Company with the SEC on November
27, 1996, File No. 0-19743).
10.33 Employment Agreement, dated as of May 11, 1995, between the
Company and William J. Shaw, and related Standby Letter of
Credit, dated September 22, 1995, issued by The Bank of
California, N.A., for the benefit of Mr. Shaw, and Letter,
dated September 20, 1995, from The Wyatt Company, regarding
Mr. Shaw's Employment Agreement (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 0-19743).
10.34 Letter dated June 29, 1996, from William J. Shaw to the
Company, regarding Mr. Shaw's election to receive the
Enterprise Bonus payable under his Employment Agreement, and
Letter, dated July 8, 1996, from Deloitte & Touche LLP,
regarding the computation of the amount of the Enterprise
Bonus payable to Mr. Shaw under his Employment Agreement
(incorporated by reference to Exhibit 10.30 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.35 Amended and Restated Employment Agreement, dated as of
September 10, 1992, among NACO, Trails, RPI, and William F.
Dawson (incorporated by reference to Exhibit 10.49 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1993, File No. 0-19743), and Letter, dated December 1,
1995, from RPI to William F. Dawson, regarding certain
compensation arrangements (incorporated by reference to
Exhibit 10.4 to the Company's Quarterly on From 10-Q for the
quarter ended December 31, 1995, File No. 0-19743).
Page 95
<PAGE> 96
10.36 Amended and Restated Employment Agreement, dated as of
December 2, 1992, among the Company, NACO, Trails, and Walter
B. Jaccard (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992, File No. 0-19743), and amendment dated
November 15, 1994 (incorporated by reference to Exhibit 10.30
to the Company's Annual Report on Form 10-K for the year
ended June 30, 1995, File No. 0-19743), and amendment dated
December 7, 1995 (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995, File No. 0-19743).
10.37 Amended and Restated Employment Agreement, dated as of
October 21, 1993, between the Company and Harry J. White, Jr.
(incorporated by reference to Exhibit 99.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1993, File No. 0-19743), and amendment dated December 7,
1996 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995, File No. 0-19743).
10.38 Employment Agreement, dated as of August 31, 1995, between
the Company and R. Gerald Gelinas (incorporated by reference
to Exhibit 10.32 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1995, File No. 0-19743).
10.39 Indemnification Agreement, dated as of February 18, 1992,
between the Company and Andrew Boas (incorporated by
reference to Exhibit 10.23 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No.
0-19743), and schedule of substantially identical
Indemnification Agreements (incorporated by reference to
Exhibit 10.33 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 0-19743).
10.40 Indemnification Agreement, dated as of September 1, 1995,
between Trails and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 0-19743).
10.41 Indemnification Agreement, dated as of September 1, 1995,
between NACO and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 0-19743).
Page 96
<PAGE> 97
10.42 Indemnification Agreement, dated as of May 8, 1991, between
the Company and Donald W. Hair, and schedule of substantially
identical Indemnification Agreements (incorporated by
reference to Exhibit 10.38 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No.
0-19743).
10.43 Indemnification Agreement, dated as of November 20, 1996,
between the Company and William J. Shaw and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.39 to the Company's
Registration Statement No. 333-19357 on Form S-1, originally
filed with the SEC on January 7, 1997, File No. 0-19743).
10.44 Lease, dated February 24, 1994, as amended, between
Carter-Crowley Properties, Inc. as lessor, and the Company as
lessee, relating to the Company's offices in Dallas, Texas
(incorporated by reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994,
File No. 0-19743).
10.45 Lease, dated October 7, 1987, as amended, between Hardy Court
Shopping Center, Inc. as lessor, and NACO as lessee, relating
to NACO's offices in Gautier, Mississippi (incorporated by
reference to Exhibit 10.36 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, File No.
0-19743).
10.46 Grantor Trust Agreement, dated as of September 30, 1991,
between Union Bank of California, N.A. (formerly known as The
Bank of California, N.A., and referred to herein as "Union
Bank"), and Trails (incorporated by reference from Trails'
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-9246).
10.47 Supplement to Grantor Trust Agreement, dated as of November
20, 1996, by the Company in favor of Union Bank (incorporated
by reference to Exhibit 10.44 to the Company's Registration
Statement No. 333-19357 on Form S-1, originally filed with
the SEC on January 7, 1997, File No. 0-19743).
10.48 Grantor Trust Agreement, dated as of September 30, 1991,
between The Bank of California, N.A. and NACO (incorporated
by reference to Exhibit 10.43 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1992, File No.
0-19743).
10.49 Supplement to Grantor Trust Agreement, dated as of January
22, 1998, between NACO and a majority of the persons
presently named as beneficiaries under the Grantor Trust
Agreement, dated as of September 30, 1991, between NACO and
Union Bank of California, N.A., as Trustee (incorporated by
reference to exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, File No.
0-19743).
Page 97
<PAGE> 98
10.50 Grantor Trust Agreement, dated May 8, 1991, between the
Company and Texas Commerce Bank, N.A. ("Texas Bank")
(incorporated by reference to Exhibit 10.41 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-19743).
10.51 Supplement and Succession Agreement to Grantor Trust
Agreement, dated as of October 13, 1992, among Union Bank,
Texas Bank, the Company, and certain beneficiaries under the
Grantor Trust Agreement (incorporated by reference to Exhibit
10.51 to the Company's Registration Statement No. 33-571261
on Form S-2, originally filed with the SEC on January 15,
1993, File No. 0-19743).
10.52 Supplement to Grantor Trust Agreement, dated as of
November 20, 1996, by the Company in favor of Union Bank
(incorporated by reference to Exhibit 10.43 to the Form 8-B
filed by the Company with the SEC on November 27, 1996, File
No. 0-19743).
10.53 Supplement No. 2 to Grantor Trust Agreement, dated as of
January 22, 1998, between the Company and a majority of the
persons presently named as beneficiaries under the Grantor
Trust Agreement, dated as of May 8, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee (incorporated by reference to exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 0-19743).
10.54 Trust Agreement, dated as of July 22, 1992, establishing the
Company's Flexible Benefits Plan Trust Fund (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No.
0-19743).
10.55 Thousand Trails, Inc. Employee Savings Trust, dated as of
July 1, 1994, between the Company and its subsidiaries and
The Bank of California, N.A., as trustee (incorporated by
reference to Exhibit 10.42 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, File No.
0-19743).
10.56 Agreement for the Thousand Trails, Inc. Non-Qualified
Deferred Compensation Plan, effective April 23, 1998.
10.57 Tax Allocation Agreement, dated as of September 10, 1992,
between the Company and RPI (incorporated by reference to
Exhibit 99.6 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, File No. 0-19743).
Page 98
<PAGE> 99
10.58 Tax Allocation Agreement, dated as of July 1, 1991, between
the Company and NACO (incorporated by reference to Exhibit
10.44 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1994, File No. 0-19743).
10.59 Tax Allocation Agreement, dated as of October 29, 1993,
between the Company and Wilderness Management (incorporated
by reference to Exhibit 10.46 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1994, File No.
0-19743).
10.60 Exchange Agent Agreement, dated as of March 29, 1994, among
the Company, Trails, and American Stock Transfer & Trust
Company (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed with the SEC on
April 11, 1994, File No. 0-19743).
10.61 Sample form of current Membership Contract.
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule as of and for the year ended June 30,
1998.
27.2 Restated Financial Data Schedule as of and for the year ended
June 30, 1997.
Page 99
<PAGE> 100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THOUSAND TRAILS, INC.
(Registrant)
Date: September 24, 1998 By: /s/William J. Shaw
------------------------------------
William J. Shaw
Chairman of the Board, President,
Chief Executive Officer, and acting
Chief Financial Officer
Date: September 24, 1998 By: /s/Bryan Reed
------------------------------------
Bryan Reed
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/Andrew M. Boas Director September 24, 1998
- ---------------------------
Andrew M. Boas
/s/William P. Kovacs Director September 24, 1998
- ---------------------------
William P. Kovacs
/s/Donald R. Leopold Director September 24, 1998
- ---------------------------
Donald R. Leopold
/s/H. Sean Mathis Director September 24, 1998
- ---------------------------
H. Sean Mathis
/s/Douglas K. Nelson Director September 24, 1998
- ---------------------------
Douglas K. Nelson
/s/William J. Shaw Chairman of September 24, 1998
- --------------------------- the Board
William J. Shaw
Page 100
<PAGE> 101
EXHIBIT INDEX
Exhibit
Number Description
2.1 Plan of Reorganization of the Company (which was formerly
known as NACO Finance Corporation), dated October 15, 1991,
as supplemented (incorporated by reference to Exhibit 2.1 to
the Company's Annual Report on Form 10-K for the year ended
June 30, 1992, File No. 0-19743).
2.2 Offer to Purchase for Cash the Company's 12% Secured Notes
due 1998 and Additional Series 12% Secured Notes due 1998 by
the Company, dated June 5, 1996 (the "Offer to Purchase")
(incorporated by reference to Exhibit 99.2 to the Company's
Current Report on Form 8-K filed with the SEC on June 7,
1996, File No. 0-19743).
2.3 Supplement to the Offer to Purchase, dated June 21, 1996
(incorporated by reference to Exhibit 2.5 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
2.4 Private Placement Memorandum by the Company offering to
exchange the Company's 12% Secured Notes due 1998 and
Additional Series 12% Secured Notes due 1998 to certain
holders of such notes, dated June 28, 1996 (the "Private
Placement Memorandum") (incorporated by reference to Exhibit
2.6 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1996, File No. 0-19743).
2.5 Letter of Transmittal pertaining to the transmittal of the
Company's 12% Secured Notes Due 1998 and Additional Series
12% Secured Notes Due 1998 by certain holders of such notes
pursuant to the exchange offer made by the Company in the
Private Placement Memorandum (incorporated by reference to
Exhibit 2.7 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1996, File No. 0-19743).
2.6 Supplement to the Private Placement Memorandum, dated July
15, 1996 (incorporated by reference to Exhibit 2.8 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996, File No. 0-19743).
2.7 Agreement and Plan of Merger, dated as of October 1, 1996,
between the Company and USTrails (predecessor in interest to
the Company) (incorporated by reference to the proxy
statement/prospectus filed with the the SEC on October 3,
1996 as part of the Registration Statement on Form S-4,
Registration Statement No. 333-13339, File No.
0-19743 (the "S-4 Registration Statement").
2.8 Offer to Purchase for Cash the Company's 12% Senior
Subordinated Pay-In-Kind Notes due 2003, dated as of May 20,
1997 (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed with the SEC on
July 8, 1997, File No. 0-19743).
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to the proxy statement/prospectus
filed with the SEC on October 3, 1996 as part of the S-4
Registration Statement).
3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Form 8-B filed by the Company
with the SEC on November 27, 1996, File No. 0-19743).
<PAGE> 102
4.1 Form of Reorganization Warrant Certificate to purchase shares
of Common Stock and schedule of substantially identical
warrants (incorporated by reference to Exhibit 4.7 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1992, File No. 0-19743).
4.2 Letter Agreement, dated March 19, 1993, between the Company
and Carl Marks Strategic Investments, LP (incorporated by
reference to Exhibit 4.18 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed with
the SEC on January 15, 1993, File No. 0-19743).
4.3 Form of Warrant Certificate to purchase shares of Common
Stock issued pursuant to the Exchange Agreement with certain
holders of Trails' indebtedness (incorporated by reference to
Exhibit 4.3 to the Company's Current Report on Form 8-K filed
with the SEC on June 25, 1992, File No. 0-19743) and schedule
of substantially identical warrants (incorporated by
reference to Exhibit 4.15 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No.
0-19743).
4.4 Warrant Agency Agreement, dated as of March 2, 1994, between
the Company and Shawmut Bank Connecticut, National
Association, as Warrant Agent (incorporated by reference to
Exhibit 4.4 to the Company's Current Report on Form 8-K filed
with the SEC on April 11, 1994, File No. 0-19743).
4.5 Registration Rights Agreement, dated as of June 12, 1992,
regarding the Company's Additional Series Secured Notes and
the shares of Common Stock issuable upon the exercise of
certain warrants (incorporated by reference to Exhibit 4.4 of
the Company's Current Report on Form 8-K filed with the SEC
on June 25, 1992, File No. 0-19743).
4.6 Indemnification Agreement, dated as of January 14, 1993,
between the Company and the selling security holders under
Registration Statement No. 33-571261 (incorporated by
reference to Exhibit 10.44 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed with
the SEC on January 15, 1993, File No. 0-19743).
4.7 Indenture, dated as of July 17, 1996, among the Company,
Fleet National Bank as Trustee, and certain other parties
described therein, pertaining to the Company's Senior
Subordinated Pay-In-Kind Notes Due 2003 (incorporated by
reference to Exhibit 4.36 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No.
0-19743).
<PAGE> 103
4.8 Form of Senior Subordinated Pay-In-Kind Note Due 2003
(incorporated by reference to Exhibit 4.37 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
4.9 Registration Rights Agreement, dated as of July 17, 1996,
between the Company and Fleet National Bank as Trustee
(incorporated by reference to Exhibit 4.38 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.1 Credit Agreement, dated as of December 31, 1991, between the
Company and NACO (incorporated by reference to Exhibit 10.27
to the Company's Annual Report on Form 10-K for the year
ended June 30, 1992, File No. 0-19743).
10.2 First Amendment to Credit Agreement, dated as of May 20,
1993, between the Company and NACO (incorporated by reference
to Exhibit 10.48 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1993, File No. 0-19743).
10.3 Second Amendment to Credit Agreement, dated as of November
10, 1994, between the Company and NACO (incorporated by
reference to Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1995, File No.
0-19743).
10.4 Amended and Restated Promissory Note, dated as of November
10, 1994, pursuant to which the Company provides a
$40,000,000 revolving credit facility to NACO (incorporated
by reference to Exhibit 10.4 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1995, File No.
0-19743).
10.5 Amended and Restated Promissory Note, dated as of November
10, 1994, pursuant to which the Company provided a
$10,765,000 term loan to NACO (incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 0-19743).
10.6 Guaranty, dated as of December 31, 1991, pursuant to which
the subsidiaries of NACO guaranteed certain amounts that NACO
owes the Company (incorporated by reference to Exhibit 10.5
to the Company's Registration Statement No. 33-73284 on Form
S-2, originally filed with the SEC on December 22, 1993, File
No. 0-19743).
10.7 Release From Guaranty, dated as of May 31, 1993, among
certain subsidiaries of the Company, the Company, and Shawmut
Bank Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 10.56 to the Company's
Registration Statement No. 33-571261 on Form S-2, originally
filed with the SEC on January 15, 1993, File No. 0-19743).
<PAGE> 104
10.8 Release under Credit Agreement and Security Agreement, dated
as of May 31, 1993, among certain subsidiaries of the
Company, the Company, and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by reference to Exhibit
10.57 to the Company's Registration Statement No. 33-571261
on Form S-2, originally filed with the SEC on January 15,
1993, File No. 0-19743).
10.9 Security Agreement, dated as of December 31, 1991, pursuant
to which NACO granted to the Company a security interest in
substantially all of its personal and real property including
the pledge of NACO's stock in its subsidiaries as required by
the credit agreement between the Company and NACO
(incorporated by reference to Exhibit 10.31 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-19743).
10.10 First Supplement and Amendment to Security Agreement, dated
as of May 20, 1993, among NACO and certain of its
subsidiaries, RPI, the Company, and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by reference
to Exhibit 10.53 to the Company's Registration Statement No.
33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993, File No. 0-19743).
10.11 Form of Mortgage from NACO and its subsidiaries to the
Company pursuant to the credit agreement between the Company
and NACO (incorporated by reference to Exhibit 10.32 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1992, File No. 0-19743, and schedule of documents
substantially identical to the Form of Mortgage (incorporated
by reference to Exhibit 10.55 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed with
the SEC on January 15, 1993, File No. 0-19743).
10.12 Form of First Amendment to Mortgage from NACO and its
subsidiaries to the Company amending certain terms of a
Mortgage that previously granted a beneficial security
interest in certain property to the Company pursuant to the
credit agreement between the Company and NACO, and schedule
of documents substantially identical to the Form of First
Amendment to Mortgage (incorporated by reference to Exhibit
10.13 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1995, File No. 0-19743).
10.13 Loan and Security Agreement, dated as of July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.19 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
<PAGE> 105
10.14 First Amendment to Loan and Security Agreement, dated as of
May 16, 1997, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K filed with the SEC on
July 8, 1997, File No. 0-19743).
10.15 Second Amendment to Loan and Security Agreement dated as of
December 23, 1997, between the Company and Foothill
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1997, File No. 0-19743).
10.16 Third Amendment to Loan and Security Agreement dated as of
January 5, 1998, between the Company and Foothill Capital
Corporation (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 0-19743).
10.17 Fourth Amendment to Loan and Security Agreement, dated as of
June 10, 1998, between the Company and Foothill.
10.18 Secured Promissory Note (Account Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.19 Secured Promissory Note (Term Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.20 Form of Pledge and Security Agreement, dated as of July 10,
1996, between the Company and Foothill Capital Corporation,
and schedule of documents substantially identical to the form
of Pledge and Security Agreement (incorporated by reference
to Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1996, File No. 0-19743).
10.21 Consent and First Amendment to Pledge and Security Agreement,
dated as of October 31, 1997, between certain subsidiaries of
the Company and Foothill Capital Corporation (incorporated by
reference to exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, File No.
0-19743).
<PAGE> 106
10.22 Form of Mortgage, dated as of July 10, 1996, to grant liens
to Foothill Capital Corporation to secure the Company's
obligations under the Credit Agreement with Foothill, and
schedule of documents substantially identical to the form of
Mortgage (incorporated by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1996, File No. 0-19743).
10.23 Form of Assignment of Indebtedness and Mortgage, dated as of
July 10, 1996, transferring the liens securing certain
indebtedness that NACO owes to the Company to Foothill
Capital Corporation under the Credit Agreement with Foothill,
and schedule of documents substantially identical to the form
of Assignment of Indebtedness and Mortgage (incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No.
0-19743).
10.24 Form of Subordination Agreement, dated as of July 10, 1996,
between the Company and Foothill Capital Corporation,
subordinating the security interests under the credit
agreement between the Company and NACO to the security
interests under the Credit Agreement with Foothill, and
schedule of documents substantially identical to the form of
Subordination Agreement (incorporated by reference to Exhibit
10.25 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1996, File No. 0-19743).
10.25 The Company's 1991 Employee Stock Incentive Plan
(incorporated by reference to Exhibit 10.40 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-19743).
10.26 Amendment No. 1 to the Company's 1991 Employee Stock
Incentive Plan (incorporated by reference to Exhibit 10.8 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, File No. 0-19743).
10.27 The Company's 1993 Stock Option and Restricted Stock Purchase
Plan (incorporated by reference to Exhibit 10.22 to the
Company's Registration Statement No. 33-73284 on Form S-2,
originally filed with the SEC on December 22, 1993, File No.
0-19743).
10.28 Amendment No. 1 to the Company's 1993 Stock Option and
Restricted Stock Purchase Plan (incorporated by reference to
Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, File No. 0-19743).
10.29 The Company's 1993 Director Stock Option Plan (incorporated
by reference to Exhibit 10.23 to the Company's Registration
Statement No. 33-73284 on Form S-2, originally filed with the
SEC on December 22, 1993, File No. 0-19743).
<PAGE> 107
10.30 Amendment No. 1 to the Company's 1993 Director Stock Option
Plan (incorporated by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, File No. 0-19743).
10.31 Stock Option Agreement, dated as of August 1, 1996, between
the Company and William J. Shaw (incorporated by reference to
Exhibit 10.26 to the Form 8-B filed by the Company with the
SEC on November 27, 1996, File No. 0-19743).
10.32 Assumption of Obligations, dated as of November 20, 1996, by
the Company assuming the obligations of USTrails under the
USTrails Inc. 1991 Employee Stock Incentive Plan, as amended;
the USTrails Inc. 1993 Stock Option and Restricted Stock
Purchase Plan, as amended; the USTrails Inc. 1993 Director
Stock Option Plan, as amended; Warrant Certificates
originally issued on December 31, 1991, June 12, 1992, and
March 2, 1994 to May 16, 1995; and the Stock Option
Agreement, dated as of August 1, 1996, between USTrails and
William J. Shaw (incorporated by reference to Exhibit 10.27
to the Form 8-B filed by the Company with the SEC on November
27, 1996, File No. 0-19743).
10.33 Employment Agreement, dated as of May 11, 1995, between the
Company and William J. Shaw, and related Standby Letter of
Credit, dated September 22, 1995, issued by The Bank of
California, N.A., for the benefit of Mr. Shaw, and Letter,
dated September 20, 1995, from The Wyatt Company, regarding
Mr. Shaw's Employment Agreement (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 0-19743).
10.34 Letter dated June 29, 1996, from William J. Shaw to the
Company, regarding Mr. Shaw's election to receive the
Enterprise Bonus payable under his Employment Agreement, and
Letter, dated July 8, 1996, from Deloitte & Touche LLP,
regarding the computation of the amount of the Enterprise
Bonus payable to Mr. Shaw under his Employment Agreement
(incorporated by reference to Exhibit 10.30 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1996,
File No. 0-19743).
10.35 Amended and Restated Employment Agreement, dated as of
September 10, 1992, among NACO, Trails, RPI, and William F.
Dawson (incorporated by reference to Exhibit 10.49 to the
Company's Annual Report on Form 10-K for the year ended June
30, 1993, File No. 0-19743), and Letter, dated December 1,
1995, from RPI to William F. Dawson, regarding certain
compensation arrangements (incorporated by reference to
Exhibit 10.4 to the Company's Quarterly on From 10-Q for the
quarter ended December 31, 1995, File No. 0-19743).
<PAGE> 108
10.36 Amended and Restated Employment Agreement, dated as of
December 2, 1992, among the Company, NACO, Trails, and Walter
B. Jaccard (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992, File No. 0-19743), and amendment dated
November 15, 1994 (incorporated by reference to Exhibit 10.30
to the Company's Annual Report on Form 10-K for the year
ended June 30, 1995, File No. 0-19743), and amendment dated
December 7, 1995 (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1995, File No. 0-19743).
10.37 Amended and Restated Employment Agreement, dated as of
October 21, 1993, between the Company and Harry J. White, Jr.
(incorporated by reference to Exhibit 99.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1993, File No. 0-19743), and amendment dated December 7,
1996 (incorporated by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995, File No. 0-19743).
10.38 Employment Agreement, dated as of August 31, 1995, between
the Company and R. Gerald Gelinas (incorporated by reference
to Exhibit 10.32 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1995, File No. 0-19743).
10.39 Indemnification Agreement, dated as of February 18, 1992,
between the Company and Andrew Boas (incorporated by
reference to Exhibit 10.23 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No.
0-19743), and schedule of substantially identical
Indemnification Agreements (incorporated by reference to
Exhibit 10.33 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1995, File No. 0-19743).
10.40 Indemnification Agreement, dated as of September 1, 1995,
between Trails and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 0-19743).
10.41 Indemnification Agreement, dated as of September 1, 1995,
between NACO and William J. Shaw, and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K for the year ended
June 30, 1996, File No. 0-19743).
<PAGE> 109
10.42 Indemnification Agreement, dated as of May 8, 1991, between
the Company and Donald W. Hair, and schedule of substantially
identical Indemnification Agreements (incorporated by
reference to Exhibit 10.38 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, File No.
0-19743).
10.43 Indemnification Agreement, dated as of November 20, 1996,
between the Company and William J. Shaw and schedule of
substantially identical Indemnification Agreements
(incorporated by reference to Exhibit 10.39 to the Company's
Registration Statement No. 333-19357 on Form S-1, originally
filed with the SEC on January 7, 1997, File No. 0-19743).
10.44 Lease, dated February 24, 1994, as amended, between
Carter-Crowley Properties, Inc. as lessor, and the Company as
lessee, relating to the Company's offices in Dallas, Texas
(incorporated by reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994,
File No. 0-19743).
10.45 Lease, dated October 7, 1987, as amended, between Hardy Court
Shopping Center, Inc. as lessor, and NACO as lessee, relating
to NACO's offices in Gautier, Mississippi (incorporated by
reference to Exhibit 10.36 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, File No.
0-19743).
10.46 Grantor Trust Agreement, dated as of September 30, 1991,
between Union Bank of California, N.A. (formerly known as The
Bank of California, N.A., and referred to herein as "Union
Bank"), and Trails (incorporated by reference from Trails'
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-9246).
10.47 Supplement to Grantor Trust Agreement, dated as of November
20, 1996, by the Company in favor of Union Bank (incorporated
by reference to Exhibit 10.44 to the Company's Registration
Statement No. 333-19357 on Form S-1, originally filed with
the SEC on January 7, 1997, File No. 0-19743).
10.48 Grantor Trust Agreement, dated as of September 30, 1991,
between The Bank of California, N.A. and NACO (incorporated
by reference to Exhibit 10.43 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1992, File No.
0-19743).
10.49 Supplement to Grantor Trust Agreement, dated as of January
22, 1998, between NACO and a majority of the persons
presently named as beneficiaries under the Grantor Trust
Agreement, dated as of September 30, 1991, between NACO and
Union Bank of California, N.A., as Trustee (incorporated by
reference to exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, File No.
0-19743).
<PAGE> 110
10.50 Grantor Trust Agreement, dated May 8, 1991, between the
Company and Texas Commerce Bank, N.A. ("Texas Bank")
(incorporated by reference to Exhibit 10.41 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992,
File No. 0-19743).
10.51 Supplement and Succession Agreement to Grantor Trust
Agreement, dated as of October 13, 1992, among Union Bank,
Texas Bank, the Company, and certain beneficiaries under the
Grantor Trust Agreement (incorporated by reference to Exhibit
10.51 to the Company's Registration Statement No. 33-571261
on Form S-2, originally filed with the SEC on January 15,
1993, File No. 0-19743).
10.52 Supplement to Grantor Trust Agreement, dated as of
November 20, 1996, by the Company in favor of Union Bank
(incorporated by reference to Exhibit 10.43 to the Form 8-B
filed by the Company with the SEC on November 27, 1996, File
No. 0-19743).
10.53 Supplement No. 2 to Grantor Trust Agreement, dated as of
January 22, 1998, between the Company and a majority of the
persons presently named as beneficiaries under the Grantor
Trust Agreement, dated as of May 8, 1991, as supplemented,
between the Company and Union Bank of California, N.A., as
Trustee (incorporated by reference to exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, File No. 0-19743).
10.54 Trust Agreement, dated as of July 22, 1992, establishing the
Company's Flexible Benefits Plan Trust Fund (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992, File No.
0-19743).
10.55 Thousand Trails, Inc. Employee Savings Trust, dated as of
July 1, 1994, between the Company and its subsidiaries and
The Bank of California, N.A., as trustee (incorporated by
reference to Exhibit 10.42 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, File No.
0-19743).
10.56 Agreement for the Thousand Trails, Inc. Non-Qualified
Deferred Compensation Plan, effective April 23, 1998.
10.57 Tax Allocation Agreement, dated as of September 10, 1992,
between the Company and RPI (incorporated by reference to
Exhibit 99.6 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, File No. 0-19743).
<PAGE> 111
10.58 Tax Allocation Agreement, dated as of July 1, 1991, between
the Company and NACO (incorporated by reference to Exhibit
10.44 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1994, File No. 0-19743).
10.59 Tax Allocation Agreement, dated as of October 29, 1993,
between the Company and Wilderness Management (incorporated
by reference to Exhibit 10.46 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1994, File No.
0-19743).
10.60 Exchange Agent Agreement, dated as of March 29, 1994, among
the Company, Trails, and American Stock Transfer & Trust
Company (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed with the SEC on
April 11, 1994, File No. 0-19743).
10.61 Sample form of current Membership Contract.
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule as of and for the year ended June 30,
1998.
27.2 Restated Financial Data Schedule as of and for the year ended
June 30, 1997.
<PAGE> 1
Exhibit 10.17
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Forth Amendment to Loan and Security Agreement
("Amendment") is entered into as of June 10, 1998, by and among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), on the one hand, and
NATIONAL AMERICAN CORPORATION, a Nevada corporation ("NACO"), THOUSAND TRAILS,
INC., a Delaware corporation ("Trails"), and the other party borrowers signatory
hereto (each, together with NACO and 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, and
Foothill have previously entered into that certain Loan and Security Agreement,
dated as of July 10, 1996 (as amended and modified, the "Loan Agreement").
FACT TWO: Borrowers have requested that Foothill consent to
Trails purchasing all of the stock of
and that Foothill lend, pursuant to the terms of the Loan Agreement, a
portion of the purchase price for such stock purchase. Borrowers have also
requested that the Loan Agreement be amended to allow Borrowers to purchase
additional PIK Notes and to provide a working capital line of credit which
Borrower shall not be required to repay until July 17, 2002.
FACT THREE: Borrowers and Foothill desire to amend the
Loan Agreement as provided for herein.
A G R E E M E N T
NOW, THEREFORE, Borrowers and Foothill hereby amend and
supplement the Loan Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used in
this Amendment shall have the meanings given to them in the Loan Agreement
unless specifically defined herein.
2. AMENDMENT.
2.1 Section 1.1 of the Loan Agreement is
hereby amended by deleting the definition of Revolving Maximum Amount and
substituting the following in its place and stead: "Revolving Maximum Amount"
means Thirty-Five Million Dollars ($35,000,000), which such amount is
permanently reduced to lower amounts by the greater of
1
<PAGE> 2
(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 June 10, 1998;
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>
<S> <C> <C>
12/31/1998 - $4,500,000
6/30/1999 - $9,000,000
12/31/1999 - $13,500,000
6/30/2000 - $18,000,000
7/15/2000 - $35,000,000; provided that if
Borrower has paid in full or
otherwise retired all PIK Notes by
July 15, 2000, the reduction
scheduled for such date shall not
occur and the following amounts
shall apply on the following dates
of reduction:
12/31/2000 - $22,500,000
6/30/2001 - $27,000,000
12/31/2001 - $31,500,000
6/30/2002 - $35,000,000
</TABLE>
2.2 Section 3.1(b) of the Loan Agreement is
hereby amended by deleting the reference to Twenty-Six Million Five Hundred
Sixty-Five Thousand Dollars ($26,565,000) and substituting in its place and
stead the number Thirty Five Million Dollars ($35,000,000).
2.3 Pursuant to Section 3.3 (c) of the Loan
Agreement, Foothill is holding Six Million Five Hundred Sixty-Five Thousand
Dollars ($6,565,000) as cash collateral. On a one-time basis only, in connection
with this Amendment, to the extent that the Maximum Revolving Amount shall not
drop below Six Million Five Hundred Sixty-Five Thousand Dollars ($6,565,000),
Foothill shall return such cash collateral funds to Borrower. Returning these
funds to Borrower shall not affect in any manner the provisions of Section 3.3
(c) of the Loan Agreement or any other provision of the Loan Agreement. All
future proceeds shall continue to be held as cash collateral pursuant to the
terms of Section 3.3(c) and the other provisions of the Loan Agreement.
2.4 Section 3.5(a) is hereby deleted in its
entirety and is replaced
2
<PAGE> 3
with the following in its place and stead: "Interest Rate. All Obligations up to
the first Fifteen Million Dollars ($15,000,000) shall bear interest, on the
actual Daily Balance, at a per annum rate of one quarter of one (.25) percentage
points above the Reference Rate. All Obligations over Fifteen Million Dollars
($15,000,000) and up to Twenty-Five Million Dollars ($25,000,000) shall bear
interest, on the actual Daily Balance, at a per annum rate of one-half of one
(.50) percentage points above the Reference Rate. All Obligations over
Twenty-Five Million Dollars ($25,000,000) shall bear interest, on the actual
Daily Balance, at a per annum rate of one and one-half (1.5) percentage point
above the reference rate."
2.5 Section 3.8(h) of the Loan Agreement is
hereby amended so that the servicing fee set forth therein shall be reduced from
Six Thousand Dollars ($6,000) per month to Five Thousand Dollars ($5,000) per
month.
2.6 Section 3.8(i) of the Loan Agreement
shall be deleted in its entirety and shall be replaced with the following in its
place and stead: "(i) Advance Fee. An Advance Fee, which shall be fully earned
when paid, of one half of one percent (.50%) of any amount advanced to purchase
PIK Notes or to purchase the stock of , which such sum shall be added to each
Advance and become a portion of the Obligations.
2.7 There shall be added a new Section 3.9 to
the Loan Agreement which reads as follows: "3.9. Borrower shall have a one time
option ("Reload Option"), which option shall expire on December 31, 1999 if not
exercised prior thereto, to increase the Revolving Maximum Amount back to
Thirty-Five Million Dollars ($35,000,000) upon Borrower's payment to Foothill of
a non-refundable fee, which shall be fully earned upon payment, in the amount of
Twenty-Five Thousand Dollars ($25,000). If Borrower exercises this Reload Option
then: (i) Section 4.3 of the Loan Agreement shall be amended so that the term
ends on July 17, 2003 instead of July 17, 2002 as is currently provided for in
the Loan Agreement and (ii) the definition of Revolving Maximum Amount in
Section 1.1 of the Loan Agreement shall be amended to read as follows:
"Revolving Maximum Amount means Thirty-Five Million Dollars ($35,000,000), which
such amount is permanently reduced to lower amounts by 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 the exercise of the Reload
Option; plus (2) 100% of Account collections, once the Term Note has been fully
secured by cash; or (z) Thirty-Five Million Dollars ($35,000,000); provided that
if Borrower has repaid in full or otherwise retired all PIK Notes by July 15,
2000, the amounts of the reductions under this clause (z) shall be $4,500,000 on
the next following June 30 or December 31, whichever occurs first and by an
additional $4,500,000 on each following June 30 and December 31 until the
Revolving Maximum Amount is zero." Borrower shall only be permitted to exercise
the Reload Option to purchase PIK Notes issued by Trails or to purchase the
stock of AIC."
2.8 Section 4.3 of the Loan Agreement is hereby
amended so that term ends on July 17, 2002 instead of three years from the
Closing Date as is currently provided for in the Loan Agreement.
3
<PAGE> 4
2.9 Section 4.8 of the Loan Agreement shall be
deleted in its entirety and shall be replaced with the following in its place
and stead: "4.8. In addition to the conditions contained in Section 4.2 of the
Loan Agreement, Foothill's obligation to make Advances for Borrower to purchase
the stock of shall be conditioned upon the fulfillment, to the satisfaction
of Foothill and its counsel of each of the following:
(a) Borrower purchases all of the stock
of . Borrower shall pay the entire purchase price for the purchase of the
stock which is not being lent by Foothill.
(b) The purchase of the stock of
shall occur on or before September 12, 1998.
(c) There shall not have occurred any
material adverse change in either or Borrower's businesses.
(d) Foothill and its counsel shall
have reviewed and approved of the stock acquisition agreement with and all
other documents and agreements between and Borrower.
(e) Borrower shall have delivered to
Foothill and Foothill shall have approved of (i) an updated combined cash flow
statement for the next 4 years which takes into account the purchase of the
stock and (ii) a phase I environmental report on all properties owned by .
(f) shall not be in violation of
any Acts other than such violations which are disclosed to, and accepted by,
Foothill.
(g) Completion by Foothill of an audit
of and its assets which must be acceptable to Foothill.
(h) Completion of an appraisal by an
entity acceptable to Foothill of all campgrounds, which appraisal must be
acceptable to Foothill.
(i) executes an amendment to the
Loan Agreement adding as a borrower thereunder.
(j) Foothill is provided with a first
priority security interest securing the obligations under the Loan Agreement in
all of the assets of ; provided, however that Foothill shall accept a second
in priority lien on some or all of the assets provided that (a) such lien(s)
were previously provided to third party lenders by and (b) such lien(s) in
the aggregate secure indebtedness in the amount of $3,500,000, or less. Borrower
shall deliver a beneficiary statement from any and all senior lenders on the
assets of which such
4
<PAGE> 5
beneficiary statement shall (a) confirm the outstanding balance of that lender's
loan, (b) confirm that such lender's loan shall not be increased and (c) approve
the transfer of the stock of to Trails and the junior encumbrances in favor
of Foothill.
(k) Foothill obtains title
insurance and title insurance endorsements on all of the real property owned by
(evidencing Foothill in a first in priority position, or a second in
priority position, as provided for above). Borrower shall execute and have
recorded in the appropriate county a mortgage or deed of trust, as appropriate,
on all real property owned by . shall also execute such UCC's as Foothill
deems appropriate. The form of all of the documents required in this section
shall be comparable to the documents that Borrower has already executed in the
past related to mortgages/deeds of trust for other properties.
(l) Each Borrower (including )
shall be a corporation in good standing in the jurisdiction of its incorporation
and qualified to do business in any other jurisdiction where such qualification
is required by law.
(m) Foothill shall have received
such opinions of Borrower's counsel and local counsel relating to and its
assets as Foothill shall reasonably require, which opinion(s) shall be
satisfactory to Foothill and its counsel as to both form and substance. Such
opinions shall include, but not be limited to, opinions as to corporate
existence, power and authority to enter into the amendment and other
documents, the validity, binding effect, and enforceability of each of the loan
and security documents against and the perfection of Foothill's liens and
security interests in the assets of .
(n) Borrower shall have paid to
Foothill the Advance a fee provided for in this Loan Agreement."
2.10 There shall be added a new Section 4.9 to
the Loan Agreement which reads as follows: "4.9. In addition to the conditions
contained in Section 4.2 of the Loan Agreement, Foothill's obligation to make
Advances for Borrower to purchase PIK Notes shall be conditioned upon the
fulfillment, to the satisfaction of Foothill and its counsel of each of the
following:
(a) Such Advance shall have occurred on
or before December 31, 1999.
(b) Borrower shall have paid to
Foothill the Advance fee provided for in this Loan Agreement."
2.11 There shall be added a new Section 4.10
to the Loan Agreement which reads as follows: "4.10. If Borrower has not repaid
in full or otherwise retired all PIK Notes issued by Trails by July 15, 2000,
then all of the following shall occur in order to refinance up to Ten Million
Dollars ($10,000,000) in principal of the Obligations provided that
5
<PAGE> 6
no Event of Default then exists: (i) up to Ten Million Dollars ($10,000,000) in
principal of the Obligations shall be refinanced from a simultaneous borrowing
hereunder in an equal amount, and the amount of the Obligations not so
refinanced shall be simultaneously repaid by Borrower, and (ii) all Advances
under the Loan Documents shall thereafter only be used for Borrower's working
capital needs (notwithstanding Section 8.17 of the Loan Agreement), and (iii)
Section 3.1(b) of the Loan Agreement shall be amended by deleting the reference
to Thirty Five Million Dollars ($35,000,000) and substituting in its place and
stead the number Ten Million Dollars ($10,000,000) and (iii) Section 1.1 of the
Loan Agreement shall be amended by deleting the definition of Revolving Maximum
Amount and substituting the following in its place and stead: "Revolving Maximum
Amount" means Ten Million Dollars ($10,000,000), which such amount is
permanently reduced to lower amounts by 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 July 15, 2000; 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>
<S> <C>
12/31/2000 - $2,500,000
6/30/2001 - $5,000,000
12/31/2001 - $7,500,000
6/30/2002 - $10,000,000"
</TABLE>
2.12 Section 7.10(a) of the Loan Agreement is
hereby deleted in its entirety and replaced with the following in its place and
stead: "(a) EBITDA in the amounts set forth below by such dates, measured on a
fiscal quarter end basis for the trailing twelve months, of at least:
<TABLE>
<S> <C>
June 30, 1998 $ 9,000,000
September 30, 1998 9,000,000
December 31, 1998 $ 9,000,000
March 31, 1999 $ 9,000,000
June 30, 1999 $ 9,000,000
September 30, 1999 and
each quarter end thereafter $10,000,000"
</TABLE>
2.13 Section 8.10 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following in its place and
stead: "8.10 Capital Expenditures. Make any capital expenditures, or any
commitment therefor, in excess of $3,800,000 in any fiscal year."
2.14 The following shall be added to the end
of Section 8.13 of the
6
<PAGE> 7
Loan Agreement: "Notwithstanding the prior sentence, Thousand Trails, Inc. shall
be permitted to purchase up to $50,000 worth of Thousand Trails, Inc. stock per
month at a price which is not greater than the market price for such stock on
such dates. Provided that Borrower has availability under the Revolving Maximum
Amount and provided that all other conditions under the Loan Agreement have been
satisfied, Borrower shall be permitted to use the proceeds of Revolving Advances
to purchase such stock."
2.15 Section 8.16 of the Loan Agreement shall
be deleted in its entirety and replaced with the following in its place and
stead: "8.16 Compensation. Except with respect to the enterprise bonus paid to
William Shaw, increase the annual fee or per-meeting fee paid to directors
during any year by more than fifteen percent (15%) over the prior year; pay or
accrue base compensation, during any year, to officers and senior management in
an aggregate amount in excess of one hundred fifteen percent (115%) of such base
compensation paid or accrued in the prior year, exclusive of severance payments
and exclusive of annual bonuses, such annual bonuses being limited to 100% of
base compensation in the case of the President and Chief Executive Officer, 50%
of base compensation in the case of other executive officers and 25% of base
compensation in the case of all other senior management."
2.16 Section 8.17 of the Loan Agreement shall
be deleted in its entirety and shall be replaced with the following in its place
and stead: "8.17 Use of Proceeds. Except for Five Million Dollars ($5,000,000)
which may be used by Borrower for its working capital needs, use the proceeds of
any Advances made hereunder for any purpose other than either (i) the repurchase
of PIK Notes issued by Trails or (ii) the purchase of the stock of . Borrower
may use all Advances to repurchase PIK Notes and purchase the stock of if
Borrower so chooses. The Five Million Dollar ($5,000,000) working capital
component of the Revolving Maximum Amount may be repaid and reborrowed provided
that Borrower has complied with all of the other provisions of the Loan
Agreement."
2.17 The Unused Line Fee provided for in Section
3.8(d) of the Loan Agreement shall apply to the Advances permitted pursuant to
this Amendment.
2.18 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.
2.19 The definition of "Amendment Advance" and
the last sentence of Section 3.1(a), which were added to the Loan Agreement in
that certain First Amendment to Loan and Security Agreement and Pledge and
Security Agreement, are hereby deleted in their entirety.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to
Foothill that all of Borrower's representations and warranties set forth in the
Loan
7
<PAGE> 8
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).
4. NO DEFAULTS. Borrower hereby affirms to Foothill that no
Event of Default has occurred and is continuing as of the date hereof.
5. CONDITION PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon receipt by Foothill of an executed copy of this
Amendment and the fulfillment, to the satisfaction of Foothill and Foothill's
counsel, of each of the following conditions precedent:
5.1 Borrower shall execute and have recorded in
the appropriate county amendments to mortgages/deeds of trust on all of the real
property which secures the Loan Agreement. The form of all of the documents
required in this section shall be comparable to the documents that Borrower has
already executed in the past related to amendments to mortgages/deeds of trust
and new mortgages/deeds of trust.
5.2 Foothill obtains title insurance endorsements on
real property included within 10 existing policies of title insurance
(evidencing no further encumbrances or liens), all in form and substance and in
amounts required by Foothill in its sole and absolute discretion. Foothill shall
determine which 10 policies of title insurance they will receive endorsements or
new policies. These may be the policies with the highest insured values.
Foothill shall obtain commitments for title insurance (but shall not purchase
new policies) for all of the properties located in Texas evidencing that there
exists no further encumbrances or liens from the date that Foothill received
policies of title insurance on such properties.
5.3 Each Borrower shall be a corporation in
good standing in the jurisdiction of its incorporation and qualified to do
business in any other jurisdiction where such qualification is required by law.
5.4 Borrower and Foothill shall have entered into
an amendment to the security documents in form and substance reasonably
satisfactory to Foothill and Foothill's counsel containing usual and customary
provisions for a transaction of this type. All other documents and legal matters
in connection with this Amendment shall have been entered into and delivered,
consistent with (but not limited to) prior amendments to the Loan Agreement.
5.5 Foothill shall have received such opinions of
Borrower's counsel as Foothill shall reasonably require, which opinion(s) shall
be satisfactory to Foothill and its counsel as to both form and substance. Such
opinions shall include opinions as to Borrower's corporate existence, Borrower's
power and authority to enter into this Amendment and other documents and the
validity and binding effect of this Amendment and the other documents entered
into in connection herewith.
5.6 Borrower shall have paid to Foothill all of
Foothill's out-of-
8
<PAGE> 9
pocket expenses relating to this Amendment, including, but not limited to,
search fees, title search and insurance fees, filing and recording fees,
examination and appraisal fees, internal transaction charges, and attorneys fees
and expenses.
6. 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, the terms and provisions of this Amendment shall govern. In all other
respects, the Loan Agreement, as amended and supplemented hereby, shall remain
in full force and effect.
7. WAIVER. The waiver of certain provisions of the Loan
Agreement as provided in this Amendment which, inter alia, allows Borrower to
purchase the stock of AIC and to purchase PIK Notes shall constitute a one time
waiver only, and Foothill shall have the right to require strict compliance with
all of the provisions of the Loan Agreement in the future.
8. BROKERS' FEES. Any brokerage commission or finder's fees
payable in connection with the financing arrangement contemplated hereby will be
payable by Borrowers and not by Foothill. Borrowers and Foothill each represent
and warrant to the other that they have not incurred any obligation for a
brokerage commission or a finder's fee. Borrowers hereby indemnify Foothill and
hold Foothill harmless from and against any claim of any broker or finder
arising out of the financing arrangement described above or any commitment
relating thereto.
9. 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.
9
<PAGE> 10
10. COMPLETE AGREEMENT; NO ORAL MODIFICATIONS. This Amendment
embodies the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior proposals, negotiations, or
agreements whether written or oral, relating to the subject matter hereof. This
Amendment may not be modified, amended, supplemented, or otherwise changed,
except by a document in writing signed by 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: /s/ KATY J. BROOKS
----------------------------------------
Title: Vice President
-------------------------------------
"BORROWERS"
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
THOUSAND TRAILS, INC.,
a Delaware corporation, f/k/a USTrails,
Inc., a Nevada corporation, and New Thousand Trails,
Inc., a Delaware corporation
By: /s/ Walter B. Jaccard
----------------------------------------
Title: Vice President
-------------------------------------
10
<PAGE> 11
THOUSAND TRAILS (CANADA) INC.,
a British Columbian corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
TT OFFSHORE, LTD.,
a Virginia corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
BEECH MOUNTAIN LAKES CORPORATION,
a Pennsylvania corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
CAROLINA LANDING CORPORATION,
a South Carolina corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
CARRIAGE MANOR CORPORATION,
a North Carolina corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
11
<PAGE> 12
CHEROKEE LANDING CORPORATION,
a Tennessee corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
CHIEF CREEK CORPORATION,
a Tennessee corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
COAST FINANCIAL SERVICES, INC.,
a Delaware corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
DIXIE RESORT CORPORATION,
a Mississippi corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
FOXWOOD CORPORATION,
a South Carolina corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
12
<PAGE> 13
GL LAND DEVELOPMENT CORPORATION,
an Oklahoma corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
LAKE ROYALE CORPORATION,
a North Carolina corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
LAKE TANSI VILLAGE, INC.,
a Tennessee corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
LML RESORT CORPORATION,
an Alabama corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
NATCHEZ TRACE WILDERNESS PRESERVE
CORPORATION, a Tennessee corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
13
<PAGE> 14
QUAIL HOLLOW PLANTATION CORPORATION,
a Tennessee corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
QUAIL HOLLOW VILLAGE, INC.,
a Pennsylvania corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
RECREATION LAND CORPORATION,
a Pennsylvania corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
RECREATION PROPERTIES, INC.,
a Mississippi corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
RESORT LAND CORPORATION,
an Arkansas corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
14
<PAGE> 15
RESORT PARKS INTERNATIONAL, INC., f/k/a
Shorewood Corporation, a Georgia corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
TANSI RESORT, INC.,
a Tennessee corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
THE KINSTON CORPORATION,
a South Carolina corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
WESTERN FUN CORPORATION,
a Texas corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
15
<PAGE> 16
WESTWIND MANOR CORPORATION,
a Texas corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
WOLF RUN MANOR CORPORATION,
a Pennsylvania corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
UST WILDERNESS MANAGEMENT CORPORATION,
a Nevada corporation
By: /s/ WALTER B. JACCARD
----------------------------------------
Title: Vice President
-------------------------------------
16
<PAGE> 1
EXHIBIT 10.56
ADOPTION AGREEMENT
FOR
CPI QUALIFIED PLAN CONSULTANTS, INC.
PROTOTYPE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
By executing this Adoption Agreement, the Employer(s) named below
establish(es) the CPI QUALIFIED PLAN CONSULTANTS, INC. PROTOTYPE SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN, as set forth in this Adoption Agreement and in the
CPI Qualified Plan Consultants, Inc. Prototype Supplemental Executive
Retirement Plan document (the "Plan Document"), which is hereby incorporated by
reference into this Adoption Agreement.
THE FAILURE TO PROPERLY FILL OUT THIS ADOPTION AGREEMENT MAY RESULT IN
ADVERSE TAX CONSEQUENCES TO PLAN PARTICIPANTS AND SIGNIFICANT LIABILITY TO THE
EMPLOYER.
IF YOU HAVE ANY QUESTIONS CONCERNING THE ADOPTION AGREEMENT OR THE
PLAN, CONTACT CPI QUALIFIED PLAN CONSULTANTS, INC. AT 1809 24TH STREET, P. O.
BOX 1167, GREAT BEND, KANSAS 67530-1167, OR CALL (316) 793-8473.
Al. Name of Plan: Thousand Trails, Inc. Non-Qualified Deferred
Compensation Plan.
EMPLOYER INFORMATION
B1. Name of Employer(s) (If more than one Employer is specified below,
enter beside a., below, the Employer that is desired to have rights to
amend the Plan, the right and responsibility to administer the Plan
and interpret its terms and the right to consent to the adoption of
the Plan by new adopting Employers.):
a. *Thousand Trails, Inc.
b. National American Corporation
c. Resort Parks International, Inc.
*This employer has the rights associated with the adoption and
administration of this Plan.
B2. Address of the Employer Specified in B1. a.:
a. 2711 LBJ Freeway Suite 200
--------------------------------------------------------
Street address, not P.O. box
b. Dallas c. Texas d. 75234
------------------ ----------------- -----------------
c. Telephone (972) 488-5120
--- --------
1
<PAGE> 2
B3. Federal Tax I.D. No. of the Employer Specified in B1, a.: 75-2138671.
B4. Total Number of Other Non-Tax-Qualified Deferred Compensation Plans
maintained by all Employers: 0.
B5. Total Number of Employees, by plan, participating, or expected
initially to participate, in the Plan and the plans specified in B4:
a. This Plan: 15.
b. Other Plans:
<TABLE>
<CAPTION>
Name of Plan Number of Active Participants
------------ -----------------------------
<S> <C>
- --------------------------------- -----------------------------------
- --------------------------------- -----------------------------------
- --------------------------------- -----------------------------------
</TABLE>
PLAN INFORMATION
C1. Effective Date:
This Adoption Agreement when used with the Plan shall (Check one):
a. (X) Establish a new Plan effective as of April 23, 1998 the
"Effective Date".
b. ( ) Constitute an amendment and restatement in its entirety
of a previously established nonqualified deferred
compensation plan of the Employer, whether using this
prototype Plan or another plan, which was initially
effective ______________________. This amendment and
restatement is effective as of
_______________________________, the "Effective Date".
C2. Plan Year:
a. (X) The calendar year.
b. ( ) The non-calendar year twelve month period beginning
_________________ and ending ____________________.
c. ( ) If the first Plan Year is a short year, the short year
began on _______________.Month and Day
2
<PAGE> 3
ELIGIBILITY
NOTE: THE PLAN MAY BE MAINTAINED ONLY FOR THE BENEFIT OF A SELECT
GROUP OF THE EMPLOYER'S MANAGEMENT OR HIGHLY COMPENSATED
EMPLOYEES OR INDEPENDENT CONTRACTORS.
D1. Eligible Employees. (Check a. or b.):
a. (X) The following named individuals, each of whom classify
as a member of a select group of management or highly
compensated employees or independent contractors of the
Employer:
William J. Shaw, Bobby J. Thomas, R. Gerald Gelinas,
Walter B. Jaccard, Harry J. White, Jr., Brad Nelson,
Michael Beckelhymer, William Dawson, David McCrum,
Michael Nichols, Kendrick Matthews, Roderick Minaker,
Bryan D. Reed, Kenneth Hendrycy and Philip H. Torjusen.
b. ( ) Persons holding the following policy-making positions
within the Employer's management:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
(Employees becoming eligible after the Effective Date shall be those specified
by the Board of Directors of the Employer in accordance with the terms of the
Plan.)
D2. Eligible Independent Contractors. Independent contractors performing
bona fide services for the Employer:
a. ( ) will
(X) will not
be eligible to participate in the Plan.
If D2, a. is selected, name those independent contractors who will
participate as of the Effective Date:
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
3
<PAGE> 4
(Independent Contractors becoming eligible after the Effective Date shall be
those specified by the Board of Directors of the Employer in accordance with
the terms of the Plan.)
NOTE: IF D2a. IS SELECTED ABOVE, THE DEFINITION OF COMPENSATION IN
EL MUST INCLUDE AMOUNTS PAYABLE TO AN INDEPENDENT CONTRACTOR.
D3. Employees of Affiliated Employers
a. ( ) Employees or Independent Contractors, as applicable,
of Affiliated Employers will not be considered
Eligible Employees of the Employer for purposes of
Plan coverage and benefits.
b. (X) Employees or Independent Contractors, as applicable,
of Affiliated Employers WILL be considered Eligible
Employees of the Employer for purposes of Plan
coverage and benefits.
NOTE: IF D3b, IS CHOSEN, ALL AFFILIATED EMPLOYERS SHOULD EXECUTE
THIS ADOPTION AGREEMENT AS PARTICIPATING EMPLOYERS AND BE
DESIGNATED AS EMPLOYERS ON B1 HEREOF.
CONTRIBUTIONS AND ALLOCATIONS
E1. Supplemented Plan. If contributions under the Plan shall be
determined with reference to benefits provided under or contributions
to a tax-qualified retirement plan (e.g., profit sharing plan, money
purchase pension plan, 401(k) plan) maintained by the Employer,
indicate the name of the tax-qualified retirement
plan:______________________________ (the "Qualified Plan").
E2. Compensation with respect to any Participant means:
a. (X) W-2 earnings paid for the taxable year ending with or
within the Plan Year.
b. ( ) Total compensation that is subject to tax under Section
3121(a) of the Internal Revenue Code (i.e. FICA wages),
regardless of the dollar limit of Section 3121(a), which
is actually paid during the Plan Year.
c. ( ) Compensation (or its equivalent), as defined under the
Qualified Plan identified in El, above.
d. ( ) Other: _______________________________________________.
Regardless of the above, Compensation shall exclude:
e. (X) N/A - No exclusions
f. ( ) Overtime pay.
g. ( ) Commissions.
4
<PAGE> 5
h. ( ) Bonuses.
i. ( ) Other: ____________________________________
(specify type of compensation to exclude)
E3. Compensation Deferral Credits. If Compensation Deferral Credits will
be permitted under the Plan, each Participant may elect to have his or
her Compensation reduced by (Select the applicable restriction(s)):
a. ( ) N/A, The Plan will not permit Compensation Deferral
Credits.
b. ( ) No less than $_____________________ per pay period and
no less than, $__________________________ per bonus
period.
c. ( ) No less than _______ % of ordinary salary or bonus.
d. (X) Up to 10% of ordinary salary or bonus.
e. ( ) Up to $___________ per pay period and up to
$____________ per bonus period.
f. ( ) An amount, determined as of the last day of the Plan
Year, equal to the Internal Revenue Code Section 402(g)
limit on salary reduction contributions to the Qualified
Plan identified in E1, above for the year ($7,000, as
indexed) less the amount the Participant is entitled to
contribute to the Qualified Plan identified in El, above
because of the application of discrimination tests and
other limitations (e.g., the Internal Revenue Code
Section 415 limit) to salary reduction Contributions
thereunder.
g. ( ) Any amount or percentage of the Participant's
Compensation, at the Participant's discretion.
E4. Employer Contributions. If Employer Contribution Credits are intended
to be provided by the Employer under the Plan, select the applicable
contribution calculation method(s):
a. ( ) N/A.
b. (X) The Employer may contribute each Plan Year an amount of
Employer Contribution Credits on behalf of one or more
Participants, at times and in amounts determined solely
in the discretion of the Employer.
c. ( ) The Employer shall "match" any Voluntary Compensation
Deferrals made under the Plan by each Participant, as
follows: _______________
d. ( ) The Employer shall contribute to the Plan on behalf of
each Participant an amount equal to the difference
between the amount of the basic contribution that the
Employer would make on behalf of the Participant to the
Qualified Plan in the absence of the application of the
Internal Revenue Code Section 401(a)(17) dollar
limitation ($150,000, as indexed) and the amount of the
basic contribution actually contributed to the Qualified
Plan by the Employer on behalf of the Participant for
the Plan Year.
e. ( ) Other: _________________________________________.
5
<PAGE> 6
Each Participant shall be entitled to receive any Employer Contribution Credit
made on his or her behalf if the Participant (Check all that apply):
e. ( ) Is employed on the last day of the Plan Year.
f. (X) Dies, retires or becomes disabled during the Plan Year
g. (X) Is employed for any part of the Plan Year.
DISTRIBUTIONS
Fl. Form of Distributions. Distributions under the Plan may be made
(Check one or both):
a. (X) In lump sum form.
b. ( ) In monthly, quarterly or annual installments over a
period selected by the Participant.
F2. Benefit Entitlement Events for Employer Compensation Credits. A
Participant will be entitled to receive his or her Plan Account
attributable to Employer Contribution Credits upon the occurrence of
any of the following events (Check all that apply):
a. (X) Retirement after age 65.
b. (X) Death.
c. (X) Total and permanent disability (as determined by the
Employer),
d. ( ) Involuntary termination of employment or independent
contractor relationship by the employer without cause
(as determined by the Employer).
e (X) Any termination of employment or independent contractor
relationship with the Employer (i.e., including all of
the above).
f. ( ) A voluntary termination of employment or independent
contractor relationship with the Employer after __ years
of Plan participation.
g. ( ) Other
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
NOTE: ALL COMPENSATION DEFERRAL CREDIT AMOUNTS ARE FULLY VESTED AT
ALL TIMES IN THE PARTICIPANTS AND WILL BE PAYABLE UPON ANY
TERMINATION OF EMPLOYMENT OR INDEPENDENT CONTRACTOR
RELATIONSHIP BY THE PARTICIPANT.
6
<PAGE> 7
MISCELLANEOUS
G1. Participant Directed Investment:
a. (X) Yes, in accordance with procedures adopted by the
Employer and among the following funds:
Fidelity Retirement Gov't MM Portfolia
Fidelity Blue Chip Growth Fund
Fidelity Growth & Income
Fidelity Intermediate Bond Fund
Fidelity Asset Manager
b. ( ) No, Participant investment direction is not permitted.
Investments shall be directed by:
1. ( ) The Employer.
2. ( ) An Investment Manager
(Provide Name,
Contact Person,
Address and Phone Number):
-------------
-------------
-------------
-------------
-------------
G2. Expenses incurred in connection with the Plan:
a. ( ) shall be charged against the balance in each
individual's Plan Account and paid out of the amounts
held by the Employer attributable to the individual's
Plan Account; or
b. (X) shall not be charged against each individual's Plan
Account, but shall be paid by the Employer from its
general assets.
G3. Advance Distribution for Hardship Due to Unforeseeable Emergency.
a. ( ) A hardship distribution from the Participant's Plan
Account may be made in the event of the Participant's
financial hardship due to unforeseeable emergency, as
determined by the Employer and subject to the
restrictions set forth in the Plan.
b. (X) No hardship withdrawals due to unforeseeable emergency
will be permitted.
7
<PAGE> 8
THIS AGREEMENT AND THE PLAN MAY ONLY BE USED IF CPI QUALIFIED PLAN CONSULTANTS,
INC. INDICATES ITS CONSENT BELOW.
BY SIGNING THIS ADOPTION AGREEMENT, THE EMPLOYER (i) CERTIFIES THAT IT HAS
CONSULTED WITH LEGAL COUNSEL REGARDING THE EFFECTS OF THIS PLAN, AS APPLICABLE,
ON ALL PARTIES, (ii) CERTIFIES THAT IT HAS AND WILL LIMIT PARTICIPATION IN THE
PLAN TO A SELECT GROUP OF THE EMPLOYER'S MANAGEMENT OR HIGHLY COMPENSATED
EMPLOYEES AND/OR INDEPENDENT CONTRACTORS, AS DETERMINED BY THE EMPLOYER OR ITS
COUNSEL AND (iii) ACKNOWLEDGES THAT CPI QUALIFIED PLAN CONSULTANTS, INC. MAKES
REPRESENTATIONS AS TO TAX EFFECTS ON PARTICIPATING EMPLOYERS OR PARTICIPANTS.
PLAN ADOPTION:
IN WITNESS WHEREOF, the Employer (and adopting Affiliated Employers, if any)
hereby cause this Plan to be executed this 23rd day of April, 1998.
Thousand Trails. Inc. By: /s/ WALTER B. JACCARD
- ----------------------- --------------------------------
Type or Print Employer's Name Type or Print Name and Title of
Signing Officer: Walter B. Jaccard
-------------------
Vice President
-------------------
National American Corporation By: /s/ WALTER B. JACCARD
- ----------------------------- --------------------------------
Type or Print Employer's Name Type or Print Name and Title of
Signing Officer: Walter B. Jaccard
-------------------
Vice President
-------------------
Resort Parks International, Inc. By: /s/ WALTER B. JACCARD
- ------------------------------- --------------------------------
Type or Print Employer's Name Type or Print Name and Title of
Signing Officer: Walter B. Jaccard
--------------------
Vice President
-------------------
CPI QUALIFIED PLAN CONSULTANTS, INC.'S CONSENT TO THE EMPLOYER'S ADOPTION OF
THE PLAN:
By: /s/ SHERYL K. CHEELY
-----------------------------------
Print Name: Sheryl K. Cheely
----------------------
Print Title: President
----------------------
Print Date: May 28, 1998
----------------------
8
<PAGE> 9
EXHIBIT 10.56
CPI QUALIFIED PLAN CONSULTANTS, INC.
PROTOTYPE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(For Use With The Adoption Agreement For
CPI Qualified Plan Consultants, Inc.
Prototype Supplemental Executive Retirement Plan)
<PAGE> 10
CPI QUALIFIED PLAN CONSULTANTS, INC.
PROTOTYPE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.1. Account 1
1.2. Adoption Agreement 1
1.3. Beneficiary 1
1.4. Code 1
1.5. Compensation 2
1.6. Compensation Deferred Credit Account 2
1.7. Compensation Deferral Credits 2
1.8. Designation Date 2
1.9. Effective Date 2
1.10. Eligible Employee 2
1.11. Employer 2
1.12. Employer Contribution Credit Account 2
1.13. Employer Contribution Credits 2
1.14. Entry Date 2
1.15. Participant 2
1.16. Participant Enrollment and Election Forms 2
1.17. Plan 3
1.18. Plan Year 3
1.19. Valuation Date 3
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1. Requirements 3
2.2. Re-Employment 3
2.3. Change of Employment Category 3
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C>
ARTICLE III
CONTRIBUTIONS AND CREDITS
3.1. Employer Contribution Credits 3
3.2. Participant Compensation Deferral Credits 4
ARTICLE IV
ALLOCATION OF FUNDS
4.1. Allocation of Deemed Earnings or Losses on Accounts 5
4.2. Accounting for Distributions 5
4.3. Separate Accounts 5
4.4. Deemed Investment Directions of Participants 5
4.5. Expenses 6
ARTICLE V
ENTITLEMENT TO BENEFITS
5.1. Termination of Employment 6
5.2. Hardship Distributions 7
5.3. Re-Employment of Recipient 7
ARTICLE VI
DISTRIBUTION OF BENEFITS
6.1. Amount 7
6.2. Method of Payment 8
(a) Medium of Payments 8
(b) Timing and Manner of Payment 8
6.3. Death Benefits 8
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
ARTICLE VII
BENEFICIARIES: PARTICIPANT DATA
7.1. Designation Of Beneficiaries 8
7.2. Information To Be Furnished by Participants and Beneficiaries:
Inability to Locate Participants or Beneficiaries 9
ARTICLE VIII
ADMINISTRATION
8.1. Administrative Authority 9
8.2. Uniformity of Discretionary Acts 11
8.3. Litigation 11
8.4. Claims Procedure 11
ARTICLE IX
AMENDMENT
9.1. Right to Amend 12
9.2. Amendments to Ensure Proper Characterization of Plan 12
ARTICLE X
TERMINATION
10.1. Employer's Right to Termination or Suspend Plan 13
10.2. Automatic Termination of Plan 13
10.3. Suspension of Deferrals 13
10.4. Allocation and Distribution 13
10.5. Successor to Employer 13
ARTICLE XI
MISCELLANEOUS
11.1. Limitations on Liability 14
11.2. Construction 14
11.3. Spendthrift Provision 14
</TABLE>
<PAGE> 13
CPI QUALIFIED PLAN CONSULTANTS, INC.
PROTOTYPE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
RECITALS
By executing the attached Adoption Agreement (the "Adoption
Agreement"), the Employer, as identified therein (the "Employer"), has adopted
the CPI Qualified Plan Consultants, Inc. Prototype Supplemental Executive
Retirement Plan (the "Plan"), effective as provided in the Adoption Agreement.
The Plan offers eligible employees and/or independent contractors of the
Employer deferred compensation benefits taxable pursuant to section 451 of the
Internal Revenue Code of 1986, as attended (the "Code"), and regulations
thereunder, and is intended to qualify as a deferred compensation plan
maintained for a select group of the Employer's management or highly
compensated employees or independent contractors pursuant to sections 201(2),
301(a)(3) and 40l(a)(J) of Employee Retirement Income Securities Act of 1974.
The purpose of this Plan is to enable eligible employees or
independent contractors who become covered under the Plan to enhance their
retirement security by permitting them to enter into agreements with the
Employer to defer a portion of their compensation and/or to have the Employer
Supplement benefits under the Employer's tax-qualified retirement plan(s) and
to have the eligible employees or independent contractors receive benefits at
retirement, death, disability and/or other termination of employment or in the
event of financial hardship due to unforeseeable emergencies, as selected in
the Adoption Agreement.
ARTICLE I
DEFINITIONS
1.1 ACCOUNT means the balance credited to a Participant's or
Beneficiary's Compensation Deferral Credit Account and/or Employer Contribution
Credit Account, including contribution credits and deemed income, gains,
expenses and losses (as determined by the Employer, in its discretion) credited
thereto or debited therefrom. A Participant's or Beneficiary's Account shall be
determined as of the date of reference.
1.2 ADOPTION AGREEMENT means the Agreement by which this Plan is
adopted by the Employer.
1.3 BENEFICIARY means any person or person so designated in
accordance with the provisions of Article VII.
1.4 CODE means the Internal Revenue Code of 1986 and the
regulations thereunder, as amended from time to time.
<PAGE> 14
1.5 COMPENSATION means the total amount of remuneration earned by
a Participant for personal services rendered to the Employer for the Plan Year
and computed in accordance with the method selected in the Adoption Agreement.
1.6 COMPENSATION DEFERRED CREDIT ACCOUNT is defined in Section
3.2.
1.7 COMPENSATION DEFERRAL CREDITS is defined in Section 3.2.
1.8 DESIGNATION DATE means the date or dates as of which a
designation of deemed investment directions by an individual pursuant to
Section 4.5, or any change in a prior designation of deemed investment
directions by an individual pursuant to Section 4.5, shall become effective.
The Designation Dates in any Plan Year shall be designated by the Employer.
1.9 EFFECTIVE DATE means the effective date of the Plan as set
forth in the Adoption Agreement.
1.10 ELIGIBLE EMPLOYEE means, for any Plan Year (or applicable
portion thereof), a person employed by the Employer who is determined by the
Employer to be a member of a select group of management or highly compensated
employees or independent contractors of the Employer and who is designated by
the Employer's Board of Directors to be an Eligible Employee under the Plan.
Before the first day of each Plan Year, the Employer shall notify those
individuals, if any, who will be Eligible Employees for the Plan Year. If the
Employer determines that an individual first becomes an Eligible Employee
during a Plan Year, the Employer shall notify such individual of its
determination and of the date during the Plan Year on which the individual
shall first become an Eligible Employee.
1.11 EMPLOYER means the entity or entities that adopt the Adoption
Agreement and its or their successors and assigns unless otherwise have been
provided, or any other corporation or business organization which, with the
consent of the Employer, or its or their successors or assigns, assumes the
Employer's obligations hereunder, or any other corporation or business
organization which agrees, with the consent, of the Employer, to become a party
to the Plan.
1.12 EMPLOYER CONTRIBUTION CREDIT ACCOUNT is defined Section 3.1.
1.13 EMPLOYER CONTRIBUTION CREDITS is defined in Section 3.1.
1.14 ENTRY DATE with respect to an individual means the first day
of the pay period following the date on which the individual first becomes an
Eligible Employee.
1.15 PARTICIPANT means any person so designated in accordance with
the provisions of Article II, including, where appropriate according to the
context of the Plan, any former employee who is or may become (or whose
Beneficiaries may become) eligible to receive a benefit under the Plan.
<PAGE> 15
1.16 PARTICIPANT ENROLLMENT AND ELECTION FORMS means the form or
forms on which a Participant elects to deter Compensation hereunder and on
which the Participant makes certain other designations as required thereon.
1.17 PLAN means this CPI Qualified Plan Consultants, Inc.
Prototype Supplemental Executive Retirement Plan, as amended from time to time.
1.18 PLAN YEAR means the period designated as the Plan Year in
the Adoption Agreement during which this Plan is in effect.
1.19 VALUATION DATE means the last day of each Plan Year and any
other date or dates that the Employer, in its sole discretion, reasonably
chooses to treat as a Valuation Date.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 REQUIREMENTS. Every Eligible Employee on the Effective Date
shall be eligible to become a Participant on the Effective Date. Every other
Eligible Employee shall be eligible to become a Participant on the first Entry
Date occurring on or after the date on which he or she becomes an Eligible
Employee. No individual shall become a Participant, however, if he or she is
not an Eligible Employee on the date his or her participation is to begin.
Participation in the Participant Compensation Deferral Credit
feature of the Plan is voluntary. In order to participate in the Participant
Compensation Deferral Credit feature of the Plan, an otherwise Eligible
Employee must make written application in such matter as may be required by
Section 3.2 and by the Employer and must agree to make Compensation Deferral
Credits as provided in Article III.
2.2 RE-EMPLOYMENT. If a Participant whose employment or
independent contractor relationship with the Employer is terminated is
subsequently re-employed by or subsequently again becomes an independent
contractor of the Employer, he or she shall become a Participant in accordance
with the provisions of Section 2.1.
2.3 CHANGE OF EMPLOYMENT CATEGORY. During any period in which a
participant remains in the employ of, or continues to maintain an independent
contractor with, the Employer, but ceases to be an Eligible Employee, he or she
shall not be eligible to make Compensation Deferral Credits hereunder.
<PAGE> 16
ARTICLE III
CONTRIBUTIONS AND CREDITS
3.1 EMPLOYER CONTRIBUTION CREDITS. If the Employer elects in the
Adoption Agreement to make Employer Contribution Credits under the Plan, there
shall be established and maintained a separate Employer Contribution Credit
Account in the name of each Participant, to which shall be credited or debited,
as applicable, (a) amounts equal to the Employer's Contribution Credits; (b)
any deemed earnings, losses or expenses allocated to the account.
For purposes of this Section, the Employer's Contribution Credits with
respect to a Participant for a particular Plan Year shall be an amount equal to
the amount specified in the Adoption Agreement, if any, for the Plan Year. The
Employer's Contribution Credits shall be credited to the Participant's Account
either in a single credit or ratably over the applicable period and shall be
credited only if the Participant satisfies the eligibility requirements for
receiving an Employer Contribution Credit for the Plan Year specified in the
Adoption Agreement.
The Participant's Employer Contribution Credit Account shall be
credited or debited as applicable, as of each Valuation Date with deemed
earnings, losses and expenses, as applicable. The amount of deemed earnings,
losses and expenses shall be as determined under Article IV. The Employer shall
have the discretion to allocate such deemed income, gains, losses and expenses
among Employer Contribution Credit Account pursuant to such allocation rules as
the Employer deems to be reasonable and administratively practicable.
3.2 PARTICIPANT COMPENSATION DEFERRAL CREDITS. If the Employer
elects in the Adoption Agreement, in accordance with rules established by the
Employer and subject to such amount limitations as are specified in the Adoption
Agreement, a Participant may elect to defer Compensation which is due to be
earned and which, would otherwise be paid to the Participant, in a lump sum or
in any fixed periodic dollar amount(s) or percentage(s) of Compensation
designated by the Participant. Amounts so deferred will be considered a
Participant's "Compensation Deferral Credits." Ordinarily, a Participant shall
make such an election with respect to a coming twelve (12) month Plan Year
during the period beginning on the thirtieth (30th) day prior to the Plan Year
and ending on the day prior to the Plan Year, or during such other period as is
established by the Employer.
Compensation Deferral Credits shall be made through regular payroll
deductions or through art election by the Participant to defer the payment of a
bonus not yet payable to him or her at the time of the election. The
Participant may reduce his or her payroll deduction Compensation Deferral
Credit amount as of, and by written notice delivered to the Employer at least
thirty (30) days prior to, the beginning of any regular payroll period, with
such reduction being first effective for Compensation to be earned in that
payroll period. In the case of bonus deferrals the Participant may reduce his
or her bonus or bonuses due to be paid by the Employer by giving notice to the
Employer or the bonus Compensation Deferral Credit Amount prior to the date the
applicable bonus is to be paid. Once made, a Compensation Deferral Credit
payroll deduction election shall continue in force indefinitely, until changed
by the Participant on a subsequent Participant
<PAGE> 17
Enrollment and Election Form provided by the Employer. Compensation Deferral
Credits shall be deducted by the Employer from the pay of a deferring
Participant and shall be credited to the Account of the deferring Participant.
There shall be established and maintained by the Employer a separate
Compensation Deferral Credit Account in the name of each Participant to which
shall be credited or debited: (a) amounts equal to the Participant's
Compensation Deferral Credits and (b) amounts equal to any deemed income,
gains, expenses and losses (to the extent realizable, based upon deemed fair
market value of the Account's deemed assets, as determined by the Employer, in
its discretion) attributable or allocable thereto.
ARTICLE IV
ALLOCATION OF FUNDS
4.1 ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS. Subject
to such limitations as may from time to time be required by law, imposed by the
Employer or contained elsewhere in the Plan, and subject to such operating
rules and procedures as may be imposed from time to time by the Employer, prior
to the date on which a direction will become effective, the Participant shall
have the right to direct the Employer as to how amounts in his or her Account
and held among the Employer's general assets shall be deemed to be invested.
The Employer shall invest the assets held by the Employer on behalf of the
Participant pursuant to the deemed investment directions the Employer properly
has received from the Participant. The value of the Participant's Account
shall be equal to the value of the account maintained by the Employer on behalf
of the Participant. As of each valuation date of the assets held under the
Plan, the Participant's Account will be credited or debited to reflect the
Participant's deemed investments. The Participant's Plan Account will be
credited or debited with the increase or decrease in the realizable net asset
value or the designated deemed investments, as follows. As of each Valuation
Date, an amount equal to the net increase or decrease in realizable net asset
value (as determined by the Employer) of each deemed investment option within
the Account since the preceding Valuation Date shall be allocated among all
Participants' Accounts deemed to be invested in that investment option in
accordance with the ratio which the portion of the Account of each Participant
which is deemed to be invested within that investment option, determined as
provided herein, bears to the aggregate of all amounts deemed to be invested
within that investment option.
4.2 ACCOUNTING FOR DISTRIBUTIONS. As of the date of any
distribution hereunder, the distribution made hereunder to the Participant or
her Beneficiary or Beneficiaries shall be charged to such Participant's
Account. Such amounts shall be charged on a pro rata basis against the
investments of the Plan in which the Participant's Account is deemed to be
invested.
4.3 SEPARATE ACCOUNTS. A separate account under the Plan shall
be established and maintained by the Employer to reflect the Account for each
Participant with sub-accounts to separately show the deemed earnings and losses
credited or debited to such Account, and the applicable deemed investments of
the Account.
<PAGE> 18
4.4 DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to
such limitations as may from time to time be required by law, imposed by the
Employer or contained elsewhere in the Plan, and subject to such operating
rules and procedures as may be imposed from time to time by the Employer, prior
to and effective for each Designation Date, each Participant may communicate to
the Employer a direction as to how his or her Plan Accounts should be deemed to
be invested among such categories of deemed investments as may be made
available by the Employer hereunder. Such direction shall designate the
percentage (in any whole percent multiples) of each portion of the
Participant's Plan Accounts which is requested to be deemed to be invested in
such categories of deemed investments, and shall be subject to the following
rules:
(a) Any initial or subsequent deemed investment direction
shall be in writing, on a form supplied by and filed with the Employer, and
shall be effective as of the next Designation Date (as determined by the
Employer). The Participant may, if permitted by the Employer in its
discretion, make a deemed investment direction for his or her existing Account
balance as of the Designation Date and a separate deemed investment direction
for contribution credits occurring after the Designation Date.
(b) All amounts credited to the Participant's Account shall
be deemed to be invested in accordance with the then effective deemed
investment direction, and as of the effective date of any new deemed investment
direction, all or a portion of the Participant's Account at that date shall be
reallocated among the designated deemed investment funds according to the
percentages specified in the new deemed investment direction unless and until a
subsequent deemed investment direction shall be filed and become effective. An
election concerning deemed investment choices shall continue indefinitely as
provided in the Participant's most recent Participant Enrollment and Election
Form, or other form specified by the Employer.
(c) If the Employer receives an initial or revised deemed
investment direction which it deems to be incomplete, unclear or improper, the
Participant's investment direction then in effect shall remain in effect (or,
in the case of a deficiency in an initial deemed investment direction, the
Participant shall be deemed to have filed no deemed investment direction) until
the next Designation Date, unless the Employer provides for, and permits the
application of, corrective action prior thereto.
(d) If the Employer possesses at any time directions as to
the deemed investment of less than all of a Participant's Account, the
Participant shall be deemed to have directed that the undesignated portion of
the Account be deemed to be invested in a money market, fixed income or similar
fund made available under the Plan, as determined by the Employer in its
discretion.
(e) Each Participant hereunder, as a condition to his or her
participation hereunder, agrees to indemnify and hold harmless the Employer and
its agents representatives from any losses or damages of any kind relating to
the deemed investment of the Participant's Account hereunder.
(f) Each reference in this Section to a Participant shall be
deemed to include, where applicable, a reference to a Beneficiary.
<PAGE> 19
4.5 EXPENSES. Expenses, including taxes and administrative fees,
allocable to the administration or operation of an Account maintained under the
Plan (as determined by the Employer in its discretion) shall be paid by the
Employer or shall be charged against the Participant's Account, as elected by
the Employer in the Adoption Agreement.
ARTICLE V
ENTITLEMENT TO BENEFITS
5.1 TERMINATION OF EMPLOYMENT. If the Participant terminates
employment with the Employer for any reason, the Participant's Compensation
Deferral Credit Account at the date of such termination shall be valued based
on the last Validation Date and payable to the provisions of Article IV. In
addition, if a Participant terminates employment with the Employer for any
reason specified in the Adoption Agreement as being a benefit entitlement
event, the Participant's Employer Contribution Credit Account (or applicable
portion thereof, as specified in the Adoption Agreement) at the date of such
termination shall be valued based on the last Valuation Date and payable
according to the provisions of Article VI.
5.2 HARDSHIP DISTRIBUTIONS. If elected by the Employer in the
Adoption Agreement, in the event of financial hardship of the Participant, as
hereinafter defined, the Participant may apply to the Employer for the
distribution of all or any part of his or her Account. The Employer shall
consider the circumstances of each such case, and the best interests of the
Participant and his or her family, and shall have the right, in its sole
discretion, if applicable, to allow such distribution, or, if applicable, to
direct a distribution of part of' the amount requested, or to refuse to allow
any distribution. Upon a finding of financial hardship, the Employer shall
make the appropriate distribution to the Participant from amounts held by the
Employer in respect of the Participant's Account. In no event shall the
aggregate amount of the distribution exceed either the full value of the
Participant's Account or the amount determined by the Employer to be necessary
to alleviate the Participant's financial hardship (which financial hardship may
be considered to include any taxes due because of the distribution occurring
because of this Section), and which is not reasonably available from other
resources of the Participant. For purposes of this Section, the value of the
Participant's Account shall be determined as of the date of the distribution.
"Financial hardship means (a) a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant
or of a dependent (as defined in Code section l52(a)) of the Participant, (b)
loss of the Participant's property due to casualty, or (c) other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant, each as determined to exist by the
Employer.
5.3 RE-EMPLOYMENT OF RECIPIENT. If a Participant receiving
installment distributions pursuant to Section 6.2 is re-employed by the
Employer as an employee, the remaining (distributions due to the Participant
shall be suspended until such time as the Participant (or his or her
Beneficiary) once again becomes eligible for benefits under Section 5.1 or 5.2,
at which time such distribution shall commence, subject to the limitations and
conditions contained in this Plan.
<PAGE> 20
ARTICLE VI
DISTRIBUTION OF BENEFITS
6.1 AMOUNT. A Participant (or his or her Beneficiary) shall
become entitled to receive, on, or as soon as practicable after, the occurrence
of the Participant's benefit entitlement event (as specified in the Adoption
Agreement), if any (or earlier as provided in Section 5.2), a distribution in
an aggregate amount equal to all or a portion of the Participant's Account, as
provided in Section 5.1 or Section 5.2, as applicable. Any payment due
hereunder will be paid by the Employer from its general assets.
6.2 METHOD OF PAYMENT.
(a) Medium of Payments. All payments under the Plan
shall be made in cash, the actual property held by the Employer and
attributable to the Participant's Account, or in part property and part cash,
as permitted by the Employer in its discretion.
(b) Timing and Manner of Payment. In the case of
distributions to a Participant or his or her Beneficiary by virtue of an
entitlement pursuant to Sections 5.1, an aggregate amount equal to the
Participant's Account will be paid by the Employer, as provided by Section 6.1
and subject to the Employers elections in the Adoption Agreement, as selected
by the Participant prior to his or her termination of employment, in a lump sum
or in substantially equal monthly, quarterly or annual installments (adjusted
for gains, losses and expenses) over a period selected by the Participant. If a
Participant fails to designate properly the manner of payment of the
Participant's benefit under the Plan, such payment will be in a lump sum on or
about the date of the Participant's termination.
If the whole or any part of a payment hereunder by the
Employer is to be in installments, the total to be so paid shall continue to be
deemed to be invested pursuant to Sections 4.1 and 4.5 under such procedures as
the Employer may establish, in which case any deemed income, gain, loss or
expense attributable thereto (as determined by the Employer, in its discretion)
shall be reflected in the installment payments, in such equitable manner as the
Employer shall determine.
6.3 DEATH BENEFITS. If the Employer elects in the Adoption
Agreement to make the death of a Participant a benefit entitlement event and if
a Participant dies before terminating his or her employment with the Employer
and before the commencement of payments to the Participant hereunder, the
entire value of the Participant's Account shall be paid, as provided in Section
6.2, to the person or persons designated in accordance with Section 7.1.
Upon the death of a Participant after payments hereunder have begun
but before he or she has received all payments to which he or she is entitled
under the Plan, the remaining benefit payments shall be paid to the person or
persons designated in accordance with Section 7.1, in the manner in which such
benefits were payable to the Participant.
<PAGE> 21
ARTICLE VII
BENEFICIARIES: PARTICIPANT DATA
7.1 DESIGNATION OF BENEFICIARIES. Each Participant from time to
time may designate on a form provided by the Employer any person or persons
(who may be named contingently or successively) to receive such benefits as may
be payable under the Plan upon or after the Participant's death, and such
designation may be changed from time to time by the Participant by filing a new
designation. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Employer, and will be
effective only when filed in writing with the Employer during the Participant's
lifetime.
In the absence of a valid Beneficiary designation, or if, at the time
any benefit payment is due to a Beneficiary, there is no living Beneficiary
validly named by the Participant, the Employer shall pay any such benefit
payment to the Participant's spouse, if then living, but otherwise to the
Participant's then living descendants, if any, per stripes, but, if none, to
the Participant's estate. In determining the existence or identity of anyone
entitled to a benefit payment, the Employer may rely conclusively upon
information supplied by the Participant's personal representative, executor or
administrator. If a question arises as to the existence or identity of anyone
entitled to receive a benefit payment as aforesaid, or if a dispute arises with
respect to any such payment, then, notwithstanding the foregoing, the Employer,
in its sole discretion, may distribute such payment to the Participant's estate
without liability for any tax or other consequences which might flow therefrom,
or may take such other action as the Employer deems to be appropriate.
7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND
BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES. Any
communication, statement or notice addressed to a Participant or to a
Beneficiary at his or her last post office address as shown on the Employer's
records shall be binding on the Participant or Beneficiary for all purposes of
the Plan. The Employer shall not be obliged to search for any Participant or
Beneficiary beyond the sending of a registered letter to such last known
address. If the Employer notifies any Participant or Beneficiary that he or she
is entitled to an amount under the Plan and the Participant or Beneficiary
fails to claim such amount or make his or her location known to the Employer
within three (3) years thereafter, except as otherwise required by law, if the
Participant's spouse or surviving spouse is then living, the Employer shall
direct distribution of such amount to the Participant's spouse or surviving
spouse, and, if the Participant has died and then has no surviving spouse, the
Employer shall direct distribution of such amount to the Participant's estate
and, if the Participant has not died, the entirety of the Participant's Account
not then paid shall be forfeited to the Employer, and such distribution or
forfeiture shall discharge the Employer's obligations to any such unlocated
Participant or Beneficiary. If a benefit payable to an unlocated Participant
or Beneficiary is subject to escheat pursuant to applicable state law, the
Employer shall not be liable to any person for any payment made in accordance
with such law.
<PAGE> 22
ARTICLE VIII
ADMINISTRATION
8.1 ADMINISTRATIVE AUTHORITY. Except as otherwise specifically
provided herein, the Employer shall have the sole responsibility for and the
sole control of the operation and administration of the Plan, and shall have
the power and authority to take all action and to make all decisions and
interpretations which may be necessary or appropriate in order to administer
and operate the Plan, including, without limiting the generality of the
foregoing, the power, duty and responsibility to:
(a) Resolve and determine all disputes or questions
arising under the Plan, including the power to determine the rights of Eligible
Employees, Participants and Beneficiaries, and their respective benefits, and
to remedy any ambiguities, inconsistencies or omissions in the Plan.
(b) Adopt such rules of procedure and regulations as in
its opinion may be necessary for the proper and efficient administration of the
Plan and as are consistent with the Plan.
(c) Implement the Plan in accordance with its terms and
the rules and regulations adopted as above.
(d) Make determinations with respect to the eligibility
of any Eligible Employee as a Participant and make determinations concerning
the crediting and distribution of Plan Accounts.
(e) Appoint any persons or firms, or otherwise act to
secure specialized advice or assistance, as it deems necessary or desirable in
connection with the administration and operation of the Plan, and the Employer
shall be entitled to rely conclusively upon, and shall be fully protected in
any action or omission taken by it in good faith reliance upon, the advice or
opinion of such firms or persons. The Employer shall have the power and
authority to delegate from time to time by written instrument all or any part
of its duties, powers or responsibilities under the Plan, both ministerial and
discretionary, as it deems appropriate, to any person or committee, and in the
same manner to revoke any such delegation of duties, powers or
responsibilities, including the power to delegate any administrative and/or
recordkeeping functions as are required to be performed under the Plan to CPI
Qualified Plan Consultants, Inc., subject to CPI Qualified Plan Consultants,
Inc.'s acceptance of such responsibility. Any action of such person or committee
in the exercise of such delegated duties, powers or responsibilities shall have
the same force and effect for all purposes hereunder as if such action had been
taken by the Employer. Further, the Employer may authorize one or more persons,
including CPI Qualified Plan Consultants, Inc., to execute any certificate or
document on behalf of the Employer, in which event any person notified by the
Employer of such authorization shall be entitled to accept and conclusively
rely upon any such certificate or document executed by such person as
representing action by the Employer until such third person shall have been
notified of the revocation of such authority.
<PAGE> 23
If CPI Qualified Plan Consultants, Inc. is delegated any
administrative or recordkeeping authority by the Employer hereunder, CPI
Qualified Plan Consultants, Inc. shall use ordinary care and diligence in the
performance of its duties pertaining to the Plan, but, except to the extent
required by law, CPI Qualified Plan Consultants, Inc. shall not incur any
liability: (i) by virtue of any contract, agreement, bond or other instrument
made or executed by it or on its behalf as delegatee of the Employer (ii) for
any act or failure to act, or any mistake or judgment made, by it with respect
to the business of the Plan, unless resulting from its gross negligence or
willful misconduct or (iii) for the neglect, omission or wrong-doing of any
other person or firm employed or retained by the Employer.
The Employer shall indemnify and hold harmless CPI Qualified Plan
Consultants, Inc. and its officers, directors, employees and other
representatives (any one of which hereinafter is referred to as an "Indemnified
Person") from the effects and consequences of the Indemnified Person's acts,
omissions and, conduct in its official capacity with respect to the Plan,
except to the extent that such effects and consequences shall result from the
Indemnified Person's own willful misconduct or negligence. This indemnification
will protect an Indemnified Person from all losses, claims, damages,
liabilities and expenses incurred by an Indemnified Person (including
reasonable fees and disbursements of counsel) which (i) are related to or arise
out of (A) actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by the Employer or (B)
actions taken or omitted to be taken by an Indemnified Person with the
Employer's consent or in conformity with the Employer's actions or omissions;
(ii) arise out of changes in investments initiated by the Employer, such as
losses incurred while Plan assets are being transferred; or (iii) are otherwise
related to or arise out of CPI Qualified Plan Consultants. Inc.'s activities on
behalf of the Employer. The Employer will reimburse an Indemnified Person
within 30 days for all expenses (including fees and disbursements of counsel)
as they are incurred by such Indemnified Person in connection with
investigating, preparing or defending any such action or claim, whether or not
in connection with pending or threatened litigation. In addition, if CPI
Qualified Plan Consultants Inc.'s services are required, including deposition,
expert testimony, related meetings, conferences and preparation time for such
events, whether by agreement or subpoena by any party in litigation in which
CPI Qualified Plan Consultants, Inc.'s services may he relevant, Employer shall
pay CPI Qualified Plan Consultants Inc.'s then current hourly rate for the
Indemnified Person(s) involved. If CPI Qualified Plan Consultant, Inc. is
engaged by the Employer in one or more additional capacities, and the terms of
this Plan or any additional agreement may be embodied in one or more separate
written agreements, this indemnification shall apply to the original Plan and
any such additional agreement and shall remain in full force and effect
following the completion or termination of this Plan.
8.2 UNIFORMITY OF DISCRETIONARY ACTS. Whenever in the
administration or operation of the Plan discretionary actions by the Employer
are required or permitted, such actions shall be consistently and uniformly
applied to all persons similarly situated, and no such action shall be taken
which shall discriminate in favor of any particular person or group of persons.
8.3 LITIGATION. Except as may be otherwise required by law, in
any action or judicial proceeding affecting the Plan, no Participant or
Beneficiary shall be entitled to any notice or service of process, and any
final judgment entered in such action shall be binding on all persons
interested in, or claiming under, the Plan.
<PAGE> 24
8.4 CLAIMS PROCEDURE. Any person claiming a benefit under the
Plan (a "Claimant") shall present the claim, in writing, to the Employer, and
the Employer shall respond in writing. If the claim is denied, the written
notice of denial shall state, in a manner calculated to be understood by the
Claimant:
(a) The specific reason or reasons for the denial, with
specific references to the Plan provisions on which the denial is based;
(b) A description of any additional material or
information necessary for the Claimant to perfect his or her claim and an
explanation of why such material or information is necessary; and
(c) An explanation of the Plan's claims review procedure.
The written notice denying or granting the Claimant's claim
shall be provided to the Claimant within ninety (90) days alter the Employer's
receipt of the claim, unless special circumstances require an extension of time
for processing the claim. If such an extension is required, written notice of
the extension shall be furnished by the Employer to the Claimant within the
initial ninety (90) day period and in no event shall such all extension exceed
a period of ninety (90) days from the end of the initial ninety (90) day
period. Any extension notice shall indicate the special circumstances
requiring the extension and the date on which the Employer expects to render a
decision on the claim. Any claim not granted or denied within the period noted
above shall be deemed to have been denied.
Any Claimant (or such Claimant's authorized representative) whose
claim is denied, or deemed to have been denied under the preceding sentence,
may, within sixty (60) days after the Claimant's receipt of notice of the
denial, or after the date of the deemed denial, request a review of the denial
by notice given, in writing, to the Employer. Upon such a request for review,
the claim shall be reviewed by the Employer (or its designated representative)
which may, but shall not be required to, grant the Claimant a hearing. In
connection with the review, the Claimant may have representation, may examine
pertinent documents, and may submit issues and comments in writing. The
decision on review normally shall be made within sixty (60) days of the
Employer's receipt of the request for review. If an extension of time is
required due to special circumstances, the Claimant shall be notified, in
writing, by the Employer, and the time limit for the decision on review shall
be extended to one hundred twenty (120) days.
The decision on review shall be in writing and shall state, in a
manner calculated to be understood by the Claimant, the specific reasons for
the decision and shall include references to the relevant Plan provisions on
which the decision is based. The written decision on review shall be given to
the Claimant within the sixty (60) day (or, if applicable, the one hundred
twenty (120) day) time limit discussed above. If the decision on review is not
communicated to the Claimant within the sixty (60) day (or, if applicable, the
one hundred twenty (120) day) period discussed above, the claim shall be deemed
to have been denied upon review. All decisions on review shall be final and
binding with respect to all concerned parties.
<PAGE> 25
ARTICLE IX
AMENDMENT
9.1 RIGHT TO AMEND. The Employer specified as having the power to
amend the Plan in the Adoption Agreement, by written instrument executed by the
Employer, shall have the right to amend the Plan by making changes to previous
elections in the Adoption Agreement, at any time and with respect to any
provisions thereof, and all parties hereto or claiming any interest hereunder
shall be bound by such amendment; provided, however, that no such amendment
shall deprive a Participant or a Beneficiary of a right accrued hereunder prior
to the date of the amendment.
9.2 AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN.
Notwithstanding the provisions of Section 9.1, the Plan may be amended by the
Employer specified as having the power to amend the Plan in the Adoption
Agreement at any time, retroactively if required, if found necessary, in the
opinion of the Employer, in order to ensure that the Plan is characterized as a
"top-hat" plan of deferred compensation maintained for a select group of
management or highly compensated employees as described under ERISA sections
201(2), 301(a)(3), and 401(a)(1), and to conform the Plan to the provisions and
requirements of any applicable law (including ERISA and the Code). No such
amendment shall be considered prejudicial to any interest of a Participant or a
Beneficiary hereunder.
ARTICLE X
TERMINATION
10.1 EMPLOYER'S RIGHT TO TERMINATION OR SUSPEND PLAN. Each
Employer reserves the right to terminate the Plan and/or its obligation to make
further credits to Plan accounts. Each Employer also reserves the right to
suspend the operation of the Plan for a fixed or indeterminate period of time.
10.2 AUTOMATIC TERMINATION OF PLAN. The Plan automatically shall
terminate as to any Employer upon the dissolution of the Employer, or upon its
merger into or consolidation with any other corporation or business
organization if there is a failure by the surviving corporation or business
organization to adopt specifically and agree to continue the Plan.
10.3 SUSPENSION OF DEFERRALS. In the event of a suspension of the
Plan, the Employer shall continue all aspects of the Plan, other than
Compensation Deferral Credits or Employer Contribution Credits, during the
period of the suspension, in which event payments hereunder will continue to be
made during the period of the suspension in accordance with Articles V and VI.
<PAGE> 26
10.4 ALLOCATION AND DISTRIBUTION. This Section shall become
operative on a complete termination of the Plan. The provisions of this Section
also shall become operative in the event of a partial termination of the Plan,
as determined by a terminating Employer, but only with respect to that portion
of the Plan attributable to the Participants to whom the partial termination is
applicable. Upon the effective date of any such event, notwithstanding any
other provisions of the Plan, no persons who were not theretofore Participants
shall be eligible to become Participants, the value of the interest of all
Participants and Beneficiaries shall be determined and, after deduction of
estimated expenses in liquidating and, if applicable, paying Plan benefits,
paid to them as soon as is practicable after such termination.
10.5 SUCCESSOR TO EMPLOYER. Any corporation or other business
organization which is a successor to the Employer by reason of a consolidation,
merger or purchase of substantially all of the assets of the Employer shall
have the right to become a party to the Plan by adopting the same by resolution
of the entity's board of directors or other appropriate governing body. If,
within ninety (90) days from the effective date of such consolidation, merger
or sale of assets, such new entity does not become a party hereto, as above
provided, the Plan automatically shall be terminated, and the provisions of
Section 10.4 shall become operative.
ARTICLE XI
MISCELLANEOUS
11.1 LIMITATIONS ON LIABILITY. Neither the establishment of the
Plan nor any modification thereof, nor the creation of any account under the
Plan, nor the payment of any benefits under the Plan shall be construed as
giving to any Participant or other person any legal or equitable right against
the Employer, or any officer or employee thereof except as provided by law or
by any Plan provision. Neither CPI Qualified Plan Consultants, Inc. nor the
Employer in any way guarantees any Participant's Account from loss or
depreciation, whether caused by poor investment performance of a deemed
investment or the inability to realize upon an investment due to an insolvency
affecting an investment vehicle or any other reason. In no event shall the
Employer or CPI Qualified Plan Consultants, Inc., or any successor, employee,
officer, director or stockholder of the Employer or CPI Qualified Plan
Consultants, Inc., be liable to any person on account of any claim arising by
reason of the provisions of the Plan or of any instrument or instruments
implementing its provisions, or for the failure of any Participant, Beneficiary
or other person to be entitled to any particular tax consequences with respect
to the Plan, or any credit or distribution hereunder.
11.2 CONSTRUCTION. If any provision of the Plan is held to be
illegal or void, such illegality or invalidity shall not affect the remaining
provisions of the Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if said illegal or invalid provision had never been
inserted herein. For all purposes of the Plan, where the context admits, the
singular shall include the plural, and the plural shall include the singular.
Headings of Articles and Sections herein are inserted only for convenience of
reference and are not to be considered in the construction of the Plan. The
laws of the state of the Employer's incorporation shall govern, control
<PAGE> 27
and determine all questions of law arising with respect to the Plan and the
interpretation and validity of its respective provisions, except where those
laws are preempted by the laws of the United States. Participation under the
Plan will not give any Participant the right to be retained in the service of
the Employer nor any right or claim to any benefit under the Plan unless such
right or claim has specifically accrued hereunder.
The Plan is intended to be and at all times shall be interpreted and
administered so as to qualify as an unfunded deferred compensation plan, and no
provision of the Plan shall be interpreted so as to give any individual any
right in any assets of the Employer which right is greater than the rights of a
general unsecured creditor of the Employer.
11.3 SPENDTHRIFT PROVISION. No amount payable to a Participant or
a Beneficiary under the Plan will, except its otherwise specifically provided
by law, be subject in any manner to anticipation, alienation, attachment,
garnishment, sale, transfer, assignment (either at law or in equity), levy,
execution, pledge, encumbrance, charge or any other legal or equitable process,
and any attempt to do so will he void; nor will any benefit be in any manner
liable for or subject to the debts, contracts, liabilities, engagements or
torts of the person entitled thereto. Further, (i) the withholding of taxes
from Plan benefit payments, (ii) the recovery under the Plan of overpayments of
benefits previously made to a Participant or Beneficiary, (iii) if applicable,
the transfer of benefit rights from the Plan to another plan, or (iv) the
direct deposit of benefit payments to an account in a banking institution (if
not actually part of an arrangement constituting an assignment or alienation)
shall not be construed as an assignment or alienation.
In the event that any Participant's or Beneficiary's benefits
hereunder are garnished or attached by order of any court, the Employer may
bring an action or a declaratory judgment in a court of competent jurisdiction
to determine the proper recipient of the benefits to be paid under the Plan.
During the pendency of said action, any benefits that become payable shall be
held as credits to the Participant's or Beneficiary's Account or, if the
Employer prefers, paid into the court as they become payable, to be distributed
by the court to the recipient as the court deems proper at the close of said
action.
<PAGE> 1
Exhibit 10.61
Member Name: Member #:
--------------------------------------- -----------------
MEMBERSHIP AGREEMENT
(NATIONAL MEMBERSHIP WITH FLEXIBLE DUES)
RETAIL INSTALLMENT CONTRACT
1. DEFINITION OF TERMS. "You" and "your" refer to the individual purchaser or
purchasers who have signed this Agreement. "We", "us", and "our" refer to
Thousand Trails, Inc. ("Trails") and National American Corporation and its
subsidiaries ("NACO"). "Disclosure Statement" means the booklet containing
information on our membership program that was attached to this Agreement and
delivered to you at the time of your purchase. "Preserves" mean the recreational
campground resorts owned or operated by Trails and the recreational campground
resorts owned or operated by NACO for the benefit of their respective
memberships. "Member Rules" mean the rules and other terms set forth in our
Campground Directory, which govern the use of the preserves by our members. A
copy of our Campground Directory was delivered to you at the time of your
purchase.
2. WHAT YOU ARE PURCHASING. You are purchasing a NATIONAL CAMPING MEMBERSHIP
which entitles you to use all Trails and NACO preserves on the terms set forth
herein. The preserves that are currently available for use by members are
described in the Disclosure Statement.
The initial term of your membership is three (3) years following the date of
your purchase. After this initial term, the term of your membership will
automatically renew for additional one-year periods ("renewal terms" herein)
unless you notify us in writing of your desire to terminate your membership at
least 60 days prior to the expiration of the initial term or renewal term, as
the case may be.
3. TERMS OF MEMBERSHIP. During the term of your membership, you are entitled to
use all preserves that are designated by Trails and/or NACO as available for use
by members and included in your membership, subject to the following:
You must use the preserves in accordance with this Agreement and the Member
Rules. We have Member Rules regarding, among other things: (a) advance
reservation or first-come, first-choice space arrangements; (b) length of stay;
(c) frequency of use; (d) charges for benefits or services, including rental
units, pet fees, food services, goods purchased, gasoline, and other services
made available by us from time to time; (e) restrictions on guest visits,
including number of guests allowed and guest fees; (f) length of season for use
of the preserves; (g) hours of operation of facilities; (h) use of preserves by
non-members in connection with programs sponsored by us, including without
limitation, our marketing and sales programs, SuperHost group rentals,
charitable functions, community groups and other public use scheduled so as not
to conflict with member use; and (i) such other matters and restrictions on use
as may be reasonably necessary to ensure maximum availability of any preserve
for use by our membership as a whole. We reserve the right, in our sole
discretion, to add, modify, or delete Member Rules from time to time as we may
deem appropriate. Please consult the current Member Rules if you have questions
regarding use of the preserves.
It is your responsibility to use the preserves in a safe and reasonable manner
and to observe the Member Rules. You are also responsible for the conduct of
your children and guests and you are liable for all damages caused by the
negligent or reckless use, or intentional misuse, of the preserves by you or
your children.
The location of, and facilities and amenities at, all of Trails' and NACO's
preserves are described in the Disclosure Statement and are subject to change by
Trails and NACO. Preserves and facilities may be added to or subtracted from
those which existed at the time of execution of this Agreement. Trails and NACO
are under no obligation to increase the number of or improve existing preserves.
Trails and NACO reserve the right to sell memberships with rights and privileges
different from your membership.
Your membership constitutes merely a contractual license to use the facilities
provided by Trails and/or NACO from time to time at the preserves where you have
membership rights. Such preserves and facilities are subject to change as
provided in this Agreement and your membership does not constitute an interest
in, is not secured by, and does not entitle you to any recourse against any real
property of Trails or NACO, nor are you entitled to vote on any aspect relating
to the businesses of Trails or NACO or to share in any of the profits of the
businesses of Trails or NACO. The application and use of all amounts paid by you
under this Agreement, including your purchase price and annual dues, is within
our sole discretion.
You may not possess, hold, or own more than one membership in either Trails or
NACO, and if you acquire more than one membership under any circumstances, we
will terminate all memberships held by you in excess of one.
4. TRANSFERABILITY. Your National Membership is transferable, subject to the
following limitations. A National Membership: (a) may only be resold for a price
which does not exceed the price paid by you for your membership plus a
reasonable transfer fee as set forth below; (b) may be transferred only if the
purchase price for your membership is paid in full and your annual dues are
current at the time of transfer; and (c) may be transferred only if your
transferee agrees to accept the rate of annual dues and use fees charged by us
on new sales of similar memberships and the Member Rules in effect at the time
of transfer. A National Membership cannot be divided and, if you transfer one,
or if one is transferred by operation of law, as in the event of divorce,
inheritance, descent, or attachment, all membership privileges must be
transferred together.
In connection with any transfer of a National Membership, we will charge a
reasonable transfer fee, which is currently $750. A transfer may be effected
only with our prior written consent, which we will not unreasonably withhold. A
transfer will not become effective until: (a) you and your prospective
transferee have represented to us in writing that the transfer is in compliance
with the foregoing terms; and (b) your prospective transferee has entered into a
new membership agreement.
We will not purchase your membership and we can provide no assurance that we
will be able to locate a buyer for your membership in the event it is
transferable and you decide to sell it. In addition to our sale of new
memberships in company sales programs, we currently offer a resale program
pursuant to which we attempt to resell previously-owned memberships on behalf of
the selling member. In order to participate in our resale program, the selling
member must have paid the purchase price of his membership in full and must be
current on his annual dues. We reserve the right to modify or discontinue our
resale program at any time without further notice and without incurring any
legal liability for the modification or discontinuation.
You may not transfer or sell your membership or assign, rent, loan, or otherwise
alienate your membership, temporarily or permanently, in any manner other than
as provided in this section. Any transfer in violation of this prohibition shall
be null and void. In the event of any dispute over ownership of your membership,
we may, without liability to any person and without releasing you
Page 1 of 4
<PAGE> 2
Member Name: Member #:
--------------------------------------- -----------------
from your financial obligations to us, suspend and refuse membership privileges
to all persons claiming rights to the membership until they have resolved the
dispute in a manner satisfactory to us and communicated the resolution to us in
writing.
5. DEFAULT AND REMEDIES. Time is of the essence of this Agreement and any of the
following events will be "an event of default":
(a) Your failure to make any payment under this Agreement when due,
including but not limited to the payment of the application fee,
purchase price, finance charge, and annual dues, or
(b) The falsity of any representation made by you in this Agreement or
your credit application, or
(c) A material breach by you of any provision of this Agreement or the
Member Rules.
Should any "event of default" occur, we may immediately suspend your membership
rights. In addition, upon the occurrence of any "event of default", we may, upon
30 days' written notice to you, declare the entire unpaid principal balance of
the purchase price, together with the finance charge and annual dues accrued to
the date of default, immediately due and payable. Moreover, we may continue to
collect annual dues from you as they accrue for the balance of the initial term
or renewal term, as the case may be. In the alternative, we may, upon the
occurrence of any "event of default", and upon 30 days' written notice to you,
terminate this Agreement and your membership. If we terminate this Agreement and
your membership because of your default, which we may, but are not required to
do, we shall have all remedies provided by law. If any payment required by this
Agreement is not made in full within ten days of its due date, you agree to pay
us a late charge in the amount set forth in paragraphs 11 and 12. In addition,
where permitted by law, reasonable collection charges will be imposed if any
payment required by this Agreement is not made in full within 30 days of its due
date and collection efforts are made. If permitted by law, a reasonable fee will
also be imposed for processing any check or other payment that is returned
unpaid. If this Agreement is referred to an attorney for collection after your
default, or if a legal action is commenced to enforce or declare the meaning of
any provision of this Agreement, the prevailing party will be awarded its
reasonable attorney's fees and costs, including fees and costs incurred in both
trial and appellate courts.
6. ASSIGNMENT. We may sell or assign this Agreement, and any such assignment may
vest in our assignee all of our right, title, and interest in this Agreement,
and all payments required to be made by you under this Agreement may be required
to be paid to such assignee. No transfer, extension, or assignment of any
interest under this Agreement will release you from your obligation to make all
payments required under this Agreement.
7. CREDIT APPLICATION AND REPORTING. If this Agreement provides for an
installment purchase, the Agreement may be rescinded by us, in our sole
discretion, unless your application for credit is approved by our corporate
office. If your credit application is not approved, we will notify you in
writing within 30 days. You agree that we may from time to time seek and receive
credit related information about you from others such as stores, other
creditors, and credit reporting agencies. You also agree that we may furnish on
a regular basis credit and experience information regarding your account to
others seeking that information. You represent that all information supplied to
us is true, that you are of legal age, that the address set forth on page 4 of
this Agreement is your permanent residence address, and that you are acquiring
this membership solely for the personal enjoyment of you and your family.
8. MISCELLANEOUS. This Agreement contains the entire agreement between you and
us. No waiver or modification of any of the terms or conditions of this
Agreement shall be effective unless in writing and signed by you and an
authorized representative of our corporate office. The terms of this Agreement
will benefit and bind the respective heirs, executors, administrators, legal
representatives, successors, assigns, and transferees of the parties. Any
provision of this Agreement which proves to be invalid, void, or illegal will
not affect, impair, or invalidate any other provision of this Agreement and such
other provisions will remain in full force and effect.
9. APPLICATION FEE. An application fee of $150.00, plus applicable taxes, is
payable as set forth in section 11. This application fee is designed to cover
the costs we incur in processing your membership application and related
paperwork, setting up your membership in our computer system, and issuing you a
membership card that works with our CIS system.
10. PURCHASE PRICE. The purchase price for your membership is
$_________________, plus applicable taxes, and is payable as set forth in
section 11.
Page 2 of 4
<PAGE> 3
Member Name: Member #:
--------------------------------------- -----------------
11. METHOD OF PAYMENT. (CHECK ONLY ONE AND INITIAL.)
[ ] I desire to pay the total application fee and
- ------------------ purchase price for my membership of $_______________
(Buyer's Initials) in full on the day of purchase.
[ ] I desire to pay the total application fee and
- ------------------ purchase price for my membership in installments, as
(Buyer's Initials) follows: (IF CHECKED, COMPLETE THE BALANCE OF SECTION
11.)
If you are financing, a cash down payment of $________ is due on the day of
purchase. The remaining balance of $_________ will accrue interest on the
declining principal balance at the rate of 14.9% per annum, and will be payable
in [ ] 12 (twelve), [ ] 24 (twenty-four), or [ ] 36 (thirty-six) equal
consecutive monthly installments of $________ each, including interest. These
payments will commence on the__ day of____, 19___, and will continue on the same
day of each month thereafter until the principal balance and accrued interest
thereon are paid in full. All payments are stated and must be made in U.S.
Dollars.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL PERCENTAGE RATE FINANCE CHARGE AMOUNT FINANCED TOTAL OF PAYMENTS TOTAL SALE PRICE
The cost of your credit The dollar amount the The amount of credit The amount you will have The total cost of your
as a yearly rate. credit will cost you. provided to you or on paid after you have paid purchase on credit
your behalf. all payments as including your down
scheduled. payment of
$
--------------
% $ $ $ $
- -------------- --------------- --------------- --------------- --------------
- -----------------------------------------------------------------------------------------------------------------------------------
Your payment schedule will be: Number of Payments:
------------------------
Amount of Monthly Payment: $
------------------------
Payments are due monthly beginning:
-----------------
LATE CHARGE: If a payment is late by ten or more days, you will be charged 5% of
the delinquent installment or $5.00, whichever is less.
PAC PLAN: The interest rate disclosed above will automatically increase by 3%
(which is the maximum increase) in the event any one of the following occurs:
(a) you discontinue participation in our preauthorized check (PAC) plan, (b)
your financial institution is unable to participate, or (c) we discontinue your
participation for a reasonable cause. The interest rate will not increase above
17.9%. An increase in the interest rate would increase your monthly payment by
not more than $2.00.
PREPAYMENT: If you pay off early, you will not have to pay a penalty. See the
other provisions of this Agreement for additional information about nonpayment,
default, our right to accelerate the maturity of this obligation, and
prepayment.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEMIZATION OF THE AMOUNT FINANCED:
(1) Application Fee $
---------------
(2) Purchase Price of Your Membership $
---------------
(3) Less Down Payment $
---------------
(4) Amount Financed (Sum of items 1 & 2, less item 3) $
---------------
12. DUES. During the initial term and each renewal term of your membership, you
agree to pay us annual dues in the amount set forth below for the dues option
("Dues Option") you select (CHECK ONLY ONE AND INITIAL). Applicable taxes, if
any, will be added to your annual dues. You may change from one Dues Option to
another Dues Option one time for each calendar year, provided that you give us
written notice of your desire to change options no later than November 1 of the
year prior to the year for which you desire the change to be effective.
[ ] ADVENTURER: 30 NIGHTS FOR $329 PER YEAR (entitles you
- ----------------- to camp overnight at the preserves included (Buyer's
(Buyer's Initials) Initiate your membership for a total of 30 nights in a
calendar year and also includes unlimited day use of
these preserves).
[ ] EXPLORER: 50 NIGHTS FOR $441 PER YEAR (entitles you to
- ----------------- camp overnight at the preserves included in your
(Buyer's Initials) membership for a total of 50 nights in a calendar year
and also includes unlimited day use of these
preserves).
[ ] ON THE ROAD: UNLIMITED USE FOR $1,200 PER YEAR
- ----------------- (entitles you to unlimited overnight camping at the
(Buyer's Initials) preserves included in your membership (subject to
length of stay restrictions for any one preserve) and
to unlimited day use of these preserves).
BY SIGNING THIS AGREEMENT, YOU ARE MAKING A LEGAL COMMITMENT TO PAY ANNUAL DUES
FOR A MINIMUM OF THREE YEARS.
Your annual dues will be prorated for the period from the date of this Agreement
through December 31 of the year in which this Agreement is executed. Thereafter,
your annual dues are payable in full on or before January 1 of each year. As a
convenience, you may pay the annual dues in two semi-annual installments or four
quarterly installments. Each of the installment payments will be subject to a
processing fee in an amount set by us. This processing fee, which is subject to
increase, is currently $5 for each installment payment. If payment of your
annual dues is late by ten or more days, you will be assessed a late charge in
the maximum amount permitted for late charges under the retail installment sales
law in effect in the state of your residence. Your annual dues are stated and
must be paid in U.S. Dollars.
DUES INCREASES. The amount of annual dues payable under each Dues Option may be
increased each year, upon thirty (30) days advance written notice, by the
percentage increase in the Consumer Price Index for the calendar year prior to
the year for which the increase is being made. Consumer Price Index means the
consumer price index for all urban consumers as reported by the United States
Department of Labor, Bureau of Labor Statistics.
USE FEES. If you desire to camp overnight for more nights than are included in
the Dues Option you select, you agree to pay a use fee equal to (i) $16.00 per
additional night if you are camping in your own recreational vehicle, or (ii)
$12.00 per additional night if you
Page 3 of 4
<PAGE> 4
Member Name: Member #:
--------------------------------------- -----------------
are camping in a tent. The terms "recreational vehicle" and "tent" are defined
in the Member Rules. The amount of these use fees may be increased from time to
time by the cumulative percentage increase in the Consumer Price Index since the
date of the last increase. If you rent a trailer or cabin during your stay, this
use fee will be included in the rental fee for the trailer or cabin. The stated
amount of the use fees include any applicable taxes.
NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES
OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE
DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
NOTICE TO THE BUYER: (1) DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT OR IF IT
CONTAINS ANY BLANK SPACES TO BE FILLED IN. (2) YOU ARE ENTITLED TO A COMPLETELY
FILLED IN COPY OF THIS AGREEMENT. (3) YOU CAN PREPAY THE FULL AMOUNT DUE UNDER
THIS AGREEMENT AT ANY TIME. (4) IF YOU DESIRE TO PAY OFF IN ADVANCE THE FULL
AMOUNT DUE, THE AMOUNT WHICH IS OUTSTANDING WILL BE FURNISHED UPON REQUEST. (5)
EACH PERSON SIGNING THIS AGREEMENT AS A MEMBER SHALL BE JOINTLY AND SEVERALLY
LIABLE FOR ALL OF YOUR OBLIGATIONS. (6) YOU ACKNOWLEDGE THAT YOU HAVE READ AND
RECEIVED A COPY OF THIS AGREEMENT, THE DISCLOSURE STATEMENT AND OUR CAMPGROUND
DIRECTORY .
YOUR INITIALS /
-----------------------------
IF YOU HAVE BEEN PERSONALLY SOLICITED, AND YOUR AGREEMENT OR OFFER TO PURCHASE
IS MADE AT A PLACE OTHER THAN OUR PLACE OF BUSINESS, YOU MAY CANCEL THIS
AGREEMENT AS SET FORTH BELOW.
YOU, THE BUYER, MAY CANCEL THIS TRANSACTION AT ANY TIME PRIOR TO MIDNIGHT OF THE
THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE THE ATTACHED NOTICE
OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT.
CHECK ONE: APPLICABLE [ ] NOT APPLICABLE [ ]
EVEN IF THE FOREGOING RIGHT OF CANCELLATION IS NOT APPLICABLE, YOU MAY CANCEL
THIS AGREEMENT AS SET FORTH BELOW.
NOTICE OF CANCELLATION
YOU MAY CANCEL THIS CONTRACT, WITHOUT ANY PENALTY OR OBLIGATION, WITHIN THREE
BUSINESS DAYS FROM THE DATE THE CONTRACT IS EXECUTED. TO CANCEL THIS CONTRACT,
MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS CANCELLATION NOTICE OR A COPY OF
THIS CONTRACT IF IT CONTAINS THE CANCELLATION INSTRUCTIONS, OR ANY OTHER WRITTEN
NOTICE, OR SEND A TELEGRAM TO THOUSAND TRAILS, INC., AT 2711 LBJ FREEWAY, SUITE
200, DALLAS, TEXAS 75234; ATTENTION: CONTRACT PROCESSING, NOT LATER THAN
MIDNIGHT OF
.
- --------------------------------------------
(Date)
I HEREBY CANCEL THIS TRANSACTION .
------------------
(Date)
-----------------------------------
(Purchaser's Signature)
WITH THE NOTICE OF CANCELLATION, OR SEPARATELY IF A TELEGRAM IS SENT, YOU MUST
RETURN THE ORIGINAL MEMBERSHIP CAMPING CONTRACT, MEMBERSHIP CARD AND ALL OTHER
EVIDENCE OF MEMBERSHIP TO THE SELLER. YOU SHOULD PROMPTLY RETURN THESE DOCUMENTS
WITH THE NOTICE OF CANCELLATION, OR SEPARATELY IF A TELEGRAM IS SENT. FAILURE TO
SEND THE DOCUMENTS PROMPTLY COULD DELAY YOUR REFUND. YOU SHOULD RETAIN FOR YOUR
RECORDS ONE COPY OF THE CANCELLATION NOTICE, OR A CARBON OF THE CONTRACT WHEN IT
PROVIDES THE CANCELLATION INFORMATION, OR OTHER WRITING SHOWING INTENT TO
CANCEL. MAILING BY ORDINARY MAIL IS ADEQUATE BUT CERTIFIED MAIL RETURN RECEIPT
REQUESTED IS RECOMMENDED.
NAME: ADDRESS:
----------------------------- ------------------------------------
CITY: STATE: ZIP:
----------------------------------- ----------- ---------------
EXECUTED THIS DAY OF 19
------------------------ --------------- -----------
Membership Campground Operator:
- ------------------------------------------
Purchaser's Signature ---------------------------------
2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
- ------------------------------------------
Purchaser's Name (please print)
- ------------------------------------------ ---------------------------------
Purchaser's Signature Authorized Signature
- ------------------------------------------ ---------------------------------
Purchaser's Name (please print) Preserve
Page 4 of 4
<PAGE> 1
EXHIBIT 11.1
THOUSAND TRAILS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(DOLLARS AND COMMON SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
June 30, 1998 June 30, 1997 June 30, 1996
------------- ------------- -------------
<S> <C> <C> <C>
BASIC:
Weighted average number of common shares outstanding 7,407 7,223 3,703
============= ============= =============
Net income allocable to common shareholders $ 24,879 $ 6,799 $ 1,109
============= ============= =============
Net income per common share -- basic $ 3.36 $ 0.94 $ 0.30
============= ============= =============
DILUTED:
Weighted average number of common shares outstanding 7,407 7,223 3,703
Weighted average common stock equivalents -
Dilutive options 975 480 18
Dilutive warrants 16 1 -
------------- ------------- -------------
Weighted average number of common shares outstanding 8,398 7,704 3,721
============= ============= =============
Net income allocable to common shareholders $ 24,879 $ 6,799 $ 1,109
============= ============= =============
Net income per common share -- diluted $ 2.96 $ 0.88 $ 0.30
============= ============= =============
</TABLE>
Note that the calculation for the year ended June 30, 1996, has been restated to
reflect the change in accounting method adopted by the Company in fiscal 1997,
and retroactively applied to all reporting periods presented (see Note 1 to the
consolidated financial statements included in Item 8).
Page 1 of 1
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
The corporations listed below in bold type are the direct wholly owned
subsidiaries of the Registrant as of the date of this filing. Listed below
National American Corporation in regular type are its wholly owned subsidiaries.
COAST FINANCIAL SERVICES, INC.
NATIONAL AMERICAN CORPORATION
Beech Mountain Lakes Corporation
Carolina Landing Corporation
Carriage Manor Corporation
Cherokee Landing Corporation
Chief Creek Corporation
Dixie Resort Corporation
Foxwood Corporation
G.L. Land Development Corporation
Lake Royale Corporation
Lake Tansi Village, Inc.
LML Resort Corporation
Natchez Trace Wilderness Preserve Corporation
Quail Hollow Plantation Corporation
Quail Hollow Village, Inc.
Recreation Land Corporation
Recreation Properties, Inc.
Resort Land Corporation
Tansi Resort, Inc.
The Kinston Corporation
The Villas of Hickory Hills, Inc.
Western Fun Corporation
Westwind Manor Corporation
Wolf Run Manor Corporation
RESORT PARKS INTERNATIONAL, INC.
THOUSAND TRAILS (CANADA), INC.
TT OFFSHORE LTD.
UST WILDERNESS MANAGEMENT CORPORATION
YUBA INVESTMENT COMPANY
<PAGE> 1
Exhibit 23.1
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated September 4, 1998, included in the Thousand
Trails, Inc. (the "Company") Form 10-K for the year ended June 30, 1998, and to
all references to our Firm included in the registration statements covering the
Company's 1991 Employee Stock Incentive Plan, 1993 Stock Option and Restricted
Stock Purchase Plan, 1993 Director Stock Option Plan, and the Stock Option
Agreement dated as of August 1, 1996, between the Company and William J. Shaw.
/s/ARTHUR ANDERSEN LLP
- ----------------------------
Dallas, Texas
September 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 13,631
<SECURITIES> 0
<RECEIVABLES> 4,181
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,453
<PP&E> 21,879
<DEPRECIATION> 0
<TOTAL-ASSETS> 74,262
<CURRENT-LIABILITIES> 31,948
<BONDS> 32,973
0
0
<COMMON> 74
<OTHER-SE> 1,130
<TOTAL-LIABILITY-AND-EQUITY> 2,754
<SALES> 3,894
<TOTAL-REVENUES> 76,509
<CGS> 0
<TOTAL-COSTS> 60,793
<OTHER-EXPENSES> 56,194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,599
<INCOME-PRETAX> 15,716
<INCOME-TAX> (9,163)
<INCOME-CONTINUING> 24,879
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,879
<EPS-PRIMARY> 3.36
<EPS-DILUTED> 2.96
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE COMPANY'S FINANCIAL DATA AS OF AND FOR THE YEAR ENDED JUNE 30, 1997, HAS
BEEN RESTATED TO REFLECT THE ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 128, "EARNINGS PER SHARE" (SEE NOTES 1 AND 2 TO THE CONSOLIDATED
FINANCIAL STATEMENTS INCLUDED IN ITEM 8).
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 1,343
<SECURITIES> 0
<RECEIVABLES> 7,517
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,142
<PP&E> 23,983
<DEPRECIATION> 0
<TOTAL-ASSETS> 63,302
<CURRENT-LIABILITIES> 39,586
<BONDS> 44,094
0
0
<COMMON> 74
<OTHER-SE> (22,111)
<TOTAL-LIABILITY-AND-EQUITY> 63,302
<SALES> 3,477
<TOTAL-REVENUES> 78,413
<CGS> 0
<TOTAL-COSTS> 71,244
<OTHER-EXPENSES> 62,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,084
<INCOME-PRETAX> 7,169
<INCOME-TAX> 370
<INCOME-CONTINUING> 6,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,799
<EPS-PRIMARY> .94
<EPS-DILUTED> .88
</TABLE>
