UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
FAIRFIELD COMMUNITIES, INC.
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(Name of issuer)
COMMON STOCK, $.01 PAR VALUE
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(Title of class of securities)
304231301
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(CUSIP number)
DANIEL E. REED, ESQ.
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
(305) 579-0827
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(Name, address and telephone number of person
authorized to receive notices and communications)
DECEMBER 19, 1997
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with the statement [X].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
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CUSIP NO. 304231301 SCHEDULE 13D PAGE 2 OF __ PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
RALPH P. MULLER
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)
[ ]
(b)
[ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
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NUMBER OF 7 SOLE VOTING POWER 3,151,240
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
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8 SHARED VOTING POWER 6,500
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9 SOLE DISPOSITIVE POWER 3,151,240
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10 SHARED DISPOSITIVE POWER 6,500
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,157,740
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.06%
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14 TYPE OF REPORTING PERSON
IN
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1 SECURITY AND ISSUER.
This Statement relates to the Common Stock, par value $.01 per share (the
"Common Stock"), of FAIRFIELD COMMUNITIES, INC. ("Fairfield"). The
executive offices of Fairfield Communities, Inc. are located at 2800
Cantrell Road, Little Rock, Arkansas.
2 IDENTITY AND BACKGROUND.
Ralph P. Muller ("Muller") is a Florida resident. Mr. Muller resides at 64b
S.E. 5th Avenue, Delray Beach, Florida 33483. Mr. Muller is currently a
private investor and is not otherwise employed by any entity.
Muller has not been convicted in a criminal proceeding in the last five
years.
During the last five years, Muller has not been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
which resulted in it being subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or state securities laws.
Muller is a United States citizen.
3 SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On August 8, 1997, Fairfield signed a definitive Agreement and Plan of
Merger (the "Merger Agreement") with FCVB Corp. ("FCVB"), a wholly-owned
subsidiary of Fairfield, and Vacation Break U.S.A., Inc. ("VBUSA"). The
Merger Agreement provided for the merger (the "Merger") of FCVB with and
into VBUSA. Upon the consummation of the Merger which occurred on December
19, 1997 and pursuant to the terms of the Merger Agreement, each issued and
outstanding share of common stock of VBUSA converted into .6075 share of
Common Stock, the separate existence of FCVB terminated and VBUSA became a
wholly-owned subsidiary of Fairfield. By virtue of Muller's holdings of
VBUSA common stock immediately prior to the Merger, and pursuant to the
Merger Agreement, Muller became the beneficial holder of 3,157,740 shares
of Common Stock upon the closing of the Merger.
4 PURPOSE OF TRANSACTION.
Muller has acquired the Common Stock in connection with the above-described
merger transaction and not with the view to, or for resale in connection
with, any distribution thereof. Muller has no present intention of selling,
granting any participation in, or otherwise distributing the Common Stock.
The shares of the Common Stock of Fairfield owned by Muller have been
registered under the Securities Act of 1933, as amended.
5 INTEREST IN SECURITIES OF ISSUER.
To the best knowledge of Muller, Muller is the beneficial owner of
3,157,740 shares of Common Stock or approximately 14.06% of the Common
Stock currently outstanding. Muller has the sole power to vote and dispose
of 3,151,240 of his shares of Common Stock and is deemed to share voting
and dispositive power of 6,500 shares of Common Stock held in the name of
Muller's wife.
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6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
(i) Mr. Muller granted an option to Ms. Joyce North permitting her to
acquire at her discretion 212,625 shares of Common Stock at a price per
share of $8.22; and
(ii) Mr. Muller is party to a certain Loan and Pledge Agreement with
Morgan Stanley & Co. International Limited dated October 17, 1997 pursuant
to which Mr. Muller has pledged an aggregate of 1,822,500 shares of Common
Stock to secure a loan from Morgan Stanley & Co. Incorporated.
7 MATERIAL TO BE FILED AS EXHIBITS.
Agreement and Plan of Merger by and among Fairfield, FCVB and VBUSA dated
August 8, 1997
Option Agreement between Ralph P. Muller and Joyce North
Loan and Pledge Agreement between Morgan Stanley & Co. International
Limited and Ralph P. Muller.
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SIGNATURE
After reasonable inquiry and to the best of knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
APRIL 1, 1998
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(Date)
/s/ RALPH P. MULLER
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Ralph P. Muller
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION SEQUENTIAL PAGE NO.
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2 Agreement and Plan of Merger among Fairfield
Communities, Inc., FCVB Corp., and Vacation
Break USA, Inc. Dated as of August 8, 1997
(incorporated by reference from Appendix A to
Fairfield Communities, Inc.'s Form S-4 filed on
November 5, 1997 with the Commission)
10.1 Option Agreement between Ralph Muller and
Joyce North
10.2 Loan and Pledge Agreement between Morgan Stanley
& Co. International Limited and Ralph P. Muller
EXHIBIT 10.1
STOCK OPTION AGREEMENT
This is a Stock Option Agreement ("Agreement"), executed on the ___ day
of December, 1997, to be effective as of the ___ day of September, 1995 (the
"Grant Date"), by and between R&A PARTNERSHIP, LTD., a Texas limited
partnership, through Ralph Muller as designee of the General Partner, RPM
Investments, Inc. (the "Grantor"), and JOYCE NORTH (the "Optionee").
W I T N E S S E T H :
WHEREAS, the Grantor desires to grant the Optionee an option to
purchase three hundred fifty thousand (350,000) shares of Common Stock, par
value $.01 per share ("Common Stock"), of Vacation Break U.S.A., Inc., a Florida
corporation (the "Company"), which shares are currently owned by the Grantor,
upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, the Grantor and the Optionee hereby agree as follows:
1. GRANT OF OPTION. Subject to the provisions of this Agreement, the
Grantor hereby grants to the Optionee an option (the "Option") to purchase from
the Grantor three hundred fifty thousand (350,000) shares of Common Stock (after
the exercise of the Option and upon the proposed sale of the shares, the "Option
Shares"), at the price set forth in Section 2 hereof (the "Option Price").
2. OPTION PRICE AND EXERCISE OF OPTION.
(a) Except as set forth below, the Optionee may exercise the
Option and acquire and sell the Option Shares commencing October 15, 1996 and
thereafter any time and from time to time until October 1, 1999, for the Option
Price of $5.00 per share.
(b) The Option may be exercised in whole or in part by the
Optionee in accordance with the terms and conditions set forth in that certain
Option Exercise and Escrow Agreement, attached hereto as Annex A.
(c) NUMBER OF SHARES EXERCISABLE. Each exercise of an Option
hereunder shall reduce the total number of Option Shares that may thereafter be
purchased under this Option.
3. SHARE CERTIFICATE. Upon each exercise of the right to purchase
Option Shares pursuant to this Option, legends in substantially the form set
forth below shall be placed upon each stock certificate representing the Option
Shares:
"The shares of stock represented by this certificate have been
acquired directly from an affiliate of the issuer without being
registered under the Securities Act of 1933, as amended ("Act"),
or the securities laws of any state or other jurisdiction,
including the
<PAGE>
Florida Securities Act, and are restricted securities as that
term is defined under Rule 144 promulgated under the Act. These
shares may not be sold, transferred, pledged, hypothecated or
otherwise disposed of in any manner (a "Transfer") unless they
are registered under the Act and the securities laws of all
applicable states and other jurisdictions or unless the request
for Transfer is accompanied by a favorable opinion of counsel
satisfactory to the issuer, stating that such Transfer will not
result in a violation of such laws."
4. ANTI-DILUTION PROVISIONS.
(a) ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any
time subdivide its outstanding shares of Common Stock by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its shareholders, the number of
Option Shares then subject to this Option immediately prior to such subdivision
shall be proportionately increased and the exercise price shall be
proportionately decreased, and if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification or
combination thereof, the number of option shares then subject to this Option
immediately prior to such combination shall be proportionately decreased and the
exercise price shall be proportionately increased. Any such adjustments pursuant
to this Section 4(a) shall be effective at the close of business on the
effective date of such subdivision or combination or if any adjustment is the
result of a stock dividend or distribution then the effective date for such
adjustment based thereon shall be the record date therefor. Optionee shall be
entitled to participate in any subscription or other rights offering made to
holders of Common Stock to the same extent as though Optionee has purchased the
full number of shares as to which this Option remains unexercised immediately
prior to the record date for such subscription or other rights offering.
(b) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case of any reorganization of the Company or in case the Company shall
consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation, then, and in each such
case, the Optionee upon the exercise of this Option at any time after the
consummation of such reorganization, consolidation, merger or conveyance, shall
be entitled to receive, in lieu of the Option Shares issuable and upon the
exercise of this Option prior to such consummation, the securities or property
to which the Optionee would have been entitled upon such consummation if the
Optionee had exercised this Option immediately prior thereto, in each such case,
the terms of this Option shall be applicable to the securities or property
receivable upon the exercise of this Option after such consummation.
(c) NOTICE OF CERTAIN EVENTS. If at any time:
(i) the Company shall declare a dividend or other
distribution of Common Stock payable otherwise than in cash at the
same rate as the immediately preceding regular dividend or in Common
Stock; or
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(ii) the company shall authorize the granting to the holders
of the Common Stock of rights to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(iii) there shall be any plan or agreement of
reorganization, or reclassification of the capital stock, of the
Company, or consolidation or merger of the Company with, or sale of
all or substantially all of its assets to, another corporation, or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company then the Grantor shall use
best efforts to give to the Optionee at the address of Optionee a copy
of any written notice received from the Company regarding the
foregoing.
(d) Except as otherwise expressly provided herein, the issuance
by the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or exercise price of Option
Shares then subject to this Option.
(e) Without limiting the generality of the foregoing, the
existence of this Option shall not affect in any manner the right or power of
the Grantor to approve or the Company to make, authorize or consummate (i i) any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii ii) any merger or consolidation
of the Company; (iii iii) any issuance by the Company of debt securities, or
preferred or preference stock that would rank above the Option Shares subject to
outstanding Options; (iv iv) the dissolution or liquidation of the Company; (v
v) any sale, transfer or assignment of all or any part of the assets or business
of the Company; or (vi vi) any other corporate act or proceeding, whether of a
similar character or otherwise.
5. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder in respect to the Option Shares as to which the Option shall not
have been exercised and payment made as herein provided.
6. ISSUANCE OF SHARES. As a condition of any sale or issuance of Option
Shares upon exercise of this Option, the Grantor may require such agreements or
undertakings, if any, as the Grantor may deem necessary or advisable to assure
compliance with any such applicable securities or other law or regulation
including, but not limited to, the following:
(i) a representation and warranty by the Optionee to the
Grantor and the Company, at the time this Option is exercised, that
she is acquiring the Option Shares to be issued to her for investment
and not with a view to, or for sale in connection with, the
distribution of any such Option Shares; and
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<PAGE>
(ii) a representation, warranty and/or agreement to be bound
by any legends that are, in the opinion of the Grantor or the Company,
necessary or appropriate to comply with the provisions of any
securities law deemed by the Grantor or the Company to be applicable
to the issuance of the Option Shares and are endorsed upon the Option
Share certificates.
7. MISCELLANEOUS PROVISIONS.
(a) NOTICES. Unless otherwise specifically provided herein, all
notices to be given hereunder shall be in writing and sent to the parties by
certified mail, return receipt requested, to each party's respective address as
set forth in the books and records of the Company, or to such other address as
such party shall give to the other party hereto by a notice given in accordance
with this Section. Except as otherwise provided in this Agreement, notice shall
be effective when deposited in the United States mails properly addressed and
postage prepaid. If such notice is sent other than by the United States mails,
such notice shall be effective when actually received by the party being
notified.
(b) ASSIGNMENT. This Agreement may not be assigned in whole or in
part by the Optionee; however, as provided in Section 7(i) herein, upon the
death of Optionee, the rights of Optionee pursuant to this Agreement will be
transferred by operation of law for the benefit of heirs, successors, estate and
personal representatives of the Optionee.
(c) FURTHER ASSURANCES. The Optionee shall execute and deliver
such other instruments and do such other acts as may be necessary to effectuate
the intent and purposes of this Agreement.
(d) CAPTIONS. The captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, extend or
prescribe the scope of this Agreement or the intent of any of the provisions
hereof.
(e) COMPLETENESS AND MODIFICATION. This Agreement constitutes the
entire understanding between the parties hereto and supersedes all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the grant by the Grantor to the Optionee of such options and shall not be
terminated or amended except in writing executed by each of the parties hereto.
(f) WAIVER. The waiver of a breach of any term or condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
or the same or any other term or condition.
(g) SEVERABILITY. The invalidity or unenforceability, in whole or
in part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provisions of this
Agreement shall not affect the validity or enforceability of the remaining
portions thereof.
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(h) CONSTRUCTION. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Florida without
regard to any conflict of law rule or principle that would result in the
application of the laws of another jurisdiction.
(i) BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the heirs, successors, estate and personal
representatives of the Optionee and the Grantor.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as set forth above.
R&A PARTNERSHIP, LTD., a Texas
limited partnership, the Grantor
BY: Ralph Muller, as designee of RPM
Investments, Inc., the General Partner
By: /s/ RALPH MULLER
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Name: Ralph Muller
Title: as Designee
/s/ JOYCE NORTH
--------------------------------
JOYCE NORTH, the Optionee
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EXHIBIT 10.2
LOAN AND PLEDGE AGREEMENT
Morgan Stanley & Co. International Limited ("MSIL"), with Morgan
Stanley & Co. Incorporated ("MS&Co.") as agent (together with MSIL, "Morgan
Stanley"), agrees to extend to Ralph P. Muller (the "Borrower"), a non-purpose
loan as that term is used in the context of Regulation T ("Regulation T")
promulgated by the Board of Governors of the Federal Reserve System (12 CFR 220)
(the "Loan") in an aggregate principal amount not to exceed six million seven
hundred and fifty-three thousand dollars ($6,753,000) subject to the terms and
representations as contained herein. A portion of the Loan proceeds will be used
to pay off a loan in the same amount that was extended to the Borrower by MS&Co.
1. The Borrower represents that the proceeds of the Loan (and of the loan that
was extended by MS&Co. which is being paid off with the Loan proceeds) will
not be used to trade in or carry securities and the borrower agrees to sign
a Board of Governors of the Federal Reserve System Statement of Purpose for
an Extension of Credit by a Creditor ("Form T-4") to that effect.
2. In order to induce Morgan Stanley to extend the Loan and for other good and
valuable consideration, the R&A Partnership (the "Partnership") and the
Borrower (together, the Pledgors") hereby pledge to Morgan Stanley as
collateral for the Loan 3,000,000 shares (the "Pledged Shares") of the
common stock of Vacation Break, USA Inc. (the "Company"), which have been
credited to an account held at MS&Co. numbered _________ and titled "Ralph
Muller-Pledgor/Morgan Stanley-Pledgee" (the "Account"), all securities
entitlements in respect thereof, all income and profits thereon, all
interest, dividends and other payments and distributions with respect
thereto and all proceeds of any of the foregoing (the "Collateral"). So
long as the Loan is outstanding, the Pledgors agree to maintain the
Collateral in the Account. The Pledgors, MSIL and MS&Co. further agree
that, so long as the Loan shall remain outstanding, MS&Co. shall comply
with instructions and entitlement orders with respect to the Collateral or
the Account that are originated by MSIL or MS&Co. without further consent
by the Pledgors. The Borrower and the Partnership acknowledge that MSIL and
MS&Co. are relying on the Collateral as an inducement to extend the Loan.
3. The Pledgors represent that (i i) the holding period under Rule 144 for the
Pledged Shares is at least three years; and (ii ii) they do not know or
have any reason to believe that the Company has not complied with the
reporting requirements contained in Rule 144(c)(1) of the Act.
4. The Pledgors represent that the Collateral is owned free and clear of any
liens, pledges or encumbrances, other than the security interest granted
hereunder (the "Security Interest"). The Collateral is subject to no
options to purchase or similar rights of any person. The Pledgors are not
and will not become a party to or otherwise be or become bound by any
agreement, other than this Loan and Pledge Agreement, which restricts in
any manner the rights of any present or future holder of any of the
Collateral with respect thereto; PROVIDED THAT the Pledgors are subject to
various restrictions as provided in the Principal
<PAGE>
Stockholders Agreement dated August 8, 1997, by and among Fairfield
Communities, Inc., Ralph P. Muller, the R&A Partnership, Ltd., and Kevin
Sheehan, which restrictions do not restrict Pledgors from pledging the
Collateral to Morgan Stanley or restrict Morgan Stanley from realizing on
the Collateral. The Pledgors further represent that they shall not subject
the Collateral to other liens, pledges or encumbrances during the term of
the Loan, except for the Security Interest. Morgan Stanley shall have a
continuing security interest in the Collateral during the term of the Loan,
and its interest therein shall be first priority and fully perfected.
5. If the Pledgors are entitled to receive in respect of the Collateral any
stock dividends, any dividends payable in securities or other property
(including ordinary cash dividends), any dividends or distributions on
dissolution or total or partial liquidation or in connection with a
reduction of capital, capital surplus or paid-in surplus, or any other
securities or any rights to purchase any securities (whether through
conversion, stock-split, spin-off, split-off, reclassification, merger,
consolidation, sale of assets, combination of shares or otherwise), any
such entitlements or rights, and any cash, securities or other property
paid or distributed in respect thereof, shall constitute part of the
Collateral and (except in the case of ordinary cash dividends) shall be
delivered to MS&Co. and held in the Account as part of the Collateral and,
if delivered to the Pledgors, the Pledgors shall accept the same in trust
for the benefit of Morgan Stanley, as pledgee, and shall deliver the same
promptly to Morgan Stanley as Collateral in the same form as received and
in suitable form for transfer by delivery or exercise, or accompanied by
duly executed instruments of transfer, exercise, or assignment in blank,
with signatures appropriately guaranteed, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to Morgan
Stanley. Unless a Default (as defined below) shall have occurred and be
continuing, the Borrower shall be entitled to receive, and MS&Co. shall,
upon the request of the Borrower, to the extent MS&Co. shall have received
the same, deliver to the Borrower, all ordinary dividends and interest paid
upon or with respect to the Collateral. In the event of a Default (as
defined below), all dividends and interest received by MS&Co. shall be
retained by MS&Co. and all such dividends and interest which are received
by the Pledgors shall be received in trust for the benefit of Morgan
Stanley, as pledgee, and, if Morgan Stanley so directs during the
continuance of a default, shall be segregated from other funds of the
Pledgors and shall, forthwith upon demand by Morgan Stanley, be paid over
or delivered to Morgan Stanley as Collateral in the same form as received
(with any necessary endorsement).
6. The Pledgors hereby authorize Morgan Stanley to lend on commercially
reasonable terms, to any of its affiliates or to others, any securities
held by Morgan Stanley as Collateral in the Account or any other securities
held by Morgan Stanley on margin in Morgan Stanley's possession or control,
together with all attendant rights of ownership (including the right to
vote such securities).
7. The Borrower agrees to repay the Loan in full at any time (i i) upon Morgan
Stanley's written demand or (ii ii) immediately in the event that Borrower
or the Partnership is in default with respect to any provision of this Loan
and Pledge Agreement. If the Borrower
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<PAGE>
refuses or is unable to repay the Loan in accordance with the terms hereof,
Morgan Stanley shall have the right to liquidate the Collateral, and any
resulting deficit shall be for the Borrower's account and risk.
8. The Borrower agrees that until the principal amount of the Loan is paid in
full the unpaid principal amount of the Loan shall bear interest for each
day at a rate per annum equal to Morgan Stanley's Base Rate ("broker call")
minus 5/8% (.625%). Interest shall be calculated on the basis of a 360 day
year for the actual days elapsed.
9. Morgan Stanley understands that the Company has entered into a merger
agreement with Fairfield Communities, Inc. and agrees to use its best
efforts to cooperate in the merger process, subject to Morgan Stanley's
rights under this Agreement.
10. Morgan Stanley shall have the right, upon any breach, repudiation,
misrepresentation or default (howsoever characterized) by the borrower or
the Partnership hereunder (a "Default") and for the purpose of satisfying
any and all of the Borrower's obligations hereunder to: (i i) cancel any of
the Borrower's or the Partnership's outstanding orders for the purchase or
sale of any securities, commodities or other property; (ii ii) sell any or
all of the securities (including the Collateral) and commodities or other
property of the Borrower or the Partnership in the Account; (iii iii) buy
in any securities, commodities or other property of which the account or
accounts (including the Account) of the Borrower or the Partnership may be
short; or (iv iv) exercise all of the rights of a secured party under the
New York Uniform Commercial Code (whether or not in effect in the
jurisdiction where such rights are exercised) with respect to the
Collateral. Such foreclosure, sale, purchase or cancellation may be made on
the exchange or other market where such business is then usually
transacted, or at public auction or at private sale, without advertising
the same and without any notice of the time or place of sale to the
Borrower or the Partnership or to their personal representatives, all of
which are expressly waived, and Morgan Stanley may purchase the whole or
any part thereof free from any right of redemption, and the Borrower shall
remain liable for any deficiency; it being understood that a prior tender,
demand or call of any kind from Morgan Stanley, or prior notice from Morgan
Stanley, of the time and place of such sale or purchase shall not be
considered a waiver of its right to sell or buy any securities (including
the Collateral) and/or commodities and/or other property held by Morgan
Stanley, or which the Borrower or the Partnership may owe to Morgan
Stanley. The Borrower and the Partnership hereby agree to execute and
deliver such documents and take such actions as Morgan Stanley deems
necessary or advisable in order that any such foreclosure, sale, purchase
or cancellation be made in compliance with applicable law. Without limiting
the generality of the foregoing, a Default under this Loan and Pledge
Agreement shall be deemed to have occurred in the event that:
(a) the Borrower fails to pay any amount when due under this Loan and
Pledge Agreement;
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<PAGE>
(b) the Borrower or the Partnership fails to fulfill or discharge any
other obligations or agreements under or relating to this Loan and Pledge
Agreement or under any other Agreement it may have with Morgan Stanley;
(c) any representation made or repeated or deemed to have been made or
repeated by the Borrower or the Partnership hereunder or in respect of this
Loan and Pledge Agreement proves to have been incorrect or misleading in
any material respect when made or repeated or deemed to have been made or
repeated;
(d) any of the following occurs with respect to the Borrower or the
Partnership: (i i) the filing or commencement of any case, petition or
proceeding by or against the Borrower or the Partnership under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
law; (ii ii) the filing or commencement of any case, petition or proceeding
by or against the Borrower or the Partnership for the appointment of a
receiver, trustee, custodian or similar official for the Borrower or the
Partnership of any substantial portion of its property or assets; (iii iii)
the levy of an attachment against any property or accounts of the Borrower
or the Partnership in excess of $500,000 or in any amount against any
account of Borrower or the Partnership at Morgan Stanley or its affiliates;
(iv iv) the making by the Borrower or the Partnership of a general
assignment for the benefit of creditors; or (v v) the admission by the
Borrower or the Partnership of its inability to pay its debts as they come
due; or
(e) Morgan Stanley is required (and only to the extent required) to
take any action in respect of the Loan or the Collateral, in order to
comply with any applicable laws of, or the rules and regulations of, any
applicable United Kingdom or United States federal, state or other
regulatory authorities, including but not limited to the Securities and
Exchange Commission, the Securities and Investments Board, The Securities
and Futures Authority, all relevant securities and commodity exchanges, the
Municipal Securities Rulemaking Board, the National Association of
Securities Dealers, the Board of Governors of the Federal Reserve System
and the constitution, rules and customs of any relevant exchange or market
(and its clearinghouse, if any).
11. The Borrower and the Partnership each represent and warrant to Morgan
Stanley that: (i i) the individual(s) executing and delivering this Loan
and Pledge Agreement and any other documentation relating to this Loan and
Pledge Agreement and any other documentation relating to this Loan and
Pledge Agreement to which it is a party or that it is required to deliver
are duly empowered and authorized to do so, and it has duly executed and
delivered this Loan and Pledge Agreement; (ii ii) it is not relying upon
any representations (whether written or oral) of Morgan Stanley other than
representations expressly set forth herein; (iii iii) it is entering into
this Loan and Pledge Agreement with a full understanding of all of the
terms and risks hereof (economic and otherwise), and it is capable of
assuming (financially and otherwise) those risks; (iv iv) it has made its
investment and trading decisions (including decisions regarding the
suitability of the Loan) based upon its own judgment and it has consulted
with its own legal, regulatory, tax, business, investment, financial and
accounting advisors as it has deemed necessary,
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<PAGE>
and not in reliance upon any view expressed by Morgan Stanley or its
counsel; (v v) Morgan Stanley is not acting as a fiduciary or an advisor
for it, and all decisions have been the result of arms' length negotiations
between the Borrower, the Partnership and Morgan Stanley; (vi vi) Morgan
Stanley has not given the Borrower or the Partnership any assurance or
guarantee as to the expected performance or result of the Loan; and (vii
vii) there exists no prohibition against it entering into this Loan and
Pledge Agreement, pledging the Collateral to secure the Loan, or Morgan
Stanley's ability to freely liquidate the Collateral in accordance with the
terms of this Loan and Pledge Agreement, and that by entering into this
Loan and Pledge Agreement neither the Borrower nor the Partnership will
violate any law or the terms or conditions of any other agreement to which
the Borrower, the Partnership or their assets may be subject. Without
limiting the generality of the foregoing, the Partnership further
represents that it is authorized and empowered to pledge the Collateral to
support the Loan to Borrower and that it has received good and valuable
consideration from the Borrower to do so.
12. Any amount payable by the Borrower to Morgan Stanley in circumstances where
a breach, repudiation, misrepresentation or default (howsoever
characterized) by the Borrower under this Loan and Pledge Agreement has
occurred, may, at the option of Morgan Stanley (and without prior notice to
the Borrower or the Partnership), be reduced by its set-off against any
amount payable (whether at such time or in the future or upon the
occurrence of a contingency) by Morgan Stanley to the Borrower or the
Partnership (and such amount will be discharged promptly and in all
respects to the extent it is so set-off). Morgan Stanley will give notice
to the Borrower of any set-off effected hereunder. Nothing contained in
this Paragraph 12 shall impair Morgan Stanley's right to liquidate
Collateral pursuant to this Loan and Pledge Agreement.
13. This Loan and Pledge Agreement and its enforcement shall be governed by the
laws of the State of New York, except to the extent that remedies provided
by the laws of any jurisdiction other than New York are governed by the
laws of such jurisdiction.
14. ANY DISPUTE THE PLEDGORS MAY HAVE WITH MORGAN STANLEY ARISING OUT OF,
RELATING TO OR IN CONNECTION WITH THIS LOAN AND PLEDGE AGREEMENT SHALL BE
DETERMINED BY ARBITRATION OR LITIGATION IN COURT AT THE ELECTION OF THE
PLEDGORS REGARDLESS OF WHETHER THE PLEDGORS CHOOSE TO PROCEED BY
ARBITRATION OR LITIGATION, THE PLEDGORS AND MORGAN STANLEY AGREE TO FOLLOW
THE PROCEDURES AND ABIDE BY THE REQUIREMENTS LISTED BELOW:
FOR ARBITRATION:
/bullet/ ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
/bullet/ THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL.
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<PAGE>
/bullet/ PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND
DIFFERENT FROM COURT PROCEEDINGS.
/bullet/ THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO
SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY
LIMITED.
/bullet/ THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF
ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES
INDUSTRY.
ANY ARBITRATION SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK STOCK EXCHANGE,
INC., THE AMERICAN STOCK EXCHANGE, INC., THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. OR ANY OTHER SELF-REGULATORY ORGANIZATION OF WHICH
MS&CO. IS A MEMBER. THE PLEDGORS HAVE THE RIGHT TO ELECT ARBITRATION BEFORE
ONE OF THE FOREGOING ORGANIZATIONS, BUT IF THE PLEDGORS FAIL TO MAKE SUCH
ELECTION BY CERTIFIED LETTER ADDRESSED TO MORGAN STANLEY BEFORE THE
EXPIRATION OF TEN DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM MORGAN
STANLEY TO AN AWARD OF PUNITIVE DAMAGES. THE AWARD OF THE ARBITRATORS, OR
THE MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED
MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.
NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION,
NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY
PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER
OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY
CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:
(i) THE CLASS CERTIFICATION IS DENIED;
(ii) THE CLASS IS DECERTIFIED; OR
(iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT.
SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE
A WAIVER OF ANY RIGHTS UNDER THIS LOAN AND PLEDGE AGREEMENT EXCEPT TO THE
EXTENT STATED HEREIN.
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<PAGE>
FOR LITIGATION IN COURT:
(A) UNLESS THE PARTIES OTHERWISE AGREE IN WRITING WHEN ANY DISPUTE
ARISES, ANY LITIGATION MUST BE INSTITUTED IN THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE
STATE OF NEW YORK FOR THE COUNTY OF NEW YORK.
(B) ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION IS
HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT.
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<PAGE>
WHEREFORE, the parties have made and entered into this Loan and Pledge
Agreement as of the respective dates set forth below:
__________________, as Borrower
Name: Ralph P. Muller
Dated: 10/17/1997
R&A PARTNERSHIP, LTD.
By: RPM Investments, Inc., Its General
Partner
By:_______________________
Name: Linda M. Fenner
Title: President
Dated: 10-18-1997
MORGAN STANLEY & CO.
INCORPORATED, AS AGENT
By: ______________________
Name:
Title: VP
Dated: 10-20-1997
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
By: ______________________
Name:
Title:
Dated: _________, 199_
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