<PAGE>
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 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
Commission file number 0-19743
USTRAILS INC.
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(Exact name of registrant as specified in its charter)
NEVADA 75-2138671
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2711 LBJ FREEWAY, SUITE 200, DALLAS, TX 75234
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(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
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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. [ ]
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At September 12, 1996, the latest practicable date, the aggregate market value
of voting common stock of the Registrant held by nonaffiliates was $3.5 million.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---
At September 12, 1996, there were 7,383,276 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 1996
Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission (the "SEC") pursuant to Regulation 14A.
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INDEX TO
ANNUAL REPORT ON FORM 10-K
<TABLE>
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Page
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PART I
<S> <C> <C>
Item 1. Business............................................................................4
Item 2. Properties.........................................................................12
Item 3. Legal Proceedings..................................................................16
Item 4. Submission of Matters to a Vote of Security-Holders................................16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...............................................................17
Item 6. Selected Financial Data............................................................19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................................20
Item 8. Financial Statements and Supplementary Data........................................36
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...............................................76
PART III
Item 10. Directors and Executive Officers of the Registrant.................................77
Item 11. Executive Compensation.............................................................77
Item 12. Security Ownership of Certain Beneficial Owners
and Management....................................................................77
Item 13. Certain Relationships and Related Transactions.....................................77
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.......................................................................78
Signature Page....................................................................................90
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PART I
ITEM 1. BUSINESS
OVERVIEW
GENERAL. USTrails Inc., a Nevada corporation (the "Company"), and its
subsidiaries own and operate a system of 58 membership-based campgrounds located
in 19 states and British Columbia, Canada, serving 128,000 members as of
June 30, 1996. Through its subsidiaries, the Company also manages timeshare
facilities and owns certain real estate at eight full service resorts and
provides a reciprocal use program for members of approximately 320 recreational
facilities. The Company's principal executive office is located at 2711 LBJ
Freeway, Suite 200, Dallas, Texas 75234, and its telephone number is (972) 243-
2228.
The Company's operations in the campground and resort business commenced on June
30, 1991, when the Company acquired 100% of the capital stock of National
American Corporation (collectively with its subsidiaries, "NACO") and 69% of the
capital stock of Thousand Trails, Inc. (collectively with its subsidiaries,
"Trails") in connection with the reorganization of the Company in a proceeding
under Chapter 11 of the Bankruptcy Code. On June 3, 1992, the Company increased
its ownership in Trails to 80% through a tender offer. On March 29, 1994, the
Company acquired the remaining 20% of the capital stock of Trails in a merger.
Prior to acquiring NACO and Trails, the Company purchased contracts receivable
generated principally by them from the sale of campground memberships and resort
interests on the installment basis. The Company was incorporated in 1984, NACO
was incorporated in 1967, and Trails was incorporated in 1969. On July 16, 1996,
Trails was merged into the Company.
CURRENT BUSINESS STRATEGY. The Company's current business strategy is to
improve its campground operations, stabilize its campground membership base, and
determine the appropriate level for its ongoing campground operations.
Consistent with this strategy, the Company intends to downsize its business by
implementing cost reduction measures while its membership base declines. These
cost reduction measures will likely include the closure and disposition of
additional campgrounds and decreases in general and administrative expenditures.
At the same time, the Company intends to expand its sales and marketing efforts
with a view to stopping the membership decline. The Company believes that the
ultimate size of its campground system and the amounts realized from future
asset dispositions will depend principally upon the degree to which the Company
can successfully implement this strategy.
1996 SECURED NOTE 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. 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 Senior Subordinated Pay-In-Kind Notes due 2003 (the "PIK
Notes") and 45 shares of the Company's 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 a new three-year Credit Agreement (the "Credit
Agreement"), dated as of July 10, 1996, with Foothill Capital Corporation
("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 may not exceed $35.0
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million. A total of $32.0 million was drawn under the Credit Agreement at
closing of the Restructuring.
CAMPGROUND OPERATIONS
CAMPGROUNDS. The Company and its subsidiaries own and operate a network of 58
membership-based campgrounds located in 19 states and British Columbia, Canada.
The Company owns and operates a network of 35 of these campgrounds under the
Thousand Trails logo, and NACO owns and operates a network of 23 of these
campgrounds under the NACO logo. The 58 campgrounds contain a total of
approximately 19,300 campsites.
Members using the campgrounds may bring their own recreational vehicles ("RVs"),
tents or other sleeping equipment, or rent travel trailers or cabins located at
the campgrounds or visit for the day. As of June 30, 1996, there were
approximately 81,000 campground members in the Thousand Trails system and 47,000
campground members in the NACO system. However, approximately 32% of the NACO
campground members and approximately 48% 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 38%). Large
numbers of campground members also reside in Florida, Oregon, Texas, and
Washington.
Memberships permit the member's family to use the campgrounds, but do not convey
an ownership interest in the Company or the campgrounds with the exception of
six campgrounds in which members have purchased undivided interests in the
campground. A member also does not possess the right to use a specific
campsite, trailer, or cabin, or the right to control further development or
operation of a campground.
Depending upon member usage, the campgrounds are open year-round or on a
seasonal basis. The campgrounds feature campsites with electrical, water, and
in some cases, sewer connections for RVs, restroom and shower facilities, rental
trailers or cabins, and other recreational amenities. At each campground, a
manager and staff provide security, maintenance, and recreational programs that
vary by location.
The Company derives other campground revenue from renting trailers, cabins, and
sports equipment to members, selling food and other items to members from
convenience stores located at the campgrounds, and providing the members access
to laundry facilities and game machines. The Company also charges members a fee
for storing recreational vehicles and providing food service.
MEMBERSHIP SALES. Prior to April 1992, the Company sold new campground
memberships on an installment basis at sales prices up to $8,000. In April 1992,
the Company suspended the sale of new campground memberships because its sales
program was operating at a loss and with negative cash flow. In the fall of
1992, the Company began to assist campground members desiring to sell their
memberships in the secondary market. During fiscal 1994, as part of its focus on
ongoing revenues from campground operations, the Company determined that it
should increase its sales and marketing efforts in order to replenish its
campground membership base. As a result, in May 1994, the Company instituted a
new sales program under which it began selling new campground memberships on a
limited basis. In May 1995, the Company introduced new membership products, and
significantly increased its sales and marketing efforts for the summer of 1995.
The Company has focused its membership sales efforts primarily on guests
referred by existing members, whom management believes are more likely to
purchase memberships.
The new membership products offer the consumer a choice of membership options
ranging from the use of one campground to the entire system of campgrounds with
prices ranging from $495 to $2,495. In addition, the new membership products
offer a choice of annual
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dues levels ranging from $198 for 15 nights of use to $998 for 365 nights of
use. The member is charged a nightly fee for camping more days than are
included in the dues option selected. The Company does not finance sales with
prices of less than $995. For sales with prices of $995 and higher, the Company
requires a down payment of a least 33% of the sales price and will finance the
balance over a period of up to 12 months. During fiscal 1996, the Company sold
approximately 3,100 new membership at an average sales price of $779 and an
average annual dues level of $306.
The Company has the capacity to sell approximately 65,000 additional new
campground memberships in the future, assuming the sale of ten memberships for
each existing campsite. Any downsizing of the Company's business would reduce
this capacity.
MARKETING. The Company's research indicates that camping is a popular and
growing activity in the United States. Camping was the second largest
participant sport/activity in the United States in 1995 with 23% of US
households camping at least once a year. Sales of camping equipment total $1.5
billion annually, and increased by approximately 10% per year in 1994 and 1995.
Although RV sales were flat in 1995 and 1996 to date, the Company believes that
the aging of the baby boomers should have a positive effect on RV sales and
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.
NEW COTTAGE PROGRAM. During the spring of 1996, the Company installed "upscale"
park model trailers at four of its campgrounds in California, Oregon, and
Washington and introduced a new "cottage membership." The cottage membership is
designed to broaden the market for the Company's product by appealing to
families who do not generally consider themselves "campers" but who would like
to vacation where they can enjoy outdoor activities. The cottage membership
offers one week's use of a fully-furnished park model trailer each year for a
period of 10 years. The sales prices for the cottage membership range from
$1,400 to $3,000, depending upon the season selected, and the annual dues are
$299. Although this new program is a significant component of the Company's
current business strategy, it is still in a test phase, and there is no
assurance that it will be successful.
DUES. Campground members pay annual dues ranging from $60 to $998. The annual
dues collected from campground members constitute general revenue of the
Company. Although the Company uses the dues to fund its operating expenses,
including corporate expenses and the maintenance and operation of the
campgrounds, the membership agreements do not require the Company to use the
dues for any specific purpose.
The average annual dues paid by the Company's campground members was $335 for
the year ended June 30, 1996. This same average was $329 and $315 for the years
ended June 30, 1995 and 1994, respectively. The increases resulted from the TTN
Alliance Program (discussed below), and the regular increase in dues implemented
by the Company each year in accordance with the terms of the membership
agreements. These regular annual increases averaged 2%, 4%, and 6% per member
for the years ended June 30, 1996, 1995, and 1994, respectively.
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From January 1, 1993 to March 31, 1995, the Company requested its campground
members to participate in the TTN Alliance Program under which participating
members agreed to increase their dues and campground fees voluntarily. A total
of 34,200 of the Company's members (27%) chose to participate in the TTN
Alliance Program, which has resulted in additional ongoing dues revenue of
$2.1 million per year. Under the TTN Alliance Program, for each dollar that
members' annual dues were increased voluntarily, the Company made a one-time
investment of one dollar in major repairs, renovations, or capital improvements
at the campgrounds. The Company completed these expenditures, which exceeded
$2.1 million, in fiscal 1995.
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
approximately 50% of the campground members are senior citizens eligible to
request that their dues be frozen. The Company is unable to estimate when or if
a significant number of these members will request that their dues be frozen in
the future.
MAINTENANCE AND IMPROVEMENTS. The Company's campgrounds require a significant
amount of maintenance, repairs, and improvements, which has been deferred, in
part, as a result of general cost-cutting measures. During fiscal 1996, the
Company spent $4.0 million on major maintenance, repairs, and improvements at
the campgrounds. The Company anticipates that it will spend an additional
$4.2 million during fiscal 1997 on such maintenance, repairs, and improvements.
RECIPROCAL USE. NACO members and holders of dual-system memberships, which
permit the member to use the campgrounds in both the NACO and Thousand Trails
systems, may join Resort Parks International ("RPI"). A wholly owned subsidiary
of the Company operates the RPI program, which offers a reciprocal program for
members of approximately 320 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,
1996, there were approximately 103,000 RPI members, of which approximately
77,000 were members of campgrounds that are not affiliated with the Company.
CAMPGROUND MANAGEMENT. During fiscal 1994, Wilderness Management, a wholly
owned subsidiary of the Company, began to manage public campgrounds for the
US Forest Service. As of June 30, 1996, Wilderness Management had entered into
management contracts covering 36 campgrounds containing a total of 1,520
campsites. Pursuant to these contracts, the Company incurs the expenses of
operating the campgrounds and receives the related revenues, net of a fee paid
to the Forest Service.
OPERATIONAL CHANGES. During fiscal 1996, the Company made significant
operational changes at the campgrounds to reduce operating costs. These changes
included reducing campground management and campground personnel, closing and
disposing of four campgrounds, and changing to seasonal operations at additional
campgrounds with low usage during off-season periods. The Company also reduced
corporate personnel to reduce its general and administrative costs.
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RESORT OPERATIONS
RESORTS. NACO manages timeshare facilities and owns certain real estate at
eight full service resorts located in seven states. NACO currently owns and
operates the resort amenities at one of these locations, and has sold the resort
amenities at the other locations. NACO's interest in the resorts consists
principally of residential lots and timeshare interests in townhouses. As of
June 30, 1996, NACO had approximately 29,000 resort members who owned a
timeshare interest or lot.
FEES. Timeshare owners pay annual fees to their respective timeshare
associations for the cost of operating and maintaining the timeshare facilities.
For the year ended June 30, 1996, the average annual fee was $299. From these
fees, the timeshare associations pay management fees to NACO averaging 11% of
the annual fees. The Company cannot use these annual fees, other than the
management fees, to pay the Company's expenses. Additionally, NACO pays dues to
the timeshare associations on unsold timeshare inventory, and receives rental
income on the unsold timeshare inventory when the units are rented.
In the past, the fees paid to certain timeshare associations were sometimes
insufficient to pay the cost of maintaining the facilities. Under these
circumstances, NACO performed the maintenance and billed the timeshare
associations. The Company believes that it will probably not collect a
significant portion of amounts owed by the timeshare associations due to their
limited funds.
SALES. Since June 1992, NACO has been selling its timeshare interests and lots
at significantly reduced prices in order to decrease the timeshare inventory on
which it pays dues and its inventory of lots. As of June 30, 1996, there were
approximately 1,700 timeshare weeks available for sale out of a total of 32,000,
and approximately 600 residential lots available for sale.
MAINTENANCE AND IMPROVEMENTS. During fiscal 1996, the Company spent $440,000 on
improvements and major maintenance and repairs at the resorts. The Company
anticipates that it will spend an additional $325,000 during fiscal 1997 on such
improvements and major maintenance and repairs, including amounts that will
satisfy certain of the HUD obligations discussed below.
At June 30, 1996, NACO had obligations to spend $3.2 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 spent $300,000 in fiscal 1996, and plans to spend
approximately
$100,000 in fiscal 1997, in fulfilling these obligations. 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 NACO
and could seek damages from NACO or rescission of the lot purchase.
Approximately 1,400 persons purchased lots from NACO when the HUD reports in
effect described improvements that NACO has not yet constructed. An
insignificant number of persons have asserted claims against NACO for the
failure to make these improvements.
SEGMENT FINANCIAL INFORMATION
Segment financial information for the campgrounds and resorts is set forth in
Note 14 to the consolidated financial statements included in Item 8.
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ASSET SALES
The sale of excess assets is a key component of the Company's current business
strategy. During fiscal 1996, 1995, and 1994, the Company sold certain of its
real estate assets and received proceeds of $7.2 million, $1.1 million, and
$10.4 million, respectively. During this three year period, the Company sold
the country club and golf operations at five of the full service resorts, the
seven utility companies associated with the resorts, and certain other real
estate holdings at the resorts. In addition, the Company sold unused buildings
and trailers, certain undeveloped land, and excess acreage associated with the
campgrounds. Over the next several years, the Company intends to dispose of a
substantial portion of its remaining assets at the full service resorts, any
campgrounds that are closed as the Company downsizes, and other undeveloped land
and excess acreage associated with the campgrounds. However, no assurance exists
that the Company will be able to locate a buyer for these assets or that sales
on acceptable terms can be effected. In addition, the disposition of
campgrounds will require addressing the rights of members associated with such
campgrounds. The impact of these rights is uncertain and could adversely affect
the availability or timing of disposition opportunities or the ability of the
Company to realize recoveries from asset dispositions.
Under the Credit Agreement between the Company and Foothill, all proceeds from
asset sales must be paid to Foothill and applied to reduce outstanding
borrowings under the Credit Agreement.
CONTRACTS RECEIVABLE
Prior to April 1992, the Company sold substantially all of its campground
memberships and resort interests on the installment basis, creating a portfolio
of contracts receivable. The collection of these contracts receivable is a key
component of the Company's current business strategy.
The Company charges interest on the unpaid balance of the contracts receivable
at fixed rates, which vary depending upon the size of the down payment and the
length of the contract. The contracts receivable bear interest at rates ranging
from 9.5% to 16.0%, with an approximate weighted average stated interest rate of
12.9% as of June 30, 1996. Monthly installment payments range from $38 to $182
over the term of the contracts receivable, which can be up to ten years. The
terms of most newer contracts receivable, however, do not exceed five years and
contract terms under the Company's present campground membership sales program
are limited to one year. At June 30, 1996, approximately 95% of the Company's
campground and resort members had paid for their membership or resort interest
in full.
As of June 30, 1996, the Company owned contracts receivable from campground and
resort members with an aggregate principal balance of $21.1 million, consisting
of $5.8 million of contracts receivable associated with the NACO campgrounds,
$12.6 million of contracts receivable associated with the Thousand Trails
campgrounds, $2.4 million of contracts receivable associated with the NACO
resorts, and $282,000 of contracts receivable associated with SoPac Resort
Properties, Inc., a former affiliate. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Contracts Receivable" in
Item 7.
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 outstanding borrowings under the Credit
Agreement.
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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 and resorts 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 and resorts, 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 and resorts, 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 and resorts are also subject to a variety of federal
and state environmental statutes and regulations. Certain environmental issues
may exist at some of the campgrounds and resorts 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, timeshare, 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 effect the 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 powers 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
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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 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 16,000 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 428,000 members, of
which 128,000 are the Company's members.
Several companies compete directly with the Company's campground operations. For
example, Rank Anhert, Inc. which does business as Outdoor World, sells
memberships to its system of 15 campgrounds; Thousand Adventures, Inc. sells
memberships to its system of 58 campgrounds, and Leisure Time Resorts, Inc.
sells memberships to its system of nine 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 other types of recreational
land developments that do not involve camping.
Coast to Coast Resorts, RPI's primary competition and the largest reciprocal use
system, has a reciprocal system of approximately 450 campgrounds and in excess
of 250,000 members. Both RPI and Coast to Coast operate vacation clubs offering
travel and lodging discounts and services to their members.
Other organizations and individuals compete directly with the Company's resort
operations by managing resorts and selling timeshare interests and lots.
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Campgrounds attract campers by the quality of the facilities and services
offered at the campground, as well as by location because campers tend to prefer
a campground within one day's travel from their home. The resorts compete for
members through amenities offered at the resorts, and the pricing of timeshare
interests and lots.
EMPLOYEES
As of June 30, 1996, the Company had 1,523 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.
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.
CAMPGROUNDS. The Company currently operates 58 campgrounds in 19 states and
British Columbia, Canada. The locations of these campgrounds are shown on the
map on page 14. The amenities presently available at each campground are
indicated on the chart on page 15. The Company owns 57 of these campgrounds and
leases the LaConner campground and a portion of the Lake Tawakoni campground.
Six of the campgrounds are open seasonally and 23 are open year-round but
provide only limited services during the off-season period. In addition, at June
30, 1996, the Company had one additional campground which is not part of its
membership system and is open to the public, and four additional campgrounds
which are closed. Subsequent to year end, the Company sold two of the closed
campgrounds.
RESORTS. The Company currently manages timeshare facilities and owns certain
real estate at eight full-service resorts located in seven states. The Company
currently owns and operates the resort amenities at one of the locations, and
has sold the resort amenities at the other locations.
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. Under the Credit Agreement, 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 may not exceed $35.0 million. Total
outstanding borrowings under the Credit Agreement were $22.3 million as of
September 12, 1996. The Company's subsidiaries other than an immaterial utility
subsidiary have guaranteed 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 $29.4 million at June 30, 1996. 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.
Page 12
<PAGE>
The PIK Notes that were issued in the Restructuring on July 17, 1996, are
guaranteed by the Company's subsidiaries other than an immaterial utility
subsidiary, and are presently unsecured. However, upon payment in full of all
of the Company's obligations under the Credit Agreement with Foothill, the PIK
Notes will be secured by the same assets as then secure the Credit Agreement
other than cash and cash equivalents and other assets required to secure any
refinancing or replacement of the borrowings provided by the 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.
Two of the Thousand Trails campgrounds and two of the NACO campgrounds are also
subject to mortgages in favor of the party from whom the Company or NACO
purchased the property.
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 foreclosure of the campground liens in such significant numbers
would also likely be limited. The impact of the rights of members under these
laws and nondisturbance provisions is uncertain and could adversely effect the
availability or timing of disposition opportunities or the ability of the
Company or lienholder to realize recoveries from asset dispositions.
OTHER. The Company owns various parcels of undeveloped real estate that it
intends to sell over time.
Page 13
<PAGE>
USTRAILS
CAMPGROUNDS
[A MAP OF THE UNITED STATES OF AMERICA DEPICTING THOUSAND TRAILS
AND NACO CAMPGROUND LOCATIONS APPEARS HERE]
THOUSAND TRAILS CAMPGROUNDS NACO CAMPGROUNDS
- --------------------------- ----------------
BRITISH COLUMBIA TEXAS WASHINGTON INDIANA
- --------------- ----- ---------- -------
Cultus Lake Medina Lake Birch Bay Indian Lakes
Galveston Island Little Diamond
Lake Conroe Rainier
WASHINGTON Colorado River Black Point VIRGINIA
- ---------- Lake Whitney Long Beach --------
LaConner Lake Texoma Virginia Landing
Mt. Vernon Lake Tawakoni
Chehalis OREGON
Leavenworth ------ NEW JERSEY
ILLINOIS South Jetty ----------
-------- Chestnut Lakes
OREGON Fox River
- ------ CALIFORNIA
Bend ---------- MISSOURI
Pacific City MICHIGAN Lake Minden --------
-------- Russian River Jefferson Resort
St. Clair Snowflower
CALIFORNIA Turtle Beach
- ---------- Yosemite
Donner Pass INDIANA Windsor
Lake of the Springs ------- Rancho Oso
San Jose Horseshoe Lake Wilderness Lakes
San Benito
Soledad
Idyllwild VIRGINIA TEXAS
Pio Pico -------- -----
Oakzanita Springs Lynchburg Bay Landing
Palm Springs Chesapeake Bay
MISSISSIPPI
NEVADA North Carolina -----------
- ------ -------------- Indian Point
Las Vegas Forest Lake
SOUTH CAROLINA
Arizona --------------
- ------- Carolina Landing
Verde Valley
Tennessee
Florida ---------
- ------- Natchez Trace
Orlando Cherokee Landing
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Campground Family Trailers
Facilities and Partial Tent Adult Center/ Tennis Athletic Vehicle Restrooms/ (Seasonal Horseshoe
Amenities Cottages Hookups Sites Lodge Pavillion Pool Court Court Storage Showers Availability) Pits
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Thousand Trails
Bend 4 301 10 1 1 2 2 1 1 6 17 4
Chehalis 325 1 1 2 2 2 1 8 9 7
Chesapeake Bay 355 19 1 1 2 1 1 1 4 50 6
Colorado River 128 1 1 1 1 1 1 2 10 4
Cultus Lake 345 12 1 1 1 2 2 1 4 5 2
Donner Pass 405 6 1 2 2 1 8 18 6
Forest Lake 262 12 1 1 2 2 1 1 3 14 4
Fox River 185 20 1 1 1 1 1 1 4 25 7
Galveston Island 122 1 1 1 1 1 10 2
Hershey 313 1 1 1 1 1 1 3 38 4
Horseshoe Lake 118 1 1 2 1 1 2 10 4
Idyllwild 4 287 38 1 1 1 3 1 6 35 4
Kenisee Lake 108 10 1 1 1 1 2 8 2
LaConner 293 1 1 1 1 6 18 6
Lake Conroc 333 1 1 1 2 2 1 4 25 8
Lake Of The
Springs 540 12 1 1 1 1 2 1 12 25 8
Lake Tawakoni 318 1 1 1 2 1 1 5 30 8
Lake Texoma 241 2 1 1 2 1 1 6 34 6
Lake Whitney 229 3 1 1 2 1 1 1 5 22 8
Las Vegas 214 2 1 1 2 1 3 10 2
Leavenworth 4 272 1 1 2 4 2 1 8 7 5
Lynchburg 224 1 1 1 2 6 1 5 20 7
Medina Lake 387 1 1 1 1 1 4 34 4
Mt. Vernon 245 3 1 1 1 1 1 6 4 4
Oakzanita Springs 121 30 1 1 1 1 1 2 15 4
Orlando 735 1 1 2 2 1 7 30 6
Pacific City 4 316 1 1 1 1 2 1 5 16 12
Palm Springs 397 1 1 1 1 1 4 24 4
Pio Pico 440 12 1 1 2 5 3 8 20 12
San Benito 518 51 1 1 2 1 1 7 32 4
San Jose 318 28 1 1 1 1 1 1 7 27 4
Soledad Canyon 850 9 1 1 2 2 3 1 14 45 13
Saint Clair 101 8 1 1 1 1 3 13 2
Verde Valley 339 6 2 1 1 2 3 12 8
Wilmington 126 1 1 1 1 2 1 2 10 2
NACO
Bay Landing 283 1 1 1 1 2 24 6
Birch Bay 220 8 1 1 1 1 3 8 2
Black Point 350 50 1 1 1 13 3
Carolina Landing 229 1 2 2 1 1 4 4
Cherokee Landing 296 1 1 1 1 1 3 3
Chestnut Lake 235 1 1 1 1 1 23 2
Indian Lakes 1120 50 2 1 3 2 2 1 5 12 8
Indian Point 119 1 2 1 2 3 1
Jefferson 98 10 1 2 1 2 1 1 2 4
Lake Minden 162 161 1 1 1 3 13 2
Little Diamond 541 100 1 4 1 1 1 5 4 3
Long Beach 156 20 1 1 1 2 6 2
Natchez Trace 526 1 2 1 1 5 1
Rainier 704 300 1 1 1 1 10 9 8
Rancho Oso 111 50 1 1 1 1 1 3 25 4
Russian River 125 30 1 4 7 2
Snowflower 294 10 1 1 11 7 3
South Jetty 214 10 1 1 1 1 5 18 3
Turtle Beach 66 120 1 2 6 2
Virginia Landing 210 1 1 1 3 10 2
Wilderness Lakes 529 5 1 1 2 1 1 1 8 34 6
Windsor 95 25 1 1 1 1 8 3
Yosemite Lakes 431 131 1 1 1 8 33 4
<CAPTION>
==================================================================================================================================
Campground Children's Boat
Facilities and Play Trading Miniature Shuffle Launch/ Laundry Cabins/ Public
Amenities Area Post Golf Board Spa Volleyball Marina Facility Lodging Camping
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Thousand Trails
Bend 2 1 1 1 1 1 3
Chehalis 1 1 1 1 1 1 1 1
Chesapeake Bay 3 1 1 2 1 1 1 1 18
Colorado River 2 1 1 1 1 2 1 1
Cultus Lake 2 1 2 1 1
Donner Pass 2 1 8 1 1 1 6
Forest Lake 2 1 1 2 2 1 1 18
Fox River 4 1 1 6 2 1 1 18
Galveston Island 1 1 1
Hershey 1 1 1 1 1
Horseshoe Lake 10 1 2 1 1
Idyllwild 3 1 1 2 1 3
Kenisee Lake 2 1 1 1 1 1
LaConner 3 1 1 3 1 1 1 1 17
Lake Conroc 2 1 1 2 1 2 1 2
Lake Of The
Springs 3 1 1 1 1 1 1
Lake Tawakoni 2 1 1 8 2 2 1 1
Lake Texoma 2 1 1 2 2 1 1 1 18
Lake Whitney 2 1 1 2 1 2 1
Las Vegas 1 1 1 1 3
Leavenworth 2 1 1 4 1 2 4
Lynchburg 2 1 1 2 1 2 1
Medina Lake 3 1 1 4 1 2 1 1
Mt. Vernon 2 1 1 1 1 1 1
Oakzanita Springs 3 1 1 2 1 1 1
Orlando 2 1 1 16 1 1 1 4
Pacific City 2 1 1 1 1 1
Palm Springs 1 2 1 3
Pio Pico 3 1 1 8 2 2 2
San Benito 4 1 1 6 2 2 1
San Jose 3 1 1 4 1 1
Soledad Canyon 7 1 1 8 1 4 1
Saint Clair 2 1 1 1 1 1 2
Verde Valley 3 1 2 1 1 1
Wilmington 2 1 2 1 1 1
NACO
Bay Landing 1 1 1 4 1 1 1 34 X
Birch Bay 1 1 1 1
Black Point 1 2 1
Carolina Landing 1 1 1 1 1 18 X
Cherokee Landing 1 1 1 2 1 1 30 X
Chestnut Lake 1 1 1 2 1 1 X
Indian Lakes 3 1 1 2 3 1 3 54 X
Indian Point 1 1 1 1 1 1 16
Jefferson 1 1 1 2 1 2 1 18 X
Lake Minden 1 1 1 1
Little Diamond 3 1 2 2 1 1 1
Long Beach 2 1 1 1
Natchez Trace 4 1 1 1 1 1 58 X
Rainier 2 1 1 1 1
Rancho Oso 1 1 1 2 2
Russian River 1 1
Snowflower 1 2 1 1 4 X
South Jetty 1 1 2 1 1
Turtle Beach 1 1 1 1 1
Virginia Landing 2 1 1 2 1 1 1 19 X
Wilderness Lakes 2 1 1 3 3 1 4
Windsor 1 1 1
Yosemite Lakes 1 1 1 1 1 2 32 X
</TABLE>
PAGE 15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Oregon and California Attorneys General Matters. During fiscal 1994, the
- -----------------------------------------------
Attorneys General of Oregon and California threatened to commence lawsuits
against the Company as a result of its practice of charging a cancellation fee
in connection with the cancellation of paid-in-full memberships. The Attorneys
General alleged that paid-in-full memberships may be terminated by the member at
any time by simply giving notice to the Company, and that it is an unlawful
trade practice for the Company to insist upon payment of a cancellation fee. In
September 1994, the Company agreed to change its practice and no longer require
a cancellation fee. The Company has entered into an Assurance of Voluntary
Compliance with the Oregon Attorney General regarding its cancellation policy.
The Company has also entered into a Stipulated Judgment with the California
Attorney General regarding its cancellation policy, and also agreed to refund
certain amounts to members.
During fiscal 1996, the California Attorney General also threatened to commence
a lawsuit against the Company as a result of its closure of two campgrounds in
California during the Fall of 1995. The Attorney General alleged that the
Company failed to provide a comparable substitute campground as required by
California law. The Stipulated Judgment discussed above also covers this matter
and provides that the Company will make certain benefits available, and/or
refund certain amounts to, affected members. Management does not believe that
the resolution of these matters will have a material adverse impact on the
Company's operations or financial position.
Johnnie Lacy v. Thousands Trails, Inc., Civil Action No C-96 004411, filed
- -------------------------------------
February 1, 1996, in the United States District Court for the Northern District
of California. In this action, which purports to be a class action, the
plaintiff alleges that the Company has failed to comply with the Americans with
Disabilities Act and related California statutes with respect to certain of its
campgrounds. The plaintiff alleges that the Company has failed to remove
barriers to access by persons with disabilities where such barrier removal is
readily achievable. The plaintiff seeks unspecified damages and injunctive
relief. Although this case is still in the early stages of development,
management does not believe that it will have a material adverse impact on the
Company's operations or financial position.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
Page 16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET AND TRADING. The Company's outstanding common stock (the "Common Stock")
has been publicly traded in the over-the-counter market under the symbol USTQ
since 1992. Since 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 table sets forth for the
fiscal periods indicated, the high and low bid quotations as quoted through the
NASD OTC Bulletin Board and the National Quotation Bureau's Pink Sheets. Such
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Bid Low Bid
------------ -----------
<S> <C> <C>
1996:
First Quarter 5/8 1/4
Second Quarter 5/8 1/4
Third Quarter 3/4 1/4
Fourth Quarter 5/8 1/4
1995:
First Quarter 1 3/4 1 1/4
Second Quarter 1 5/8 1/2
Third Quarter 5/8 1/4
Fourth Quarter 1/2 1/4
</TABLE>
As of September 12, 1996, the Company's Common Stock was held by 96 holders of
record. Moreover, security position listings available to the Company listed
approximately 720 beneficial holders of Common Stock.
In the Restructuring, the Company issued, in a private transaction with certain
holders of Secured Notes, an aggregate of 3,680,550 shares of Common Stock in
partial consideration for the retirement of the Secured Notes. These shares,
which represent approximately 50% of the shares of Common Stock currently
outstanding, are subject to a registration rights agreement under which the
Company is obligated to register the shares under the applicable securities laws
within 180 days after the Restructuring. It is uncertain whether these shares,
together with these registration rights, will adversely affect any market for
the Common Stock.
ABSENCE OF DIVIDENDS. Since inception, the Company has not paid any dividends.
The Credit Agreement with Foothill prohibits the payment of any cash dividends
on the Common Stock, without the consent of Foothill, until the borrowings under
the Credit Agreement are repaid. In addition, the Indenture for the PIK Notes
prohibits the payment of any cash dividends on the Common Stock until the PIK
Notes are repaid.
TRANSFER RESTRICTIONS. In connection with the Restructuring, the Company's by-
laws were amended to subject all new issuances of Common Stock, including the
shares of Common Stock issued as part of the Restructuring, to transfer
restrictions designed to minimize the likelihood of an "ownership change" within
the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"). In addition, the former Secured Noteholders who participated in the
exchange portion of the Restructuring voluntarily subjected their previously
owned shares of Common Stock to these transfer restrictions. As a result,
approximately 85% of the Common Stock outstanding after the completion of
Page 17
<PAGE>
the Restructuring is subject to these transfer restrictions, which are designed
to help assure that the Company's substantial net operating loss carryforwards
("NOLs"), which totaled $54.5 million at June 30, 1996, 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.
The transfer restrictions generally restrict, until July 1998, any direct or
indirect transfer of Common Stock that would, subject to certain exceptions, (i)
increase to more than 4.75% the percentage ownership of Common Stock of any
person or group of persons 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 or group of persons that during
the preceding three-year period owned more than 4.75% of the Common Stock, or
(iii) cause an ownership change within the meaning of Section 382 of the Code.
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 the
Common Stock purportedly transferred in excess of the threshold established in
the transfer restrictions.
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.
REINCORPORATION MERGER. At the 1996 Annual Meeting of Stockholders, the
stockholders of the Company will be asked to approve a merger (the
"Reincorporation Merger") between the Company and a newly formed, wholly owned
subsidiary of the Company ("New Trails") incorporated in Delaware. The
Reincorporation Merger is being proposed by the Company (a) to include certain
transfer restrictions on the common stock of New Trails issued in the
Reincorporation Merger, which restrictions are intended to further reduce the
likelihood of an "ownership change" within the meaning of Section 382 of the
Code, and (b) to change the Company's state of incorporation from Nevada to
Delaware and to change its name to Thousand Trails, Inc. The purpose of the
transfer restrictions to be implemented by the Reincorporation Merger is to
extend the existing transfer restrictions discussed above to the approximately
15% of the Common Stock not already subject to the existing transfer
restrictions and to extend the duration of such transfer restrictions to
correspond to the period during which the Company is entitled to use its NOLs,
that is, until 2011.
Page 18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
<TABLE>
<CAPTION>
Predecessor
Entity
----------------
For the year ended June 30. For the six months ended
--------------------------------------------- ---------------------------------
June 30, December 31,
1996 1995 1994 1993 1992 1991
---------- -------- -------- -------- ---------------------------------
(1)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue $91,996 $91,546 $100,922 $98,189 $54,310 | $63,670
Membership dues 39,924 41,175 43,200 39,555 19,170 | 20,345
Other campground/resort revenues 22,288 23,506 23,524 26,856 13,224 | 13,401
Membership and real estate sales 3,987 4,228 3,975 4,427 6,442 | 15,140
Interest income 6,756 9,935 12,202 16,345 11,780 | 12,090
Interest expense 17,693 20,960 21,446 22,249 11,947 | 13,578
Income (loss) from operations before |
taxes, minority interest and |
extraordinary item 488 (11,668) (5,967) (9,781) (23,195) | 7,151
Extraordinary gain on debt discharge 1,390 -- 671 2,507 -- | --
Net income (loss) 1,837 (11,923) (6,046) (7,582) (21,737) | 6,276
Dividends paid (2) -- -- -- -- -- | --
Earnings (loss) per share data (3): | (4)
Income (loss) before extraordinary |
item .12 (3.22) (1.81) (2.73) (5.88) |
Extraordinary item .38 -- .18 .68 -- |
Net income (loss) .50 (3.22) (1.63) (2.05) (5.88) |
|
BALANCE SHEET DATA: |
(AT END OF PERIOD) (5) |
Cash and cash equivalents (6) 37,403 50,596 50,059 44,359 32,989 | 43,233
Receivables, net 13,219 18,698 32,585 57,731 93,442 | 119,316
Campground properties 45,676 51,327 49,330 47,939 49,582 | 58,552
Resort properties 2,902 5,736 6,612 11,252 11,578 | 12,530
Total assets 109,754 135,886 148,164 170,067 196,788 | 242,567
Secured Notes, net 94,350 115,490 110,854 115,389 123,511 | 113,095
Other notes payable 1,102 4,753 5,503 7,558 12,960 | 29,588
Stockholder's equity (deficit) (27,991) (29,821) (17,912) (11,793) (4,151) | 17,586
|
STATISTICAL DATA: |
(AT END OF PERIOD) |
Campgrounds |
- ----------- |
Number of operating campgrounds 58 60 62 65 69 | 69
Number of campsites 19,300 19,400 20,000 20,400 21,600 | 21,600
Number of members 128,000 136,000 149,000 157,000 165,000 | 167,000
Average annual dues per member $335 $329 $315 $290 $246 | $243
Average cost per camper night $18.03 $19.69 $18.36 $17.29 $16.55 | $18.28
Timeshare Management |
- -------------------- |
Total timeshare weeks 32,000 32,000 32,000 32,000 32,000 | 32,000
Timeshare weeks available for sale 1,700 1,700 2,100 3,300 4,200 | 4,400
</TABLE>
(continued)
Page 19
<PAGE>
(Footnotes continued)
(1) "Fresh Start Reporting" under the provisions of SOP 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code," was
reflected as of December 31, 1991, in the above balance sheet captions. As
a result, information for the years ended June 30, 1996, 1995, 1994 and
1993, and the six months ended June 30, 1992, was prepared as if the
Company is a new reporting entity and a black line is shown to separate it
from prior period information since it was not prepared on a comparable
basis.
(2) The Indenture for the Secured Notes, which was discharged in the
Restructuring on July 17, 1996, prohibited the Company from paying any cash
dividends until the Secured Notes were repaid. In addition, the Credit
Agreement with Foothill prohibits the payment of any cash dividends without
the consent of Foothill until the borrowings under the Credit Agreement are
repaid, and the Indenture for the PIK Notes prohibits the payment of any
cash dividends until the PIK Notes are repaid.
(3) In the Restructuring on July 17, 1996, the Company issued a total of
3,680,550 additional shares of Common Stock, which represent approximately
50% of the shares of Common stock currently outstanding.
(4) Income (loss) per share is not meaningful due to reorganization and
revaluation entries and the issuance of a material amount of Common Stock
in a stock split and bankruptcy reorganization. At June 30, 1996, there
were 3,702,726 shares of Common Stock outstanding, compared with 1,000
shares immediately before the consummation of the reorganization on
December 31, 1991. Outstanding warrants and stock options are excluded from
the net loss per share computation as they would reduce net loss per share,
which is anti-dilutive.
(5) Pro forma balance sheet information for selected amounts which would have
changed had the Restructuring occurred as of June 30, 1996, is as follows
(in thousands): cash and cash equivalents, $9,618; total assets, $84,452;
Secured Notes, net, $0; and stockholders' equity (deficit), ($25,847). In
addition, new long term debt incurred in connection with the Restructuring
totaled $72,521.
(6) For the periods presented, cash held by the Company and its wholly owned
subsidiaries, other than that required for operations, was generally
deposited in accounts that were pledged for the benefit of the holders of
the Secured Notes. Under the Credit Agreement with Foothill, cash held by
the Company and its wholly owned subsidiaries is generally deposited in
accounts that are controlled by, and pledged to, Foothill.
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, the Company makes certain statements as to its expected financial
condition, results of operations, and cash flows for periods after June 30,
1996. All of these statements are forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These statements are not historical and involve risks and uncertainties.
The Company's actual financial condition, results of operations, and cash flows
for future periods may differ materially due to several factors, including but
not limited to the Company's continued ability to control costs and implement
its sales and marketing plan, the actual rate of decline in the campground
membership, the actual use of the campgrounds by members and guests, the effects
on members and guests of the Company's stated 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.
Page 20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
STABILIZED OPERATIONS. Since reorganizing under Chapter 11 on December 31,
1991, the Company's annualized operating revenues have decreased by $21.3
million (23%). Over the same period, the Company has decreased its annualized
operating expenses by $43.7 million (38%), and implemented a program under which
certain campground members voluntarily increased their annual dues by an
aggregate of $2.1 million. During this period, the Company has concentrated on
increasing continuing revenues and decreasing continuing expenses. The Company
has closed eleven campgrounds and changed other campgrounds to seasonal
operations, reduced staff, consolidated its administrative functions, deferred
maintenance, and reduced service levels. The Company has also disposed of
certain campgrounds and other non-core assets. However, during this period, the
Company's membership base has declined from 167,000 at December 31, 1991 to
128,000 at June 30, 1996. The membership base is expected to decline by
approximately 10,500 members in fiscal 1997. The Company attributes this
continuing decline principally to its aging membership base, approximately 50%
of whom are senior citizens.
During the year ended June 30, 1996, the Company stabilized its operations,
which it has been seeking to accomplish since emerging from Chapter 11
proceedings in 1991, and the Company achieved a positive contribution from
operations for the fiscal year of $4.8 million. This compares with a negative
contribution from operations of $3.9 million for the prior fiscal year. For
this purpose, the contribution from operations is defined as operating income
before interest income and expense, gain on asset dispositions, restructuring
costs, nonrecurring income and expenses, taxes, and extraordinary items. See
the tables on pages 27 through 29 for the elements of the contribution from
operations and the Company's operating income (loss) before taxes for the
historical periods presented.
CURRENT BUSINESS STRATEGY. The Company's current strategy is to improve its
campground operations, stabilize its campground membership base through
increased sales and marketing efforts, and determine the appropriate level for
its ongoing campground operations. The Company has conducted an extensive
marketing study, redesigned its membership products, and developed a sales and
marketing operation, appointing a Vice President of Sales and Marketing in
September 1995. Consistent with this strategy, the Company intends to downsize
its business by implementing additional cost reduction measures while its
membership base declines. These cost reduction measures will likely include the
closure and disposition of additional campgrounds and decreases in general and
administrative expenditures. The disposition of campgrounds will require
addressing the rights of members associated with such campgrounds. The impact
of these rights is uncertain and could adversely affect the availability or
timing of disposition opportunities or the ability of the Company to realize
recoveries from asset dispositions. Moreover, the possibility of additional
campground dispositions may adversely affect the collection of dues and
contracts receivable from members.
1996 SECURED NOTE RESTRUCTURING. At June 30, 1996, the Company had outstanding
$101.5 million principal amount of Secured Notes. At that time, there was a
substantial risk that the resources available to the Company would be
insufficient to cover its continuing operating needs and the mandatory sinking
fund and interest payments due on the Secured Notes on July 15, 1996. In
addition, the Company faced default under the financial covenants in the
Indenture for the Secured Notes if waivers were not obtained by September 30,
1996. On July 17, 1996, however, the Company consummated the Restructuring, in
which all of the Secured Notes were retired. The Restructuring was intended to
provide a new capital structure for the Company. This new capital structure
includes $40.2 million principal amount of PIK Notes that do not require the
cash payment of interest until fiscal 2001, do not contain financial covenants,
and mature on July 15, 2003 without earlier scheduled principal payments. The
new capital structure also includes the Credit Agreement with Foothill that, in
addition to financing $32.0 million of the
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<PAGE>
retirement of the Secured Notes and related costs, provides the Company with a
working capital facility which reduces in availability through final maturity on
July 16, 1999. Availability of such working capital is subject to continued
compliance by the Company with the financial covenants, amortization schedule,
and other requirements of the Credit Agreement, including certain covenants
respecting minimum earnings before interest, taxes, depreciation and
amortization, and minimum tangible net worth.
CASH. On June 30, 1996, the Company had approximately $37.4 million of cash and
cash equivalents, a decrease of $13.2 million during fiscal 1996. The Company's
cash declined primarily because $18.6 million was used to make a mandatory
redemption of Secured Notes on July 15, 1995, and $5.3 million was used to
repurchase Secured Notes in January 1996. See Borrowings. These expenditures
were partially offset by proceeds of $7.2 million from the sale of assets, and
$5.6 million provided by operating activities.
The Company's principal sources of operating cash for the year were $18.5
million in principal and interest collections on contracts receivable and
invested cash, and $73.2 million in dues collections and other campground
revenues. Principal uses of operating cash for fiscal 1996 consisted of $49.6
million in operating expenses, $13.8 million in general and administrative
expenses (including corporate member services and restructuring costs), $5.4
million in sales and marketing expenses, $5.2 million in insurance premiums, and
$14.5 million in interest payments, principally related to the Secured Notes.
During fiscal 1996, the Company also spent $1.0 million on capital expenditures
and HUD-related improvements, and made $1.1 million in principal payments on
notes payable.
Excluding $12.3 million of principal collections on its contracts receivable,
the Company had negative cash flow from operating activities of $6.7 million for
the year ended June 30, 1996. The Company used collections on its contracts
receivable to fund its negative cash flow from operations during the year.
In the Restructuring, $50.2 million of cash was paid to the holders of the
Secured Notes as full or partial consideration for the retirement of the Secured
Notes, and $6.2 million of cash was paid to the holders of the Secured Notes for
the semi-annual interest due July 15, 1996, and additional interest through the
date of the Restructuring. In addition, $1.0 million of cash was used to pay
the costs of the Restructuring, and $3.1 million of cash was used to pay the
costs of obtaining the Credit Agreement with Foothill. The Company funded these
cash payments with $28.5 million of its cash and $32.0 million of new borrowings
under the Credit Agreement with Foothill.
The Indenture for the Secured Notes, which was discharged in the Restructuring
on July 17, 1996, limited, and the Credit Agreement with Foothill limits, the
type of investments in which the Company can invest its available cash,
resulting in a relatively low yield. Investments of cash had a weighted average
yield of 5.33% at June 30, 1996, compared with 6.07% at June 30, 1995.
CONTRACTS RECEIVABLE. As of June 30, 1996, the Company on a consolidated basis
owned $21.1 million of contracts receivable consisting of (i) $5.8 million of
contracts receivable associated with the NACO campgrounds, (ii) $12.6 million of
contracts receivable associated with the Thousand Trails campgrounds, (iii) $2.4
million of contracts receivable associated with the NACO resorts, and (iv)
$282,000 of contracts receivable associated with SoPac Resort Properties, Inc.,
a former affiliate. These contracts receivable have an average remaining term of
approximately two and one half years. As of June 30, 1996, approximately 95% of
the Company's campground and resort members had paid for their membership or
resort interest in full.
Because of lower interest rates available in the marketplace during fiscal 1996
and 1995, some members chose to prepay their accounts, and the Company received
principal
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<PAGE>
payments of $2.5 million and $3.3 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 30% of gross contracts
receivable at June 30, 1996, compared with 39% of gross contracts receivable at
June 30, 1995, and 32% at June 30, 1994. The overall cancellation rate as a
percentage of gross contracts receivable was 8% for fiscal 1996 and fiscal 1995,
compared with 13% for fiscal 1994. Although management does not anticipate a
significant change, the cancellation rate could increase in fiscal 1997 as a
result of the expected closure and disposition of additional campgrounds.
In fiscal 1996, the Company reduced the allowance for doubtful accounts on the
contracts receivable related to the campgrounds by $4.0 million. In addition,
in fiscal 1996, 1995, and 1994, the Company reduced the allowance for doubtful
accounts on the contracts receivable related to the full service resorts by $1.1
million, $457,000 and $887,000, respectively. These adjustments were made
because the Company experienced lower contract losses than anticipated in fiscal
1996 and 1995, and with respect to the resort contracts receivable, in fiscal
1994. For the campground contracts receivable, in fiscal 1994, the Company
increased the related allowance for doubtful accounts by $1.9 million to provide
for additional future contract losses. This adjustment was made because the
cancellation rate on the campground contracts receivable had increased compared
with historical levels of approximately 8%, and the Company had experienced
higher contract losses than anticipated.
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 related to either the
campgrounds or resorts. 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 of $3.9 million to increase to 14.75% the
weighted average yield on the contracts receivable then owned by NACO and
Trails. Additionally, the Company recorded an allowance of $7.5 million for
future collection costs in connection with its purchase of NACO and Trails and
the Company's emergence from bankruptcy, which is being applied to reduce future
general and administrative expenses. In fiscal 1995, the Company reduced the
allowance for future collection costs related to the contracts receivable by
$540,000 more than the scheduled amortization amount because the estimated cost
to collect the remaining contracts receivable was less than the amount estimated
when the allowance was recorded. The allowance is continuing to be amortized as
a reduction of general and administrative expenses based on cash collected on
the related portfolio.
Repurchase of Receivables Owned by Third Party
- ----------------------------------------------
On March 22, 1995, the Company purchased $3.0 million of contracts receivable
from a third party, effective as of June 30, 1994, for $1.6 million. The
Company received contracts receivable with a gross balance of $2.0 million and
$1.0 million in cash representing principal and interest collections on the
contracts receivable from July 1, 1994 to March 22, 1995. The Company recorded
the $2.0 million gross balance of the contracts receivable net of an allowance
for doubtful accounts of $523,000 and a valuation allowance of $550,000. The
valuation allowance is being amortized over the remaining term of the contracts
receivable.
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<PAGE>
These contracts receivable had previously been sold by NACO to the third party.
In connection with this sale, a portion of the purchase price was withheld as a
dealer holdback against which the purchaser could offset canceled and delinquent
contracts receivable. As of March 22, 1995, the canceled and delinquent
contracts receivable charged against the dealer holdback had consumed it and a
deficiency of $2.7 million existed. Although the Company took the position that
it was not liable for the deficiency based upon the terms of certain agreements
and releases with the third party, the Company had recorded a contingent
liability for the amount of the deficiency. When the Company repurchased the
contracts receivable, this contingent liability was released, and the Company
reversed the $2.7 million recorded liability.
Changes in Receivables
- ----------------------
The net balance of contracts receivable decreased by $5.5 million during fiscal
1996, primarily due to $12.3 million in cash collections on contracts
receivable, offset by (i) a reduction of $5.1 million in the allowance for
doubtful accounts, and (ii) $1.1 million related to 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 $5.7 million in
fiscal 1996, as a result of the sale of two non-operating campgrounds and
certain other real estate, the abandonment of two operating campgrounds, and
depreciation on buildings and equipment, partially offset by capital
improvements at selected campgrounds.
The Company's resort properties consist of timeshare and lot inventory,
buildings and equipment used in operations, and land held for sale. Resort
properties decreased by $2.8 million in fiscal 1996 primarily due to the sale of
the common amenities at one resort, the sale of excess acreage and buildings at
certain resorts, the sale of timeshare units and lots in the normal course of
business, and depreciation on buildings and equipment.
The Company's campgrounds and resorts require significant annual capital and
maintenance expenditures, including commitments under HUD obligations, a portion
of which has been deferred. During fiscal 1996 and 1995, the Company spent $4.0
million and $8.6 million, respectively, on major maintenance, repairs, and
improvements at the campgrounds, and $440,000 and $1.4 million, respectively, on
major maintenance, repairs, and improvements at the resorts.
BORROWINGS. On June 30, 1996, the Company had outstanding $101,458,000
principal amount of Secured Notes which were retired in full on July 17, 1996,
in the Restructuring (see "1996 Secured Note Restructuring" above). The
Restructuring was accounted for as a Troubled Debt Restructuring, whereby the
restructured debt is recorded at the carrying value of the old debt, and no gain
or loss is recorded on the transaction.
Prior to the Restructuring, the Company had repurchased certain 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.
On July 15, 1995, the Company made a mandatory redemption of $18.6 million
principal amount of Secured Notes. On June 6, 1994, the Company repurchased
$10.0 million principal amount of Secured Notes in a Dutch auction available to
all Secured Noteholders, at a cost of $8.5 million, including accrued interest.
The Company recognized a gain of $671,000 on this transaction.
Credit Agreement with Foothill
- ------------------------------
In the Restructuring, the Company entered into a new three-year 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,
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<PAGE>
provided that the aggregate borrowings under the Credit Agreement at any one
time may not exceed $35.0 million. As of September 12, 1996, the total
borrowings outstanding under the Credit Agreement were $22.3 million, and
the amount available for borrowing under the revolving portion of the Credit
Agreement was $12.7 million.
The Company must use all collections of principal and interest on the contracts
receivable, which are estimated to be $9.2 million in fiscal 1997, and all
proceeds from asset sales to reduce borrowings under the Credit Agreement. In
addition, the Company must make specified principal reductions on these
borrowings over time based on a monthly calculation of eligible contracts
receivable and an amortization schedule set forth in the agreement. The maximum
amount of the revolving loan declines as these principal reductions are made.
The remaining borrowings under the Credit Agreement must be paid in full on July
16, 1999. To make the principal reductions required by the Credit Agreement,
the Company must successfully collect the contracts receivable, sell assets, and
downsize its business in the timeframe contemplated by the Credit Agreement. If
these activities take longer than contemplated by the Credit Agreement, the
Company may not have sufficient cash flow to make the required principal
reductions, in which case the working capital facility might cease to be
available. Furthermore, availability of such working capital is subject to
continued compliance by the Company with the financial covenants and other
requirements of the Credit Agreement, including certain covenants respecting
minimum earnings before interest, taxes, depreciation and amortization, and
minimum tangible net worth. The Credit Agreement prohibits the Company from
borrowing from other sources in significant amounts except for equipment
purchases.
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. 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 replacement
working capital facility, and equipment purchases.
The Company is not permitted to pay cash interest on the PIK Notes until the
borrowings under the Credit Agreement are repaid in full. As a result, the
principal amount of PIK Notes outstanding will increase at the rate of 12% per
year, compounded semi-annually, at least until the borrowings under the Credit
Agreement are repaid in full. The payment-in-kind feature of the PIK Notes will
decrease the Company's cash interest costs over 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.
DEFERRED MEMBERSHIP DUES. Deferred membership dues revenues of $17.6 million
and $18.6 million at June 30, 1996 and 1995, respectively, consist of dues
collections which relate to future periods. The decrease was due primarily to
the loss of 8,000 members during fiscal 1996, and related decreases in
membership dues collections.
SELF INSURANCE. During the year ended June 30, 1994, the Company began to self-
insure general liability losses up to $250,000 per occurrence, with an annual
aggregate of $2.4 million. As of June 30, 1996, the Company had insurance
policies which provided excess coverage up to $27.0 million per occurrence and
aggregate. The Company has provided a liability for estimated known and unknown
claims related to uninsured general liability risks of approximately $1.6
million at June 30, 1996 and 1995. This liability is based on actuarial
estimates.
Page 25
<PAGE>
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, 1996, 1995, and 1994.
The financial information set forth below should be read in conjunction with the
Company's consolidated financial statements included in Item 8.
NET INCOME (LOSS). The Company reported net income of $1.8 million or $.50 per
share on revenues of $92.0 million for fiscal 1996, compared with a net loss of
$11.9 million or $3.22 per share on revenues of $91.5 million for fiscal 1995,
and a net loss of $6.0 million or $1.63 per share on revenues of $100.9 million
for fiscal 1994.
Excluding extraordinary gains, nonrecurring income and expenses, and
restructuring costs, the Company would have had a net loss of $2.1 million for
fiscal 1996, compared with a net loss of $14.6 million for fiscal 1995.
Excluding these items, the Company's results improved in the current fiscal
year, on relatively flat revenues, due primarily to decreases in expenses,
principally campground operating costs, general and administrative expenses, and
interest. Revenues were relatively stable from year to year, despite declining
membership dues revenue and interest income, due primarily to higher gains from
asset dispositions in fiscal 1996. Excluding these same items, the Company would
have had a net loss of $3.9 million for fiscal 1994.
The results for fiscal 1996 include a $1.4 million extraordinary gain on 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 its 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 (see "Accrued Bonus"
below).
The results for fiscal 1995 include $3.7 million of nonrecurring income
consisting of $1.0 million from reductions in the allowances for doubtful
accounts and collection costs and $2.7 million from the reversal of a contingent
liability. The fiscal 1995 results also include $637,000 of restructuring costs
incurred in connection with the relocation of the Company's corporate office to
Dallas, Texas, and $437,000 of other nonrecurring expenses representing
severance payments made to certain management employees who left the Company in
the fourth quarter of fiscal 1995.
The results for fiscal 1994 include a $671,000 extraordinary gain on the
repurchase of Secured Notes and $4.5 million of nonrecurring income consisting
of $887,000 from a reduction in the allowance for doubtful accounts related to
the resort contracts receivable, $3.1 million from the reversal of accrued
resort disposition costs, and $500,000 from the settlement of a contractual
obligation. The fiscal 1994 results also include $3.3 million of restructuring
costs incurred in connection with an amendment to the Indenture for the Secured
Notes, the Trails merger, and the relocation of the Company's corporate offices,
and the following other nonrecurring expenses: (i) a $1.9 million net increase
in the allowance for doubtful accounts related to the campground contracts
receivable, (ii) a $1.0 million charge to record a provision for certain
uncollectible membership dues receivable, and (iii) a $1.1 million write down of
the carrying value of net resort assets.
Page 26
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds and full service resorts, excluding allocations of corporate
overhead and other revenues and expenses, for the year ended June 30, 1996:
<TABLE>
<CAPTION>
Year Ended June 30, 1996
---------------------------------------------
Full Service
Campgrounds Resorts Total
------------- ------------- ------------
<S> <C> <C> <C>
OPERATIONS
Membership dues $39,924 $39,924
Other campground/resort revenues 15,313 $6,975 22,288
Campground ancillary expenses (7,726) (7,726)
Operating expenses (35,211) (7,371) (42,582)
------------- ------------ ------------
Profit (loss) on campground/resort operations 12,300 (396) 11,904
------------- ------------ ------------
SALES
Memberships 2,630 2,630
Resort interests 1,357 1,357
------------- ------------ ------------
Total sales 2,630 1,357 3,987
Selling costs (3,340) (926) (4,266)
Marketing expenses (1,294) (1,294)
------------- ------------ ------------
Total expenses (4,634) (926) (5,560)
------------- ------------ ------------
Profit (loss) on sales (2,004) 431 (1,573)
------------- ------------ ------------
RESORT PARKS INTERNATIONAL
Fee income 4,579 4,579
Cost of operations (2,237) (2,237)
------------- ------------ ------------
RPI net contribution 2,342 2,342
------------- ------------ ------------
$12,638 $35 12,673
============= ============ ============
Other income 4,479
Corporate member services (1,843)
General and administrative expenses (10,473)
------------
OPERATING INCOME BEFORE INTEREST INCOME
AND EXPENSE, GAIN ON ASSET
DISPOSITIONS, RESTRUCTURING COSTS,
NONRECURRING INCOME AND EXPENSES,
TAXES AND EXTRAORDINARY ITEM 4,836
------------
Interest income 6,756
Interest expense (17,693)
Gain on asset dispositions 4,038
Nonrecurring income 5,945
Nonrecurring expenses (2,270)
Restructuring costs (1,124)
------------
OPERATING INCOME BEFORE TAXES AND
EXTRAORDINARY ITEM $488
============
</TABLE>
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<PAGE>
The following table summarizes the operating results of the Company's
campgrounds and full service resorts, excluding allocations of corporate
overhead and other revenues and expenses, for the year ended June 30, 1995:
<TABLE>
<CAPTION>
Year Ended June 30, 1995
---------------------------------------------
Full Service
Campgrounds Resorts Total
-------------- ------------ -----------
<S> <C> <C> <C>
OPERATIONS
Membership dues $41,175 $41,175
Other campground/resort revenues 15,411 $8,095 23,506
Campground ancillary expenses (8,150) (8,150)
Operating expenses (40,236) (8,711) (48,947)
-------------- ------------ -----------
Profit (loss) on campground/resort operations 8,200 (616) 7,584
-------------- ------------ -----------
SALES
Memberships 1,780 1,780
Resort interests 2,448 2,448
-------------- ------------ -----------
Total sales 1,780 2,448 4,228
Selling costs (1,985) (1,414) (3,399)
Marketing expenses (3,639) (3,639)
-------------- ------------ -----------
Total expenses (5,624) (1,414) (7,038)
-------------- ------------ -----------
Profit (loss) on sales (3,844) 1,034 (2,810)
-------------- ------------ -----------
RESORT PARKS INTERNATIONAL
Fee income 4,845 4,845
Cost of operations (2,727) (2,727)
-------------- ------------ -----------
RPI net contribution 2,118 2,118
-------------- ------------ -----------
$6,474 $418 6,892
============== ============ ===========
Other income 3,485
Corporate member services (2,200)
General and administrative expenses (12,118)
-----------
OPERATING LOSS BEFORE INTEREST INCOME
AND EXPENSE, GAIN ON ASSET
DISPOSITIONS, RESTRUCTURING COSTS,
NONRECURRING INCOME AND EXPENSES, AND TAXES (3,941)
-----------
Interest income 9,935
Interest expense (20,960)
Gain on asset dispositions 658
Nonrecurring income 3,714
Nonrecurring expenses (437)
Restructuring costs (637)
-----------
OPERATING LOSS BEFORE TAXES ($11,668)
===========
</TABLE>
Page 28
<PAGE>
The following table summarizes the operating results of the Company's
campgrounds and full service resorts, excluding allocations of corporate
overhead and other revenues and expenses, for the year ended June 30, 1994:
<TABLE>
<CAPTION>
Year Ended June 30, 1994
--------------------------------------------------
Full Service
Campgrounds Resorts Total
----------------- ------------- ------------
<S> <C> <C> <C>
OPERATIONS
Membership dues $43,200 $43,200
Other campground/resort revenues 13,529 $9,995 23,524
Campground ancillary expenses (7,247) (7,247)
Operating expenses (38,276) (10,146) (48,422)
----------------- ------------- ------------
Profit (loss) on campground/resort operations 11,206 (151) 11,055
----------------- ------------- ------------
SALES
Memberships 1,457 1,457
Resort interests 2,518 2,518
----------------- ------------- ------------
Total sales 1,457 2,518 3,975
Selling costs (1,582) (1,974) (3,556)
Marketing expenses (1,282) (1,282)
----------------- ------------- ------------
Total (2,864) (1,974) (4,838)
----------------- ------------- ------------
Profit (loss) on sales (1,407) 544 (863)
----------------- ------------- ------------
RESORT PARKS INTERNATIONAL
Fee income 5,286 5,286
Cost of operations (3,055) (3,055)
----------------- ------------- ------------
RPI net contribution 2,231 2,231
----------------- ------------- ------------
$12,030 $393 12,423
================= ============= ============
Other income 2,669
Corporate member services (2,165)
General and administrative expenses (12,403)
------------
OPERATING INCOME BEFORE INTEREST INCOME
AND EXPENSE, GAIN ON ASSET
DISPOSITIONS, RESTRUCTURING COSTS,
NONRECURRING INCOME AND EXPENSES,
TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEM 524
------------
Interest income 12,202
Interest expense (21,446)
Gain on asset dispositions 5,544
Nonrecurring income 4,522
Nonrecurring expenses (4,000)
Restructuring costs (3,313)
------------
OPERATING LOSS BEFORE TAXES, MINORITY
INTEREST, AND EXTRAORDINARY ITEM ($5,967)
============
</TABLE>
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<PAGE>
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 $39.9 million for the year ended
June 30, 1996, compared with $41.2 million for the year ended June 30, 1995, and
$43.2 million for the year ended June 30, 1994. The continuing decline in dues
revenues over the three years was due primarily to the net loss of campground
members, partially offset by the effect of annual dues increases. In addition,
in fiscal 1994, the Company recognized $900,000 of additional dues revenue from
the TTN Alliance Program (described below) that was deferred at June 30, 1993.
From January 1, 1993 to March 31, 1995, the Company requested its campground
members to participate in the TTN Alliance Program under which participating
members agreed to increase their dues and campground fees voluntarily. A total
of 34,200 of the Company's members (27%) chose to participate in the TTN
Alliance Program, which has resulted in additional ongoing dues revenue of
$2.1 million per year. Under the TTN Alliance Program, for each dollar that
members' annual dues were increased voluntarily, the Company made a one-time
investment of one dollar in major repairs, renovations, or capital improvements
at the campgrounds. The Company completed these expenditures, which exceeded
$2.1 million, in fiscal 1995. Additional dues revenue of $900,000 attributable
to the six months ended June 30, 1993 was not recognized in fiscal 1993 due to
the uncertainty of the program's success at that time. As a result, in fiscal
1994, the Company recognized additional dues revenue from the program of $2.9
million for the 18 month period from January 1, 1993 to June 30, 1994.
Other campground revenues were $15.3 million for the year ended June 30, 1996,
compared with $15.4 million for the year ended June 30, 1995, and $13.5 million
for the year ended June 30, 1994. The slight decrease in fiscal 1996 was due to
the closure of four operating campgrounds during the year and reductions in
service levels at certain other campgrounds. The $1.9 million increase in
fiscal 1995 was due primarily to increases in guest fees, trailer and cabin
rentals, and revenues from special amenities offered at certain campgrounds,
reflecting the Company's focus on increasing its ancillary sources of revenue at
the campgrounds. The related campground ancillary expenses were $7.7 million,
$8.2 million, and $7.2 million for fiscal 1996, 1995, and 1994, respectively.
The improvement in the contribution from these programs in fiscal 1996 resulted
primarily from better control of expenses.
Campground operating expenses were $35.2 million for the year ended June 30,
1996, compared with $40.2 million for the year ended June 30, 1995, and $38.3
million for the year ended June 30, 1994. The $5.0 million decrease in fiscal
1996 was due to the operational changes made at the campgrounds in fiscal 1996,
which included reducing campground management and personnel, closing and
disposing of four campgrounds, and changing to seasonal operations at additional
campgrounds with low usage during off-season periods. The $1.9 million increase
in fiscal 1995 was due primarily to higher labor and utility costs in selected
regions, and increased maintenance costs, related in part to the expenditure of
committed funds under the TTN Alliance Program.
In fiscal 1997, the Company intends to continue to evaluate its campground
operations to determine the appropriate level for such operations, and it
expects to implement additional cost reduction measures while its membership
base declines. These cost reduction measures will likely include the closure
and disposition of additional campgrounds. These changes should result in lower
operating expenses in fiscal 1997, but no assurance can be given that such
changes will not reduce revenues by an amount in excess of the expense
reductions.
Page 30
<PAGE>
For the years ended June 30, 1996, 1995, and 1994, campground membership sales
revenues were $2.6 million, $1.8 million, and $1.5 million, respectively. For
these same periods, selling and marketing expenses as a percentage of sales were
176%, 316%, and 197%, respectively. These expenses have exceeded revenues due
to the suspension of new membership sales in April 1992, the retention of
certain marketing staff to develop new marketing programs and products in
anticipation of future sales, and the increased sales and marketing efforts
begun in May 1994. The Company's marketing efforts require significant expense
and, in the short term, the Company expects that its selling and marketing
expenses will continue to exceed its campground membership sales revenues. The
Company must significantly increase its campground membership sales over current
levels in order to stop the continuing decline in the Company's membership base.
As a result, the success of the Company's business strategy over the long term
will be dependent upon the Company being able to market new memberships in
sufficient numbers on a cost-effective basis.
Effective July 1, 1995, the Company discontinued its practice of amortizing
campground real estate by recording a cost of sales charge in connection with
new campground membership sales. The Company will discontinue this practice as
long as the number of membership cancellations exceeds the number of new
memberships sold, and the Company's membership base continues to decline.
CAMPGROUND MANAGEMENT. During fiscal 1994, Wilderness Management, a wholly
owned subsidiary of the Company, began to manage public campgrounds for the
US Forest Service. For the year ended June 30, 1996, these operations produced
revenues of $853,000 with related expenses (excluding certain shared
administrative costs) of $831,000. This compares with revenues for the prior
year of $589,000 and related expenses (excluding certain shared administrative
costs) of $665,000.
FULL SERVICE RESORT OPERATIONS. The direct operating expenses of the full
service resorts exceeded revenues by $396,000 for the year ended June 30, 1996,
compared with $616,000 for the year ended June 30, 1995, and $151,000 for the
year ended June 30, 1994. The results for fiscal 1994 exclude losses of
$618,000 that were applied against the accrual for resort disposition costs
instead of being reflected in operating results. Without the exclusion of these
losses, the operating results for fiscal 1996 and 1995 improved by $220,000 and
$153,000, respectively, over the prior fiscal year. These improvements resulted
primarily from decreased administrative costs in fiscal 1996, increased amenity
fee income from certain resorts in fiscal 1995 as a result of improved
collection efforts, and from the sale of certain operations at the resorts,
which reduced operating costs by an amount greater than the related decrease in
resort revenues.
In fiscal 1994, the Company reassessed the net realizable value of its resort
assets and liabilities, and recorded a $1.1 million adjustment to reduce the
carrying value of the net assets to their net realizable value. Based on the
Company's disposition plan for the resorts and its assessment of the
recoverability of the net resort assets, the Company also reversed the remaining
$3.1 million of its accrual for resort disposition costs.
The Company's operations at the resorts are presently limited primarily to
timeshare management and timeshare and lot sales. The revenues from the
Company's timeshare management operations exceeded the related expenses
(excluding certain shared administrative costs) by $830,000 for the year ended
June 30, 1996, compared with $858,000 for the year ended June 30, 1995, and
$890,000 for the year ended June 30, 1994. The net contribution has declined
because of a decrease in the management fee the Company charges certain
timeshare associations, which is based on the amount of dues collected, and
lower dues collections.
The Company has been actively selling its timeshare and lot inventory at
substantially reduced prices in order to reduce the carrying costs on the unsold
inventory, increase
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<PAGE>
management fees, and eliminate the Company's requirement to pay annual fees to
the timeshare associations on unsold units. For the years ended June 30, 1996,
1995, and 1994, timeshare and lot sales were $1.4 million, $2.4 million, and
$2.5 million, respectively. The decrease in fiscal 1996 resulted from the
Company having less desirable inventory available for sale and fewer existing
timeshare owners who had not been contacted previously about purchasing an
additional timeshare. For the years ended June 30, 1996, 1995, and 1994, the
related selling expenses as a percentage of sales (including cost of sales and
bad debt expense) were 68%, 58%, and 78%, respectively. The lower percentage in
fiscal 1995 resulted primarily from the sale of a group of lots at one of the
resorts without a sales commission.
RESORT PARKS INTERNATIONAL. RPI produced a net contribution of $2.3 million for
the year ended June 30, 1996, compared with $2.1 million for the year ended June
30, 1995, and $2.2 million for the year ended June 30, 1994. RPI's revenues
have declined over the three year period as a result of declining sales in the
membership camping industry generally. However, RPI has been able to maintain
and improve its positive contribution by reducing its expenses.
INTEREST INCOME AND EXPENSE. Interest income decreased by $3.2 million and $2.3
million for the years ended June 30, 1996 and 1995, respectively, from the
previous year, due primarily to a decrease in interest earned on the Company's
diminishing portfolio of contracts receivable, and in fiscal 1996, also due to
an $804,000 decrease in interest earned on lower cash balances. The decrease in
interest earned on the contracts receivable for fiscal 1995 was partially offset
by an $895,000 increase in interest earned on invested cash in fiscal 1995
compared with the prior year due to higher cash balances in fiscal 1995 and
rising interest rates. Also included in interest income is amortization of the
allowance for interest discount and valuation allowance related to the contracts
receivable, of which $607,000, $607,000, and $925,000 was amortized during the
years ended June 30, 1996, 1995, and 1994, respectively. See "Liquidity and
Capital Resources -- Contracts Receivable".
Interest expense decreased by $3.3 million and $486,000 for the years ended June
30, 1996 and 1995, respectively, from the previous year, due primarily to a
mandatory redemption of $18.6 million of Secured Notes in July 1995, the
repurchases of $7.4 million and $10.0 million of Secured Notes in January 1996
and June 1994, respectively, a $2.5 million reduction of notes payable in
connection with the abandonment of two operating campgrounds in the Fall of
1995, and scheduled repayments of notes payable. Also included in interest
expense was Secured Note discount amortization of $4.2 million, $4.6 million,
and $4.1 million for the years ended June 30, 1996, 1995, and 1994,
respectively. The discount on the Secured Notes was recorded to reduce the
carrying value of the Secured Notes to their estimated fair value at December
31, 1991, the date the Company emerged from bankruptcy. The discount, which
resulted in an effective interest yield of 18% for the Secured Notes, was
amortized as additional interest expense using the effective interest method
over the term of the Secured Notes through fiscal 1996. On July 17, 1996, the
balance of the discount was eliminated in connection with the retirement of the
Secured Notes in the Restructuring.
As a result of the Restructuring, interest expense is expected to decrease
significantly in fiscal 1997 due to the reduction in the total amount of debt
outstanding. Since the Company is prohibited from paying cash interest on the
PIK Notes until the borrowings under the Credit Agreement are repaid, during
this period, a substantial portion of the Company's interest expense will
represent non-cash interest. Moreover, during this period, 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.
GAINS ON ASSET SALES. During the years ended June 30, 1996, 1995, and 1994, the
Company sold certain of its real estate assets and recognized related gains of
$4.0 million,
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$658,000, and $5.5 million, respectively. During fiscal 1996, the Company sold
the common amenities at one of the resorts, sold two non-operating campgrounds,
and disposed of two operating campgrounds that were abandoned. During fiscal
1995, the primary assets sold included excess acreage and buildings at the
resorts and unused buildings and trailers at the campgrounds. During fiscal
1994, the Company sold the common amenities at three of the resorts, the seven
utility companies associated with the resorts, and certain other real estate
holdings at the campgrounds and resorts. Over the next several years, the
Company intends to dispose of a substantial portion of its remaining assets at
the resorts, any campgrounds that are closed as the Company downsizes, and other
undeveloped land and excess acreage associated with the campgrounds. However, no
assurance exists that the Company will be able to locate a buyer for these
assets or that sales on acceptable terms can be effected.
OTHER INCOME. Other income consists principally of transfer fees received when
existing memberships are transferred in the secondary market without assistance
from the Company, settlements received on defaulted contracts, and subscription
fees received from members who subscribe to the Company's member magazine. In
addition, the Company has implemented an automated reservation system and,
effective June 1, 1996, has begun charging members for making more than five
operator-assisted reservations in a given year.
Other income was $4.5 million for the year ended June 30, 1996, compared with
$3.5 million for the year ended June 30, 1995, and $2.7 million for the year
ended June 30, 1994. The increase in fiscal 1996 and 1995 from the previous
year was due primarily to additional income of $1.3 million and $685,000,
respectively, from recoveries on canceled contracts and dues as a result of
increased use of outside collection agencies in those years.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were
$10.5 million for the year ended June 30, 1996, compared with $12.1 million for
the year ended June 30, 1995, and $12.4 million for the year ended June 30,
1994. The decrease in fiscal 1996 from the prior years is primarily due to cost
reductions implemented in the last quarter of fiscal 1995 and the first quarter
of fiscal 1996. The Company anticipates that general and administrative
expenses will be lower in fiscal 1997 than in fiscal 1996 due to additional cost
reductions.
General and administrative expenses include costs related to the collections of
contracts receivable and membership dues of $3.0 million, $3.1 million, and $3.5
million for the years ended June 30, 1996, 1995, and 1994, respectively. These
collection costs were reduced by $513,000, $854,000, and $1.5 million,
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 continues to decline.
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 $1.8
million for the year ended June 30, 1996, compared with approximately $2.2
million for fiscal 1995 and 1994. The decrease in costs in fiscal 1996 was a
result of cost reductions implemented during the Fall of 1995.
NONRECURRING INCOME. Nonrecurring income was $5.9 million for fiscal 1996,
compared with $3.7 million and $4.5 million for fiscal 1995 and 1994,
respectively. Nonrecurring income for fiscal 1996 includes income of $5.1
million from the reduction in the allowance for doubtful accounts, and $799,000
from the reversal of a contingent liability. Nonrecurring income for fiscal
1995 includes income of $1.0 million from reductions in the allowances for
doubtful accounts and collection costs, and $2.7 million
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<PAGE>
from the reversal of a contingent liability. Nonrecurring income for fiscal 1994
includes income of $3.1 million from the reversal of accrued resort disposition
costs, $887,000 from a decrease in the allowance for doubtful accounts related
to the resort contracts receivable, and $500,000 from the settlement of a
contractual obligation.
NONRECURRING EXPENSES. Nonrecurring expenses were $2.3 million for fiscal 1996,
compared with $437,000 for fiscal 1995, and $4.0 million for fiscal 1994.
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 (see "Accrued Bonus" below). Nonrecurring expenses for fiscal 1995
represent severance payments made to certain management employees who left the
Company in the fourth quarter of fiscal 1995. Nonrecurring expenses for fiscal
1994 include a $1.9 million net increase in the allowance for doubtful accounts
related to the campground contracts receivable, a $1.0 million charge to record
a provision for certain uncollectible membership dues receivable, and a $1.1
million write-down of the carrying value of net resort assets.
ACCRUED BONUS. The employment agreement between the Company and its Chief
Executive Officer ("CEO") provided that the CEO would receive a one-time bonus
equal to between 4% and 6% of the amount by which the enterprise value of the
Company (including the value of its debt and equity) exceeded $75 million at the
time he elected to receive the bonus. The bonus would have been adversely
affected by the consummation of the Restructuring. As a result, prior to the
Restructuring, the CEO exercised his right to receive the bonus. The CEO is
entitled to $1,270,589, of which $952,927 was paid on July 9, 1996. The
additional $317,662 will be payable on May 11, 1997, provided that the CEO is
employed by the Company on that date. The Company has obtained an irrevocable
standby letter of credit on which the CEO may draw this bonus if the Company
fails to pay the bonus after receiving a request from the CEO. A $1.5 million
cash deposit securing this letter of credit is included in restricted cash in
the Company's consolidated balance sheet at June 30, 1996. The amount of the
cash deposit was subsequently reduced to $317,662. The Company accrued the
entire amount of the bonus at June 30, 1996, which is included in nonrecurring
expenses in the Company's consolidated statement of operations.
RESTRUCTURING COSTS. 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. The Company incurred approximately $1.0 million of additional
costs in July 1996 in connection with the consummation of the Restructuring
which will be reflected as restructuring costs in fiscal 1997. In connection
with the Restructuring, the Company also incurred $3.1 million of costs in
connection with obtaining the Credit Agreement with Foothill, which will be
capitalized as debt issue costs in fiscal 1997.
At June 30, 1994, the Company recorded $1.8 million of restructuring costs for
severance pay and moving expenses related to relocating certain of its
administrative functions to Dallas, Texas. Of this $1.8 million, $203,000 was
spent in fiscal 1994, and $1.6 million was spent in fiscal 1995 and applied
against the accrual. During fiscal 1995, the Company also incurred $922,000 of
additional costs related to expanding its Dallas office and hiring and training
new employees. $637,000 of these costs were expensed as restructuring costs,
and $285,000 of these costs were capitalized.
In fiscal 1994, the Company also incurred $463,000 in legal and financial
advisory fees related to the Trails merger and $1.1 million in legal and other
expenses related to an amendment to the Indenture for the Secured Notes, which
were expensed as restructuring costs.
INCOME TAXES. The Company's provision for income taxes was $41,000, $255,000,
and $425,000 for the years ended June 30, 1996, 1995, and 1994, respectively.
The
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<PAGE>
provision relates to state income taxes payable in the various states where the
Company conducts its operations. The Company does not have federal income taxes
payable on a consolidated basis due to its net operating tax loss carryforwards,
which had a balance of $54.5 million at June 30, 1996, and expire in years 2007
through 2011.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements Index
---------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants.................................................37
Consolidated Balance Sheets -- June 30, 1996 and 1995, and pro forma June 30, 1996
as if the Restructuring completed on July 17, 1996 had occurred on June 30, 1996........38
Consolidated Statements of Operations for the years ended
June 30, 1996, 1995 and 1994............................................................39
Consolidated Statements of Stockholders' Deficit
for the years ended June 30, 1996, 1995 and 1994........................................40
Consolidated Statements of Cash Flows for the years ended
June 30, 1996, 1995 and 1994...........................................................41
Notes to Consolidated Financial Statements...............................................43
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts...................................75
</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 36
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
USTrails Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of USTrails Inc.
and subsidiaries (the "Company") as of June 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
each of the three years in the period ended June 30, 1996. 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 USTrails Inc. and subsidiaries
as of June 30, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1996, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
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 consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in our audits of the basic consolidated
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
consolidated financial statements taken as a whole.
s/ Arthur Andersen LLP
Dallas, Texas
September 12, 1996
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<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
June 30, June 30,
---------------------------------
ASSETS 1996 1995 1996
------ ------------ ------------ -------------
<S> <C> <C> <C>
CURRENT ASSETS (unaudited)
Cash and cash equivalents $37,403 $50,596 | $9,618
Current portion of receivables, net of allowances and discount of |
$2.7 million in 1996 and $5.3 million in 1995 4,270 5,376 | 4,270
Accounts and dues receivable, net 522 3,017 | 522
Inventory and other current assets 4,672 2,353 | 5,590
------------ ------------ | -------------
Total Current Assets 46,867 61,342 | 20,000
Restricted cash 2,912 1,629 | 2,912
Receivables, net of allowances and discount of $5.4 million in |
1996 and $11.4 million in 1995 8,949 13,322 | 8,949
Campground real estate 13,468 15,331 | 13,468
Resort real estate 1,159 1,352 | 1,159
Buildings and equipment, net of accumulated depreciation of |
$10.4 million in 1996 and $8.4 million in 1995 27,130 32,039 | 27,130
Land held for sale 6,821 8,341 | 6,821
Other assets 2,448 2,530 | 4,013
------------ ------------ | -------------
Total Assets $109,754 $135,886 | $84,452
============ ============ | =============
LIABILITIES AND STOCKHOLDERS' DEFICIT |
------------------------------------- |
CURRENT LIABILITIES |
Accounts payable $3,030 $3,740 | $3,030
Accrued interest on Secured Notes 5,617 7,008 |
Other accrued liabilities 9,329 8,140 | 9,329
Current portion of long-term debt 28,530 21,935 | 6,701
Current portion of accrued construction costs 3,154 3,454 | 3,154
Deferred membership dues revenue 17,599 18,622 | 17,599
------------ ------------ | -------------
Total Current Liabilities 67,259 62,899 | 39,813
Long term debt 66,922 98,308 | 66,922
Other liabilities 3,564 4,500 | 3,564
------------ ------------ | -------------
Total Liabilities 137,745 165,707 | 110,299
------------ ------------ | -------------
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' 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, |
3,702,726 shares issued and outstanding 37 37 | 74
Additional paid-in capital 17,549 17,549 | 20,503
Accumulated deficit subsequent to December 31, 1991, date of |
emergence from bankruptcy (total deficit eliminated $51,752) (45,451) (47,288) | (46,298)
Cumulative foreign currency translation adjustment (126) (119) | (126)
------------ ------------ | -------------
Total Stockholders' Deficit (27,991) (29,821) | (25,847)
------------ ------------ | -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $109,754 $135,886 | $84,452
============ ============ | =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the years ended June 30,
-----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Membership dues $39,924 $41,175 $43,200
Other campground/resort revenue 22,288 23,506 23,524
Membership and resort interest sales 3,987 4,228 3,975
RPI membership fees 4,579 4,845 5,286
Interest income 6,756 9,935 12,202
Gain on asset dispositions 4,038 658 5,544
Nonrecurring income 5,945 3,714 4,522
Other income 4,479 3,485 2,669
------------ ------------ ------------
Total Revenues $91,996 $91,546 $100,922
------------ ------------ ------------
EXPENSES
Campground/resort operating expenses 50,308 57,097 55,669
Selling expenses 4,073 2,732 2,899
Cost of sales 193 667 657
Marketing expenses 1,294 3,639 1,282
RPI membership expenses 2,237 2,727 3,055
Corporate member services 1,843 2,200 2,165
Interest expense and amortization of
debt discount and consent fees 17,693 20,960 21,446
General and administrative expenses 10,473 12,118 12,403
Nonrecurring expenses 2,270 437 4,000
Restructuring costs 1,124 637 3,313
------------ ------------ ------------
Total Expenses 91,508 103,214 106,889
------------ ------------ ------------
INCOME (LOSS) BEFORE TAXES, MINORITY
INTEREST AND EXTRAORDINARY ITEM 488 (11,668) (5,967)
Income tax provision (41) (255) (425)
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTEREST
AND EXTRAORDINARY ITEM 447 (11,923) (6,392)
Minority interest (325)
------------ ------------ ------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 447 (11,923) (6,717)
Extraordinary gain on debt repurchases 1,390 671
------------ ------------ ------------
NET INCOME (LOSS) $1,837 ($11,923) ($6,046)
============ ============ ============
PRIMARY AND FULLY DILUTED NET INCOME (LOSS)
PER SHARE:
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $.12 ($3.22) ($1.81)
EXTRAORDINARY ITEM .38 .18
------------ ------------ ------------
NET INCOME (LOSS) $.50 ($3.22) ($1.63)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 3,703 3,703 3,703
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Dollars in thousands)
<TABLE>
<CAPTION>
Cumulative
Common Stock 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, 1993 3,702,506 $37 $17,549 ($29,319) ($60) ($11,793)
Issuance of common shares 220
Foreign currency
translation adjustment (73) (73)
Net loss (6,046) (6,046)
---------- ---------- ----------- -------------- ------------- -----------
Balance, June 30, 1994 3,702,726 37 17,549 (35,365) (133) (17,912)
Foreign currency
translation adjustment 14 14
Net loss (11,923) (11,923)
---------- ---------- ----------- -------------- ------------- -----------
Balance, June 30, 1995 3,702,726 37 17,549 (47,288) (119) (29,821)
Foreign currency
translation adjustment (7) (7)
Net income 1,837 1,837
---------- ---------- ----------- -------------- ------------- -----------
Balance, June 30, 1996 3,702,726 $37 $17,549 ($45,451) ($126) ($27,991)
========== ========== =========== ============== ============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended June 30,
------------------------------------------------
1996 1995 1994
-------------- ------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Collections of principal on receivables $12,251 $16,678 $26,256
Interest received 6,202 9,270 10,216
Interest paid (14,545) (15,873) (17,798)
General and administrative, corporate
member services and restructuring costs (13,827) (18,233) (17,366)
Cash collected from operations,
including deferred revenue 73,220 77,231 75,537
Cash from sales of memberships and
resort interests at the point of sale 3,789 4,036 3,893
Expenditures for property operations (49,627) (56,768) (52,955)
Expenditures for sales and marketing (5,370) (5,645) (4,213)
Expenditures for insurance premiums (5,176) (4,553) (5,013)
Payment of income taxes (41) (256) (243)
Deposit made to secure standby letter
of credit (1,500)
Other, net 221 927
---------- --------- ---------
Net cash provided by operating
activities 5,597 5,887 19,241
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and HUD-related expenditures (1,022) (5,732) (4,548)
Proceeds from asset sales 7,239 1,132 10,394
Trails acquisition (7,497)
---------- --------- ---------
Net cash provided by (used in)
investing activities 6,217 (4,600) (1,651)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mandatory redemption of Secured Notes (18,599)
Repurchase of Secured Notes (5,275) (8,000)
Repayments of notes and
mortgages payable (1,133) (369) (2,280)
Retirement of capital lease (381)
Payment of consent fees to
Secured Noteholders (1,610)
---------- --------- ---------
Net cash used in financing activities (25,007) (750) (11,890)
---------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (13,193) 537 5,700
CASH AND CASH EQUIVALENTS:
Beginning of year 50,596 50,059 44,359
---------- --------- ---------
End of year $37,403 $50,596 $50,059
========== ========= =========
</TABLE>
(continued)
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<PAGE>
USTRAILS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
For the years ended June 30,
---------------------------------
1996 1995 1994
--------- ---------- ----------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income (loss) $1,837 ($11,923) ($6,046)
--------- ---------- ---------
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES-
Depreciation 2,866 2,591 2,457
Provision for doubtful accounts, net
of adjustments (4,122) (434) 2,121
Cost of sales 193 667 657
Amortization of interest yield,
collection costs and valuation
allowance (1,120) (1,461) (2,378)
Amortization of debt discount and
consent fees 4,565 5,060 4,136
Gain on asset dispositions (4,038) (658) (5,544)
Extraordinary gain on debt repurchases (1,390) (671)
Reversal of contingent liabilities (799) (2,717) (500)
CEO bonus accrual 1,270
Reduction of allowance for collection
costs (540)
Decrease (increase) in restricted cash (1,283) (404) 273
Decrease in receivables 11,721 16,322 26,513
Decrease (increase) in other assets (747) 29 (455)
Increase (decrease) in other
liabilities (3,354) (633) 1,059
Minority interest 325
Reversal of accrued resort disposition
costs (3,135)
Losses charged against accrued resort
disposition costs (618)
Provision for loss on carrying value
of assets 1,113
Other, net (2) (12) (66)
--------- ---------- ---------
Total adjustments 3,760 17,810 25,287
--------- ---------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES $5,597 $5,887 $19,241
========= ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 42
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF FINANCIAL STATEMENT PRESENTATION
USTrails Inc. and its subsidiaries (the "Company") own and operate a system of
58 membership-based campgrounds located in 19 states and British Columbia,
Canada. In addition, the Company manages timeshare facilities and owns certain
real estate at eight full service resorts located in seven states and owns and
operates the resort amenities at one of these locations. The Company also
provides a reciprocal use program for members of approximately 320 recreational
facilities. The campground segment represents the most significant portion of
the Company's business comprising 83% of the Company's operating revenues in
fiscal 1996. The full service resort and reciprocal use segments provide the
remaining 17%. 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
USTrails Inc. ("UST") and the following wholly owned subsidiaries: National
American Corporation and its subsidiaries ("NACO"), Thousand Trails, Inc. and
its subsidiaries ("Trails"), Shorewood Corporation, which does business as
Resort Parks International ("RPI"), and UST Wilderness Management Corporation
("Wilderness Management"). On June 30, 1991, the Company acquired 100% of the
capital stock of NACO and 69% of the capital stock of Trails. On June 3, 1992,
the Company increased its ownership in Trails to 80% through a tender offer. On
March 29, 1994, the Company acquired the remaining 20% of the capital stock of
Trails in a merger. 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 became a
direct subsidiary of the Company effective September 10, 1992, prior to which it
was a wholly owned subsidiary of NACO. Wilderness Management commenced
operations in January 1994.
The Company emerged from proceedings under Chapter 11 of the Bankruptcy Code on
December 31, 1991, pursuant to a confirmed plan of reorganization (see Notes 6
and 9). 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, 1996, 1995 and 1994.
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 those estimates.
The accompanying consolidated balance sheets include a pro forma balance sheet
prepared as if the Restructuring completed on July 17, 1996 (see Note 6)
occurred on June 30, 1996. The pro forma presentation has been included as an
integral part of the Company's consolidated
Page 43
<PAGE>
financial statements due to the significance of the Restructuring on the
Company's financial condition.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
effective for fiscal years beginning after December 15, 1995. This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company has not adopted the principles of this statement
within the accompanying consolidated financial statements; however, it is not
anticipated that it will have a material effect on the carrying value of the
Company's long-lived assets.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," effective for fiscal years beginning after December 15, 1995.
This statement defines a fair value method of accounting for employee stock
options and encourages entities to adopt that method of accounting for its stock
compensation plans. SFAS No. 123 allows an entity to continue to measure
compensation costs for those plans using the intrinsic value based method of
accounting prescribed by Accounting Pronouncement Bulletin Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has not decided whether
it will adopt SFAS No. 123, but does not anticipate that the implementation of
SFAS No. 123, if adopted, would have a material adverse impact on the Company's
financial position or results of operations.
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform to the current year presentation.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
- -------------------
Campground members are assessed annual dues which are used to fund campground
maintenance and operations, member services and general and administrative
expenses. Certain membership contracts provide for an annual adjustment of dues
to reflect increases in the Consumer Price Index. Other membership contracts
provide for an annual adjustment not greater than 10% or the percentage increase
in the Consumer Price Index. Annual dues are recognized as revenue ratably over
12 months and are recorded net of an allowance to provide for uncollectible
amounts. Dues paid in advance are deferred as unearned revenue.
Campground membership sales include contracts that give purchasers the right to
use one or more of the Company's campgrounds and undivided interests that give
purchasers an undivided fractional interest in certain campground facilities.
Resort interest sales include interval ownerships ("timeshares") that give
purchasers exclusive use of fully furnished vacation homes in weekly intervals
and fee simple ownership of lots located at the resorts. Sales revenue is
recognized upon execution of a sales contract and receipt of a down payment of
at least 10% of the sales price. Under the Company's current sales program, the
majority of campground membership and resort interest sales are not financed.
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.
Page 44
<PAGE>
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 Company recorded the contracts receivable at the
Selling Company's carrying value net of a discount to reflect current market
yield at the time of acquisition of NACO and Trails. 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.
Allowance for Interest Discount
- -------------------------------
In connection with the acquisition 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 interest
discount is being amortized using the effective interest method over the
respective terms of the contracts.
Allowance for Collection Costs
- ------------------------------
In connection with the Company's acquisition of NACO and Trails and its
emergence from bankruptcy, the Company recorded an allowance for future costs
associated with the collection of the contracts receivable portfolio. The
allowance is being amortized as a reduction to general and administrative
expenses based on cash collected on the related portfolio.
Valuation Allowance
- -------------------
In connection with purchases of contracts receivable from third parties, the
Company recorded a valuation allowance to record the contracts receivable at the
purchase price. The allowance is being amortized as an increase to interest
income over the respective terms of the contracts.
Campground and Resort Real Estate
- ---------------------------------
Campground and resort real estate, consisting of land and improvements and
timeshare property, is recorded at the lower of cost or estimated net realizable
value. Historically, campground properties were charged to cost of membership
sales based on the relationship of memberships sold to total memberships which
the Company estimates it will ultimately sell. Effective July 1, 1995, the
Company made the decision to discontinue its practice of amortizing campground
real estate by recording a cost of sales charge in connection with new
campground membership sales. The Company will discontinue this practice as long
as the number of membership cancellations exceeds the number of new memberships
sold, and the Company's membership base continues to decline. Resort timeshare
property is charged to cost of sales based on the value of a timeshare week sold
in relation to total sellable weeks at the property.
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.
Page 45
<PAGE>
Consent Fees
- ------------
In fiscal 1994, to obtain an amendment of the Indenture for the Secured Notes,
the Company paid aggregate cash consent fees of $1.6 million to the holders of
the Secured Notes who consented to the amendment. The consent fees have been
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 eliminated when the Secured Notes were retired
in the Restructuring on July 17, 1996 (see Note 6).
Discount on Secured Notes
- -------------------------
In connection with the issuance of the Secured Notes, a discount was recorded 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, and through fiscal
1996, was being amortized as additional interest expense using the effective
interest method over the term of the Secured Notes. The remaining unamortized
balance of this discount was eliminated when the Secured Notes were retired in
the Restructuring 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 (Loss) Per Common Share
- ----------------------------------
Net income per common share 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, whereby proceeds, if any, from the assumed
exercise of common stock equivalents, would be used to purchase shares at
current market prices. Net loss per common share is computed based on weighted
average common shares outstanding only. Warrants outstanding as well as common
stock equivalents that would be assumed outstanding are excluded from the net
loss per common share computation as they would be anti-dilutive.
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 -- RESTRUCTURING COSTS
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,
which are presented as restructuring costs in the accompanying consolidated
statement of operations. The Company incurred approximately $1.0 million of
additional costs in July 1996 in connection with the consummation of the
Restructuring (see Note 6), which will be reflected as restructuring costs in
fiscal 1997. In connection with the Restructuring, the Company also incurred
$3.1 million of costs in connection with obtaining a credit facility with
Foothill Capital Corporation, which will be capitalized as debt issue costs in
fiscal 1997.
At June 30, 1994, the Company recorded $1.8 million of restructuring costs for
severance pay and moving expenses related to relocating certain of its
administrative functions to Dallas, Texas, which are included in restructuring
costs in the accompanying consolidated statement of operations. Of this $1.8
million, $203,000 was spent in fiscal 1994 and $1.6 million was spent in fiscal
1995 and applied against the accrual. During fiscal 1995, the Company also
incurred $922,000 of additional costs related to expanding its Dallas office and
hiring and training new employees. $637,000 of these costs are included in
restructuring costs in the accompanying consolidated statement of operations,
and $285,000 of these costs were capitalized and are included in buildings and
equipment in the accompanying consolidated balance sheets.
Page 46
<PAGE>
On March 29, 1994, the Company acquired the 20% of Trails' capital stock then
held by public shareholders in a merger at a cost of $7.5 million including
legal costs, and Trails became a wholly owned subsidiary of the Company. The
Company incurred $463,000 in legal and financial advisory fees related to the
merger which were reflected as restructuring costs in the accompanying
consolidated statement of operations. In fiscal 1994, the Company also incurred
$1.1 million in legal and other expenses related to an amendment of the
Indenture for the Secured Notes. These costs are also included in restructuring
costs in the accompanying consolidated statement of operations.
NOTE 4 -- RECEIVABLES
CONTRACTS RECEIVABLE
Contracts receivable are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION> June 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Contracts receivable -
Memberships/undivided interests $18,689 $30,245
Timeshares and lots 2,440 4,931
----------- ------------
21,129 35,176
Allowance for doubtful accounts (6,290) (13,806)
Allowance for interest discount (722) (1,079)
Allowance for collection costs (778) (1,291)
Valuation allowance (262) (512)
----------- ------------
13,077 18,488
Interest receivable 142 210
----------- ------------
$13,219 $18,698
=========== ============
</TABLE>
Contracts Receivable
- --------------------
Contracts receivable bear interest at rates which generally range from 9.5% to
16.0%, with a weighted average stated rate of 12.9% at June 30, 1996 and 1995.
The net recorded value of the contracts receivable had a weighted average yield
of approximately 13% at June 30, 1996 and 1995. The obligor's weighted average
equity in the contracts receivable at June 30, 1996 and 1995, was 65% and 61%,
respectively. As of June 30, 1996, approximately 95% of the Company's campground
and resort members had paid for their membership or resort interest in ful l.
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.
Repurchase of Receivables From a Third Party
- --------------------------------------------
On March 22, 1995, the Company purchased $3.0 million of contracts receivable
from a third party, effective as of June 30, 1994, for $1.6 million. The
Company received contracts receivable with a gross balance of $2.0 million and
$1.0 million in cash representing principal and interest collections on the
contracts receivable from June 30, 1994 to March 22, 1995. The Company recorded
the $2.0 million gross balance of the contracts receivable net of an allowance
for doubtful accounts of $523,000 and a purchase price discount of $550,000.
These contracts receivable had previously been sold by NACO to the third party.
In connection with this sale, a portion of the purchase price was withheld as a
dealer holdback against which
Page 47
<PAGE>
the purchaser could offset canceled and delinquent contracts receivable. As of
March 22, 1995, the canceled and delinquent contracts receivable charged against
the dealer holdback had consumed it and a deficiency of $2.7 million existed.
Although the Company took the position that it was not liable for the deficiency
based upon the terms of certain agreements and releases with the third party,
the Company had recorded a contingent liability for the amount of the
deficiency. When the Company repurchased the contracts receivable, this
contingent liability was released. As a result, the Company reversed the $2.7
million recorded liability and included this amount in nonrecurring income in
the accompanying consolidated statement of operations.
Allowance for Doubtful Accounts
- -------------------------------
In fiscal 1996, the Company reduced the allowance for doubtful accounts on the
contracts receivable related to the campgrounds by $4.0 million. In addition,
in fiscal 1996, 1995 and 1994, the Company reduced the allowance for doubtful
accounts on the contracts receivable related to the resorts by $1.1 million,
$457,000 and $887,000, 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 fiscal 1996 and 1995, and with respect to the resort contracts
receivable, in fiscal 1994. For the campground contracts receivable, in fiscal
1994, the Company increased the related allowance for doubtful accounts by
$1.9 million to provide for additional future contract losses. This amount is
included in nonrecurring expenses in the accompanying consolidated statement of
operations. This adjustment was made because the cancellation rate on the
campground contracts receivable had increased, and the Company had experienced
higher contract losses than anticipated.
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 related to either the
campgrounds or full service resorts. 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 $722,000 and
$1.1 million at June 30, 1996 and 1995, respectively. Amortization of the
allowance for interest discount totaled $357,000, $486,000 and $846,000 for the
years ended June 30, 1996, 1995 and 1994, respectively, which increased interest
income.
Allowance for Collection Costs
- ------------------------------
The allowance for collection costs had a remaining balance of $778,000 and $1.3
million at June 30, 1996 and 1995, respectively. Amortization of the allowance
for collection costs totaled $513,000, $854,000 and $1.5 million for the years
ended June 30, 1996, 1995 and 1994, respectively, which decreased general and
administrative expenses. In fiscal 1995, the Company reduced the allowance for
future collection costs by $540,000 more than the normal accrual because the
estimated future cost to collect the remaining contracts receivable was less
than the amount anticipated when the allowance was recorded. This amount is
included in nonrecurring income in the accompanying consolidated statement of
operations.
Valuation Allowance
- -------------------
The valuation allowance had a balance of $262,000 and $512,000 at June 30, 1996
and 1995, respectively. Amortization of the valuation allowance totaled
$250,000, $121,000 and $79,000 for the years ended June 30, 1996, 1995 and 1994,
respectively.
Page 48
<PAGE>
At June 30, 1996, scheduled future receipts on contracts receivable are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Memberships/
Undivided Timeshares
Interests and Lots Total
------------ ----------- -----------
<S> <C> <C> <C>
1997 $5,582 $1,199 $6,781
1998 4,770 670 5,440
1999 4,041 322 4,363
2000 2,873 154 3,027
2001 1,207 63 1,270
Thereafter 216 32 248
------------ ----------- -----------
Total $18,689 $2,440 $21,129
============ =========== ===========
</TABLE>
The Company operates 58 campgrounds located in 19 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 38%). As of June 30, 1996, the
Company's contracts receivable from members who purchased memberships in the
state of California totaled approximately $7.9 million.
MEMBERSHIP DUES RECEIVABLE
In fiscal 1996 and fiscal 1994, the Company increased the allowance for
uncollectible dues by $1.0 million, related to certain aged dues accounts that
were determined uncollectible in those years. These charges are included in
nonrecurring expenses in the accompanying consolidated statements of operations.
NOTE 5 -- CAMPGROUND AND RESORT PROPERTIES
Campground properties consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
----------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Land held for sale $5,339 $6,287
Land inventory 13,468 15,331
Property and equipment 37,138 35,280
Construction in progress 67 2,331
Accumulated depreciation (10,336) (7,902)
------------- -------------
$45,676 $51,327
============= =============
</TABLE>
Page 49
<PAGE>
Resort properties consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-----------------------------------------
1996 1995
-------------- ----------------
<S> <C> <C>
Land held for sale $1,482 $2,054
Land, timeshare and lot inventory 1,159 1,352
Property and equipment 311 2,733
Construction in progress 24 97
Accumulated depreciation (74) (500)
-------------- ----------------
$2,902 $5,736
============== ================
</TABLE>
The campground and resort properties are encumbered by certain borrowings as
described in Note 6.
The resort operations have historically generated operating losses. At June 30,
1992, the Company planned to dispose of four of the eight resorts and was
pursuing discussions with potential purchasers for certain of these resorts. As
a result, at June 30, 1992, the Company accrued $4.5 million for the estimated
operating losses of the four resorts through the disposition period and the
related disposition costs. Related resort losses of $618,000 were applied
against this accrual during fiscal 1994. The Company determined subsequently
that it was not feasible to sell entire resorts, and began to focus on the sale
of individual resort assets. Since June 30, 1992, the Company has sold the
common amenities at five resorts, the seven utility companies associated with
the resorts, and certain other real estate holdings at the resorts for which it
received total net cash proceeds of $12.9 million plus the purchasers'
assumption of net obligations of the Company with an estimated cost of up to
$1.6 million. The Company presently plans to dispose of the remaining resort
assets over the next several years. However, no assurance exists 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.
In fiscal 1994, the Company reassessed the net realizable value of its resort
assets and liabilities, and recorded a $1.1 million adjustment to reduce the
carrying value of the net assets. This charge is included in nonrecurring
expenses in the accompanying consolidated statement of operations, and consists
of the following (in thousands):
<TABLE>
<S> <C>
Timeshare inventory $438
Receivables from timeshare
associations 280
Operating assets to be transferred to
a timeshare association 59
Additional HUD-related improvements 94
Deferred maintenance and other costs 242
-------------
$1,113
=============
</TABLE>
Based on the Company's disposition plan for the resorts and its assessment of
the recoverability of the net resort assets, in fiscal 1994, the Company also
reversed the remaining $3.1 million accrual for resort disposition costs. This
amount is included in nonrecurring income in the accompanying consolidated
statement of operations.
The Company believes that the continued operation of the resorts is critical to
the collection of the contracts receivable generated from resort sales, which
had a remaining balance of $2.4 million at June 30, 1996.
Page 50
<PAGE>
NOTE 6 -- LONG TERM DEBT
SECURED NOTES
In connection with its emergence from Chapter 11, on December 31, 1991, the
Company issued $141.4 million of Secured Notes. On June 12, 1992, the Company
issued $10.7 million of Additional Series Secured Notes in exchange for certain
indebtedness of a subsidiary, resulting in a total of $152.1 million principal
amount of Secured Notes outstanding. The Secured Notes were recorded net of a
$30.2 million discount to yield an effective rate of 18%. During the years
ended June 30, 1996, 1995 and 1994, $4.2 million, $4.6 million and $4.1 million,
respectively, of this discount was amortized as additional interest expense.
The Secured Notes, including the additional series, bore interest at 12% per
annum, payable semi-annually on January 15 and July 15 of each year. The
Indenture required the Company to redeem $18.6 million of 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 June 30, 1996, the Company had outstanding $101,458,000 principal amount of
Secured Notes which were retired in full on July 17, 1996 in the Restructuring
(see "Secured Note Restructuring" below). Prior to the Restructuring, the
Company had repurchased certain 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. On July 15, 1995, the Company made a
mandatory redemption of $18.6 million principal amount of Secured Notes. On
June 6, 1994, the Company repurchased $10.0 million principal amount of Secured
Notes in a Dutch auction available to all Secured Noteholders, at a cost of $8.5
million, including accrued interest. The Company recognized a gain of $671,000
on this transaction. These gains have been presented as extraordinary items in
the accompanying consolidated statements of operations. No taxes were provided
as cancellation of debt income is not included in taxable income to the extent
that the Company's liabilities exceeded the value of its assets immediately
prior to the acquisition of the Secured Notes.
SECURED NOTE RESTRUCTURING
On July 17, 1996, the Company consummated a restructuring (the "Restructuring"),
in which all of the $101,458,000 principal amount of Secured Notes 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 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 obtained new senior secured financing through
Foothill Capital Corporation ("Foothill").
The Restructuring was accounted for as a Troubled Debt Restructuring, whereby
the restructured debt is recorded at the carrying value of the old debt (in the
event that future expected cash payments are greater than the carrying amount of
the old debt), and no gain or loss is recorded on the transaction. The
$40,218,000 principal amount of PIK Notes issued in the exchange were recorded
with a deferred gain of $303,000. This deferred gain will be amortized as a
reduction of interest expense using the effective interest method over the term
of the notes.
Page 51
<PAGE>
In addition to the $1.1 million of costs incurred by the Company during fiscal
1996 in connection with its efforts to restructure the Secured Notes (see Note
3), the Company incurred approximately $1.0 million of additional legal expenses
and other direct costs in fiscal 1997 in connection with the completion of the
Restructuring, which will be presented as restructuring costs in the Company's
fiscal 1997 consolidated statement of operations.
Credit Agreement with Foothill
- ------------------------------
In the Restructuring, the Company entered into a new three-year credit agreement
(the "Credit Agreement"), dated as of July 10, 1996, 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 may not exceed $35.0 million. A total of $32.0 million was drawn under the
Credit Agreement at closing of the Restructuring. As of September 12, 1996, the
total borrowings outstanding under the Credit Agreement were $22.3 million, and
the amount available for borrowing under the revolving portion of the Credit
Agreement was $12.7 million.
The borrowings under the Credit Agreement bear interest at a rate which will
provide Foothill an internal rate of return of 14.5% over the term of the Credit
Agreement. Interest is payable monthly at the prime rate plus 2 3/4 percentage
points (with a minimum rate of 9% per annum), with any additional interest
required to fulfill Foothill's internal rate of return requirement payable upon
the termination of the Credit Agreement. The Company does not anticipate that
the amount of this residual interest payment will be material, due primarily to
$570,000 of prepaid interest paid to Foothill at the closing of the Credit
Agreement.
The Company must use all collections of principal and interest on the contracts
receivable and all proceeds from asset sales to reduce borrowings under the
Credit Agreement. In addition, the Company must make specified principal
reductions on these borrowings over time based on a monthly calculation of
eligible contracts receivable and an amortization schedule set forth in the
agreement. The maximum amount of the revolving loan declines as these principal
reductions are made. The remaining borrowings under the Credit Agreement must be
paid in full on July 16, 1999. The Credit Agreement contains various restrictive
covenants governing the Company, including certain financial covenants related
to calculations, measured as of the end of each fiscal quarter, of (i) Earnings
Before Interest, Taxes and Depreciation and Amortization, and (ii) Minimum
Tangible Net Worth. The 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 Credit Agreement. The Company's subsidiaries other than
an immaterial utility subsidiary have guaranteed 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.
The Company incurred debt issue costs of $3.1 million, including $570,000 of
prepaid interest, related to obtaining the Credit Agreement. These costs, which
include legal costs, financial advisory fees and other direct costs of obtaining
the loans, will be capitalized in the Company's fiscal 1997 consolidated balance
sheet and amortized over the term of the Credit Agreement.
PIK Notes
- ---------
In the Restructuring, the Company issued $40,218,000 principal amount of Senior
Subordinated Pay-In-Kind Notes due 2003 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
Page 52
<PAGE>
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 will be paid semiannually on January 15 and July 15 and is payable in the
form of additional PIK Notes (the "Secondary Notes") as long as borrowings
remain outstanding under the Credit Agreement. After the borrowings under the
Credit Agreement are repaid in full, the Company has the option to issue
Secondary Notes in lieu of cash payment of interest through July 15, 2000. After
July 15, 2000, interest on the PIK Notes will be paid in cash.
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 replacement working capital 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
payment in full of all of the Company's obligations under the Credit Agreement,
the PIK Notes will be secured by the same assets as then secure the Credit
Agreement other than cash and cash equivalents and other assets required to
secure any refinancing or replacement of the borrowings provided by the 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.
NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-------------------------------
1996 1995
------------- -----------
<S> <C> <C>
Real estate mortgages, interest payable
at fixed rates ranging from 7.0% to
17.3% due through May 2012 $867 $4,538
Note payable with interest at
escalating rates ranging from 8.9% to
10.4%, semi-annual payments due
through February 2008 235 215
------------- -----------
$1,102 $4,753
============= ===========
</TABLE>
Real estate mortgages totaling $2.5 million were eliminated in connection with
the abandonment of two operating campgrounds in the Fall of 1995.
Page 53
<PAGE>
BALANCE SHEET PRESENTATION
Balance sheet presentation of the current and long term components of the
Company's outstanding debt is reflected below, as of June 30, 1996 and 1995, and
on a pro forma basis as if the Restructuring had occurred on June 30, 1996
(dollars in thousands):
<TABLE>
<CAPTION>
June 30, Pro Forma
------------------------------
1996 1995 June 30, 1996
------------ ------------ -----------------
| (unaudited)
<S> <C> <C> | <C>
CURRENT PORTION OF LONG TERM |
DEBT : |
Secured Notes, net of discount |
of $7.1 million and $.2 million $28,264 $18,398 |
Borrowings under Credit Agreement | $6,435
Notes and mortgages payable 266 3,537 | 266
------------ ---------------- | -----------------
|
$28,530 $21,935 | $6,701
============ ================ | =================
LONG TERM DEBT: |
Secured Notes, net of discount |
of $11.7 million in 1995 $66,086 $97,092 |
Borrowings under Credit Agreement | $25,565
PIK Notes, including deferred gain |
of $.3 million | 40,521
Notes and mortgages payable 836 1,216 | 836
------------ ---------------- | -----------------
|
$66,922 $98,308 | $66,922
============ ================ | =================
|
Total long term debt $95,452 $120,243 | $73,623
============ ================ | =================
</TABLE>
The following table presents scheduled maturities of the principal amount of the
Company's outstanding debt as of June 30, 1996, and a pro forma description of
scheduled maturities of the Company's restructured debt as if the Restructuring
had occurred on June 30, 1996 (dollars in thousands):
<TABLE>
<CAPTION>
Pro Forma
Year ending June 30, June 30,
June 30, 1996 1996
------------------------------- ------------ ------------
<S> <C> | <C>
| (unaudited)
|
1997 $18,865 | $6,701
1998 18,673 | 7,874
1999 64,341 | 9,381
2000 187 | 8,652
2001 94 | 94
Thereafter 400 | 40,618
------------ | ------------
102,560 | 73,320
Adjustment for |
deferred gain (discount) (7,108) | 303
------------ | ------------
$95,452 | $73,623
============ | ============
</TABLE>
Page 54
<PAGE>
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 generally provide that a subsidiary will reimburse or be reimbursed
by the Company in an amount equal to 100% (80% for Trails through March 29,
1994) 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 loss, between statutory and
effective federal income tax rates are as follows:
<TABLE>
<CAPTION>
For the years ended June 30,
------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Statutory tax rate (34.0)% (34.0)% (34.0)%
Provision for state income taxes 2.2 2.2 7.6
Unrecordable net operating loss 34.0 34.0 34.0
------------ ----------- -----------
Effective tax rate 2.2% 2.2% 7.6%
============ =========== ===========
</TABLE>
At June 30, 1996, the Company also had a net operating tax loss carryforward of
$54.5 million, expiring in years 2007 through 2011.
Components of deferred income taxes are as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Property Basis Differences ($2,658) ($2,316)
Purchase Discount Amortization (342) (532)
Secured Note Discount (3,983)
Bad Debt Provision (1,956) (198)
-------------- --------------
(4,956) (7,029)
-------------- --------------
DEFERRED TAX ASSETS:
Secured Note Offering Costs and
Consent Fee Amortization 305 619
Deferred Gain on Secured Notes 1,231
Unpaid Expenses 4,387 3,924
Restructuring Costs 1,936 1,229
Deferred Revenue 536 480
Net Operating Loss 19,917 18,648
Other 516 469
-------------- --------------
28,828 25,369
-------------- --------------
Net Deferred Tax Asset 23,872 18,340
Valuation Account (23,872) (18,340)
-------------- --------------
Net Deferred Tax Asset $0 $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 recorded a valuation
allowance for the amount by which deferred tax assets exceed deferred
liabilities and, as a result, the Company has not recorded any liability or
asset for deferred taxes as of June 30, 1996 or 1995.
Page 55
<PAGE>
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, 1996, 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>
1997 $773
1998 307
1999 162
2000 129
2001 120
</TABLE>
Accrued Construction Costs
- --------------------------
At June 30, 1996, the Company had a recorded liability of $3.2 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.
CONTINGENCIES
Self Insurance
- --------------
During the year ended June 30, 1994, the Company began to self-insure general
liability losses up to $250,000 per occurrence, with an annual aggregate of $2.8
million. As of June 30, 1996, the Company had insurance policies which provided
excess coverage up to $27.0 million per occurrence and aggregate. The Company
has provided a liability for estimated known and unknown claims related to
uninsured general liability risks of $1.6 million at June 30, 1996 and 1995,
which is included in other liabilities in the accompanying consolidated balance
sheets. This liability is determined based on actuarial estimates.
Workers' Compensation Insurance
- -------------------------------
In fiscal 1996, the Company improved 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 its 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.
CEO Bonus Accrual and Stock Options
- -----------------------------------
The employment agreement between the Company and its Chief Executive Officer
("CEO") provided that the CEO would receive a one-time bonus equal to between 4%
and 6% of the amount by which the enterprise value of the Company (including the
value of its debt and equity) exceeded $75.0 million at the time he elected to
receive the bonus. The bonus would have been adversely affected by the
consummation of the Restructuring. As a result, on June 29, 1996, the CEO
exercised his right to receive the bonus. The CEO is entitled to $1,270,589, of
which $952,927 was paid on July 9, 1996. The additional $317,662 will be
payable on May 11, 1997, provided that the CEO is employed by the Company on
that date. The Company has obtained an irrevocable standby letter of credit on
which the CEO may draw this bonus if the Company fails to pay the bonus after
receiving a request from the CEO. A $1.5 million cash deposit securing this
letter of credit is included in restricted cash in the Company's consolidated
balance sheet at June 30, 1996. The amount of the cash deposit was
Page 56
<PAGE>
subsequently reduced to $317,662. The Company accrued the entire amount of the
bonus at June 30, 1996, which is included in nonrecurring expenses in the
Company's consolidated statement of operations.
Upon consummation of the Restructuring, the Company's CEO was granted, subject
to stockholder approval, options to purchase 664,495 shares of Common Stock at
$0.69 per share. If approved, the options will be immediately 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, will be subject to
restrictions so as to prevent an "ownership change" for federal tax purposes.
Declining Membership Base
- -------------------------
The Company derives a significant portion of its ongoing operating revenue from
its campground members (83% in fiscal 1996). The Company's membership base has
declined from 167,000 at December 31, 1991 to 128,000 at June 30, 1996 (23%),
and the membership base is expected to decline further in fiscal 1997. The
Company attributes this continuing decline principally to its aging membership
base, of whom approximately 50% are senior citizens. The Company must
significantly increase its campground membership sales over current levels in
order to stop the continuing decline in the Company's membership base. As a
result, the success of the Company's business strategy over the long term will
be dependent upon the Company being able to market new memberships in sufficient
numbers on a cost-effective basis.
Environmental Issues
- --------------------
Certain environmental issues may exist at some of the Company's campgrounds and
resorts 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
- ----------
Oregon and California Attorneys General Matters. During fiscal 1994, the
- -----------------------------------------------
Attorneys General of Oregon and California threatened to commence lawsuits
against the Company as a result of its practice of charging a cancellation fee
in connection with the cancellation of paid-in-full memberships. The Attorneys
General alleged that paid-in-full memberships may be terminated by the member at
any time by simply giving notice to the Company, and that it is an unlawful
trade practice for the Company to insist upon payment of a cancellation fee. In
September 1994, the Company agreed to change its practice and no longer require
a cancellation fee. The Company has entered into an Assurance of Voluntary
Compliance with the Oregon Attorney General regarding its cancellation policy.
The Company has also entered into a Stipulated Judgment with the California
Attorney General regarding its cancellation policy, and also agreed to refund
certain amounts to members.
During fiscal 1996, the California Attorney General also threatened to commence
a lawsuit against the Company as a result of its closure of two campgrounds in
California during the Fall of 1995. The Attorney General alleged that the
Company failed to provide a comparable substitute campground as required by
California law. The Stipulated Judgment discussed above also covers this matter
and provides that the Company will make certain benefits available, and/or
refund certain amounts to, affected members. Management does not believe that
the resolution of these matters will have a material adverse impact on the
Company's operations or financial position.
Johnnie Lacy v. Thousands Trails, Inc., Civil Action No C-96 004411, filed
- -------------------------------------
February 1, 1996, in the United States District Court for the Northern District
of California. In this action, which purports to be a class action, the
plaintiff alleges that the Company has failed to comply with the Americans with
Disabilities Act and related California statutes with respect to certain of its
campgrounds. The plaintiff alleges that the Company has failed to remove
barriers to access by persons with disabilities where such barrier removal is
readily
Page 57
<PAGE>
achievable. The plaintiff seeks unspecified damages and injunctive relief.
Although this case is still in the early stages of development, management does
not believe that it will have a material adverse impact on the Company's
operations or financial position.
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)
In connection with its emergence from Chapter 11, the Company issued 3,703,726
shares of Common Stock (including shares issued in lieu of issuing Secured Notes
in denominations of less than $1,000, of which 220 such shares were issued in
fiscal 1994). As discussed in Note 6, a total of 3,680,550 additional shares of
Common Stock were issued in the Restructuring on July 17, 1996.
In connection with the Restructuring, the Company's by-laws were amended to
subject all new issuances of Common Stock, including the shares of Common Stock
issued as part of the Restructuring, to transfer restrictions designed to
minimize the likelihood of an "ownership change" within the meaning of Section
382 of the Internal Revenue Code of 1986, as amended (the "Code"). In addition,
the former Secured Noteholders who participated in the exchange portion of the
Restructuring voluntarily subjected their previously owned shares of Common
Stock to these transfer restrictions. As a result, approximately 85% of the
Common Stock outstanding after the completion of the Restructuring is subject to
these transfer restrictions, which are designed to help assure that the
Company's substantial net operating loss carryforwards ("NOLs"), which totaled
$54.5 million at June 30, 1996, 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.
The Company's Restated Articles of Incorporation provide for the issuance of
15,000,000 shares of Common Stock, par value of $.01 per share. In addition,
the Company's Restated Articles of Incorporation provide for the issuance of
1,500,000 shares of preferred stock, par value $.01 per share, none of which
have been issued to date.
In connection with its emergence from Chapter 11, the Company issued warrants to
acquire up to 194,521 shares of Common Stock at $4.24 per share. 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. These warrants expire on
June 30, 1999. In March 1994, the Company issued warrants to acquire 10,087
shares of Common Stock at $1.625 per share. These warrants expire on
March 31, 1999. To date, none of these warrants have been exercised. The
Company has also granted stock options to key employees and non-employee
directors (see Note 13).
Since inception, the Company has not paid any dividends. The Indenture for the
Secured Notes, which was discharged in the Restructuring on July 17, 1996,
prohibited the Company from paying any cash dividends on the Common Stock until
the Secured Notes were repaid. In addition, the Credit Agreement with Foothill
prohibits the payment of any cash dividends on the Common Stock without the
consent of Foothill until the borrowings under the Credit Agreement are repaid,
and the Indenture for the PIK Notes prohibits the payment of any cash dividends
on the Common Stock until the PIK Notes are repaid.
Page 58
<PAGE>
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 year ended
June 30, 1996 (dollars in thousands):
<TABLE>
1996
-------------
<S> <C>
Abandonment of two operating
campgrounds and elimination of related
nonrecourse obligations (see Note 6) $2,518
</TABLE>
The Company did not have any non-cash investing or financing activities during
the years ended June 30, 1995 or 1994.
NOTE 11 -- SUPPLEMENTAL EARNINGS PER SHARE INFORMATION
As discussed in Note 9, 3,680,550 additional shares of Common Stock were issued
in the Restructuring on July 17, 1996. The following earnings per share data
reflects the pro forma effect of the issuance of these shares as if the
additional shares had been issued as of the beginning of each period presented
(shares in thousands):
<TABLE>
<CAPTION>
Pro Forma
Year Ended June 30,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
PRIMARY AND FULLY DILUTED NET INCOME
(LOSS) PER SHARE:
Income (loss) before extraordinary
item $.06 ($1.61) ($.91)
Extraordinary item .19 .09
-------- -------- --------
Net Income (Loss) .25 ($1.61) ($.82)
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 7,383 7,383 7,383
======== ======== ========
</TABLE>
Page 59
<PAGE>
NOTE 12 -- 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 at June 30, 1996 and 1995, and on
a pro forma basis as if the Restructuring had occurred as of June 30, 1996, are
as follows (dollars in thousands):
<TABLE>
<CAPTION>
Pro Forma
June 30, 1996 June 30, 1995 June 30, 1996
------------------- ---------------------- | ---------------------
Carrying Fair Carrying Fair | Carrying Fair
Amount Value Amount Value | Amount Value
---------- ------ --------- --------- | ---------- ---------
| (unaudited)
<S> <C> <C> <C> <C> | <C> <C>
FINANCIAL ASSETS: |
Cash and Cash Equivalents |
$37,403 $37,403 $ 50,596 $50,596 | $ 9,618 $ 9,618
|
Restricted Cash 2,912 2,912 1,629 1,629 | 2,912 2,912
|
Contracts Receivable 21,271 35,386 | 21,271
Less: allowance and discounts (8,052) (16,688) | (8,052)
---------- --------- | ----------
13,219 13,600 18,698 21,000 | 13,219 13,600
|
|
FINANCIAL LIABILITIES: |
Secured Notes, net of discount |
94,350 80,743 115,490 93,000 |
|
Borrowings under Credit Agreement |
| 32,000 32,000
|
PIK Notes | 40,521 30,365
|
Notes and Mortgages Payable |
1,102 1,000 4,753 5,000 | 1,102 1,000
|
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of the Company's financial instruments at June 30, 1996 and 1995, 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 is 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.
Secured Notes
- -------------
The fair value of the Secured Notes is estimated using (i) $18.6 million for the
mandatory redemption of Secured Notes due on July 15, 1996, and for the balance,
(ii) quoted market
Page 60
<PAGE>
prices for the Company's securities at the balance sheet date. These quoted
prices may not represent actual transactions.
PIK Notes
- ---------
The PIK Notes were issued in a private transaction and, as a result, there is no
public trading market for the PIK Notes. As of September 12, 1996, management
was not aware of any transaction involving the PIK Notes. For purposes of SFAS
No. 107, management estimates that the fair value of the PIK Notes is 75.5% of
face value. This estimate is based on information obtained from holders of the
PIK Notes who believe that, if a public trading market for the PIK Notes
existed, trades could be anticipated at approximately 75% to 76% of face value.
Notes and Mortgages Payable
- ---------------------------
The fair value of notes and mortgages payable is estimated based on the
borrowing rates currently 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.
NOTE 13 -- EMPLOYEE BENEFITS
EMPLOYEE STOCK PLANS
In connection with its emergence from Chapter 11, 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 of the Board of Directors (the "Compensation
Committee") 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 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.
Page 61
<PAGE>
The Company reserved 291,780 shares of Common Stock for issuance under the 1991
Employee Plan. Set forth below is a summary of awards made under the 1991
Employee Plan for the years ended June 30, 1996, 1995 and 1994, and awards
outstanding as of the end of those years:
<TABLE>
<CAPTION>
Years ended June 30,
---------------------------------------
1996 1995 1994
---------- ----------- ---------
<S> <C> <C> <C>
ISOs outstanding, beginning of year 246,000 285,000 285,000
ISOs granted 160,000
ISOs canceled (246,000) (39,000)
ISOs exercised
----------- ----------- ---------
ISOs outstanding, end of year 160,000 246,000 285,000
=========== =========== =========
ISOs exercisable, end of year 20,000 246,000 232,667
=========== =========== =========
Shares available for grant, end of year 131,780 45,780 6,780
=========== =========== =========
</TABLE>
The 285,000 ISOs outstanding at the beginning of fiscal 1994 were granted to key
employees in fiscal 1993 with an exercise price of $2.50 per share. Of these
285,000 ISOs, 39,000 and 151,000 were canceled in fiscal 1995 and fiscal 1996,
respectively, 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 as
discussed below. The 160,000 ISOs granted in fiscal 1996 include 140,000 ISOs
granted to key employees in September 1995 with an exercise price of $.625 per
share and 20,000 Non-Qualified Options granted to non-employee directors in
January 1996 with an exercise price of $.81 per share. The ISOs granted to key
employees in September 1995 have a three-year vesting schedule, and the ISOs
granted to directors in January 1996 were fully vested on the date of grant. To
date, none of these options have been exercised.
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 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.
The Company reserved 285,919 shares of Common Stock for issuance under the 1993
Employee Plan. The 1993 Employee Plan 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
Page 62
<PAGE>
granted under the 1991 Employee Plan at an exercise price of $2.50 per share.
The ISOs granted in May 1996 were fully vested on the date of grant. To date,
none of these ISOs have been exercised.
DIRECTOR STOCK OPTION 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, all of which were issued as
Non-Qualified Options to the non-employee directors of the Company, 25,000 in
fiscal 1994 with an exercise price of $2.75 per share and 25,000 in fiscal 1995
with an exercise price of $0.79 per share. As of June 30, 1996, these options
were fully vested and none had been exercised.
The Director Plan is designed to be a "formula plan," pursuant to which each
non-employee director will automatically received 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. 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.
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 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 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 USTrails 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 $205,000 for the year ended June 30, 1996, and has
committed to make matching contributions for the year ended June 30, 1997, 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 63
<PAGE>
NOTE 14 -- INDUSTRY SEGMENT INFORMATION
The Company's operations are 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
conducted 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 business includes operations at eight full service
resorts which primarily consist of the sale of timeshare interests in fully
furnished vacation homes, management of the timeshare facilities, and the sale
of lots at certain resorts. In addition, the Company operates the common
amenities at one resort. The Company plans to dispose of the remaining material
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. Separate information regarding 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.
The following table shows sales, operating earnings (loss), and other financial
information by industry segment for the years ended June 30, 1996, 1995 and 1994
(in thousands):
<TABLE>
<CAPTION>
Year ended June 30, 1996
------------------------
Corporate and
Campgrounds Resorts Other Consolidated
--------------- ----------- ----------------- ----------------
<S> <C> <C> <C> <C>
Operating revenues $59,816 $6,975 $66,791
Sales 2,630 1,357 3,987
Operating earnings (loss) 12,638 35 ($12,185) 488
Identifiable assets 65,076 4,705 39,973 109,754
Depreciation 2,209 123 534 2,866
Capital expenditures 621 366 35 1,022
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30, 1995
------------------------
Corporate and
Campground Resorts Other Consolidated
--------------- ----------- ----------------- ----------------
<S> <C> <C> <C> <C>
Operating revenues $61,431 $8,095 $69,526
Sales 1,780 2,448 4,228
Operating earnings (loss) 6,474 418 ($18,560) (11,668)
Identifiable assets 74,933 9,012 51,941 135,886
Depreciation 1,940 165 486 2,591
Capital expenditures 3,984 998 750 5,732
</TABLE>
Page 64
<PAGE>
<TABLE>
<CAPTION>
Year ended June 30, 1994
------------------------
Corporate and
Campgrounds Resorts Other Consolidated
--------------- ----------- ----------------- ----------------
<S> <C> <C> <C> <C>
Operating revenues $62,015 $9,995 $72,010
Sales 1,457 2,518 3,975
Operating earnings (loss) 9,143 393 ($15,503) (5,967)
Identifiable assets 83,041 12,227 52,896 148,164
Depreciation 1,853 218 386 2,457
Capital expenditures 2,174 1,553 821 4,548
</TABLE>
NOTE 15 -- INDEMNIFICATION ARRANGEMENTS
Under its Articles of Incorporation, 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. In 1991,
the Company and Trails contributed $500,000 and $300,000, respectively, to the
Indemnification Trusts. 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. NACO also
has indemnification obligations to its directors and officers. In connection
therewith, NACO contributed $200,000 to a trust. This trust will reimburse NACO
directors and certain officers for any indemnifiable damages and expenses that
they incur and will advance defense funds to them.
The trust assets, which totaled $1.3 million at June 30, 1996, are included in
other assets in the accompanying consolidated balance sheets.
Page 65
<PAGE>
NOTE 16 -- CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following financial statements present the Company's condensed consolidating
balance sheets as of June 30, 1996 and 1995, and the Company's condensed
consolidating statements of operations and cash flows for the years ended June
30, 1996, 1995 and 1994. RPI was acquired by the Company from NACO on September
10, 1992, prior to which RPI was owned by NACO. As a result, RPI's results of
operations and financial position as of and for the years presented, have been
reflected in a separate column. Wilderness Management commenced operations in
January 1994. Since the assets and operations of Wilderness Management are not
material, its results of operations and financial position as of and for the
years presented have been combined with the balances of RPI for purposes of the
following presentation.
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.
Page 66
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND ELIMI-
USTRAILS TRAILS NACO WILDERNESS(E) NATIONS TOTAL
---------- --------- -------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS --
Cash and cash equivalents $37,298 $16 $89 $37,403
Current portion of receivables, net 1,921 $2,108 375 ($134)a 4,270
Accounts and dues receivable, net 211 311 522
Other current assets 2,032 22,571 1,687 5,388 (27,006)b 4,672
---------- --------- -------- --------------- --------------- ------------
Total current assets 41,251 24,890 2,389 5,477 (27,140) 46,867
Receivables, net 2,252 5,713 1,203 (219)a 8,949
Notes receivable from affiliates 29,417 (29,417)c
Real estate and property, net 104 22,364 26,030 80 48,578
Investment in subsidiaries 21,081 (21,081)d
Other assets 2,420 1,503 1,238 199 5,360
---------- --------- -------- --------------- --------------- ------------
Total assets $96,525 $54,470 $30,860 $5,756 ($77,857) $109,754
=========== ========= ========= =============== =============== ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES --
Accounts payable and accrued liabilities $6,077 $7,969 $4,486 $753 ($1,309)a,b $17,976
Due to affiliates 23,748 1,571 378 (25,697)b
Current portion of long-term debt 28,264 232 34 28,530
Accrued construction costs 3,154 3,154
Deferred membership dues revenue 10,782 5,641 1,176 17,599
---------- --------- --------- -------------- -------------- ------------
Total current liabilities 58,089 18,983 14,886 2,307 (27,006) 67,259
Notes payable to parent 1 29,416 (29,417)c
Long term debt 66,086 346 490 66,922
Other liabilities 353 1,554 2,010 (353) 3,564
---------- --------- --------- -------------- -------------- ------------
Total liabilities 124,528 20,884 46,802 2,307 (56,776) 137,745
---------- --------- --------- -------------- -------------- ------------
STOCKHOLDERS' EQUITY (DEFICIT) (28,003) 33,586 (15,942) 3,449 (21,081) (27,991)
TOTAL LIABILITIES AND STOCKHOLDERS' ---------- --------- --------- -------------- -------------- ------------
EQUITY (DEFICIT) $96,525 $54,470 $30,860 $5,756 ($77,857) $109,754
========== ========= ========= ============== ============== ============
</TABLE>
a Entry to eliminate the dealer holdback liability to subsidiaries.
b Entry to eliminate other intercompany accounts.
c Entry to eliminate intercompany debt and related interest.
d Entry to record subsidiaries' results on a consolidated basis.
e Includes Wilderness Management assets of $325,000.
Page 67
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND ELIMI-
USTRAILS TRAILS NACO WILDERNESS(E) NATIONS TOTAL
----------- ------------ ----------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS --
Cash and cash equivalents $49,267 $435 $852 $42 $50,596
Current portion of receivables, net 4,364 2,801 155 ($1,944)a 5,376
Accounts and dues receivable, net 1,834 1,183 3,017
Other current assets 634 10,128 1,023 3,801 (13,233)b 2,353
----------- ------------ ----------- ------------ -------------- -----------
Total current assets 54,265 15,198 3,213 3,843 (15,177) 61,342
Receivables, net 5,287 8,722 167 (854)a 13,322
Notes receivable from affiliates 33,504 (33,504)c
Real estate and property, net 169 26,193 30,597 104 57,063
Investment in subsidiaries 11,827 (11,827)d
Other assets 2,029 1,047 872 211 4,159
----------- ------------ ----------- ------------ -------------- ------------
Total assets $107,081 $51,160 $34,849 $4,158 ($61,362) $135,886
=========== ============ =========== ============ ============== ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES --
Accounts payable and accrued liabilities $9,298 $5,968 $5,230 $695 ($2,303)a,b $18,888
Due to affiliates 11,279 1,238 357 (12,874)b
Current portion of long-term debt 18,398 2,520 1,017 21,935
Current portion of accrued construction
costs 3,454 3,454
Deferred membership dues revenue 10,938 6,637 1,047 18,622
----------- ------------ ----------- ------------ -------------- ------------
Total current liabilities 38,975 19,426 17,576 2,099 (15,177) 62,899
Notes payable to parent 1 33,503 (33,504)c
Long term debt 97,092 838 378 98,308
Other liabilities 854 1,906 2,594 (854)a 4,500
----------- ------------ ----------- ------------ -------------- ------------
Total liabilities 136,921 22,171 54,051 2,099 (49,535) 165,707
----------- ------------ ----------- ------------ -------------- ------------
STOCKHOLDERS' EQUITY (DEFICIT) (29,840) 28,989 (19,202) 2,059 (11,827) (29,821)
----------- ------------ ----------- ------------ -------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $107,081 $51,160 $34,849 $4,158 ($61,362) $135,886
=========== ============ =========== ============ ============== ============
</TABLE>
a Entry to eliminate the dealer holdback liability to subsidiaries.
b Entry to eliminate other intercompany accounts.
c Entry to eliminate intercompany debt and related interest.
d Entry to record subsidiaries' results on a consolidated basis.
e Includes Wilderness Management assets of $325,000.
Page 68
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND ELIMI-
USTRAILS TRAILS NACO WILDERNESS(D) NATIONS 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 real estate sales 2,028 1,959 3,987
Interest income $6,445 3,446 1,219 267 ($4,621)a 6,756
Income from subsidiaries 9,254 (9,254)c
Other income 66 4,669 10,977 4,585 (1,256)b 19,041
----------- ---------- -------- ---------------- ----------- -------------
Total Revenue 15,765 45,054 40,636 5,672 (15,131) 91,996
----------- ---------- -------- ---------------- ----------- -------------
EXPENSES
Campground/resort operating expenses 25,647 23,865 796 50,308
Selling and marketing 3,652 1,715 5,367
Interest expense 17,346 146 4,822 (4,621)a 17,693
General and administrative 1,604 3,813 6,312 (1,256)b,c 10,473
Restructuring costs 1,124 1,124
Other expenses 3,721 585 2,237 6,543
----------- ---------- -------- ---------------- ----------- -------------
Total Expenses 20,074 36,979 37,299 3,033 (5,877) 91,508
----------- ---------- -------- ---------------- ----------- -------------
Operating income (loss) (4,309) 8,075 3,337 2,639 (9,254) 488
Income tax (provision) benefit 4,756 (3,471) (77) (1,249) (41)
Extraordinary gain 1,390 1,390
----------- ---------- -------- ---------------- ----------- -------------
Net Income (Loss) $1,837 $4,604 $3,260 $1,390 ($9,254) $1,837
=========== ========== ======== ================ =========== =============
</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 69
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND ELIMI-
USTRAILS TRAILS NACO WILDERNESS(D) NATIONS TOTAL
------------ ---------- --------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Membership dues and other
campground/resort revenue $36,261 $28,385 $554 ($519)a $64,681
Membership and real estate sales 1,102 3,126 4,228
Interest income $8,509 3,961 1,698 188 (4,421)b 9,935
Other income 660 1,891 7,155 4,845 (1,849)a 12,702
------------ ---------- --------- ---------------- ------------ ---------------
Total Revenue 9,169 43,215 40,364 5,587 (6,789) 91,546
------------ ---------- --------- ---------------- ------------ ---------------
EXPENSES
Campground/resort operating
expenses 29,789 27,214 613 (519)a,c 57,097
Selling and marketing 3,371 3,000 6,371
Interest expense 20,370 449 4,562 (4,421)b 20,960
General and administrative 2,239 4,777 6,951 (1,849)a,c 12,118
Restructuring costs 124 308 205 637
Loss from subsidiaries 926 (926)c
Other expenses 2,231 1,074 2,726 6,031
------------ ---------- --------- ---------------- ------------ ---------------
Total Expenses 23,659 40,925 43,006 3,339 (7,715) 103,214
------------ ---------- --------- ---------------- ------------ ---------------
Operating income (loss) (14,490) 2,290 (2,642) 2,248 926 (11,668)
Income tax (provision) benefit 2,567 (1,656) (38) (1,128) (255)
------------ ---------- --------- ---------------- ------------ ---------------
Net Income (Loss) ($11,923) $634 ($2,680) $1,120 $926 ($11,923)
============ ========== ========= ================ ============ ===============
</TABLE>
a Entry to eliminate servicing fee income earned on affiliate receivable
portfolios.
b Entry to eliminate intercompany interest.
c Entry to record subsidiaries' results on a consolidated basis.
d Includes Wilderness Management revenues and expenses of $554,000 and
$613,000, respectively.
Page 70
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1994
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND ELIMI-
USTRAILS TRAILS NACO WILDERNESS(D) NATIONS TOTAL
------------- ------------ ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Membership dues and other
campground/resort revenue $36,873 $30,153 $153 ($455)a $66,724
Membership and real estate sales 978 2,997 3,975
Interest income $10,039 4,899 2,409 (5,145)b 12,202
Income from subsidiaries 4,414 (4,414)c
Other income 38 4,219 10,636 5,286 (2,158)a 18,021
------------- ------------ ------------ ------------ ------------- --------------
Total Revenue 14,491 46,969 46,195 5,439 (12,172) 100,922
------------- ------------ ------------ ------------ ------------- --------------
EXPENSES
Campground/resort operating expenses 28,210 27,644 270 (455)a,c 55,669
Selling and marketing 1,752 2,429 4,181
Interest expense 20,624 1,426 4,541 (5,145)b 21,446
General and administrative 2,784 5,077 6,700 (2,158)a,c 12,403
Restructuring costs 1,101 1,285 927 3,313
Other expenses 6,037 785 3,055 9,877
------------- ------------ ------------ ------------ ------------- --------------
Total Expenses 24,509 43,787 43,026 3,325 (7,758) 106,889
------------- ------------ ------------ ------------ ------------- --------------
Operating income (loss) (10,018) 3,182 3,169 2,114 (4,414) (5,967)
Income tax (provision) benefit 3,301 (2,051) (374) (1,301) (425)
Minority interest (325)c (325)
------------- ------------ ------------ ------------ ------------- --------------
Net income (loss) before extraordinary
item (6,717) 1,131 2,795 813 (4,739) (6,717)
Extraordinary gain 671 671
------------- ------------ ------------ ------------ ------------- --------------
Net Income (Loss) ($6,046) $1,131 $2,795 $813 ($4,739) ($6,046)
============= ============ ============ ============ ============= ==============
</TABLE>
a Entry to eliminate servicing fee income earned on affiliate receivable
portfolios.
b Entry to eliminate intercompany interest.
c Entry to record subsidiaries' results on a consolidated basis and
reflect minority interest.
d Includes Wilderness Management revenues and expenses of $153,000 and
$270,000, respectively.
Page 71
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND
USTRAILS TRAILS NACO WILDERNESS TOTAL
----------- ---------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Collections of receivables $5,306 $5,106 $1,839 $12,251
Interest received 1,577 3,446 912 $267 6,202
Interest paid (14,174) (146) (225) (14,545)
Intercompany interest 4,621 (4,621)
Receipts from sales and operations 66 39,329 32,084 5,530 77,009
Management fees, net (597) 3,561 (2,964)
Refund of excess dealer holdback (1,925) 496 1,429
Deposit for Letter of Credit (1,500) (1,500)
Expenditures for:
Property operations (24,467) (22,121) (3,039) (49,627)
Sales and marketing (3,649) (1,721) (5,370)
General and administrative (2,065) (7,466) (4,296) (13,827)
Insurance premiums (155) (2,836) (2,185) (5,176)
Income tax refund (payment) 4,756 (3,471) (77) (1,249) (41)
Other, net (851) 1,069 3 221
----------- ---------- ---------- -------------- ---------
Net operating activities (4,941) 10,972 (1,943) 1,509 5,597
----------- ---------- ---------- -------------- ---------
INVESTING ACTIVITIES:
Capital and HUD-related expenditures (155) (851) (16) (1,022)
Proceeds from the sale of assets 3 308 6,916 12 7,239
----------- ---------- ---------- -------------- ---------
Net investing activities 3 153 6,065 (4) 6,217
----------- ---------- ---------- -------------- ---------
FINANCING ACTIVITIES:
Mandatory redemption of Secured Notes (18,599) (18,599)
Repurchase of Secured Notes (5,275) (5,275)
Repayments of intercompany debt, net 4,087 (4,087)
Advances to parent 12,756 (11,298) (1,458)
Repayments of notes payable (262) (871) (1,133)
----------- ---------- ---------- -------------- ---------
Net financing activities (7,031) (11,560) (4,958) (1,458) (25,007)
----------- ---------- ---------- -------------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (11,969) (435) (836) 47 (13,193)
CASH AND CASH EQUIVALENTS:
Beginning of year 49,267 435 852 42 50,596
---------- ---------- ---------- -------------- ---------
End of year $37,298 $0 $16 $89 $37,403
========== ========== ========== ============== =========
</TABLE>
Page 72
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND
USTRAILS TRAILS NACO WILDERNESS TOTAL
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Collections of receivables $8,133 $6,550 $1,995 $16,678
Interest received 4,020 3,969 1,281 9,270
Interest paid (15,290) (440) (143) (15,873)
Intercompany interest 4,421 (9) (4,412)
Receipts from sales and operations 37 39,370 36,181 $5,679 81,267
Management fees, net (331) 2,788 (2,457)
Refund of excess dealer holdback (1,729) 1,729
Expenditures for:
Property operations (27,316) (25,855) (3,597) (56,768)
Sales and marketing (2,723) (2,922) (5,645)
General and administrative (2,640) (9,703) (5,890) (18,233)
Insurance premiums (217) (2,484) (1,830) (22) (4,553)
Income tax refund (payment) 2,795 (1,840) (62) (1,149) (256)
Other, net (33) (756) 1,009 (220)
---------- ---------- ---------- ------------ ----------
Net operating activities (834) 7,406 (1,376) 691 5,887
---------- ---------- ---------- ------------ ----------
INVESTING ACTIVITIES:
Capital and HUD-related expenditures (30) (2,765) (2,885) (52) (5,732)
Proceeds from the sale of assets 9 91 1,032 1,132
---------- ---------- ---------- ------------ ----------
Net investing activities (21) (2,674) (1,853) (52) (4,600)
---------- ---------- ---------- ------------ ----------
FINANCING ACTIVITIES:
Repayments of intercompany debt, net (3,425) 3,425
Advances to parent 4,588 (4,106) 161 (643)
Repayments of notes payable (308) (61) (369)
Retirement of capital lease (381) (381)
---------- ---------- ---------- ------------ ----------
Net financing activities 1,163 (4,795) 3,525 (643) (750)
---------- ---------- ---------- ------------ ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 308 (63) 296 (4) 537
CASH AND CASH EQUIVALENTS:
Beginning of year 48,959 498 556 46 50,059
---------- ---------- ---------- ------------ ----------
End of year $49,267 $435 $852 $42 $50,596
========== ========== ========== ============ ==========
</TABLE>
Page 73
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1994
(dollars in thousands)
<TABLE>
<CAPTION>
RPI AND
USTRAILS TRAILS NACO WILDERNESS TOTAL
---------- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Collections of receivables $15,142 $8,374 $2,740 $26,256
Interest received 4,738 4,087 1,391 10,216
Interest paid (16,961) (628) (209) (17,798)
Intercompany interest 5,152 (790) (4,362)
Receipts from sales and operations 39,692 34,243 $5,495 79,430
Management fees, net (981) 2,250 (1,269)
Expenditures for:
Property operations (24,948) (24,933) (3,074) (52,955)
Sales and marketing (2,907) (1,306) (4,213)
General and administrative (3,838) (7,111) (6,417) (17,366)
Insurance premiums (14) (2,350) (2,647) (2) (5,013)
Income tax refund (payment) 4,410 (3,071) (162) (1,420) (243)
Other, net 240 109 578 927
---------- ---------- --------- ------------ -----------
Net operating activities 7,888 12,707 (2,353) 999 19,241
---------- ---------- --------- ------------ -----------
INVESTING ACTIVITIES:
Capital and HUD-related expenditures (140) (1,450) (2,927) (31) (4,548)
Proceeds from the sale of assets 4,167 6,227 10,394
Acquisition of remaining 20% minority
interest in Trails (7,497) (7,497)
---------- ---------- --------- ------------ -----------
Net investing activities (7,637) 2,717 3,300 (31) (1,651)
---------- ---------- --------- ------------ -----------
FINANCING ACTIVITIES:
Repayments of intercompany debt, net 10,546 (10,168) (378)
Advances to parent 4,699 (3,765) (934)
Repayments of notes payable (1,480) (800) (2,280)
Repurchase of Secured Notes (8,000) (8,000)
Payment of consent fees to Secured
Noteholders (1,610) (1,610)
---------- ---------- --------- ------------ -----------
Net financing activities 5,635 (15,413) (1,178) (934) (11,890)
---------- ---------- --------- ------------ -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
5,886 11 (231) 34 5,700
CASH AND CASH EQUIVALENTS:
Beginning of year 43,073 487 787 12 44,359
---------- ---------- --------- ------------ -----------
End of year $48,959 $498 $556 $46 $50,059
========== ========== ========= ============ ===========
</TABLE>
Page 74
<PAGE>
SCHEDULE II
USTRAILS INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Description:
Balance at the Balance at
Valuation and qualifying beginning of the end of
accounts deducted from assets Year ended the year Additions Deductions the year
- ------------------------------- ---------- -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts 6/30/96 $13,806 $24 $7,540 a $6,290
6/30/95 17,495 546 b 4,235 13,806
6/30/94 26,710 1,122 c 10,337 17,495
Allowance for uncollectible dues 6/30/96 $4,008 $4,754 d $4,096 $4,666
receivable 6/30/95 4,611 4,400 5,003 4,008
6/30/94 4,045 4,050 d 3,484 4,611
Allowance for interest discount, 6/30/96 $2,882 $0 $1,120 $1,762
collection costs and valuation 6/30/95 4,333 550 e 2,001 f 2,882
discount 6/30/94 6,711 0 2,378 4,333
Deferred tax valuation allowance 6/30/96 $18,340 $5,532 $0 $23,872
6/30/95 15,548 2,792 0 18,340
6/30/94 6,754 8,794 0 15,548
Other
- -----
Accrued resort disposition costs 6/30/94 $3,753 $0 $3,753 g $0
</TABLE>
a Includes a reduction in the allowance for doubtful accounts of $5,146.
b Includes an allowance for doubtful accounts of $523 recorded in connection
with the repurchase of contracts receivable from a third party.
c Includes an increase in the allowance for doubtful accounts of $1,000.
d Includes a reduction in the allowance for uncollectible dues receivable of
$1,000.
e Represents a valuation allowance of $550 recorded in connection with the
repurchase of contracts receivable from a third party.
f Includes a reduction in the allowance for collection costs of $540.
g Includes the reversal of accrued resort disposition costs of $3,135.
Page 75
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Page 76
<PAGE>
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 1996 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 1996 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 1996 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 1996 Annual Meeting of Stockholders, which will be filed with the
SEC pursuant to Regulation 14A, and is hereby incorporated by reference.
Page 77
<PAGE>
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, 1996,
1995 and 1994.
Consolidated Balance Sheets as of June 30, 1996 and 1995, and Pro Forma
June 30, 1996, as if the Restructuring completed on July 17, 1996 had
occurred on June 30, 1996.
Consolidated Statements of Operations for the years ended June 30, 1996,
1995 and 1994.
Consolidated Statements of Stockholders' Deficit for the years ended
June 30, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1995 and 1994.
Notes to Consolidated Financial Statements.
Schedule II Valuation and Qualifying Accounts
(B) 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).
2.2 Exchange Agreement, dated as of June 11, 1992,
between the Company and certain holders of Trails'
14 5/8% Senior Subordinated Notes (incorporated by
reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K filed with the SEC on June 25, 1992).
2.3 Agreement and Plan of Merger, dated as of August
2, 1993, among the Company, Trails Acquisition,
Inc., and Trails, as amended (incorporated by
reference to Exhibit (c)(1) to the Rule 13E-3
Transaction Statement on Schedule 13E-3 that the
Company, Trails Acquisition, Inc., and Trails
originally filed with the SEC on December 2, 1993).
Page 78
<PAGE>
2.4 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).
2.5 Supplement to the Offer to Purchase, dated June 21,
1996.
2.6 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").
2.7 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.
2.8 Supplement to the Private Placement Memorandum, dated
July 15, 1996.
3.1 Amended and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1992).
3.2 Amended and Restated By-Laws of the Company (as amended
on July 15, 1996).
4.1 Indenture, dated as of July 15, 1991, between the
Company and Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National
Bank, as Trustee (incorporated by reference to Exhibit
T3C to the Company's Form T-3 No. 22-21449 filed with
the SEC on November 19, 1991, as amended).
4.2 First Supplemental Indenture, dated as of December 31,
1991, between the Company and Shawmut Bank Connecticut,
National Association (formerly known as The Connecticut
National Bank), as Trustee (incorporated by reference to
Exhibit 4.4 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1992).
4.3 Second Supplemental Indenture, dated as of June 12,
1992, between the Company and Shawmut Bank Connecticut,
National Association (formerly known as The Connecticut
National Bank), as Trustee (incorporated by reference to
Exhibit 4.5 to the Company's Current Report on Form 8-K
filed with the SEC on June 25, 1992).
4.4 Third Supplemental Indenture, dated as of May 20, 1993,
between the Company and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by
reference to Exhibit 4.19 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed
with the SEC on January 15, 1993).
4.5 Fourth Supplemental Indenture, dated as of September 13,
1993, between the Company and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the SEC on September 16, 1993).
Page 79
<PAGE>
4.6 Fifth Supplemental Indenture, dated as of March 28,
1994, between the Company and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the SEC on April 11, 1994).
4.7 Sixth Supplemental Indenture, dated as of March 29,
1994, between the Company and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by
reference to Exhibit 4.5 to the Company's Current Report
on Form 8-K filed with the SEC on April 11, 1994).
4.8 Seventh Supplemental Indenture, dated as of June 22,
1995, between the Company and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Current Report
on Form 8-K filed with the SEC on June 23, 1995).
4.9 Guaranty, dated as of July 15, 1991, pursuant to which
certain subsidiaries of the Company guaranteed the
Secured Notes (incorporated by reference to Exhibit 4.12
to the Company's Annual Report on Form 10-K for the year
ended June 30, 1992).
4.10 Undertaking of Guaranty and Security Agreement, dated as
of January 5, 1993, by ACI Campgrounds, Ltd. and
Wilderness Management (formerly known as UST1 Inc.)
(incorporated by reference to Exhibit 4.17 to the
Company's Registration Statement No. 33-571261 on
Form S-2, originally filed with the SEC on January 15,
1993).
4.11 Release From Guaranty, dated as of May 31, 1993, among
certain subsidiaries of the Company and Shawmut Bank
Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 4.25 to the
Company's Registration Statement No. 33-571261 on
Form S-2, originally filed with the SEC on January 15,
1993).
4.12 First Supplement and Amendment to the Subsidiary
Guaranty, dated as of March 29, 1994, among the debtors
signatory thereto and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by reference to
Exhibit 4.5 to the Company's Current Report on Form 8-K
filed with the SEC on April 11, 1994).
4.13 Security Agreement, dated as of July 15, 1991, pursuant
to which certain subsidiaries of the Company granted the
Trustee under the Indenture security interests in
substantially all of their assets (incorporated by
reference to Exhibit 4.13 to the Company's Annual Report
on Form 10-K for the year ended June 30, 1992).
4.14 First Amendment to Security Agreement, dated as of June
12, 1992, among the debtors signatory thereto and
Shawmut Bank Connecticut, National Association (formerly
known as The Connecticut National Bank), as Trustee
(incorporated by reference to Exhibit 4.17 to the
Company's Annual Report on Form 10-K for the year ended
June 30, 1992).
4.15 Second Supplement and Amendment to Security Agreement,
dated as of May 20, 1993, among the debtors signatory
thereto and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by reference to
Exhibit 4.20 to the Company's Registration Statement No.
33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993).
Page 80
<PAGE>
4.16 Release under Indenture and Security Agreement, dated as of May
31, 1993, among the debtors signatory thereto and Shawmut Bank
Connecticut, National Association, as Trustee (incorporated by
reference to Exhibit 4.26 to the Company's Registration Statement
No. 33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993).
4.17 Third Supplement and Amendment to Security Agreement, dated as of
March 29, 1994, among the debtors signatory thereto and Shawmut
Bank Connecticut, National Association, as Trustee (incorporated
by reference to Exhibit 4.7 to the Company's Current Report on
Form 8-K filed with the SEC on April 11, 1994).
4.18 Form of Mortgage, dated as of December 31, 1991, to grant liens
to Shawmut Bank Connecticut, National Association (formerly known
as The Connecticut National Bank), as Trustee, to secure the
Company's obligations under the Indenture (incorporated by
reference to Exhibit 4.6 to the Company's Annual Report on Form
10-K for the year ended June 30, 1992), and schedule of documents
substantially identical to the Form of Mortgage (incorporated by
reference to Exhibit 4.21 to the Company's Registration Statement
No. 33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993).
4.19 Form of Collateral Transfer of Liens and Security Interests,
dated as of December 31, 1991, transferring the liens securing
certain indebtedness that NACO owes to the Company to the Trustee
under the Indenture (incorporated by reference to Exhibit 4.10 to
the Company's Annual Report on Form 10-K for the year ended June
30, 1992), and schedule of documents substantially identical to
the Form of Collateral Transfer of Liens and Security Interests
(incorporated by reference to Exhibit 4.23 to the Company's
Registration Statement No. 33-571261 on Form S-2, originally
filed with the SEC on January 15, 1993).
4.20 Form of Collateral Transfer of Liens and Security Interests,
dated as of December 31, 1991, transferring the liens securing
certain indebtedness that Trails owes to the Company to the
Trustee under the Indenture and schedule of documents
substantially identical to the form of Collateral Transfer of
Liens and Security Interests (incorporated by reference to
Exhibit 4.11 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
4.21 Form of Subordination Agreement, dated as of December 31, 1991,
between the Company and Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National Bank), as
Trustee, subordinating the security interests under the credit
agreement between the Company and NACO to the security interests
under the Indenture (incorporated by reference to Exhibit 4.9 to
the Company's Annual Report on Form 10-K for the year ended June
30, 1992), and schedule of documents substantially identical to
the Form of Subordination Agreement (incorporated by reference to
Exhibit 4.22 to the Company's Registration Statement No. 33-
571261 on Form S-2, originally filed with the SEC on January 15,
1993).
Page 81
<PAGE>
4.22 Form of Deed of Trust and Security Agreement (With Assignment of
Rents and Leases and UCC Financing Statement for Fixture Filing)
granting a beneficial security interest in certain property to
Shawmut Bank Connecticut, National Association, as Trustee, to
secure the performance of certain guarantees and schedule of
substantially identical documents (incorporated by reference to
Exhibit 4.8 to the Company's Current Report on Form 8-K filed
with the SEC on April 11, 1994).
4.23 Form of Subordination Agreement between the Company and Shawmut
Bank Connecticut, National Association, as Trustee, subordinating
the security interests under the credit agreement between the
Company and Trails to the security interests under the Indenture
and schedule of substantially identical documents (incorporated
by reference to Exhibit 4.9 to the Company's Current Report on
Form 8-K filed with the SEC on April 11, 1994).
4.24 Form of First Amendment to Deed of Trust and Security Agreement
amending certain terms of a Deed of Trust and Security Agreement
that previously granted a beneficial security interest in certain
property to Shawmut Bank Connecticut, National Association, as
Trustee, to secure the performance of certain guarantees and
schedule of substantially identical documents (incorporated by
reference to Exhibit 4.10 to the Company's Current Report on Form
8-K filed with the SEC on April 11, 1994).
4.25 Concentration Bank Agreement, dated as of December 27, 1991,
among the Company, The Bank of California, N.A., and Shawmut Bank
Connecticut, National Association (formerly known as The
Connecticut National Bank), as Trustee (incorporated by reference
to Exhibit 10.24 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1992).
4.26 Amendment No. 1 to the Concentration Bank Agreement, dated as of
March 28, 1994, among the Company, The Bank of California, N.A.,
and Shawmut Bank Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed with the SEC on April 11, 1994).
4.27 Collection Bank Agreement, dated as of December 31, 1991, between
the Company, The Bank of California, N.A., and Shawmut Bank
Connecticut, National Association (formerly known as The
Connecticut National Bank), as Trustee, and schedule of
substantially identical documents (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
4.28 Amendment No. 1 to the Collection Bank Agreement, dated as of
March 28, 1994, among the Company, The Bank of California, N.A.,
and Shawmut Bank Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 4.3 to the Company's
Current Report on Form 8-K filed with the SEC on April 11, 1994).
4.29 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).
Page 82
<PAGE>
4.30 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).
4.31 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) 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).
4.32 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).
4.33 Registration Rights Agreement, dated as of December 31, 1991,
regarding the Company's Secured Notes and other securities
(incorporated by reference to Exhibit 4.8 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1992).
4.34 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.
4.35 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).
4.36 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.
4.37 Form of Senior Subordinated Pay-In-Kind Note Due 2003.
4.38 Registration Rights Agreement, dated as of July 17, 1996, between
the Company and Fleet National Bank as Trustee.
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).
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).
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).
Page 83
<PAGE>
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).
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).
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).
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).
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).
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).
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).
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), 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).
Page 84
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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).
10.13 Credit Agreement, dated as of December 31, 1991, between the
Company and Trails (incorporated by reference to Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the year ended June
30, 1992).
10.14 Amendment No. 1 to Credit Agreement, dated as of June 12, 1992,
between the Company and Trails (incorporated by reference to
Exhibit 10.35 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
10.15 Amended and Restated Revolving Credit Note, originally dated as
of December 31, 1991, between the Company and Trails
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992).
10.16 Amended and Restated Guaranty, dated as of June 12, 1992,
pursuant to which the subsidiaries of Trails guaranteed certain
amounts that Trails owes the Company (incorporated by reference
to Exhibit 10.16 to the Company's Registration Statement No. 33-
73284 on Form S-2, originally filed with the SEC on December 22,
1993).
10.17 Amended and Restated Security Agreement, originally dated as of
December 31, 1991, between the Company and Trails (incorporated
by reference to Exhibit 10.37 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992).
10.18 Form of Mortgage, as amended, from Trails and its subsidiaries to
the Company pursuant to the credit agreement between the Company
and Trails, and schedule of documents substantially identical to
the Form of Mortgage (incorporated by reference to Exhibit 10.38
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1992).
10.19 Loan and Security Agreement, dated as of July 10, 1996, between
the Company and Foothill Capital Corporation.
10.20 Secured Promissory Note (Account Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation.
10.21 Secured Promissory Note (Term Note), dated July 10, 1996, between
the Company and Foothill Capital Corporation.
10.22 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.
10.23 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.
Page 85
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10.24 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.
10.25 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.
10.26 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).
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).
10.28 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).
10.29 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).
10.30 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.
10.31 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), 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).
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<PAGE>
10.32 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), 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), 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).
10.33 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), and amendment dated December 7, 1995 (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1995).
10.34 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).
10.35 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), 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).
10.36 Indemnification Agreement, dated as of September 1, 1995, between
Trails and William J. Shaw, and schedule of substantially
identical Indemnification Agreements.
10.37 Indemnification Agreement, dated as of September 1, 1995, between
NACO and William J. Shaw, and schedule of substantially identical
Indemnification Agreements.
10.38 Indemnification Agreement, dated as of May 8, 1991, between the
Company and Donald W. Hair, and schedule of substantially
identical Indemnification Agreements.
10.39 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).
10.40 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).
Page 87
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10.41 Grantor Trust Agreement, dated as of September 30, 1991, between
The Bank of California, N.A. and Trails (incorporated by
reference from Trails' Annual Report on Form 10-K for the year
ended June 30, 1992, File No. 0-9246).
10.42 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).
10.43 Grantor Trust Agreement, dated May 8, 1991, between the Company
and Texas Commerce Bank, N.A. (incorporated by reference to
Exhibit 10.41 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
10.44 Supplement and Succession Agreement to Grantor Trust Agreement,
dated as of October 13, 1992, among The Bank of California, N.A.,
Texas Commerce Bank, National Association, 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).
10.45 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).
10.46 USTrails 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).
10.47 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).
10.48 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).
10.49 Amended and Restated Tax Allocation Agreement, dated as of March
31, 1994, between the Company and Trails (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on Form
10-K for the year ended June 30, 1994).
10.50 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).
10.51 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).
10.52 Sample form of current Membership Contract.
Page 88
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21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
(C) REPORTS ON FORM 8-K
On June 7, 1996, the Company filed a Current Report on Form 8-K relating to a
proposed restructuring of its outstanding Secured Notes involving a cash tender
offer for certain Secured Notes and a private exchange of certain Secured Notes
for cash and securities. On June 15, 1996, the Company filed an amendment to
this Current Report on Form 8-K adding as an exhibit thereto a copy of the Offer
to Purchase for Cash, dated June 5, 1996.
On June 25, 1996, the Company filed a Current Report on Form 8-K relating to an
increase in the consideration offered to the holders of the Secured Notes in the
cash tender offer and private exchange.
On July 25, 1996, the Company filed a Current Report on Form 8-K relating to the
consummation of the Restructuring pursuant to which all of the outstanding
Secured Notes were retired.
Page 89
<PAGE>
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.
USTRAILS INC.
(Registrant)
Date: September 26, 1996 By: s/William J. Shaw
---------------------------------------------
William J. Shaw
Chairman of the Board, President
and Chief Executive Officer
Date: September 26, 1996 By: s/Harry J. White, Jr.
---------------------------------------------
Harry J. White, Jr.
Vice President, Chief Accounting Officer,
Chief Financial Officer, and Treasurer
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 26, 1996
- ----------------------
Andrew M. Boas
s/William P. Kovacs Director September 26, 1996
- ----------------------
William P. Kovacs
s/Donald R. Leopold Director September 26, 1996
- ----------------------
Donald R. Leopold
s/H. Sean Mathis Director September 26, 1996
- ----------------------
H. Sean Mathis
s/Douglas K. Nelson Director September 26, 1996
- ----------------------
Douglas K. Nelson
s/William J. Shaw Chairman of September 26, 1996
- ----------------- the Board
William J. Shaw
Page 90
<PAGE>
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).
2.2 Exchange Agreement, dated as of June 11, 1992, between the
Company and certain holders of Trails' 14 5/8% Senior
Subordinated Notes (incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K filed with the SEC on
June 25, 1992).
2.3 Agreement and Plan of Merger, dated as of August 2, 1993, among
the Company, Trails Acquisition, Inc., and Trails, as amended
(incorporated by reference to Exhibit (c)(1) to the Rule 13E-3
Transaction Statement on Schedule 13E-3 that the Company, Trails
Acquisition, Inc., and Trails originally filed with the SEC on
December 2, 1993).
2.4 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).
2.5 Supplement to the Offer to Purchase, dated June 21, 1996.
2.6 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").
2.7 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.
2.8 Supplement to the Private Placement Memorandum, dated July 15,
1996.
3.1 Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1992).
3.2 Amended and Restated By-Laws of the Company (as amended on July
15, 1996).
4.1 Indenture, dated as of July 15, 1991, between the Company and
Shawmut Bank Connecticut, National Association (formerly known as
The Connecticut National Bank, as Trustee (incorporated by
reference to Exhibit T3C to the Company's Form T-3 No. 22-21449
filed with the SEC on November 19, 1991, as amended).
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<PAGE>
4.2 First Supplemental Indenture, dated as of December 31, 1991,
between the Company and Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National Bank), as
Trustee (incorporated by reference to Exhibit 4.4 to the
Company's Annual Report on Form 10-K for the year ended June 30,
1992).
4.3 Second Supplemental Indenture, dated as of June 12, 1992, between
the Company and Shawmut Bank Connecticut, National Association
(formerly known as The Connecticut National Bank), as Trustee
(incorporated by reference to Exhibit 4.5 to the Company's
Current Report on Form 8-K filed with the SEC on June 25, 1992).
4.4 Third Supplemental Indenture, dated as of May 20, 1993, between
the Company and Shawmut Bank Connecticut, National Association,
as Trustee (incorporated by reference to Exhibit 4.19 to the
Company's Registration Statement No. 33-571261 on Form S-2,
originally filed with the SEC on January 15, 1993).
4.5 Fourth Supplemental Indenture, dated as of September 13, 1993,
between the Company and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K filed with the SEC on
September 16, 1993).
4.6 Fifth Supplemental Indenture, dated as of March 28, 1994, between
the Company and Shawmut Bank Connecticut, National Association,
as Trustee (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed with the SEC on April
11, 1994).
4.7 Sixth Supplemental Indenture, dated as of March 29, 1994, between
the Company and Shawmut Bank Connecticut, National Association,
as Trustee (incorporated by reference to Exhibit 4.5 to the
Company's Current Report on Form 8-K filed with the SEC on April
11, 1994).
4.8 Seventh Supplemental Indenture, dated as of June 22, 1995,
between the Company and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K filed with the SEC on
June 23, 1995).
4.9 Guaranty, dated as of July 15, 1991, pursuant to which certain
subsidiaries of the Company guaranteed the Secured Notes
(incorporated by reference to Exhibit 4.12 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992).
4.10 Undertaking of Guaranty and Security Agreement, dated as of
January 5, 1993, by ACI Campgrounds, Ltd. and Wilderness
Management (formerly known as UST1 Inc.) (incorporated by
reference to Exhibit 4.17 to the Company's Registration Statement
No. 33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993).
4.11 Release From Guaranty, dated as of May 31, 1993, among certain
subsidiaries of the Company and Shawmut Bank Connecticut,
National Association, as Trustee (incorporated by reference to
Exhibit 4.25 to the Company's Registration Statement No. 33-
571261 on Form S-2, originally filed with the SEC on January 15,
1993).
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<PAGE>
4.12 First Supplement and Amendment to the Subsidiary Guaranty, dated
as of March 29, 1994, among the debtors signatory thereto and
Shawmut Bank Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 4.5 to the Company's
Current Report on Form 8-K filed with the SEC on April 11, 1994).
4.13 Security Agreement, dated as of July 15, 1991, pursuant to which
certain subsidiaries of the Company granted the Trustee under the
Indenture security interests in substantially all of their assets
(incorporated by reference to Exhibit 4.13 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992).
4.14 First Amendment to Security Agreement, dated as of June 12, 1992,
among the debtors signatory thereto and Shawmut Bank Connecticut,
National Association (formerly known as The Connecticut National
Bank), as Trustee (incorporated by reference to Exhibit 4.17 to
the Company's Annual Report on Form 10-K for the year ended June
30, 1992).
4.15 Second Supplement and Amendment to Security Agreement, dated as
of May 20, 1993, among the debtors signatory thereto and Shawmut
Bank Connecticut, National Association, as Trustee (incorporated
by reference to Exhibit 4.20 to the Company's Registration
Statement No. 33-571261 on Form S-2, originally filed with the
SEC on January 15, 1993).
4.16 Release under Indenture and Security Agreement, dated as of May
31, 1993, among the debtors signatory thereto and Shawmut Bank
Connecticut, National Association, as Trustee (incorporated by
reference to Exhibit 4.26 to the Company's Registration Statement
No. 33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993).
4.17 Third Supplement and Amendment to Security Agreement, dated as of
March 29, 1994, among the debtors signatory thereto and Shawmut
Bank Connecticut, National Association, as Trustee (incorporated
by reference to Exhibit 4.7 to the Company's Current Report on
Form 8-K filed with the SEC on April 11, 1994).
4.18 Form of Mortgage, dated as of December 31, 1991, to grant liens
to Shawmut Bank Connecticut, National Association (formerly known
as The Connecticut National Bank), as Trustee, to secure the
Company's obligations under the Indenture (incorporated by
reference to Exhibit 4.6 to the Company's Annual Report on Form
10-K for the year ended June 30, 1992), and schedule of documents
substantially identical to the Form of Mortgage (incorporated by
reference to Exhibit 4.21 to the Company's Registration Statement
No. 33-571261 on Form S-2, originally filed with the SEC on
January 15, 1993).
4.19 Form of Collateral Transfer of Liens and Security Interests,
dated as of December 31, 1991, transferring the liens securing
certain indebtedness that NACO owes to the Company to the Trustee
under the Indenture (incorporated by reference to Exhibit 4.10 to
the Company's Annual Report on Form 10-K for the year ended June
30, 1992), and schedule of documents substantially identical to
the Form of Collateral Transfer of Liens and Security Interests
(incorporated by reference to Exhibit 4.23 to the Company's
Registration Statement No. 33-571261 on Form S-2, originally
filed with the SEC on January 15, 1993).
Page 93
<PAGE>
4.20 Form of Collateral Transfer of Liens and Security Interests,
dated as of December 31, 1991, transferring the liens securing
certain indebtedness that Trails owes to the Company to the
Trustee under the Indenture and schedule of documents
substantially identical to the form of Collateral Transfer of
Liens and Security Interests (incorporated by reference to
Exhibit 4.11 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
4.21 Form of Subordination Agreement, dated as of December 31, 1991,
between the Company and Shawmut Bank Connecticut, National
Association (formerly known as The Connecticut National Bank), as
Trustee, subordinating the security interests under the credit
agreement between the Company and NACO to the security interests
under the Indenture (incorporated by reference to Exhibit 4.9 to
the Company's Annual Report on Form 10-K for the year ended June
30, 1992), and schedule of documents substantially identical to
the Form of Subordination Agreement (incorporated by reference to
Exhibit 4.22 to the Company's Registration Statement No. 33-
571261 on Form S-2, originally filed with the SEC on January 15,
1993).
4.22 Form of Deed of Trust and Security Agreement (With Assignment of
Rents and Leases and UCC Financing Statement for Fixture Filing)
granting a beneficial security interest in certain property to
Shawmut Bank Connecticut, National Association, as Trustee, to
secure the performance of certain guarantees and schedule of
substantially identical documents (incorporated by reference to
Exhibit 4.8 to the Company's Current Report on Form 8-K filed
with the SEC on April 11, 1994).
4.23 Form of Subordination Agreement between the Company and Shawmut
Bank Connecticut, National Association, as Trustee, subordinating
the security interests under the credit agreement between the
Company and Trails to the security interests under the Indenture
and schedule of substantially identical documents (incorporated
by reference to Exhibit 4.9 to the Company's Current Report on
Form 8-K filed with the SEC on April 11, 1994).
4.24 Form of First Amendment to Deed of Trust and Security Agreement
amending certain terms of a Deed of Trust and Security Agreement
that previously granted a beneficial security interest in certain
property to Shawmut Bank Connecticut, National Association, as
Trustee, to secure the performance of certain guarantees and
schedule of substantially identical documents (incorporated by
reference to Exhibit 4.10 to the Company's Current Report on Form
8-K filed with the SEC on April 11, 1994).
4.25 Concentration Bank Agreement, dated as of December 27, 1991,
among the Company, The Bank of California, N.A., and Shawmut Bank
Connecticut, National Association (formerly known as The
Connecticut National Bank), as Trustee (incorporated by reference
to Exhibit 10.24 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1992).
4.26 Amendment No. 1 to the Concentration Bank Agreement, dated as of
March 28, 1994, among the Company, The Bank of California, N.A.,
and Shawmut Bank Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed with the SEC on April 11, 1994).
Page 94
<PAGE>
4.27 Collection Bank Agreement, dated as of December 31, 1991, between
the Company, The Bank of California, N.A., and Shawmut Bank
Connecticut, National Association (formerly known as The
Connecticut National Bank), as Trustee, and schedule of
substantially identical documents (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
4.28 Amendment No. 1 to the Collection Bank Agreement, dated as of
March 28, 1994, among the Company, The Bank of California, N.A.,
and Shawmut Bank Connecticut, National Association, as Trustee
(incorporated by reference to Exhibit 4.3 to the Company's
Current Report on Form 8-K filed with the SEC on April 11, 1994).
4.29 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).
4.30 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).
4.31 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) 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).
4.32 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).
4.33 Registration Rights Agreement, dated as of December 31, 1991,
regarding the Company's Secured Notes and other securities
(incorporated by reference to Exhibit 4.8 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1992).
4.34 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).
4.35 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).
4.36 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.
Page 95
<PAGE>
4.37 Form of Senior Subordinated Pay-In-Kind Note Due 2003.
4.38 Registration Rights Agreement, dated as of July 17, 1996, between
the Company and Fleet National Bank as Trustee.
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).
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).
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).
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).
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).
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).
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).
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).
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).
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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).
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), 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).
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).
10.13 Credit Agreement, dated as of December 31, 1991, between the
Company and Trails (incorporated by reference to Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the year ended June
30, 1992).
10.14 Amendment No. 1 to Credit Agreement, dated as of June 12, 1992,
between the Company and Trails (incorporated by reference to
Exhibit 10.35 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
10.15 Amended and Restated Revolving Credit Note, originally dated as
of December 31, 1991, between the Company and Trails
(incorporated by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992).
10.16 Amended and Restated Guaranty, dated as of June 12, 1992,
pursuant to which the subsidiaries of Trails guaranteed certain
amounts that Trails owes the Company (incorporated by reference
to Exhibit 10.16 to the Company's Registration Statement No. 33-
73284 on Form S-2, originally filed with the SEC on December 22,
1993).
10.17 Amended and Restated Security Agreement, originally dated as of
December 31, 1991, between the Company and Trails (incorporated
by reference to Exhibit 10.37 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992).
10.18 Form of Mortgage, as amended, from Trails and its subsidiaries to
the Company pursuant to the credit agreement between the Company
and Trails, and schedule of documents substantially identical to
the Form of Mortgage (incorporated by reference to Exhibit 10.38
to the Company's Annual Report on Form 10-K for the year ended
June 30, 1992).
10.19 Loan and Security Agreement, dated as of July 10, 1996, between
the Company and Foothill Capital Corporation.
Page 97
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10.20 Secured Promissory Note (Account Note), dated July 10, 1996,
between the Company and Foothill Capital Corporation.
10.21 Secured Promissory Note (Term Note), dated July 10, 1996, between
the Company and Foothill Capital Corporation.
10.22 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.
10.23 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.
10.24 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.
10.25 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.
10.26 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).
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).
10.28 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).
10.29 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).
10.30 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.
Page 98
<PAGE>
10.31 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), 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).
10.32 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), 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), 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).
10.33 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), and amendment dated December 7, 1995 (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1995).
10.34 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).
10.35 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), 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).
10.36 Indemnification Agreement, dated as of September 1, 1995, between
Trails and William J. Shaw, and schedule of substantially
identical Indemnification Agreements.
10.37 Indemnification Agreement, dated as of September 1, 1995, between
NACO and William J. Shaw, and schedule of substantially identical
Indemnification Agreements.
10.38 Indemnification Agreement, dated as of May 8, 1991, between the
Company and Donald W. Hair, and schedule of substantially
identical Indemnification Agreements.
10.39 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).
Page 99
<PAGE>
10.40 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).
10.41 Grantor Trust Agreement, dated as of September 30, 1991, between
The Bank of California, N.A. and Trails (incorporated by
reference from Trails' Annual Report on Form 10-K for the
year ended June 30, 1992, File No. 0-9246).
10.42 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).
10.43 Grantor Trust Agreement, dated May 8, 1991, between the Company
and Texas Commerce Bank, N.A. (incorporated by reference to
Exhibit 10.41 to the Company's Annual Report on Form 10-K for the
year ended June 30, 1992).
10.44 Supplement and Succession Agreement to Grantor Trust Agreement,
dated as of October 13, 1992, among The Bank of California, N.A.,
Texas Commerce Bank, National Association, 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).
10.45 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).
10.46 USTrails 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).
10.47 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).
10.48 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).
10.49 Amended and Restated Tax Allocation Agreement, dated as of March
31, 1994, between the Company and Trails (incorporated by
reference to Exhibit 10.45 to the Company's Annual Report on Form
10-K for the year ended June 30, 1994).
10.50 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).
Page 100
<PAGE>
10.51 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).
10.52 Sample form of current Membership Contract.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
Page 101
<PAGE>
EXHIBIT 2.5
SUPPLEMENT TO OFFER TO PURCHASE
USTRAILS INC.
HAS INCREASED THE PURCHASE PRICE OF ITS
OFFER TO PURCHASE FOR CASH
UP TO $20,161,000 AGGREGATE PRINCIPAL AMOUNT
OF
USTRAILS INC. 12% SECURED NOTES DUE 1998 AND ADDITIONAL SERIES 12% SECURED NOTES
DUE 1998
TO $780, PLUS $60 ACCRUED INTEREST THROUGH JULY 15, 1996, PER $1,000 OF
PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------
THIS OFFER AND THE WITHDRAWAL RIGHTS WITH
RESPECT HERETO HAVE BEEN EXTENDED TO 12:00 MIDNIGHT, EASTERN TIME,
ON FRIDAY, JULY 5, 1996, UNLESS FURTHER EXTENDED.
- --------------------------------------------------------------------------------
Secured Noteholders who have previously tendered Secured Notes and not
validly withdrawn the Secured Notes and who wish to have the tendered Secured
Notes purchased pursuant to this Offer need not take any further action, except
for complying with the procedure for guaranteed delivery if that procedure is
being used.
Any Secured Noteholder desiring to tender all or some of its Secured Notes
should complete and sign the Letter of Transmittal in accordance with the
instructions therein and in the Offer to Purchase, dated June 5, 1996 (the
"Offer to Purchase"), of USTrails Inc. and deliver it along with the
certificates for such Secured Notes and any other required documents to the
Depositary at one of the addresses set forth on the back cover of this
Supplement to Offer to Purchase (this "Supplement"). Alternatively, a financial
institution may be able to tender its Secured Notes pursuant to the book-entry
transfer procedures set forth in the Offer to Purchase. If a Secured Noteholder
cannot comply with such procedures, it may tender its Secured Notes through the
guaranteed delivery procedures set forth in the Offer to Purchase. A holder of
Secured Notes registered in the name of a bank, broker, custodian, fiduciary,
nominee, securities dealer, trust company, or other person must contact such
person if it desires to tender its Secured Notes and request such other person
to effect the transaction on its behalf. Tendering Secured Noteholders may use
the Letter of Transmittal and Notice of Guaranteed Deliver previously
distributed to Secured Noteholders with the Offer to Purchase or the Letter of
Transmittal and Notice of Guaranteed Deliver included with this Supplement.
This Offer is being made in connection with the Company's proposed
restructuring of the outstanding debt represented by the Secured Notes. If the
Company's attempt to restructure is unsuccessful, the Company may seek relief
under the United States Bankruptcy Code or attempt to operate at significantly
reduced levels, either of which the Company believes will materially adversely
affect its ongoing operations and asset recoveries.
(cover continued on next page)
___________________________
<PAGE>
NEITHER THIS OFFER NOR THE RESTRUCTURING TRANSACTION HAS BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
AUTHORITY NOR HAS THE COMMISSION OR ANY SUCH AUTHORITY PASSED UPON THE FAIRNESS
OR MERITS OF THIS OFFER OR THE RESTRUCTURING TRANSACTION NOR UPON THE ACCURACY
OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
___________________________
The Information Agent for this Offer is:
HILL & KNOWLTON, INC.
June 21, 1996
The Company has proposed that certain Secured Noteholders exchange all
Secured Notes held by them for a combination of cash and newly issued debt and
equity securities of the Company. Each Secured Noteholder participating in the
Exchange Offer will be required as a condition of the exchange to agree not to
tender its Secured Notes pursuant to this Offer but only to exchange them
pursuant to the Exchange Offer.
Consummation of this Offer is conditioned upon, among other things, (i)
there being validly tendered pursuant to this Offer and not withdrawn prior to
the Expiration Date not less than $13,000,000 (approximately 12.8%) in aggregate
principal amount of Secured Notes, (ii) the exchange by Exchanging Noteholders
of Secured Notes representing at least $81,300,000 (approximately 80.1%) in
aggregate principal amount of Secured Notes for cash and newly issued debt and
equity securities of the Company pursuant to the Exchange Offer and (iii)
receipt by the Company of senior secured financing on terms acceptable to it
that, with the Company's available cash, is sufficient to purchase the Secured
Notes tendered pursuant to this Offer, to consummate the Exchange Offer and to
redeem all untendered or unexchanged Secured Notes as contemplated by the
Restructuring Transaction. This Offer is also subject to other terms and
conditions. See "Certain Conditions of the Offer" in the Offer to Purchase.
Questions and requests for assistance and additional copies of this
Supplement, the Offer to Purchase and the Letter of Transmittal may be directed
to the Information Agent at its address and telephone number set forth on the
back cover of this Supplement.
<PAGE>
INTRODUCTION
The following information amends and supplements the information contained
in the Offer to Purchase, dated June 5, 1996, of USTrails Inc., a Nevada
corporation (the "Company"). The Company is now offering, upon the terms and
conditions set forth herein, in the Offer to Purchase and in the related Letter
of Transmittal, to purchase for cash up to $20,161,000 aggregate principal
amount of its 12% Secured Notes Due 1998 and Additional Series 12% Secured Notes
Due 1998 (collectively, the "Secured Notes") that are validly tendered and not
withdrawn prior to the Expiration Date for a purchase price of $780 per $1,000
of principal amount (the "Purchase Price"), plus $60 accrued interest through
July 15, 1996. Interest through July 15, 1996 will be paid to holders of record
of the Secured Notes as of July 1, 1996. If any Secured Note is transferred
after July 1, 1996, no interest will be paid to the transferee. This offer (this
"Offer") is subject to the terms and conditions set forth in the Offer to
Purchase, this Supplement, and in the related Letter of Transmittal (the "Letter
of Transmittal"). The Offer and the withdrawal rights with respect thereto have
been extended to 12:00 midnight, Eastern Time, on Friday, July 5, 1996, or if
further extended, the time and date to which the Company has extended this
Offer. All capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Offer to Purchase.
QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES OF THIS
SUPPLEMENT, THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL MAY BE DIRECTED
TO THE INFORMATION AGENT AT ITS ADDRESS AND TELEPHONE NUMBER SET FORTH ON THE
BACK COVER OF THIS SUPPLEMENT. SECURED NOTEHOLDERS ARE URGED TO READ THIS
SUPPLEMENT, THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL
CAREFULLY BEFORE DECIDING TO TENDER THEIR SECURED NOTES.
INCREASED CONSIDERATION
In addition to increasing the Purchase Price to $780 per $1,000 of
principal amount, plus $60 accrued interest through July 15, 1996, the Board of
Directors has modified the Exchange Consideration such that Exchanging
Noteholders will receive $400 in cash, $492 in principal amount of Senior
Subordinated PIK Notes and 45 shares of the Company's Common Stock for each
$1,000 in principal amount of Secured Notes. Junior Subordinated PIK Notes have
been excluded from the Exchange Consideration. The following table summarizes
the consideration to be received by Tendering Noteholders and by Exchanging
Noteholders, in each case per $1,000 in principal amount of Secured Notes,
pursuant to the modified terms of the Restructuring Transaction approved by the
Board of Directors.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
TENDERING EXCHANGING
CONSIDERATION NOTEHOLDERS NOTEHOLDERS
------------- ----------- -----------
<S> <C> <C>
Cash $780.00 $400.00
Accrued interest in cash $ 60.00 $ 60.00
------- -------
Total cash $840.00 $460.00
Principal amount of Senior Subordinated
PIK Notes $492.00
Common Stock 45 shares
-------------------------------------------------------------------------
</TABLE>
1
<PAGE>
STEERING COMMITTEE ENDORSEMENT/ NOTEHOLDER SUPPORT
The Steering Committee has endorsed the modified terms of the Restructuring
Transaction. To date, Secured Noteholders, including CM Strategic, SC
Fundamental, IAT Reinsurance Syndicate, Ltd., Post Advisory Group, and Third
Avenue Fund and other affiliates and associates of Martin J. Whitman, which hold
$64.8 million in principal amount of Secured Notes (representing 64% of the
Secured Notes outstanding), have advised the Company that they intend to
exchange their Secured Notes in the modified Exchange Offer. However, pending
announcement of the terms of the modified Restructuring Transaction, certain
potential Exchanging Noteholders have not yet been contacted regarding the
modified terms of the Exchange Offer.
SUMMARY CAPITALIZATION
The following table summarizes the capital structure of the Company as of
June 30, 1996 (i) estimated without consummation of the Restructuring
Transaction and (ii) pro forma for the consummation of the modified
Restructuring Transaction, assuming receipt of the Senior Secured Credit
Facility and satisfaction of the Minimum Exchange Condition and Minimum Tender
Condition.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
(DOLLARS IN THOUSANDS)
----------------------------------
ESTIMATED PRO FORMA
----------- -----------
<S> <C> <C>
Cash $ 33,380 $ 5,125
=========== ===========
Secured Notes, gross 101,461
Debt discount (7,096)
-----------
Secured Notes, net 94,365
Senior Secured Credit Facility 30,000
Other mortgages 940 940
Senior Subordinated PIK Notes 40,000
Deferred gain on exchange to be
classified as additional subordinated
debt under FAS 15 2,054
Total debt $ 95,305 $ 72,994
=========== ===========
Shares of Common Stock outstanding (1) 3,702,726 7,361,226
</TABLE>
_______________________
(1) Does not include warrants to purchase 484,835 and 10,087 shares of Common
Stock at $4.24 and $1.62 per share, respectively, and options to purchase
305,000 shares of Common Stock under the Company's stock option plans at
various prices.
SOLICITING DEALERS
The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee of $15 per $1,000 aggregate amount of Secured Notes validly
tendered and accepted pursuant to this Offer. A "Soliciting Dealer" includes any
of the following which has solicited and obtained a tender pursuant to this
Offer: (i) any broker or dealer in securities who is a member of any national
securities exchange or of the National Association of Securities Dealers, Inc.
("NASD"); (ii) any foreign broker or dealer not eligible for membership in the
NASD who agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as though it were an NASD
member; or (iii) any bank or trust company. No such fee shall be payable to a
Soliciting Dealer in respect of Secured Notes registered in the name of such
Soliciting Dealer unless such Secured Notes are held by such Soliciting Dealer
as nominee and
2
<PAGE>
such Secured Notes are being tendered for the benefit of one or more beneficial
owners identified on the Letter of Transmittal or on the Notice of Solicited
Tenders (included in the materials provided to brokers and dealers).
If tendered Secured Notes are being delivered with a Letter of Transmittal,
the Letter of Transmittal must designate the Soliciting Dealer as such in the
box captioned "Solicited Tenders." If tendered Secured Notes are being delivered
by book-entry transfer made to an account maintained by the Depositary, the
Soliciting Dealer must return a Notice of Solicited Tenders to the Depositary
within three Business Days after the Expiration Date in order to receive a
solicitation fee. No solicitation fee shall be payable to the Soliciting Dealer
with respect to the tender of Secured Notes by the holder of record, for the
benefit of the beneficial owner, unless the beneficial owner has designated the
Soliciting Dealer as such.
EFFECT OF UNSUCCESSFUL RESTRUCTURING
If the Company's attempt to restructure is unsuccessful, management
believes that the resources available to the Company may be insufficient both to
meet the continuing operating needs of the Company in accordance with the
Business Plan and to make the mandatory sinking fund and interest payments due
on July 15, 1996. Under the terms of the Indenture, if the Company fails to make
a payment of principal or interest or defaults under the financial covenants, it
is prohibited from making withdrawals from its cash accounts except for a one-
time withdrawal of up to $5 million, which would be insufficient to meet the
business needs of the Company during the summer season, the period of highest
demand for working capital. Under such circumstances the Company may seek relief
under the United States Bankruptcy Code or attempt to operate at significantly
reduced levels and recapitalize or reorganize at a later date. The Company
believes that its ongoing operations, particularly collections of contracts
receivable and membership dues and sales efforts, will be materially adversely
affected by either the commencement of bankruptcy proceedings or continued
operations at significantly reduced levels. As a result, there can be no
assurance that a bankruptcy reorganization or a later recapitalization or
reorganization would not be significantly less favorable to the Secured
Noteholders than the proposed Restructuring Transaction.
BACKGROUND TO THIS OFFER
EVENTS LEADING TO RESTRUCTURING
The discussion set forth in this subsection of the Offer to Purchase is
hereby supplemented as follows:
Subsequent to commencement of this Offer on June 5, 1996 (the "Commencement
Date"), the Company and CIBC Wood Gundy continued to meet with representatives
of the Steering Committee, CM Strategic and other potential Exchanging
Noteholders to discuss the Exchange Consideration. The Company has also
evaluated the response of the Secured Noteholders to this Offer.
On June 18, 1996, the Special Committee met to consider the terms of the
Restructuring Transaction and the continuing discussions with the Steering
Committee and other potential Exchanging Noteholders. At the meeting, CIBC Wood
Gundy indicated that, based on its discussion with potential Exchanging
Noteholders, the Restructuring Transaction would be perceived more favorably by
the Secured Noteholders if the principal amount of the Senior Subordinated PIK
Notes and the number of shares of Common Stock to be received by Exchanging
Noteholders were increased, the Junior Subordinated PIK Notes eliminated from
the Exchange Consideration and the Purchase Price increased. The Special
Committee then discussed with Mr. Boas, among other things, the position of CM
Strategic with respect to modified terms
3
<PAGE>
of the Restructuring Transaction. After Mr. Boas and representatives of CIBC
Wood Gundy departed, the Special Committee discussed CIBC Wood Gundy's
presentation with management and RPR and received management's recommendations
as to modified terms of the Restructuring Transaction. The Special Committee
preliminarily determined to modify the Exchange Consideration to increase the
aggregate amount of Senior Subordinated PIK Notes and the number of shares of
Common Stock to be issued in the Exchange Offer, assuming satisfaction of the
Minimum Exchange Condition, to $40 million in aggregate principal amount and
3,658,500 shares, respectively, and to exclude the Junior Subordinated PIK Notes
from the Exchange Consideration, and to increase the Purchase Price to $780 per
$1,000 in aggregate principal amount of Secured Notes. The Special Committee
then received an oral opinion from RPR that (i) the Restructuring Transaction,
as proposed to be modified, was fair from a financial point of view to the
holders of Common Stock and (ii) that the proposed increased Purchase Price was
reasonably equivalent to the proposed modified Exchange Consideration. In
rendering its opinion, RPR, among other things, reviewed the proposed modified
terms of the Restructuring Transaction and reconsidered and updated the factors
it had considered in rendering its previous opinion. The Special Committee then
unanimously approved recommending the modified Restructuring Transaction to the
Board of Directors.
On June 18, 1996, the Board of Directors met to consider the proposed
modified Restructuring Transaction. The Board reviewed the transaction, the
status of this Offer and the state of discussions with the Steering Committee,
CM Strategic and other potential Exchanging Noteholders. The Special Committee
provided its recommendation of the modified Restructuring Transaction to the
Board of Directors. The Board then unanimously approved the modified
Restructuring Transaction, with Mr. Boas abstaining due to the ownership of
Secured Notes by his affiliate, CM Strategic. The Board reaffirmed the principal
factors it identified in its approval of the Restructuring Transaction at its
June 3, 1996 meeting. The Board also considered the impact of the modified
Restructuring Transaction on the Business Plan, including the additional
leverage and cash requirements, but concluded that the modified consideration
provided the greatest opportunity for a successful restructuring without further
negotiation.
The Steering Committee has endorsed the modified terms of the Restructuring
Transaction. To date, Secured Noteholders, including CM Strategic, SC
Fundamental, IAT Reinsurance Syndicate, Ltd., Post Advisory Group, and Third
Avenue Fund and other affiliates and associates of Martin J. Whitman, which hold
$64.8 million in principal amount of Secured Notes (representing 64% of the
Secured Notes outstanding), have advised the Company that they intend to
exchange their Secured Notes in the modified Exchange Offer. However, pending
announcement of the terms of the modified Restructuring Transaction, certain
potential Exchanging Noteholders have not yet been contacted regarding the
modified terms of the Exchange Offer.
SPECIAL CONSIDERATIONS
The discussion in this subsection of the Offer to Purchase is hereby
supplemented as follows:
MODIFIED RESTRUCTURING TRANSACTION
The Special Committee recommended the modified terms of the Restructuring
Transaction to the Board of Directors based, in part, upon the conclusion of RPR
that the increased Purchase Price is reasonably equivalent to the modified
Exchange Consideration. The report of RPR is attached hereto as Exhibit A. There
can be no assurance, however, as to the actual value of the Exchange
Consideration.
4
<PAGE>
RECENT PRICES
The Company believes bid prices for the Secured Notes since the
Commencement Date have been in the range of $750 to $762.50 per $1,000 of
principal amount. There can be no assurance that these bids are accurate
indications of prices available to willing sellers. The Company believes such
prices may not have been effectively available to non-institutional investors
because of related transaction costs. On June 20, 1996, the closing bid
quotation per share of Common Stock was $0.50. The foregoing Common Stock bid
quotation is as quoted through the NASD OTC Bulletin Board and the National
Quotation Bureau's Pink Sheets. Such quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
CURRENT BUSINESS PLAN
The Business Plan has been revised to give effect to the modified terms of
the Restructuring Transaction. Additionally, the Business Plan has also been
revised (i) based on the Company's discussions with potential lenders, to
increase the assumed rate of interest on the Senior Secured Credit Facility,
(ii) to increase the transaction expenses incurred by the Company in connection
with the Restructuring Transaction and (iii) to reflect the Company's present
expectation of a positive contribution from operations for fiscal 1996 of
approximately $4.9 million, due to higher than expected campground dues and
lower campground operating expenses, partially offset by lower ancillary revenue
programs. The revised Business Plan is attached as Exhibit B (the "Revised
Business Plan"). The revised Business Plan should be read in its entirety in
conjunction with the financial statements of the Company set forth in its Annual
Report and Quarterly Report delivered with the Offer to Purchase, as it forms
the primary assumptions upon which the Board of Directors and its advisors
formulated the modified Restructuring Transaction. The Company's projected
results under the Revised Business Plan are not historical, except in the case
of the first three quarters included in fiscal 1996, and involve significant
risks and uncertainties. The Company's future results of operations and
financial condition may differ materially due to several factors, including but
not limited to the Company's continued ability to control costs, its ability to
implement its 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 actual timing and completion of planned asset sales, the actual
collection experience of the Company's contracts receivable, future interest
rates and the other factors affecting the Restated Business Plan as set forth in
this Supplement, the Offer to Purchase and the Annual Report and Quarterly
Report delivered with the Offer to Purchase. Accordingly, such projections are
not necessarily indicative of the future performance of the Company and should
not be regarded as representations that such results will be achieved.
TERMS OF THE RESTRUCTURING TRANSACTION
GENERAL
The discussion in this subsection of the Offer to Purchase is hereby
supplemented as follows:
Under the terms of the modified Restructuring Transaction, the Company is
seeking to exchange with the Exchanging Noteholders, each of whom will represent
to the Company that it is an Accredited Investor, Secured Notes for a
combination of cash, newly issued Senior Subordinated PIK Notes and Common Stock
(the "Exchange Consideration"). Junior Subordinated PIK Notes have been
eliminated from the Exchange Consideration. The Company is offering to purchase
the remaining Secured Notes on the terms and conditions stated in the Offer to
Purchase, as amended and supplemented by the Supplement and the related Letter
of Transmittal.
5
<PAGE>
EXCHANGE OFFER
The discussion in this subsection of the Offer to Purchase is hereby
supplemented as follows:
Assuming that $81.3 million in principal amount of Secured Notes are
exchanged in the Exchange Offer, Exchanging Noteholders will receive in the
aggregate $32.5 million in cash, $40 million in principal amount of newly issued
Senior Subordinated Pay-In-Kind Notes due 2003 (the "Senior Subordinated PIK
Notes") and 3,658,500 shares of the Company's common stock, $.01 par value per
share (the "Common Stock"), representing approximately 50% of the outstanding
Common Stock (after giving effect to the Restructuring Transaction). The
aggregate Exchange Consideration will be exchanged in a ratio of $400 in cash,
$492 in principal amount of Senior Subordinated PIK Notes and 45 shares of the
Company's Common Stock for each $1,000 in principal amount of Secured Notes.
Accrued interest of $60 per $1,000 of principal amount through July 15, 1996
will be paid in cash. For a description of the Senior Subordinated PIK Notes see
"Terms of the Restructuring Transaction - Exchange Offer" in the Offer to
Purchase.
A significant potential Exchanging Noteholder has indicated that, in order
to meet its internal requirements and participate in the Exchange Offer, a
portion of the interest on the Senior Subordinated PIK Notes must be prepaid in
cash. In order to meet this need, a portion of the $400 cash component of the
Exchange Consideration will represent prepaid interest on the newly issued
Senior Subordinated PIK Notes, and adjustments will be made to the Senior
Subordinated PIK Notes to maintain economic equivalence to the Exchange
Consideration as approved by the Board of Directors.
EFFECT ON STOCKHOLDERS
The discussion in this subsection of the Offer to Purchase is hereby
supplemented as follows:
After giving effect to the modified Restructuring Transaction, assuming
satisfaction of the Minimum Exchange Condition, holders of Common Stock who are
not also Exchanging Noteholders receiving Common Stock would be reduced from
approximately 40.0% of outstanding Common Stock to 20.1% of the outstanding
Common Stock. Exchanging Noteholders would receive shares representing
approximately 50% of the outstanding Common Stock. The beneficial ownership of
CM Strategic, the Company's largest stockholder, will be reduced from
approximately 45.5% to 38.1% of the outstanding Common Stock. See "Interests of
Management and Others" in the Offer to Purchase.
THE DESCRIPTION OF THE EXCHANGE OFFER AND OTHER REFERENCES TO THE EXCHANGE
OFFER IN THE OFFER TO PURCHASE AND THE SUPPLEMENT ARE FOR INFORMATIONAL PURPOSES
ONLY. SECURED NOTEHOLDERS WHO ARE POTENTIAL EXCHANGING NOTEHOLDERS HAVE BEEN
CONTACTED PRIOR TO THE COMMENCEMENT DATE. NO OTHER SECURED NOTEHOLDERS WILL BE
CONTACTED WITH RESPECT TO THE EXCHANGE OFFER. THIS OFFER DOES NOT CONSTITUTE AN
OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE EXCHANGE
CONSIDERATION TO BE ISSUED IN CONNECTION WITH THE EXCHANGE OFFER, WHICH WILL
ONLY BE OFFERED OTHERWISE BY THE COMPANY TO THE EXCHANGING NOTEHOLDERS ABSENT
REGISTRATION UNDER AND PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
6
<PAGE>
SOURCE AND AMOUNT OF FUNDS
GENERAL
The discussion in this subsection of the Offer to Purchase is hereby
supplemented as follows:
The maximum amount required by the Company to purchase the Secured Notes
pursuant to this Offer, to consummate the Exchange Offer and to redeem the
untendered and unexchanged Secured Notes, and for related fees and expenses, is
approximately $58.4 million. The Company estimates that it will have available
approximately $28.4 million from its working capital to be used in connection
with the Restructuring Transaction. Since commencing this Offer, the Company has
engaged in discussions with various lenders to secure the proposed Senior
Secured Credit Facility, but has not yet received a commitment for such
financing.
INTERESTS OF MANAGEMENT AND OTHERS
The discussion in the third paragraph of this section of the Offer to
Purchase is hereby supplemented as follows:
After giving effect to the modified Restructuring Transaction, the 305,000
options outstanding under the Company's 1991 Employee Stock Incentive Plan, 1993
Stock Option and Restricted Stock Purchase Plan and 1993 Director Stock Option
Plan will represent approximately 4.1% of such outstanding Common Stock.
7
<PAGE>
HISTORICAL AND PRO FORMA CAPITALIZATION
The discussion in this section of the Offer to Purchase is hereby amended
and restated in its entirety as follows:
The following table sets forth the historical capitalization of the Company
at March 31, 1996 and the pro forma capitalization of the Company immediately
following implementation of the modified Restructuring Transaction assuming it
occurred on July 1, 1994, the first day of the most recent full fiscal year, and
assuming satisfaction of the Minimum Tender Condition and Minimum Exchange
Condition. This table should be read in conjunction with the pro forma financial
data set forth in "Selected and Pro Forma Financial Data" of the Supplement. For
a summary of the capitalization of the Company after giving effect to the
Restructuring Transaction, see "Introduction - Summary Capitalization" of the
Supplement.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------
HISTORICAL PRO FORMA
---------- ------------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C>
Secured Notes (due July 15, 1998;
$18,599,000 currently redeemable on each of
July 15, 1996 and 1997), gross $101,454
Secured Notes, discount (1) (8,163)
--------
Secured Notes, net 93,291
Senior Secured Credit Facility
Real estate mortgages (due through June 2009) 1,923 $ 1,923
Senior Subordinated PIK Notes, at face 48,030
Subordinated debt, FAS 15 (2) 1,341
-------- --------
Total Borrowings 95,214 51,294
-------- --------
Preferred stock, $.01 par value, 1,500,000 shares
authorized, none issued and outstanding
Common Stock, $.01 par value, 15,000,000 shares
authorized, 3,702,726 shares issued and outstanding,
7,361,226 pro forma as adjusted (3) 37 56
Additional paid-in capital 17,549 19,381
Accumulated deficit (41,138) (28,640)
-------- --------
Total Stockholders' Deficit (23,798) (9,203)
-------- --------
Total Capitalization $ 71,539 $ 42,091
======== ========
</TABLE>
__________
(1) In accordance with generally accepted accounting principles, the Company
recorded a discount to the principal amount of the Secured Notes when it
issued them because the market yield on the Secured Notes significantly
exceeded their stated interest rate. Each month the Company expenses a
portion of this discount as interest expense.
(2) In accordance with generally accepted accounting principles, the Company
will not record a gain on the Restructuring Transaction. Rather, the
amount which would have otherwise been recorded as a gain will be recorded
as a subordinated obligation which will be amortized over the estimated
payout period of the obligation to reduce future interest expense on the
Senior Subordinated PIK Notes issued in the Restructuring Transaction.
(3) Does not include warrants to purchase 484,835 and 10,087 shares of Common
Stock at $4.24 and $1.62 per share, respectively, and options to purchase
305,000 shares of Common Stock under the Company's stock option plans at
various prices.
8
<PAGE>
SELECTED AND PRO FORMA FINANCIAL DATA
The discussion in this section of the Offer to Purchase is hereby amended
and restated in its entirety as follows:
The pro forma financial data contained in this Offer to Purchase, as
supplemented by the Supplement, gives effect to the modified Restructuring
Transaction as if it had occurred as of the beginning of the periods presented.
The pro forma balance sheet information contained in this Offer to Purchase, as
supplemented by the Supplement, gives effect to the modified Restructuring
Transaction as if it occurred on July 1, 1994, the first day of the most recent
full fiscal year.
The consummation of this Offer and the consummation of the Exchange Offer
are conditioned upon each other. However, it is impossible to predict the exact
aggregate principal amount of Secured Notes that may be tendered and accepted
for payment in this Offer or exchanged in the Exchange Offer. Therefore, the
Company cannot predict whether the consummation of the Restructuring Transaction
will conform to the assumptions used in the preparation of the pro forma
financial data. In analyzing the pro forma financial data and other information
contained in this Offer to Purchase and the Supplement, Secured Noteholders
should consider that the Restructuring Transaction as actually consummated could
differ from the assumptions relating thereto. Notwithstanding the foregoing, the
Company believes that the assumptions made with respect to such events provide a
reasonable basis on which to present the pro forma financial data.
THE PRO FORMA FINANCIAL DATA PRESENTED HEREIN DO NOT PURPORT TO REPRESENT
WHAT THE COMPANY'S RESULTS OF OPERATIONS OR FINANCIAL POSITION WOULD HAVE BEEN
HAD SUCH TRANSACTIONS IN FACT OCCURRED AT THE BEGINNING OF THE PERIODS OR TO
PROJECT THE COMPANY'S RESULTS OF OPERATIONS IN ANY FUTURE PERIOD. THE PRO FORMA
FINANCIAL DATA SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY, INCLUDING THE NOTES THERETO, INCORPORATED BY
REFERENCE IN THIS OFFER TO PURCHASE, AS SUPPLEMENTED BY THE SUPPLEMENT.
9
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
SIX
NINE MONTHS ENDED YEARS ENDED MONTHS
MARCH 31, JUNE 30, ENDED
------------------------------------- -----------------------------------------------
1996 1996 1995 1995 JUNE 30,
PRO FORMA(1) ACTUAL 1995 PRO FORMA(1) ACTUAL 1994 1993 1992
------------ ---------- ---------- ------------ ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONAL
DATA:
Total revenue $ 69,977 $ 69,977 $ 69,633 $ 91,546 $ 91,546 $100,922 $ 98,189 $ 54,310
Membership dues 29,956 29,956 31,073 41,175 41,175 43,200 39,555 19,170
Other campground/resort
revenues 16,641 16,641 17,112 23,500 23,506 23,524 28,056 13,224
Membership and real estate
sales 2,798 2,798 3,159 4,228 4,228 3,975 4,427 6,442
Interest income 3,981 5,146 7,536 8,147 9,935 12,202 16,345 11,780
Interest expense 5,763 13,399 15,686 8,122 20,950 21,446 22,249 11,947
Income (loss) from
operations before taxes,
minority interest, and
extraordinary item 11,321 4,771 (5,515) (873) (11,669) (5,967) (9,781) (23,195)
Extraordinary gain on debt
discharge 1,390 671 2,507
Net income (loss) 10,703 6,150 (5,730) (1,355) (11,920) (6,046) (7,582) (21,737)
Dividends paid (4)
Earnings (loss) per share
data:
Earnings (loss) before
extraordinary item 1.45 1.29 (1.55) (0.18) (3.22) (1.81) (2.73) (5.88)
Extraordinary item 0.37 0.16 0.68
Net income (loss) 1.45 1.66 (1.55) (0.18) (3.22) (1.63) (2.05) (5.88)
BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash equivalents (6) 5,125 36,255 47,924 5,125 60,696 50,059 44,359 32,989
Receivables, net 15,541 15,541 22,295 18,698 18,608 32,585 57,731 93,442
Campground properties 46,524 46,524 50,863 51,327 51,327 49,330 47,939 49,582
Resort properties 2,977 2,977 6,116 5,736 5,736 5,612 11,252 11,578
Total assets 78,310 110,331 137,548 89,180 135,886 148,164 170,067 196,788
Senior and Senior
Equivalent Notes, net
Secured Notes, net 93,291 114,282 115,490 110,854 115,389 123,511
Senior Secured Credit
Facility 19,334
Senior Subordinated PIK
Notes (7) 49,371 46,539
Total long term debt, net 43,460 75,928 96,879 48,462 98,308 115,877 121,889 130,210
Stockholders' equity
(deficit) (9,203) (23,675) (23,639) (19,902) (29,821) 17,912 (11,703) (4,151)
STATISTICAL DATA
(AT END OF PERIOD):
Campgrounds-
Number of operating
campgrounds 58 58 60 60 60 62 65 69
Number of members 131,000 131,000 142,000 136,000 136,000 149,000 157,000 165,000
Average annual dues per
member $ 324 $ 324 $ 327 $ 329 $ 329 $ 315 $ 290 $ 246
Average cost per camper
night $17.95 $17.95 $20.29 $19.69 $19.69 $18.36 $17.29 $16.55
Resorts-
Number of lot owners 1,100 1,100 5,200 5,100 5,100 5,000 5,100 5,000
Total timeshare weeks 32,000 32,000 32,000 32,000 32,000 32,000 32,000 32,000
Timeshare weeks available
for sale 1,700 1,700 1,700 1,700 1,700 2,100 3,300 4,200
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR ENTITY
----------------------------
SIX MONTHS YEAR
ENDED ENDED
DEC. 31, JUNE 30,
1991(2) 1991(3)
--------- ---------
<S> <C> <C>
STATEMENT OF OPERATIONAL
DATA:
Total revenue $ 63,670 $ 20,754
Membership dues 20,345
Other campground/resort
revenues 13,401
Membership and real estate
sales 15,140
Interest income 12,090 20,165
Interest expense 13,578 15,361
Income (loss) from
operations before taxes,
minority interest, and
extraordinary item 7,151 (8,495)
Extraordinary gain on debt
discharge
Net income (loss) 6,278 (8,405)
Dividends paid (4)
Earnings (loss) per share data: (5) (5)
Earnings (loss) before
extraordinary item
Extraordinary item
Net income (loss)
BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash equivalents (6) 42,233 3,500
Receivables, net 119,318 137,023
Campground properties 58,552 54,199
Resort properties 12,530 12,632
Total assets 242,587 253,694
Senior and Senior
Equivalent Notes, net 150,675
Secured Notes, net 113,095
Senior Secured Credit
Facility
Senior Subordinated PIK
Notes (7)
Total long term debt, net 120,150 163,842
Stockholders' equity
(deficit) 17,586 (5,003)
STATISTICAL DATA
(AT END OF PERIOD):
Campgrounds-
Number of operating
campgrounds 69 69
Number of members 167,000 170,000
Average annual dues per
member $ 243
Average cost per camper
night
Resorts-
Number of lot owners 4,900 4,900
Total timeshare weeks 32,000 32,000
Timeshare weeks available
for sale 4,400 4,600
</TABLE>
10
<PAGE>
(1) The pro forma information presented assumes the Restructuring Transaction
occurred on July 1, 1994, the first day of the most recent full fiscal
year.
(2) "Fresh Start Reporting" under the provisions of SOP 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code," was
reflected as of December 31, 1991, in the above balance sheet captions. As
a result, the information for the years ended June 30, 1995, 1994 and 1993,
and the six months ended June 30, 1992, was prepared as if the Company is a
new reporting entity and a black line is shown to separate it from prior
period information since it was not prepared on a comparable basis.
(3) The Company acquired NACO and Trails on June 30, 1991. The captions
reflecting results of operations, therefore, do not include the operations
of NACO and Trails for the year ended June 30, 1991. The assets,
liabilities, and stockholders' equity (deficit) captions, however, reflect
the consolidation of the Company, NACO and Trails as of June 30, 1991, and
thereafter.
(4) The Company is prohibited from paying any cash dividends until the
repayment of its secured and subordinated indebtedness.
(5) Income (loss) per share is not meaningful due to reorganization and
revaluation entries and the issuance of a material amount of Common Stock
in a stock split and bankruptcy reorganization. At June 30, 1995, there
were 3,702,726 shares of Common Stock outstanding, compared with 1,000
shares immediately before the consummation of the reorganization on
December 31, 1991. Outstanding warrants and stock options are excluded
from the net loss per share computation as they would have reduced net loss
per share, which is anti-dilutive.
(6) Cash held by the Company and its wholly owned subsidiaries, other than that
required for operations, is generally deposited in accounts that are
pledged for the benefit of the holders of the Secured Notes.
(7) In accordance with generally accepted accounting principles, the Company
will not record a gain on the Restructuring Transaction. Rather, the
amount which would have otherwise been recorded as a gain will be recorded
as a subordinated obligation which will be amortized over the estimated
payout period of the obligation to reduce future interest expense on the
Senior Subordinated PIK Notes issued in the Restructuring Transaction.
11
<PAGE>
APPENDIX I
DEFINED TERMS
This appendix lists all of the defined terms in this Supplement and
indicates the page on which this Supplement defines them.
<TABLE>
<CAPTION>
DEFINED TERMS PAGE
<S> <C>
Commencement Date.............................................................3
Common Stock..................................................................6
Company.......................................................................1
Exchange Consideration........................................................5
Letter of Transmittal.........................................................1
NASD..........................................................................2
Offer.........................................................................1
Offer to Purchase....................................................cover page
Purchase Price................................................................1
Revised Business Plan.........................................................5
Secured Notes.................................................................1
Senior Subordinated PIK Notes.................................................6
Soliciting Dealer.............................................................2
Supplement...........................................................cover page
</TABLE>
I-1
<PAGE>
EXHIBIT A
[Letterhead of Rauscher Pierce Refsnes, Inc. appears here.]
June 18, 1996
Special Committee of the
Board of Directors
USTrails Inc.
Suite 200
2711 LBJ Freeway
Dallas, Texas 75234
Gentlemen:
We understand that USTrails Inc. (the "Company") proposes to restructure its
outstanding 12% Secured Notes Due 1998 and Additional Series 12% Secured Notes
Due 1998 (the "Secured Notes") through an offer to purchase for cash up to
$20,161,000 aggregate principal amount of Secured Notes (the "Tender Offer") and
an offer to exchange for cash and newly issued debt and equity securities
certain other Secured Notes (the "Exchange Offer"), as more fully described in
the Offer to Purchase dated June 5, 1996, as amended and supplemented by the
Supplement to Offer to Purchase dated June 21, 1996. You have requested our
opinion as to whether the consideration to be paid in the Tender Offer is
reasonably equivalent to the consideration to be paid in the Exchange Offer.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company and the Offer to Purchase, as
amended and supplemented by the Supplement. We have also reviewed certain other
information, including financial forecasts, provided to us by the Company and
met with the Company's management to discuss the business and prospects of the
Company. We have also considered certain financial and market data of the
Company and such other information, financial studies, analyses and
investigations and financial economic and market criteria as we deemed relevant.
In connection with our review, we have not independently verified any of the
foregoing information. We have not made an independent evaluation or appraisal
of the assets of the Company. With respect to the Company's financial
projections, we have assumed that they have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the Company's
management as to the future financial performance of the Company, and we express
no opinion with respect to such forecasts or
A-1
<PAGE>
the assumption on which they are based. Our opinion is based upon circumstances
existing and disclosed to us as of the date hereof.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be paid in the Tender Offer is reasonably equivalent to the
consideration to be paid in the Exchange Offer.
Very truly yours,
/s/ Rauscher Pierce Refsnes, Inc.
RAUSCHER PIERCE REFSNES, INC.
A-2
<PAGE>
EXHIBIT B
USTRAILS INC. AND SUBSIDIARIES
BUSINESS PLAN
(REVISED TO REFLECT JUNE 21, 1996
MODIFICATION OF RESTRUCTURING TRANSACTION)
B-1
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
BUSINESS PLAN
(REVISED TO REFLECT JUNE 21, 1996
MODIFICATION OF RESTRUCTURING TRANSACTION)
TABLE OF CONTENTS
<TABLE>
<S> <C>
ASSUMPTIONS................................................................B-3
FINANCIAL STATEMENTS
Operating Statement...................................................B-8
Balance Sheet.........................................................B-9
Cash Flows Available.................................................B-10
</TABLE>
B-2
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
BUSINESS PLAN
(REVISED TO REFLECT JUNE 21, 1996
MODIFICATION OF RESTRUCTURING TRANSACTION)
SIGNIFICANT ASSUMPTIONS
GENERAL OVERVIEW
Set forth herein is the business plan (the "Business Plan") for USTrails Inc.
and subsidiaries ("USTrails" or the "Company") for the fiscal years ending June
30, 1996 through June 30, 2001. Historical financial statements for the years
ended June 30, 1994 and 1995 are also included. The Business Plan contemplates
downsizing the Company to a level appropriate to a stable membership base, the
collection of the remaining contracts receivable and the sale of non-core
assets. Because the Company's membership base is declining at a significant
rate, stabilization will require several years and sales significantly in excess
of current levels. Moreover, the timing and amount of asset sales cannot be
assured. As a consequence, the actual operating results achieved through
implementation of the Business Plan are uncertain and may vary significantly
from those set forth herein.
The Business Plan assumes that a restructuring (the "Restructuring") of the
Company's 12% senior secured notes due 1998 (the "Secured Notes") is consummated
on July 15, 1996. In the restructuring, holders of the Secured Notes will
receive approximately $50 million in cash, $40 million in new senior
subordinated pay-in-kind notes (the "Senior Subordinated PIK Notes"), and
approximately 50% of the common stock of the Company, plus accrued interest
($6.1 million through July 15, 1996). Furthermore, the Business Plan assumes
that the Company obtains a $40 million Senior Secured Credit Facility (the
"Senior Secured Credit Facility") to fund future working capital needs and a
portion of the cash payment to holders of the Secured Notes and pay related fees
and expenses.
The Business Plan also assumes the Company pays interest on the Senior Secured
Credit Facility at 10.75% per annum. For the first 4 years, interest on the
Senior Subordinated PIK Notes at 12% per annum will be paid in additional Senior
Subordinated PIK Notes (see also the "Senior Subordinated PIK Notes" assumption
on page B-6). After 4 years interest on the Senior Subordinated PIK Notes will
be paid in cash. Pro forma for the restructuring and the financing, the Company
is assumed to have $5 million of cash on hand and $71 million of funded debt
(including the $40 million of Senior Subordinated PIK Notes).
In addition, the Business Plan assumes that the Company continues to market and
sell memberships similar to those introduced in the spring of 1995. These
products, which allow purchasing members to select various access and usage
levels based on their individual needs, appear to be well received by certain
camping consumers. The Company's sales and marketing organizations and sales
processes have been enhanced, so that the Company is now able to sell more
memberships. Despite the increased membership sales assumptions, however, it is
assumed that the membership base will continue to decline until the year 2000,
as member attrition will continue due to the advanced age of the current
membership base and other normal reasons.
B-3
<PAGE>
An assumption is made for one major new product called the Cottage membership
whereby ten-year memberships will be sold beginning in fiscal 1997. The Cottage
membership entitles the purchasing member the right to a one-week per year
rental in an upscale rental trailer, plus other amenities. It is projected that
approximately 7,200 of these memberships will be sold between fiscal 1997 and
2001.
Other major assumptions provide that the Company will be able to continue
reducing both operating expenses and general and administrative expenses as the
membership base declines. These effects are partially offset by inflation which
is projected to occur at a rate of 3% per annum.
The overall improvements in results projected in the Business Plan are in large
part due to increased membership sales, ancillary revenues and the introduction
of a profitable cottage program. If these individual improvements do not occur,
the actual results will vary significantly from the Business Plan.
In addition, significant sales of non-core assets are included in fiscal 1997
through 2000. The sale of these non-core assets is subject to identifying buyers
willing to pay appraised value, and to addressing the rights of members at the
campgrounds projected to be withdrawn from the system and sold. The timing and
amounts of these sales could also vary significantly from the Business Plan.
BACKGROUND
USTrails owns and operates one of the largest privately owned campground systems
in the United States, with 58 campgrounds serving approximately 131,000 members
as of March 31, 1996. The Company also manages timeshare facilities and owns
certain real estate at eight full service resorts and provides a reciprocal use
program for members of approximately 330 recreational facilities.
Over the past four years, the Company has focused on stabilizing operations by
reducing costs, improving its overall services to members, and attempting to
increase revenues from its existing membership base. During the last year and
one-half, the Company has increased its sales and marketing efforts in order to
replenish its membership base. The Company's current strategy is to continue to
seek to improve its ongoing operations, enhance marketing efforts and determine
the appropriate level at which ongoing operations should be continued. In this
regard, the Company intends to down-size its business by implementing additional
cost reduction measures as its membership base continues to decline. The
Business Plan assumes that these cost reduction measures will include reduced
service levels at certain campgrounds, decreased general and administrative
expenses, and a reduction of the number of campgrounds in the system beginning
in fiscal 1997. The Company's current strategy also includes efforts to dispose
of assets not required for ongoing operations, such as land and other assets at
the campgrounds and full service resorts.
B-4
<PAGE>
SPECIFIC ASSUMPTIONS
DUES REVENUE AND MEMBERSHIP BASE
- --------------------------------
The Company's membership base has declined from 167,000 at December 31, 1991, to
131,000 at March 31, 1996 (22%), and the membership base is presently declining
at the rate of approximately 8% per year. Through increased sales and marketing
efforts, the Company believes that its declining membership base will stabilize
by fiscal 1999 at a level substantially below the current level (approximately
117,000 members). In addition, the membership agreements generally permit the
Company to increase annually the amount of each member's dues, subject to
specified limitations. The Business Plan includes the following assumptions
affecting dues revenue:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL
1996 1997 1998 1999 2000 2001
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
# Members at Year-end 128,155 122,718 119,044 117,152 117,226 117,409
Average Dues at Year-end $ 336 $ 346 $ 356 $ 367 $ 378 $ 389
Dues Revenue (in 000Os) $ 39,548 $ 37,139 $ 36,854 $ 37,098 $ 37,954 $ 39,146
</TABLE>
The Business Plan assumes the loss of members and dues revenue as a result of
campground closures as the Company downsizes.
SALES AND MARKETING EFFORTS
- ---------------------------
In April 1992, new membership sales were suspended because the Company's 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, and in May 1994, began selling new
campground memberships on a limited basis and testing new sales programs. Since
that time, the Company has been testing membership sales programs and revising
them based on results and its ongoing market research. Based on the results
from the summer of 1995, the Company believes that it will be able to increase
the level of membership sales in the future. The Business Plan anticipates that
the sales program will generate a positive contribution by fiscal 1998. The
following assumptions are made affecting sales revenue:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
1996 1997 1998 1999 2000 2001
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
# Sales Units 3,005 4,454 6,054 7,949 10,030 10,795
Average Sales Price $ 873 $1,079 $1,141 $1,181 $ 1,223 $ 1,256
Sales Revenue (in 000's) $2,624 $4,805 $6,907 $9,387 $12,263 $13,561
</TABLE>
ANCILLARY CONTRIBUTION
- ----------------------
The Business Plan assumes that the ancillary revenue generated from the
campground operations will increase steadily during the periods presented and
that expenses will increase in a similar manner, maintaining a contribution
margin during the period of between 47% and 49%.
B-5
<PAGE>
CAMPGROUND OPERATING COSTS
- --------------------------
The Business Plan reflects a $4.1 million (10%) decrease in operating expenses
during the period presented from fiscal 1995 levels, as a result of service
reductions at certain campgrounds, campground closures and other operational
changes, offset by inflation. The Business Plan assumes that the cost reduction
measures will not materially impact the Company's ability to attract and retain
members at the projected levels.
FULL SERVICE RESORTS AND RPI
- ----------------------------
The Company anticipates that its operations at the full service resorts will
yield a positive contribution for the projected periods after fiscal 1997,
primarily from the timeshare management operations, and that RPI will produce a
positive contribution from its operations of $2.1 million for fiscal 1996, which
steadily increases during the subsequent periods presented as the result of the
introduction of a new program in fiscal 1997.
GENERAL AND ADMINISTRATIVE COSTS
- --------------------------------
The Company's general and administrative costs declined during fiscal 1994 and
1995, and are projected to decrease significantly in fiscal 1996 and 1997 over
fiscal 1995 levels. Cost savings will be achieved primarily through head count
reductions and other efficiencies realized in the various administrative
departments and significant cost reductions in the area of receivables billings
and collections in connection with the diminishing contracts receivable
portfolio.
INTEREST INCOME
- ---------------
Interest income represents the interest earned on the contracts receivable
portfolio as well as interest income earned on cash balances. As the majority of
the Company's current new membership sales are not being financed, the Companys'
portfolio of contracts receivable is rapidly diminishing. The Business Plan
assumes that the outstanding gross balance of contracts receivable will decline
to $2.7 million by fiscal 2001 from a gross balance of $35.4 million at June 30,
1995. The interest earned on the contracts receivable will in turn decrease,
with interest income on the portfolio projected to decline from $7.4 million in
fiscal 1995 to $744,000 in fiscal 2001. The Business Plan assumes the Company
earns interest income on its cash balances at an annual rate of 4%.
SENIOR SUBORDINATED PIK NOTES
- -----------------------------
A significant potential exchanging noteholder has indicated that, in order to
meet its internal requirements and participate in the exchange offer, a portion
of the interest on the Senior Subordinated PIK Notes must be prepaid in cash.
In order to meet this need, a portion of the cash component of the exchange
consideration will represent prepaid interest on the newly issued Senior
Subordinated PIK Notes, and adjustments will be made to the Senior Subordinated
PIK Notes to maintain economic equivalence to the exchange consideration as
approved by the Board of Directors.
B-6
<PAGE>
The Restructuring meets the definition of a Troubled Debt Restructuring under
Financial Accounting Standards Number 15 - "Accounting by Debtors and Creditors
for Troubled Debt Restructurings" ("FAS 15"). Under FAS 15, no gain is
recognized in a troubled debt restructuring; rather the amount that would have
otherwise been recorded as a gain is recorded as a subordinated obligation which
is amortized over the estimated payout period of the Senior Subordinated PIK
Notes issued in the Restructuring to reduce future interest expense.
It is assumed that after the retirement of the Senior Secured Credit Facility,
excess cash will be invested in the repurchase of Senior Subordinated PIK Notes.
ASSET SALES
- -----------
The Company believes that it is reasonably likely that it will be able to sell,
without any material adverse effect from members rights, the five campgrounds
held for disposition under the Business Plan, which have an appraised value of
$2.3 million, and other unspecified campgrounds that are included for
disposition in the Business Plan, which have an appraised value of $8.9 million,
although there can be no assurance that these appraised values will be realized
or that sales can be completed on the schedule projected in the Business Plan.
However, some states, including California, Oregon, and Washington, have non-
disturbance 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 the sale, closure or
foreclosure if the holders of related memberships receive access to a comparable
campground. The campground mortgages that secure the Secured Notes contain
similar nondisturbance provisions. The impact of the rights of members under
these laws and non-disturbance provisions is uncertain and could adversely
effect the availability or timing of disposition opportunities or the ability of
the company to realize recoveries from asset disposition.
INCOME TAX CONSIDERATIONS
- -------------------------
It is assumed that the Restructuring occurs outside a bankruptcy proceeding and
does not involve a change in ownership under Section 382 of the Internal Revenue
Code of 1986, as amended. However, if that is not the case and a change in
ownership is deemed to have occurred, the Company's accumulated net operating
losses ("NOLs"), which approximated $54 million as of June 30, 1995, would be
diminished significantly or their annual utilization substantially limited.
If a change in ownership were to occur, the annual NOL usage limitation is
calculated based on the fair value of the Company's stock immediately prior to
the Restructuring. In this instance, the Company's NOLs would be virtually
eliminated, with only a nominal annual amount available to be used over the
15-year carryforward period.
It should also be noted that NOL carryforwards can be utilized to shelter
federal income taxes of the company and its subsidiaries, but are subject to
additional limitations under various state laws; for example, the inability of a
subsidiary company to utilize USTrails NOL carryforwards. Therefore, the Company
projects that it will have to incur state income taxes based on its pre-tax
income.
B-7
<PAGE>
USTRAILS INC.
BUSINESS PLAN BALANCE SHEETS
HISTORICAL THROUGH JUNE 30, 1995, BUSINESS PLAN THEREAFTER
(REVISED TO REFLECT JUNE 21, 1996 MODIFICATION OF RESTRUCTURING TRANSACTION)
(AMOUNT IN THOUSANDS)
<TABLE>
<CAPTION>
ACTUAL JUNE 30, BUSINESS PLAN AS OF JUNE 30,
ASSETS 1994 1995 1996 1997 1998 1999 2000 2001
- ------ --------- --------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash $ 50,059 $ 50,596 $ 33,526 $ 5,125 $ 5,125 $ 5,125 $ 5,125 $ 5,125
Restricted Cash 1,225 1,629 2,963 2,963 2,963 2,963 2,963 2,963
Contracts Receivable, gross 54,413 35,386 21,290 14,227 10,526 8,649 7,412 6,534
Allowance for Doubtful
Accounts (17,495) (13,806) (6,085) (5,136) (3,867) (3,068) (2,564) (2,247)
Other Allowances (4,333) (2,882) (1,855) (1,272) (886) (697) (612) (551)
--------- --------- --------- ---------- --------- --------- --------- ---------
Contracts Receivable, net 32,585 18,698 13,350 7,819 5,773 4,884 4,236 3,736
Campground Real Estate 15,997 15,331 13,362 12,994 12,805 12,541 12,198 12,198
Resort Real Estate 2,853 1,352 1,352 962 962 962 962 962
Buildings and Equipment, gross 36,148 40,441 38,746 40,728 41,915 44,000 46,141 48,941
Accumulated Depreciation (5,890) (8,402) (10,509) (13,863) (16,672) (19,510) (22,343) (25,269)
--------- --------- --------- ---------- --------- --------- --------- ---------
Buildings and
Equipment, net 30,258 32,039 28,237 26,865 25,243 24,490 23,798 23,672
Land Held for Sale 6,854 8,341 6,820 4,736 3,229 1,844 1,764 1,764
Dues and Accounts Receivable 3,546 3,017 1,268 2,212 2,223 2,234 2,292 2,292
Inventories 1,401 1,281 1,156 1,174 1,223 1,278 1,336 1,396
Prepaid Expenses 526 651 1,567 620 618 620 617 615
Consent Fee, net 1,512 1,089 647 - - - - -
Other Assets 1,368 1,862 3,525 4,403 5,180 5,734 6,298 6,783
--------- --------- --------- ---------- --------- --------- --------- ---------
Total Assets $148,164 $135,886 $107,773 $ 69,873 $ 65,344 $ 62,675 $ 61,589 $ 61,506
========= ========= ========= ========== ========= ========= ========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Liabilities:
Accounts Payable $ 3,215 $ 3,740 $ 1,216 $ 1,874 $ 1,924 $ 1,974 $ 2,024 $ 2,024
Accrued Wages 3,023 4,212 3,389 2,889 2,889 2,889 2,889 2,889
Accrued Liabilities 6,055 3,568 4,738 2,775 2,785 2,798 2,812 2,825
Accrued Interest Payable 6,988 7,008 5,617 - - - - -
Borrowings -
Notes and Mortgages 5,503 4,753 940 504 306 139 - -
Senior Secured Credit Facility 13,309
Subordinated Notes 44,944 49,163 42,505 34,774 27,274
Subordinated Notes - FAS 15 1,725 1,355 955 609 328
Secured Notes 127,421 127,421 101,454 - - - - -
Discount on Secured Notes (16,567) (11,931) (7,096) - - - - -
--------- --------- --------- ---------- --------- --------- --------- ---------
Secured Notes, net 101,854 115,490 94,358 - - - - -
Deferred Dues Revenues 18,414 18,622 17,631 17,631 17,631 17,631 17,631 17,631
Other Liabilities 12,024 8,314 7,024 6,525 6,128 5,705 5,420 5,115
--------- --------- --------- ---------- --------- --------- --------- ---------
Total Liabilities 166,076 165,707 134,913 92,176 82,181 74,596 66,159 58,086
--------- --------- --------- ---------- --------- --------- --------- ---------
SHAREHOLDERS' EQUITY (DEFICIT):
Removal of Debt - - - - - - - -
Common Stock 37 37 37 56 56 56 56 56
Additional Paid-in Capital 17,549 17,549 17,549 19,381 19,381 19,381 19,381 19,381
Accumulated Earnings (Deficit) (35,498) (47,407) (44,726) (41,740) (36,274) (31,358) (24,007) (16,017)
--------- --------- --------- ---------- --------- --------- --------- ---------
Total Shareholders' Equity
(Deficit) (17,912) (29,821) (27,140) (22,303) (16,837) (11,921) (4,570) 3,420
--------- --------- --------- ---------- --------- --------- --------- ---------
Total Liabilities & Shareholders'
Equity (Deficit) $148,164 $135,886 $107,773 $ 69,873 $ 65,344 $ 62,675 $ 61,589 $ 61,506
========= ========= ========= ========== ========= ========= ========= =========
</TABLE>
The accompanying assumptions are an integral part of these business plan balance
sheets.
B-8
<PAGE>
USTRAILS INC. AND SUBSIDIARIES
BUSINESS PLAN CASH FLOWS AVAILABLE
HISTORICAL THROUGH JUNE 30, 1995, PROJECTIONS THEREAFTER
(REVISED TO REFLECT JUNE 21, 1996 MODIFICATION OF RESTRUCTURING TRANSACTION)
(Amounts in thousands)
<TABLE>
<CAPTION>
Actual June 30, Business Plan for the Year Ending June 30,
---------------------- -------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001
--------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Income (loss) from operations $ 1,375 ($ 3,682) $ 4,867 $ 6,428 $ 7,731 $ 8,493 $10,528 $11,566
Depreciation 2,457 2,591 2,702 2,635 2,658 2,789 2,808 2,901
Capital expenditure - campground
operations (1,806) (4,881) (2,115) (2,300) (2,300) (2,800) (2,800) (2,800)
-------- --------- -------- -------- -------- -------- -------- --------
Net Cash Provide By (Used In)
Operations 2,026 (5,972) 5,454 6,763 8,089 8,482 10,536 11,667
Principal collections on
contracts receivable 26,256 16,678 11,521 6,052 3,990 3,503 3,414 3,422
Processing fees 1,501 1,044 825 750 688 641 400 400
Interest income on contracts
receivable 8,741 5,732 3,611 2,273 1,453 1,106 903 754
-------- --------- -------- -------- -------- -------- -------- --------
36,498 23,454 15,957 9,075 6,131 5,250 4,717 4,576
Proceeds from asset sales 10,294 1,130 7,048 7,420 4,964 3,238 2,241 -
Principal payments on notes
and mortgages (2,280) (750) (1,178) (436) (198) (167) (139) -
Interest payments on notes
and mortgages (822) (590) (311) (122) (70) (45) (35) -
Interest income on cash balances 99 99 99 99 99
Other, net (5,933) (1,452) (6,033) (2,743) (2,607) (3,266) (3,414) 3,491
-------- --------- -------- -------- -------- -------- -------- --------
Cash Available Before Debt
and Taxes 39,783 15,820 20,937 20,056 16,408 13,591 14,005 12,851
-------- --------- -------- -------- -------- -------- -------- --------
Repurchases of Secured Notes (8,000) - (5,233) - - - - -
Payment of consent fees to
Secured Noteholder (1,610) - - - - - - -
Mandatory redemption of
Secured Notes - - (18,599) - - - - -
Redemption - Secured Notes - - - (49,812) - - - -
Proceeds from Senior Secured
Credit Facility - - - 30,000 - - - -
Payment of Senior Secured
Credit Facility - - - (16,691) (13,309) - - -
Payment of Subordinated Notes - - - - (1,336) (12,734) (12,985) (7,500)
Interest paid on Secured Notes (16,976) (15,283) (14,175) (6,088) - - - -
Interest paid on Senior Secured
Notes - - - (2,884) (1,145) (108) (108) (108)
Interest paid on Subordinated
Notes - - - - - - - (4,298)
Fees and expenses on restructuring - - - (2,500) - - - -
State income taxes (482) (618) (749) (912) (945)
Trails acquisition (7,497) - - - - - - -
-------- --------- -------- -------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,700 537 (17,070) (28,401) - - - -
CASH AND CASH EQUIVALENTS:
Beginning of year 44,359 50,059 50,596 33,526 5,125 5,125 5,125 5,125
-------- --------- -------- -------- -------- -------- -------- --------
End of year $50,059 $ 50,596 $33,526 $ 5,125 $ 5,125 $ 5,125 $ 5,125 $ 5,125
======== ========= ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying assumptions are an integral part of these business plan cash
flows.
B-9
<PAGE>
USTrails Inc. and Subsidiaries
Business Plan Operating Statements
Historical through June 30, 1995, Business Plan Thereafter
(Revised to Reflect June 21, 1996 Modification of Restructuring Transaction)
(Amounts in thousands)
<TABLE>
<CAPTION>
Actual June 30, Business Plan for the Years Ending June 30,
----------------------- -----------------------------------------------------------------------
1994 1995 1996 1997 1998 1999 2000 2001
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Campground Operations
Membership dues $43,200 $41,175 $39,548 $37,139 $36,854 $37,098 $37,954 $39,146
Ancillary revenues 13,529 15,411 14,650 16,348 17,015 17,816 18,711 19,486
Cost of Ancillary Revenues (7,643) (8,148) (7,409) (8,463) (8,895) (9,403) (10,008) (10,392)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
5,886 7,263 7,241 7,885 8,120 8,413 8,703 9,094
Operating expenses (37,880) (40,163) (34,890) (32,954) (33,559) (34,269) (35,024) (36,069)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Contribution Before Sales &
Marketing 11,206 8,275 11,899 12,070 11,415 11,242 11,633 12,171
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Sales 1,457 1,780 2,624 4,805 6,907 9,387 12,263 13,561
Selling expenses (1,583) (1,985) (2,877) (3,078) (4,021) (5,281) (6,629) (7,242)
Marketing expenses (1,282) (3,639) (1,301) (2,288) (2,757) (3,532) (3,986) (4,195)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Sales (1,408) (3,844) (1,554) (561) 129 574 1,648 2,124
Cottage membership operations - - - 406 1,215 1,737 2,034 2,271
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Contribution from Campground
Operations 9,798 4,431 10,345 11,915 12,759 13,553 15,315 16,566
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Full service resorts, net (142) 465 (101) 423 450 579 596
RPI, net 2,231 2,118 2,273 2,367 2,681 2,743 2,922 3,001
General and administrative
expenses (14,568) (14,181) (12,212) (11,365) (11,155) (10,980) (10,932) (11,214)
Other revenue 4,056 3,485 4,461 3,612 3,023 2,727 2,644 2,617
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating Income (Loss) 1,375 (3,682) 4,867 6,428 7,731 8,493 10,528 11,566
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Interest income 12,202 9,935 6,797 3,606 2,598 2,127 1,628 1,494
Interest expense (21,446) (20,960) (17,682) (8,092) (6,400) (5,829) (5,052) (4,125)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income (expense) (9,244) (11,025) (10,885) (4,486) (3,802) (3,702) (3,424) (2,631)
Gain on asset sales 5,544 658 4,036 4,024 2,155 874 1,159 -
Restructuring charges (3,313) (637) (800) (2,500) - - - -
Extraordinary gain on debt
transactions 671 - 1,390 - - - - -
Enterprise bonus - - (795) - - - - -
Insurance reserves released - - 568 - - - - -
Adjust receivable reserves - - 4,146 - - - - -
State income taxes - - (72) (482) (618) (749) (912) (945)
All other (1,079) 2,763 231 2 - - - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (Loss) ($6,046) ($11,923) $2,686 $2,986 $5,466 $4,916 $7,351 $7,990
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying assumptions are an integral part of these business plan
operating statements.
B-10
<PAGE>
======================================== ======================================
A Secured Noteholder desiring to tender
some or all of its Secured Notes
pursuant to this Offer should complete
the related Letter of Transmittal in
accordance with the instructions USTRAILS INC.
therein and in the Offer to Purchase
and then deliver it along with the
certificates for such Secured Notes
and any other required documents to
the Depositary. Alternatively a SUPPLEMENT TO
financial institution may be able to OFFER TO PURCHASE
tender its Secured Notes pursuant to
the book-entry transfer procedures set
forth in the Offer to Purchase. If a
Secured Noteholder cannot deliver a
Letter of Transmittal and its Secured
Notes to the Depositary on or before DEPOSITARY:
the Expiration Date such Secured
Noteholder may tender its Secured
Notes through the guaranteed delivery
procedures set forth in the Offer to FLEET NATIONAL BANK,
Purchase. The Company has not AS DEPOSITARY
authorized the Depositary, the CORPORATE TRUST OPERATIONS
Information Agent or any other person 777 MAIN STREET, CTMO 0224
to give any information with respect HARTFORD, CT 06115
to this Offer other than the TELEPHONE NO. (860) 986-1271
information set forth herein and in FACSIMILE NO. (860) 986-7908
the Offer to Purchase. Moreover under
no circumstances shall the information
set forth herein be considered correct
or unchanged as of any date subsequent
to the date hereof. This Offer does
not constitute an offer to purchase
Secured Notes in any jurisdiction
where such an offer would be illegal
or otherwise prohibited.
_________
SUMMARY TABLE OF CONTENTS
PAGE BY HAND DELIVERY IN NEW YORK:
----
Introduction...................1
Background to this Offer.......3 SHAWMUT TRUST COMPANY
Special Considerations.........4 C/O FIRST CHICAGO TRUST
Terms of the Restructuring COMPANY OF NEW YORK
Transaction...................5 14 WALL STREET, 8TH FLOOR, WINDOW 2
Source and Amount of Funds.....7 NEW YORK, NY 10015
Interests of Management and
Others........................7
Historical and Pro Forma INFORMATION AGENT:
Capitalization................8
Selected and Pro Forma HILL & KNOWLTON, INC.
Financial Data................9 466 LEXINGTON AVENUE
Appendix I: Defined Terms....I-1 NEW YORK, NY 10017
Exhibit A: Opinion of Rauscher TELEPHONE NO. (212) 885-0555
Pierce Refsnes, Inc.........A-1 OR (800) 755-3002
Exhibit B: Revised Business
Plan........................B-1
SUPPLEMENT TO OFFER TO PURCHASE
JUNE 21, 1996
======================================= ======================================
<PAGE>
EXHIBIT 2.6
PRIVATE PLACEMENT MEMORANDUM
USTRAILS INC.
IS OFFERING TO EXCHANGE
PER $1,000 OF PRINCIPAL AMOUNT
OF ITS
12% SECURED NOTES DUE 1998 AND ADDITIONAL SERIES 12% SECURED NOTES
DUE 1998
$400 IN CASH
(INCLUDING $40.59 PREPAID INTEREST)
$492 IN PRINCIPAL AMOUNT OF SENIOR SUBORDINATED PAY-IN-KIND NOTES DUE 2003,
AND
45 SHARES COMMON STOCK, PAR VALUE $.01 PER SHARE, OF USTRAILS INC.
PLUS $60 ACCRUED INTEREST THROUGH JULY 15, 1996 IN CASH
- -------------------------------------------------------------------------------
THIS MEMORANDUM IS BEING SUBMITTED TO CERTAIN HOLDERS OF USTRAILS INC. 12%
SECURED NOTES DUE 1998 AND ADDITIONAL SERIES 12% SECURED NOTES DUE 1998
BELIEVED TO BE ACCREDITED INVESTORS AS DEFINED IN REGULATION D PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, WHO WERE CONTACTED DIRECTLY
OR THROUGH THEIR REPRESENTATIVES BY OR ON BEHALF OF USTRAILS INC. ON OR
BEFORE JUNE 3, 1996. THIS MEMORANDUM IS ONLY FOR THE USE OF SUCH HOLDERS
AND THEIR REPRESENTATIVES.
- -------------------------------------------------------------------------------
USTrails Inc., a Nevada corporation (the "Company"), is offering certain
holders of its 12% Secured Notes Due 1998 (the "Initial Series Notes") and
Additional Series 12% Secured Notes Due 1998 (the "Additional Series Notes" and
collectively with the Initial Series Notes, the "Secured Notes") the opportunity
to exchange, on the terms and conditions set forth in this Private Placement
Memorandum (this "Memorandum") and the enclosed Letter of Transmittal (the
"Letter of Transmittal") in a private offering (the "Exchange Offer"), all of
their Secured Notes for the following consideration (the "Exchange
Consideration"), in each case per $1,000 in principal amount: $400 in cash
(including $40.59 prepaid interest), $492 in principal amount of Senior
Subordinated Pay-In-Kind Notes due 2003 (the "Senior Subordinated PIK Notes")
and 45 shares of the common stock, par value $.01 per share, of the Company (the
"Common Stock"). In addition, accrued interest of $60 per $1,000 in principal
amount through July 15, 1996 on the Secured Notes will be paid in cash.
(cover continued on next page)
___________________________
NEITHER THE EXCHANGE OFFER NOR THE RESTRUCTURING TRANSACTION HAS BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE
SECURITIES AUTHORITY OR ANY OTHER REGULATORY AUTHORITY, NOR HAS THE COMMISSION
OR ANY SUCH AUTHORITY PASSED UPON THE FAIRNESS OR MERITS OF THE EXCHANGE OFFER
OR THE RESTRUCTURING TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
June 28, 1996
<PAGE>
The Exchange Offer is being made in connection with the Company's proposed
restructuring of the outstanding debt represented by the Secured Notes (the
"Restructuring Transaction"). The Company has made an offer to purchase for cash
(the "Tender Offer") up to $20,161,000 in aggregate principal amount of Secured
Notes for $780 (the "Purchase Price") plus $60 accrued interest, per $1,000 in
principal amount, on the terms and conditions described in the Offer to Purchase
dated June 5, 1996, as supplemented by the Supplement to Offer to Purchase dated
June 21, 1996 (as supplemented, the "Offer to Purchase"). Secured Noteholders
participating in the Exchange Offer (the "Exchanging Noteholders") will be
required as a condition of the exchange to agree not to tender their Secured
Notes pursuant to the Tender Offer but only to exchange them pursuant to the
Exchange Offer.
This Offer is being made in connection with the Company's proposed
restructuring of the outstanding debt represented by the Secured Notes. If the
Company's attempt to restructure is unsuccessful, the Company may seek relief
under the United States Bankruptcy Code or attempt to operate at significantly
reduced levels, either of which the Company believes will materially adversely
affect its ongoing operations and asset recoveries.
Consummation of this Exchange Offer will be conditioned upon, among other
things, (i) the exchange by Exchanging Noteholders of Secured Notes representing
at least $81,300,000 (approximately 80.1%) in aggregate principal amount of
Secured Notes pursuant to this Exchange Offer (the "Minimum Exchange
Condition"), (ii) there being validly tendered pursuant to the Tender Offer and
not withdrawn not less than $13,000,000 (approximately 12.8%) in aggregate
principal amount of Secured Notes (the "Minimum Tender Condition"), and (iii)
receipt by the Company of senior secured financing on terms acceptable to it
that, with the Company's available cash, is sufficient to consummate this
Exchange Offer, to purchase the Secured Notes tendered pursuant to the Tender
Offer and to redeem all unexchanged or untendered Secured Notes as contemplated
by the Restructuring Transaction. This Exchange Offer is also subject to other
terms and conditions. See "Certain Conditions of this Exchange Offer."
___________________________
EACH PERSON RECEIVING THIS MEMORANDUM ACKNOWLEDGES THAT IT HAS BEEN
AFFORDED AN OPPORTUNITY TO REQUEST FROM THE COMPANY, TO REVIEW, AND HAS RECEIVED
ALL ADDITIONAL INFORMATION CONSIDERED BY IT TO BE NECESSARY TO VERIFY THE
ACCURACY AND COMPLETENESS OF THE INFORMATION SET FORTH HEREIN OR INCORPORATED
HEREIN BY REFERENCE AND NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION CONCERNING THE EXCHANGE CONSIDERATION OFFERED HEREBY
EXCEPT AS CONTAINED IN THIS MEMORANDUM, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
THIS MEMORANDUM, INCLUDING DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS MEMORANDUM AND IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN.
IN MAKING AN INVESTMENT DECISION, PROSPECTIVE EXCHANGING NOTEHOLDERS MUST
RELY ON THEIR OWN EXAMINATION OF THE TERMS OF THIS EXCHANGE OFFER, INCLUDING THE
MERITS AND RISKS INVOLVED. THE COMPANY IS NOT MAKING ANY REPRESENTATION TO ANY
<PAGE>
PROSPECTIVE EXCHANGING NOTEHOLDER REGARDING THE LEGALITY OF INVESTMENT THEREIN
BY SUCH PROSPECTIVE EXCHANGING NOTEHOLDER UNDER APPLICABLE LEGAL INVESTMENT OR
SIMILAR LAWS OR REGULATIONS. THE CONTENTS OF THIS MEMORANDUM ARE NOT TO BE
CONSTRUED AS LEGAL, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE EXCHANGING
NOTEHOLDER SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR AND TAX ADVISOR AS
TO LEGAL, BUSINESS AND TAX ADVICE.
EACH EXCHANGING NOTEHOLDER WILL BE DEEMED TO HAVE MADE CERTAIN
ACKNOWLEDGMENTS, REPRESENTATIONS AND AGREEMENTS AS SET FORTH UNDER "NOTICE TO
EXCHANGING NOTEHOLDERS." THIS MEMORANDUM IS BEING PROVIDED TO CERTAIN ACCREDITED
INVESTORS FOR INFORMATIONAL USE IN CONNECTION WITH THE CONSIDERATION OF THIS
EXCHANGE OFFER. ITS USE FOR ANY OTHER PURPOSE IS NOT AUTHORIZED. IT MAY NOT BE
COPIED OR REPRODUCED IN WHOLE OR IN PART, NOR MAY IT BE DISTRIBUTED TO ANYONE
OTHER THAN THE PROSPECTIVE EXCHANGING NOTEHOLDER TO WHOM IT IS BEING PROVIDED
AND SUCH PROSPECTIVE EXCHANGING NOTEHOLDER'S REPRESENTATIVES.
___________________________
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM AND IN ACCORDANCE WITH THE ADDITIONAL
RESTRICTIONS ON TRANSFER AND RESALE AS SET FORTH UNDER "NOTICE TO EXCHANGING
NOTEHOLDERS." EXCHANGING NOTEHOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
___________________________
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE
CONNECTICUT UNIFORM SECURITIES ACT AND THEREFORE CANNOT BE RESOLD UNLESS THEY
ARE REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
___________________________
THE FLORIDA SECURITIES ACT PROVIDES, WHERE SALES ARE MADE TO FIVE OR MORE
PERSONS IN FLORIDA, THAT ANY SALE MADE PURSUANT TO SUBSECTION 517.061(11) OF THE
FLORIDA SECURITIES ACT SHALL BE VOIDABLE BY SUCH FLORIDA PURCHASER EITHER WITHIN
THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO
THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT, OR WITHIN THREE DAYS
AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER,
WHICHEVER OCCURS LATER.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.............................................................................. 1
RISK FACTORS......................................................................... 8
Value of Exchange Consideration................................................. 8
Business Plan Uncertainty....................................................... 8
Net Operating Loss Carryforwards................................................ 9
Transfer Restrictions........................................................... 10
Significant Leverage............................................................ 10
Member Rights................................................................... 10
Subordination; Provision of Collateral.......................................... 11
Certain Fraudulent Conveyance, Preference and Bankruptcy Considerations......... 11
Possible Mandatory Repurchase Offer............................................. 12
Limitations of Security......................................................... 12
Debt Restrictions............................................................... 13
No Market....................................................................... 13
Concentration of Common Stock and Secured Note Ownership........................ 14
BACKGROUND TO EXCHANGE OFFER......................................................... 14
The Company..................................................................... 14
History of Financial Troubles/1991 Bankruptcy................................... 15
Prior Transactions.............................................................. 15
Stabilized Operations but Negative Cash Flow.................................... 16
Current Business Strategy....................................................... 16
Required Recapitalization or Reorganization..................................... 17
Events Leading to Restructuring................................................. 17
CURRENT BUSINESS PLAN................................................................ 22
Business Plan Summary........................................................... 22
Appraisals/Member Rights........................................................ 23
TERMS OF THE RESTRUCTURING TRANSACTION............................................... 23
General......................................................................... 23
Exchange Offer.................................................................. 24
Tender Offer.................................................................... 24
Redemption...................................................................... 24
Effect on Stockholders.......................................................... 25
Senior Secured Credit Facility.................................................. 25
INTERESTS OF MANAGEMENT AND OTHERS................................................... 26
</TABLE>
i
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<TABLE>
<S> <C>
HISTORICAL AND PRO FORMA CAPITALIZATION............................................... 27
SELECTED AND PRO FORMA FINANCIAL DATA................................................. 28
CERTAIN CONDITIONS OF THE EXCHANGE OFFER.............................................. 31
THE EXCHANGE OFFER.................................................................... 32
Terms of the Exchange Offer...................................................... 32
Procedure for Delivery of Secured Notes.......................................... 33
Delivery of Exchange Consideration............................................... 34
Withdrawal Rights................................................................ 35
CIBC Wood Gundy.................................................................. 35
Rauscher Pierce Refsnes, Inc..................................................... 35
Depositary....................................................................... 35
DESCRIPTION OF THE COMPANY'S BUSINESS................................................. 36
General.......................................................................... 36
Campground Operations............................................................ 36
Campground Management............................................................ 37
Resort Operations................................................................ 37
Contracts Receivable............................................................. 38
Financial Information............................................................ 38
Recent Operating Strategy........................................................ 39
Management....................................................................... 40
DESCRIPTION OF SENIOR SUBORDINATED PIK NOTES.......................................... 40
Principal, Maturity and Interest................................................. 41
Subsidiary Guarantee............................................................. 41
Ranking.......................................................................... 41
Security......................................................................... 43
Optional Redemption.............................................................. 44
Change of Control Repurchase Offer............................................... 44
Redemption and Repurchase Offer Procedure........................................ 45
Certain Covenants................................................................ 45
Payments for Consent............................................................. 50
Events of Default and Remedies................................................... 50
Modification of the Senior Subordinated PIK Note Indenture and Collateral
Documents................................................................... 52
Requirements for Certain Actions................................................. 53
Further Assurances............................................................... 53
Discharge of the Senior Subordinated PIK Note Indenture.......................... 53
Concerning the Trustee........................................................... 54
Certain Definitions.............................................................. 54
</TABLE>
ii
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<TABLE>
<S> <C>
DESCRIPTION OF COMMON STOCK 63
General.......................................................................... 63
Nevada Statutory Restrictions on Business Combinations/Corporate Control......... 64
Transfer Agent and Registrar..................................................... 64
Additional Stock Transfer Restrictions........................................... 65
Contractual Transfer Restrictions................................................ 68
Risk of Ownership Change......................................................... 69
Enforcement of By-Law Transfer Restrictions and Contractual Transfer
Restrictions................................................................ 69
REGISTRATION RIGHTS AGREEMENT......................................................... 70
THE SECURED NOTES..................................................................... 71
General.......................................................................... 71
Payment Terms and Trading........................................................ 71
Redemption, Retirement, and Purchase............................................. 71
Subsidiary Guarantees............................................................ 72
Security Interests............................................................... 72
Financial Covenants.............................................................. 74
Certain Covenants................................................................ 74
Events of Default................................................................ 77
Different Circumstances of Each Series of Secured Notes.......................... 77
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................................. 77
Exchange of Secured Notes........................................................ 78
OID With Respect to the Senior Subordinated PIK Notes............................ 80
Consequences as a Result of the Senior Subordinated PIK Notes Being Issued
with OID.................................................................... 81
Market Discount.................................................................. 82
Consequences of Holding the Common Stock......................................... 83
Sale, Exchange or Redemption..................................................... 83
Tax Consequences to the Company.................................................. 84
Application of High Yield Debt Obligation Rules.................................. 85
The Registration Rights Agreement................................................ 85
Backup Withholding............................................................... 86
NOTICE TO EXCHANGING NOTEHOLDERS...................................................... 86
LEGAL MATTERS......................................................................... 88
AVAILABLE INFORMATION................................................................. 88
INFORMATION INCORPORATED BY REFERENCE................................................. 88
APPENDIX I--DEFINED TERMS............................................................. I-1
</TABLE>
iii
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<TABLE>
<S> <C>
EXHIBIT A - BUSINESS PLAN............................................................. A-1
EXHIBIT B - OPINION OF RAUSCHER PIERCE REFSNES, INC................................... B-1
EXHIBIT C - SUMMARY OF APPRAISALS..................................................... C-1
EXHIBIT D - CERTAIN STOCK TRANSFER RESTRICTIONS....................................... D-1
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 30, 1995 (delivered herewith)
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED MARCH 31, 1996 (delivered herewith)
</TABLE>
iv
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SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information appearing elsewhere herein or incorporated herein by
reference.
INTRODUCTION
------------
PURPOSE OF THIS EXCHANGE OFFER
The purpose of this Exchange Offer is to enable the Company to consummate
the Restructuring Transaction, which will result in the retirement of all of the
Secured Notes and a new capital structure for the Company.
Since emerging from Chapter 11 proceedings in 1991, the Company has not had
sufficient earnings to cover its fixed charges, principally the payment
obligations under the Secured Notes. To meet its cash flow deficiencies, the
Company has relied primarily upon collections from its portfolio of contracts
receivable, which is not being replenished materially. The remaining balances
of these contracts receivable, the sale of non-core assets and the continuation
of the Company's recently achieved operating cash flow are not expected to be
sufficient to meet the principal payment obligations due July 15, 1997 and at
maturity under the Secured Notes. Moreover, the resources available to the
Company may be insufficient both to meet the continuing operating needs of the
Company and to make the mandatory sinking fund and interest payments due on
July 15, 1996. Additionally, the Company will not be able to comply with the
financial covenants of the Secured Note Indenture, which have been waived
through June 30, 1996, at the September 30, 1996 measurement date.
The Restructuring Transaction is intended to permit the Company to build
upon its successful operating results in fiscal 1996 by providing a new capital
structure which is consistent with, and provides the opportunity to achieve, the
Company's business plan, which is attached hereto as Exhibit A (the "Business
Plan"). The Business Plan contemplates downsizing the Company to a level
appropriate to a stable membership base, the collection of the remaining
contracts receivable and the sale of non-core assets. Because the Company's
membership base is declining at a significant rate, stabilization will require
several years and sales significantly in excess of current levels. Moreover,
the timing and amount of asset sales cannot be assured. As a consequence, the
actual operating results achieved through implementation of the Business Plan
are uncertain and may vary significantly from those contemplated by the Business
Plan.
RESTRUCTURING TRANSACTION
The following table summarizes the consideration to be received by
Exchanging Noteholders and by Secured Noteholders tendering pursuant to the
Tender Offer ("Tendering Noteholders"), in each case per $1,000 in principal
amount of Secured Notes.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
TENDERING EXCHANGING
CONSIDERATION NOTEHOLDERS NOTEHOLDERS
------------- ----------- -----------
<S> <C> <C>
Cash $780 $400 (1)
Accrued interest through July 15, 1996 in cash $ 60 $ 60
---- ----
Total cash $840 $460
Principal amount of Senior Subordinated PIK Notes $492
Common Stock 45 shares
________________
(1) Includes $40.59 in prepaid interest on the Senior Subordinated PIK
Notes.
-------------------------------------------------------------------------------
</TABLE>
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1
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The Restructuring Transaction has been proposed by the Company after
discussions with a committee of Secured Noteholders (the "Steering Committee"),
Carl Marks Strategic Investments, L.P. (together with its affiliates, "CM
Strategic") and CIBC Wood Gundy Securities Corp. ("CIBC Wood Gundy"), which has
acted as the financial advisor to both the Company and certain Secured
Noteholders.
A significant potential Exchanging Noteholder has indicated that to meet
its internal requirements and participate in the Exchange Offer, a portion of
the interest on the Senior Subordinated PIK Notes must be prepaid in cash. In
order to meet this need, a portion of the $400 cash component of the Exchange
Consideration as approved by the Board of Directors will represent prepaid
interest on the newly issued Senior Subordinated PIK Notes. The interest rate on
the Senior Subordinated PIK Notes for the initial 18 months they are outstanding
will be 17 1/2% per annum, of which 5 1/2% per annum will be prepaid in cash,
and the balance of 12% per annum will be payable on scheduled interest payment
dates in cash or in kind. See "Description of Senior Subordinated PIK Notes ."
SUMMARY CAPITALIZATION
The following table summarizes the capital structure of the Company as of
June 30, 1996 (i) estimated without consummation of the Restructuring
Transaction and (ii) pro forma for the consummation of the Restructuring
Transaction, assuming receipt of the Senior Secured Credit Facility and
satisfaction of the Minimum Exchange Condition and Minimum Tender Condition.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
(DOLLARS IN THOUSANDS)
--------------------------------------
ESTIMATED PRO FORMA
--------- ---------
<S> <C> <C>
Cash $ 33,526 $ 5,125
-------- --------
Secured Notes, gross 101,461
Debt discount (7,096)
---------
Secured Notes, net 94,365
Senior Secured Credit Facility 30,000
Other mortgages 940 940
Senior Subordinated PIK Notes 40,000
Deferred gain on exchange to be classified as
additional subordinated debt under FAS 15 2,054
Total debt $ 95,305 $ 72,994
-------- --------
Shares of Common Stock outstanding (1) 3,702,726 7,361,226
</TABLE>
__________________
(1) Does not include warrants to purchase 484,835 and 10,087 shares of Common
Stock at $4.24 and $1.62 per share, respectively, and options to purchase
305,000 shares of Common Stock under the Company's stock option plans at
various prices.
REQUIRED EXCHANGE AND TENDER
Consummation of the Restructuring Transaction will require the combined
participation of holders of not less than $94.4 million (approximately 92.9%) in
aggregate principal amount of the Secured Notes in this Exchange Offer and the
Tender Offer.
The Steering Committee has endorsed the terms of the Restructuring
Transaction. As of June 20, 1996, Secured Noteholders, including CM Strategic,
SC Fundamental, IAT Reinsurance Syndicate, Ltd., Post Advisory Group, and Third
Avenue Fund and other affiliates and associates of Martin J. Whitman, which hold
$64.8 million in principal amount of Secured Notes
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2
<PAGE>
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(representing 64% of the Secured Notes outstanding), have advised the Company
that they intend to exchange their Secured Notes in the Exchange Offer.
As of June 20, 1996, $25,000 in principal amount of Secured Notes had been
tendered in the Tender Offer. On June 21, 1996 the Company increased the
purchase price to Tendering Noteholders to $780 per $1,000 of principal amount,
plus accrued interest of $60, from $740 per $1,000 of principal amount. The
Company also extended the Tender Offer to expire at 12:00 midnight, Friday July
5, 1996.
EFFECT OF UNSUCCESSFUL RESTRUCTURING
If the Company's attempt to restructure is unsuccessful, management
believes that the resources available to the Company may be insufficient both to
meet the continuing operating needs of the Company in accordance with the
Business Plan and to make the mandatory sinking fund and interest payments due
on July 15, 1996. Under the terms of the Secured Note Indenture, if the Company
fails to make a payment of principal or interest or defaults under the financial
covenants, it is prohibited from making withdrawals from its cash accounts
except for a one-time withdrawal of up to $5 million, which would be
insufficient to meet the business needs of the Company during the summer season,
the period of highest demand for working capital. Under such circumstances, the
Company may seek relief under the United States Bankruptcy Code or attempt to
operate at significantly reduced levels and recapitalize or reorganize at a
later date. The Company believes that its ongoing operations, particularly
collections of contracts receivable and membership dues and sales efforts, will
be materially adversely affected by either the commencement of bankruptcy
proceedings or continued operations at significantly reduced levels. As a
result, there can be no assurance that a bankruptcy reorganization or a later
recapitalization or reorganization would not be significantly less favorable to
the Secured Noteholders than the proposed Restructuring Transaction.
CONTINUING NEGOTIATIONS
The Company has proposed terms for a Senior Secured Credit Facility to fund
a portion of the cash payments to Secured Noteholders in the Restructuring
Transaction and to fund future working capital needs of the Company as described
herein. See "Terms of the Restructuring Transaction - Senior Secured Credit
Facility." The terms of the Senior Subordinated PIK Notes described herein are
consistent with the terms proposed by the Company for the Senior Secured Credit
Facility. The Company is continuing to engage in any discussions with certain
potential lenders, but has not yet received a commitment for such financing.
THEREFORE, THE TERMS OF THE SENIOR SECURED CREDIT FACILITY MAY VARY MATERIALLY
FROM THE TERMS DESCRIBED HEREIN AND, AS A RESULT, THE TERMS OF THE SENIOR
SUBORDINATED PIK NOTES AS DESCRIBED HEREIN ARE SUBJECT TO MODIFICATION.
EXCHANGE CONSIDERATION
----------------------
Assuming satisfaction of the Minimum Exchange Condition, the Exchange
Consideration will consist of cash, Senior Subordinated PIK Notes and Common
Stock in the amounts set forth below. See "Terms of the Restructuring
Transaction - Exchange Offer," "Description of Senior Subordinated PIK Notes,"
"Description of Common Stock" and "Registration Rights Agreement."
CASH
Aggregate Payment $32.5 million (including $3.3 million prepaid
interest on the Senior Subordinated PIK Notes), plus
accrued interest on the Secured Notes aggregating
$4.9 million through July 15, 1996.
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3
<PAGE>
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Per $1,000 principal $400.00 (including $40.59 prepaid interest on the
amount of Secured Senior Subordinated PIK Notes), plus $60 accrued
Notes exchanged interest on the Secured Notes, through July 15, 1996.
SENIOR SUBORDINATED PIK NOTES
Issue $40,000,000 principal amount of the Company's Senior
Subordinated Pay-In-Kind Notes due 2003.
Per $1,000 principal $492 principal amount.
amount of Secured
Notes exchanged
Interest 17 1/2% per annum for the initial 18 months and 12% per
annum thereafter. Interest at 5 1/2% per annum for the
initial 18 months the Senior Subordinated PIK Notes are
outstanding will be prepaid on the date of issuance in
cash. All remaining interest will be payable in cash or
additional Senior Subordinated PIK Notes, at the
Company's option, through July 15, 2000 and in cash
thereafter. The interest rate is subject to increase
under certain circumstances for non-compliance with the
Registration Rights Agreement. The Senior Secured
Credit Facility may require that interest (other than
the prepaid interest) be paid only in kind while such
facility is outstanding.
Interest Payment January 15 and July 15 of each year, commencing January
Dates 15, 1997.
Subsidiary Guarantee The Company's obligations under the Senior Subordinated
PIK Notes will be unconditionally guaranteed (the
"Subsidiary Guarantee"), jointly and severally, by all
subsidiaries of the Company (other than an immaterial
utility subsidiary), each of which is, directly or
indirectly, a wholly-owned subsidiary of the Company,
and all future wholly-owned subsidiaries.
Ranking The Senior Subordinated PIK Notes and the Subsidiary
Guarantee will be subordinated to the Senior Secured
Credit Facility, and will rank pari passu with all
existing and future Indebtedness of the Company and its
subsidiaries and senior to any Subordinated
Indebtedness of the Company and its subsidiaries. The
Senior Subordinated PIK Note Indenture will permit the
Company and its subsidiaries to incur up to $40 million
in principal amount under the Senior Secured Credit
Facility and certain additional secured indebtedness.
At March 31, 1996, the Company and its subsidiaries had
$31.9 million of such secured indebtedness including
the Senior Secured Credit Facility, pro forma after
giving effect to the Restructuring Transaction.
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4
<PAGE>
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Security The Senior Subordinated PIK Notes and the Subsidiary
Guarantee will initially be unsecured. Upon repayment
in full of the Senior Secured Credit Facility, the
Senior Subordinated PIK Notes and the Subsidiary
Guarantee will be secured by the same assets as secured
the Senior Secured Credit Facility other than cash and
cash equivalents and other assets required to secure
any refinancing or replacement of a portion of the
Senior Secured Credit Facility for working capital
purposes. The Senior Secured Credit Facility will be
secured by substantially all of the assets of the
Company and its subsidiaries other than certain
excluded assets. A refinancing or replacement of the
Senior Secured Credit Facility for working capital
purposes will be limited to $10 million in principal
amount.
Optional Redemption The Senior Subordinated PIK Notes will be redeemable at
the option of the Company, in whole or in part, at any
time, at 100% of the principal amount thereof, plus
accrued and unpaid interest to the redemption date. The
Company will not be required to make any sinking fund
payments on the Senior Subordinated PIK Notes.
Change of Control In the event that a Change of Control has occurred,
each holder of Senior Subordinated PIK Notes will have
the right, at such holder's option, subject to the
terms and conditions of the Senior Subordinated PIK
Note Indenture, to require the Company to repurchase
all or any part of such holder's Senior Subordinated
PIK Notes at a cash price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest to the purchase date.
Certain Covenants The Senior Subordinated PIK Note Indenture will
restrict, among other things, (i) the incurrence of
additional indebtedness, (ii) the incurrence of liens,
(iii) the payment of dividends and distributions,
(iv) the making of loans and investments,
(v) transactions with affiliates, (vi) agreements
restricting the ability of certain of the Company's
subsidiaries to pay dividends or make other
distributions on their capital stock, (vii) the
Company's ability to conduct other businesses,
(viii) the sale or other disposition of assets, and
(ix) certain mergers, consolidations and transfers of
all or substantially all of the assets of the Company
and its subsidiaries.
COMMON STOCK
Common Stock to be 3,658,500 shares, representing approximately 50% of the
issued outstanding Common Stock after giving effect to the
Restructuring Transaction (excluding outstanding
warrants to purchase 484,835 and 10,087 shares of
Common Stock at $4.24 and $1.62 per share,
respectively, and options to purchase 305,000 shares of
Common Stock under the Company's stock option plans at
various prices).
Per $1,000 principal 45 shares.
amount of Secured
Notes exchanged
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5
<PAGE>
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Common Stock 7,361,226 shares (excluding outstanding warrants and
outstanding after the options as set forth above).
Restructuring
Transaction
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement will require the Company to file a shelf
registration statement covering resales of the Senior Subordinated PIK Notes and
the Common Stock by the initial holders thereof and use its good faith efforts
to maintain the effectiveness thereof until the initial holders have resold such
securities or are able to resell such securities under Rule 144(k) under the
Securities Act.
THE SECURED NOTES TO BE RETIRED
-------------------------------
Issue $101,454,000 principal amount outstanding of the
Company's 12% Secured Notes Due 1998 and Additional
Series 12% Secured Notes Due 1998. See "The Secured
Notes."
Interest Payments January 15 and July 15.
Rank and Security The Secured Notes are secured by liens on substantially
all of the assets of the Company and its subsidiaries,
including: (i) the capital stock of substantially all
of the Company's subsidiaries, (ii) 56 campgrounds and
the common amenities at one resort owned by the
Company's subsidiaries, together with related
improvements, and certain trailers, equipment and
certain other tangible personal property, (iii) the
closed campgrounds and other real estate that the
Company's subsidiaries own and are in the process of
selling, (iv) the contracts receivable that the Company
and its subsidiaries own, (v) all indebtedness owed to
the Company by its subsidiaries, together with all
related liens, and (vi) substantially all of the cash
balances of the Company and its subsidiaries. However,
certain assets are excluded from the liens of the
Secured Note Indenture, including two of the Company's
operating campgrounds, certain leasehold interests,
rights and franchises that would become void if
mortgaged or pledged, certain vehicles, trailers and
movable equipment, certain cash in restricted accounts,
and the stock and assets of an immaterial utility
subsidiary.
The Secured Note Indenture permits the subordination of
liens securing the Secured Notes to security interests
securing a limited amount of indebtedness under
revolving credit and other facilities. The Secured Note
Indenture also permits the incurrence of certain other
indebtedness that may share the security for and rank
pari passu with the Secured Notes.
Guarantees The Secured Notes are guaranteed by all of the
Company's subsidiaries, other than an immaterial
utility subsidiary.
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6
<PAGE>
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Redemption and The Company may redeem the Secured Notes at any time,
Retirement in whole or in part, at 100% of the principal amount
thereof plus interest thereon. The Company must redeem
$18.6 million in principal amount of the Secured Notes
on each of July 15, 1996 and 1997, which amount is
subject to reduction in connection with certain
purchases and retirements of Secured Notes. Unless the
Company obtains a waiver, upon a change of control and
certain other events the Company must offer to purchase
all of the outstanding Secured Notes at 100% of the
principal amount thereof plus accrued and unpaid
interest thereon. Subject to certain exceptions, the
Company must also use 80% of the proceeds of any Asset
Sale (as defined in the Secured Note Indenture) to
retire outstanding Secured Notes unless the Company
reinvests those proceeds in its core business.
Certain Covenants The Secured Note Indenture contains covenants that
limit or restrict the ability of the Company and its
subsidiaries to: (i) grant security interests in their
assets, (ii) incur additional indebtedness, (iii) pay
cash dividends, (iv) make acquisitions and investments,
(v) purchase Secured Notes, (vi) enter into
transactions with affiliates and insiders, (vii) issue
new securities, and (viii) make loans and other
financings. The Secured Note Indenture also requires
the Company to maintain certain financial ratios and
limits the amount of losses that the Company may incur;
however, by reason of an amendment of the Secured Note
Indenture, required compliance with such financial
covenants was eliminated through June 30, 1996.
RISK FACTORS
------------
For a discussion of certain factors that should be considered in connection
with a decision to participate in the Exchange Offer, see "Risk Factors."
- --------------------------------------------------------------------------------
7
<PAGE>
RISK FACTORS
In deciding whether to participate in this Exchange Offer, each prospective
Exchanging Noteholder should carefully review the risk factors discussed below,
in addition to the other information set forth elsewhere herein and incorporated
herein by reference. The headings are not intended to describe fully the risks
but are intended to alert prospective Exchanging Noteholders to the general
subject matter of the risks described.
VALUE OF EXCHANGE CONSIDERATION
The Board of Directors approved the Exchange Offer based, in part, upon the
conclusion of Rauscher Pierce Refsnes, Inc. ("RPR") that the Exchange
Consideration is reasonably equivalent to the Purchase Price in the Tender
Offer. A copy of the written report of RPR setting forth such conclusion is
attached as Exhibit B. There can be no assurance, however, as to the actual
value of the Exchange Consideration. Neither the Company nor RPR evaluated the
adequacy of the total consideration to be received by the Secured Noteholders
from the point of view of the Secured Noteholders. To the contrary, RPR and the
Special Committee of the Board of Directors evaluated the financial fairness of
the Restructuring Transaction from the point of view of the Company's
stockholders. Additionally, the Board of Directors approved the Exchange
Consideration after discussions with the members of the Steering Committee and
certain other potential Exchanging Noteholders, including CM Strategic, with the
assistance of CIBC Wood Gundy. In such discussions, CIBC Wood Gundy was advising
both the Company and the Steering Committee and was not retained to act solely
from the perspective of the Secured Noteholders. See "Background to Exchange
Offer - Events Leading to Restructuring."
The Secured Notes are not listed or quoted on a recognized exchange or
quotation system and, according to information received by the Company, are
infrequently traded. From this information, the Company believes that bid
prices for the Secured Notes prior to the announcement of the Restructuring
Transaction were in the range of $700 to $740 per $1,000 of principal amount.
The Company believes bid prices for the Secured Notes since such announcement,
but before announcement of the modification of the Exchange Consideration and
the Purchase Price, have been in the range of $750 to $762.50 per $1,000 of
principal amount. There can be no assurance that these bids are accurate
indications of prices available to willing sellers. The Company believes such
prices may not have been effectively available to non-institutional investors
because of related transaction costs.
The Common Stock does not trade every day, and the trading volume is often
small. Since July 1, 1994, the highest closing bid quotation per share of
Common Stock has been $1.75. On May 31, 1996, prior to the announcement of the
Restructuring Transaction, the closing bid quotation per share of Common Stock
was $.375. On June 20, 1996, the day before the announcement of the
modification of the Exchange Consideration and the Purchase Price, the closing
bid quotation per share of Common Stock was $0.50. The foregoing Common Stock
bid quotations are as quoted through the NASD OTC Bulletin Board and the
National Quotation Bureau's Pink Sheets. Such quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
BUSINESS PLAN UNCERTAINTY
History of Unprofitable Operations. The Company believes it has stabilized
its operations and presently expects to achieve a positive contribution from
operations for fiscal 1996. However, since emerging from bankruptcy on December
31, 1991, through fiscal year 1995, the Company has experienced net losses,
excluding nonrecurring and extraordinary items, and negative cash flow from
operating activities, excluding the principal collections on the contracts
8
<PAGE>
receivable portfolio. There can be no assurance that the stabilization that the
Company has recently achieved will continue. See "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report and Quarterly Report incorporated herein by reference.
Significant Assumptions. The Business Plan assumes that the progress made
in fiscal 1996 will continue, and in the case of the Company's sales and
marketing program will increase materially. The Company has formulated the
Business Plan on the significant assumptions, among others, that the Company
significantly increases its sales of memberships similar to those introduced in
the spring of 1995 and successfully introduces a new cottage membership, that
the current membership base continues to decline at no more than the current
rate, that both operating expenses and general and administrative expenses
continue to be reduced, that ancillary revenues generated from campground
operations increase, that the Company is able to sell certain non-core assets
and that there are no limitations on the Company s ability to utilize its net
operating loss carryforwards. Many factors will influence whether such
assumptions, and the other assumptions and factors affecting the Business Plan
that are set forth in this Memorandum and the Annual Report and Quarterly Report
incorporated herein by reference, can be met. Many of such factors are beyond
the control of the Company. If the assumptions of the Business Plan are not
met, the Company s actual results will vary significantly from the Business
Plan. See "Exhibit A - Business Plan" herein and "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report and Quarterly Report incorporated herein by reference.
Campground Operations. There can be no assurance that the Company can
achieve increased sales of campground memberships, a material assumption in the
Business Plan, or successfully introduce its cottage membership. Continued cost
reduction measures may cause member dissatisfaction and thus damage the
Company's relationship with its campground members, the collectibility of
contracts receivable or dues and the Company's ability to sell new memberships
and successfully introduce new products. Periods of economic slowdown or
recession may be accompanied by decreased demand for new memberships and
decreased use of the Company's campgrounds by existing members, reduction in
collections of contracts receivable and the proceeds realized upon disposition
of non-core assets and decrease the ability of the Company to successfully
introduce new products. See "Exhibit A - Business Plan" herein and "Business"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report and Quarterly Report incorporated herein by
reference.
Disposition of Non-Core Assets. The ability of the Company to realize on
the disposition of non-core assets, a material assumption in the Business Plan,
will also be affected by several factors, including identifying potential buyers
who will pay appraised value for certain properties included for disposition in
the Business Plan and successfully addressing the rights of members at other
properties proposed to be withdrawn from the campground system and sold. The
timing and amounts of these dispositions could vary materially from the Business
Plan and adversely affect the Company's cash flows and ability to service its
indebtedness. See "Current Business Plan" and "Exhibit A - Business Plan"
herein.
NET OPERATING LOSS CARRYFORWARDS
For federal income tax purposes, immediately after consummation of the
Restructuring Transaction, the Company estimates that it will have available for
its use net operating loss carryovers ("NOLs") of $50.4 million. The NOLs can
generally be used to offset taxable income earned by the Company (and thus
reduce the Company's income tax liability) in subsequent years within a 15-year
carryover period. Section 382 of the Internal Revenue Code of 1986, as amended
(the "Code"), provides that when a corporation undergoes an "ownership change,"
the corporation's use of its NOLs is limited each year to an amount of losses
determined by multiplying the fair market value of the corporation's stock
immediately before the ownership
9
<PAGE>
change by the "long-term tax exempt rate." The Exchange Offer has been
structured to avoid a "ownership change" under Section 382 of the Code. The
Company expects that the issuance of Common Stock in the Exchange Offer will
result in a change in ownership for purposes of Section 382 of less than the 50%
change required to cause an "ownership change." If the Company were to
experience an ownership change as a result of the Exchange Offer, the Company
estimates that it would not be entitled to use any substantial amount of its
available NOLs to reduce its taxable income. Such a limitation on the use of the
Company's NOLs would materially reduce the Company's after-tax earnings as
projected in the Business Plan. See "Description of Common Stock - Additional
Stock Transfer Restrictions."
TRANSFER RESTRICTIONS
It is possible that the change in ownership resulting from the issuance of
Common Stock in the Restructuring Transaction, when combined with any future
change in ownership resulting from subsequent transfers of Common Stock, could
create an "ownership change" under Section 382 of the Code. In order to reduce
the risk of an inadvertent ownership change as a result of subsequent transfers,
the transfer of Common Stock received by Exchanging Noteholders in the Exchange
Offer, as well as any Common Stock owned by the Exchanging Noteholders prior to
the consummation of the Exchange Offer, will be restricted for a period of 24
months after consummation of the Restructuring Transaction. The transfer
restrictions will prohibit certain transfers that would increase the cumulative
change in ownership of the Company for purposes of Section 382 of the Code. Any
purported transfer of shares of Common Stock that is not permitted pursuant to
the transfer restrictions will be disregarded. See "Description of Common
Stock - Additional Stock Transfer Restrictions."
Despite the transfer restrictions, it is possible that transfers by
stockholders whose shares of Common Stock are not restricted, or even that a
series of permitted transfers by stockholders whose shares are subject to
transfer restrictions, will result in an "ownership change" of the Company for
purposes of Section 382 of the Code, resulting in restricted use of the
Company's NOLs and a commensurate increase in the Company's federal income tax
liability.
SIGNIFICANT LEVERAGE
After the Restructuring Transaction, the Company will remain significantly
leveraged. As of June 30, 1996, estimated pro forma for the consummation of the
Restructuring Transaction, the Company would have outstanding indebtedness of
approximately $71 million. In addition, subject to the restrictions of the
Senior Secured Credit Facility and the Senior Subordinated PIK Note Indenture,
the Company may incur additional indebtedness from time to time. This leverage
may limit the Company's ability to respond to changing business and economic
conditions. Required payments of principal and interest are expected to be
financed from operating cash flow, collections of contracts receivables and
proceeds from the disposition of non-core assets. The Company's ability to
generate such cash is subject to many factors, including the factors discussed
above, and there can be no assurance that sufficient cash will be available to
service the Company's indebtedness. See "Historical and Pro Forma
Capitalization," "Selected and Pro Forma Financial Data" and "Exhibit
A - Business Plan" herein and "Management Discussion and Analysis of Financial
Condition and Results of Operations" on the Annual Report and Quarterly Report
Incorporated herein by reference.
MEMBER RIGHTS
The Company believes that the success of the Business Plan will necessarily
be tied to continued operation of a downsized campground system. Some states,
including California, Oregon and Washington, where 29 of the Company's
campgrounds are located, have nondisturbance statutes that limit the ability of
an owner to sell or close, or a lienholder to
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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. Moreover, the campground mortgages that could
secure the Senior Subordinated PIK Notes 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 in addition to those contemplated by the
Business Plan will likely be limited by state law or the membership contracts
themselves, and foreclosure of the campground liens in such significant numbers
will also likely be limited. Moreover, the impact of members' rights in a
bankruptcy proceeding is uncertain and could adversely affect the implementation
of, and the recoveries that may be available to holders of Senior Subordinated
PIK Notes from, such a proceeding. See "Current Business Plan -
Appraisals/Member Rights," "Description of Senior Subordinated PIK Notes -
Events of Defaults and Remedies - Remedies with Respect to Collateral" and "The
Secured Notes - Security Interests - Limitations on Foreclosure" herein.
SUBORDINATION; PROVISION OF COLLATERAL
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of the Senior Subordinated PIK Notes will be
subordinated in right of payment to the Senior Secured Credit Facility. In the
event of the bankruptcy, liquidation, dissolution, reorganization or other
winding up of the Company, the assets of the Company will be available to pay
obligations on the Senior Subordinated PIK Notes only after the Senior Secured
Credit Facility has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Senior Subordinated PIK Notes.
In addition, under certain circumstances, the Company may not pay principal of,
premium, if any, or interest on or any other amounts owing in respect of the
Senior Subordinated PIK Notes or purchase, redeem or otherwise retire the Senior
Subordinated PIK Notes if a payment or nonpayment default exists with respect to
the Senior Secured Credit Facility. See "Description of Senior Subordinated PIK
Notes - Ranking" herein.
The Senior Secured Credit Facility will require that the Senior
Subordinated PIK Notes remain unsecured while the Senior Secured Credit Facility
remains outstanding. If the Business Plan is not successful, the Senior Secured
Credit Facility may remain outstanding for longer than contemplated and the
provision of collateral for the Senior Subordinated PIK Notes may be delayed
materially and possibly indefinitely. Moreover, the Senior Subordinated PIK
Note Indenture will permit the Company to refinance or replace up to $10 million
in principal amount of the Senior Secured Credit Facility with a working capital
facility. Any assets required to secure such facility will not be available to
secure the Senior Subordinated PIK Notes and will likely be material. See
"Description of Senior Subordinated PIK Notes - Security" herein.
CERTAIN FRAUDULENT CONVEYANCE, PREFERENCE AND BANKRUPTCY CONSIDERATIONS
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if any subsidiary of the Company
that guarantees the Senior Subordinated PIK Notes (a)(i) is insolvent or
rendered insolvent by reason of the issuance of its guarantee or the liens
securing the guarantee or (ii) is engaged in a business or transaction or is
about to engage in a business or transaction for which the assets of such
subsidiary constitute an unreasonably small capital or (iii) intends to incur,
or believes that it would incur, debts beyond its ability to pay such debts as
they mature and (b) such subsidiary receives less than reasonably equivalent
value or fair consideration for its guarantee or such lien, the guarantee, and
any liens securing such guarantee, could be voided. If any guarantee or lien
were avoided, the holders could lose the benefit of the guarantee and any
collateral therefor, and the holders could also be required to return to such
subsidiary or its estate the amount of any payment or foreclosure proceeds
received. In addition, if the guarantee of any subsidiary of the Company were
to be set aside, indebtedness permitted to be incurred by such subsidiary
pursuant to the Senior Subordinated PIK Note Indenture could become,
effectively, senior to the Senior Subordinated
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PIK Notes with respect to such subsidiary, with the assets of such subsidiary
being available for the payment of the Senior Subordinated PIK Notes only after
they are applied to the payment of such indebtedness.
In the event that a case under the United States Bankruptcy Code is
commenced by or against the Company or any of its subsidiaries within 90 days
after the Company or such subsidiary makes a payment on or provides collateral
to secure the Senior Subordinated PIK Notes or a Person becomes a guarantor,
some or all of the payments received, or collateral provided, during such 90-day
period may be avoidable as a preference under the Bankruptcy Code. Such 90-day
period could be extended to one year in certain cases. Neither the Company nor
any of its subsidiaries will provide collateral for the Senior Subordinated PIK
Notes until the Senior Secured Credit Facility has been repaid. In addition,
the Senior Subordinated PIK Note Indenture will provide that subsidiaries formed
or acquired after the issuance of the Senior Subordinated PIK Notes will be
required to guarantee the Senior Subordinated PIK Notes and the stock and assets
of such guarantors must be pledged as security for such guarantees. Such
pledges and guarantees may be avoidable as a preference if a bankruptcy case
concerning the Company or such subsidiaries, as applicable, were to be commenced
within the applicable statutory period. Any payment made, or collateral
received, which is avoided as a preference would be required to be returned to
the bankruptcy estate of the Company or such subsidiaries. See "Description of
Senior Subordinated PIK Notes - Subsidiary Guarantee" and "- Security" herein.
POSSIBLE MANDATORY REPURCHASE OFFER
The Company will be required to offer to repurchase the Senior Subordinated
PIK Notes and the holders of the Senior Subordinated PIK Notes will have the
right to require the Company to repurchase all or any part of such holder's
Senior Subordinated PIK Notes upon the occurrence of a Change of Control. The
Company's ability to purchase the Senior Subordinated PIK Notes following a
Change of Control will be limited by the Company's financial resources and
short-term financial obligations at the time of the proposed purchase. See
"Description of Senior Subordinated PIK Notes - Change of Control Repurchase
Offer" herein.
LIMITATIONS OF SECURITY
Scope of Collateral. The Senior Subordinated PIK Notes and the Subsidiary
Guarantee will initially be unsecured obligations of the Company and its
subsidiaries. Upon repayment in full of the Senior Secured Credit Facility, the
Senior Subordinated PIK Notes and the Subsidiary Guarantee will be secured by
the same assets as secured the Senior Secured Credit Facility, other than cash
or cash equivalents and other assets required to secure any refinancing or
replacement of up to $10 million principal amount of the Senior Secured Credit
Facility for working capital purposes. The Senior Secured Credit Facility will
be secured by substantially all of the assets of the Company and the
Subsidiaries other than (i) leasehold interests and other leased assets,
(ii) certain vehicles, trailers and other equipment; (iii) equipment subject to
financing and any newly acquired or leased assets financed with permitted
indebtedness and (iv) any assets subject to agreements, permits, licenses or the
like that cannot be subjected to a lien under the collateral documents without
the consent of third parties, which consent has not been obtained. Certain of
these assets are material to the continued operations of the campgrounds of the
Company's subsidiaries. However, pursuant to the covenant described below under
"Description of Senior Subordinated PIK Notes - Certain Covenants - Limitation
on Liens," neither the Company nor any of its subsidiaries will be permitted to
incur liens on such excluded assets except to the limited extent described
therein.
No assurance can be given that the value of the collateral, when provided,
will equal or exceed the principal amount of the Senior Subordinated PIK Notes
or that any proceeds that may be realized upon any foreclosure of the liens on
any such collateral would be sufficient to pay
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unpaid principal and interest on the Senior Subordinated PIK Notes. See
"Description of Senior Subordinated PIK Notes - Security," "- Certain Covenants
- - Limitations on Liens" and "- Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock."
Foreclosure Limitations. The ability to foreclose on any collateral
securing the Senior Subordinated PIK Notes will be subject to members' rights
under state law and certain member contracts, procedural and other restrictions
under state real estate and commercial law, Federal and state securities laws
and other laws affecting the rights of creditors generally in the jurisdictions
applicable to the collateral. See "Description of Senior Subordinated PIK Notes
- - Remedies with Respect to Collateral."
Bankruptcy Limitations. The ability to take possession and dispose of any
collateral directly or indirectly securing the Senior Subordinated PIK Notes
upon acceleration is also likely to be significantly impaired or delayed by
applicable bankruptcy laws if a bankruptcy case were to be commenced by or
against the Company or the subsidiary owning the collateral. Under applicable
bankruptcy laws, the Trustee and the holders of Senior Subordinated PIK Notes
would be prohibited from taking possession or disposing of the collateral absent
bankruptcy court approval. Moreover, the Company or subsidiary would be
permitted to retain and use the collateral as long as the Trustee and the
holders are being provided "adequate protection" in the form of periodic cash
payments or substitute liens or in some other form approved by the court in its
discretion. While this requirement is generally intended to protect the value
of the security, it cannot be predicted what form of "adequate protection" might
be approved by the court in the particular case. The court has broad
discretionary powers in all these matters, including the valuation of the
collateral. In addition, since the collateral generally does not include cash
and cash equivalents derived from operations, the holders of the Senior
Subordinated PIK Notes would not have any consent rights with respect to the use
of those funds by the Company or subsidiary during the pendency of the
proceedings. In view of these considerations, it is not possible to predict for
how long payments on the Senior Subordinated PIK Notes would be delayed
following the filing of a bankruptcy case, whether or when the Trustee could
take possession of or sell the collateral or to what extent the holders of the
Senior Subordinated PIK Notes would be compensated for any delay in payment or
loss of value of the collateral.
DEBT RESTRICTIONS
The Senior Secured Credit Facility and Senior Subordinated PIK Indenture
and the Company's other debt instruments impose certain financial and operating
covenants all of which may restrict the Company's ability to pursue the Business
Plan. Changes in economic or business conditions, results of operations or
other factors could in the future cause a violation of one or more covenants in
the Company's debt instruments.
NO MARKET
The Senior Subordinated PIK Notes and the Common Stock included in the
Exchange Consideration will not be registered under the Securities Act or any
state securities laws, although under the Registration Rights Agreement the
Company will be required to file a registration statement covering resales by
the initial holders. As a consequence, these securities will not be freely
transferable initially. Moreover, once such securities are registered for
resale, a market for the Senior Subordinated PIK Notes may not develop. The
Company does not intend to list the Senior Subordinated PIK Notes on any
national securities exchange. To the Company's knowledge, no broker intends to
make a market in the Senior Subordinated PIK Notes. The Common Stock has traded
in the over-the-counter market since 1992. Trading in the Common Stock is light
and an established public trading market may not exist. Moreover, state and
local securities laws may prohibit the trading of the Senior Subordinated PIK
Notes and the Common Stock in certain jurisdictions. As a consequence, the
investment in these securities may be illiquid
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for an indefinite period. If a market for the Senior Subordinated PIK Notes does
develop, the Senior Subordinated PIK Notes could trade at a substantial discount
from their face amount and liquidity may be limited. If such a market does not
develop, holders may be unable to resell the Senior Subordinated PIK Notes for
an extended period of time, if at all. Future trading prices of the Senior
Subordinated PIK Notes will depend upon many factors, including, among others,
prevailing interest rates, the Company's operating results, the market for
similar securities and restrictions imposed by state securities laws.
CONCENTRATION OF COMMON STOCK AND SECURED NOTE OWNERSHIP
CM Strategic, including its affiliate, Mr. Boas, a director of the Company,
beneficially owns an aggregate of 45.5% of the outstanding Common Stock and
$22.9 million in principal amount of Secured Notes. After consummation of the
Restructuring Transaction assuming satisfaction of the Minimum Exchange
Condition, CM Strategic will beneficially own approximately 38.1% of the
outstanding Common Stock and will also beneficially own approximately $11.3
million (representing approximately 28%) in principal amount of Senior
Subordinated PIK Notes. As a result, CM Strategic and Mr. Boas will be in a
position to significantly influence the outcome of substantially all actions
requiring stockholder approval, as well as certain actions by the holders of the
Senior Subordinated PIK Notes. See "Terms of the Restructuring Transaction --
Effect on Stockholders," "Interests of Management and Others," and "Description
of Senior Subordinated PIK Notes - Requirements for Certain Actions."
BACKGROUND TO EXCHANGE OFFERECT OFFER
THE COMPANY
The Company owns and operates through its subsidiaries a system of 58
membership-based campgrounds located in 19 states and British Columbia, Canada,
serving 131,000 members as of March 31, 1996. Through its subsidiaries, the
Company also manages timeshare facilities and owns certain real estate at eight
full service resorts and provides a reciprocal use program for members of
approximately 330 recreational facilities. Unless the context otherwise
requires, the term the Company includes the Company's subsidiaries.
The Company's operations in the campground and resort business commenced on
June 30, 1991, when the Company acquired 100% of the capital stock of National
American Corporation (collectively with its subsidiaries, "NACO") and 69% of the
capital stock of Thousand Trails, Inc. (collectively with its subsidiaries,
"Trails"). On June 3, 1992, the Company increased its ownership in Trails to
80% through a tender offer. On March 29, 1994, the Company acquired the
remaining 20% of the capital stock of Trails in a merger. Prior to acquiring
NACO and Trails, the Company purchased contracts receivable generated
principally by them from the sale of campground memberships and resort interests
on an installment basis. Apart from its debt and equity interests in its
subsidiaries, the Company's principal assets consist of these receivables and
the cash generated by the receivables and its subsidiaries' operations.
HISTORY OF FINANCIAL TROUBLES/1991 BANKRUPTCY
In January 1987, in connection with the formation of the Company and its
initial purchase of contracts receivable, the Company publicly issued $149.5
million aggregate principal amount of unsecured senior notes (the "Senior
Notes"). From June 1988, the Company, then an indirect wholly-owned subsidiary
of Southmark Corp. ("Southmark"), purchased $91.7 million principal amount of
publicly traded debt securities of Southmark and $2.5 million principal amount
of publicly traded debt securities of a Southmark affiliate (collectively, the
"Southmark Debt Securities") for an aggregate purchase price of $52.2 million.
Southmark's subsequent financial difficulties and Chapter 11 reorganization
caused the Company to realize a loss of $50.1 million
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on the Southmark Debt Securities. As a result, the Company was faced with a
deteriorating financial condition, which led, in part, to the Company's
Chapter 11 filing on May 9, 1991. As part of its plan of reorganization, the
Company sought to combine its operations with NACO and Trails and acquired
control of NACO and Trails during the course of the reorganization proceedings.
Under its plan of reorganization, effective December 31, 1991, the Company
issued $140.9 million in principal amount of Secured Notes and substantially all
of the Common Stock to the holders of the Senior Notes and certain other
indebtedness. In addition, the Company made certain payments and issued certain
securities to the financial advisor of the holders of the Senior Notes and to
the former parent of NACO and Trails. The Company either paid all other
remaining claims in cash or such claims remained unchanged upon emergence from
Chapter 11. Subsequently, on June 12, 1992, the Company issued the Additional
Series Notes with an aggregate principal amount of $10.7 million, plus warrants
to acquire shares of Common Stock, in exchange for outstanding 14 5/8%
subordinated debt of Trails having an aggregate principal amount of $8.8 million
that was then in default.
PRIOR TRANSACTIONS
After the issuance of the Initial Series Notes in its reorganization and
the Additional Series Notes thereafter, the Company was highly leveraged, with
outstanding debt of $165 million principal amount as of June 30, 1992, of which
$152 million principal amount constituted Secured Notes. Because the results
under the business plan upon which the Company was reorganized did not meet
expectations, the Company was required to amend the financial covenants to avoid
a default under the Secured Note Indenture, revise its business plan and seek to
deleverage. The Company has acquired or redeemed an aggregate $50.6 million
principal amount of Secured Notes from time to time and retired $11.0 million
principal amount of secured purchase money indebtedness through repayments or
the sale or abandonment of unprofitable operations secured thereby.
On November 6, 1992, the Company repurchased $1.5 million of Secured Notes
from a single unrelated seller at a cost of $1.1 million, including accrued
interest. On November 20, 1992, the Company repurchased an additional $13.1
million in principal amount of Secured Notes in an auction held by the
Resolution Trust Corporation at a cost of $9.0 million, including accrued
interest. On March 28, 1994, the Company entered into amendments to the Secured
Note Indenture which modified or eliminated certain financial ratio covenants
and modified certain other covenants in the Secured Note Indenture.
Additionally, pursuant to the Secured Note Indenture amendments, on June 6,
1994, the Company repurchased $10.0 million principal amount of Secured Notes at
a cost of $8.5 million, including accrued interest, in a Dutch auction available
to all holders of Secured Notes. On June 23, 1995, the Company entered into an
amendment to the Secured Note Indenture that eliminated required compliance with
the financial covenants of the Indenture through the June 30, 1996 measurement
date. On July 15, 1995, the Company redeemed $18.6 million of Secured Notes at
par as mandated by the Secured Note Indenture. On January 31, 1996, the Company
repurchased $7.4 million in principal amount of Secured Notes from unrelated
sellers for $5.3 million, including accrued interest.
The Company has not purchased or sold any Secured Notes during the 40
business days preceding the date hereof. The Company does not know whether any
affiliated person, or any associate or subsidiary thereof, including any
director or executive officer of any such subsidiary, purchased or sold any
Secured Notes during such period. However, members of the Steering Committee and
certain other Secured Noteholders have agreed to restrict their trading of the
Company's securities. See "Background to Exchange Offer - Events Leading to
Restructuring."
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STABILIZED OPERATIONS BUT NEGATIVE CASH FLOW
Since reorganizing under Chapter 11 on December 31, 1991, the Company has
decreased its annualized operating expenses by $44.1 million (39%), and
implemented a program under which certain campground members voluntarily
increased their annual dues by an aggregate of $2.1 million. These results are
reflective of trends which have become evident since 1991. The campground
membership sales that resulted in the Company's substantial contracts receivable
portfolio could only be effected at substantial losses due to the sales and
marketing costs involved as well as decreasing demand for the membership
products the Company then offered. As a consequence, in the spring of 1992, the
Company discontinued substantially all of its sales and marketing activities and
concentrated on increasing continuing revenues and decreasing continuing
expenses. The Company has closed eleven campgrounds and changed other
campgrounds to seasonal operations, reduced staff, consolidated its
administrative functions, deferred maintenance and reduced service levels. The
Company has also disposed of certain campgrounds and other non-core assets.
However, during this period the Company's membership base declined from 167,000
as of December 31, 1991 to 131,000 as of March 31, 1996. The membership base is
expected to decline at the rate of approximately 8% per annum during the balance
of fiscal 1996. The Company attributes this continuing decline to its aging
membership base, approximately 50% of whom are senior citizens, and the low
level of membership sales during the period.
During fiscal 1996, the Company stabilized its operations, and it presently
expects to achieve a positive contribution from operations for the full fiscal
year of approximately $4.9 million, increased from its previous expectation of
$4.0 to 4.5 million due to higher than expected campground dues and lower
campground operating expenses, partially offset by lower ancillary revenues.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Quarterly Report incorporated herein by reference. However,
despite these improvements, the Company is still experiencing net losses,
excluding nonrecurring and extraordinary items, and overall negative cash flow.
Through fiscal 1996, the Company has funded this cash flow deficiency with its
cash reserves, asset sales and the collections from the contracts receivable
portfolio, which the Company is no longer replenishing materially.
CURRENT BUSINESS STRATEGY
The Company's current strategy is to continue to improve its ongoing
operations, stabilize its campground membership base through increased sales and
marketing efforts, and determine the appropriate level at which ongoing
operations can be continued. The Company has conducted an extensive marketing
study, has redesigned its membership and other products and developed a sales
and marketing operation, appointing a Vice President of Sales and Marketing in
1995. Consistent with this strategy, the Company intends to downsize its
business by implementing additional cost reduction measures as its membership
base continues to decline. These cost reduction measures will likely include
the closure and disposition of additional campgrounds, additional reductions in
service levels at certain campgrounds, and decreased general and administrative
expenses. The disposition of campgrounds not included in a downsized business
will require addressing the rights of members associated with such campgrounds.
The impact of these rights is uncertain and could adversely affect the
availability or timing of disposition opportunities or the ability of the
Company to realize recoveries from asset dispositions. See "Risk Factors -
Business Plan Uncertainty" and "Member Rights" herein. These cost reduction
measures, and the possibility of campground dispositions, may adversely affect
the collectibility of membership dues and contracts receivable and accelerate
the rate at which the Company is losing members.
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REQUIRED RECAPITALIZATION OR REORGANIZATION
The Company continues to be highly leveraged. At March 31, 1996, the
Company had outstanding debt of $103.4 million (excluding trade payables and the
discount on the Secured Notes) and an equity deficit of $23.7 million. Since
the Company emerged from Chapter 11 proceedings, its earnings have been
insufficient to cover its fixed charges. Based upon the Business Plan, the
Company believes that its future cash flow will be insufficient to enable it to
repay the balance of its outstanding Secured Notes at maturity on July 15, 1998
or to make the mandatory redemption of Secured Notes on July 15, 1997. In
addition, the resources available to the Company may be insufficient both to
meet its continuing operating needs and make the mandatory sinking fund and
interest payments due on July 15, 1996. Moreover, the Company presently expects
that it will default under the financial covenants in the Secured Note Indenture
at the September 30, 1996 measurement date, unless waivers are obtained.
EVENTS LEADING TO RESTRUCTURING
During the spring of 1995, the Board of Directors began to consider
recapitalization or reorganization alternatives for the Company. The Board of
Directors determined that the Company could maximize value for its
securityholders by improving its operations, replenishing its campground
membership base through increased sales and marketing efforts and downsizing its
business to a level at which ongoing operations could be continued. The Board
of Directors also determined that the Company should aggressively collect its
contracts receivable portfolio and sell or otherwise dispose of assets that are
not essential to its ongoing operations. As any downsizing would likely include
the closure and disposition of certain campgrounds, the Board of Directors
directed the Company's outside legal counsel to review the rights of members at
the campgrounds, and the Board obtained appraisals of the Company's campgrounds
and undeveloped real estate. See "Current Business Plan - Appraisals/Member
Rights" herein.
On May 11, 1995, the Board of Directors appointed William J. Shaw as Chief
Executive Officer and President of the Company. Mr. Shaw was provided an
employment contract that contains financial incentives for increasing the
overall enterprise value of the Company, whether through a recapitalization,
reorganization or otherwise. See "Interests of Management and Others." At the
same time, the Board of Directors appointed a special committee of independent
directors (the "Special Committee") to act in connection with a recapitalization
or reorganization of the Company. The Special Committee was formed, in part,
because Andrew M. Boas is a member of the Board of Directors and his affiliate,
CM Strategic, is the beneficial owner of approximately 45.5% of the Common Stock
and $22.9 million principal amount of Secured Notes, representing approximately
21.6% of the outstanding Secured Notes.
Between May 1995 and March 1996, the Company continued to concentrate its
efforts on reducing its operating expenses and refining its sales and marketing
plans. This reflected a judgment that stabilized operations are central to the
realization of value from continuing operations as well as the realization of
additional value through the collection of the Company's contracts receivable
portfolio and the potential recoveries available from asset sales through
downsizing the business.
Effective as of March 19, 1996, with the consent of certain Secured
Noteholders representing approximately 64.5% in aggregate principal amount of
the Secured Notes, the Company retained CIBC Wood Gundy as financial advisor to
advise the Company and these Secured Noteholders on recapitalization and
reorganization alternatives for the Company.
On April 3, 1996, representatives of the Company and CIBC Wood Gundy met
with certain Secured Noteholders, representing in excess of 50% in principal
amount of Secured Notes, and the Trustee for the Secured Notes. At the meeting,
management presented an overview of the Company's business objectives and
strategy and recent financial performance.
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Certain Secured Noteholders then excused themselves from the meeting and
management presented certain projected operating results of the Company to the
Steering Committee. The projected results presented are reflected in the
Business Plan. The members of the Steering Committee are SC Fundamental, Inc.
(together with its affiliates, "SC Fundamental") (representing 20.6% outstanding
principal amount), National Bank of Canada (representing 7.5% outstanding
principal amount) and IAT Reinsurance Syndicate, Ltd. (representing 3.4%
outstanding principal amount).
On May 1, 1996, at a meeting of the Board of Directors, CIBC Wood Gundy
made a presentation regarding the Company's recapitalization and reorganization
alternatives. In its presentation, CIBC Wood Gundy reviewed the factors
affecting the Company's current business strategy, including its assumptions
regarding the Company's core business, contracts receivable and assets sales,
and the factors affecting the value of the Company, including the recent
stabilization of the core business and the nature of growth opportunities.
At the meeting, CIBC Wood Gundy recommended a preliminary restructuring
plan involving the delivery of cash, subordinated debt and common and/or
preferred equity to the Secured Noteholders to retire all of the Secured Notes
outside of a Chapter 11 proceeding. The CIBC Wood Gundy recommendation took
into account the possibility that the Company's stabilized operations in fiscal
1996 and the Business Plan could permit the Company to raise commercial debt to
refinance the Secured Notes in part as well as a working capital facility, the
cash potentially available for payment to Secured Noteholders, the advantages of
preserving the Company's net operating loss carryforwards and the limitations on
making capital stock available to Secured Noteholders so as to avoid
jeopardizing such tax loss carryforwards. The Business Plan, which provides the
primary assumptions upon which CIBC Wood Gundy's recommendations were based,
contemplates operating a downsized campground system, with cash flow enhanced by
contracts receivable collections and asset sales as the Company seeks to
stabilize its membership base through its new sales and marketing efforts. In
the view of management, the success of the Business Plan requires continuation
of the positive operating results first achieved in fiscal 1996, significant
increases in membership sales beyond current levels, the successful disposition
of the campgrounds and other properties not included in the ongoing operations,
reduced leverage and elimination of uncertainties regarding the Company's
financial stability. Although realization of the Business Plan involves
significant uncertainties, the Board of Directors believes that it represents
the best approach to realize value for the securityholders of the Company.
The preliminary restructuring plan was also consistent with the judgment of
management that the sale or liquidation of the Company would likely result in
lesser recoveries for the Company's securityholders. Central to this judgment
was the impact of the rights of members at the campgrounds. The Company
believes that value over the period addressed by the Business Plan will
necessarily be tied to continued operation of a downsized campground system.
Some states, including California, Oregon and Washington, where 29 of the
Company's campgrounds are located, have nondisturbance statutes that limit the
ability of an owner 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. Moreover, all of the campground mortgages that secure the Secured
Notes 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 will likely be
limited by state law or the membership contracts themselves, and foreclosure of
the campground liens in significant numbers will also likely be limited.
Moreover, the impact of addressing member rights in a proceeding under the
United States Bankruptcy Code is uncertain and could adversely affect the
implementation of, and the recoveries that may be available to Secured
Noteholders from, such a proceeding.
18
<PAGE>
Throughout the first half of May 1996, CIBC Wood Gundy held discussions
with the members of the Steering Committee to determine the outlines of an
acceptable restructuring plan. In mid-May CIBC Wood Gundy determined that the
Steering Committee members and CM Strategic were receptive to exchanging their
Secured Notes for some combination of cash (including accrued interest), newly
issued senior subordinated notes and Common Stock. However, because
consummation of such a restructuring prior to the July 15, 1996 mandatory
sinking fund payment precluded registration of securities under applicable
federal and state securities laws, the package of cash and securities could be
offered only to those Secured Noteholders the Company had reason to believe were
"accredited investors" as defined in Regulation D ("Accredited Investors") under
the Securities Act of 1933, as amended (the "Securities Act"), and could be
approached without a general solicitation. The Company determined to offer all
other Secured Noteholders only cash.
On May 24, 1996, the Special Committee met with management to discuss CIBC
Wood Gundy's recommendations and discussions with the Steering Committee and CM
Strategic. At such meeting, the Special Committee considered alternatives that
did not involve issuing additional equity or obtaining additional funding, as
well as the possibility of effecting the plan through a Chapter 11 proceeding or
of attempting to pay the July 15, 1996 sinking fund payment on the Secured Notes
and pursuing a recapitalization or reorganization at a later date. The Special
Committee approved pursuing the preliminary restructuring plan. It also
authorized retaining RPR to advise the Special Committee in connection with the
contemplated transaction. RPR was retained after the meeting. RPR had
previously served as an advisor to directors of Trails in the transactions under
which the Company purchased the minority stockholder interests in Trails.
By May 28, 1996, CIBC Wood Gundy had identified and begun contacting
potential Exchanging Noteholders who were not affiliated with the Company or
members of the Steering Committee. All such Secured Noteholders, or their
representatives, were contacted prior to June 3, 1996. Some, however, were
unwilling to receive the terms of the Exchange Offer until such time as it had
been publicly announced.
On May 31, 1996, the Special Committee met to consider the potential terms
of an exchange with certain Secured Noteholders as part of the Restructuring
Transaction. At such meeting, the Special Committee received an oral report of
RPR concerning the fairness from a financial point of view of the transaction
then under discussion to the holders of Common Stock and the estimated range of
potential values of the exchange consideration then under discussion.
Immediately after the meeting, the Board of Directors met to review the status
of discussions concerning the Restructuring Transaction. At the Board meeting,
CIBC Wood Gundy reviewed the comments it had received from members of the
Steering Committee as well as other potential Exchanging Noteholders and its
recommendation as to the amount and terms of the Exchange Consideration,
including its recommendation that the Company consider providing debt or equity
to the Exchanging Noteholders in addition to that previously contemplated.
Subsequently, the Company and CIBC Wood Gundy met with representatives of the
Steering Committee and CM Strategic to discuss additional consideration.
On June 3, 1996, the Special Committee met to consider the Restructuring
Transaction. At the beginning of the meeting, the Special Committee discussed
with Mr. Boas, among other things, the position of CM Strategic with respect to
the proposed transaction and the Company's alternatives. After Mr. Boas
departed, the Special Committee received management's recommendation as to the
terms of the contemplated restructuring, all of which are reflected in the
Restructuring Transaction. The Special Committee preliminarily determined to
offer potential Exchanging Noteholders $400 in cash, $369 in principal amount of
senior subordinated pay-in-kind notes, $61.50 in principal amount of junior
subordinated pay-in-kind notes and 23 shares of Common Stock per $1,000 in
principal amount of Secured Notes and to offer Tendering Noteholders $740 per
$1,000 principal amount of Secured Notes. The Special Committee then
19
<PAGE>
received an oral opinion from RPR that (i) the Restructuring Transaction as
proposed was fair from a financial point of view to the holders of Common Stock
and (ii) that the purchase price to be received in the Tender Offer by Tendering
Noteholders was reasonably equivalent to the Exchange Consideration. In
rendering its opinion, RPR, among other things: (i) reviewed the Offer to
Purchase; (ii) reviewed certain publicly available information relating to the
Company; (iii) discussed the Company's historical and current operations,
financial condition and future prospects and reviewed the Business Plan; (iv)
reviewed historical market prices for the Common Stock and the Secured Notes;
(v) reviewed certain financial and market data for the Company and compared such
information with similar information for certain publicly traded companies that
RPR deemed comparable to the Company; (vi) performed certain discounted cash
flow analyses of the Company's contracts receivable portfolio, non-core assets
to be sold and net operating loss carryforwards as presented in the Business
Plan; (vii) reviewed certain financial and market data for publicly traded high-
yield debt instruments that RPR deemed comparable to the debt included in the
Restructuring Transaction; and (viii) performed such other analyses and
investigations and considered such other factors as RPR deemed appropriate. The
Special Committee then unanimously approved recommending the proposed
Restructuring Transaction to the Board of Directors.
On June 3, 1996, the Board of Directors met to consider the proposed
Restructuring Transaction. The Board reviewed the transaction and the state of
negotiations with the potential Exchanging Noteholders. The Special Committee
provided its recommendation of the proposed Restructuring Transaction to the
Board of Directors. The Board then unanimously approved the proposed
Restructuring Transaction with Mr. Boas abstaining due to the ownership of
Secured Notes by his affiliate, CM Strategic. The principal factors identified
by the Board of Directors in its approval of the proposed Restructuring
Transaction were the following: (i) that a Chapter 11 proceeding entails
significant risk of deterioration in the business, especially the increased
sales and marketing efforts, and collection of dues and contracts receivable,
that are central to the Business Plan; (ii) that a depletion of significant
amounts of working capital to make the July 15, 1996 sinking fund payment on the
Secured Notes involves significant risks to the Company's liquidity and does not
address the Company's long-term need for a new capital structure consistent with
the Business Plan; (iii) that the cash available to the Company for distribution
to Secured Noteholders is limited; (iv) that the Company must significantly
reduce its leverage; (v) that the Company's tax loss carryforwards are
significant and should not be jeopardized; and (vi) that the uncertainties
inherent in the Business Plan may affect the Secured Notes as well as the
securities portion of the Exchange Consideration.
On June 5, 1996 (the "Commencement Date"), the Company commenced the Tender
Offer and publicly announced the terms of the proposed Exchange Offer. As of
the Commencement Date, the Company had initially contacted all Secured
Noteholders that may be involved in the Exchange Offer, but had not received a
commitment from any Secured Noteholder. However, the Company's two largest
Secured Noteholders advised the Company that they supported the Restructuring
Transaction and intended to exchange their Secured Notes in the Exchange Offer.
Subsequent to the Commencement Date, the Company and CIBC Wood Gundy continued
to meet with representatives of the Steering Committee, CM Strategic and other
potential Exchanging Noteholders to discuss the Exchange Consideration.
On June 18, 1996, the Special Committee met to consider the terms of the
Restructuring Transaction and the continuing discussions with the Steering
Committee and other potential Exchanging Noteholders. At the meeting, CIBC Wood
Gundy indicated that, based on its discussions with potential Exchanging
Noteholders, the Restructuring Transaction would be perceived more favorably by
the Secured Noteholders if the principal amount of the Senior Subordinated PIK
Notes and the number of shares of Common Stock to be received by Exchanging
Noteholders were increased, the junior subordinated pay-in-kind notes eliminated
from the Exchange Consideration and the Purchase Price increased. The Special
Committee then discussed with Mr. Boas, among other things, the position of CM
Strategic with respect to
20
<PAGE>
modified terms of the Restructuring Transaction. After Mr. Boas and
representatives of CIBC Wood Gundy departed, the Special Committee discussed
CIBC Wood Gundy's presentation with management and RPR and received management's
recommendations as to modified terms of the Restructuring Transaction. The
Special Committee preliminarily determined to modify the Exchange Consideration
to increase the aggregate amount of Senior Subordinated PIK Notes and the number
of shares of Common Stock to be issued in the Exchange Offer, assuming
satisfaction of the Minimum Exchange Condition, to $40 million in aggregate
principal amount and 3,658,500 shares, respectively, and to exclude the junior
subordinated pay-in-kind notes from the Exchange Consideration, and to increase
the Purchase Price to $780 per $1,000 in aggregate principal amount of Secured
Notes. The Special Committee then received an oral opinion from RPR that (i) the
Restructuring Transaction, as proposed to be modified, was fair from a financial
point of view to the holders of Common Stock and (ii) that the proposed
increased Purchase Price was reasonably equivalent to the proposed modified
Exchange Consideration. In rendering its opinion, RPR, among other things,
reviewed the proposed modified terms of the Restructuring Transaction and
reconsidered and updated the factors it had considered in rendering its previous
opinion. The Special Committee then unanimously approved recommending the
modified Restructuring Transaction to the Board of Directors.
On June 18, 1996, the Board of Directors met to consider the proposed
modified Restructuring Transaction. The Board reviewed the transaction, the
status of the Tender Offer and the state of discussions with the Steering
Committee, CM Strategic and other potential Exchanging Noteholders. The Special
Committee provided its recommendation of the modified Restructuring Transaction
to the Board of Directors. The Board then unanimously approved the modified
Restructuring Transaction, with Mr. Boas abstaining due to the ownership of
Secured Notes by his affiliate, CM Strategic. The Board reaffirmed the principal
factors it identified in its approval of the Restructuring Transaction at its
June 3, 1996 meeting. The Board also considered the impact of the modified
Restructuring Transaction on the Business Plan, including the additional
leverage and cash requirements, but concluded that the modified consideration
provided the greatest opportunity for a successful restructuring without further
negotiation. One June 21, 1996, the Company publicly announced the modified
terms of the Restructuring Transaction.
As of June 20, 1996, $25,000 in principal amount of Secured Notes had been
tendered in the Tender Offer. On June 21, 1996 the Company announced the
increased Tender Offer Purchase Price and modified terms of the Exchange Offer.
The Steering Committee has endorsed the modified terms of the Restructuring
Transaction. To date, Secured Noteholders, including CM Strategic, SC
Fundamental, IAT Reinsurance Syndicate, Ltd., Post Advisory Group, and Third
Avenue Fund and other affiliates and associates of Martin J. Whitman, which hold
$64.8 million in principal amount of Secured Notes (representing 64% of the
Secured Notes outstanding), have advised the Company that they intend to
exchange their Secured Notes in the modified Exchange Offer.
CURRENT BUSINESS PLAN
BUSINESS PLAN SUMMARY
The following summary is derived from the Business Plan after giving effect
to the Restructuring Transaction (assuming satisfaction of the Minimum Tender
Condition and the Minimum Exchange Condition) and the Senior Secured Credit
Facility. The Business Plan should be read in its entirety in conjunction with
the financial statements of the Company set forth in its Annual Report on Form
10-K for the year ended June 30, 1995 (the "Annual Report") and Quarterly Report
on Form 10-Q for the Nine Months ended March 31, 1996 (the "Quarterly Report")
delivered with this Memorandum, as the Business Plan forms the primary
assumptions
21
<PAGE>
upon which the Board of Directors and its advisors have formulated the
Restructuring Transaction.
BUSINESS PLAN SUMMARY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
-------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
--------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $73,933 $72,965 $77,693 $82,689 $88,475 $92,850
Expenses (excluding G&A) 56,853 55,170 58,814 63,230 67,044 70,104
General & Administrative Expenses 12,212 11,365 11,148 10,966 10,903 11,180
------- ------- ------- ------- ------- -------
EBIT (1) 4,868 6,430 7,731 8,493 10,528 11,566
Plus: Depreciation and Amortization 2,702 2,634 2,658 2,789 2,807 2,901
------- ------- ------- ------- ------- -------
EDITDA (2) 7,570 9,064 10,389 11,282 13,335 14,467
Plus: Collections on Contracts 15,600 9,383 5,964 4,085 2,842 2,286
Receivable (3)
Plus: Proceeds from Asset Sales, Net 7,000 7,420 4,964 3,238 2,241 0
Less: Capital Expenditures (2,115) (2,300) (2,300) (2,800) (2,800) (2,800)
Less: Decrease (Increase) in Working
Capital and Other (6,035) (3,052) (2,440) (2,101) (1,539) (1,202)
------- ------- ------- ------- -------- --------
Cash Flow Available for Debt Service (4) $22,020 $20,515 $16,577 $13,704 $14,079 $12,751
======= ======= ======= ======= ======== ========
_______________
</TABLE>
(1) Represents earnings before interest income, interest expense and taxes.
Excludes non-recurring income, gains on asset sales and extraordinary items.
(2) Represents earnings before interest income, interest expense, taxes,
depreciation and amortization, excluding the same items as note (1) above.
(3) Includes principal and interest payments on contracts receivable.
(4) Equal to EDITDA plus collections of principal and interest on contracts
receivable and net proceeds from asset sales, less capital expenditures and
increases in working capital.
The Company's projected results under the Business Plan are not historical,
except in the case of the first three quarters included in fiscal 1996, and
involve significant risks and uncertainties. The Company's future results of
operations and financial condition may differ materially due to several factors,
including but not limited to the Company's continued ability to control costs,
its ability to implement its 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 actual timing and completion of planned asset sales, the
actual collection experience of the Company's contracts receivable, future
interest rates and the other factors affecting the Business Plan as set forth or
incorporated by reference in this Memorandum and the Annual Report and Quarterly
Report delivered with this Memorandum. Accordingly, such projections are not
necessarily indicative of the future performance of the Company and should not
be regarded as representations that such results will be achieved.
APPRAISALS/MEMBER RIGHTS
During 1995, the Company obtained appraisals (the "Appraisals") of its
campgrounds and undeveloped real estate. The Appraisal results are summarized in
Exhibit B hereto. With respect to the Company's campgrounds, the Appraisals
assumed that the campgrounds could be sold individually without the encumbrance
of members' rights. However, because of the material impact of members' rights,
the Company believes that the Appraisals substantially overstated the
22
<PAGE>
value that could be obtained from the campgrounds in the near term, except in
the case of the limited sales of campgrounds contemplated by the Business Plan.
The Company believes that it is reasonably able to sell, without any material
adverse effect from members' rights, (i) the five campgrounds currently held for
disposition under the Business Plan, which have an appraised value of
approximately $2.3 million, and (ii) other unspecified campgrounds that are
included for disposition in the Business Plan, which have an appraised value of
$8.9 million, although there can be no assurance that these appraised values
will be realized. The Company believes, however, that the balance of the
Appraisals, which totaled approximately $118.7 million, substantially overstated
the value that could be obtained from the remaining campgrounds because the
Appraisals did not reflect the continued use of the campgrounds as part of a
membership camping system or the material impact of the encumbrance of members'
rights. The book value of these campgrounds was $39.0 million as of March 31,
1996.
The Company believes that value over the period addressed by the Business
Plan will necessarily be tied to continued operation of a downsized campground
system. Some states, including California, Oregon and Washington, where 29 of
the Company's campgrounds are located, have nondisturbance statutes that limit
the ability of an owner 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. Moreover, all of the campground mortgages that secure the Secured
Notes 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 in addition to
those contemplated by the Business Plan will likely be limited by state law or
the membership contracts themselves, and foreclosures of the campground liens in
such significant numbers will also likely be limited. Moreover, the impact of
members' rights in a Chapter 11 proceeding is uncertain and could adversely
affect the implementation of, and the recoveries that may be available to
Secured Noteholders from, such a proceeding.
TERMS OF THE RESTRUCTURING TRANSACTION
GENERAL
The purpose of the Restructuring Transaction is to retire the Secured Notes
and to create a capital structure for the Company consistent with the Business
Plan. Under the terms of the Restructuring Transaction, the Company is seeking
to exchange with the Exchanging Noteholders, each of whom will represent to the
Company that it is an Accredited Investor, their Secured Notes for the Exchange
Consideration. The Company is offering to purchase the remaining Secured Notes
as provided in the Offer to Purchase. Simultaneously with the consummation of
the Exchange Offer and the Tender Offer, it is the Company's intention to call
for redemption or otherwise defease all untendered and unexchanged Secured
Notes. Upon consummation of the Restructuring Transaction, all of the Secured
Notes will be retired. The exchanges, purchases and redemption or defeasance of
the Secured Notes are conditioned on one another and are intended to be effected
simultaneously, and no exchange, purchase, or redemption or defeasance of the
Secured Notes will be effected unless all exchanges and purchases and the
redemption or defeasance is effected.
To finance certain of its cash requirements in connection with the
Restructuring Transaction, including the payment of related expenses, the
Company is seeking a $40 million Senior Secured Credit Facility. This facility
will be senior to the Senior Subordinated PIK Notes, will be secured by
substantially all of the assets of the Company, subject to certain limitations,
and may preclude cash payments on the Senior Subordinated PIK Notes. The Company
does not currently have a commitment from any lender with respect to the Senior
Secured Credit Facility. See "Senior Secured Credit Facility" below.
23
<PAGE>
EXCHANGE OFFER
Assuming that $81.3 million in principal amount of Secured Notes are
exchanged in the Exchange Offer, Exchanging Noteholders will receive in the
aggregate $32.5 million in cash (including $3.3 million representing 51/2%
prepaid interest for the initial 18 months the Senior Subordinated PIK Notes are
outstanding), $40 million in principal amount of newly issued Senior
Subordinated Pay-In-Kind Notes due 2003 (the "Senior Subordinated PIK Notes"),
and 3,658,500 shares of the Company's common stock, $.01 par value per share
(the "Common Stock"), representing approximately 50% of the outstanding Common
Stock (after giving effect to the Restructuring Transaction). The aggregate
Exchange Consideration will be exchanged in a ratio of $400 in cash (including
$40.59 representing prepaid interest on the Senior Subordinated PIK Notes), $492
in principal amount of Senior Subordinated PIK Notes and 45 shares of the
Company's Common Stock for each $1,000 in principal amount of Secured Notes.
Accrued interest of $60 per $1,000 of principal amount of Secured Notes through
July 15, 1996 will be paid in cash. Interest on the Secured Notes through July
15, 1996 will be paid to holders of record of the Secured Notes as of July 1,
1996. If any Secured Note is transferred after July 1, 1996, no interest will be
paid to the transferee. As a condition to the Exchange Offer, each Exchanging
Noteholder will be required to agree not to tender the Secured Notes held by it
pursuant to the Tender Offer but only to exchange the Secured Notes held by it
pursuant to the Exchange Offer. Pursuant to a Registration Rights Agreement, the
Company will be required to file a registration statement under the Securities
Act with respect to the Senior Subordinated PIK Notes and the Common Stock. The
registration statement would permit public trading of the Senior Subordinated
PIK Notes and the Common Stock, subject to any limitations imposed by applicable
state securities laws.
TENDER OFFER
Assuming that $13 million in principal amount of Secured Notes are
exchanged in the Tender Offer, tendering Secured Noteholders will receive in the
aggregate approximately $10.1 million in cash. Accrued interest through July 15,
1996 will be paid in cash to holders of record of the Secured Notes as of July
1, 1996. If any Secured Note is transferred after July 1, 1996, no interest will
be paid to the transferee. The aggregate Purchase Price for tendered Secured
Notes represents $780 for each $1,000 in principal amount.
REDEMPTION
Simultaneously with the successful consummation of the Exchange Offer and
the Tender Offer, all unexchanged and untendered Secured Notes will be redeemed
effective on the July 15, 1996 mandatory redemption date, at a redemption price
of 100% of the principal amount thereof, plus accrued and unpaid interest.
Assuming that only the Minimum Exchange Condition and the Minimum Tender
Condition are satisfied, approximately $7.2 million in principal amount of
Secured Notes would be redeemed. Interest through July 15, 1996 will be paid to
holders of record of the Secured Notes as of July 1, 1996. If any Secured Note
is transferred after July 1, 1996, no interest will be paid to the transferee.
Exchanging Noteholders and Secured Noteholders whose Secured Notes are tendered
and accepted in the Tender Offer will not participate in such redemption.
EFFECT ON STOCKHOLDERS
The Restructuring Transaction does not contemplate any action on the part
of the stockholders of the Company. However, upon consummation of the
Restructuring Transaction and issuance of the Common Stock contemplated by the
Exchange Offer, the Common Stock currently outstanding will be significantly
diluted. After giving effect to the Restructuring Transaction, assuming
satisfaction of the Minimum Exchange Condition, holders of Common Stock who are
not also Exchanging Noteholders receiving Common Stock would be reduced
24
<PAGE>
from approximately 40.0% of the outstanding Common Stock to 20.1% of the
outstanding Common Stock. Exchanging Noteholders would receive shares
representing approximately 50% of the outstanding Common Stock. The beneficial
ownership of CM Strategic, the Company's largest stockholder, will be reduced
from approximately 45.5% to 38.1% of the outstanding Common Stock. See
"Interests of Management and Others." RPR has determined that the Restructuring
Transaction is fair from a financial point of view to the common stockholders of
the Company. See "Background to Exchange Offer - Events Leading to
Restructuring" herein.
SENIOR SECURED CREDIT FACILITY
The maximum amount required by the Company to consummate the Exchange
Offer, to purchase the Secured Notes pursuant to the Tender Offer and to redeem
the untendered and unexchanged Secured Notes, and for related fees and expenses,
is approximately $58.4 million. The Company estimates that it will have
available approximately $28.4 million from its working capital to be used in
connection with the Restructuring Transaction. The Company has circulated a
confidential memorandum seeking the Senior Secured Credit Facility financing
required to consummate the Restructuring Transaction on substantially the terms
and conditions set forth below.
If such financing can be obtained on the terms contemplated by the
confidential memorandum, such financing will consist of a $40 million senior
secured credit facility (the "Senior Secured Credit Facility"), a portion of
which will be available for working capital purposes. The Senior Secured Credit
Facility will mature three years from the date of consummation of the
Restructuring Transaction, subject to earlier scheduled payments and required
prepayments. As collateral for the Senior Secured Credit Facility, the lenders,
subject to certain limitations, will receive a security interest in
substantially all of the Company's assets, including, but not limited to, the
campgrounds (subject to non-disturbance provisions protecting the rights of
members), contracts receivable, non-core assets and inventory. The Senior
Secured Credit Facility will rank senior to substantially all other debt of the
Company and its subsidiaries. All of the Company's obligations under the Senior
Secured Credit Facility will be unconditionally guaranteed by each of the
Company's subsidiaries other than an immaterial utility subsidiary.
The Company will be required to use the collections of its outstanding
contracts receivable and the proceeds of the sale of non-core assets to prepay
amounts outstanding under the Senior Secured Credit Facility. After scheduled
principal installments and required prepayments, any outstanding amounts on the
Senior Secured Credit Facility remaining unpaid will be due in full at maturity.
The Senior Secured Credit Facility will be prepayable at any time, with a
prepayment fee in certain circumstances.
The Senior Secured Credit Facility will include customary covenants,
including, but not limited to, financial tests, limitations on indebtedness and
liens, limitations on capital expenditures, limitations on restricted payments,
change of control restrictions, limitations on acquisitions and limitations on
mergers, consolidations and asset sales. The Senior Secured Credit Facility may
require that interest payments on the Senior Subordinated PIK Notes be made in
kind while the Senior Secured Credit Facility is outstanding.
Failure to maintain any of the covenants under the Senior Secured Credit
Facility will be an event of default under the Senior Secured Credit Facility.
If for any reason the Company is unable to comply with the other terms of the
Senior Secured Credit Facility, such noncompliance could also result in an event
of default. Such events of default could result in the acceleration of the
indebtedness under the Senior Secured Credit Facility and foreclosure of the
collateral therefor and the prohibition of payments on the Senior Subordinated
PIK Notes under the subordination provisions of the Senior Subordinated PIK Note
Indenture.
25
<PAGE>
INTERESTS OF MANAGEMENT AND OTHERS
Certain holders of Secured Notes who participated in the formulation of the
Restructuring Transaction are also holders of significant amounts of Common
Stock. CM Strategic, including its affiliate, Mr. Boas, who is a director of the
Company, beneficially owns an aggregate of 45.5% of the outstanding Common
Stock. CM Strategic also beneficially owns $22.9 million in principal amount of
Secured Notes, representing approximately 21.6% of the outstanding aggregate
principal amount of Secured Notes. CM Strategic has advised the Company of its
intention to exchange its Secured Notes in the Exchange Offer and not to
participate in the Tender Offer. In addition, SC Fundamental, which is a member
of the Steering Committee, beneficially owns an aggregate of 17.5% of the
outstanding Common Stock and $20.9 million principal amount of the Secured
Notes, representing approximately 20.6% of the outstanding aggregate principal
amount of Secured Notes. SC Fundamental has also advised the Company of its
intention to exchange its Secured Notes in the Exchange Offer and not to
participate in the Tender Offer. In order to participate in the Exchange Offer
and receive the Exchange Consideration in compliance with certain provisions of
the NGCL, SC Fundamental will be required to reduce its ownership of Common
Stock to less than 10% of the outstanding Common Stock. SC Fundamental is
expected to attempt to do so. If SC Fundamental is unable to do so, the Minimum
Exchange Condition may not be satisfied. CM Strategic has expressed interest in
acquiring Common Stock which SC Fundamental may dispose of.
Mr. Shaw has an employment agreement with the Company that entitles him to
receive a one-time bonus equal to 4% to 6% of the amount by which the aggregate
market value of the Company's outstanding securities exceeds $75 million at the
time he elects to receive the bonus. Mr. Shaw's right to receive such bonus is
currently 75% vested, and the Company has accrued $800,000 therefor. The
Restructuring Transaction will have an adverse effect on Mr. Shaw's bonus and,
as a result, the Board of Directors and Mr. Shaw are presently negotiating an
amendment to Mr. Shaw's employment agreement that will ensure that he receives
the material benefit of his original agreement.
There are currently outstanding options to purchase 305,000 shares of
Common Stock granted under the Company's 1991 Employee Stock Incentive Plan,
1993 Stock Option and Restricted Stock Purchase Plan and 1993 Director Stock
Option Plan at exercise prices ranging from $.59 to $2.75 per share,
representing approximately 7.6% of the outstanding Common Stock (after giving
effect to the exercise thereof). The Company granted 95,000 of these options on
May 1, 1996 at an exercise price of $.59 per share, representing the fair market
value of the Common Stock on such date, contingent upon the termination of an
equal number of existing options held by the employees involved that were
granted in 1992 with an exercise price of $2.50 per share. After giving effect
to the Restructuring Transaction, the options outstanding under these plans will
represent approximately 4.1% of such outstanding Common Stock. Management has
requested that options to purchase additional shares of Common Stock be made
available to key employees of the Company, including management, after the
Restructuring Transaction. The Board of Directors has yet to act upon
management's request.
26
<PAGE>
HISTORICAL AND PRO FORMA CAPITALIZATION
The following table sets forth the historical capitalization of the Company
at March 31, 1996 and the pro forma capitalization of the Company immediately
following implementation of the Restructuring Transaction assuming it occurred
on July 1, 1994, the first day of the most recent full fiscal year, and assuming
satisfaction of the Minimum Tender Condition and Minimum Exchange Condition.
This table should be read in conjunction with the pro forma financial data set
forth in "Selected and Pro Forma Financial Data" of this Memorandum. For a
summary of the capitalization of the Company after giving effect to the
Restructuring Transaction, see "Introduction - Summary Capitalization" of this
Memorandum.
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
(UNAUDITED, IN THOUSANDS)
Secured Notes (due July 15, 1998; $18,599,000 currently
redeemable on each of July 15, 1996 and 1997), gross $101,454
Secured Notes, discount (1) (8,163)
Secured Notes, net -------
93,291
Senior Secured Credit Facility
Real estate mortgages (due through June 2009) 1,923 $ 1,923
Senior Subordinated PIK Notes, at face 48,030
Subordinated debt, FAS 15 (2) 1,341
------ ------
Total Borrowings 95,214 51,294
------ ------
Preferred stock, $.01 par value, 1,500,000 shares authorized,
none issued and outstanding
Common Stock, $.01 par value, 15,000,000 shares
authorized, 3,702,726 shares issued and outstanding.
7,361,226 pro forma as adjusted (3) 37 56
Additional paid-in capital 17,549 19,381
Accumulated deficit (41,138) (28,640)
-------- --------
Total Stockholders' Deficit (23,798) (9,203)
-------- --------
Total Capitalization $71,539 $42,091
-------- -------
</TABLE>
- ---------
(1) In accordance with generally accepted accounting principles, the Company
recorded a discount to the principal amount of the Secured Notes when it
issued them because the market yield on the Secured Notes significantly
exceeded their stated interest rate. Each month the Company expenses a
portion of this discount as interest expense.
(2) In accordance with generally accepted accounting principles, the Company
will not record a gain on the Restructuring Transaction. Rather, the amount
which would have otherwise been recorded as a gain will be recorded as a
subordinated obligation which will be amortized over the estimated payout
period of the obligation to reduce future interest expense on the Senior
Subordinated PIK Notes issued in the Restructuring Transaction.
(3) Does not include warrants to purchase 484,835 and 10,087 shares of Common
Stock at $4.24 and $1.62 per share, respectively, and options to purchase
305,000 shares of Common Stock under the Company's stock option plans at
various prices.
27
<PAGE>
SELECTED AND PRO FORMA FINANCIAL DATA
The pro forma financial data contained in this Memorandum gives effect to
the modified Restructuring Transaction as if it had occurred as of the beginning
of the periods presented. The pro forma balance sheet information contained in
this Memorandum gives effect to the modified Restructuring Transaction as if it
occurred on July 1, 1994, the first day of the most recent full fiscal year.
The consummation of the Tender Offer and the consummation of the Exchange
Offer are conditioned upon each other. However, it is impossible to predict the
exact aggregate principal amount of Secured Notes that may be tendered and
accepted for payment in the Tender Offer or exchanged in the Exchange Offer.
Therefore, the Company cannot predict whether the consummation of the
Restructuring Transaction will conform to the assumptions used in the
preparation of the pro forma financial data. In analyzing the pro forma
financial data and other information contained in this Memorandum, Secured
Noteholders should consider that the Restructuring Transaction as actually
consummated could differ from the assumptions relating thereto. Notwithstanding
the foregoing, the Company believes that the assumptions made with respect to
such events provide a reasonable basis on which to present the pro forma
financial data.
THE PRO FORMA FINANCIAL DATA PRESENTED HEREIN DO NOT PURPORT TO REPRESENT
WHAT THE COMPANY'S RESULTS OF OPERATIONS OR FINANCIAL POSITION WOULD HAVE BEEN
HAD SUCH TRANSACTIONS IN FACT OCCURRED AT THE BEGINNING OF THE PERIODS OR TO
PROJECT THE COMPANYOS RESULTS OF OPERATIONS IN ANY FUTURE PERIOD. THE PRO FORMA
FINANCIAL DATA SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY, INCLUDING THE NOTES THERETO, INCORPORATED BY
REFERENCE IN THIS MEMORANDUM.
28
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
MARCH 31, JUNE 30,
----------------------------------- -----------------------------------------------
1996 1996 1995 1995
PRO FORMA(1) ACTUAL 1995 PRO FORMA(1) ACTUAL 1994 1993
------------ ------ ---- ------------ ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONAL DATA:
Total revenue $ 69,977 $ 69,977 $ 69,633 $ 91,546 $ 91,546 $100,922 $ 98,189
Membership dues 29,956 29,956 31,073 41,175 41,175 43,200 39,555
Other campground/resort revenues 16,641 16,641 17,112 23,500 23,506 23,524 28,056
Membership and real estate sales 2,798 2,798 3,159 4,228 4,228 3,975 4,427
Interest income 3,981 5,146 7,536 8,147 9,935 12,202 16,345
Interest expense 5,763 13,399 15,686 8,122 20,950 21,446 22,249
Income (loss) from operations
before taxes, minority interest,
and extraordinary item 11,321 4,771 (5,515) (873) (11,669) (5,967) (9,781)
Extraordinary gain on debt discharge 1,390 671 2,507
Net income (loss) 10,703 6,150 (5,730) (1,355) (11,920) (6,046) (7,582)
Dividends paid (4)
Earnings (loss) per share data:
Earnings (loss) before
extraordinary item 1.45 1.29 (1.55) (0.18) (3.22) (1.81) (2.73)
Extraordinary item 0.37 0.16 0.68
Net income (loss) 1.45 1.66 (1.55) (0.18) (3.22) (1.63) (2.05)
BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash equivalents (6) 5,125 36,255 47,924 5,125 60,696 50,059 44,359
Receivables, net 15,541 15,541 22,295 18,698 18,608 32,585 57,731
Campground properties 46,524 46,524 50,863 51,327 51,327 49,330 47,939
Resort properties 2,977 2,977 6,116 5,736 5,736 5,612 11,252
Total assets 78,310 110,331 137,548 89,180 135,886 148,164 170,067
Senior and Senior Equivalent
Notes, net
Secured Notes, net 93,291 114,282 115,490 110,854 115,389
Senior Secured Credit Facility 19,334
Senior Subordinated PIK Notes (7) 49,371 46,539
Total long term debt, net 43,460 75,928 96,879 48,462 98,308 115,877 121,889
Stockholders' equity (deficit) (9,203) (23,675) (23,639) (19,902) (29,821) 17,912 (11,703)
STATISTICAL DATA (AT END OF PERIOD):
Campgrounds-Number of operating
campgrounds 58 58 60 60 60 62 65
Number of members 131,000 131,000 142,000 136,000 136,000 149,000 157,000
Average annual dues per member $ 324 $ 324 $ 327 $ 329 $ 329 $ 315 $ 290
Average cost per camper night $ 17.95 $ 17.95 $ 20.29 $ 19.69 $ 19.69 $ 18.36 $ 17.29
Resorts-Number of lot owners 1,100 1,100 5,200 5,100 5,100 5,000 5,100
Total timeshare weeks 32,000 32,000 32,000 32,000 32,000 32,000 32,000
Timeshare weeks available for sale 1,700 1,700 1,700 1,700 1,700 2,100 3,300
<CAPTION>
Predecessor Entity
-------------------------
SIX
MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
JUNE 30, DEC. 31, JUNE 30,
1992 1991(2) 1991(3)
---- ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONAL DATA:
Total revenue $ 54,310 $ 63,670 $ 20,754
Membership dues 19,170 20,345
Other campground/resort revenues 13,224 13,401
Membership and real estate sales 6,442 15,140
Interest income 11,780 12,090 20,165
Interest expense 11,947 13,578 15,361
Income (loss) from operations
before taxes, minority interest,
and extraordinary item (23,195) 7,151 (8,495)
Extraordinary gain on debt discharge
Net income (loss) (21,737) 6,278 (8,405)
Dividends paid (4) (5) (5)
Earnings (loss) per share data:
Earnings (loss) before
extraordinary item (5.88)
Extraordinary item
Net income (loss) (5.88)
BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash equivalents (6) 32,989 42,233 3,500
Receivables, net 93,442 119,318 137,023
Campground properties 49,582 58,552 54,199
Resort properties 11,578 12,530 12,632
Total assets 196,788 242,587 253,694
Senior and Senior Equivalent
Notes, net 150,675
Secured Notes, net 123,511 113,095
Senior Secured Credit Facility
Senior Subordinated PIK Notes (7)
Total long term debt, net 130,210 120,150 163,842
Stockholders' equity (deficit) (4,151) 17,586 (5,003)
STATISTICAL DATA (AT END OF PERIOD):
Campgrounds-Number of operating
campgrounds 69 69 69
Number of members 165,000 167,000 170,000
Average annual dues per member $ 246 $ 243
Average cost per camper night $ 16.55
Resorts-Number of lot owners 5,000 4,900 4,900
Total timeshare weeks 32,000 32,000 32,000
Timeshare weeks available for sale 4,200 4,400 4,600
</TABLE>
29
<PAGE>
(1) The pro forma information presented assumes the Restructuring Transaction
occurred on July 1, 1994, the first day of the most recent full fiscal
year.
(2) "Fresh Start Reporting" under the provisions of SOP 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code," was
reflected as of December 31, 1991, in the above balance sheet captions. As
a result, the information for the years ended June 30, 1995, 1994 and 1993,
and the six months ended June 30, 1992, was prepared as if the Company is a
new reporting entity and a black line is shown to separate it from prior
period information since it was not prepared on a comparable basis.
(3) The Company acquired NACO and Trails on June 30, 1991. The captions
reflecting results of operations, therefore, do not include the operations
of NACO and Trails for the year ended June 30, 1991. The assets,
liabilities, and stockholders' equity (deficit) captions, however, reflect
the consolidation of the Company, NACO and Trails as of June 30, 1991, and
thereafter.
(4) The Company is prohibited from paying any cash dividends until the
repayment of its secured and subordinated indebtedness.
(5) Income (loss) per share is not meaningful due to reorganization and
revaluation entries and the issuance of a material amount of Common Stock
in a stock split and bankruptcy reorganization. At June 30, 1995, there
were 3,702,726 shares of Common Stock outstanding, compared with 1,000
shares immediately before the consummation of the reorganization on
December 31, 1991. Outstanding warrants and stock options are excluded from
the net loss per share computation as they would have reduced net loss per
share, which is anti-dilutive.
(6) Cash held by the Company and its wholly owned subsidiaries, other than that
required for operations, is generally deposited in accounts that are
pledged for the benefit of the holders of the Secured Notes.
(7) In accordance with generally accepted accounting principles, the Company
will not record a gain on the Restructuring Transaction. Rather, the amount
which would have otherwise been recorded as a gain will be recorded as a
subordinated obligation which will be amortized over the estimated payout
period of the obligation to reduce future interest expense on the Senior
Subordinated PIK Notes issued in the Restructuring Transaction.
30
<PAGE>
CERTAIN CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of this Memorandum, the Company will
not be required to accept for exchange any Secured Notes, and may withdraw the
Exchange Offer, or, at its option, modify or otherwise amend the Exchange Offer,
if any of the following conditions have not been satisfied, whether prior to or
simultaneously with the completion of the Exchange Offer:
(a) satisfaction of the Minimum Exchange Condition;
(b) satisfaction of the Minimum Tender Condition;
(c) no action shall have been taken or threatened by or before any
court or governmental regulatory or administrative agency or authority, or
any other person or tribunal, or any statute, rule, regulation, judgment,
order, stay, decree or injunction shall have been promulgated, enacted,
entered, enforced or shall be or deemed applicable to the Exchange Offer,
the Tender Offer, the proposed redemption, the exchange of Secured Notes
pursuant to the Exchange Offer, the purchase of Secured Notes pursuant to
the Tender Offer, the acquisition of any of the Exchange Consideration by
any Exchanging Noteholder or the consummation of the Restructuring
Transaction (collectively, the "Transactions") which (i) challenges any of
the Transactions in any respect or might directly or indirectly prohibit,
prevent, restrict or delay consummation of or otherwise adversely affect
any of the Transactions in any material manner or (ii) in the sole judgment
of the Company could materially adversely affect the business, condition
(financial or otherwise), operations or prospects of the Company or
materially impair the contemplated benefits of any of the Transactions to
the Company;
(d) there shall not have been threatened, instituted, or pending
any action, proceeding, application or counterclaim by or before any court
or governmental, regulatory or administrative agency or authority, or any
other person or tribunal that (i) challenges or seeks to challenge,
restrain or prohibit any of the Transactions, or any other matter directly
or indirectly relating to any of the Transactions, or obtain any material
damages or otherwise directly or indirectly relating to any of the
Transactions or (ii) seeks to make the acceptance for payment of, or
payment for, some or all of the Secured Notes pursuant to the Exchange
Offer, the Tender Offer or any redemption or defeasance of any Secured
Notes illegal or results in a delay in or otherwise restricts the ability
of the Company, or renders the Company unable, to accept for payment or pay
for some or all of the Secured Notes pursuant to the Exchange Offer, the
Tender Offer or any redemption or defeasance of any Secured Notes;
(e) no event shall have occurred or be likely to occur affecting
the business or financial affairs of the Company that, in the sole judgment
of the Company, would or might prohibit, prevent, restrict or delay
consummation of any of the Transactions, or that will, or is reasonably
likely to, materially impair the contemplated benefits of any of the
Transactions to the Company;
(f) the Trustee shall not have objected in any respect to, or taken
any action that could, in the sole judgment of the Company, adversely
affect the consummation of any of the Transactions, or have taken any
action that challenges the validity or effectiveness of the procedures used
by the Company in effecting the exchange of Secured Notes pursuant to the
Exchange Offer, making of the Tender Offer or the acceptance of Secured
Notes tendered for purchase or the redemption of Secured Notes in
connection with the Restructuring Transaction; or
31
<PAGE>
(g) the Senior Secured Credit Facility shall have been obtained on
terms acceptable to the Company in its sole discretion, and the funds
required by the Company to purchase Secured Notes tendered pursuant to the
Tender Offer and to consummate the Exchange Offer and the proposed
redemption of Secured Notes as contemplated by the terms of the
Restructuring Transaction, and to pay related fees and expenses, shall be
available to the Company.
If any of the foregoing conditions is not satisfied, the Company may
terminate the Exchange Offer and return the Secured Notes to the holders who
delivered them; extend the Exchange Offer and retain all delivered Secured Notes
until the expiration of the Exchange Offer, subject, however, to the withdrawal
rights of Secured Noteholders; or waive the unsatisfied conditions with respect
to the Exchange Offer and accept all Secured Notes delivered.
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
Upon the terms and conditions set forth in this Memorandum and the related
Letter of Transmittal, the Company proposes to acquire in exchange for the
Exchange Consideration, plus accrued interest through July 15, 1996, all Secured
Notes that are validly delivered for exchange and not withdrawn prior to the
Tender Offer Expiration Date by the Accredited Investors to whom this Memorandum
is delivered by the Company. Interest through July 15, 1996 will be paid to
holders of record of the Secured Notes as of July 1, 1996. If any Secured Note
is transferred after July 1, 1996, no interest will be paid to the transferee.
Expiration Date. Only Secured Notes validly delivered for exchange by
prospective Exchanging Noteholders on or before the Tender Offer Expiration Date
and not withdrawn will be eligible for exchange pursuant to the Exchange Offer.
A prospective Exchanging Noteholder desiring to exchange its Secured Notes
pursuant to the Exchange Offer may deliver such Secured Notes pursuant to the
terms and conditions set forth herein at any time prior to the date the Tender
Offer expires, as the same may be extended from time to time (the "Expiration
Date").
Company's Determination Final and Binding. The Company's interpretation of
the terms and conditions of the Exchange Offer is final and binding. The
Company, in its sole discretion, will determine all questions concerning
acceptance, form, time of receipt, validity, withdrawal, and any other matter
with respect to the Exchange Offer. Moreover, notwithstanding anything to the
contrary herein, on or before the Expiration Date, the Company may abandon the
Exchange Offer or amend it in any respect.
The Company reserves the right to reject any or all deliveries of Secured
Notes for exchange that it determines are in inappropriate form or the
acceptance or payment for which may be unlawful. The Company also reserves the
right to waive any defect or irregularity in any delivery with respect to any
particular Secured Notes or any particular prospective Exchanging Noteholder. A
delivery or withdrawal of Secured Notes will not be validly made until all
defects and irregularities have been cured or expressly waived. Neither the
Company nor the Depositary, however, will be obligated to notify a prospective
Exchanging Noteholder of any defects or irregularities in its delivery or
withdrawal.
Abandonment or Amendment. If the Company abandons or amends the Exchange
Offer, the Company will promptly notify the prospective Exchanging Noteholders
of such abandonment or amendment. If the Company extends the Expiration Date,
the Company will publicly announce such extension no later than 9:00 a.m.,
Eastern Time, on the business day immediately after the previously scheduled
Expiration Date. The Company will make such public announcement of any
extension by making a release to the Dow Jones News Service.
32
<PAGE>
PROCEDURE FOR DELIVERY OF SECURED NOTES
Letter of Transmittal. To effectuate a valid delivery of Secured Notes for
exchange, the Depositary must receive a properly completed Letter of Transmittal
with respect thereto at one of the addresses set forth on the back cover hereof,
along with the certificates for the delivered Secured Notes and any other
required documents. Only a registered holder of Secured Notes on the Secured
Note register or a person registered as the holder of Secured Notes on the
records of a Clearing Agency that delivers an omnibus endorsement to the
Depositary may complete a Letter of Transmittal. The Depositary will request
Depository Trust Company and its nominee Cede & Co., Midwest Securities Trust
Company and its nominee Kray & Co. and The Philadelphia Depository Trust Company
and its nominee Philadep & Co. (collectively, the "Clearing Agencies") to
deliver to the Depositary an omnibus endorsement for the benefit of the persons
registered on their records as the holders on the Expiration Date of the Secured
Notes for which they are the registered holders. If a Clearing Agency delivers
such an endorsement, the persons designated thereon may complete, execute and
deliver a Letter of Transmittal with respect to the Secured Notes for which such
endorsement indicates that they are the holders as if they were the registered
holders thereof. On or before the Expiration Date, however, such a Clearing
Agency must deliver to the Depositary the Secured Note certificates representing
any such Secured Notes. Instead of having Depository Trust Company and its
nominee Cede & Co. deliver such Secured Note certificates, however, the persons
registered on its records as the holders of Secured Notes may deliver such
Secured Notes pursuant to the book-entry transfer procedures set forth below.
Unless a Secured Noteholder is an Eligible Institution, such Secured
Noteholder must have its signature guaranteed by an Eligible Institution that is
a member of: (i) the Securities Transfer Agents Medallion Program, (ii) the New
York Stock Exchange Medallion Signature Program or (iii) the Stock Exchange
Medallion Program (collectively, the "Medallion Programs").
An "Eligible Institution" is: (i) a firm that is a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or (ii) a commercial bank or trust company that has an office or a
correspondent in the United States of America.
When Secured Note certificates are held by joint tenants, both joint
tenants should sign. When signing as administrator, attorney-in-fact, executor,
fiduciary, guardian, officer, trustee or other person acting in a representative
capacity, the person signing should give such person's full title and deliver
evidence to the Depositary of its authority to execute the Letter of
Transmittal. If a corporation, an authorized officer should sign in the name of
the corporation. If a partnership, a general partner should sign in the name of
the partnership.
The method of delivery of all documents is at the election and risk of the
tendering Secured Noteholder. A tender of Secured Notes will not occur until
the Depositary actually receives all of the documents required to effectuate the
delivery at one of the addresses set forth on the back cover hereof.
Accordingly, if a Secured Noteholder mails its documents to the Depositary, the
Depositary recommends that it use certified or registered mail and allow
sufficient time to insure receipt on or before the Expiration Date.
Book-Entry Transfer. The Depositary will request Depository Trust Company
and its nominee Cede & Co. to establish a book-entry transfer account for the
Secured Notes. Any financial institution that participates in the Book-Entry
Transfer Facility's system may make book-entry delivery of Secured Notes by
causing the Book-Entry Transfer Facility to transfer such Secured Notes into the
Depositary's account thereat.
Book-entry transfer of Secured Notes, however, will not obviate the
requirement that the Depositary receive a Letter of Transmittal with respect to
such Secured Notes and any other required documents on or before the Expiration
Date. Delivery of the Letter of Transmittal and
33
<PAGE>
such other documents to the Book-Entry Transfer Facility will not constitute
delivery to the Depositary.
Guaranteed Delivery. If a Secured Noteholder cannot deliver a Letter of
Transmittal and its Secured Notes to the Depositary on or before the Expiration
Date, such Secured Noteholder may deliver its Secured Notes through an Eligible
Institution. To make such a tender, on or before the Expiration Date the
Depositary must receive from the Eligible Institution a properly completed
Notice of Guaranteed Delivery substantially in the form enclosed herewith.
Within three business days after receipt of the Notice of Guaranteed Delivery,
the Depositary must receive from the Eligible Institution a properly completed
Letter of Transmittal, the Secured Note certificates for the tendered Secured
Notes or confirmation of a book-entry transfer of such Secured Notes into the
Depositary's account at the Book-Entry Transfer Facility, and any other required
documents.
DELIVERY OF EXCHANGE CONSIDERATION
Upon the terms and subject to the conditions of this Memorandum, the
Company will acquire by accepting for exchange and will pay and deliver the
Exchange Consideration for all Secured Notes properly delivered pursuant to the
Exchange Offer on or prior to the Expiration Date and not withdrawn. In all
cases, the Company will deliver the Exchange Consideration for accepted Secured
Notes only after the Depositary timely receives the Secured Note certificates
for such Secured Notes or confirmation of a book-entry transfer of such Secured
Notes into the Depositary's account at the Book-Entry Transfer Facility. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
Secured Notes as, if and when the Company gives oral or written notice of such
acceptance to the Depositary.
The Company will pay and deliver the Exchange Consideration for the
accepted Secured Notes by transferring the aggregate amount thereof along with
interest due to the Depositary. Interest through July 15, 1996 will be paid
only to holders of record of a Secured Note on July 1, 1996. If an exchanged
Secured Note was transferred to the exchanging Secured Noteholder after July 1,
1996, no interest will be paid to the transferee. Upon the Depositary's receipt
thereof, the Company will be deemed to have acquired the accepted Secured Notes
and the Exchange Offer will be deemed consummated for all purposes. At that
time, such Secured Notes shall be retired and cease to be outstanding. The
Depositary will act as the agent for the exchanging Secured Noteholders for the
purpose of receiving such payment and transmitting the appropriate portions
thereof to them. Under no circumstances will any interest be owed or paid on
such amounts because of any delay in making such payments.
With respect to Secured Notes that the Company does not accept, as soon as
possible after determining which Secured Notes the Company has accepted, the
Depositary will return the Secured Note certificates for such unaccepted Secured
Notes to the registered holder thereof or redeliver such unaccepted Secured
Notes by book-entry transfer to the Book-Entry Transfer Facility account from
which the Secured Noteholder caused their delivery. If a Secured Note
certificate represents both accepted and unaccepted Secured Notes, the
Depositary will cause the cancellation of such certificate and the issuance of a
new certificate for the unaccepted Secured Notes to the registered holder of the
original certificate.
WITHDRAWAL RIGHTS
A Secured Noteholder's delivery of Secured Notes pursuant to the Exchange
Offer will be irrevocable, except that the Secured Noteholder may withdraw such
Secured Notes on or before the Expiration Date, unless the Company has accepted
them before that date. To withdraw Secured Notes, the Depositary must receive a
written notice of withdrawal (a "Notice of Withdrawal") from the Secured
Noteholder at one of the Depositary's addresses set forth on the back cover
hereof. The Notice of Withdrawal must specify: (i) the name of the person who
34
<PAGE>
delivered the Secured Notes to be withdrawn, (ii) the principal amount of
Secured Notes to be withdrawn and (iii) the name in which the Secured Note
certificates representing such Secured Notes are registered.
If the Secured Noteholder has delivered or otherwise identified to the
Depositary the Secured Note certificates for the Secured Notes to be withdrawn,
prior to the physical release of those Secured Note certificates the Secured
Noteholder must also furnish to the Depositary the serial numbers for such
Secured Note certificates and have the signatures on the Notice of Withdrawal
guaranteed by an Eligible Institution that is a member of a Medallion Program,
unless the person submitting the Notice of Withdrawal is an Eligible
Institution. If a Secured Noteholder has delivered Secured Notes to the
Depositary pursuant to the procedure for book-entry transfers, the Notice of
Withdrawal must specify the account at the Book-Entry Transfer Facility to be
credited with such withdrawn Secured Notes and must otherwise comply with the
Book-Entry Transfer Facility's procedures.
CIBC WOOD GUNDY
CIBC Wood Gundy has provided certain financial advisory services to the
Company and certain Secured Noteholders in connection with the Restructuring
Transaction. The Company has agreed to pay CIBC Wood Gundy a monthly fee of
$85,000 for the period of its engagement, plus a $300,000 fee payable upon the
consummation of a restructuring transaction for its advisory services, plus
reimbursement for out-of-pocket expenses. In addition, the Company will pay
CIBC Wood Gundy a fee of 2.5% of the committed amount if the Senior Secured
Credit Facility is funded. The Company has agreed to indemnify CIBC Wood Gundy
against certain liabilities in connection with its services as financial
adviser, including liabilities under the federal securities laws.
RAUSCHER PIERCE REFSNES, INC.
For RPR's services in connection with the Restructuring Transaction, the
Company has agreed to pay RPR a fee of $100,000, plus reimbursement for out-of
pocket expenses. The Company has agreed to indemnify RPR against certain
liabilities in connection with its services, including liabilities under the
federal securities laws.
DEPOSITARY
The Depositary for the Exchange Offer is Fleet National Bank. All
deliveries, correspondence and questions sent or presented to the Depositary
relating to the Exchange Offer should be directed to one of the addresses or
telephone numbers set forth on the back cover of this Memorandum. The
Depositary is also acting as such for the Tender Offer. The Company will pay
the Depositary reasonable and customary compensation for its services in
connection with the Exchange Offer and the Tender Offer, plus reimbursement for
out-of-pocket expenses. The Company will indemnify the Depositary against
certain liabilities and expenses in connection therewith, including liabilities
under the federal securities laws.
DESCRIPTION OF THE COMPANY'S BUSINESS
GENERAL
The Company owns and operates through its subsidiaries a system of 58
membership-based campgrounds located in 19 states and British Columbia, Canada,
serving 131,000 members as of March 31, 1996. Through its subsidiaries, the
Company also manages timeshare facilities and owns certain real estate at eight
full service resorts and provides a reciprocal use program for members of
approximately 330 recreational facilities.
35
<PAGE>
CAMPGROUND OPERATIONS
The Company owns and operates its network of membership-based campgrounds
through NACO and Trails. NACO owns and operates a network of 23 of these
campgrounds, and Trails owns and operates a network of 35 of these campgrounds.
Members may bring their own recreational vehicles, tents or other sleeping
equipment, or rent travel trailers or cabins located at the campgrounds or visit
for the day. As of March 31, 1996, NACO had approximately 49,000 campground
members and Trails had approximately 82,000 campground members. However,
approximately 31% of NACO's campground members and approximately 48% of Trails'
campground members possess the right to use the campgrounds in the network of
the other company. Campground members are concentrated in several states,
including California, Florida, Oregon, Texas and Washington. California has the
largest concentration of members.
Prior to April 1992, the Company sold new campground memberships on an
installment basis at sales prices up to approximately $8,000. In April 1992, the
Company suspended the sale of new campground memberships because its sales
program was operating at a loss and with negative cash flow. In the fall of
1992, the Company began to assist campground members desiring to sell their
memberships in the secondary market. During fiscal 1994, as part of its focus on
ongoing revenues from campground operations, the Company determined that it
should increase its sales and marketing efforts in order to replenish its
campground membership base. As a result, in May 1994, the Company instituted a
new sales and marketing program under which it began selling new campground
memberships on a limited basis. Since that time, the Company has been testing
membership products and revising them based on results and its ongoing market
research.
The Company's research indicates that camping is a popular and growing
activity in the United States. Camping was the fifth largest participant
sport/activity in the United States in 1993, and the number of campers has
increased during each of the preceding five years. Moreover, 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. 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.
Campground members pay annual dues ranging from $60 to $998. The annual
dues collected from campground members constitute general revenue of the
Company. Although the Company uses the dues to fund its operating expenses,
including corporate expenses and the maintenance and operation of the
campgrounds, the membership agreements do not require the Company to use the
dues for any specific purpose.
From January 1, 1993 to March 31, 1995, the Company requested its
campground members to participate in a voluntary dues program (the "TTN Alliance
Program") under which participating members agreed to increase their dues and
campground fees voluntarily. Under this program, participating members either:
(i) increased their annual dues by $100, up to a maximum of $429 per year, and
agreed to pay a use fee of $2.00 per night after staying at the campgrounds for
50 nights in any calendar year, or (ii) increased their annual dues to $730 per
year without agreeing to pay any use fee. Participating members, however,
received certain considerations. A total of 34,200 of the Company's members
(25%) chose to participate in the TTN Alliance Program, which has resulted in
additional ongoing dues revenue of $2.1 million per year.
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,
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may not increase the dues on existing contracts of senior citizens and disabled
members who notify the Company of their age or disability and request that their
dues be frozen. At the present time, approximately 36% of the members have
requested that their dues be frozen because of their age or disability. The
Company estimates that approximately 50% of the campground members are senior
citizens eligible to request that their dues be frozen. The Company is unable to
estimate when or if a significant number of these members will request that
their dues be frozen in the future.
NACO members and holders of dual-system memberships, which permit the
member to use the campgrounds in both the NACO and Trails systems, may join
Resort Parks International ("RPI"). A wholly owned subsidiary of the Company
operates the RPI program, which offers a reciprocal program for members of
approximately 330 participating recreational facilities. Members of these
participating facilities pay a fee to RPI that entitles them to use any of the
participating facilities, subject to the limitation that they cannot use an RPI
facility located within 125 miles of their home facility. As of March 31, 1996,
there were approximately 98,000 RPI members, of which approximately 78,000 were
members of campgrounds that are not affiliated with the Company.
CAMPGROUND MANAGEMENT
During fiscal 1994, a wholly owned subsidiary of the Company ("Wilderness
Management") began to manage public campgrounds for the U.S. Forest Service. As
of March 31, 1996, Wilderness Management had entered into management contracts
covering 35 campgrounds containing a total of 1,436 campsites. Pursuant to these
contracts, the Company incurs the expenses of operating the campgrounds and
receives the related revenues, net of a fee paid to the Forest Service.
RESORT OPERATIONS
NACO manages timeshare facilities and owns certain real estate at eight
full service resorts located in seven states. NACO currently owns and operates
the resort amenities at one of these locations, and has sold the resort
amenities at the other locations. NACO's interest in the resorts consists
principally of residential lots and timeshare interests in townhouses. As of
March 31, 1996, NACO had approximately 29,000 resort members who owned a
timeshare interest or lot.
Timeshare owners pay annual fees to their respective timeshare associations
for the cost of operating and maintaining the timeshare facilities. From these
fees, the timeshare associations pay management fees to NACO averaging 11% of
the annual fees. The Company cannot use these annual fees, other than the
management fees, to pay the Company's expenses. Additionally, NACO pays dues to
the timeshare associations on unsold timeshare inventory, and receives rental
income on the unsold timeshare inventory when the units are rented. In the past,
the fees paid to certain timeshare associations were sometimes insufficient to
pay the cost of maintaining the facilities. Under these circumstances, NACO
performed the maintenance and billed the timeshare associations. As of March 31,
1996, NACO had an aggregate receivable of $3.1 million due from various
timeshare associations. The Company believes that collection of certain of these
amounts could be difficult due to the limited funds of the timeshare
associations. Therefore, the Company has recorded a $2.1 million reserve for
amounts considered uncollectible.
Since June 1992, NACO has been selling its timeshare interests and
lots at significantly reduced prices in order to decrease the timeshare
inventory on which it pays dues and its inventory of lots.
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CONTRACTS RECEIVABLE
Prior to April 1992, the Company sold substantially all of its campground
memberships and resort interests on the installment basis, creating a portfolio
of contracts receivable. The Company charges interest on the unpaid balance of
the contracts receivable at fixed rates, which vary depending upon the size of
the down payment and the length of the contract. The contracts receivable bear
interest at rates ranging from 6.0% to 18.9%, with an approximate weighted
average stated interest rate of 12.9% as of March 31, 1996. Monthly installment
payments range from $90 to $210 over the term of the contracts receivable, which
can be up to ten years. The terms of most newer contracts receivable, however,
do not exceed five years and contract terms under the Company's current
campground membership sales program are limited to one year. At March 31, 1996,
approximately 95% of the Company's campground and resort members had paid for
their membership or resort interest in full. As of March 31, 1996, the Company
possessed contracts receivable from campground and resort members with an
aggregate principal balance of $24.3 million, consisting of $6.9 million of
contracts receivable associated with the NACO campgrounds, $14.1 million of
contracts receivable associated with the Trails campgrounds and $3.3 million of
contracts receivable associated with the NACO resorts.
FINANCIAL INFORMATION
The Company's financial statements for the fiscal year ended June 30, 1995
are contained in the Annual Report incorporated by reference herein and
delivered herewith. The Company's interim financial statements for the nine
months ended March 31, 1996 are contained in the Quarterly Report incorporated
by reference herein and delivered herewith.
During fiscal 1996, the Company has made operational changes in order to
reduce operating costs at its campgrounds and general and administrative
expenses. These changes have been achieved through the reduction of excess
campground personnel, the seasonal closure of certain facilities with low usage
during off-season periods, the permanent closure and abandonment of four
campgrounds and the reduction of excess corporate personnel. As a result, total
operating costs declined to $25.5 million for the nine months ended March 31,
1996, from $29.6 million for the comparable period in fiscal 1995 (a 14%
reduction), while general and administrative expenses fell $1.2 million to $9.3
million (an 11% reduction) for the same periods. For the nine months ended March
31, 1996, the Company had a positive contribution from operations of $4.4
million, compared with a negative contribution of $1.0 million for the same
period of fiscal 1995. The Company presently expects to achieve a positive
contribution from operations for the full fiscal year of approximately $4.9
million, increased from its previous expectation of $4.0 to 4.5, due to higher
than expected campground dues and lower campground operating expenses, partially
offset by lower ancillary revenues. See Item 2, "Management's Discussion and
Analysis of Financial Conclusion and Results of Operations" in the Quarterly
Report incorporated by reference herein.
RECENT OPERATING STRATEGY
Over the past two years, the Company has modified its membership product to
better address the needs of its target market and focused on membership
referrals in its sales efforts. The Company's current strategy involves selling
multiple and more affordable types of membership products to better suit the
desires of various campers. The Company offers membership products with up-front
fees ranging from $495 to $2,495 based principally on the number and location of
the campgrounds the member wishes to access, with accompanying annual dues
ranging from $198 for 15 days of camping per year to $998 for unlimited camping.
The Company focuses its new membership sales efforts on guests referred by
existing members, whom management believes are more likely to purchase
memberships.
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New membership sales have increased substantially. For the nine months
ended March 31, 1996, the Company sold 1,834 new memberships at an average sales
price of $905 for total revenue of $1.7 million, compared to 439 memberships at
an average price of $1,613 for total revenue of $708,000 for the same period in
1995, with accompanying aggregate annual dues of $565,000 in the current period
compared to $173,000 in the same period last year. Improved sales, particularly
the increase in aggregate annual dues, have enabled the Company to partially
offset decreases in revenue resulting from member attrition, but at a level
below that necessary to stabilize the membership base. The membership base is
declining at a rate of approximately 8% annually. The Company attributes the
decline principally to the aging of its members. The Company believes that as
new membership sales improve, its net attrition rate will decrease substantially
and the membership base will stabilize.
Over the past two years, the Company's collection of its contracts
receivables portfolio has improved as a result of management's implementation of
well-defined policies regarding collections procedures and as a result of the
portfolio becoming more seasoned. As of March 31, 1996, approximately 95% of the
gross contracts receivable balance was current, and less than 2% was more than
90 days past due. The Company estimates that as of June 30, 1996, it will have
contracts receivable from campground and resort members with an aggregate
principal balance of $21.2 million and a balance of $13.3 million, net of
reserves.
The Company is divesting non-core assets to generate cash and reduce
indebtedness. Non-core assets include undeveloped land, lots and buildings in
connection with the full service resorts, excess acreage at certain of the
Company's campgrounds, and campgrounds that have been removed from the
membership system. For fiscal 1996, the Company estimates that it will generate
net proceeds of $7.0 million from the sale of non-core assets.
The Company has approximately $54 million in net operating loss
carryforwards incurred during fiscal 1992 through 1995 that are available to
shelter future cash flows. The net operating loss carryforwards expire fifteen
years after incurred. The Restructuring Plan is intended to avoid a change in
control for federal income tax purposes and, therefore, preserve the Company's
ability to utilize its net operating loss carryforwards.
The Company has formulated the Business Plan on the important assumptions,
among others, that the progress made in fiscal 1996 will continue and, in the
case of its sales and marketing program, increase materially. The Company's
calculations under the Business Plan are not historical, except in the case of
the first three quarters of fiscal 1996, and involve significant risks and
uncertainties. The Company's future results of operations and financial
condition may differ materially due to several factors; including but not
limited to the Company's continued ability to control costs, its ability to
implement its 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 actual timing of planned asset sales, the actual collection
experience of the Company's contracts receivable, future interest rates and the
other factors affecting the Business Plan that are set forth or incorporated by
reference in this Memorandum and the Annual Report and Quarterly Report
incorporated herein by reference. See "Risk Factors - Business Plan Uncertainty"
herein.
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MANAGEMENT
The following table sets forth the directors and executive officers of the
Company as of the date hereof.
<TABLE>
<CAPTION>
NAME AGE OFFICES AND POSITIONS WITH COMPANY
- ----------------- ------------ -----------------------------------------
<S> <C> <C>
William J. Shaw 53 Director (May 1995)
Chairman of the Board, Chief Executive
Officer and President
Andrew M. Boas 41 Director (December 1991)
William P. Kovacs 50 Director (December 1991)
Donald R. Leopold 47 Director (December 1995)
H. Sean Mathis 49 Director (December 1991)
Douglas K. Nelson 53 Director (December 1991)
Harry J. White, Jr. 42 Vice President, Chief Financial Officer,
Chief Accounting Officer and Treasurer
R. Gerald Gelinas 50 Vice President, Sales and Marketing
Walter B. Jaccard 42 Vice President, General Counsel and
Secretary
</TABLE>
DESCRIPTION OF SENIOR SUBORDINATED PIK NOTES
The Senior Subordinated PIK Notes will be issued pursuant to an Indenture
(the "Senior Subordinated PIK Note Indenture") among the Company, the Guarantors
and Fleet National Bank, as Trustee. The terms of the Senior Subordinated PIK
Notes include those stated in the Senior Subordinated PIK Note Indenture and
those made a part of the Senior Subordinated PIK Note Indenture by reference to
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The following summary of certain provisions of the Senior Subordinated PIK
Notes and the Senior Subordinated PIK Note Indenture does not purport to be
complete and is qualified in its entirety by reference to the Senior
Subordinated PIK Notes and the Senior Subordinated PIK Note Indenture, drafts of
which will be made available upon request.
Certain defined terms used in the following description have the meanings
set forth in this description under "Certain Definitions." References to the
Company do not include the Company's Subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
The Senior Subordinated PIK Notes will be limited to an aggregate principal
amount of $40 million, excluding the Secondary Notes (as defined below), and
will mature July 15, 2003. Interest on the Senior Subordinated PIK Notes will
accrue at the rate of 17 1/2% per
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annum thereafter. Interest at 5 1/2% per annum for the initial 18 months will be
prepaid to the initial holders thereof on the Issue Date. All remaining interest
will be payable semi-annually on January 15 and July 15 of each year, commencing
January 15, 1997, to holders of record on the immediately preceding January 1
and July 1, in cash or additional Senior Subordinated PIK Notes (the "Secondary
Notes"), at the Company's option, through July 15, 2000 and in cash thereafter;
however, the Senior Secured Credit Facility may require that interest be paid
only in Secondary Notes while the Senior Secured Credit Facility is outstanding.
The interest rate will be subject to increase under certain circumstances if the
Company is not in compliance with its obligations under the Registration Rights
Agreement, as described under "Registration Rights Agreement." Interest on the
Senior Subordinated PIK Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 16, 1996 (or,
in the case of Secondary Notes, from the relevant interest payment date).
Interest will be computed on the basis of a 360-day year comprised of twelve 30-
day months. The Senior Subordinated PIK Notes will be payable both as to
principal and interest at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check or through certificates mailed
to the holders of the Senior Subordinated PIK Notes at their respective
addresses set forth in the register of holders of the Senior Subordinated PIK
Notes. Unless otherwise designated, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Senior
Subordinated PIK Notes will be issued in registered form, without coupons, and
in denominations of $1,000 and integral multiples thereof, except that Secondary
Notes (or Senior Subordinated PIK Notes issued upon transfer thereof) may be
issued in denominations of greater or less than $1,000.
SUBSIDIARY GUARANTEE
The Company's obligations under the Senior Subordinated PIK Notes and the
other Note Documents will be unconditionally guaranteed, jointly and severally,
pursuant to the Subsidiary Guarantee by all Subsidiaries of the Company existing
on the Issue Date (other than an immaterial utility subsidiary), each of which
is Wholly Owned, and all future Wholly Owned Subsidiaries of the Company. The
Subsidiary Guarantee will be limited in amount to an amount not to exceed the
maximum amount that can be guaranteed by each Guarantor without rendering the
Subsidiary Guarantee, as it relates to such Guarantor, voidable under applicable
law relating to fraudulent conveyances or fraudulent transfers or similar laws
affecting the rights of creditors generally.
So long as an Event of Default has not occurred and the Senior Subordinated
PIK Notes have not been accelerated, the Senior Subordinated PIK Note Indenture
and the Subsidiary Guarantee will provide that Guarantors may be released from
their obligations under the Subsidiary Guarantee without obtaining any consent
or release from the Trustee when they are disposed of in compliance with the
requirements of the Senior Subordinated PIK Note Indenture.
RANKING
The payment of the principal of, premium (if any) and interest on the
Senior Subordinated PIK Notes will be subordinated in right of payment, as set
forth in the Senior Subordinated PIK Note Indenture, to the payment when due of
the Senior Secured Credit Facility. The payment of the obligations of the
Guarantors under the Subsidiary Guarantee is also subordinated in right of
payment, as set forth in the Subsidiary Guarantee, to the payment when due of
the Senior Secured Credit Facility. After giving effect to the issuance of the
Senior Subordinated PIK Notes and the consummation of the Restructuring
Transaction, the outstanding principal amount of the Senior Secured Credit
Facility is expected to be approximately $30 million.
Only the Senior Secured Credit Facility will rank senior to the Senior
Subordinated PIK Notes or the Subsidiary Guarantee in accordance with the
provisions of the Senior Subordinated
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PIK Note Indenture and the Subsidiary Guarantee. The Senior Subordinated PIK
Notes and the Subsidiary Guarantee will in all respects rank pari passu with all
other Indebtedness of the Company and the Subsidiaries, other than Subordinated
Indebtedness, and will rank senior to any Subordinated Indebtedness permitted by
the Senior Subordinated PIK Note Indenture. However, the Senior Subordinated PIK
Note Indenture will permit a limited amount of Permitted Purchase Money
Indebtedness, Capitalized Lease Obligations and certain existing secured
Indebtedness, as well as the Working Capital Replacement Facility that may
refinance or replace up to $10 million of the Senior Secured Credit Facility for
working capital purposes. The Company and each Guarantor will agree in the
Senior Subordinated PIK Note Indenture and the Subsidiary Guarantee that it will
not incur, directly or indirectly, any Indebtedness which is subordinate or
junior in ranking in any respect to the Senior Secured Credit Facility unless
such Indebtedness is expressly subordinated in right of payment to the Senior
Subordinated PIK Notes.
The Company may not pay principal of, premium (if any) or interest (other
than interest payable in kind) on, the Senior Subordinated PIK Notes or make any
deposit pursuant to the provisions described under "Defeasance" below and may
not otherwise purchase or retire any Senior Subordinated PIK Notes
(collectively, "pay the Senior Subordinated PIK Notes"), and no Guarantor may
pay any amount on the Subsidiary Guarantee, if (i) any of the Senior Secured
Credit Facility is not paid when due or (ii) any other default on the Senior
Secured Credit Facility occurs and the maturity of the Senior Secured Credit
Facility is accelerated in accordance with its terms unless, in either case, the
default has been cured or waived and any such acceleration has been rescinded or
the Senior Secured Credit Facility has been paid in full in cash. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) with respect to the Senior Secured Credit
Facility pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, neither the
Company nor any Guarantor may pay the Senior Subordinated PIK Notes or pay any
amount on the Subsidiary Guarantee, as the case may be, for a period (a "Payment
Blockage Period") commencing upon the receipt by the Trustee (with a copy to the
Company) of written notice (a "Blockage Notice") of such default from the
Representative of the Senior Secured Credit Facility specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company and any such Guarantor from such Representative; (ii) because
the default giving rise to such Blockage Notice is no longer continuing or
(iii) because the Senior Secured Credit Facility has been repaid in full in
cash). Notwithstanding the provisions described in the immediately preceding
sentence, unless the lenders under the Senior Secured Credit Facility or the
Representative of such lenders has accelerated the maturity of the Senior
Secured Credit Facility, the Company and the Guarantors may resume payments on
the Senior Subordinated PIK Notes or on the Subsidiary Guarantee, as the case
may be, after the end of such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to the Senior Secured Credit Facility during
such period. In no event may the total number of days during which any Payment
Blockage Period is in effect exceed 179 days in the aggregate during any 360
consecutive day period.
Upon any payment or distribution of the assets of the Company or any
Guarantor, upon a total or partial liquidation or dissolution or reorganization
of or similar proceeding relating to the Company or any Guarantor, or any of
their respective property, the lenders under the Senior Secured Credit Facility
will be entitled to receive payment in full in cash of the Senior Secured Credit
Facility before the holders of the Senior Subordinated PIK Notes are entitled to
receive any payment and until the Senior Secured Credit Facility is paid in full
in cash, any payment or distribution to which holders of Senior Subordinated PIK
Notes would be entitled but for the subordination provisions of the Senior
Subordinated PIK Note Indenture and the Subsidiary Guarantee will be made to the
lenders under the Senior Secured Credit Facility. If a distribution is made to
holders of Senior Subordinated PIK Notes that due to the subordination
provisions
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<PAGE>
should not have been made to them, such holders will be required to hold it in
trust for the lenders under the Senior Secured Credit Facility and pay it over
to them as their interests may appear.
If payment of the Senior Subordinated PIK Notes is accelerated because of
an Event of Default, the Company or the Trustee shall promptly notify the
lenders under the Senior Secured Credit Facility or the Representative of such
lenders of the acceleration. The Company may not pay the Senior Subordinated PIK
Notes until five Business Days after such lenders or the Representative of the
Senior Secured Credit Facility receives notice of such acceleration and,
thereafter, may pay the Senior Subordinated PIK Notes only if the subordination
provisions of the Senior Subordinated PIK Note Indenture otherwise permit
payment at that time.
By reason of such subordination provisions contained in the Senior
Subordinated PIK Note Indenture and the Subsidiary Guarantee, in the event of
insolvency, creditors of the Company or the Guarantors who are lenders under the
Senior Secured Credit Facility may recover more, ratably, than the holders of
Senior Subordinated PIK Notes, and creditors of the Company who are not lenders
under the Senior Secured Credit Facility or holders of the Senior Subordinated
PIK Notes may recover less, ratably, than lenders under the Senior Secured
Credit Facility and may recover more, ratably, than the holders of Senior
Subordinated PIK Notes.
SECURITY
Generally. The Senior Subordinated PIK Notes and the Subsidiary Guarantee
will initially be unsecured obligations of the Company and the Guarantors. Upon
repayment in full of the Senior Secured Credit Facility, the Senior Subordinated
PIK Notes and the Subsidiary Guarantee will be secured by the same assets as
secured the Senior Secured Credit Facility, other than cash and other Cash
Equivalents and other assets required to secure any Working Capital Replacement
Facility. The Senior Secured Credit Facility will be secured by substantially
all of the assets of the Company and the Subsidiaries other than (i) certain
leasehold interests and other leased assets, (ii) certain vehicles, trailers and
other equipment; (iii) equipment subject to financing and any newly acquired or
leased assets financed with Permitted Indebtedness and (iv) any agreements,
permits, licenses or the like that cannot be subjected to a Lien without the
consent of third parties, which consent has not been obtained.
Subject to the continuing collateral requirements of any Working Capital
Replacement Facility, the assets available to secure the Senior Subordinated PIK
Notes and the Subsidiary Guaranty after repayment of the Senior Secured Credit
Facility, include, as of the date of this Memorandum, the following: (i) the
capital stock of the Company's subsidiaries, including NACO and its
subsidiaries, RPI, Trails and its subsidiaries, and Wilderness Management,
(ii) 56 campgrounds and common amenities at one resort owned by a Subsidiary,
together with related improvements, certain equipment, and certain other
tangible personal property located there to the extent existing mortgages do not
prohibit such Liens, (iii) the closed campgrounds and other real estate that the
Subsidiaries own and are in the process of selling, (iv) the contracts
receivable that the Company and the Subsidiaries own and (v) all indebtedness
owed to the Company by its Subsidiaries, together with any related Liens.
Disposition of Collateral. So long as an Event of Default has not occurred
and the Senior Subordinated PIK Notes have not been accelerated, the Senior
Subordinated PIK Note Indenture and the Subsidiary Guarantee will provide that
the Company and the Subsidiaries may dispose of their properties free from the
Liens of the Collateral Documents without obtaining any consent or release from
the Trustee; provided that the Company complies with the requirements of the
Senior Subordinated PIK Note Indenture and any applicable appraisal and other
requirements of the Trust Indenture Act.
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OPTIONAL REDEMPTION
The Senior Subordinated PIK Notes will be redeemable at the option of the
Company, in whole or in part, at any time upon not less than 30 nor more than 60
days' notice to each holder of Senior Subordinated PIK Notes, at the redemption
price of 100% of principal amount, plus accrued interest to the redemption date.
The Company will not be required to make sinking fund payments with respect
to the Senior Subordinated PIK Notes.
CHANGE OF CONTROL REPURCHASE OFFER
In the event that a Change of Control (as defined below) has occurred, each
holder of Senior Subordinated PIK Notes will have the right, at such holder's
option, subject to the terms and conditions of the Senior Subordinated PIK Note
Indenture, to require the Company to repurchase all or any part of such holder's
Senior Subordinated PIK Notes at a cash price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest to the purchase date. Within
30 days following a Change of Control, the Company will be required to
(i) notify the lenders under the Senior Secured Credit Facility or any Working
Capital Replacement Facility that a Change of Control has occurred and
(ii) either (1) repay in full the Senior Secured Credit Facility or any Working
Capital Replacement Facility or offer to repay in full all such Indebtedness and
repay the Indebtedness held by each lender who has accepted such offer or
(2) obtain the requisite consent under the Senior Secured Credit Facility or any
Working Capital Replacement Facility to permit the repurchase of the Senior
Subordinated PIK Notes. The Company shall first comply with the foregoing before
the beginning of a 30-day period within which it shall be required to commence
its offer to repurchase the Senior Subordinated PIK Notes as described under
"Redemption and Repurchase Offer Procedure" below.
"Change of Control" means (i) the sale, lease or transfer of all or
substantially all of the Company's assets to any "person" or "group" (as such
terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act)
other than the Existing Affiliates, (ii) the liquidation or dissolution of the
Company, (iii) the time that the Company first determines or reasonably should
have known that any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) other
than the Existing Affiliates is or becomes the "beneficial owner" (as such term
is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such "person" has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total voting power in the
aggregate of all classes of Capital Stock then outstanding of the Company
normally entitled to vote in elections of directors or (iv) during any period of
12 consecutive months after the Issue Date, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board or whose nomination for election by
the stockholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
Except as described above with respect to a Change of Control, the holders
of the Senior Subordinated PIK Notes will not be able to require the Company to
repurchase or redeem the Senior Subordinated PIK Notes in the event of a
takeover, recapitalization or similar restructuring. The Change of Control
purchase feature may in certain circumstances make more difficult or discourage
a takeover of the Company, and thus the removal of incumbent management. The
Company has no knowledge of any specific effort to accumulate the
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Company's stock or to obtain control of the Company by means of a merger, tender
offer, solicitation or otherwise. Subject to the limitations discussed below,
the Company could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not constitute
a Change of Control under the Senior Subordinated PIK Note Indenture, but that
could affect the Company's capital structure.
REDEMPTION AND REPURCHASE OFFER PROCEDURE
Within 30 days after the repurchase provisions described above or under
"Certain Covenants - Limitation on Sales of Assets and Subsidiary Stock" have
been triggered, the Company will, or will cause the Trustee to, send to each
holder of Senior Subordinated PIK Notes whose Senior Subordinated PIK Notes have
been selected to be offered to be repurchased, an offer to repurchase such
Senior Subordinated PIK Notes or a portion thereof. A holder may exercise its
rights with respect to such an offer by delivering to the Paying Agent, at the
office of the Paying Agent, a written notice prior to the close of business on
the third Business Day prior to the repurchase date set forth in the Company's
offer. Any holder may withdraw such notice at any time prior to the close of
business on the third Business Day prior to the repurchase date specified in the
Company's offer by delivering a written notice of withdrawal to the Paying
Agent. The delivery of the Senior Subordinated PIK Notes to be sold by the
holder (together with any necessary endorsements) to the Paying Agent at the
office of the Paying Agent will be a condition to the receipt by the holder of
the purchase price therefor.
The notice mailed by the Company in respect of the redemptions and
repurchase offers described above or below under "Certain Covenants - Limitation
on Sales of Assets and Subsidiary Stock" will contain all instructions and
materials necessary to enable the holders of Senior Subordinated PIK Notes to
tender their Senior Subordinated PIK Notes to the Company, and each such
redemption and repurchase offer will be conducted in compliance with applicable
tender offer rules, including, if applicable, Section 14(e) of the Exchange Act
and Rule 14e-l thereunder.
In the case of any redemption or repurchase offer where all of the Senior
Subordinated PIK Notes are not being redeemed or repurchased at any time,
selection of the Senior Subordinated PIK Notes to be redeemed or repurchased
will be made by the Trustee from and among the outstanding Senior Subordinated
PIK Notes on a pro rata basis, by lot or by any other method determined by the
Trustee to be fair and appropriate, subject to compliance with the requirements
of any national securities exchange on which the Senior Subordinated PIK Notes
may be then listed. On and after any applicable redemption or repurchase date,
interest shall cease to accrue on the Senior Subordinated PIK Notes or portions
thereof called for redemption or being repurchased.
CERTAIN COVENANTS
Limitation on Restricted Payments. The Senior Subordinated PIK Note
Indenture will provide that the Company will not, and will not cause or permit
any of its Subsidiaries to, make, directly or indirectly, any Restricted
Payment; provided, however, that the foregoing will not prohibit:
(a) the redemption, repurchase or other acquisition or retirement of
Capital Stock from the substantially concurrent sale of Qualified Capital
Stock or Capital Stock that is common stock; or
(b) the defeasance, redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness with the Net Proceeds received by
the Company from the substantially concurrent sale of Qualified Capital
Stock or Subordinated Indebtedness of the Company or in exchange for
Qualified Capital Stock or Subordinated Indebtedness of
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the Company, which Subordinated Indebtedness (i)(A) is at least as
subordinated in ranking to the Senior Subordinated PIK Notes as, (B) has an
Average Life not shorter than, and (C) has no installment (contingent or
otherwise) of principal or liquidation amount (including upon the happening
of an event or the passage of time) due before any installment of principal
of, the Subordinated Indebtedness being so defeased, redeemed, repurchased,
acquired or retired and (ii) has a principal amount (or, if such
Indebtedness is issued at less than its principal amount, has an original
issue price, as determined in accordance with GAAP) not to exceed the sum
of (A) the lesser of (x) the principal amount of such Subordinated
Indebtedness being so defeased, redeemed, repurchased, acquired or retired
in exchange therefor and (y) if such Subordinated Indebtedness being
acquired was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such
transaction, plus (B) the out-of-pocket expenses incurred by the Company in
connection with the acquisition or retirement of such Subordinated
Indebtedness or the sale of or its exchange for such Qualified Capital
Stock or Subordinated Indebtedness, including without limitation any
redemption, prepayment or similar premium paid with respect to such
acquisition or retirement.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Senior Subordinated PIK Note Indenture will provide that
neither the Company nor any of its Subsidiaries will, directly or indirectly,
create, assume or suffer to exist any consensual encumbrance or restriction on
the ability of any Subsidiary to pay dividends or make other distributions on
the Capital Stock of such Subsidiary or pay any obligation to the Company or any
of its Subsidiaries or otherwise transfer assets or make or pay loans or
advances to the Company or any of its Subsidiaries, except (a) restrictions
imposed by the Senior Subordinated PIK Notes, the Senior Subordinated PIK Note
Indenture and the Collateral Documents, (b) encumbrances and restrictions
imposed by the Senior Secured Credit Facility or any Working Capital Replacement
Facility, (c) customary non-assignment provisions restricting subletting or
assignment of any lease entered into in the ordinary course of business,
consistent with industry practices, (d) rights of members and other customers
arising in the ordinary cause of business from memberships, rights to use or
related or similar interests in campgrounds, resorts or other facilities
(whether arising from the holding of such memberships, rights to use or related
or similar interests, by applicable law or otherwise), (e) restrictions under
any agreement relating to any property, assets or business acquired by the
Company or its Subsidiaries, which restrictions existed at the time of
acquisition, were not put in place in anticipation of such acquisition and are
not applicable to any Person, other than the Person acquired or to any property,
assets or business other than the property, assets and business of the Person so
acquired, (f) any such contractual encumbrance imposed by or in connection with
the incurrence of any Permitted Purchase Money Indebtedness and Capitalized
Lease Obligations permitted pursuant to clause (d) of the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
provided such encumbrance does not have the effect of restricting (otherwise
than upon foreclosure) the payment of dividends to the Company or any Guarantor
or the payment of Indebtedness owed to the Company or any Guarantor or reducing
the amount of any such dividends or payments, (g) any such contractual
encumbrance or restriction in existence as of the Issue Date, (h) any
restrictions with respect to Capital Stock or assets, respectively, of a
Subsidiary imposed pursuant to an agreement that has been entered into for the
sale or disposition of all or substantially all of the Capital Stock or assets
of such Subsidiary and (i) replacements of restrictions imposed pursuant to
clauses (a) through (h) that are no more restrictive than those being replaced.
Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock. The Senior Subordinated PIK Note Indenture will provide that,
except as set forth below, the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, issue, assume, Guarantee,
incur, or otherwise become directly or indirectly liable with respect to
(including as a result of an acquisition, merger or consolidation), or otherwise
become responsible for, contingently or otherwise (individually and
collectively, to "incur," or, as appropriate, an
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"incurrence of"), any Indebtedness or any Disqualified Capital Stock from and
after the Issue Date. The exceptions set forth below are not exclusive of one
another.
(a) The Company and the Subsidiaries may incur Existing Indebtedness.
(b) The Company and the Subsidiaries may incur Indebtedness under the Note
Documents.
(c) The Company and the Subsidiaries may incur the Senior Secured Credit
Facility and any Working Capital Replacement Facility.
(d) The Company and its Subsidiaries may incur (i) Permitted Purchase
Money Indebtedness and Capitalized Lease Obligations not exceeding $9,000,000 in
principal amount (excluding Existing Indebtedness and any Refinancing
Indebtedness in respect thereof) at any time outstanding and (ii) unsecured
Indebtedness not exceeding $500,000 in principal amount (excluding Existing
Indebtedness and any Refinancing Indebtedness in respect thereof) at any time
outstanding.
(e) The Company may incur Subordinated Debt, provided that the Net Cash
Proceeds thereof are used for the substantially concurrent redemption,
repurchase or other acquisition or retirement of Senior Subordinated PIK Notes
or the Senior Secured Credit Facility.
(f) The Company and the Subsidiaries may incur Refinancing Indebtedness
with respect to any Indebtedness permitted by this covenant, other than clause
(c) or (d) above.
(g) The Company may incur Indebtedness (i) in respect of bankers'
acceptances, letters of credit and performance bonds (to the extent that such
incurrence does not result in the incurrence of any obligation for the payment
of borrowed money of others), all in the ordinary course of business, in amounts
and for the purposes customary in the Company's industry, (ii) arising under any
appeal or reimbursement obligations with respect to any judgment, which judgment
does not constitute a Default or (iii) constituting reimbursement obligations
with respect to letters of credit in respect of workers' compensation claims,
provided that the aggregate principal amount outstanding of such Indebtedness
(including any Existing Indebtedness of like kind and any Refinancing
Indebtedness with respect to such Indebtedness) shall at no time exceed
$5,000,000.
(h) The Company may incur Indebtedness to any Wholly Owned Subsidiary of
the Company, and any Wholly Owned Subsidiary of the Company may incur
Indebtedness to any other Wholly Owned Subsidiary or to the Company; provided
that such obligations, in each case, shall either be (i) unsecured and
subordinated in all respects to the prior payment in full in cash of the
Company's or such Subsidiary's obligations pursuant to the Note Documents (other
than with respect to payment of principal or interest if no Default or Event of
Default shall have occurred and be continuing at the time of any payment of or
with respect thereto) or (ii) a Permitted Intercompany Secured Loan; provided
that any such Indebtedness of a Subsidiary that is not a Guarantor shall comply
with all requirements for a Permitted Intercompany Secured Loan. Subsidiaries
may also incur Indebtedness that is a Permitted Investment of the Company or
another Subsidiary.
(i) The Company and its Subsidiaries may incur Indebtedness representing
the balance deferred and unpaid of the purchase price of any property or
services used in the ordinary course of their business that would constitute
ordinarily a trade payable to trade creditors (other than accounts payable or
other obligations to trade creditors arising in the ordinary course of business
that have remained unpaid for greater than 90 days, unless such payable or
obligation is being contested in good faith and adequate reserves therefor have
been established in accordance with GAAP).
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Limitation on Liens. The Senior Subordinated PIK Note Indenture will
provide that the Company will not, and will not permit its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien in or
on any right, title or interest to any of their properties or assets, except,
(a) Permitted Liens,
(b) Liens that secure the Senior Secured Credit Facility or any
Working Capital Replacement Facility,
(c) Liens created by the Collateral Documents, and
(d) Liens that secure Permitted Purchase Money Indebtedness and
Capitalized Lease Obligations permitted to be incurred under clause (d) of
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," which Liens shall not attach to any assets
other than the assets financed thereby.
Limitation on Sales of Assets and Subsidiary Stock. The Senior
Subordinated PIK Note Indenture will provide that neither the Company nor any of
its Subsidiaries will, in one transaction or a series of related transactions,
(i) convey, sell, lease, transfer, assign or otherwise dispose of, directly or
indirectly, any of its property, business or assets or (ii) engage in any sale
or other transfer or issuance of any Capital Stock of any Subsidiary of the
Company, whether by the Company or a Subsidiary of the Company, or through the
issuance, sale or transfer of Capital Stock by a Subsidiary of the Company (an
"Asset Sale"), unless (A) within 180 days after the date of such Asset Sale, the
Net Cash Proceeds therefrom are (x) applied to the repayment of the Senior
Secured Credit Facility or any Working Capital Replacement Facility or
(y)either applied to the repurchase of the Senior Subordinated PIK Notes (which
may be made in any manner selected by the Company, including, without
limitation, open market purchases, privately negotiated transactions or
redemptions), or invested in assets or property directly related to a Related
Business of the Company or such Subsidiary (or the Company or such Subsidiary
shall have entered into a binding obligation to make such an investment), (B) in
the case of any Asset Sale (or series of related Asset Sales) for Net Proceeds
in excess of $1,250,000, at least 80% of the value of such consideration for
such Asset Sale consists of U.S. Legal Tender or Cash Equivalents, (C) no
Default or Event of Default shall have occurred and be continuing at the time
of, or would occur after giving effect to such Asset Sale and (D) the Board of
Directors of the Company determines in good faith that the Company or such
applicable Subsidiary receives fair market value for such Asset Sale.
Notwithstanding the provisions of the foregoing paragraph:
(i) the Company and its Subsidiaries may in the ordinary course of
business and consistent with past practices, convey, sell, lease, transfer,
assign or otherwise dispose of assets acquired and held for resale in the
ordinary course of business;
(ii) the Company and its Subsidiaries may convey, sell, lease,
transfer or otherwise dispose of assets pursuant to and in accordance with
the covenant "Limitation on Merger, Sale or Consolidation";
(iii) the Company and its Subsidiaries may sell damaged, worn out or
other obsolete property or abandon property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Subsidiary, as applicable;
and
(iv) the Company and its Subsidiaries may convey, sell, lease,
transfer, assign, or otherwise dispose of assets at no less than their fair
value to the extent that the Net
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Cash Proceeds for any Asset Sale (or series of related Asset Sales) does
not exceed $1,000,000.
Limitation on Transactions with Affiliates. The Senior Subordinated PIK
Note Indenture will provide that, subject to the last sentence of this
paragraph, neither the Company nor any of its Subsidiaries will be permitted
after the Issue Date to enter into or extend or renew any transaction or series
of related transactions with any Affiliate (an "Affiliate Transaction"), unless
(A) the Affiliate Transaction is on terms at least as favorable to the Company
or such Subsidiary, as the case may be, as those that could have been obtained
in a comparable transaction with an unaffiliated third party; (B) in the case of
an Affiliate Transaction with a value to either party in excess of $1,000,000, a
majority of the independent directors of the Company determines that such
transaction complies with clause (A); and (C) in the case of any Affiliate
Transaction (including any series of related transactions) with an aggregate
value (to either party) in excess of $5,000,000, the Company or such Subsidiary
must in addition, prior to the consummation thereof, obtain a written favorable
opinion as to the fairness of such transaction to the Company from a financial
point of view from any national or regional independent investment banking firm.
The foregoing shall not apply to (i) transactions between one or more Guarantors
or between the Company and one or more Guarantors, (ii) Restricted Payments
permitted to be made under the covenant "Limitations on Restricted Payments,"
(iii) customary directors' fees and other compensation, stock option grants and
indemnities, (iv) extensions of and payments made with respect to Permitted
Intercompany Loans or unsecured subordinated Indebtedness permitted to be
incurred under clause (h) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock" or (v) employment,
consulting and related agreements entered into by the Company or any of the
Subsidiaries with their respective officers, employees or directors in the
ordinary course of business.
Maintenance of Insurance. The Senior Subordinated PIK Note Indenture will
provide that, from and at all times after the Issue Date, the Company and its
Subsidiaries will have in effect customary insurance against such risks, on
terms, with deductibles (or self-insurance), and in amounts as are customarily
carried by similar businesses.
Limitation on Merger, Sale or Consolidation. The Senior Subordinated PIK
Note Indenture will provide that none of the Company or any Subsidiary will
consolidate with or merge with or into another Person or, directly or
indirectly, sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons, other than the Company or a
Subsidiary, unless (i) either (a) the Company or such Subsidiary, as the case
may be, is the continuing entity or (b) the resulting, surviving or transferee
entity is a corporation organized under the laws of the United States, any state
thereof or the District of Columbia and expressly assumes by supplemental
indenture or other appropriate document all of the obligations of the Company or
such Subsidiary, as the case may be, in connection with the Note Documents to
which the Company or the Subsidiary, as the case may be, was a party (including
any Liens thereunder); (ii) no Default or Event of Default shall exist or shall
occur immediately after giving effect to such transaction; and (iii) immediately
after giving effect to such transaction on a pro forma basis, the Consolidated
Net Worth of the surviving or transferee entity is at least equal to the
Consolidated Net Worth of the Company or such Subsidiary, as the case may be,
immediately prior to such transaction (exclusive of amounts paid in respect of
dissenters' rights). Notwithstanding the foregoing, the Company and its
Subsidiaries may effect Asset Sales that comply with the covenant "Limitation on
Sales of Assets and Subsidiary Stock" (or are expressly excluded from compliance
with such covenant by the provisions thereof) without complying with the
foregoing covenant, provided that no such Asset Sale (or series of related Asset
Sales) involves all or substantially all of the properties or assets of the
Company and its Subsidiaries taken as a whole.
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Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company or such Subsidiary to which the foregoing is
applicable, the successor corporation formed by such consolidation or into which
the Company or such Subsidiary, as the case may be, is merged or to which such
transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Subsidiary, as the case may be,
under the Note Documents to which the Company or Subsidiary is a party with the
same effect as if such successor corporation had been named therein as the
Company or such Subsidiary, as the case may be. Any such Person will be required
to ensure, by executing and delivering appropriate instruments and opinions of
counsel, that the Trustee continues to hold any Lien on any Collateral for the
benefit of the holders of the Senior Subordinated PIK Notes to the extent then
required by the Note Documents.
Limitation on Lines of Business. The Senior Subordinated PIK Note
Indenture will provide that neither the Company nor any Subsidiary will directly
or indirectly engage in any line or lines of business activity other than in a
Related Business.
Financial Reports. Whether or not the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will be
required to deliver to the Trustee within 15 days after it is or would have been
required to file such with the SEC, for delivery to each holder of Senior
Subordinated PIK Notes, annual and quarterly financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the SEC if the Company were subject to the requirements of Section 13
or 15(d) of the Exchange Act, together with a management's discussion and
analysis of financial condition and results of operations that would be so
required.
In addition, the Company will be required to deliver to the Trustee
quarterly an Officers' Certificate regarding the absence of any Default or Event
of Default or specifying the nature of any such Default or Event of Default, the
period of existence thereof and any steps the Company or the relevant Subsidiary
proposes to take with respect thereto.
PAYMENTS FOR CONSENT
The Senior Subordinated PIK Note Indenture will provide that neither the
Company nor any of its Subsidiaries shall directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any holder of any Senior Subordinated PIK Notes for or as an inducement to any
consent, waiver or amendment of any of the provisions of the Senior Subordinated
PIK Note Indenture or the other Note Documents unless such consideration is
offered to be paid or agreed to be paid to all holders of the Senior
Subordinated PIK Notes that consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
EVENTS OF DEFAULT AND REMEDIES
Events of Default. The Senior Subordinated PIK Note Indenture will define
an Event of Default to include (i) the failure by the Company to pay any
installment of interest on the Senior Subordinated PIK Notes as and when due and
payable and the continuance of any such failure for 30 days, (ii) the failure by
the Company to pay all or any part of the principal, or premium, if any, on the
Senior Subordinated PIK Notes when and as the same become due and payable at
maturity, redemption, by acceleration or otherwise, including without limitation
failure to make any payment required upon a Change of Control Offer or Asset
Sale, as and when due, (iii) the failure by the Company or any Subsidiary to
observe or perform any other covenant or agreement contained in the Note
Documents and, subject to certain exceptions, the continuance of such failure
for a period of 30 days after written notice is given to the Company by the
Trustee or to the Company and the Trustee by the holders of at least 30% in
aggregate principal amount of the
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Senior Subordinated PIK Notes outstanding, (iv) certain events of bankruptcy,
insolvency or reorganization in respect of the Company or any Material
Subsidiary, (v) a default in the payment of principal, premium, if any, or
interest when due that extends beyond any stated period of grace applicable
thereto or an acceleration for any other reason of maturity of (a) the Senior
Secured Credit Facility or any Working Capital Replacement Facility or (b) any
other Indebtedness of the Company or any of its Subsidiaries with an aggregate
principal amount in excess of $2,000,000, (vi) final unsatisfied judgments not
covered by insurance aggregating at least $2,000,000 at any one time rendered
against the Company or any of its Subsidiaries and not stayed, bonded or
discharged within 60 days and (vii) the repudiation by any Subsidiary of its
obligations under the Subsidiary Guarantee, or any judgment or decree by a court
or governmental agency of competent jurisdiction declaring the unenforceability
of the payment obligations under the Subsidiary Guarantee or any of the
Collateral Documents (subject to a 10-day grace period in the case of any
Collateral Document). The Trustee may withhold from the holders of Senior
Subordinated PIK Notes notice of any continuing Event of Default (except any
Event of Default in payment of principal or interest on the Senior Subordinated
PIK Notes) if the Trustee determines that withholding such notice is in the best
interest of the holders of the Senior Subordinated PIK Notes.
Acceleration. If an Event of Default occurs and is continuing (other than
an Event of Default specified in clause (iv) above), then in every such case
unless the principal of all of the Senior Subordinated PIK Notes shall have
already become due and payable, either the Trustee or the holders of 30% in
aggregate principal amount of the Senior Subordinated PIK Notes then
outstanding, by notice in writing to the Company, and to the Trustee if given by
such holders, may declare all principal and accrued interest thereon to be due
and payable immediately. If an Event of Default specified in clause (iv) above
relating to the Company or any of its Material Subsidiaries occurs, all
principal and accrued interest will be immediately due and payable on all
outstanding Senior Subordinated PIK Notes without any declaration or other act
on the part of the Trustee or the holders of Senior Subordinated PIK Notes. The
holders of no less than a majority in aggregate principal amount of Senior
Subordinated PIK Notes generally are authorized to rescind such acceleration if
all existing Events of Default, other than the non-payment of the principal on
the Senior Subordinated PIK Notes that became due as a result of the
acceleration, have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Senior
Subordinated PIK Notes, the holders of a majority in aggregate principal amount
of the Senior Subordinated PIK Notes at the time outstanding may waive on behalf
of all such holders any Default or Event of Default, except a Default in the
payment of principal of or interest on any Senior Subordinated PIK Note not yet
cured, or a Default or Event of Default with respect to any covenant or
provision that cannot be modified or amended without the consent of the holder
of each outstanding Senior Subordinated PIK Note affected.
Remedies with Respect to Collateral
In General. Specific rights and remedies of the Trustee under the
Collateral Documents ultimately will include the right of the Trustee to sell
the Collateral and to apply the net proceeds to the Senior Subordinated PIK
Notes in accordance with the terms of the Senior Subordinated PIK Note Indenture
and the Collateral Documents.
Limitations on Foreclosure. Some states, including California, Oregon and
Washington, have non-disturbance statutes that place limitations on the ability
of the owner of a campground to close the campground or a lienholder to
foreclose its lien. In certain states, these statutes permit the owner of a
campground to close the campground or a lienholder to foreclose its lien if the
holders of memberships at the campground receive access to a comparable
campground. The Mortgages on the campgrounds included in any Collateral will
contain non-disturbance provisions that limit the ability of the Lienholder to
foreclose its Lien unless the holders of the related
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memberships receive access to a comparable campground. The impact of the rights
of members under these laws and non-disturbance provisions is uncertain and
could adversely effect the implementation of, and the benefits or recoveries
that may be available from, foreclosures in respect of such Collateral.
Other General Restrictions. The Trustee's ability to foreclose upon and
sell any campgrounds, stock of Subsidiaries, any loans from the Company to its
Subsidiaries ("Affiliate Loans") or other Collateral will be subject to the
procedural and other restrictions of the relevant state's real estate law or
Uniform Commercial Code. The Collateral includes stock of Subsidiaries that is
not publicly traded and may only be sold in compliance with applicable Federal
and state securities laws.
As regards proceeding against any Guarantor and its assets, the Trustee may
either foreclose upon any Affiliate Loans outstanding to such Guarantor included
in the Collateral or proceed under the Subsidiary Guarantee. If the Trustee
chose to foreclose upon Affiliate Loans, the necessity of first foreclosing on
the pledge of the Affiliate Loans might result in delay and increase the risk
that a petition for relief under bankruptcy or insolvency law could be filed by
or against any one or more of the Company and the Guarantors. If, on the other
hand, the Trustee chose to proceed by demand and foreclosure under the
Subsidiary Guarantee, its ability to realize upon the Collateral could be
limited by the invocation of state-law suretyship defenses and laws relating to
fraudulent conveyances or fraudulent transfers or similar laws affecting the
rights of creditors generally.
Additional Foreclosure Limitations. The laws of the jurisdictions where the
Company's campgrounds are located contain limitations on foreclosure that could
delay or prevent realization pursuant to the Collateral Documents or discourage
bidders at a foreclosure sale. These limitations may include, among others, (i)
the right to reinstate the debt after commencement of foreclosure proceedings by
paying any delinquent installments, costs and expenses incurred by the Trustee;
(ii) the right to redeem the property after it has been sold in a foreclosure
sale; (iii) "one-action" rules which require a creditor to pursue its remedies
against a defaulting debtor in a single action, and which, after a creditor
determines to pursue a particular remedy, will deny that creditor any other
remedy that it may have; and (iv) anti-deficiency statutes which prohibit a
creditor from seeking a deficiency judgment following a non-judicial foreclosure
sale.
MODIFICATION OF THE SENIOR SUBORDINATED PIK NOTE INDENTURE AND COLLATERAL
DOCUMENTS
The Senior Subordinated PIK Note Indenture will provide that the Senior
Subordinated PIK Note Indenture and the Collateral Documents may be modified by
a vote of holders of 66 2/3% in aggregate principal amount of the Senior
Subordinated PIK Notes, except in certain circumstances that will require
unanimous consent including, without limitation, changes with respect to payment
of principal, premium and interest (upon redemption, maturity or otherwise) and
the release of Guarantors or Collateral, except as otherwise provided by the
Senior Subordinated PIK Note Indenture.
The Senior Subordinated PIK Note Indenture will also provide that the
Company and the Trustee may modify the Senior Subordinated PIK Note Indenture or
the Collateral Documents without the consent of the holders of Senior
Subordinated PIK Notes to, among other things, (i) add covenants, conditions and
restrictions for the protection of the holders of Senior Subordinated PIK Notes
or to surrender any right or power of the Company or any Guarantor, (ii) cure
any ambiguity or correct any inconsistency that does not adversely affect the
legal or other rights of holders of Senior Subordinated PIK Notes or
(iii) modify, eliminate or add to the provisions to the extent necessary to
qualify the Senior Subordinated PIK Note Indenture under or otherwise comply
with the Trust Indenture Act or other applicable statutes. In addition,
Collateral may be released or modified as permitted in the Senior Subordinated
PIK Note
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Indenture and in the Collateral Documents (including in connection with any
Asset Sale) or a Subsidiary ceasing to be a Guarantor as permitted under the
Note Documents.
REQUIREMENTS FOR CERTAIN ACTIONS
The Senior Subordinated PIK Note Indenture will provide that for the
purposes of any modification of the Senior Subordinated PIK Note Indenture or
the Note Documents, the requisite 66 2/3% in principal amount of outstanding
Senior Subordinated PIK Notes will take into account Senior Subordinated PIK
Notes held by Affiliates controlling the Company in the absence of a Default or
Event of Default. However, the majority in principal amount of outstanding
Senior Subordinated PIK Notes required for any waivers or certain other actions
after a Default or Event of Default, and the 30% in principal amount required
for notices of default or acceleration, will disregard Senior Subordinated PIK
Notes held by Affiliates controlling the Company.
FURTHER ASSURANCES
The Senior Subordinated PIK Note Indenture will provide that the Company
will, and will cause each of its Subsidiaries to, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register, any and all such
further acts, deeds, conveyances, security agreements, mortgages, assignments,
estoppel certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as reasonably may be required from time to time
in order (i) to carry out more effectively the purposes of the Collateral
Documents, (ii) to subject to the Liens created by any of the Collateral
Documents any of the properties, rights or interests required to be encumbered
thereby, (iii) to perfect and maintain the validity, effectiveness and priority
of any of the Collateral Documents and the Liens intended to be created thereby,
and (iv) to better assure, convey, grant, assign, transfer, preserve, protect
and confirm to the Trustee any of the rights granted or now or hereafter
intended by the parties thereto to be granted to the Trustee or the Company
under the Collateral Documents or under any other instrument executed in
connection therewith.
DISCHARGE OF THE SENIOR SUBORDINATED PIK NOTE INDENTURE
The Senior Subordinated PIK Note Indenture will be discharged upon payment
or redemption of all of the Senior Subordinated PIK Notes issued thereunder. In
addition, the Senior Subordinated PIK Note Indenture will be discharged
(subject, among other things, to the rights of the holders of Senior
Subordinated PIK Notes to receive payment in respect of the principal, premium,
if any, and interest on the Senior Subordinated PIK Notes) 90 days after
(i) irrevocable deposit by the Company with the Trustee of U.S. Legal Tender
and/or U.S. government obligations that will provide money in an amount
sufficient to pay the principal of, and premium, if any, and each installment of
interest on the outstanding Senior Subordinated PIK Notes and (ii) delivery to
the Trustee of a satisfactory opinion of counsel regarding Federal income tax
consequences to the holders of the Senior Subordinated PIK Notes.
The Company alternatively may omit to comply with certain restrictive
covenants (but must continue to otherwise comply with the Senior Subordinated
PIK Note Indenture) and such omission shall not be deemed an Event of Default
under the Senior Subordinated PIK Note Indenture and the Senior Subordinated PIK
Notes if, among other things, the Company (i) makes the above-described deposit
and (ii) delivers to the Trustee a satisfactory opinion of counsel regarding the
absence of adverse Federal income tax consequences to the holders of the Senior
Subordinated PIK Notes.
In order for any discharge to be effective as described above, (i) there
can be no Default or Event of Default that has occurred and is then continuing,
and (ii) such act cannot result in a
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default under any agreement to which the Company or any Subsidiary is a party or
by which it is bound.
CONCERNING THE TRUSTEE
The Senior Subordinated PIK Note Indenture will contain certain limitations
on the rights of the Trustee, should it become a creditor of the Company, to
obtain payment of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions with the Company; provided,
however, if the Trustee acquires any conflicting interest (as defined in the
Senior Subordinated PIK Note Indenture) and a default exists under the Senior
Subordinated PIK Note Indenture, the Trustee must eliminate such conflict or
resign.
The holders of 66 2/3% in aggregate principal amount of the Senior
Subordinated PIK Notes will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Senior Subordinated PIK Note Indenture will
provide that in case an Event of Default occurs and is not cured, the Trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent Person in similar circumstances in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no duty to exercise any of
its rights or powers under the Senior Subordinated PIK Note Indenture at the
request of any holder of Senior Subordinated PIK Notes, unless such holder shall
have offered to the Trustee security and indemnity satisfactory to the Trustee.
CERTAIN DEFINITIONS
"Affiliate" means (i) any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
of its Subsidiaries, (ii) any spouse, immediate family member, or other relative
who has the same principal residence of any Person described in clause (i)
above, and (iii) any trust in which any Person described in clause (i) or (ii)
above has a beneficial interest. For purposes of this definition, the term
"control" means (a) the power to direct the management and policies of a Person,
directly or through one or more intermediaries, whether through the ownership of
voting securities, by contract, or otherwise, (b) the beneficial ownership of
10% or more of the voting Capital Stock of a Person (on a fully diluted basis)
or of warrants or other rights to acquire such voting Capital Stock (whether or
not exercisable) in respect of the covenant "Limitation on Transactions with
Affiliates" or (c) the beneficial ownership of 25% or more of such voting
Capital Stock or warrants or other rights in respect of all other provisions of
the Senior Subordinated PIK Note Indenture.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal (or redemption) payment of such security or
instrument multiplied by the amount of such principal (or redemption) payment by
(ii) the sum of all such principal (or redemption) payments.
"Business Day" means any day other than a Saturday, Sunday or a legal
holiday in the states of New York, Texas or any other relevant State.
"Capitalized Lease Obligation" of a Person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty, and any refinancing or
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replacement of such obligation; and such obligation shall be deemed secured by a
Lien on any property or assets to which such lease relates.
"Capital Stock" means, with respect to any Person, any and all shares of
stock, partnership or other interests, participations or other equivalents of or
interests in (however designated) such Person, including each class of common
stock and preferred stock of such Person, but excluding convertible
Indebtedness.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of two years or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof, provided that
the full faith and credit of the United States of America is pledged in support
thereof; (ii) demand and time deposits and certificates of deposit or acceptance
with a maturity of 180 days or less of any financial institution that is a
member of the Federal Reserve System having combined capital and surplus and
undivided profits of not less than $250,000,000; (iii) commercial paper with a
maturity of 270 days or less issued by a corporation that is not an Affiliate of
the Company and is organized under the laws of any state of the United States or
the Director of Columbia and rated at least A-1 by S&P or at least P-1 by
Moody's; (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any commercial bank meeting the specifications of clause (ii) above;
(v) overnight bank deposits and bankers acceptances at any commercial bank
meeting the qualifications specified in clause (ii) above; (vi) deposits
available for withdrawal on demand with any commercial bank not meeting the
qualifications specified in clause (ii) above but which is a local depository
bank, provided all deposits in the local depository bank do not exceed $100,000
in the aggregate at any one time; (vii) deposits available for withdrawal on
demand with any commercial bank not meeting the qualifications specified in
clause (ii) above but which is a lender (or bank affiliate thereof) under the
Senior Secured Credit Facility or any Working Capital Replacement Facility,
provided all such deposits do not exceed $5,000,000 in the aggregate at any one
time; (viii) demand and time deposits and certificates of deposit with any
commercial bank organized in the United States not meeting the qualifications
specified in clause (ii) above, provided that such deposits and certificates
support bond, letter of credit and other similar types of obligations incurred
in the ordinary course of business; and (ix) investments in money market or
other mutual funds substantially all of whose assets comprise securities of the
types described in clauses (i) through (v) above.
"Collateral" means any assets of the Company, the Guarantors or any of
their respective Subsidiaries defined as Collateral in any of the Collateral
Documents.
"Collateral Documents" means, collectively, the Company Pledge Agreement,
the Company Security Agreement, the Subsidiary Pledge Agreement, the Subsidiary
Security Agreement, the Mortgages and any other security document entered into
by the Company or any Subsidiary to secure its obligations under the Note
Documents, in each case as amended from time to time as permitted by the Senior
Subordinated PIK Note Indenture.
"Company Pledge Agreement" means the Company Pledge Agreement, dated as of
the date of the Senior Subordinated PIK Note Indenture, between the Company and
the Trustee, securing the Company's obligations under the Note Documents and
substantially in the form attached to the Senior Subordinated PIK Note
Indenture, as amended from time to time as permitted by the Senior Subordinated
PIK Note Indenture.
"Company Security Agreement" means the Company Security Agreement, dated as
of the date of the Senior Subordinated PIK Note Indenture, between the Company
and the Trustee, securing the Company's obligations under the Note Documents and
substantially in the form attached to the Senior Subordinated PIK Note
Indenture, as amended from time to time as permitted by the Senior Subordinated
PIK Note Indenture.
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"Consolidated Net Worth" of any Person at any date means the aggregate of
capital, surplus and retained earnings of such Person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such Person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
equity) (a) the amount of capital, surplus and accrued but unpaid dividends
attributable to any Disqualified Capital Stock or treasury stock and (b) all
upward revaluations and other write-ups in the book value of any asset of such
Person or a Consolidated Subsidiary of such Person, other than subsequent to the
Issue Date.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired), the financial
statements of which shall be (or should have been) consolidated for financial
statement reporting purposes with the financial statements of such Person in
accordance with GAAP.
"Default" means any event that is, or after notice or passage of time would
be, an Event of Default.
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or repurchased
(including at the option of the holder thereof) by such Person or any of its
Subsidiaries, in whole or in part, on or prior to a date that is 91 days after
the Maturity Date.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Affiliate" means any Affiliate of the Company as of June 1, 1996,
together with its Affiliates as of such date.
"Existing Indebtedness" means Indebtedness of the Company or its
Subsidiaries in existence on the Issue Date and listed on a schedule to the
Senior Subordinated PIK Note Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means any guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligation. "Guarantee", when used as a verb, has a
correlative meaning.
"Guarantor" means any Person that has executed and delivered the Subsidiary
Guarantee. Guarantor shall include each present and future Wholly Owned
Subsidiary of the Company, except as otherwise provided in the Senior
Subordinated PIK Note Indenture regarding the release of Guarantors under
certain circumstances.
"Indebtedness" means, without duplication, (a) all liabilities and
obligations, contingent or otherwise, of or with respect to any Person, (i)in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof),
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(ii) evidenced by bonds, notes, debentures or similar instruments,
(iii) representing the balance deferred and unpaid of the purchase price of any
property or services, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(b) all obligations of such Person under "interest rate swap, "cap" or "collar"
obligations, foreign currency hedges and similar agreements; (c) all liabilities
of others of the kind described in the preceding clause (a) or (b) that such
Person has Guaranteed or that is otherwise its legal liability and all
obligations to purchase, redeem or acquire any Capital Stock; and (d) all
obligations secured by a Lien (other than a Permitted Lien not described in
clause (g) of the definition of "Permitted Lien") not securing any liability or
obligation that would itself constitute Indebtedness to which the property or
assets (including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are subject, whether or
not the obligations secured thereby shall have been assumed by or shall
otherwise be such Person's legal liability, provided that the amount of such
obligations shall be limited to the lesser of the fair market value of the
assets or property to which such Lien attaches and the amount of the obligation
so secured; and (e) any and all deferrals, renewals, extensions, refinancings
and refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b), (c) or (d), or this clause (e), whether or not between or
among the same parties.
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition by such Person (whether for cash, property, services,
securities or otherwise) of Equity Interests, bonds, notes, debentures,
partnership or other ownership interests or other securities of such other
Person or any agreement to make any such acquisition; (b) the making by such
Person of any deposit with, or advance, loan or other extension of credit to,
such other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other Person) or any commitment to make any such advance,
loan or extension; (c) the entering into by such Person of any Guarantee of, or
other contingent obligation with respect to, Indebtedness or other liability of
such other Person; or (d) the making of any capital contribution by such Person
to such other Person.
"Issue Date" means the date of first issuance of the Senior Subordinated
PIK Notes under the Senior Subordinated PIK Note Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge
or encumbrance of any kind with respect to such asset (including any agreement
to give any Lien). For the purposes of the Senior Subordinated PIK Note
Indenture, a Person shall be deemed to own subject to a Lien any asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreements, Capitalized Lease Obligation or other title
retention agreement relating to such asset.
"Material Subsidiary" means a Consolidated Subsidiary representing at least
5% of the book value of the total assets of the Company and its Consolidated
Subsidiaries determined in accordance with GAAP.
"Maturity Date" means July 15, 2003, the Stated Maturity of the Senior
Subordinated PIK Notes.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Mortgage" means a mortgage or deed of trust and related assignment of
rents between any Subsidiary that owns or leases any campground or other
significant real estate asset and the Trustee, granting a Lien on such
campground or other real estate securing such Subsidiary's
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obligations under the Note Documents (including under the Subsidiary Guarantee
(in the case of a Guarantor) and any Permitted Intercompany Loans) and
substantially in the form attached to the Senior Subordinated PIK Note
Indenture, as amended from time to time as permitted by the Senior Subordinated
PIK Note Indenture.
"Net Cash Proceeds" means the aggregate amount of U.S. Legal Tender and
Cash Equivalents received by the Company or any Subsidiary in respect of an
Asset Sale or the sale of Capital Stock or Subordinated Debt, less the sum of
all reasonable fees, commissions and other out-of-pocket expenses incurred in
connection with such Asset Sale or sale, including the amount (estimated
reasonably and in good faith by the Company) of income, franchise, sales and
other applicable taxes to be paid by the Company or such Subsidiary in
connection with such Asset Sale or sale (as reasonably determined by the Company
in good faith based upon then applicable average tax rates and giving effect to
all applicable deductions, credits and other allowances and payments under tax
sharing agreements), and after giving effect to the repayment of all
Indebtedness secured by, and which became due and payable as a result of the
sale of the subject assets or such sale of Capital Stock or Subordinated Debt,
other than the Senior Secured Credit Facility and the Senior Subordinated PIK
Notes, provided that Net Cash Proceeds shall in no event be less than zero.
"Net Proceeds" means the aggregate Net Cash Proceeds and fair market value
of property (valued at the fair market value thereof at the time of receipt in
good faith by the Board of Directors of the Company), other than securities of
the Company or any of its Subsidiaries, received by the Company after the
payment of expenses, taxes, commissions, discounts and the like incurred in
connection therewith.
"Note Documents" means, collectively, the Senior Subordinated PIK Notes,
the Senior Subordinated PIK Note Indenture (including the Subsidiary Guarantee)
and the Collateral Documents, in each case as amended from time to time as
permitted by the Senior Subordinated PIK Note Indenture.
"Permitted Intercompany Secured Loan" means any loan made by the Company to
any Subsidiary that (i) is evidenced by a promissory note, (ii) is secured by a
Lien on substantially all assets of such Subsidiary other than assets of the
kind not required to be pledged as Collateral pursuant to the Senior
Subordinated PIK Note Indenture, which Lien shall be subject only to a prior
Lien on the same assets, if any, securing the Subsidiary Guarantee, and
(iii) together with a promissory note and any related Collateral and Liens, is
pledged to the Trustee for the benefit of the holders of the Senior Subordinated
PIK Notes.
"Permitted Investments" means any (i) Investments in the Company,
(ii) Investments in a Wholly Owned Subsidiary or in a Person engaged in a
Related Business which, upon the making of such Investment, will become a Wholly
Owned Subsidiary, provided that such Subsidiary is not subject to any
encumbrance or restriction (other than under the Senior Secured Credit Facility)
that has the effect of restricting the payment by such Subsidiary of dividends
to the Company or any Guarantor or the payment by such Subsidiary of
Indebtedness owed to the Company or any Guarantor or reducing the amount of any
such dividends or payments, (iii) Investments in another Person engaged in a
Related Business in connection with a consolidation, merger or disposition of
assets permitted by the covenant "Limitation on Merger, Sale or Consolidation,"
(iv) Investments in another Person engaged in a Related Business which is not,
or will not (upon the making of such Investment) become a Wholly-Owned
Subsidiary, provided that the aggregate amount invested in all such Persons
shall not exceed $1,000,000 at any time outstanding, (v) Investments in Cash
Equivalents, (vi) any securities received in connection with Asset Sales to the
extent permitted by the covenant "Limitation on Sales of Assets and Subsidiary
Stock," (vii) Investments paid for with Qualified Capital Stock in a Person
engaged in a Related Business, (viii) payments required by the By-Law amendment
attached as Exhibit D to this Memorandum, and the transfer
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restrictions set forth in paragraph 5 of "Notice to Exchanging Noteholders" and
(ix) payments in respect of dissenters' rights to holders of not more than 5% of
the Company's Capital Stock.
"Permitted Liens" means any of the following:
(a) Liens arising by reason of any judgment, decree or order of any
court only to the extent for an amount and for a period not resulting in an
Event of Default with respect thereto and so long as such Lien is being
contested in good faith and is adequately bonded, and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order shall not have been finally adversely terminated
or the period within which such proceedings may be initiated shall not have
expired;
(b) Security for the performance of bids, tenders, trade, contracts
(other than contracts for the payment of money) or leases, surety bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business or appeal bonds, and public and statutory
bonds;
(c) Liens (other than Liens arising under Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) for taxes, assessments or other
governmental charges not yet due or which are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Company in accordance with GAAP;
(d) Liens of carriers, warehousemen, mechanics, landlords,
materialmen, repairmen or other like Liens arising by operation of law in
the ordinary course of business (other than Liens arising under ERISA) and
consistent with industry practices and Liens on deposits made to obtain the
release of such Liens if (i) the underlying obligations are not overdue for
a period of more than 90 days or (ii) such Liens are being contested in
good faith and by appropriate proceedings and adequate reserves with
respect thereto are maintained on the books of the Company in accordance
with GAAP; and banker's liens and rights of set off arising in the ordinary
cause of business;
(e) Easements, rights of way, zoning and similar restrictions and
other similar encumbrances or title defects incurred in the ordinary course
of business and consistent with industry practices that, in the aggregate,
are not substantial in amount, and that do not in any case materially
detract from the value of the property subject thereto (as such property is
used by the Company or a Subsidiary) or interfere with the ordinary conduct
of the business of the Company or any of its Subsidiaries; provided that
any such Liens are not incurred in connection with any borrowing of money
or any commitment to loan any money or to extend any credit;
(f) rights of members and other customers arising in the ordinary
cause of business from memberships, rights to use or related or similar
interests in campgrounds, resorts, or other facilities (whether arising
from the holding of such memberships, rights to use or related or similar
interests, by applicable law or otherwise);
(g) leases, subleases, permits or other rights to use or occupy
property owned or hereafter acquired by the Company or any of its
Subsidiaries other than Capitalized Lease Obligations;
(h) Pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security legislation;
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(i) Liens, incurred in connection with the incurrence of Refinancing
Indebtedness in compliance with the Senior Subordinated PIK Note Indenture
with respect to Indebtedness secured by Liens, provided (i) such Liens do
not extend to any additional property or assets and (ii) such Liens are no
more adverse to the interests of holders of the Senior Subordinated PIK
Notes than the Liens replaced or extended thereby;
(j) Such Liens and items described in paragraph (e) above in
existence and outstanding on the Issue Date as are disclosed in title
reports issued in connection with the Senior Secured Credit Facility;
(k) Liens that secure Indebtedness of any Person existing at the time
such Person becomes a Subsidiary of the Company or is merged or
consolidated into or with the Company or a Subsidiary of the Company,
provided that such Liens do not extend to or cover any other property or
assets and were not put in place in anticipation of such acquisition;
(l) Liens in favor of the Trustee (or, in the case of Liens securing
Permitted Intercompany Loans, the Company or any Guarantor) under the
Collateral Documents;
(m) Liens in favor of the Company or any Guarantor, which are
assigned to the Trustee as Collateral for the Senior Subordinated PIK Notes
or the Subsidiary Guarantee, as applicable; and
(n) Liens of the Company or its Subsidiaries in existence on the
Issue Date, and set forth in a schedule to the Senior Subordinated PIK Note
Indenture.
"Permitted Purchase Money Indebtedness" means Indebtedness that is incurred
to finance the acquisition or lease after the Issue Date of newly acquired or
leased trailers, vehicles and other movable equipment, fixtures and other
equipment used in connection with the operation of any campground, resort or
other asset, and any refinancing or replacement of such Indebtedness.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
association, government or any agency or political subdivision thereof or any
other entity.
"Qualified Capital Stock" means any preferred stock of the Company that is
not Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed the sum of
(i) the reasonable and customary fees and expenses incurred in connection with
such Refinancing, including any prepayment premium or penalty, plus (ii) the
lesser of (A) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock
so Refinanced and (B) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing; provided that (1) Refinancing
Indebtedness of any Subsidiary of the Company shall only be used to Refinance
outstanding Indebtedness or Disqualified Capital Stock of such Subsidiary,
(2) Refinancing Indebtedness shall (x) not have an Average Life shorter than the
Indebtedness or Disqualified Capital Stock to be so refinanced at the time of
such refinancing and (y) in all
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respects, be no less subordinated, if applicable, to the rights of holders of
the Senior Subordinated PIK Notes than was the Indebtedness or Disqualified
Capital Stock to be refinanced, (3) such Refinancing Indebtedness shall have no
installment of principal (or redemption) scheduled to come due earlier than the
scheduled maturity of any installment of principal of the Indebtedness (or
Disqualified Capital Stock) to be so refinanced that was scheduled to come due
prior to the Maturity Date and (4) such Refinancing Indebtedness shall have no
installment of interest payable in cash without the Company's option to pay such
interest in kind earlier than the installments of cash interest on the
Indebtedness to be refinanced.
"Registration Rights Agreement" means the Registration Rights Agreement, to
be dated as of the date of the Senior Subordinated PIK Note Indenture, between
the Company and Fleet National Bank, as Trustee.
"Related Business" means the ownership, operation or management of
campgrounds (whether or not membership based), resorts or other facilities in
the vacation or recreation industry, and the provision of reservations or other
services related thereto, as well as sales and marketing activities related
thereto, conducted or proposed in good faith to be conducted by the Company or
any of its Subsidiaries and any and all materially related businesses conducted
or proposed in good faith to be conducted by the Company or any of its
Subsidiaries in support of and ancillary to the foregoing.
"Representative" means the trustee, agent or representative (if any) for an
issue of Indebtedness.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Payment" means, with respect to any Person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity Interests
of such Person or any Subsidiary of such Person (other than dividends or
distributions payable in Equity Interests (other than Disqualified Capital
Stock) of the Company, dividends or distributions payable to the Company or any
Subsidiary and pro rata dividends or distributions payable to a minority
stockholder of a Subsidiary), (b) any payment on account of the purchase,
redemption or other acquisition or retirement for value of Equity Interests of
such Person or any Subsidiary of such Person other than any such Equity
Interests owned by the Company or any Subsidiary (but excluding (i) payments
required by the By-Law amendment attached as Exhibit D to this Memorandum, and
the transfer restrictions set forth in paragraph 5 of "Notice to Exchanging
Noteholders," and (ii) payments in respect of dissenters' rights to holders of
not more than 5% of the Company's Capital Stock), (c) any purchase, redemption
or other acquisition or retirement for value of, or any payment in respect of
any defeasance of, any Subordinated Indebtedness, directly or indirectly, by
such Person or a Subsidiary of such Person prior to the scheduled maturity, any
scheduled repayment of principal, or scheduled sinking fund payment, as the case
may be, of such Indebtedness and (d) any Restricted Investment by such Person.
"S&P" means Standard & Poor's Corporation and its successors.
"SEC" means the Securities and Exchange Commission.
"Senior Secured Credit Facility" means the senior secured credit facility
contemplated by this Memorandum (including, without limitation, all credit,
guarantee and collateral documents in respect thereof) for the Company or its
Subsidiaries in a principal amount not exceeding $40,000,000 at any time
outstanding (as the same may be amended, modified, extended, refinanced or
replaced from time to time, provided that the final maturity thereof is not
extended more than one year after the initial final maturity thereof). Any
Subordinated Indebtedness, the proceeds of which are used to refinance the
Senior Secured Credit Facility, shall not be included within this definition.
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"Senior Subordinated PIK Note Indenture" means the Senior Subordinated PIK
Note Indenture among USTrails Inc., as issuer, certain of its Subsidiaries, as
Guarantors, and Fleet National Bank, as Trustee.
"Stated Maturity," means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof).
"Subordinated Indebtedness" means all Indebtedness of the Company or of its
Subsidiaries that (a) is unsecured, (b) is subordinated in right of payment to
the prior payment in full in cash of the Senior Subordinated PIK Notes or the
Subsidiary Guarantee or Permitted Intercompany Secured Loans owing by such
Subsidiary to the same extent as the Senior Subordinated PIK Notes and the
Subsidiary Guarantee are subordinated to the Senior Secured Credit Facility,
(c) provides that interest thereon may be paid in cash only after July 15, 2000,
(d) matures after the Maturity Date and (e) has an Average Life not shorter than
that applicable to the Senior Subordinated PIK Notes.
"Subsidiary," with respect to any Person, means (i)a corporation a majority
of whose Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such Person, by such
Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person or (ii)any other Person (other than a corporation)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof has at least a majority ownership interest. Unless
otherwise specified, "Subsidiary" means any Subsidiary of the Company.
"Subsidiary Guarantee" means the unconditional and irrevocable Guarantees
by the Guarantors of the obligations of the Company under the Senior
Subordinated PIK Notes and the other Note Documents, as contained in the Senior
Subordinated PIK Note Indenture, as amended from time to time as permitted by
the Senior Subordinated PIK Note Indenture.
"Subsidiary Pledge Agreement" means the Subsidiary Pledge Agreement, dated
as of the date of the Senior Subordinated PIK Note Indenture, among the
Subsidiaries (other than Yuba) and the Trustee, securing such Subsidiaries'
respective obligations under the Note Documents (including under the Subsidiary
Guarantee and Permitted Intercompany Loans) and substantially in the form
attached to the Senior Subordinated PIK Note Indenture, as amended from time to
time as permitted by the Senior Subordinated PIK Note Indenture.
"Subsidiary Security Agreement" means the Subsidiary Security Agreement,
dated as of the date of the Senior Subordinated PIK Note Indenture, among the
Subsidiaries (other than Yuba) and the Trustee, securing the Subsidiaries'
respective obligations under the Note Documents (including under the Subsidiary
Guarantee and Permitted Intercompany Loans) and substantially in the form
attached to the Senior Subordinated PIK Note Indenture, as amended from time to
time as permitted by the Senior Subordinated PIK Note Indenture.
"Trustee" means Fleet National Bank.
"U.S. Legal Tender" means any lawful money of the United States of America.
"Wholly Owned" means, with respect to any Subsidiary of the Company, that
all the issued and outstanding Capital Stock of such Subsidiary is owned by the
Company, directly or through other Wholly Owned Subsidiaries, as the case may
be.
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"Working Capital Replacement Facility" means a credit facility for working
capital purposes (including, without limitation, all credit, guarantee and
collateral documents in respect thereof) not exceeding $10,000,000 in principal
amount at any time outstanding that refinances or replaces the Senior Secured
Credit Facility (as such credit facility for working capital purposes may be
amended, modified, extended, refinanced or replaced from time to time).
"Yuba" means Yuba Investment Company.
DESCRIPTION OF COMMON STOCK
GENERAL
Holders of Common Stock are entitled to one vote for each share held of
record on any matter submitted to a vote at any meeting of the stockholders.
Directors are elected by a plurality of the votes cast at the election.
Generally, any matter submitted for the approval of the stockholders must
receive the affirmative vote of the holders of a majority of all the shares
represented at a meeting at which a quorum is present. However, the affirmative
vote of holders of shares representing a majority of the votes entitled to be
cast are required to approve any amendment to the Company's Restated Articles of
Incorporation or to approve any merger, consolidation, or dissolution of the
Company, or any sale, lease, or exchange of all or substantially all of the
assets of the reorganized Company.
In addition to the voting requirements specified by applicable law, the
Company's Restated Articles of Incorporation require the affirmative vote of
66 2/3% of the outstanding shares of Common Stock prior to the consummation of
certain "going private" transactions or other transactions that result in
certain changes of control of the Company for consideration less than the fair
market value of such shares at the time of issuance, unless such shares are
issued or sold (i) in an underwritten public offering pursuant to an effective
registration statement filed under the Securities Act, (ii) ratably to the
existing holders of the Company's capital stock or (iii) in connection with
benefit programs maintained for employees, officers, or directors of the
Company, which programs have been approved by the shareholders of the Company.
The Restated Articles of Incorporation of the Company do not contain a
provision permitting cumulative voting for the election of directors. The
holders of more than 50% of the Common Stock voting upon the election of
directors, therefore, may be able to elect all of the directors to be elected at
the meeting. The directors of the Company are elected annually and serve for
terms of one year and until their successors are elected and qualified.
Holders of shares of Common Stock are entitled to receive dividends when,
as and if declared by the board of directors from funds legally available for
that purpose. Since inception the Company has not paid any dividends. Moreover,
upon consummation of the Restructuring Transaction and subject to certain
exceptions, the Company will not pay any dividends until the Senior Secured
Credit Facility and the Senior Subordinated PIK Notes are repaid.
NEVADA STATUTORY RESTRICTIONS ON BUSINESS COMBINATIONS/CORPORATE CONTROL
The Nevada Combinations With Interested Stockholders Act (the "Business
Combinations Act") and the Nevada Acquisition of Controlling Interest Act (the
"Control Shares Act") may have the effect of delaying or making it more
difficult to effect a change in control of the Company. The Business
Combinations Act prohibits an "interested stockholder" and a Nevada public
corporation with 200 or more stockholders (hereinafter, "corporation") form
entering into a "combination," unless certain conditions are met. A
"combination" means any merger or consolidation of a corporation or any of its
subsidiaries with an "interested stockholder," or any
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sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets
or issuance of shares of the corporation, in one transaction or a series of
transactions, to or with an "interested stockholder" having: (i) an aggregate
market value equal to 5% or more of the aggregate market value of the assets of
a corporation, (ii) an aggregate market value equal to 5% or more of the
aggregate market value of all outstanding shares of a corporation or (iii)
representing 10% or more of the earning power or net income of a corporation. An
"interested stockholder" means (a) the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the corporation, or (b) an affiliate or
associate of the corporation, that, at any time within the three years
immediately before the date in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the corporation. A corporation
may not engage in a "combination" with any "interested stockholder" within three
years after the interested stockholder first became an interested stockholder
unless the combination or purchase of shares first making such person an
interested stockholder is approved by the board of directors before the
interested stockholder first became an interested stockholder. If this approval
is not obtained, then after the expiration of the three-year period, the
business combination may only be consummated with the approval of the board of
directors or a majority of the voting power held by disinterested stockholders,
or after certain minimum statutory consideration requirements have been met with
respect to the acquisition of all the capital stock of the corporation held by
the disinterested shareholders immediately before the date the interested
stockholder acquired such shares.
The Control Shares Act prohibits an acquirer, under certain circumstances,
from voting shares of a Nevada corporation with 200 or more stockholders, 100 of
whom are stockholders of record and Nevada residents (hereinafter, "target
corporation") after crossing certain threshold ownership percentages, unless the
acquirer obtains the approval of the target corporation's disinterested
stockholders. The Control Shares Act specifies three thresholds: (i) one-fifth
or more but less than one-third, (ii) one-third but less than a majority, and
(iii) a majority or more, of the outstanding voting power of the corporation.
Once an acquirer crosses one of these thresholds, those shares acquired in an
offer or acquisition and acquired within 90 days immediately preceding the date
when the acquiring person became an acquiring person, become "control shares"
and are deprived of the right to vote until disinterested stockholders restore
that right. The Control Shares Act also provides that in the event "control
shares" are accorded full voting rights and the acquiring person has acquired a
majority or more of all voting power, all other stockholders who do not vote in
favor of authorizing voting rights to the "control shares" are entitled to
payment for the fair value of their shares.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company. Its telephone number is (212) 936-5100.
ADDITIONAL STOCK TRANSFER RESTRICTIONS
By-Law Transfer Restrictions. The Board of Directors intends to adopt an
amendment to the By-Laws of the Company prior to consummation of the
Restructuring Transaction to impose certain restrictions (the "By-Law Transfer
Restrictions") on the transferability and ownership of Common Stock issued after
the amendment to the by-laws ("Post-Amendment Common Stock") (including the
Common Stock issued pursuant to the Exchange Offer) for up to 24 months
following consummation of the Exchange Offer. The text of the amendment to the
By-Laws is set forth as Exhibit D hereto. Holders are urged to read such exhibit
in its entirety. The By-Law Transfer Restrictions are designed to restrict
direct and indirect transfers of the Common Stock that could result in the
imposition of limitations on the use by the Company, for federal income tax
purposes, of the NOLs and other tax attributes that are and will be available to
the Company.
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The Company estimates that, after consummation of the Exchange Offer, NOLs
of approximately $50.4 million will be available to offset taxable income
recognized by the Company in periods after June 30, 1996. Section 382 of the
Code limits the use of losses and other tax benefits by a company that has
undergone an "ownership change," as defined in Section 382. Generally, an
ownership change occurs if one or more shareholders, each of whom owns 5% or
more in value of a company's capital stock, increase their aggregate percentage
ownership by more than 50 percentage points over the lowest percentage of stock
owned by such shareholders over the preceding three-year period. For this
purpose, all holders who each own less than 5% of a company's capital stock are
generally treated together as one or more 5 percent shareholders. In addition,
certain constructive ownership rules, which generally attribute ownership of
stock to the ultimate beneficial owner thereof without regard to ownership by
nominees, trusts, corporations, partnerships or other entities, or to related
individuals, are applied in determining the level of stock ownership of a
particular shareholder. Special rules, described below, can result in the
treatment of options (including warrants) as exercised if such treatment would
result in an ownership change. All percentage determinations are based on the
fair market value of a company's capital stock.
If an ownership change of the Company were to occur, the amount of taxable
income in any year (or portion of a year) subsequent to the ownership change
that could be offset by NOLs or other carryovers existing (or "built-in") prior
to such ownership change could not exceed the product obtained by multiplying
(i) the aggregate value of the Common Stock immediately prior to the ownership
change (with certain adjustments) by (ii) the federal long-term tax exempt rate
(5.78% for ownership changes occurring during July 1996). Because the value of
the Common Stock, as well as the federal long-term tax-exempt rate, fluctuate,
it is impossible to predict with any accuracy the annual limitation upon the
amount of taxable income of the Company that could be offset by such NOLs or
other items if an ownership change were to occur subsequent to the consummation
of the Exchange Offer. The Company would incur a corporate-level tax (current
maximum federal rate of 35%) on any taxable income during a given year in excess
of the Company's NOL limitation. While the NOLs not used as a result of this
limitation remain available to offset taxable income in future years, an
ownership change, under certain circumstances, would significantly defer the
utilization of the NOLs, accelerate the payment of federal income tax, cause a
portion of the NOLs to expire prior to their use, and reduce stockholders'
equity.
Based on the most current facts of which the Company has been made aware,
the Company expects that the issuance of Common Stock in the Exchange Offer will
result in a change in ownership for purposes of Section 382 of as much as 41.5%,
less than the 50% change required to cause an "ownership change." Approval and
consummation of the Exchange Offer increases the risk that the Company will
undergo an ownership change because of the significant change in ownership
attributable to the additional issuance of Common Stock. Therefore, the
possibility of triggering an ownership change of the Company through the regular
trading of Common Stock is greatly increased during the 36 month period
immediately following the Exchange Offer, although after 24 months the
likelihood of triggering an ownership change is reduced because the aggregate
changes in ownership over a three-year period at that point will be reduced by
about 10%. As a result, the Company proposed, and the Board of Directors intends
to approve, the By-Law Transfer Restrictions in order to prevent the transfer of
Post-Amendment Common Stock for the 24 month period following the Exchange
Offer. See "Risk Factors - Business Plan Uncertainty" herein.
Description of the By-Law Transfer Restrictions. The By-Law Transfer
Restrictions, generally will restrict, until 24 months after the consummation of
the Exchange Offer (or earlier in certain events), any direct or indirect
transfer of Post-Amendment Common Stock that would (i) except as provided below,
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 Company's Common Stock, (ii) except as provided below,
increase the
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percentage of Common Stock owned by any person that during the preceding three-
year period owned more than 4.75% of the Company's Common Stock, or by any group
of persons treated as a "5% shareholder" (as defined in the Code, but
substituting "4.75%" for "5%"), or (iii) cause an ownership change of the
Company within the meaning of Section 382. The Company believes that, as of the
date hereof, the only shareholders that would be treated as beneficially owning
at least 4.75% of the Company's Common Stock after consummation of the Exchange
Offer are CM Strategic and SC Fundamental and their respective affiliates. The
Company is not aware of any other shareholders that beneficially own at least
4.75% of the Company's Common Stock after the consummation of the Exchange
Offer.
Generally, the By-Law 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 results in a change in
ownership over a three-year period for purposes of Section 382 of no more than
48 percent. As an illustration, this exception would permit an Exchanging
Noteholder who owns less than 4.75% of the Company's Common Stock to transfer
shares of Common Stock to any other Exchanging Noteholders, and to transfer
shares of Common Stock to any other shareholder who does not (as a result of the
transfer) own 4.75% of the Company's Common Stock. 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 reasonably possible. Finally the By-Law Transfer
Restrictions will be imposed only with respect to the amount of the Company's
Common Stock (or options with respect to the Company's Common Stock) purportedly
transferred in excess of the threshold established in the By-Law Transfer
Restrictions.
Transfers included under the By-Law Transfer Restrictions include sales to
persons who would exceed the thresholds discussed above, or to persons whose
ownership of shares would by attribution cause another person to exceed such
thresholds, as well as sales by persons who exceeded such thresholds prior to
the By-Law Transfer Restrictions becoming effective. Numerous rules of
attribution, aggregation and calculation prescribed under the Code (and related
regulations) will be applied in determining whether the 4.75% threshold has been
met and whether a group of less than 4.75% shareholders will be treated as a
"public group" that is a 5 percent shareholder under Section 382. As a result of
these attribution rules, the By-Law Transfer Restrictions could prohibit
ownership of the Company's Common Stock as a result of a change in the
relationship between two or more persons or entities, or a transfer of an
interest other than the Company's Common Stock, such as an interest in an entity
that, directly or indirectly, owns the Company's Common Stock. The Transfer
Restrictions may also apply to proscribe the creation or transfer of certain
"options" (which are broadly defined) in respect of the Company's Common Stock
to the extent, generally, that exercise of the option would result in a
proscribed level of ownership.
The By-Laws of the Company provide for all certificates representing the
Post-Amendment Common Stock, including Common Stock issued on a transfer
thereof, to bear the following legend:
TRANSFER OF THESE SHARES 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. SUCH
RESTRICTIONS ARE SET FORTH IN THE COMPANY'S PRIVATE PLACEMENT
MEMORANDUM, DATED JUNE 28, 1996, RELATING TO A RESTRUCTURING
TRANSACTION, THE LETTER OF TRANSMITTAL RELATED THERETO AND
ARTICLE NINE OF THE BY-LAWS OF THE COMPANY. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY SUCH
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RESTRICTIONS. THE COMPANY WILL FURNISH TO THE RECORD HOLDER OF THIS
CERTIFICATE, UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL
PLACE OF BUSINESS, A COPY OF SUCH RESTRICTIONS.
The Board of Directors also intends to issue instructions to or make
arrangements with the transfer agent of the Company (the "Transfer Agent") to
implement the By-Law Transfer Restrictions. The By-Law Transfer Restrictions
provide that the Transfer Agent shall not record any transfer of the Company's
Common Stock purportedly transferred in excess of the threshold established in
the By-Law Transfer Restrictions. The Transfer Agent also has the right, prior
to and as a condition to registering any transfers of the Company's Common Stock
on the Company's stock transfer records, to request an affidavit from the
purported transferee of the Common Stock regarding such purported transferee's
actual and constructive ownership of the Company's Common Stock. If, after
requesting such an affidavit, the Transfer Agent does not receive an affidavit
or the affidavit evidences that the transfer would violate the By-Law Transfer
Restrictions, the Transfer Agent is required to notify the Company and not enter
the transfer in the Company's stock transfer records. These provisions may
result in the delay or refusal of certain requested transfers of the Company's
Common Stock.
Any direct or indirect transfer of Common Stock attempted in violation of
the restrictions would be void ab initio as to the purported transferee, and the
purported transferee would not be recognized as the owner of the shares owned in
violation of the restrictions for any purpose, including for purposes of voting
and receiving dividends or other distributions in respect of such Common Stock,
or in the case of options, receiving Common Stock in respect of their exercise.
Common Stock acquired in violation of the By-Law Transfer Restrictions is
referred to as "Excess Common Stock."
Excess Common Stock is automatically transferred to a trustee effective as
of the close of business on the business day prior to the date of the violative
transfer. As soon as practicable following the receipt of notice from the
Company that Excess Common Stock was transferred to the trustee, the trustee is
required to sell such Excess Common Stock in an arms-length transaction that
would not constitute a violation under the By-Law Transfer Restrictions. The net
proceeds of the sale, after deduction, of all costs incurred by the Company, the
Transfer Agent, and the trustee, will be distributed first to the violating
shareholder in an amount equal to the lesser of such proceeds or the cost
incurred by the shareholder to acquire such Excess Common Stock, and the balance
of the proceeds, if any, will be distributed to a charitable beneficiary
together with any other distributions with respect to such Excess Common Stock
received by the trustee. If the Excess Common Stock is sold by the purported
transferee, such person will be treated as having sold the Excess Common Stock
as an agent for the trustee, and shall be required to remit all proceeds to the
trustee (less, in certain cases, an amount equal to the amount such person
otherwise would have been entitled to retain had the trustee sold such shares).
Pending such sale, any dividends or other distributions paid prior to discovery
by the Company that the Excess Common Stock has been transferred to the trustee
are treated as held by the purported transferee as agent for the trustee and
must be paid to the trustee upon demand, and any dividends or other
distributions declared but unpaid after such time shall be paid to the trustee.
Votes cast by a purported transferee with respect to Excess Common Stock prior
to the discovery by the Company that the Excess Common Stock was transferred to
the trustee will be rescinded as void and recast in accordance with the desire
of the trustee acting for the benefit of the charitable beneficiary. The trustee
shall have all rights of ownership of the Excess Common Stock.
Special provisions apply where the violative transfer involves a transfer
by a 4.75% shareholder, which are designed to continue to treat such 4.75%
shareholder as owning the shares transferred. In such case, the Company must
attempt to locate the person or public group that purchased the Excess Common
Stock, and if such person or public group can be located, the Excess Common
Stock will be required to be returned (together with any distributions received
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thereon) to the transteror, and the tranferor to return the purchase price,
together with all other losses, damages, costs and expenses incurred by that
purchaser, to the purchaser. If the Company is unable to locate the purchaser
within 90 days, the Company is required (to the extent permitted under its loan
agreements) to purchase Common Stock in a manner that would reduce the ownership
of the person or public group whose ownership increased as a result of the
prohibited transfer and to hold such Common Stock on behalf of the 4.75%
shareholder that transferred the Excess Common Stock in violation of the By-Law
Transfer Restrictions. In such case, the 4.75% shareholder will be treated as
the owner of the Excess Common Stock for all purposes, and amounts incurred by
the Company to finance the purchase of such Excess Common Stock will be treated
as a loan to such shareholder, with interest at the "applicable federal rate"
under Section 1274(d) of the Code.
If the violative transaction results from indirect ownership of Common
Stock, the By-Law Transfer Restrictions provide a mechanism that is intended to
invalidate the ownership of the Company's Common Stock actually owned by the
violating shareholder and any persons within such shareholder's control group.
Only if such provisions will not be effective to prevent a violation of the By-
Law Transfer Restrictions will ownership of Common Stock by other persons be
invalidated under the By-Law Transfer Restrictions.
CONTRACTUAL TRANSFER RESTRICTIONS
In addition to the By-Law Transfer Restrictions and as a part of the
Exchange Offer, the Company will also require each Exchanging Noteholder to sign
a covenant imposing certain restrictions (the "Contractual Transfer
Restrictions") on the acquisition, disposition and ownership of all Common Stock
held by the Exchanging Noteholder for up to 24 months following the consummation
of the Exchange Offer. See "Notice to Exchanging Noteholders."
The Contractual Transfer Restrictions extend the By-Law Transfer
Restrictions described above to all Common Stock held by an Exchanging
Noteholder prior to the Exchange Offer. Thus, as a result of the Contractual
Transfer Restrictions, all of the Common Stock held by an Exchanging Noteholder,
including both the Common Stock held by the Exchanging Noteholder prior to the
Exchange Offer and the Common Stock issued to the Exchanging Noteholder pursuant
to the Exchange Offer will be subject to restrictions identical to the By-Law
Transfer Restrictions. Therefore, all Exchanging Noteholders will be restricted
from transferring any shares of Common Stock held by the Exchanging Noteholder
immediately prior to the consummation of the Exchange Offer in any manner which
would violate the Contractual Transfer Restrictions.
RISK OF OWNERSHIP CHANGE
Notwithstanding the transfer restrictions, there remains a risk that
certain transfers of Common Stock not restricted by the By-Law Transfer
Restrictions or the Contractual Transfer Restrictions and/or certain changes in
relationships among shareholders or other events could cause an ownership change
of the Company under Section 382. Together, the By-Law Transfer Restrictions and
the Contractual Transfer Restrictions will restrict the transfer of all Post-
Amendment Common Stock and all Common Stock currently held by the Exchanging
Noteholders. However, the transfer restrictions will place no restrictions on
the transfer of Common Stock issued prior to the amendment to the By-Laws
currently held by any stockholder other than an Exchanging Noteholder. Transfers
of such Common Stock could cause changes in ownership sufficient to trigger an
ownership change of the Company, thereby causing the loss of NOLs and other tax
attributes. Similarly, changes in the relationships of holders of Common Stock
could cause changes in ownership of Common Stock through the application of the
attribution rules discussed above, and therefore could also trigger an ownership
change of the Company, again causing a loss of NOLs.
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Purchases by other shareholders of the Company's Common Stock and other
events that occur prior to the consummation of the Exchange Offer can affect the
percentage shift in the Company's ownership as determined for purposes of
Section 382, and any such acquisition could increase the likelihood that the
Company will experience an ownership change if such shift, coupled with the
consummation of the Exchange Offer, causes the ownership of 5 percent
shareholders of the Company to increase. There also can be no assurance, in the
event transfers in violation of the By-Law Transfer Restrictions and Contractual
Transfer Restrictions are attempted, that the Internal Revenue Service (the
"Service") will not assert that such transfers have federal income tax
significance notwithstanding the By-Law Transfer Restrictions and Contractual
Transfer Restrictions.
The Board of Directors of the Company has the discretion to approve a
transfer of stock that would otherwise violate the By-Law Transfer Restrictions
and Contractual Transfer Restrictions. If the Board of Directors decides to
permit a transfer that would otherwise violate the By-Law Transfer Restrictions
and Contractual Transfer Restrictions, that transfer or later transfers may
result in an ownership change that would limit the use of the tax attributes of
the Company. The Board of Directors of the Company intends to consider any such
attempted transfer individually and determine at the time whether it is in the
best interests of the Company, after consideration of any factors that the Board
deems relevant (including possible future events), to permit such transfer
notwithstanding that an ownership change of the Company may occur.
AS A RESULT OF THE FOREGOING, THE BY-LAW TRANSFER RESTRICTIONS AND
CONTRACTUAL TRANSFER RESTRICTIONS SERVE TO REDUCE, BUT DO NOT ELIMINATE, THE
RISK THAT SECTION 382 WILL CAUSE THE LIMITATIONS DESCRIBED ABOVE ON THE USE OF
TAX ATTRIBUTES OF THE COMPANY.
ENFORCEMENT OF BY-LAW TRANSFER RESTRICTIONS AND CONTRACTUAL TRANSFER
RESTRICTIONS
THE COMPANY BELIEVES THAT THE BY-LAW TRANSFER RESTRICTIONS AND CONTRACTUAL
TRANSFER RESTRICTIONS ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS AND ARE REASONABLE, AND THE COMPANY WILL ACT VIGOROUSLY TO ENFORCE
THE RESTRICTIONS AGAINST ALL CURRENT AND FUTURE HOLDERS OF THE COMPANY'S SHARES
SUBJECT TO THE BY-LAW RESTRICTIONS AND CONTRACTUAL TRANSFER RESTRICTIONS. The
Board of Directors intends to instruct Exchanging Noteholders who already own
Common Stock to surrender and exchange their certificates for new certificates
bearing a legend reflecting the By-Laws Transfer Restrictions and Contractual
Transfer Restrictions. Such a legend may result in a decreased valuation of the
Common Stock due to the resulting restrictions on transfers to persons directly
or indirectly owning or seeking to acquire a significant block of the Common
Stock.
REGISTRATION RIGHTS AGREEMENT
The Company and the Trustee will enter into a registration rights agreement
(the "Registration Rights Agreement") on or prior to the date of issuance of the
Exchange Consideration. The Registration Rights Agreement will require that the
Company file with the SEC on or prior to 180 days after the Issue Date a shelf
registration statement (the "Shelf Registration Statement") to cover resales of
Transfer Restricted Securities by the initial holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Company will use its good faith efforts to
cause the Shelf Registration Statement to be declared effective by the SEC as
promptly as practicable after the date of filing. For purposes of the foregoing,
"Transfer Restricted Securities" means the Senior Subordinated PIK Notes and the
Common Stock received by the Exchanging Noteholders until
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the earliest to occur of (i) the period of years set forth in Rule 144(k) under
the Securities Act (which is currently three years), (ii) the date on which such
Transfer Restricted Securities have been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement, or (iii) the date on which such Transfer Restricted Securities have
been distributed to the public pursuant to Rule 144 under the Securities Act or
is salable pursuant to Rule 144(k) under the Securities Act. The Registration
Rights Agreement will provide that the Company shall use its good faith efforts
to keep the Shelf Registration Statement effective for a period of years
described in the preceding clause (ii), after the Issue Date.
If (i) the Shelf Registration Statement is not filed with the SEC within
certain specified time parameters, (ii) the Shelf Registration Statement is not
effective within certain specified time parameters, or (iii) the Shelf
Registration Statement is filed and declared effective within certain specified
time parameters, but shall thereafter cease to be effective without being
succeeded within 30 days by any additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iii), a
"Registration Default"), the interest rate on the Senior Subordinated PIK Notes
will increase by the rate of $0.10 per week per $1,000 principal amount until
such Registration Default ceases to exist.
The Registration Rights Agreement will also provide that the Company
(i) shall make available a prospectus meeting the requirements of the Securities
Act for use in connection with any resale of any such Transfer Restricted
Securities, and (ii) shall pay all expenses incident to the registration
(excluding the expenses of any counsel to the Exchanging Noteholders) and will
indemnify certain holders of the Transfer Restricted Securities against certain
liabilities, including liabilities under the Securities Act. Holders of the
Transfer Restricted Securities will be required to make certain representations
to the Company and deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Transfer Restricted Securities included in the Shelf
Registration Statement. The Company will provide a draft of the Registration
Rights Agreement to prospective Exchanging Noteholders upon request.
THE SECURED NOTES
GENERAL
The Secured Notes were issued pursuant to an Indenture dated as of July 15,
1991, with Fleet National Bank, as Trustee (the "Trustee"). The Indenture has
been amended by seven supplemental indentures, dated as of December 31, 1991,
June 12, 1992, May 20, 1993, September 13, 1993, March 28, 1994, March 29, 1994
and June 22, 1995. The Indenture as so amended is referred to in this Memorandum
as the "Secured Note Indenture." The aggregate outstanding principal amount of
the Secured Notes is $101,454,000. Capitalized terms used in this section have
the meanings given to such terms in the Secured Noted Indenture, unless the
context otherwise requires.
PAYMENT TERMS AND TRADING
Stated Maturity. The Secured Notes have a stated maturity of July 15,
1998. The Company, however, may from time to time redeem any or all of the
Secured Notes at 100% of the principal amount thereof plus accrued interest
thereon.
Interest. The Secured Notes bear interest at 12% per annum, payable semi-
annually on January 15 and July 15 of each year. The Company pays the interest
to the Secured Noteholders on the close of business on the first day of the
month in which the interest payment date occurs.
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The interest rate increases to 14% per annum after an Event of Default (as
defined in the Secured Note Indenture).
Trading. An established public trading market for the Initial Series Notes
may not exist and an established public trading market for the Additional Series
Notes does not exist. The securities laws of many states prohibit or restrict
trading in the Secured Notes because of the Company's financial condition. The
Company, however, has either registered or obtained exemptions to permit
secondary trading in the Secured Notes in the States of Illinois, New York, and
Utah. Moreover, many other jurisdictions have statutory exemptions that permit
certain institutions to trade the Secured Notes.
REDEMPTION, RETIREMENT, AND PURCHASE
Redemption. The Company must redeem $18.7 million in principal amount of
the Secured Notes on each of July 15, 1996 and 1997, at 100% of the principal
amount thereof plus accrued interest thereon. The Company may credit the
principal amount of any Secured Notes that it delivers to the Trustee for
cancellation against these mandatory redemption requirements. Generally, the
Secured Note Indenture credits such cancellations in inverse order of maturity
against the stated maturity of the Secured Notes and the mandatory redemptions
on July 15, 1996 and 1997. The Secured Note Indenture, however, credits the
Secured Notes that the Company acquires pursuant to a mandatory retirement or
purchase in connection with certain asset sales, changes of control, and other
events in equal principal amounts among any then remaining mandatory redemptions
and the stated maturity of the Secured Notes.
Retirement Obligation Upon Sale of Assets. Subject to certain limitations,
the Company must apply 80% of the Net Cash Proceeds (as defined in the Secured
Note Indenture) of certain asset sales to retire outstanding Secured Notes,
unless the Company obtains a waiver. Generally, the Company may retire such
Secured Notes through open market purchases and privately negotiated
transactions occurring not later than 90 days after the closing of such asset
sale. In the absence of such purchases, the Company must use 80% of the Net Cash
Proceeds to redeem Secured Notes at 100% of the principal amount thereof plus
accrued interest thereon. After reaching certain Net Cash Proceeds thresholds,
the Secured Note Indenture does not permit the Company to purchase Secured Notes
other than pursuant to an offer to all Secured Noteholders.
Purchase Obligation Upon Change of Control and Other Events. Unless the
Company obtains a waiver, the Company must offer to purchase all of the
outstanding Secured Notes at 100% of the principal amount thereof plus accrued
interest thereon upon: (i) an adoption by the Company of a plan of liquidation
or dissolution, (ii) a sale of all or substantially all of the Company's assets,
(iii) a merger or other corporate transaction requiring the approval of the
Company's board of directors, other than a Widely Distributed Public Offering
(as defined in the Secured Note Indenture), that causes the holders of the
Company's Voting Stock (as defined in the Secured Note Indenture) to hold less
than 66 2/3% of the voting power thereof, or if the Company is not the surviving
entity, of the surviving entity, immediately after consummation of such
transaction or (iv) a person or group acquiring or holding more than a 50%
interest in the voting power of the Company's Voting Stock.
SUBSIDIARY GUARANTEES
The Company has granted liens on substantially all of its assets to secure
its obligations under the Secured Note Indenture. The Company's subsidiaries,
other than an immaterial utility subsidiary (the "Subsidiary Guarantors"), have
guaranteed the Company's obligations under the Secured Note Indenture and,
subject to certain limitations, have granted liens on substantially all of their
assets to secure their guarantees.
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NACO and Trials have also granted liens, subject to certain limitations, on
substantially all of their assets to secure the repayment of their respective
indebtedness to the Company. These security interests were subordinated to the
security interests securing the guarantees of the Secured Notes. The
indebtedness that these security interests secure, however, was pledged by the
Company under the Secured Note Indenture to secure the Secured Notes, and these
security interests were collaterally assigned to the Secured Note Indenture
trustee. Such liens, however, are only enforceable to the extent of the
underlying indebtedness secured thereby, which at March 31, 1996, totaled $27.4
million for NACO and $1,000 for Trails. Furthermore, the subsidiaries of NACO
and Trails each guaranteed their respective parent's indebtedness to the Company
and granted security interests in substantially all of their assets to secure
such guarantees.
SECURITY INTERESTS
Generally. The assets subject to the liens of the Secured Note Indenture
include: (i) the capital stock of the Company's subsidiaries, including NACO and
its subsidiaries, RPI, Trails and its subsidiaries other than an immaterial
utility subsidiary, and Wilderness Management, (ii) the campgrounds and common
amenities at one resort owned by the Company's subsidiaries, together with
related improvements, trailers, equipment, and certain other tangible personal
property located thereat to the extent existing mortgages do not prohibit such
liens, (iii) the closed campgrounds and other real estate that the Company's
subsidiaries own and are in the process of selling, (iv) the contracts
receivable that the Company and each of its subsidiaries own, (v) all
indebtedness owed to the Company by its subsidiaries, together with all related
liens and (vi) substantially all of the cash balances of the Company and each of
its subsidiaries. Currently, 56 of the Company's 58 operating campgrounds and
the common amenities at one resort are subject to the liens of the Secured Note
Indenture. However, certain specified assets are excluded from the liens of the
Secured Note Indenture, including two of the Company's operating campgrounds,
certain leasehold interests, rights and franchises that would become void if
mortgaged or pledged, certain vehicles, trailers, and movable equipment, certain
cash in restricted accounts, and the stock and assets of one immaterial utility
subsidiary.
Certain of NACO's and Trails' campgrounds and resorts are also subject to
mortgages in favor of the party from whom NACO or Trails purchased the property.
Cash Collateral. The Company and the Subsidiary Guarantors must deposit
substantially all of their cash receipts directly into one or more cash
collection accounts (collectively, the "Collection Accounts") or a concentration
account (the "Concentration Account"). The Company and the Subsidiary Guarantors
have pledged the balances of these accounts for the benefit of the Secured
Noteholders. The Company currently has only one Collection Account. The Company
currently maintains both the Collection Account and the Concentration Account at
The Bank of California, N.A.
The Company and the Subsidiary Guarantors must irrevocably instruct any
bank maintaining a Collection Account to transfer all funds in such account into
the Concentration Account each week. Additionally, the Company and the
Subsidiary Guarantors must deposit all other proceeds in various small accounts
that the Subsidiary Guarantors may maintain (collectively, the "Field
Accounts"). A Subsidiary Guarantor must irrevocably instruct any bank
maintaining a Field Account for it to transfer all funds in such account in
excess of $500 to a Collection Account or the Concentration Account each week. A
Field Account that a NACO resort maintains (a "Resort Field Account"), however,
may hold $20,000 per account. A Subsidiary Guarantor maintaining a Resort Field
Account must irrevocably instruct the bank maintaining such account to transfer
all funds therein in excess of $20,000 to a Collection Account or the
Concentration Account each month. The Subsidiary Guarantors do not currently
have any Field Accounts because the financial institutions near the campgrounds
and resorts have declined to accept responsibility for making the required
transfers to the Collection Account. To
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resolve this problem, the Secured Note Indenture has been amended to permit the
Company to maintain subaccounts at various financial institutions with respect
to each Collection Account.
The Secured Note Indenture permits the Company to withdraw limited amounts
of money from the Concentration Account and deposit such money in an operating
account (the "Operating Account") for use in the Company's business, unless a
Material Event of Default (as defined in the Secured Note Indenture) exists.
While such a default exists, the Secured Note Indenture prohibits the Company
from making withdrawals from the Concentration Account, except withdrawals used
for the payment of Secured Notes and certain insurance premiums and a one-time
withdrawal in an amount equal to the excess of $5 million over the funds in the
Operating Account and the Field Accounts.
Priority. The security interests securing the Secured Notes are or will be
subordinate to or pari passu with certain other security interests. The Secured
Note Indenture permits superior security interests securing any Senior Secured
Working Capital Facilities ("Senior Secured Working Capital Facilities"), tax
liens, mechanics' and materialmens' liens, and certain existing security
interests. The Secured Note Indenture also permits the Company and its
subsidiaries to grant security interests to secure certain purchase money
indebtedness, which security interests will be superior to the security
interests securing the Secured Notes, and security interests to secure certain
Permitted Pari Passu Debt (as defined in the Secured Note Indenture), which will
be equal in priority to the security interests securing the Secured Notes. As of
the date hereof, the Company has not established a Senior Secured Working
Capital Facility, except for a letter of credit in the amount of $1.5 million to
secure a bonus payable to Mr. Shaw under his employment contract, or incurred
any Permitted Pari Passu Debt. The Company's subsidiaries, however, had $1.9
million in secured real estate and other indebtedness outstanding as of March
31, 1996, to which the Secured Notes are effectively subordinate.
Limitations on Foreclosure. Some states, including California, Oregon and
Washington, have nondisturbance statutes that place limitations on the ability
of the owner of a campground to close the campground or a lienholder to
foreclose its lien. In certain states, these statutes permit the owner of a
campground to close the campground or a lienholder to foreclose its lien if the
holders of memberships at the campground receive access to a comparable
campground. The mortgages on the Company's campgrounds that were granted to
secure the Company's obligations under the Secured Note Indenture, and the
mortgages on the Company's campgrounds that were granted to secure NACO's and
Trials' indebtedness to the Company, contain nondisturbance provisions that
limit the ability of the lienholder to foreclose its lien unless the holders of
the related memberships receive access to a comparable campground. The impact of
the rights of members under these laws and non-disturbance provisions is
uncertain and could adversely effect the implementation of, and the benefits or
recoveries that may be available from, a foreclosure or in a reorganization.
Disposition of Collateral. So long as an Event of Default (as defined in
the Secured Note Indenture) has not occurred and the Secured Notes have not been
accelerated, the Secured Note Indenture provides that the Company and the
Subsidiary Guarantors may dispose of their properties, other than Material
Assets (as defined in the Secured Note Indenture), free from the security
interests securing the Secured Notes without obtaining any consent or release
from the Trustee. During this period, the Company and the Subsidiary Guarantors
may also sell or otherwise dispose of any Material Assets free from the security
interests securing the Secured Notes if the Company's Board of Directors passes
a resolution stating that such sale or other disposition is in the best
interests of the Company and the Company complies with the appraisal and other
requirements of the Trust Indenture Act. The Secured Note Indenture generally
requires the Company and the Subsidiary Guarantors to deposit any proceeds from
such sales in the Concentration Account or a Collection Account.
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FINANCIAL COVENANTS
The Secured Note Indenture contains the following financial ratio tests:
(i) ratio of Consolidated Financial Assets to Consolidated Senior Debt, (ii)
ratio of Consolidated Tangible Assets to Consolidated Senior Debt and (iii)
ratio of Consolidated Tangible Assets to Consolidated Total Debt. The Secured
Note Indenture also contains a covenant that limits the Adjusted Consolidated
Net Loss that the Company may incur. On June 23, 1995, the Company entered into
an amendment to the Secured Note Indenture which eliminated required compliance
with the financial covenants in the Secured Note Indenture through and including
June 30, 1996.
CERTAIN COVENANTS
Limitations on Additional Indebtedness. Subject to certain exceptions, the
Secured Note Indenture limits the Company's ability to incur additional
indebtedness. These exceptions include: (i) indebtedness of up to $25,000,000
under the Senior Secured Working Capital Facilities, (ii) indebtedness of up to
$5,000,000 under a working capital facility for Trails, (iii) indebtedness, pari
passu with the Secured Notes, used to redeem Secured Notes, (iv) indebtedness
that the Company incurs to pay other indebtedness that is secured by a security
interest senior to the security interest granted to the Trustee, (v)
indebtedness that is unsecured and subordinate to the Secured Notes, (vi)
indebtedness that is purchase money indebtedness, subject to certain
limitations, and capitalized lease obligations not exceeding $10,000,000 in
deemed principal amount outstanding, and (vii) indebtedness to which a property
or a company is subject at the time of its acquisition.
Limitations on Liens. The Secured Note Indenture provides that the Company
may not create or suffer to exist, or permit its wholly-owned subsidiaries to
create or suffer to exist, additional liens in their respective assets, subject
to certain exceptions including: (i) existing liens securing the Secured Notes
and all other obligations under the Secured Note Indenture and liens granted by
any subsidiary to the Company or its wholly-owned subsidiaries, (ii) certain
scheduled existing liens and liens existing on assets of a person at the time
such person becomes a wholly-owned subsidiary of the Company, (iii) liens
securing indebtedness permitted under the Secured Note Indenture, (iv) liens
securing permitted purchase money indebtedness or other purchase money liens on
acquired property, and all permitted extensions or modifications thereof (such
liens may be senior in priority to the liens securing the obligations under the
Secured Note Indenture provided that such liens only attach to the property so
acquired), (v) liens securing indebtedness permitted under the Secured Note
Indenture existing on property at the time of the acquisition and (vi) other
Permitted Encumbrances (as defined in the Senior Note Indenture). Such permitted
liens may be modified, extended, renewed or replaced, provided the principal
amount secured thereby is not increased unless otherwise permitted by the
Secured Note Indenture.
Prohibition on Dividends and Other Payments. The Secured Note Indenture
provides that the Company will not, and will not permit any of its wholly-owned
subsidiaries to, (i) declare or pay any dividend or make any other distributions
or payments on the Company's capital stock (other than payment of dividends in
kind) or purchase, redeem or otherwise acquire or retire for value any of the
Company's capital stock, except that the Company may declare and pay cash
dividends on its preferred stock if no Default exists or would exist after
giving effect thereto, or (ii) except for interest payments thereon, pay,
purchase, redeem or otherwise acquire or retire for value any pari passu debt or
other indebtedness expressly subordinate to the Secured Notes.
Restrictions on Investments. The Secured Note Indenture prohibits, subject
to certain exceptions, the Company and its wholly-owned subsidiaries from making
any Investments (as defined on the Secured Note Indenture) except to the extent
that the cash portion thereof does not exceed (i) 50% of the Company's
Consolidated Net Income (as defined in the Secured Note Indenture) earned since
January 1, 1994, plus (ii) $25,000,000 with respect to acquisitions in the
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Company's core business, provided that such investments are not permitted if a
Default exists or would exist after giving effect thereto.
However, without counting the amounts thereof against the foregoing
limitations, the Company and its wholly-owned subsidiaries may at any time (i)
make acquisitions in the Company's core business provided that the aggregate
cash portion of the purchase price of such acquisitions does not exceed
$5,000,000 and the aggregate indebtedness incurred or assumed in connection with
all such acquisitions does not exceed $10,000,000, (ii) make investments of net
cash proceeds in the core business to the extent such net cash proceeds are not
required by the terms of the Secured Note Indenture to be used to retire Secured
Notes, (iii) make acquisitions of Secured Notes, provided that no Default exists
or would exist after giving effect thereto, (iv) make investments to preserve,
maintain, operate, improve, or develop properties or facilities within the
Company's core business, and (v) make other Permitted Investments (as defined in
the Secured Note Indenture).
Insider and Affiliate Transactions. The Secured Note Indenture provides
that the Company will not, and will cause each of its wholly-owned subsidiaries
not to, enter into any transaction with an Insider or with an affiliate of an
Insider or make any Capital Transfer to or investment in any affiliate of the
Company or any other person that owns more than 5% of the voting stock of the
Company or any person in which the Company holds more than a 5% voting interest.
The exceptions to such prohibition include (i) transactions by the Company or
any of its subsidiaries with the Company or other subsidiaries of the Company,
(ii) the performance of the obligations under any employment contract,
collective bargaining agreement, employee benefit plan, related trust agreement
or any other similar employment or employee arrangement entered into in the
ordinary course of business, (iii) payments of compensation to employees,
officers, directors, or consultants in the ordinary course of business, (iv)
maintenance of benefit programs or arrangements for employees, officers, or
directors, including, without limitation, vacation plans, health and life
insurance plans, stock plans, and retirement or savings plans and similar plans,
(v) maintenance of indemnification arrangements for directors, officers,
employees, or agents, and any insurance, trust or similar arrangements in
respect thereof, (vi) transactions in the Secured Notes or capital stock of the
Company offered or otherwise made available to all other security holders of the
Company on the same terms and conditions, and (vii) transactions with a person
in which the Company holds more than 5% of the Company's voting stock which the
Board of Directors determines is reasonably required to effect the acquisition
of such person by the Company or any of its wholly-owned subsidiaries.
Transactions with an affiliate of the Company that are permitted by the
Secured Note Indenture must be on terms at least as favorable to the Company, or
its wholly-owned subsidiaries, as could be obtained in a comparable arm's-length
transaction. In addition, loans and advances to the Company's wholly-owned
subsidiaries must be secured and bear interest at a rate at least equal to the
Company's cost of funds plus 2.5% per annum.
No Restrictions on Inter-Company Payments. The Secured Note Indenture
provides that the Company will not, and will not permit any of its wholly-owned
subsidiaries to, create any contractual restriction on the ability of any
wholly-owned subsidiary of the Company to (i) pay dividends or make any other
distributions on its capital stock owned by, or pay any indebtedness owed to,
the Company or any of its wholly-owned subsidiaries, (ii) make Capital Transfers
to the Company or its wholly-owned subsidiaries, (iii) transfer any of its
property or assets to the Company, (iv) repay Capital Transfers from the
Company, or (v) guarantee any indebtedness of the Company, subject to applicable
law and any other existing encumbrances or restrictions.
Limitations on Purchases of Secured Notes. The Secured Note Indenture
provides that, except for mandatory retirements and redemptions, the Company may
not purchase Secured Notes whenever (i) amounts are outstanding under the Senior
Secured Working Capital Facilities or (ii) the amount of available cash held by
the Company is, or after giving effect to the
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repurchase would be, less than $5,000,000. The Secured Note Indenture requires
that any acquisition of Secured Notes from the proceeds of subordinated debt or
preferred stock of the Company be effected through a pro rata offer to all
holders of Secured Notes. The Secured Note Indenture also prohibits the Company
from making a tender or exchange offer for the Secured Notes conditioned upon an
amendment to the Secured Note Indenture eliminating certain covenants, including
those relating to the creation and maintenance of liens, limitations on certain
distributions, transactions with insiders or affiliates, and financial
covenants.
Other Covenants. Subject to certain limitations, the Company also
covenants not to, and not to permit any of its wholly-owned subsidiaries to,
(i)in the case of wholly-owned subsidiaries, issue capital stock or any
convertible securities or other rights to acquire capital stock, other than
issuances thereof to wholly-owned subsidiaries of the Company or to the Company,
(ii)issue any series of preferred stock (or any convertible securities or other
rights to acquire preferred stock) which has any mandatory redemption (other
than redemptions payable through the issuance of additional stock) or is
otherwise redeemable at the option of the holder thereof on or prior to July 15,
1998 or one year following the date the Secured Notes cease to be outstanding,
or (iii)effect any consolidation or merger with any other corporation or company
or transfer the collateral for the Secured Notes substantially as an entity to
any person unless immediately before and after giving effect thereto no Default
exists and immediately after giving effect thereto the Company is in compliance
with the financial covenants on a pro forma basis.
Subject to certain limitations, the Company also covenants that it will,
and will cause each of its wholly-owned subsidiaries to, maintain and insure its
properties, keep in full force and effect its corporate existence, and restrict
its activities to its current business activities (as such business activities
may evolve within the industry), and any related or ancillary lines of business.
EVENTS OF DEFAULT
Events of Default include: (i) the default in the payment of interest and
the continuance of such default for 30 days, (ii) the default in the payment of
principal, (iii) the default under any financial covenant, (iv) the default
under any other covenant and the continuance of such default for 30 days after
notice from the Trustee or from Secured Noteholders with respect to 30% in
principal amount of the outstanding Secured Notes, (v) the acceleration or
nonpayment at maturity of certain indebtedness and (vi) the occurrence of
certain insolvency or bankruptcy events.
During the continuance of an Event of Default, the Trustee or Secured
Noteholders with respect to at least 30% in principal amount of the outstanding
Secured Notes may declare the Secured Notes due and payable immediately. The
Secured Note Indenture generally provides that after an acceleration, the
Trustee may sell the collateral in accordance with the Uniform Commercial Code
and other applicable laws. Any time after such a declaration of acceleration,
however, but before the sale of any collateral has occurred or any judgment
obtained for payment of the Secured Notes, Secured Noteholders owning a majority
in principal amount of the outstanding Secured Notes may rescind such
declaration and its consequences if: (i) the Company has deposited with the
Trustee a sum sufficient to pay any principal due on the Secured Notes, other
than by the acceleration thereof, and certain other payments, and (ii)the
Company has cured all Events of Default or obtained a waiver with respect
thereto.
Under the Secured Note Indenture, a waiver requires consent with respect to
at least 66 2/3% in principal amount of the outstanding Secured Notes. Moreover,
under the Trust Secured Note Indenture Act, a waiver of a past default and its
consequences will also require consent with respect to not less than a majority
in principal amount of the outstanding Secured Notes, excluding any Secured
Notes that any affiliate of the Company owns.
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DIFFERENT CIRCUMSTANCES OF EACH SERIES OF SECURED NOTES
The Company issued the Secured Notes in two series, the Initial Series
Notes when the Company emerged from bankruptcy proceedings on December 31, 1991,
and the Additional Series Notes when the Company exchanged Secured Notes for
outstanding 14 5/8% subordinated debt of Trails that was then in default on June
12, 1992. The Secured Note Indenture provides that each Secured Note should be
treated equally, notwithstanding whether it was part of the initial or
additional series. The Company, however, issued each series at a different time,
under different circumstances, for different consideration, and with different
tax consequences. Accordingly, competing creditors of the Company, including the
holders of each series of Secured Notes, could assert that such differences
cause the holders of each such series to have the different claims to the assets
of the Company and its subsidiaries.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated federal income
tax consequences with respect to the exchange pursuant to the Exchange Offer
(the "Exchange"), and the ownership and disposition of the Senior Subordinated
PIK Notes and the Common Stock. This discussion is general in nature, and does
not discuss all aspects of federal income taxation that may be relevant to a
particular investor in light of the investor's particular circumstances, or to
certain types of investors subject to special treatment under federal income tax
laws (such as individual retirement accounts, insurance companies, tax-exempt
organizations, financial institutions, brokers, dealers, foreign entities, and
taxpayers that are neither citizens nor residents of the United States). In
addition, the discussion does not consider the effect of any foreign, state,
local, or other tax laws, or any United States tax consequences other than
income tax (e.g., estate or gift tax) consequences, that may be applicable to
particular investors. The summary is based upon the Code and applicable Treasury
Regulations (including proposed regulations), rulings, administrative
pronouncements and decisions as of the date hereof, all of which are subject to
change or differing interpretations at any time and in some circumstances with
retroactive effect.
The discussion assumes that Exchanging Noteholders hold their Secured Notes
as "capital assets" (generally property held for investment) within the meaning
of Section 1221 of the Code, and will hold the Common Stock and the Senior
Subordinated PIK Notes received in exchange for the Secured Notes as capital
assets.
Further, this discussion assumes that the Senior Subordinated PIK Notes
will be treated as debt and not equity for federal income tax purposes. There
can however be no assurance that the Service would not successfully assert that
the Senior Subordinated PIK Notes were equity of the Company, in which event the
Company would not be allowed a deduction for original issue discount ("OID")
accrued on the Senior Subordinated PIK Notes. Furthermore, the Internal Revenue
Service (the "Service") takes the position that a corporate holder would not be
entitled in such an event to a dividends received deduction.
No rulings from the Service have been or will be requested with respect to
any of the tax issues discussed herein. Moreover, as noted in the discussion,
certain of the issues material to the income tax consequences of certain
transactions are inherently factual in nature, and other issues involve areas of
the law that are ambiguous or with respect to which legal authority is lacking
and as to which the Company is able to offer only limited guidance. Accordingly,
there can be no assurance that the Service will not challenge one or more of the
tax consequences of the Exchange described herein.
THE COMPANY URGES EACH EXCHANGING NOTEHOLDER TO CONSULT ITS OWN TAX ADVISOR
TO DETERMINE THE FEDERAL, STATE, LOCAL,
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FOREIGN, AND OTHER TAX CONSEQUENCES TO IT OF THE EXCHANGE, AND THE OWNERSHIP AND
DISPOSITION OF THE SENIOR SUBORDINATED PIK NOTES AND THE COMMON STOCK.
EXCHANGE OF SECURED NOTES
The consequences to Exchanging Noteholders of Secured Notes depend on
whether the Exchange is treated as a "recapitalization" for federal income tax
purposes. The Exchange generally will be treated as a recapitalization if the
Secured Notes are treated as "securities" for federal income tax purposes.
Whether a debt instrument constitutes a security for federal income tax
purposes depends on the interpretation of numerous judicial decisions. Prominent
factors that the courts have relied upon in making this determination include:
(i) the term to maturity of the debt, (ii) the collateral securing the debt,
(iii) the degree of subordination of the debt, (iv) the ratio of debt to equity
of the issuer, (v) the riskiness of the business of the issuer, and (vi) the
negotiability of the instrument. Generally, notes with initial terms to maturity
of less than five years do not constitute securities. Nevertheless, there are
authorities in which notes with terms much shorter than five years have been
held to be securities, and authorities in which notes with terms of more than
five years were held not to be securities. The Service has taken the position
that, while the term to maturity is an important factor, the determination of
whether a debt instrument is a security should be based upon "an evaluation of
the overall nature of the debt," including the degree of participation and
continuing interest in the business of the debtor represented by the debt, the
extent of the proprietary interest of the holders of the debt compared to the
similarity between the note and a cash payment, the purpose of the note (i.e.,
whether it was issued for long-term financing purposes or is more in the nature
of a short-term advance), and other factors.
While the Secured Notes originally were issued with a term to maturity of
seven years, the Secured Notes were amended in 1994 (the "Amendment") and, in
connection with the Amendment, a cash payment was made to holders who consented
thereto (the "Consent Payment"). Although the Company has taken the position
that no actual or deemed exchange occurred as a result of the Amendment and the
payment of the Consent Payment, the Amendment and payment of the Consent Payment
could be viewed as having resulted in a deemed exchange for federal income tax
purposes of the "old" Secured Notes for "new" Secured Notes. If the Amendment
and the payment of the Consent Payment resulted in a deemed exchange, the
initial term to maturity of the "new" Secured Notes (i.e., the Secured Notes
that were deemed to have been exchanged for the "old" Secured Notes as a result
of the Amendment) at the time of the Amendment would have been less than five
years. Nevertheless, based on the factors discussed above, the Company believes
that the Secured Notes (including any Secured Notes considered to have been
issued in a deemed exchange in 1994) should be treated as securities for federal
income tax purposes. However, due to the inherently factual nature of the
determination of whether a debt instrument is a security for tax purposes, the
Service or a court could determine that any Secured Notes deemed received in an
exchange in 1994 do not constitute securities.
The Company also intends to take the position that the Senior Subordinated
PIK Notes, which have a maturity of seven years, will be treated as securities
for federal income tax purposes.
If the Exchange is treated as a recapitalization (and the Secured Notes and
the Senior Subordinated PIK Notes are treated as securities), Exchanging
Noteholders would not be permitted to recognize (i.e., take into account for tax
purposes) any loss realized on the Exchange, and would recognize gain in an
amount equal to the lesser of the amount of cash (including cash received as
prepaid interest) received by such Exchanging Noteholders or the gain realized.
Gain (or loss) realized would equal the difference between an Exchanging
Noteholder's basis in the Secured Note surrendered--including basis attributable
to OID accrued through the date of the Exchange--and the sum of the "issue
price" (as described below) of the Senior
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Subordinated PIK Notes received, the fair market value of the Common Stock
received, and the amount of cash received (including cash received as prepaid
interest). Except to the extent of any market discount accrued on the Secured
Notes, any such gain recognized would be long-term capital gain if the holding
period with respect to the Secured Notes exceeds one year, and otherwise would
be short-term capital gain. Currently, the maximum tax rate with respect to
long-term capital gains realized by an individual is 28%, and the maximum tax
rate on ordinary income is 39.6%.
In general, if the Exchange is treated as a recapitalization, an Exchanging
Noteholder's initial tax basis in the Senior Subordinated PIK Notes and the
Common Stock received pursuant to the Exchange would equal the Exchanging
Noteholder's adjusted tax basis in the Secured Notes surrendered in the
Exchange, decreased by the amount of cash received (including cash received as
prepaid interest), and increased by the gain, if any, recognized as a result of
the Exchange. An Exchanging Noteholder would allocate such aggregate basis among
the Senior Subordinated PIK Notes and Common Stock received based on the
respective fair market values of the Senior Subordinated PIK Notes and Common
Stock on the date the Exchange is consummated. The Exchanging Noteholder's
holding period in the Senior Subordinated PIK Notes and the Common Stock would
include its holding period for the Secured Notes surrendered in the Exchange.
If the Exchange does not constitute a recapitalization (i.e., the Secured
Notes are not treated as securities), an Exchanging Noteholder would recognize
any gain or loss realized, calculated as described above. Except to the extent
of any market discount accrued on the Secured Notes, any gain or loss recognized
by an Exchanging Noteholder will be long-term capital gain or loss if the
holding period with respect to the Secured Notes exceeds one year, and otherwise
will be short-term capital gain or loss. The ability of an Exchanging Noteholder
to use long-term capital losses to offset income other than capital gains is
subject to significant limitations. As stated above, the maximum tax rate with
respect to long-term capital gains realized by an individual is 28%, and the
maximum tax rate on ordinary income is 39.6%. Assuming that the Secured Notes
and Senior Subordinated PIK Notes are not considered to be readily tradable in
an established securities market, an Exchanging Noteholder will be required to
report any gain using the installment sale provisions of Section 453 of the Code
(i.e., as payments are received at the time of the Exchange or on the Senior
Subordinated PIK Notes), unless such Exchanging Noteholder elects not to have
such provisions apply. If the Exchanging Noteholder makes such an election, the
Exchanging Noteholder's initial tax basis in the Senior Subordinated PIK Notes
received would equal the "issue price" thereof, and the Exchanging Noteholder's
initial tax basis in the Common Stock received would equal the fair market value
thereof, and the Exchanging Noteholder's holding period in the Senior
Subordinated PIK Notes and Common Stock would begin on the day after the
consummation of the Exchange.
OID WITH RESPECT TO THE SENIOR SUBORDINATED PIK NOTES
In general, subject to a de minimis rule, a debt obligation will be treated
as being issued with OID if the "stated redemption price at maturity" of the
instrument exceeds such instrument's "issue price."
The stated redemption price at maturity of a debt obligation is the
aggregate of all payments due to the holder under such debt obligation at or
prior to its maturity date, other than interest that is actually and
unconditionally payable in cash or property (other than debt instruments of the
issuer) at a single fixed (or a qualified floating) rate (or a permitted
combination of the two) at least annually ("QSIPs"). During the first four years
of the Senior Subordinated PIK Notes, interest is payable on a semiannual basis
commencing on the January 15 or July 15 next following the date the Exchange
Offer is consummated, either in cash or (at least in part) by the issuance of
additional Senior Subordinated PIK Notes ("Payment-In-Kind Notes"). Because
interest on the Notes may be paid through the issuance of additional Payment-In-
Kind
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Notes, none of the interest payments on the Senior Subordinated PIK Notes will
qualify as QSIPs, so the stated redemption price at maturity of the Senior
Subordinated PIK Notes will include all payments of principal and interest
required under the Senior Subordinated PIK Notes. Furthermore, under the
regulations issued pursuant to the OID provisions of the Code (the "OID
Regulations"), a Senior Subordinated PIK Note and any Payment-In-Kind Notes
issued with respect thereto are treated as part of the same debt instrument.
Accordingly, the adjusted issue price of the combined Senior Subordinated PIK
Note and Payment-In-Kind Note will not be reduced upon the issuance of the
Payment-In-Kind Note, and the stated redemption price at maturity of the
combined Senior Subordinated PIK Note and Payment-In-Kind Note will not change
upon the issuance of the Payment-In-Kind Note and will include the interest
payable under the Payment-In-Kind Note.
Assuming that neither the Secured Notes or the Senior Subordinated PIK
Notes are traded on an established securities market within the meaning of the
OID provisions of the Code and the regulations thereunder, the Company believes
that the issue price of each Senior Subordinated PIK Note will equal its stated
principal amount, which for purposes of the OID Regulations is reduced by the
prepaid interest paid with respect to the Senior Subordinated PIK Note. (If any
of the Secured Notes or the Senior Subordinated PIK Notes received in exchange
therefor are traded on an established securities market within the 30-day period
before and after the date of the Exchange, the investment unit consisting of the
Senior Subordinated PIK Notes and the Common Stock will have an issue price
equal to its fair market value, and the issue price of the Senior Subordinated
PIK Notes will be determined by allocating the issue price of the investment
unit between the Senior Subordinated PIK Notes and the Common Stock based on
their relative fair market values.)
Since the stated redemption price at maturity will exceed the stated
principal amount of the Senior Subordinated PIK Notes, the Senior Subordinated
PIK Notes will be issued with OID.
CONSEQUENCES AS A RESULT OF THE SENIOR SUBORDINATED PIK NOTES BEING ISSUED WITH
OID
Because the Senior Subordinated PIK Notes will be issued with OID, an
Exchanging Noteholder, subject to the adjustments discussed below, will be
required to include in gross income for federal income tax purposes the sum of
the daily portions of OID for each day during the taxable year or portion
thereof during which the Exchanging Noteholder holds the Senior Subordinated PIK
Notes, whether or not the Exchanging Noteholder actually receives a payment
relating to OID in such year. The daily portion is determined by allocating to
each day of the relevant "accrual period" a pro rata portion of an amount equal
to (a) the product of (i) the "adjusted issue price" of the Senior Subordinated
PIK Notes at the beginning of each accrual period, multiplied by (ii) the yield
to maturity of the Senior Subordinated PIK Notes (determined by semi-annual
compounding) less (b) the sum of any QSIPs during the accrual period. The
"adjusted issue price" of a Senior Subordinated PIK Note at any given time is
its issue price increased by all accrued OID for prior accrual periods (without
regard to the acquisition premium rules discussed below) and decreased by the
amount of any payment previously made on the Senior Subordinated PIK Notes other
than a QSIP. The accrual period for a Senior Subordinated PIK Notes (except for
any initial short period) is each six-month period which ends on the day in each
calendar year corresponding to the maturity date of the Senior Subordinated PIK
Notes or the date six months before such maturity date. As discussed above, none
of the payments on the Senior Subordinated PIK Notes will qualify as QSIPs. (See
"--OID with Respect to the Senior Subordinated PIK Notes.")
An Exchanging Noteholder will be required to include OID in income as such
OID accrues, regardless of the Exchanging Noteholder method of accounting and
regardless of when such Exchanging Noteholder receives cash payments relating to
the OID. An Exchanging
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Noteholder tax basis in Senior Subordinated PIK Notes will be increased by the
amount of OID included in the Exchanging Noteholder income and reduced by the
amount of all interest payments (other than payments in the form of Payment-In-
Kind Notes) received on the Senior Subordinated PIK Notes.
The computation of OID and adjusted issue price with respect to the
combined Senior Subordinated PIK Notes and Payment-In-Kind Notes will take into
account accruals and payments with respect to both instruments, with the result
that the Exchanging Noteholder generally will be required to include in income
as OID the interest that accrues under both the Senior Subordinated PIK Note and
any Payment-In-Kind Note issued in respect thereof, regardless of whether any
cash payments are received. Since each holder of a Senior Subordinated PIK Note
will recognize, as ordinary income, through the accrual of OID, the full amount
of interest with respect to the Senior Subordinated PIK Notes (as well as with
respect to any Payment-In-Kind Notes issued with respect to such Notes), such
holder generally should not recognize additional ordinary income upon receipt of
a Payment-In-Kind Note or a cash payment of stated interest.
Upon a disposition of a Senior Subordinated PIK Note or a Payment-In-Kind
Note issued in respect thereof, the Exchanging Noteholder will be required
(unless it disposes of a Senior Subordinated PIK Note together with all Payment-
In-Kind Notes issued in respect thereof) to allocate adjusted issue price,
stated redemption price at maturity and acquisition premium (discussed below),
if any, of the combined Senior Subordinated PIK Note and Payment-In-Kind Note
among the instruments retained and the instruments disposed of in order to
determine OID with respect to the retained instruments. Although it is not
clear, it is likely that the adjusted tax basis and adjusted issue price of a
Senior Subordinated PIK Note would be allocated between such Senior Subordinated
PIK Note and any Payment-In-Kind Notes issued with respect thereto at the time
of such issuance, based on their respective principal amounts. OID on the
Payment-In-Kind Notes will accrue in the same manner as described above in
respect of the Senior Subordinated PIK Notes.
A subsequent purchaser of a Senior Subordinated PIK Note who purchases the
note at a cost less than the remaining stated redemption price at maturity but
greater than its adjusted issue price (a purchase at an "acquisition premium")
also will be required to include in gross income the sum of the daily portions
of OID on that Senior Subordinated PIK Note. (For purposes of these rules, a
"purchase" is any acquisition of a debt instrument.) In computing the daily
portions of OID for such a purchaser, however, the daily portion is reduced by
the amount that would be the daily portion for such day (computed in accordance
with the rules set forth above) multiplied by a fraction, the numerator of which
is the amount, if any, by which the purchaser's basis in the Senior Subordinated
PIK Note on the date of purchase exceeds the adjusted issue price of the Senior
Subordinated PIK Note at that time, and the denominator of which is the sum of
the daily portions for that Senior Subordinated PIK Notes for all days beginning
on the date after the purchase date and ending on the maturity date.
Since the Senior Subordinated PIK Notes will be subject to the AHYDO rules
discussed below, a portion of the OID on the Senior Subordinated PIK Notes will
be taxed as a stock distribution. See "--Application of High Yield Debt
Obligation Rules."
The Company will furnish annually to the Service, and to each U.S. holder
of Senior Subordinated PIK Notes to whom it is required to report, information
relating to the OID accruing during the calendar year. Holders will be required
to determine for themselves whether, by reason of the rules described above,
they are eligible to report a reduced amount of OID for federal income tax
purposes.
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MARKET DISCOUNT
A holder of a Senior Subordinated PIK Note generally will be required to
treat any gain recognized on the sale, exchange, redemption or other disposition
of the Senior Subordinated PIK Note as ordinary income to the extent of any
accrued market discount. The market discount rules also provide that a holder
who acquires a Senior Subordinated PIK Note at a market discount may be required
to defer the deduction of a portion of any interest expense that may otherwise
be deductible on any indebtedness incurred or maintained to purchase or carry
such Senior Subordinated PIK Note until the holder disposes of the Senior
Subordinated PIK Note in a taxable transaction. Accrued market discount on an
Secured Note that is not recognized on the Exchange will carry over and be
treated as accrued market discount on the Senior Subordinated PIK Note received.
"Market discount" generally is the excess of the stated redemption price at
maturity of a Senior Subordinated PIK Note (adjusted to exclude any unaccrued
OID) over the holder's tax basis in the Senior Subordinated PIK Note immediately
after its acquisition. In addition, under a de minimis exception, the amount of
market discount is considered to be zero if it is less than the product of .25%
of the stated redemption price of the Senior Subordinated PIK Note at maturity
multiplied by the number of complete years from acquisition to maturity. Market
discount generally will accrue ratably during the period from the date of
acquisition to the maturity date of the Senior Subordinated PIK Note, unless the
holder elects to accrue such discount on the basis of the constant yield method.
A holder of a Senior Subordinated PIK Note acquired at a market discount
may elect to include the market discount in income as interest as it accrues, in
which case the foregoing rules would not apply. This election would apply to all
debt instruments with market discount acquired by the electing holder on or
after the first day of the first taxable year to which the election applies. The
election may be revoked only with the consent of the Service.
Pursuant to the OID Regulations, holders of debt instruments are permitted
to elect to include all interest, discount (including de minimis market
discount) and premium on a debt instrument in income currently on a yield to
maturity basis. Such election would constitute an election to include market
discount currently in income on all market discount bonds held by such holders.
Exchanging Noteholders are urged to consult their own tax advisors regarding the
availability and advisability of making such an election.
CONSEQUENCES OF HOLDING THE COMMON STOCK
Distributions, if any, made on the Common Stock will, to the extent of the
current or accumulated earnings and profits of the Company, be treated as a
dividend for federal income tax purposes and be taxable as ordinary income.
Corporate holders receiving such distributions may, however, be eligible for a
dividends received deduction. A distribution not treated as a dividend first
will reduce a holder's tax basis in the stock with respect to which the
distribution is received and the remainder, if any, will be treated as proceeds
received on the sale of such stock.
SALE, EXCHANGE OR REDEMPTION
Upon the sale, exchange or redemption of a Senior Subordinated PIK Note or
Common Stock, a holder generally will recognize gain or loss in an amount equal
to the difference between the amount of cash and the fair market value of the
property received and the holder's adjusted tax basis in the Senior Subordinated
PIK Notes or Common Stock (except to the extent that, in the case of a
redemption of Common Stock, the holder disposes of less than all of such
holder's stock, in which case the redemption proceeds may be treated as a
dividend, which, if so treated, will be taxed as ordinary income). Such gain or
loss will be capital gain or loss, except (in the case of a
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Senior Subordinated PIK Note) to the extent of any accrued market discount (see
"Market Discount" above), and will be long-term capital gain or loss if the
holder's holding period for the Senior Subordinated PIK Note or Common Stock
exceeds one year at the time of the sale or exchange, or redemption.
As noted above, the OID Regulations treat a Senior Subordinated PIK Note
and any Payment-In-Kind Notes issued with respect thereto as a part of the same
debt instrument. If however a Holder disposes of a Senior Subordinated PIK Note
or a Payment-In-Kind Note separately, in order to determine the amount of its
gain or loss recognized the holder will be required to allocate adjusted issue
price and acquisition premium of the combined Senior Subordinated PIK Note and
the Payment-In-Kind Notes issued with respect thereto among the debt instruments
retained and disposed of, using the methods described above. See "Consequences
as a Result of a Senior Subordinated PIK Notes Being Issued With OID" above.
Under the OID Regulations, an unscheduled payment made on a debt instrument
such as a Senior Subordinated PIK Note prior to maturity that results in a
substantially pro rata reduction of each payment of principal and interest
remaining on the instrument is treated as a payment in retirement of a portion
of the instrument, which may result in gain or loss to the holder. The gain or
loss is calculated by treating the debt obligation as consisting of two
instruments, one that is retired and one that remains outstanding, and by
allocating the adjusted issue price and the Holder's adjusted basis between the
two instruments based upon the relative principal amount of the portion of the
obligation that is treated as retired by the pro rata prepayment. The stated
redemption price at maturity of the OID on the remaining instrument will be
determined according to the same principles discussed earlier. See "-- OID With
Respect to the Senior Subordinated PIK Notes;" " -- Consequences as a Result of
the Senior Subordinated PIK Notes Being Issued with OID."
TAX CONSEQUENCES TO THE COMPANY
Cancellation of Indebtedness. If a taxpayer satisfies its outstanding debt
obligations for less than their principal amount (or, if the debt obligations
were issued with OID, their adjusted issue price), such taxpayer generally
realizes cancellation of debt ("COD") income for federal income tax purposes.
To the extent that the sum of (a) the fair market value of the Common
Stock, (b) the issue price of the Senior Subordinated PIK Notes (see "E--
Original Issue Discount With Respect to Senior Subordinated PIK Notes"), and (c)
the cash paid (including cash paid as prepaid interest) is less than the
adjusted issue price of the Secured Notes surrendered in the Exchange, the
Company will realize and recognize COD income equal to such difference, except
to the extent of the Company's insolvency immediately prior to the Exchange.
Furthermore, the Company will realize and recognize COD income with respect to
the Tender Offer to the extent it purchases Secured Notes for less than their
adjusted issue price. If and to the extent the Company were insolvent, such
income would be excluded from its gross income under Section 108(a) of the Code,
but the Company would be required to reduce its favorable tax attributes
pursuant to Section 108(b) of the Code.
Section 108(b) of the Code provides that certain tax losses and credits of
a taxpayer, including any net operating loss ("NOL") carryovers, must be reduced
by the amount of the taxpayer's COD income that is excluded under Section 108(a)
of the Code. To the extent that the amount excluded exceeds these tax
attributes, the taxpayer's tax basis in its property will be reduced, except
that such reduction is limited to the excess of the aggregate tax bases of the
property held by the taxpayer over the aggregate liabilities of the taxpayer
immediately after the transaction.
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The Company is required to pay the higher of the regular income tax and the
alternative minimum tax. If the Company were not entitled to exclude any COD
income recognized in the Exchange, the Company nevertheless expects for regular
income tax purposes to have sufficient NOLs to offset any COD income recognized
in the Exchange. The COD income recognized in the Exchange would increase the
Company's alternative minimum taxable income, and NOLs (as computed for
alternative minimum tax purposes) may only be used to offset 90% of alternative
minimum taxable income. The Company expects, however, that any alternative
minimum tax liability resulting from the COD income recognized in the Exchange
will not be material.
Net Operating Loss Carryovers and Limitations. After reducing the NOL
carryforwards by the amount of COD income arising from the Exchange and the
Tender Offer, the Company and its subsidiaries expect to have substantial
consolidated NOL carryforwards, totaling approximately $50.4 million, from their
taxable year ended June 30, 1996 and prior taxable years beginning after June
30, 1992. The Company's use of such NOL carryforwards would be substantially
restricted if the Company undergoes a "ownership change" as defined in Section
382 of the Code.
Section 382 provides that, following an "ownership change" with respect to
a "loss corporation" such as the Company, the amount of post-ownership change
annual taxable income of the loss corporation that can be offset by the loss
corporation's pre-ownership change NOL carryovers generally cannot exceed an
amount equal to the value of the equity of the loss corporation immediately
before the ownership change (subject to various adjustments) multiplied by a
prescribed long-term tax exempt rate announced monthly by the Service (5.78% for
ownership changes occurring during July 1996) (the "Annual Limitation"). If it
were to apply, the Annual Limitation could reduce significantly the value of the
Company's NOL carryforwards.
Based on its analysis of the transactions that will occur prior to and as a
result of the Exchange, and on information available to the Company with respect
to the identity of the Exchanging Noteholder, the Company intends to take the
position that no ownership change of the Company will occur as a result of the
Exchange. Furthermore, in order to reduce the risk of a subsequent ownership
change, the Company intends to amend its by-laws and to seek consents from its
shareholders which, together, will attempt to prohibit certain transfers of
Common Stock that would trigger an ownership change for these purposes. See
"Description of Common Stock -- Additional Stock Transfer Restrictions."
APPLICATION OF HIGH YIELD DEBT OBLIGATION RULES
As noted above, the Senior Subordinated PIK Notes will be issued with
original issue discount for Federal income tax purposes. Under the "AHYDO" rules
contained in Sections 163(e) and (i) of the Code, if a debt obligation with a
term of more than five years has "significant" OID, and has a yield to maturity
of five percentage points or more in excess of the "applicable federal rate"
(which is announced monthly by the Service and is generally based on the U. S.
Treasury note rate for instruments of similar maturities), interest deductions
with respect to OID accruing on such instrument may be deferred until such OID
is paid in cash, or, if the yield to maturity exceeds six percentage points
above the specified rate, the deduction for such excess will be denied
completely and the OID with respect to such excess will be treated as dividend
income, rather than interest income, to the holder (provided the issuer has
adequate earnings and profits to support such a dividend).
The Senior Subordinated PIK Notes will be issued with significant OID.
Furthermore, assuming that neither the Secured Notes or the Senior Subordinated
PIK Notes are traded on an established securities market, the resulting yield to
maturity of the Senior Subordinated PIK Notes of approximately 13.39% exceeds
the July 1996 applicable federal rate of 6.63% by more than six percentage
points (the yield in excess of 12.63% is referred to as the "disqualified
yield"). As a result, the Senior Subordinated PIK Notes are subject to the AHYDO
rules, and the Company's
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deduction of OID on the Senior Subordinated PIK Notes is deferred until the OID
is paid in cash. Furthermore, a portion of the OID (the "disqualified portion")
equal to the portion of the total return on the Senior Subordinated PIK Note
that bears the same ratio to the total return as the disqualified yield bears to
the yield to maturity on the Senior Subordinated PIK Note will not be allowed to
the Company as a deduction. A holder of a Senior Subordinated PIK Note will
treat the disqualified portion as a dividend to the extent that it would have
been treated as a dividend if distributed by the Company with respect to stock
in the Company, and for corporate holders any amount so treated as a dividend is
eligible for the dividends received deduction permitted under the Code.
THE REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement entered into between the Company and the
Trustee should not, absent a Registration Default, have a material effect on the
terms of the Senior Subordinated PIK Notes. However, if the Company causes a
Registration Default with respect to the Senior Subordinated PIK Notes, the
interest rate on the Senior Subordinated PIK Notes will increase, thereby
creating additional OID on the Senior Subordinated PIK Notes. Furthermore, any
such increase could increase the yield to maturity of the Senior Subordinated
PIK Notes for the time period during which the increased interest rate applied
to the Senior Subordinated PIK Notes such that an additional portion of the OID
on the Senior Subordinated PIK Notes would be treated as dividend income. See
"--Application of High Yield Debt Obligation Rules." The Company urges each
holder to consult its tax advisor to determine the federal income tax
consequences to it with respect to the possible increased interest rate caused
by a Registration Default.
BACKUP WITHHOLDING
Under the Code, a holder of a Senior Subordinated PIK Note may be subject,
under certain circumstances, to "backup withholding" at a rate of 31% with
respect to payments in respect of interest and OID thereon or the gross proceeds
from the disposition thereof. This withholding generally applies only if the
holder (i) fails to furnish his or her social security or other taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is
notified by the Service that he or she has failed to report properly payments of
interest and dividends and the Service has notified the Company that he or she
is subject to backup withholding, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that it is not subject to backup withholding.
Any amount withheld from a payment to a holder under the backup withholding
rules does not constitute additional tax, and is allowable as a credit against
such holder's federal income tax liability, provided that the required
information is furnished to the Service. Holders of Senior Subordinated PIK
Notes should consult their tax advisers as to their qualification for exemption
from backup withholding and the procedure for obtaining such an exemption.
NOTICE TO EXCHANGING NOTEHOLDERS
Each Exchanging Noteholder, by its execution of the Letter of Transmittal,
will acknowledge, represent to and agree with the Company as follows:
(1) It understands and acknowledges that the Transfer Restricted
Securities have not been registered under the Securities Act or any other
applicable securities law and may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the Securities Act or
any other applicable securities law, pursuant to an exemption therefrom and in
each case in compliance with the conditions for transfer set forth in
paragraph (4) below.
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(2) It is an "accredited investor" within the meaning of Regulation D
under the Securities Act and is aware that any sale of Transfer Restricted
Securities to it will be made in reliance on Regulation D.
(3) It acknowledges that neither the Company nor any person representing
the Company has made any representation to it with respect to the Company or the
offering or sale of any Transfer Restricted Securities, other than in this
Memorandum which has been delivered to it and upon which it is relying in making
its investment decision with respect to the Transfer Restricted Securities. It
has had access to such financial and other information concerning the Company
and the Transfer Restricted Securities as it has deemed necessary in connection
with its decision to acquire any of the Transfer Restricted Securities,
including an opportunity to ask questions of and request information from the
Company.
(4) It is acquiring the Transfer Restricted Securities for its own
account, or for one or more investor accounts for which it is acting as a
fiduciary or agent, in each case for investment, and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act, subject to any requirement of law that the disposition of its
property or the property of such investor account or accounts be at all times
within its or their control and subject to its or their ability to resell such
Transfer Restricted Securities pursuant to any exemption from registration
available under the Securities Act. It agrees on its own behalf and on behalf of
any investor account for which it is acquiring the Transfer Restricted
Securities, and each subsequent holder of the Transfer Restricted Securities by
its acceptance thereof will agree, to offer, sell or otherwise transfer such
Transfer Restricted Securities only (a)to the Company, (b)pursuant to a
registration statement which has been declared effective under the Securities
Act, or (c)pursuant to any other available exemption from the registration
requirements of the Securities Act. Each Exchanging Noteholder acknowledges that
the Company will reserve the right prior to any offer, sale or other transfer of
the Transfer Restricted Securities pursuant to clause (c) above to require the
delivery of an opinion of counsel, certifications and/or information
satisfactory to the Company. Each Exchanging Noteholder acknowledges that each
certificate for Transfer Restricted Securities will contain a legend
substantially to the following effect:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (C) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO IT.
(5) It agrees on its own behalf and on behalf of any investor account for
which it is acquiring any Transfer Restricted Securities (a "Holder") that all
Common Stock currently held by such Holder ("Holder Stock") or shall be subject
to the restrictions set forth in Article Nine of the By-Laws of the Company to
the same extent as if such Holder Stock constituted "Post-Amendment Common
Stock" (as such terms are defined in Article Nine of the
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By-Laws). Each Exchanging Noteholder acknowledges that each certificate
representing Holder Stock and Common Stock acquired pursuant to the Exchange
Offer (the "Transfer Restricted Common Stock") will contain a legend
substantially to the following effect:
TRANSFER OF THESE SHARES 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. SUCH
RESTRICTIONS ARE SET FORTH IN THE COMPANY'S PRIVATE PLACEMENT
MEMORANDUM, DATED JUNE 28, 1996, RELATING TO A RESTRUCTURING
TRANSACTION, THE LETTER OF TRANSMITTAL RELATED THERETO AND
ARTICLE NINE OF THE BY-LAWS OF THE COMPANY. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY SUCH
RESTRICTIONS. THE COMPANY WILL FURNISH TO THE RECORD HOLDER OF
THIS CERTIFICATE, UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS, A COPY OF SUCH RESTRICTIONS.
Upon the request of the Company, each Holder will deliver certificates
representing the Transfer Restricted Common Stock currently held by such Holder
to the Company or its agents so that the foregoing legend may be affixed
thereto.
(6) It acknowledges that the Company and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and agreements
and agrees that, if any of the acknowledgments, representations and agreements
deemed to have been made by purchase of the Transfer Restricted Securities are
no longer accurate, it shall promptly notify the Company. If it is acquiring any
Transfer Restricted Securities as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with respect to
each such account and it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of each such account.
LEGAL MATTERS
The validity of Senior Subordinated PIK Notes offered hereby for the
Company will be passed upon by Gibson, Dunn & Crutcher LLP, Dallas, Texas. The
validity of the Common Stock offered hereby will be passed upon for the Company
by Lionel Sawyer & Collins, Las Vegas, Nevada.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements, and other information with the
Commission. The public may inspect and copy at prescribed rates such reports,
proxy statements and other information that the Company has filed with the
Commission at the public reference facilities that the Commission maintains at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
Commission's regional offices located at Room 3190, Northwest Atrium Center, 500
West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, 13th
Floor, New York, New York 10048. In addition, the public may obtain such
reports, proxy statements, and other information concerning the Company from the
Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed
87
<PAGE>
rates. Neither the Exchange Act nor the regulations thereunder required the
Company to file, and the Company has not filed, this Memorandum with the
Commission.
INFORMATION INCORPORATED BY REFERENCE
The following documents which have been filed with the Commission pursuant
to the Exchange Act are being delivered to the potential Exchanging Noteholders
with this Memorandum and are incorporated herein by reference: the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995 and the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1996. Exhibits to such documents are not included unless such exhibits are
specifically incorporated by reference in such documents.
Any statements contained in a document all or a portion of which is
incorporated by reference in this Memorandum will be deemed to be modified or
superseded for the purposes of this Memorandum to the extent that a statement
contained in this Memorandum modifies or supersedes such statement. Any
statement so modified will not be deemed a part of this Memorandum, except as so
modified, and any statement so superseded will not be deemed part of this
Memorandum.
88
<PAGE>
================================================================================
US TRAILS INC.
PRIVATE PLACEMENT
MEMORANDUM
DEPOSITARY:
FLEET NATIONAL BANK,
AS DEPOSITARY
CORPORATE TRUST OPERATIONS
777 MAIN STREET, CTMO 0224
HARTFORD, CT 06115
TELEPHONE NO. (860) 986-1271
FACSIMILE NO. (860) 986-7908
BY HAND DELIVERY IN NEW YORK:
SHAWMUT TRUST COMPANY
C/O FIRST CHICAGO TRUST
COMPANY OF NEW YORK
14 WALL STREET, 8TH FLOOR, WINDOW 2
NEW YORK, NY 10015
June 28, 1996
================================================================================
<PAGE>
APPENDIX I
DEFINED TERMS
I-1
<PAGE>
This appendix lists all of the defined terms in the Memorandum and
indicates the page on which the Memorandum defines them.
<TABLE>
<CAPTION>
<S> <C>
Accredited Investors....................................... 19
Additional Series Notes............................ cover page
Affiliate Loans............................................ 52
Affiliate Transaction...................................... 49
Amendment.................................................. 78
Annual Limitation.......................................... 84
Annual Report.............................................. 21
Appraisals................................................. 22
Asset Sale................................................. 48
Blockage Notice............................................ 42
Business Combinations Act.................................. 63
Business Plan............................................... 1
By-Law Transfer Restrictions................................64
CIBC Wood Gundy............................................. 2
Clearing Agencies...........................................33
CM Strategic................................................ 2
COD........................................................ 83
Code........................................................ 9
Collection Accounts........................................ 72
Commencement Date.......................................... 20
Common Stock....................................cover page, 24
Company.............................................cover page
Concentration Account...................................... 72
Consent Payment............................................ 78
Contractual Transfer Restrictions.......................... 68
Control Shares Act......................................... 63
CPI........................................................ 36
Eligible Institution....................................... 33
Event of Default *.....................................71, 73
Exchange................................................... 77
Exchange Act............................................... 87
Exchange Consideration............................. cover page
Exchange Offer..................................... cover page
Exchanging Noteholders............................. cover page
Expiration Date............................................ 32
Field Accounts............................................. 72
Holder..................................................... 86
Holder Stock............................................... 86
Initial Series Notes............................... cover page
Letter of Transmittal.............................. cover page
</TABLE>
I-2
<PAGE>
<TABLE>
<S> <C>
Material Assets *......................................... 73
Material Event of Default *............................... 73
Medallion Programs......................................... 33
Memorandum......................................... cover page
Minimum Exchange Condition......................... cover page
Minimum Tender Condition........................... cover page
NACO....................................................... 14
Net Cash Proceeds *....................................... 71
NOL........................................................ 83
NOLs........................................................ 9
Notice of Withdrawal....................................... 34
Offer to Purchase.................................. cover page
OID Regulations............................................ 80
Operating Account.......................................... 73
pay the Senior Subordinated PIK Notes...................... 42
Payment Blockage Period.................................... 42
Payment-In-Kind Notes...................................... 79
Permitted Pari Passu Debt *............................... 73
Post-Amendment Common Stock................................ 64
Purchase Price..................................... cover page
QSIPs...................................................... 79
Quarterly Report........................................... 21
Refinancing................................................ 60
Registration Default....................................... 70
Registration Rights Agreement.............................. 69
Resort Field Account....................................... 72
Restructuring Transaction.......................... cover page
RPI........................................................ 37
RPR......................................................... 8
SC Fundamental............................................. 18
Secondary Notes............................................ 41
Secured Note Indenture..................................... 70
Secured Notes...................................... cover page
Securities Act......................................... 19, 86
Senior Notes............................................... 14
Senior Secured Credit Facility............................. 25
Senior Secured Working Capital Facilities.................. 73
Senior Subordinated PIK Note Indenture..................... 40
Senior Subordinated PIK Notes.................. cover page, 24
Service................................................ 69, 77
Shelf Registration Statement............................... 69
Southmark.................................................. 14
Southmark Debt Securities.................................. 14
Special Committee.......................................... 17
Steering Committee.......................................... 2
</TABLE>
I-3
<PAGE>
<TABLE>
<S> <C>
Subsidiary Guarantee........................................ 4
Subsidiary Guarantors *................................... 71
Tender Offer....................................... cover page
Tendering Noteholders....................................... 1
TIN........................................................ 85
Trails..................................................... 14
Transactions............................................... 31
Transfer Restricted Common Stock........................... 87
Trust Indenture Act........................................ 40
Trustee.................................................... 70
TTN Alliance Program....................................... 36
Voting Stock *............................................ 71
Widely Distributed Public Offering *...................... 71
Wilderness Management...................................... 37
</TABLE>
* As defined in the Secured Note Indenture.
I-4
<PAGE>
EXHIBIT 2.7
USTRAILS INC.
USTRAILS INC. 12% SECURED NOTES DUE 1998
AND
ADDITIONAL SERIES 12% SECURED NOTES DUE 1998
LETTER OF TRANSMITTAL
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL TERMINATE AND THE WITHDRAWAL RIGHTS
WITH RESPECT THERETO WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON
FRIDAY, JULY 5, 1996, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
The undersigned acknowledges the receipt of the Private Placement
Memorandum, dated June 28, 1996 (the "Memorandum") of USTrails Inc., a
Nevada corporation (the "Company") and this Letter of Transmittal (the
"Letter of Transmittal"), which together constitute the Company's offer to
exchange its 12% Secured Notes Due 1998 (the "Initial Series Notes") and
Additional Series 12% Secured Notes Due 1998 (the "Additional Series Notes"
and collectively with the Initial Series Notes, the "Secured Notes") on the
terms and conditions set forth in the Memorandum and this Letter of
Transmittal in a private offering to certain holders of the Secured Notes
(the "Exchange Offer"), all of their Secured Notes for the following
consideration (the "Exchange Consideration"), in each case per $1,000 in
principal amount: $400 in cash (including $40.59 prepaid interest), $492 in
principal amount of Senior Subordinated Pay-In-Kind Notes due 2003 (the
"Senior Subordinated PIK Notes") and 45 shares of the common stock, par
value $.01 per share, of the Company (the "Common Stock"). In addition,
accrued interest of $60 per $1,000 in principal amount through July 15,
1996 on the Secured Notes will be paid in cash.
The undersigned is either: (a) the registered holder of the
Secured Notes described below, or (b) the person named on an omnibus
endorsement that a Clearing Agency has delivered to the Depositary that
designates the undersigned as the holder on the records of such Clearing
Agency of the Secured Notes described below. Pursuant to the terms and
conditions of the Exchange Offer, the undersigned hereby tenders to the
Company the Secured Notes described below in exchange for the Exchange
Consideration. The undersigned hereby represents and warrants (i) that it
has full power and authority to execute and deliver this Letter of
Transmittal and that it can transfer all right, title, and interest in and
to these Secured Notes and (ii) that it has not tendered and will not in
the future tender any of its Secured Notes to the Company pursuant to the
Company's tender offer for such notes more fully described in an Offer to
Purchase, dated June 5, 1996, as supplemented and amended. Upon the
Company's acceptance of any of these Secured Notes pursuant to the Exchange
Offer, the undersigned hereby transfers all right, title, and interest in
and to such accepted Secured Notes to the Company.
If the undersigned fails to complete the column below entitled
"Principal Amount of Secured Notes Tendered," the undersigned shall be
deemed to have tendered the entire principal amount of Secured Notes
represented by the Secured Note certificates tendered. If the undersigned
is tendering Secured Notes by book-entry transfer, however, it should only
complete the name and address block and the column below entitled
"Principal Amount of Secured Notes Tendered."
<PAGE>
NOTICE TO EXCHANGING NOTEHOLDERS
Each Exchanging Noteholder, by its execution of the Letter of Transmittal,
will acknowledge, represent to and agree with the Company as follows:
(1) It understands and acknowledges that the Transfer Restricted
Securities have not been registered under the Securities Act or any other
applicable securities law and may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the Securities Act or
any other applicable securities law, pursuant to an exemption therefrom and in
each case in compliance with the conditions for transfer set forth in paragraph
(4) below.
(2) It is an "accredited investor" within the meaning of Regulation D
under the Securities Act and is aware that any sale of Transfer Restricted
Securities to it will be made in reliance on Regulation D.
(3) It acknowledges that neither the Company nor any person representing
the Company has made any representation to it with respect to the Company or the
offering or sale of any Transfer Restricted Securities, other than in this
Memorandum which has been delivered to it and upon which it is relying in making
its investment decision with respect to the Transfer Restricted Securities. It
has had access to such financial and other information concerning the Company
and the Transfer Restricted Securities as it has deemed necessary in connection
with its decision to acquire any of the Transfer Restricted Securities,
including an opportunity to ask questions of and request information from the
Company.
(4) It is acquiring the Transfer Restricted Securities for its own
account, or for one or more investor accounts for which it is acting as a
fiduciary or agent, in each case for investment, and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act, subject to any requirement of law that the disposition of its
property or the property of such investor account or accounts be at all times
within its or their control and subject to its or their ability to resell such
Transfer Restricted Securities pursuant to any exemption from registration
available under the Securities Act. It agrees on its own behalf and on behalf of
any investor account for which it is acquiring the Transfer Restricted
Securities, and each subsequent holder of the Transfer Restricted Securities by
its acceptance thereof will agree, to offer, sell or otherwise transfer such
Transfer Restricted Securities only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, or (c) pursuant to any other available exemption from the registration
requirements of the Securities Act. Each purchaser acknowledges that the Company
will reserve the right prior to any offer, sale or other transfer of the
Transfer Restricted Securities pursuant to clause (c) above to require the
delivery of an opinion of counsel, certifications and/or information
satisfactory to the Company. Each Exchanging Noteholder acknowledges that each
certificate for Transfer Restricted Securities will contain a legend
substantially to the following effect:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
<PAGE>
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (C) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO IT.
(5) It agrees on its own behalf and on behalf of any investor account for
which it is acquiring any Transfer Restricted Securities (a "Holder") to place
all Common Stock held by such Holder, whether currently held, acquired pursuant
to the Exchange Offer, or hereafter acquired ("Transfer Restricted Common
Stock"), under the restrictions set forth in Article Nine of the By-Laws of the
Company, concerning restrictions placed on the Common Stock in order to preserve
the net operating losses of the Company for federal income tax purposes. For the
purposes hereof, Article Nine of the By-Laws of the Corporation shall be
interpreted to expand its restrictions to apply to all Pre-Amendment Common
Stock and Post-Amendment Common Stock (as such terms are defined in Article Nine
of the By-Laws) held now or hereafter acquired by the Holder, and Article Nine
shall not be construed for these purposes to restrict only Post-Amendment Common
Stock. Each Exchanging Noteholder acknowledges that each certificate
representing Transfer Restricted Common Stock will contain a legend
substantially to the following effect:
TRANSFER OF THESE SHARES 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. SUCH
RESTRICTIONS ARE SET FORTH IN THE COMPANY'S PRIVATE PLACEMENT
MEMORANDUM, DATED JUNE 28, 1996, RELATING TO A RESTRUCTURING
TRANSACTION, THE LETTER OF TRANSMITTAL RELATED THERETO AND
ARTICLE NINE OF THE BY-LAWS OF THE COMPANY. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY SUCH
RESTRICTIONS. THE COMPANY WILL FURNISH TO THE RECORD HOLDER OF
THIS CERTIFICATE, UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS, A COPY OF SUCH RESTRICTIONS.
Upon the request of the Company, each Holder will deliver certificates
representing the Transfer Restricted Common Stock currently held by such Holder
to the Company or its agents so that the foregoing legend may be affixed
thereto.
(6) It acknowledges that the Company and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and agreements
and agrees that, if any of the acknowledgments, representations and agreements
deemed to have been made by purchase of the Transfer Restricted Securities are
no longer accurate, it shall promptly notify the Company. If it is acquiring any
Transfer Restricted Securities as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with respect to
each such account and it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of each such account.
<PAGE>
<TABLE>
<CAPTION>
________________________________________________________________________________
DESCRIPTION OF THE SECURED NOTES
________________________________________________________________________________
<S> <C>
Name and Address of the Secured Notes Certificates Enclosed
Registered Holder of (Attach signed addendum, if necessary)
Secured Notes or the
Person Named on the
Omnibus Endorsement With
Respect Thereto
- --------------------------------------------------------------------------------
Principal Amount
of Secured Notes Principal Amount of
Certificate Represented Secured Notes
Number by Certificate Tendered
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
________________________________________________________________________________
Total
Principal Amount
________________________________________________________________________________
</TABLE>
[_] Check this box if you are not delivering Secured Note
certificates with this Letter of Transmittal, but are delivering
the Secured Notes to which this Letter of Transmittal relates to
the Depositary's account at Depository Trust Company, whose
nominee is Cede & Co., and give the number of the account thereat
from which you are transferring such Secured Notes.
Book-Entry Transfer Account No._______________________
[ ] Check this box if you are not delivering Secured Note
certificates with this Letter of Transmittal because you are a
person named as the holder of Secured Notes on a Clearing
Agency's omnibus endorsement and such Clearing Agency will
deliver the certificates representing your Secured Notes to the
Depositary.
[ ] Check this box if you are delivering this Letter of Transmittal
and any accompanying Secured Note certificates pursuant to a
Notice of Guaranteed Delivery previously delivered to the
Depositary and give below the date of such Notice of Guaranteed
Delivery and the name of the Eligible Institution that executed
it.
Date of Notice of Guaranteed Delivery:_____________________
Name of Eligible Institution:______________________________
<PAGE>
- ------------------------------------ ----------------------------------------
SPECIAL PAYMENT SPECIAL DELIVERY
INSTRUCTIONS INSTRUCTIONS
Check Payable to a Designee Check Payable to the Undersigned
- ------------------------------------ ----------------------------------------
If the undersigned desires the If the undersigned desires the
Depositary to issue the check Exchange Consideration to be
for the Cash Consideration and delivered to someone other than the
the certificates for Common undersigned or to the undersigned
Stock and Senior Subordinated at an address other than the address
PIK Notes to be issued in the shown hereon, please give such name
name of someone other than the and address below:
undersigned (the"Designee"),
please give the Designee's name,
address, and telephone
number below:
Name:___________________________ Name:_______________________________
Address:________________________ Address:____________________________
________________________________ ____________________________________
________________________________ ____________________________________
________________________________ ____________________________________
Telephone No:___________________
- ------------------------------------ ----------------------------------------
Please complete, sign, and date the "Signature" box on the next page. Your
signature must appear exactly as it appears on the Secured Note certificates
described above or the omnibus endorsement, respectively. If you are not an
Eligible Institution, you must have your signature guaranteed by an Eligible
Institution that is a member of: (a) the Securities Transfer Agents Medallion
Program, (b) the New York Stock Exchange Medallion Signature Program, or (c) the
Stock Exchange Medallion Program (collectively, the "Medallion Programs").
An Eligible Institution is: (a) a firm that is a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc., or (b) a commercial bank or trust company that has an office or
correspondent in the United States of America.
When the Secured Notes are held by joint tenants, both joint tenants should
sign. When signing as administrator, attorney-in-fact, executor, fiduciary,
guardian, officer, trustee, or other person acting in a representative capacity,
please give your full title and deliver evidence to the Depositary of your
authority to execute this Letter of Transmittal. If a corporation, an authorized
officer should sign in the name of the corporation. If a partnership, a general
partner should sign in the name of the partnership.
<PAGE>
________________________________________________________________________________
SIGNATURE
Name: ________________________________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
Telephone No.: __________________________________________________
Signature: ______________________________________________________
Title: ______________________________________________________
Date: ______________________________________________________
SIGNATURE GUARANTEE
Name of Eligible Institution: ___________________________________
Address: ________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
Telephone No.: __________________________________________________
Authorized Signature: ___________________________________________
Date: ___________________________________________________________
________________________________________________________________________________
<PAGE>
INSTRUCTIONS AND TERMS
1. OFFER TO PURCHASE. This Letter of Transmittal is subject to the
terms and conditions set forth in the Memorandum.
2. BINDING AGREEMENT. The delivery of this Letter of Transmittal
and the Secured Notes to which it relates constitutes a binding agreement by the
person executing this Letter of Transmittal to sell to the Company any of such
Secured Notes that the Company accepts.
3. TENDER IRREVOCABLE. Except as discussed in the Memorandum, the
tender of Secured Notes pursuant to the Exchange Offer is irrevocable.
4. NO CONDITIONAL TENDERS. Any alternate, conditional, or
contingent tenders of Secured Notes shall be invalid and rejected.
5. PERSONS AUTHORIZED TO EXECUTE THIS LETTER OF TRANSMITTAL. To
effectuate a valid tender of Secured Notes, the Depositary must receive a
properly completed Letter of Transmittal with respect thereto. Only a registered
holder of Secured Notes on the Secured Note register or a person registered as
the holder of Secured Notes on the records of a Clearing Agency that delivers an
omnibus endorsement to the Depositary may execute a Letter of Transmittal. Such
a person (referred to herein as a Secured Noteholder) must complete the Letter
of Transmittal in accordance with the instructions contained herein and in the
Memorandum and deliver it along with the certificates for such Secured Notes and
any other required documents to the Depositary on or before the Expiration Date.
A person that is registered as the holder of Secured Notes on the records of a
Clearing Agency should ensure that such Clearing Agency delivers the physical
certificates representing such Secured Notes to the Depositary or transfers such
Secured Notes to the Depositary by book-entry transfer on or before the
Expiration Date. A beneficial holder of Secured Notes that is not the registered
holder thereof as described above should instruct the bank, broker, custodian,
fiduciary, nominee, securities dealer, trust company, or other person that is
the registered holder thereof to tender such Secured Notes on its behalf if such
beneficial holder desires to tender its Secured Notes pursuant to the Exchange
Offer.
6. GUARANTEE OF SIGNATURE. Unless the person executing this Letter
of Transmittal is an Eligible Institution, such person must have its signature
guaranteed by an Eligible Institution that is a member of a Medallion Program.
7. SECURED NOTE CERTIFICATES. The certificates for the Secured
Notes to which this Letter of Transmittal pertains must accompany this Letter of
Transmittal unless: (a) the person executing this Letter of Transmittal is
registered as the holder of such Secured Notes on the records of a Clearing
Agency that delivers an omnibus endorsement to the Depositary and such Clearing
Agency delivers such Secured Note certificates to the Depositary, or (b) the
person executing this Letter of Transmittal has caused the transfer of such
Secured Notes to the Depositary pursuant to the book-entry transfer procedures
described below.
8. BOOK-ENTRY TRANSFER. The Depositary has requested Depository
Trust Company and its nominee Cede & Co. to establish a Secured Note book-entry
transfer account for the Depositary. Any financial institution that participates
in the Book-Entry Transfer Facility's system may make book-entry delivery of
Secured Notes by causing the Book-Entry Transfer Facility to transfer such
Secured Notes into the Depositary's account thereat. Such Secured Noteholders,
however, must still deliver a properly completed Letter
<PAGE>
of Transmittal and any other required documents to the Depositary on or before
the Expiration Date. The Company anticipates using the Automated Tender Offer
Program (ATOP) system to determine the principal amount of Secured Notes
tendered pursuant to the Offer from time to time.
9. GUARANTEED DELIVERY. If a Secured Noteholder cannot deliver a
Letter of Transmittal or its Secured Note certificates to the Depositary on or
before the Expiration Date, such Secured Noteholder may tender its Secured Notes
through an Eligible Institution that guarantees such Secured Noteholder's
delivery thereof. To effect such a tender, the Eligible Institution must deliver
a Notice of Guaranteed Delivery substantially in the form accompanying the
Memorandum to the Depositary on or before the Expiration Date. Within three
business days after delivery thereof, the Eligible Institution must deliver to
the Depositary a properly completed Letter of Transmittal along with the Secured
Note certificates to which it relates or cause the transfer of such Secured
Notes into the Depositary's account at the Book-Entry Transfer Facility.
10. METHOD OF DELIVERY. You should return this Letter of Transmittal
and the related Secured Note certificates to the Depositary to the appropriate
address on the final page herein. The method of delivery is at your sole risk
and option. All documents shall be deemed delivered only when the Depositary
actually receives them. The Depositary recommends that you use certified or
registered mail and allow sufficient time to insure receipt on or before the
Expiration Date.
11. TRANSFER TAXES. The Secured Noteholders will generally not be
responsible for the payment of any transfer or other similar taxes with respect
to the transfer of their Secured Notes to the Company pursuant to the Offer. Any
Secured Noteholder that has named a Designee, however, will be responsible for
paying any such taxes that the naming of a Designee causes, which the Depositary
will deduct from the amount otherwise payable thereto.
12. RETURN OF UNACCEPTED SECURED NOTES. With respect to tendered
Secured Notes that the Company does not accept, as soon as possible after
determining which Secured Notes the Company has accepted, the Depositary will
return the Secured Note certificates for such unaccepted Secured Notes to the
registered holder thereof or redeliver such unaccepted Secured Notes by book-
entry transfer to the Book-Entry Transfer Facility account from which the
Secured Noteholder caused their delivery. If a Secured Note certificate
represents both accepted and unaccepted Secured Notes, the Depositary will cause
the cancellation of such certificate and the issuance of a new certificate for
the unaccepted Secured Notes to the registered holder of the original
certificate.
13. SECURED NOTES UNENCUMBERED. The person executing this Letter of
Transmittal hereby represents and warrants to the Company that the Company will
acquire good, marketable, and unencumbered title to any accepted Secured Notes
tendered by the undersigned, free and clear of any charge, claim, encumbrance,
lien, or restriction.
14. FURTHER ASSURANCES. The person executing this Letter of
Transmittal hereby agrees to execute and deliver to the Depositary any
additional documents necessary or desirable to perfect the transfer to the
Company of the Secured Notes described above that the Company accepts pursuant
to the Exchange Offer.
15. SUCCESSORS. All authority conferred or agreed to be conferred in
this Letter of Transmittal and any obligation hereunder of the person executing
it shall be binding upon such person's administrators, assigns, heirs,
representatives, and successors, and shall not be affected by, and shall
survive, the death or incapacity of such person.
<PAGE>
16. SURVIVABILITY. The terms of this Letter of Transmittal shall
survive the delivery of the amounts owed in exchange for the transfer of the
Secured Notes described hereon that the Company accepts pursuant to the Offer.
17. INADEQUATE SPACE. If the space provided herein is inadequate for
any purpose, please attach hereto a separate signed addendum.
18. DEPOSITARY AS AGENT. The person executing this Letter of
Transmittal hereby irrevocably appoints the Depositary as the undersigned's
attorney-in-fact and proxy, with full power of substitution, with respect to any
tendered Secured Notes that the Company accepts pursuant to the Exchange Offer.
This power of attorney and proxy shall be deemed to be irrevocable and coupled
with an interest. Upon acceptance of such Secured Notes, the undersigned hereby
revokes any and all prior powers of attorney and proxies granted with respect
thereto.
19. LOST SECURED NOTE CERTIFICATES. If you desire to tender your
Secured Notes but have lost your Secured Note certificates or someone has
destroyed, mutilated, or stolen them, please contact the Depositary concerning
the procedures for obtaining replacement certificates.
20. FURTHER INFORMATION. Please direct all questions and requests
for assistance with respect to this Letter of Transmittal to the Depositary at
the address and telephone number set forth below.
21. COMPANY'S DETERMINATION FINAL AND BINDING. The Company's
interpretation of the terms and conditions of the Exchange Offer is final and
binding. The Company, in its sole discretion, will determine all questions
concerning acceptance, form, time of receipt, validity, withdrawal, and any
other matter with respect to the Exchange Offer. The Company reserves the right
to reject any or all tenders of Secured Notes that it determines are in
inappropriate form or the acceptance or payment for which may be unlawful. The
Company also reserves the right to waive any defect or irregularity in any
tender with respect to any particular Secured Notes or any particular Secured
Noteholder. A tender of Secured Notes will not be validly made until all defects
and irregularities have been cured or expressly waived. Neither the Company nor
the Depositary, however, shall be obligated to notify a Secured Noteholder of
any defects or irregularities in its tender.
22. DELIVERY TO THE DEPOSITARY. Delivery of a completed Letter of
Transmittal and any related Secured Note certificates or other documents to the
Depositary at any address other than the addresses set forth below shall be an
invalid delivery thereof. Moreover, the transmission to the Depositary of any
document to a facsimile number other than the facsimile number set forth below
shall also be an invalid delivery thereof.
TAX INFORMATION
Under the federal income tax laws, the person executing this Letter of
Transmittal must provide the Depositary with such person's correct Taxpayer
Identification Number ("TIN") on a Substitute Form W-9. For your convenience, a
Substitute Form W-9 that you may complete is set forth below. If the person is
an individual, such person's TIN is such person's social security number. If
Secured Note certificates are held in more than one name, please consult the
accompanying Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional information on which number to report.
<PAGE>
On the Substitute Form W-9, the person executing this Letter of
Transmittal must certify under penalties of perjury that: (a) such person's TIN
is correct, and (b) such person is not subject to backup withholding, either
because the Internal Revenue Service (the "Service") has not notified such
person that such person is subject to backup withholding as a result of a
failure to report interest or dividends or because the Service has notified such
person that such person is no longer subject to backup withholding.
If the Service has notified a person that such person is subject to
backup withholding because of underreporting of interest or dividends, such
person must cross out item (2) in the "Certification" section of the Substitute
Form W-9. If subsequently, however, the Service notifies such person that such
person is no longer subject to backup withholding, such person should not cross
out item (2).
If the person executing this Letter of Transmittal does not provide
the Company with such person's correct TIN, such person may be subject to a $50
penalty that the Service imposes. Failure to comply truthfully with the backup
withholding certification requirements may also result in the imposition of
criminal and civil fines and penalties. Moreover, if the person executing this
Letter of Transmittal does not provide the Depositary with such person's correct
TIN, or if such person fails to make the certifications discussed above, the
payments that the Depositary makes to such person may be subject to backup
withholding.
Exempt persons, which include all corporations and certain foreign
individuals, are not subject to the backup withholding and reporting
requirements. An exempt person should furnish its TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign and date the form. To satisfy the
Depositary that a foreign person qualifies as an exempt recipient, such person
must also submit to the Depositary with this Letter of Transmittal a Form W-8,
Certificate of Foreign Status, signed under penalties of perjury, attesting to
such person's foreign status. Please consult the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for information on persons
who may be exempt.
If backup withholding applies, the Depositary will be required to
withhold 31% of any payments made to the person executing this Letter of
Transmittal or its Designee. Backup withholding is not an additional tax. The
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If backup withholding results in an overpayment of
taxes, such person may obtain a refund from the Service.
Any person required to provide a TIN who has not been issued a TIN and
has applied for a TIN, or intends to apply for a TIN in the near future, should
write "Awaiting TIN" on the line of the Substitute Form W-9 requiring a TIN. If
the Depositary is not provided with a TIN within 60 days, the Depositary will be
required to withhold 31% of all subsequent reportable payments until such person
provides the Depositary with such person's TIN. Additionally, during this 60 day
period the Depositary will be required to comply with certain interim backup
withholding requirements, which may require the Depositary to withhold 31% of
any payments made during such period, subject to the refunding of such amounts
if the Depositary receives the certified TIN before the end of the period.
Failure to sign, date, and complete Parts I and II of the following
Substitute Form W-9 will result in backup withholding of 31% of any payments
made to you or your Designee.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
___________________________________________________________________________________________________________________________
SUBSTITUTE PART I - PLEASE PROVIDE YOUR TAX-PAYER Social Security Number
FORM W-9 IDENTIFICATION NUMBER IN THE BOX AT
RIGHT AND CERTIFY BY SIGNING AND ________________________________________
DATING BELOW. OR
Employer Identification Number
______________________________________________________________________________________________
DEPARTMENT OF THE PART II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING, SEE THE TAX
TREASURY, INTERNAL INFORMATION ABOVE AND GUIDELINES FOR CERTIFICATION OF TAXPAYER
REVENUE SERVICE PAYER'S IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 ENCLOSED HEREWITH AND
REQUEST FOR TAXPAYER COMPLETE AS INSTRUCTED HEREIN AND THEREIN.
IDENTIFICATION NUMBER (TIN)
__________________________________________________________________________________________________________________________
CERTIFICATION - Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number or a taxpayer identification number
has not been issued to me and either: (a) I have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service Center or Social Security Administration
office, or (b) I intend to mail or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter
will be withheld until I provide a number.
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, (b) I have not
been notified by the Service that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the Service has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTION - You must cross out item (2) above if you have been notified by the Service that you are
subject to backup withholding because of underreporting interest or dividends on your tax return unless you received a
subsequent notification from the Service stating that you are no longer subject to backup withholding.
__________________________________________________________________________________________________________________________
SIGNATURE: DATE:
__________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
Please deliver this completed Letter of Transmittal and the related
Secured Note certificates on or before the Expiration Date to:
FLEET NATIONAL BANK,
AS DEPOSITARY
<S> <C> <C>
By Facsimile: By Registered/Certified Mail or Confirm by Telephone:
Overnight Courier:
(860) 986-7908 Fleet National Bank (860) 986-1271
Attention: Corporate Trust Operations Division
Patricia Williams 777 Main Street, CTMO 0224
Hartford, CT 06115
By Hand in New York:
Shawmut Trust Company
c/o First Chicago Trust Company of New York
14 Wall Street, 8th Floor, Window 2
New York, NY 10015
</TABLE>
DA961740.027/8+
<PAGE>
Exhibit 2.8
SUPPLEMENT TO PRIVATE PLACEMENT MEMORANDUM
USTrails Inc.
July 15, 1996
Certain Holders of USTrails Inc. 12% Secured Notes
Due 1998 and Additional Series 12% Secured Notes
Due 1998 (collectively, the "Secured Notes")
Re: Private Placement Memorandum of USTrails Inc. dated June 28, 1996
Ladies and Gentlemen:
The following information amends and supplements the Private Placement
Memorandum dated June 28, 1996 ("Memorandum") of USTrails Inc. (the "Company")
in connection with its private offer to exchange, on the terms and conditions
set forth therein and the related Letter of Transmittal, Secured Notes for, in
each case per $1,000 in principal amount: $400 in cash (including $40.59
prepaid interest), $492 in principal amount of Senior Subordinated Pay-In-Kind
Notes due 2003 and 45 shares of Common Stock, plus accrued interest of $60 per
$1,000 in principal amount through July 15, 1996 in cash. Capitalized terms
used herein and not otherwise defined have the meaning given them in the
Memorandum.
CONTINUING NEGOTIATIONS - SENIOR SECURED CREDIT FACILITY
The Company is working with Foothill Capital Corporation ("Foothill")
to obtain by July 17, 1996 all of the new senior secured financing required for
the Company to consummate the Restructuring Transaction. Preparation for a
closing is under way subject to final credit approval by Foothill. The Company
has previously disclosed that it executed a letter of intent with Foothill under
which Foothill proposed to lead the Senior Secured Credit Facility for use in
connection with the Restructuring Transaction.
The senior secured credit facility proposed by Foothill (the "Foothill
Facility") will be a $38 million facility, of which $32 million is anticipated
to be drawn at closing, and will bear interest at the prime rate plus 2-3/4% per
annum. In addition, upon termination of the facility, the Company will be
required to pay Foothill a fee sufficient to cause Foothill's internal rate of
return on actual outstandings under the Foothill Facility to equal 14.5%. The
Foothill Facility will require that interest payments on the Senior Subordinated
PIK Notes be made in kind while the Foothill Facility is outstanding.
Foothill has required as a condition to funding the Foothill Facility
that the Company reorganize its subsidiary structure. Pursuant to such
reorganization, Trails will be merged into the Company and certain wholly-owned
subsidiaries of NACO will be merged into NACO. The Company's obligations under
the Senior Subordinated PIK Notes will be unconditionally guaranteed, jointly
and severally, by all surviving Subsidiaries of the Company, other than the
Company's immaterial utility subsidiary.
<PAGE>
TERMS OF THE RESTRUCTURING TRANSACTION
On July 15, 1996, an interest payment aggregating approximately $6.1
million is payable to holders of record on July 1, 1996 and a mandatory
redemption of approximately $18.6 million in principal amount is also payable.
In light of the pending restructuring, the Company has determined to withhold
such payments, but in consequence thereof intends on the date the Restructuring
Transaction is consummated to pay interest at the applicable default rate,
equaling $0.39 per day per $1,000 in principal amount of Secured Notes, accruing
from July 16, 1996 to the date of consummation of the Restructuring Transaction
in respect of Secured Notes accepted by the Company for exchange. In addition,
the Company intends on the date of consummation of the Restructuring Transaction
to pay the July 15, 1996 interest payment, plus interest at the applicable
default rate equaling $0.02 per day per $1,000 in principal amount of Secured
Notes, to the holders of record on July 1, 1996. The failure to make the
interest payment and the mandatory redemption payment will be an Event of
Default under the Secured Note Indenture, and there can be no assurance that the
Restructuring Transaction will be consummated.
The Exchange Offer has been extended to and is now scheduled to expire
at 4:00 p.m., Eastern time, Tuesday, July 16, 1996. The Exchange Offer was
previously scheduled to expire at 4:00 p.m., Friday, July 12, 1996, the
expiration date of the Tender Offer. As of 4:00 p.m. eastern time, Friday July
12, 1996, Secured Notes sufficient to satisify the Minimum Exchange Condition
had been delivered for exchange pursuant to the Exchange Offer. The Tender
Offer expired according to its terms at 4:00 p.m., Eastern time, Friday, July
12, 1996. Secured Notes aggregating approximately $10,044,000 in principal
amount had been tendered pursuant to the Tender Offer as of the expiration and
as a consequence the condition to the Exchange Offer and the Tender Offer that
$10 million in aggregate principal amount of Secured Notes must be validly
tendered and not withdrawn prior to the expiration date as a condition of the
consummation of the Exchange Offer has been fulfilled. The Exchange Offer and
Tender Offer remain subject to all other conditions set forth in the Memorandum,
as supplemented. The Company has waived the requirement that Exchanging
Noteholders not participate in the redemption of unexchanged and untendered
Secured Notes.
NET OPERATING LOSS CARRYFORWARDS; TRANSFER RESTRICTIONS
Since distribution of the Memorandum, the Company has been made aware
of certain transactions that have occurred or will shortly occur with respect to
its Common Stock and the Secured Notes involving its stockholders and Exchanging
Noteholders. As a result of these transactions, the Company believes that an
affiliate of CM Strategic should also be treated as beneficially owning at least
4.75% of the Company's Common Stock after consummation of the Exchange Offer.
Consequently, the Company now expects that the issuance of Common Stock in the
Exchange Offer will result in a change in ownership for purposes of Section 382
of as much as 45%, less than the 50% change required to cause an "ownership
change." The increased change in ownership as a result of approval and
consummation of the Exchange Offer increases further the possibility of
triggering an ownership change of the Company through the regular trading of the
Common Stock.
Because of this increased risk, the Company seeks to extend the
Contractual Transfer Restrictions to also restrict any shares of Common Stock
that an Exchanging Noteholder purportedly acquires after the consummation of the
Restructuring Transaction, in addition to such Exchanging Noteholders' existing
shares and shares acquired in the Exchange Offer. The By-Law Restrictions and
the Contractual Transfer Restrictions will therefore extend to any shares of
Common Stock that an Exchanging Noteholder purportedly acquires after the
consummation of the Restructuring Transaction and that are not already subject
to such restrictions.
2
<PAGE>
As a consequence, paragraph (5) of "Notice to Exchanging Noteholders"
in the Private Placement Memorandum is hereby supplemented as follows:
Each Holder agrees that the defined term "Holder Stock" for
purposed of the Exchange Offer shall refer to all Common Stock now
held or hereafter purportedly acquired by such Holder, and that Holder
Stock shall be subject to the restrictions set forth in Article Nine
of the By-Laws of the Company to the same extent as if such Holder
Stock constituted "Post-Amendment Common Stock" (as such terms are
defined in Article Nine of the By-Laws).
Finally, as a result of the increased risk of an ownership change, the
By-Law Restriction and the Contractual Transfer Restrictions will no longer
exempt any transfer so long as the transfer does not create a greater than 48%
ownership change. Rather, the By-Law Transfer Restrictions and the Contractual
Transfer Restrictions will exempt transfers only if the transfers do not result
in a net increase in the amount of ownership change.
The By-Law Restriction and Contractual Transfer Restrictions may have
the effect of reducing the liquidity of the Common Stock, and reducing the price
at which the Common Stock may trade and otherwise affect the marketability of
the Common Stock by discouraging acquisitions of large blocks of Common Stock.
Acceptance by an Exchanging Noteholder of the Exchange Consideration
will be deemed to evidence the agreement of such Exchanging Noteholder to the
additional Contractual Transfer Restrictions and By-Law Restriction described in
this Supplement.
INTERESTS OF MANAGEMENT AND OTHERS
William J. Shaw Employment Agreement. As previously disclosed,
consummation of the Restructuring Transaction would adversely effect the one-
time bonus to which Mr. Shaw is entitled under his employment agreement with the
Company. In order to ensure that he will receive the material benefit of his
original agreement, since the date of the Memorandum Mr. Shaw has exercised his
right to receive such bonus. Mr. Shaw is entitled to a payment of $1,270,589,
of which $952,927, representing 75%, is payable immediately. The additional
$317,662 will be payable on May 11, 1997, provided that Mr. Shaw is employed by
the Company on that date. In addition, the Board of Directors has agreed in the
event the Restructuring Transaction is consummated to grant Mr. Shaw an option
to purchase the number of shares of Common Stock representing 9% of the
outstanding Common Stock after the Restructuring Transaction. The exercise
price would be equal to the average closing bid quotation for the Common Stock
as quoted through the NASD OTC Bulletin Board and National Quotation Bureau's
Pink Sheets for the ten Business Days immediately following the date the
Restructuring Transaction is consummated, but in any event no less than $0.50
per share or more than $1.00 per share. The options granted to Mr. Shaw will be
exercisable immediately, in full or in part, for a term of ten years, while Mr.
Shaw is in the employ of the Company and for a 90 day period thereafter.
However, Mr Shaw will not be permitted to exercise the options if, and to the
extent that, such exercise would cause an increase in the amount of "ownership
change" within the meaning of Section 382 of the Code, in which event the term
of the option will be extended, if necessary, such that Mr. Shaw will have at
least a 90 day period after such limitations cease within which to exercise the
options.
In the event the Restructuring Transaction is not consummated, The
Board of Directors and Mr. Shaw intend to renegotiate the terms of Mr. Shaw's
employment agreement.
SC Fundamental Common Stock Transfer. SC Fundamental and CM Strategic have
informed the Company that they intend for CM Strategic, prior to acceptance by
the Company of
3
<PAGE>
Secured Notes in the Exchange Offer, to acquire a sufficient number of shares
from SC Fundamental to permit SC Fundamental to receive the Exchange
Consideration without violating certain provisions of the NGCL. The Company has
been advised that, in the event the Restructuring Transaction is consummated, CM
Strategic intends to sell to SC Fundamental approximately $1 million in
principal amount of Senior Subordinated PIK Notes. After giving effect to such
transfers and consummation of the Restructuring Transaction (assuming
satisfaction of the Minimum Exchange Condition), CM Strategic would beneficially
own approximately 42% of outstanding Common Stock and approximately $10.3
million (representing approximately 25.7%) in principal amount of Senior
Subordinated PIK Notes.
The Secured Note Indenture provides that upon a "Change of Control" the
Company must make an offer to repurchase all of the Secured Notes within a
certain period of time thereafter. A Change of Control is defined to include
the acquisition by any Person or Group (as defined in the Secured Note
Indenture) of more than 50% of the voting power of the Voting Stock (as defined
in the Secured Note Indenture) of the Company. If the acquisition by CM
Strategic of all of the SC Fundamental shares is effected and the Restructuring
Transaction is not consummated, the Company may be obligated to offer to
repurchase all of the Secured Notes at 100% of the principal amount thereof and,
if it were so obligated, it would not have the financial resources available to
do so.
4
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
USTRAILS INC.
ARTICLE ONE
OFFICES
1.1 Registered Office and Agent. The corporation shall maintain a
---------------------------
registered office within the State of Nevada and shall have a registered agent
whose business office is identical with such registered office.
1.2 Other Offices. In addition to its registered office, the
-------------
corporation may have offices at such other place or places, within or
without the State of Nevada, as the Board of Directors may from time to time
appoint or as the business of the corporation may require or make desirable.
ARTICLE TWO
STOCKHOLDERS' MEETINGS
2.1 Place of Meetings. Meetings of the stockholders may be held at any
-----------------
place within or without the State of Nevada as set forth in the notice thereof
or, in the event of a meeting held pursuant to waiver of notice, as set forth in
the waiver, or if no place is so specified, at the office of the corporation in
the City of Dallas, Texas.
2.2 Annual Meetings. The annual meeting of stockholders shall be held
---------------
on a date and at a time following the end of the corporation's fiscal year as
may be determined by the Board of Directors, for the purpose of electing
directors and transacting any and all business that may properly come before the
meeting.
2.3 Special Meetings. Special meetings of the stockholders may be called
----------------
at any time by the President, the Secretary or a majority of the directors.
Special meetings of the stockholders shall be called by the corporation upon the
written request of the holders of fifty percent (50%) or more of all the shares
of capital stock of the corporation entitled to vote in an election of
directors.
2.4 Notice of Meetings. Unless waived as contemplated in section 5.2 or
------------------
as provided in this Section 2.4, a written or printed notice of each
stockholders' meeting stating the place, date and time of the meeting, and the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) days nor more than sixty (60) days before the date thereof, either
personally or by postage prepaid mail, by or at the direction of the President,
a Vice President, the Secretary, or the director or persons calling the meeting,
to each stockholder of record entitled
1
<PAGE>
to vote at such meeting. Attendance at the meeting, either in person or by
proxy, for any purpose other than to object to the transaction of business,
shall constitute waiver of the requirement of notice of the meeting.
2.5 Business for Stockholders' Meetings.
-----------------------------------
(a) Business at Annual Meetings. Only business properly brought
---------------------------
before an annual meeting of the stockholders may be transacted at such meeting.
To be properly brought before an annual meeting, business must be (i) brought by
or at the direction of the Board of Directors, or (ii) brought before the
meeting by a stockholder pursuant to written notice thereof, in accordance with
Section 2.5(b) hereof, and received by the Secretary not fewer than sixty (60)
nor more than ninety (90) days prior to the date determined pursuant to
Section 2.2 hereof for such annual meeting (or if less than sixty (60) day's
notice of the date of the annual meeting is given or made to the stockholders,
not later than the tenth day following the day on which the notice of the date
of the annual meeting was mailed). Any stockholder notice shall set forth
(i) the name and address of the stockholder proposing such business; (ii) a
representation that the stockholder is entitled to vote at such meeting and a
statement of the number of shares of the corporation which are beneficially
owned by the stockholder; (iii) a representation that the stockholder intends to
appear in person or by proxy at the meeting propose such business; and (iv) as
to each matter the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting; the
reasons for conducting such business at the meeting, the language of the
proposal (if appropriate), and any material interest of the stockholder in such
business. No business shall be conducted at any annual meeting of stockholders
except in accordance with this Section 2.5(a). If the facts warrant, the Board
of Directors, or the chairman of an annual meeting of stockholders, may declare
that business was not properly brought before the meeting in accordance with the
provisions of this Section 2.5(a) and, if it is so determined, any such business
not properly brought before the meeting shall not be transacted. The procedures
set forth in this Section 2.5(a) for business to be properly brought before an
annual meeting by a stockholder are in addition to, and not in lieu of, the
requirements set forth in Rule 14a-8, promulgated under Section 14 of the
Securities Exchange Act of 1934, or any successor provision.
(b) Business at Special Meetings. At any special meeting of the
----------------------------
stockholders, only such business as is specified in the notice of such special
meeting given by or at the direction of the person or persons calling such
meeting, in accordance with Section 2.3 hereof, shall come before such meeting.
(c) Notice to Corporation. Any written notice required to be
---------------------
delivered by a stockholder to the corporation pursuant to Section 2.3, 2.5(a) or
2.5(b) hereof must be given, either by personal delivery or by registered or
certified mail, postage prepaid, to the Secretary at the corporation's principal
executive office.
2.6 Quorum. At all meetings of the stockholders, a majority of the
------
holders of the shares outstanding and entitled to vote, represented in Person or
by proxy, shall constitute a quorum. If a quorum is present, a majority of the
shares outstanding and entitled to vote which
2
<PAGE>
are represented at any meeting shall determine any matter coming before the
meeting unless a different vote is required by statute, by the Articles of
Incorporation or by these Bylaws. The stockholders at a meeting at which a
quorum is once present may continue to transact business at the meeting or at
any adjournment thereof, notwithstanding the withdrawal of enough stockholders
to leave less than a quorum.
2.7 Voting of Shares. Each outstanding share having voting rights shall
----------------
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. Voting on all matters shall be by voice vote or by show of hands
unless any qualified voter, prior to the voting on any matter, demands vote by
ballot, in which case each ballot shall state the name of the stockholder voting
and the number of shares voted by him, and if such ballot be cast by proxy, it
shall also state the name of such proxy.
2.8 Proxies. A stockholder entitled to vote pursuant to Section 2.7 may
-------
vote in person or by proxy executed in writing by the stockholder or by his
attorney in fact. A proxy shall not be valid after six (6) months from the date
of its execution, unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is to continue in
force, which in no event shall exceed seven (7) years from the date of its
execution. If the validity of any proxy is questioned it must be submitted to
the secretary of the stockholders' meeting for examination or to a proxy officer
or committee appointed by the person presiding at the meeting. The secretary of
the meeting or, if appointed, the proxy officer or committee shall determine the
validity or invalidity of any proxy submitted and reference by the secretary in
the minutes of the meeting to the regularity of a proxy shall constitute prima
facie evidence of the facts stated in the minutes for the purpose of
establishing the presence of a quorum at such meeting and for all other
purposes.
2.9 Presiding Officer. The Chairman of the Board, the President, a Vice
-----------------
President or a director selected by the Board of Directors in that order, shall
serve as the chairman of every stockholders' meeting unless some other person is
elected to serve as chairman by a majority vote of the shares represented at the
meeting. The chairman shall appoint such persons as he deems required to assist
with the meeting.
2.10 Adjournments. When a quorum is once present to organize a meeting,
------------
any meeting of the stockholders may be adjourned by the holders of a majority of
the voting shares represented at the meeting to reconvene at a specific time and
place notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. It shall not be necessary to give notice of the reconvened meeting and
of the business to be transacted to all of the stockholders. At any such
reconvened meeting any business may be transacted which could have been
transacted at the meeting which was adjourned.
2.11 Action of Stockholders Without a Meeting. Except as limited by the
----------------------------------------
Nevada General Corporation Law, any action required by the Nevada General
Corporation Law to be taken at a meeting of the stockholders, or any action
which may be taken at a meeting of the stockholders, may be taken without a
meeting if written consent, setting forth the action so taken, shall be signed
by stockholders holding at least a majority in interest of the shares entitled
3
<PAGE>
to vote with respect to the subject matter thereof. Such consent shall have the
same force and effect as a vote of a majority of the stockholders entitled
to vote at a meeting called for the purpose of considering the action
authorized. Notwithstanding any of the foregoing to the contrary, if action of
greater than a majority of stockholders present at a meeting of stockholders of
the corporation is required with respect to a particular action by the Nevada
General Corporation Law, the Articles of Incorporation of the corporation or
these Bylaws, such action may be taken without a meeting if written consent,
setting forth the action so taken, shall be signed by the stockholders holding
requisite number of shares of stock required to authorize such action, provided
--------
that such number of shares may not be less than a majority of the outstanding
shares entitled to vote on such matter.
ARTICLE THREE
THE BOARD OF DIRECTORS
3.1 General Powers. The business and affairs of the corporation shall be
--------------
managed by the Board of Directors. In addition to the powers and authority
expressly conferred upon it by these Bylaws, the Board of Directors may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by law, by any lawful agreement among stockholders of the corporation, by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
3.2 Number, Election and Term of Office. The number of directors of the
-----------------------------------
corporation shall be as determined from time to time by resolution, duly
adopted, of either the stockholders or the Board of Directors. Absent such
resolution of the stockholders or Board of Directors, the number of directors of
the corporation shall be seven (7). In the event the number of directors is
decreased, such decrease shall not shorten the term of an incumbent director.
Except as provided herein and in Section 3.4, the directors shall be elected at
each annual meeting of the stockholders, or at a special meeting of stockholders
called for purposes that include the election of directors, in either case by
the affirmative vote of the holders of a majority of the shares represented at
the meeting. Each director, except in case of death, resignation, retirement,
disqualification, or removal, shall serve until the next succeeding meeting at
which directors are elected and thereafter until his successor shall have been
elected and has qualified.
3.3 Removal. The entire Board of Directors or any individual director
-------
may be removed from office with or without cause by the affirmative vote of the
holders of two-thirds (2/3) of all of the shares entitled to vote at an election
of directors. Removal action may be taken at any stockholders' meeting with
respect to which notice of such purpose has been given, and a removed director's
successor may be elected at the same meeting to serve the unexpired term.
3.4 Vacancies. A vacancy occurring in the Board of Directors, including
---------
vacancies occurring by reason of an increase in the number of directors or by
reason of the resignation of a director, but not including vacancies occurring
by reason of removal of a director, may be filled for the unexpired term, and
until the stockholders shall have elected a successor, by the affirmative vote
of a majority of the directors remaining in office though less than a quorum of
the
4
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Board of Directors.
3.5 Compensation. Directors may receive such compensation for their
------------
services as directors as may from time to time be fixed by vote of the Board of
Directors including, but not limited to a fixed fee and expenses of attendance
for attendance at each meeting. A director may also serve the corporation in a
capacity other than that of director and receive compensation, as determined by
the Board of Directors, for services rendered in such other capacity.
3.6 Committees of the Board of Directors. The Board of Directors by
------------------------------------
resolution adopted by a majority of the full Board of Directors may designate
from among its members an executive committee and one or more other standing or
ad hoc committees, each consisting of one or more directors. Except as
prohibited by law, each committee shall have the authority set forth in the
resolution establishing such committee.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 Regular Meetings. Regular meetings of the Board of Directors shall be
----------------
held immediately before or after the annual meeting of stockholders. In
addition, the Board of Directors may schedule other regular meetings to occur at
other times during the year.
4.2 Special Meetings. Special meetings of the Board of Directors may be
----------------
called by or at the request of the President, a Vice President or by any two
directors, with notice to each director pursuant to Section 4.4.
4.3 Place of Meetings. Directors may hold their meetings at any place
-----------------
within or without the State of Nevada as the Board of Directors may from time to
time establish for regular meetings or as set forth in the notice of special
meetings or, in the event of a meeting held pursuant to waiver of notice, as set
forth in the waiver.
4.4 Notice of Meetings. No notice shall be required for any scheduled
------------------
regular meeting of the directors of the corporation. Unless waived as
contemplated in Section 5.2, the President, the Secretary or any director shall
give notice to each director of each special meeting called in accordance with
Section 4.2 stating the time, place and purposes of the meeting. Such notice
shall be given by mailing a notice of the meeting at least five (5) business
days before the date of the meeting, or by telephone, telegram,
telecommunication, cablegram or personal delivery at least two (2) business days
before the date of the meeting. Notice shall be deemed to have been given by
telegram or cablegram at the time notice is filed with the transmitting agency.
Attendance by a director at a meeting shall constitute waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of business because the meeting is not lawfully
called.
4.5 Quorum. At meetings of the Board of Directors, more than one-half
------
(1/2) of the directors then in office shall be necessary to constitute a quorum
for the transaction of business, unless a greater number is required by law, the
Articles of Incorporation or these Bylaws. If a
5
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quorum shall not be present at any meeting of directors, the directors
present may adjourn the meeting from time to time until a quorum shall be
present, without notice of the time and place that the meeting will be
reconvened other than announcement at the adjourned meeting.
4.6 Vote Required for Action. Except as otherwise provided in the
------------------------
Articles of Incorporation, these Bylaws or by law, the act of a majority of the
directors present at a meeting at which a quorum is present at the time shall be
the act of the Board of Directors.
4.7 Participation by Conference Telephone. Members of the Board of
-------------------------------------
Directors, or members of any committee designated by the Board of Directors, may
participate in a meeting of the Board or of such committee by means of
conference telephone or similar communications equipment through which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section 4.7 shall constitute presence in person at such
meeting. Each person participating in the meeting shall sign the minutes
thereof, by counterparts or otherwise.
4.8 Action by Directors Without a Meeting. Any action required or
-------------------------------------
permitted to be taken at any meeting of the Board of Directors or any action
which may be taken at a meeting of a committee of directors may be taken without
a meeting if a written consent thereto shall be signed by all the directors, or
all the members of the committee, as the case may be, and if such written
consent is filed with the minutes of the proceedings of the Board of Directors
or the committee. Such consent shall have the same force and effect as a
unanimous vote of the Board of Directors or the committee.
4.9 Adjournments. A meeting of the Board of Directors, whether or not a
------------
quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give to all
of the directors notice of the reconvened meeting and of the business to be
transacted, other than by announcement at the meeting which was adjourned. At
any such reconvened meeting at which a quorum is present, any business may be
transacted which could have been transacted at the meeting which was adjourned.
ARTICLE FIVE
NOTICE AND WAIVER
5.1 Procedure. Whenever these Bylaws require notice to be given to any
---------
stockholder or director, the notice shall be given as prescribed in Section 2.4
or 4.4 for any stockholder or director, respectively. Whenever notice is given
to a stockholder or director by mail, the notice shall be sent first class mail
by depositing the same in a post office or letter box in a postage prepaid
sealed envelope addressed to the stockholder or director at his address as it
appears on the books of the corporation, and such notice shall be deemed to have
been given at the time the same is deposited in the United States mail.
5.2 Waiver. Except as limited by the Nevada General Corporation Law,
------
whenever any notice is required to be given to any stockholder or director by
law, by the Articles of
6
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Incorporation or by these Bylaws, a waiver thereof in writing signed by the
director or stockholder entitled to such notice or by the proxy of such
stockholder, whether signed before or after the meeting to which the waiver
pertains, shall be deemed equivalent thereto.
ARTICLE SIX
OFFICERS
6.1 Number. The officers of the corporation shall be a President, a
------
Secretary and a Treasurer. The Board of Directors may from time to time create
and establish the duties of other officers and elect or provide for the
appointment of other officers as it deems necessary for the efficient management
of the corporation, including a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
6.2 Election and Term. All officers shall be elected by the Board of
-----------------
Directors and shall serve at the will of the Board of Directors and until
their successors have been elected and have qualified or until their earlier
death, resignation, removal, retirement or disqualification.
6.3 Compensation. The compensation of all officers of the corporation
------------
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board.
6.4 Removal. Any officer or agent elected or appointed by the Board of
-------
Directors may be removed by the Board of Directors, with or without cause,
whenever in its judgment the best interests of the corporation will be served
thereby.
6.5 Chairman of the Board. If there shall be a Chairman of the Board, he
---------------------
shall be the chief executive officer of the corporation and shall have general
supervision of the business of the corporation. He shall see that all orders
and resolutions of the Board of Directors are carried into effect and shall call
to order meetings of the stockholders and of the Board of Directors, and shall
act as chairman of such meetings (unless another person is selected under
Section 2.9 to act as chairman). The Chairman of the Board shall have such
other powers and duties as may from time to time be prescribed by the Board of
Directors, upon written direction given to him pursuant to resolution duly
adopted by the Board of Directors.
6.6 President. The President shall be the chief operating officer of the
---------
corporation and shall have supervision of the day to day business of the
corporation. The President shall perform such other duties and have such other
powers as the Board of Directors may determine from time to time. The President
shall be authorized to appoint one or more Assistant Secretaries and one or more
Assistant Treasurers. In the absence or disability of the Chairman of the
Board, at the direction of the Chairman of the Board, or if the Board of
Directors chooses not to designate a Chairman of the Board, the President shall,
in addition to the duties and powers of the President as specified in these
Bylaws or otherwise, perform the duties and exercise the powers, whether such
duties are specified in these Bylaws or otherwise, of the Chairman of the Board.
7
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6.7 Vice President. If there shall be a Vice President, he shall, in the
--------------
absence or disability of the President, or at the direction of the President,
perform the duties and exercise the powers, whether such duties and powers
are specified in these Bylaws or otherwise, of the President. If the corporation
has more than one Vice President, the one designated by the Board of Directors
shall act in lieu of the President. Vice Presidents shall perform such other
duties and have such other powers as the Board of Directors may determine from
time to time.
6.8 Secretary. The Secretary shall keep accurate records of the acts and
---------
proceedings of all meetings of stockholders, directors and committees of
directors. He shall have authority to give all notices required by law or these
Bylaws. He shall be responsible for the custody of the corporate books, records,
contracts and other documents. The Secretary may affix the corporate seal to any
lawfully executed documents requiring it and shall sign such instruments as may
require his signature. The Secretary shall perform such other duties and have
such other additional powers as the Board of Directors may determine from time
to time.
6.9 Treasurer. The Treasurer shall be responsible for the custody of all
---------
funds and securities belonging to the corporation and for the receipt, deposit
or disbursement of such funds and securities under the direction of the Board of
Directors. The Treasurer shall cause full and true accounts of all receipts and
disbursements to be maintained and shall make such reports of same as the Board
of Directors and President request. The Treasurer shall perform such other
duties and have such other powers as the Board of Directors may determine from
time to time.
6.10 Assistant Secretaries and Assistant Treasurers. The Assistant
----------------------------------------------
Secretary and Assistant Treasurer (or if there be more than one of either such
officer, the one so designated by the Board of Directors or by the President)
shall, in the absence or disability, or at the direction, of the Secretary or
the Treasurer, respectively, perform the duties and exercise the powers, whether
such duties and powers are specified in these Bylaws or otherwise, of those
offices. Each Assistant Secretary and Assistant Treasurer shall perform such
other duties and have such other powers as the Board of Directors may determine
from time to time, and each Assistant Secretary may affix the corporate seal to
all necessary documents and attest the signature of any officer of the
corporation.
6.11 Bonds. The Board of Directors may by resolution require any or all of
-----
the officers, agents or employees of the corporation to give bonds to the
corporation, with sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with such other conditions as may from time to time be required by the
Board of Directors.
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ARTICLE SEVEN
DIVIDENDS
Subject to the provisions of the Articles of Incorporation and the Nevada
General Corporation Law, distributions upon the stock of the corporation may be
declared by the Board of Directors as and when they deem expedient. Dividends
may be paid in cash, in property, or in shares of the corporation.
ARTICLE EIGHT
SHARES
8.1 Authorization and Issuance of Shares. The par value and the maximum
------------------------------------
number of shares of any class of the corporation which may be issued and
outstanding shall be set forth from time to time in the Articles of
Incorporation of the corporation or, with respect to a class of preferred or
special stock, by a resolution adopted by the Board of Directors pursuant to the
Nevada General Corporation Law. The Board of Directors may increase or decrease
the number of issued and outstanding shares of any class of the corporation
within the maximum authorized by the Articles of Incorporation and the minimum
requirements of the Articles of Incorporation or Nevada law.
8.2 Share Certificates. The interest of each stockholder in the
------------------
corporation shall be evidenced by a certificate or certificates representing
shares of the corporation which shall be in such form as the Board of Directors
may from time to time adopt. Share certificates shall be consecutively numbered,
shall be in registered form, and shall indicate the date of issue and all such
information shall be entered on the corporation's books. Each certificate shall
be signed by the President or a Vice President and the Secretary or an Assistant
Secretary, and shall be sealed with the seal of the corporation or a facsimile
thereof; provided, however, that where such certificate is signed by a transfer
-------- -------
agent, or registered by a registrar, the signatures of such officers may be
facsimiles. In case any officer or officers who shall have signed or whose
facsimile signatures shall have been placed upon a share certificate shall have
ceased for any reason to be such officer or officers of the corporation before
such certificate is issued, such certificate may be issued by the corporation
with the same effect as if the person or persons who signed such certificate or
whose facsimile signatures shall have been used thereon had not ceased to be
such officer or officers.
8.3 Rights of Corporation with Respect to Registered Owners. Prior to due
-------------------------------------------------------
presentation for transfer of registration of its shares, the corporation may
treat the registered owner of the shares as the person exclusively entitled to
vote such shares, to receive any dividend or other distribution with respect to
such shares, and for all other purposes; and the corporation shall not be bound
to recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
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8.4 Transfers of Shares. Transfers of shares of the corporation shall be
-------------------
made in the share records of the corporation only by the written direction of
the person named in the certificate or by his attorney (authorized by duly
executed power of attorney filed with the Secretary of the corporation) or his
legal representative (who shall furnish proper evidence or authority to transfer
such shares), and upon surrender of the certificate or certificates for such
shares properly endorsed (or accompanied by a properly endorsed instrument of
transfer) and subject to such other reasonable conditions and requirements as
may be required by the corporation. The corporation shall maintain at its
principal place of business or registered office, or at the office of its
transfer agent, a record of the names and addresses of its stockholders and the
number of shares held by each.
8.5 Duty of Corporation to Register Transfer. Notwithstanding any of the
----------------------------------------
provisions of Section 8.4 of these Bylaws, the corporation is under a duty to
register the transfer of its shares only if:
(a) the share certificate is endorsed by the appropriate person or
persons;
(b) reasonable assurance is given that the endorsements are genuine
and effective;
(c) the corporation has no duty to inquire into adverse claims or has
discharged any such duty;
(d) any applicable law relating to the collection of taxes has been
complied with;
(e) the transfer is in fact rightful or is to a bona fide purchaser;
and
(f) the transfer is in compliance with applicable provisions of state
and federal securities laws and of any restrictive legends relating to such laws
that appear on the share certificate.
8.6 Lost, Stolen or Destroyed Certificates. Any person claiming a share
--------------------------------------
certificate to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board of Directors may require and
shall, if the Board of Directors so requires, give the corporation a bond of
indemnity in form and amount, and with one or more sureties satisfactory to the
Board of Directors, as the Board of Directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
8.7 Fixing of Record Date. For the purpose of determining stockholders
---------------------
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of stockholders for any other proper purpose, the Board
of Directors may fix in advance a date as the record date, such date to be not
more than 60 days (and, in the case of a stockholders' meeting, not less than 10
days) prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
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<PAGE>
8.8 Record Date if None Fixed. If no record date is fixed as provided in
-------------------------
Section 8.7 of these Bylaws, then the record date for any determination of
stockholders which may be proper or required by law shall be: the date on which
notice is mailed, in the case of a stockholders' meeting; the date on which the
Board of Directors adopts a resolution declaring a dividend, in the case of a
payment of a dividend; and the date on which any other action, the consummation
of which requires a determination of stockholders, is to be taken.
ARTICLE NINE
RESTRICTIONS ON TRANSFER AND OWNERSHIP
9.1 Prohibited Transfer; Excess Common Stock. Except as provided in
----------------------------------------
Section 9.2, until the Restriction Termination Date, any attempted direct or
indirect Transfer of Post-Amendment Common Stock shall be deemed a "Prohibited
Transfer" if (i) such Transfer would increase the Percentage of Common Stock
Owned by any Person that (or by any Person whose Common Stock is or by virtue of
such Transfer would be attributed to any Person that), either after giving
effect to the attribution rules (including the option attribution rules) of
Section 382 of the Code or without regard to such attribution rules, Owns, by
virtue of such Transfer would Own, or has at any time since the period beginning
three years prior to the date of such Transfer Owned, Common Stock in excess of
4.75 Percent of the Common Stock issued and outstanding, (ii) such Transfer
would increase the Percentage of Common Stock Owned by any 5% Shareholder
(including but not limited to a Transfer that results in the creation of a 5%
Shareholder), or (iii) such Transfer would cause an "ownership change" of
USTRAILS, INC. (the "Corporation") within the meaning of Section 382 of the
Code. Except as otherwise provided in Section 9.5 and 9.7, the Post-Amendment
Common Stock sought to be Transferred in the Prohibited Transfer shall be deemed
"Excess Common Stock."
9.2 Exceptions. The term "Prohibited Transfer" shall not include: (i) the
----------
issuance of Post-Amendment Common Stock pursuant to the Debt Restructuring,
(ii) the Transfer of Pre-Amendment Common Stock, (iii) any Transfer described in
Section 382(l)(3)(B) of the Code (relating to transfers upon death or divorce
and certain gifts) if all Persons who would Own the Common Stock Transferred
would be treated for purposes of Section 382 of the Code as having Owned such
Common Stock at all times beginning more than three (3) years prior to the date
of the Transfer, (iv) any Transfer of Pre-Amendment Common Stock if such
Transfer would not increase the amount of Common Stock owned by 5% Shareholders
during the three-year period ending on the date of such Transfer (within the
meaning of Section 382 of the Code), and (v) any Transfer with respect to which
the Person who would otherwise be the Purported Transferee obtains or is granted
the prior written approval of the Board of Directors of the Corporation (the
"Board of Directors"), which approval shall be granted in its sole and absolute
discretion after considering all facts and circumstances, including but not
limited to future events the occurrence of which are deemed by the Board of
Directors to be reasonably possible.
9.3 Transfer of Excess Common Stock to Trustee. Except as otherwise
------------------------------------------
provided in Section 9.5 and 9.7, a Prohibited Transfer shall be void ab initio
---------
as to the Purported Transferee in the Prohibited Transfer and such Purported
Transferee shall not be recognized as the owner of
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the Excess Common Stock for any purpose and shall not be entitled to any rights
as a stockholder of the Corporation arising from the ownership of Excess Common
Stock, including, but not limited to, the right to vote such Excess Common Stock
or to receive dividends or other distributions in respect thereof or, in the
case of Options, to receive Common Stock in respect of their exercise. Any
Excess Common Stock shall automatically be transferred to the Trustee in trust
for the benefit of the Charitable Beneficiary, effective as of the close of
business on the business day prior to the date of the Prohibited Transfer;
provided, however, that if the transfer to the trust is deemed ineffective for
- -------- -------
any reason, such Excess Common Stock shall nevertheless be deemed to have been
automatically transferred to the person selected as the Trustee at such time,
and such person shall have rights consistent with those of the Trustee as
described in this Section 9.3 and in Section 9.4 below. Any dividend or other
distribution with respect to such Excess Common Stock paid prior to the
discovery by the Corporation that the Excess Common Stock has been transferred
to the Trustee ("Prohibited Distributions") shall be deemed to be held by the
Purported Transferee as agent for the Trustee, and shall be paid to the Trustee
upon demand, and any dividend or distribution declared but unpaid shall be paid
when due to the Trustee. Any vote cast by a Purported Transferee with respect to
Excess Common Stock prior to the discovery by the Corporation that the Excess
Common Stock has been transferred to the Trustee will be rescinded as void and
shall be recast in accordance with the desires of the Trustee acting for the
sole benefit of the Charitable Beneficiary. The Purported Transferee and any
other Person holding certificates representing Excess Common Stock shall
immediately surrender such certificates to the Trustee. The Trustee shall have
all the rights of the owner of the Excess Common Stock, including the right to
vote, to receive dividends or other distributions, and to receive proceeds from
liquidation, which rights shall be exercised for the sole benefit of the
Charitable Beneficiary.
9.4 Disposition of Excess Common Stock. As soon as practicable following
----------------------------------
receipt of notice from the Corporation that Excess Common Stock has been
transferred to the Trustee, the Trustee shall take such actions as it deems
necessary to dispose of the Excess Common Stock in an arm's-length transaction
that would not constitute a Prohibited Transfer. Upon the disposition of such
Excess Common Stock, (i) the interest of the Charitable Beneficiary in the
Excess Common Stock shall terminate, and (ii) the Trustee shall distribute the
net proceeds of the sale as follows: (a) the Purported Transferee shall receive
an amount of the net proceeds of such sale not to exceed the Purported
Transferee's cost incurred to acquire such Excess Common Stock, or, if such
Excess Common Stock was Transferred for less than fair market value, the fair
market value of the Excess Common Stock on the date of the Prohibited Transfer,
in each case less all costs incurred by the Corporation, the Trustee and the
Transfer Agent in enforcing the Restrictions, and (b) the Charitable Beneficiary
shall receive the balance of the net proceeds from the sale of the Excess Common
Stock, if any, together with any Prohibited Distributions received from the
Purported Transferee and any other distributions with respect to such Excess
Common Stock while such Common Stock was held by the Trustee. In the event the
Purported Transferee has disposed of the Excess Common Stock and distributed the
proceeds and other amounts otherwise than in accordance with this section, then
(w) such Purported Transferee shall be deemed to have disposed of such Excess
Common Stock as an agent for the Trustee, (x) such Purported Transferee shall be
deemed to hold such proceeds and any Prohibited Distributions as
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an agent for the Trustee, (y) such Purported Transferee shall be required to
return to the Trustee the proceeds from such sale, together with any Prohibited
Distributions theretofore received by the Purported Transferee with respect to
such Excess Common Stock, provided that upon receipt of written permission from
--------
the Trustee, the Purported Transferee will be entitled to retain an amount of
such sale proceeds not to exceed the amount that such Purported Transferee would
have received from the Trustee if the Trustee had obtained and resold the Excess
Common Stock at any time during the period beginning on the date of the
Prohibited Transfer giving rise to such Excess Common Stock and ending on the
date of such disposition by the Purported Transferee, assuming for this purpose
that the Trustee would have sold the Excess Common Stock for an amount equal to
the lowest-quoted trading price of such Excess Common Stock during such period,
and (z) the Trustee shall transfer any remaining proceeds to the Charitable
Beneficiary. Neither the Trustee, the Corporation, the Purported Transferee nor
any other party shall claim an income tax deduction with respect to any transfer
to the Charitable Beneficiary and neither the Trustee nor the Corporation shall
benefit in any way from the enforcement of the Restrictions, except insofar as
these restrictions protect the Corporation's Income Tax Net Operating Loss
Carryover. Neither the Trustee, the Corporation nor the Transfer Agent shall
have any liability to any Person for any loss arising from or related to a
Prohibited Transfer.
9.5 Transfers by 5% Shareholders. In the event a Prohibited Transfer is
----------------------------
attributable to a Transfer by a 5% Shareholder, the Corporation and the Transfer
Agent shall make all reasonable efforts to locate the Person or Public Group who
acquired the Excess Common Stock (the "Public Purchaser"). In the event the
Corporation is able to locate the Public Purchaser within ninety (90) days of
the Prohibited Transfer, the Corporation shall request that the Public Purchaser
surrender the Excess Common Stock, together with any dividends or other
distributions theretofore received with respect to the Excess Common Stock by
the Public Purchaser, to the Purported Transferor, and, if such Common Stock is
surrendered, the Purported Transferor shall surrender to the Public Purchaser
the purchase price paid by the Public Purchaser for the Excess Common Stock,
plus, if the Public Purchaser acquired Ownership of the Excess Common Stock
without knowledge that such acquisition was a Prohibited Transfer, an amount
equal to all other losses, damages, costs and expenses incurred by the Public
Purchaser to acquire Ownership of the Excess Common Stock and to comply with the
Restrictions (including any loss incurred as a result of a decline in value of
such Excess Common Stock). In the event the Transfer Agent and the Corporation
are unable to locate the Public Purchaser within ninety (90) days following the
Prohibited Transfer, or the Public Purchaser refuses to surrender or has
disposed of the Excess Common Stock prior to the surrender of the Excess Common
Stock to the Purported Transferor, such Common Stock shall no longer be treated
as Excess Common Stock and the Corporation shall, to the extent not prohibited
from doing so by any credit agreement, indenture or other agreement or
instrument for money borrowed (after the Corporation shall have used its efforts
to obtain the waiver of any such prohibition) (i) purchase from one or more
third parties, in one or more transactions that would, to the extent possible,
reduce the Ownership of Common Stock by the Person or Public Group whose
Ownership increased as a result of the Prohibited Transfer to an amount equal to
such Ownership immediately prior to the Prohibited Transfer, shares of Common
Stock equal in type and number to the Common Stock Transferred in the Prohibited
Transfer (which Common Stock shall be treated as Excess Common Stock),
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<PAGE>
(ii) hold such Common Stock for and on behalf of the Purported Transferor, (iii)
treat such Common Stock as Owned by the Purported Transferor since the date of
the Prohibited Transfer for all purposes, including the right to vote and to
receive dividends and other distributions, and (iv) for all purposes treat any
dividends and other distributions made to such Person or Public Group as a
dividend or other distribution to the Purported Transferor, a payment by the
Purported Transferor to the Corporation to be applied against the Amount Due (as
defined below), and a non-dividend payment to the Persons or Public Group who
received such distributions. To the extent reasonably possible, any votes cast
by such Person or Public Group from and after the date of the Prohibited
Transfer with respect to Excess Common Stock shall be rescinded in the same
proportion as the votes actually cast by such Person or Public Group, and the
Purported Transferor shall be entitled to cast those votes that were rescinded.
The Corporation shall hold such Excess Common Stock, and any dividends or other
distributions thereon, on behalf of the Purported Transferor, as security for
payment of the Amount Due, until the earlier of such time as (a) the Corporation
has received, either directly from the Purported Transferor or indirectly from
any dividends or other distributions theretofore received by the Corporation
with respect to such Excess Common Stock on behalf of the Purported Transferor
(or any amounts deemed paid by the Purported Transferor as provided in this
Section 9.5), or any combination thereof, an amount equal to the amount incurred
by the Corporation to fund the purchase of such Excess Common Stock, plus all
costs incurred by the Corporation in enforcing the Restrictions with respect to
such Prohibited Transfer (including the amount of any non-dividend payment
deemed made by the Corporation to the Person or Public Group as provided in this
Section 9.5), plus interest on all such amounts from the dates incurred by the
Corporation at the "applicable federal rate" determined under Section 1274(d) of
the Code (collectively, the "Amount Due") (it being the intent to treat the
Amount Due and any portion thereof as a loan to the Purported Transferor), or
(b) the Corporation is able to dispose of such Excess Common Stock on behalf of
the Purported Transferor in a transaction that would not be a Prohibited
Transfer, in which case the Corporation will sell such Excess Common Stock and
distribute to the Purported Transferor any proceeds (together with any other
cash distributions theretofore received (or deemed received) with respect to the
Excess Common Stock) in excess of the Amount Due. The obligation of the
Purported Transferor for the Amount Due shall be payable on demand by the
Corporation. In the event the Amount Due exceeds the proceeds from a sale of
Excess Common Stock and any cash distributions theretofore received (or deemed
received) by the Corporation on behalf of the Purported Transferor with respect
to such Excess Common Stock, the balance shall be due from the Purported
Transferor on demand.
9.6 Transfer Agent's Rights and Responsibilities. The Transfer Agent
--------------------------------------------
shall not register any Transfer of Common Stock on the Corporation's stock
transfer records if it has knowledge that such Transfer is a Prohibited
Transfer. The Transfer Agent shall have the right, prior and as a condition to
registering any Transfer of Common Stock on the Corporation's stock transfer
records, to request any transferee of the Common Stock to submit an affidavit,
on a form agreed to by the Transfer Agent and the Corporation, stating the
number of shares of each class of Common Stock Owned by the transferee (and by
Persons who would Own the transferee's Common Stock) before the proposed
Transfer and that would, if effect were given to the proposed Transfer, be Owned
by the transferee (and by Persons who would Own the
14
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prospective transferee's Common Stock) after the proposed Transfer. If the
Transfer Agent requests such an affidavit and either (i) the Transfer Agent does
not receive an affidavit, or (ii) such affidavit evidences that the Transfer was
a Prohibited Transfer, the Transfer Agent shall notify the Corporation and shall
not enter the Prohibited Transfer into the Corporation's stock transfer records,
and the Trustee, the Corporation and the Transfer Agent shall take such steps as
provided in the Restrictions in order to dispose of the Excess Common Stock
purportedly Owned by such Purported Transferee. If the Transfer Agent, for
whatever reason, enters a Prohibited Transfer in the Corporation's stock
transfer records, such Transfer shall be nonetheless void and shall have no
force and effect, in accordance with the Restrictions, and the Corporation's
stock transfer records shall be revised to so provide.
9.7 Certain Indirect Prohibited Transfers. In the event a Transfer would
-------------------------------------
be a Prohibited Transfer as a result of attribution to the Purported Transferee
of the Ownership of Common Stock by a Person (an "Other Person") who is not
controlling, controlled by or under common control with the Purported
Transferee, which Ownership is nevertheless attributed to the Purported
Transferee, the Restrictions shall not apply in a manner that would invalidate
any Transfer to such Other Person, and the Purported Transferee and any Persons
controlling, controlled by or under common control with the Purported Transferee
(collectively, the "Purported Transferee Group") shall automatically be deemed
to have transferred to the Trustee at the time and in a manner consistent with
Section 9.3 hereof, sufficient Common Stock (which Common Stock shall (i)
consist only of Common Stock held legally or beneficially, whether directly or
indirectly, by any member of the Purported Transferee Group, but not Common
Stock held through any Other Person, other than shares held through a Person
acting as agent or fiduciary for any member of the Purported Transferee Group,
(ii) be deemed transferred to the Trustee, in the inverse order in which it was
acquired by members of the Purported Transferee Group, and (iii) be treated as
Excess Common Stock) to cause the Purported Transferee, following such transfer
to the Trustee, not to be in violation of the Restrictions; provided, however,
-------- -------
that to the extent the foregoing provisions of this Section 9.7 would not be
effective to prevent a Prohibited Transfer, the Restrictions shall apply to such
other Common Stock Owned by the Purported Transferee (including Common Stock
actually owned by Other Persons), in a manner designed to minimize the amount of
Common Stock subject to the Restrictions or as otherwise determined by the Board
of Directors to be necessary to prevent a Prohibited Transfer (which Common
Stock shall be treated as Excess Common Stock).
9.8 Legend. All certificates or other instruments evidencing Ownership of
------
Post-Amendment Common Stock shall bear a conspicuous legend describing the
Restrictions.
9.9 Prompt Enforcement; Further Actions. As soon as practicable and
-----------------------------------
within thirty (30) business days of learning of a purported Prohibited Transfer,
the Corporation through its Secretary or any Assistant Secretary shall demand
that the Purported Transferee (or any other member of the Purported Transferee
Group) or Public Purchaser surrender to the Trustee the certificates
representing the Excess Common Stock or any resale proceeds therefrom, and any
Prohibited Distributions or other dividends or distributions received thereon,
and if such surrender is not made within twenty (20) business days from the date
of such demand, the
15
<PAGE>
Corporation shall institute legal proceedings to compel such surrender;
provided, however, that nothing in this Section 9.9 shall preclude the
- -------- -------
Corporation in its discretion from immediately bringing legal proceedings
without a prior demand, and also provided that failure of the Corporation to act
--------
within the time periods set out in this Section 9.9 shall not constitute a
waiver of any right of the Corporation to compel any transfer required hereby.
Upon a determination by the Board of Directors that there has been or is
threatened a Prohibited Transfer, the Board of Directors may authorize such
additional action as it deems advisable to give effect to the Restrictions,
including, without limitation, refusing to give effect on the books of the
Corporation to any such purported Prohibited Transfer or instituting proceedings
to enjoin any such purported Prohibited Transfer. Nothing contained in the
Restrictions shall limit the authority of the Board of Directors to take such
other action to the extent permitted by law as it deems necessary or advisable
to protect the Corporation and the interests of the holders of its securities in
preserving the Income Tax Net Operating Loss Carryover, including, but not
limited to, refusing to give effect to any Prohibited Transfer or other action
on the books of the Corporation or instituting proceedings to enjoin any
Prohibited Transfer or other action, provided, however, that any Prohibited
-------- -------
Transfer shall nevertheless result in the consequences otherwise described in
the Restrictions.
9.10 Board Authority to Interpret. The Board of Directors shall have the
----------------------------
authority to interpret the provisions of the Restrictions for the purpose of
protecting the Income Tax Net Operating Loss Carryover. Any such interpretation
shall be final and binding on any Person or Public Group who Owns or purports to
acquire Ownership of Common Stock.
9.11 Change in Law. Provided that the Board of Directors shall determine
-------------
in writing that a change or modification to the Restrictions is reasonably
necessary to preserve the Income Tax Net Operating Loss Carryover, the Board of
Directors may (i) conform any term or numbers set forth in the Restrictions to
make such terms consistent with the Code and the Regulations following any
change (including proposed change) therein and (ii) conform the definitions of
any terms set forth in the Restrictions to the definitions in effect following
such change. Such determination shall be filed with the Secretary of the
Corporation and mailed by the Secretary to all stockholders of the Corporation
within ten (10) days after the date thereof.
9.12 Severability. If any part of the Restrictions is judicially
------------
determined to be invalid or otherwise unenforceable, such invalidity or
unenforceability shall not affect the remainder of the Restrictions, which shall
be thereafter interpreted as if the invalid or unenforceable part were not
contained herein, and, to the maximum extent possible, in a manner consistent
with preserving the ability of the Corporation to utilize to the greatest extent
possible the Income Tax Net Operating Loss Carryover.
9.13 Effect on Stock Exchange Transactions. Nothing in the Restrictions
-------------------------------------
shall preclude the settlement of a transaction entered into through the
facilities of the NASDAQ Over-The-Counter Stock Exchange. The Common Stock that
is the subject of such a transaction shall continue to be subject to the terms
of the Restrictions after such settlement.
16
<PAGE>
9.14 Definitions:
------------
"Charitable Beneficiary" shall mean an organization described in Sections
170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code designated in writing by the
Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended and as it
may be amended from time to time hereafter.
"Common Stock" shall mean all shares of the Corporation's common stock
issued and outstanding, including all shares of stock defined herein as Pre-
Amendment Common Stock and Post-Amendment Common Stock, and shall also include
any common stock the Ownership of which may be acquired by the exercise of an
Option.
"Control" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management, policies or decisions of a
Person, whether through the ownership of voting securities, by contract, family
relationship or otherwise. The terms "controlling," "controlled by" and "under
common control with" shall have correlative meanings. A Person shall be deemed
to control or be under common control with a Purported Transferee if the Excess
Common Stock Owned by such Person is treated as Owned by the Purported
Transferee by virtue of the family attribution rules of Section 318 of the Code.
"Debt Restructuring" shall mean, collectively, the agreements,
transactions, and issuances required in the restructuring of the Corporations
12% Secured Notes Due 1998 and its Additional Series 12% Secured Notes Due 1998,
wherein the Corporation exchanged cash, Senior Subordinated PIK Notes, and Post-
Amendment Common Stock to the original noteholders in exchange for the original
Secured Notes held.
"5% Shareholder" shall mean any Person or Public Group who is a "5% percent
shareholder" of the Corporation within the meaning of Section 382 of the Code,
substituting "4.75 percent" for "5 percent" each place it appears therein.
"Income Tax Net Operating Loss Carryover" shall mean the net operating
loss, capital loss, net unrealized built-in loss, general business credit,
alternative minimum tax credit, foreign tax credit and any other carryovers or
losses as determined for United States federal income tax purposes that are or
could become subject to limitation under Section 382 of the Code, and to which
the Corporation is entitled under the Code and Regulations, at any time during
which the Restrictions are in force.
"Option" shall mean any interest that could give rise to the Ownership of
Common Stock and that is an option, contract, warrant, convertible instrument,
put, call, stock subject to a risk of forfeiture, pledge of stock or any
interest that is similar to any of such interests or any other interest that
would be treated, under paragraph (d)(9) of Treasury Regulation Section 1.382-4,
in the same manner as an option, whether or not any of such interests is subject
to contingencies.
"Own," and all derivations of the word "Own," shall mean any direct or
indirect, actual or beneficial interest, including, except as otherwise
provided, a constructive ownership interest
17
<PAGE>
under the attribution rules (including the option attribution rules) of Section
382 of the Code. In determining whether a Person Owns an amount of Common Stock
in excess of 4.75% of the Common Stock, Options Owned by such Person (or other
Persons whose Ownership of Common Stock is or would be attributable under
Section 382 of the Code to such Person) shall be treated as exercised (and the
Common Stock that would be acquired by such exercise as outstanding) and Options
Owned by other Persons shall be treated as not exercised (and the Common Stock
that would be acquired if such Options Owned by other Persons were exercised
shall be treated as not outstanding), in each case without regard to whether
such treatment would result in an ownership change within the meaning of Section
382 of the Code. In determining whether a Transfer that is an exercise,
conversion or similar transaction with respect to an Option increases the
Percentage Ownership of Common Stock of any Person or Public Group, such Option
shall be treated as if it were not Owned by such Person immediately prior to
such Transfer.
"Percent," "Percentage" or "%" shall mean percent or percentage by value.
"Person" shall mean any individual (other than a Public Group treated as an
individual under Section 382 of the Code) or any "entity" as that term is
defined in Regulations Section 1.382-3(a).
"Post-Amendment Common Stock" shall mean all shares of common stock issued
by the Corporation after the passage of this Article Nine to the Corporation's
Bylaws, including all shares of common stock issued by the Corporation pursuant
to the Debt Restructuring and any common stock which would qualify as Post-
Amendment Common Stock, the Ownership of which may be acquired by the exercise
of an Option.
"Pre-Amendment Common Stock" shall mean all shares of common stock issued
by the Corporation prior to the passage of this Article Nine to the
Corporation's Bylaws, and shall also include any common stock which would
qualify as Pre-Amendment Common Stock, the Ownership of which may be acquired by
the exercise of an Option.
"Public Group" shall have the meaning assigned to such term in the
applicable Regulations under Section 382 of the Code. Any Transfer or attempted
Transfer of Common Stock to or from an individual or entity whose Common Stock
is included in determining the Percentage of Common Stock Owned by a Public
Group for purposes of Section 382 of the Code shall be treated as a Transfer or
attempted Transfer to such Public Group.
"Purported Transferee" shall mean a Person or Public Group who acquires
Ownership of Excess Common Stock in a Prohibited Transfer or, except as
otherwise provided in the Restrictions, any subsequent transferee of such Excess
Common Stock,
"Purported Transferor" shall mean a Person who Transfers Excess Common
Stock in a Prohibited Transfer.
"Regulations" shall mean Treasury Regulations, including proposed or
temporary
18
<PAGE>
regulations, promulgated under the Code, as the same may be amended from time to
time. References herein to specific provisions of temporary Regulations shall
include the analogous provisions of final Regulations or other successor
Regulations.
"Restriction Effective Date" shall mean the date of the issuance of the
Post-Amendment Common Stock to the Holders pursuant to the Debt Restructuring
"Restriction Termination Date" shall mean the earliest to occur of (a) the
end of the twenty-fourth (24th) month following the Restriction Effective Date,
(b) the first day of the first taxable year following the taxable year (or
years) in which the Income Tax Net Operating Loss Carryover has been reduced to
zero, or (c) the date upon which the Board of Directors has determined that
there has been a change in law (including but not limited to the repeal of
Section 382 of the Code without a successor provision that places restrictions
on the Income Tax Net Operating Loss Carryover based on changes of ownership of
the Corporation's Common Stock similar to Section 382 of the Code) eliminating
the need for the Restrictions in order to preserve the Corporation's ability to
utilize the Income Tax Net Operating Loss Carryover.
"Restrictions" shall mean the restrictions on the Transfer and Ownership of
Common Stock as set forth in this Article Nine to the Corporation's Bylaws.
"Transfer" shall mean any direct or indirect acquisition or disposition of
stock, whether by sale, exchange, merger, consolidation, transfer, assignment,
conveyance, distribution, pledge, inheritance, gift, mortgage, the creation of
any security interest in, or lien or encumbrance upon, or any other acquisition
or disposition of any kind and in any manner, whether voluntary or involuntary,
knowing or unknown by operation of law or otherwise. Notwithstanding any
understandings or agreements to which an Owner of Common Stock is a party, any
arrangement, the effect of which is to transfer any or all of the rights rising
from Ownership of Common Stock, shall be treated as a Transfer. A Transfer
shall also include (i) a transfer of an interest in an entity and a change in
the relationship between two or more Persons that results in a change in the
Ownership of Common Stock and (ii) the creation, grant, exercise, conversion,
Transfer or other disposition of or with respect to an Option, regardless of
whether such Option previously has been treated as exercised or converted for
any other purpose; provided, however, that a Transfer shall not include the
-------- -------
issuance or disposition (other than a conversion, exercise or similar
transaction in which Common Stock is acquired) of an Option described in
paragraph (d)(9) of Treasury Regulation Section 1.382-4, and whether an Option
is so described shall be determined by the Board of Directors in its sole and
absolute discretion.
"Transfer Agent" means the Person responsible for maintaining the books and
records in which are recorded the ownership and transfer of shares of Common
Stock or any Person engaged by the Corporation for the purpose of fulfilling the
duties required to be fulfilled by the Transfer Agent hereunder.
"Trustee" means the trustee of the trust appointed by the Corporation,
provided that the Trustee shall be a Person unaffiliated with the Corporation,
- --------
any 5% Shareholder, or any Person purchasing or disposing of Common Stock in a
Prohibited Transfer.
19
<PAGE>
ARTICLE TEN
MISCELLANEOUS
10.1 Inspection of Books and Records. The Board of Directors shall have
-------------------------------
the power to determine which accounts, books and records of the corporation
shall be opened to the inspection of stockholders, except such as may by law be
specifically open to inspection, and shall have power to fix reasonable rules
and regulations not in conflict with the applicable law for the inspection of
accounts, books and records which by law or by determination of the Board of
Directors shall be open to inspection.
10.2 Fiscal Year. The fiscal year of the corporation shall begin July 1
-----------
of each year and end June 30 of each succeeding year. The Board of Directors is
authorized to change the fiscal year of the corporation from time to time as it
deems appropriate.
10.3 Seal. The corporate seal shall be in such form as the Board of
----
Directors may from time to time determine.
ARTICLE ELEVEN
AMENDMENTS
11.1 Power to Amend Bylaws. The Board of Directors shall have power to
---------------------
alter, amend or repeal these Bylaws or adopt new Bylaws, but any Bylaws adopted
by the Board of Directors may be altered, amended or repealed, and new Bylaws
adopted, by the stockholders. The stockholders may prescribe that any Bylaw or
Bylaws adopted by them shall not be altered, amended or repealed by the Board of
Directors.
11.2 Conditions. Action taken by the stockholders with respect to Bylaws
----------
shall be taken by an affirmative vote of a majority of all shares entitled to
elect directors, and action by the Board of Directors with respect to Bylaws
shall be taken by an affirmative vote of a majority of all of the directors then
holding office.
20
<PAGE>
____________________________________________________________
EXHIBIT 4.36
USTRAILS INC.
ISSUER
EACH SUBSIDIARY OF THE ISSUER SET FORTH ON SCHEDULE I
SUBSIDIARY GUARANTORS
TO
FLEET NATIONAL BANK
TRUSTEE
____________________________
INDENTURE
DATED AS OF JULY 17, 1996
____________________________
SENIOR SUBORDINATED PAY-IN-KIND NOTES DUE 2003
______________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
----
<S> <C>
RECITALS OF THE COMPANY ...................................................................................................1
RECITALS OF THE SUBSIDIARY GUARANTORS .....................................................................................1
ARTICLE ONE ...............................................................................................................1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION....................................................................1
Section 101. Definitions...........................................................................................1
Section 102. Compliance Certificates and Opinions.................................................................17
Section 103. Form of Documents Delivered to Trustee...............................................................18
Section 104. Acts of Holders......................................................................................18
Section 105. Notices, etc., to Trustee and Obligors...............................................................19
Section 106. Notice to Holders; Waiver............................................................................19
Section 107. Conflict with Trust Indenture Act....................................................................20
Section 108. Effect of Headings and Table of Contents.............................................................20
Section 109. Successors and Assigns...............................................................................20
Section 110. Severability Clause..................................................................................20
Section 111. Benefits of Indenture................................................................................20
Section 112. Governing Law........................................................................................20
Section 113. Legal Holidays.......................................................................................20
Section 114. Exhibits and Schedules...............................................................................21
Section 601. Certain Duties and Responsibilities..................................................................34
Section 602. Notice of Defaults...................................................................................36
Section 603. Certain Rights of Trustee............................................................................36
Section 604. Not Responsible for Recitals or Issuance of Notes....................................................37
Section 605. May Hold Notes.......................................................................................37
Section 606. Money Held in Trust..................................................................................37
Section 607. Compensation and Reimbursement.......................................................................37
Section 608. Corporate Trustee Required...........................................................................38
Section 609. Resignation and Removal; Appointment of Successor....................................................38
Section 610. Acceptance of Appointment by Successor...............................................................39
Section 611. Merger, Conversion, Consolidation or Succession to Business..........................................40
Section 612. Preferential Collection of Claims Against Company....................................................40
Section 613. Paying Agent; Registrar..............................................................................40
ARTICLE SEVEN.............................................................................................................41
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY ........................................................................41
Section 701. Company to Furnish Trustee Names and Addresses of Holders............................................41
Section 702. Preservation of Information; Communications to Holders...............................................41
Section 703. Reports by Trustee...................................................................................42
</TABLE>
i
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<TABLE>
<S> <C> <C> <C>
Section 704. Reports by Company...................................................................................43
ARTICLE EIGHT.............................................................................................................43
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE......................................................................43
Section 801. Company and Subsidiaries May Consolidate, Etc., Only on Certain Terms................................43
Section 802. Successor Substituted................................................................................44
Section 803. Redemption...........................................................................................44
ARTICLE NINE..............................................................................................................45
SUPPLEMENTAL INDENTURES...................................................................................................45
Section 901. Supplemental Indentures Without Consent of Holders...................................................45
Section 902. Supplemental Indentures with Consent of Holders......................................................45
Section 903. Execution of Supplemental Indentures.................................................................46
Section 904. Effect of Supplemental Indentures....................................................................46
Section 905. Conformity with Trust Indenture Act..................................................................47
Section 906. Reference in Notes to Supplemental Indentures........................................................47
ARTICLE TEN...............................................................................................................47
COVENANTS.................................................................................................................47
Section 1001. Payment of Principal, Premium and Interest...........................................................47
Section 1002. Maintenance of Register; Registrar, and Paying Agent.................................................47
Section 1003. Money for Note Payments to Be Held in Trust..........................................................47
Section 1004. Corporate Existence and Keeping of Books.............................................................49
Section 1005. [Reserved]...........................................................................................49
Section 1006. Payment of Taxes and Other Claims....................................................................49
Section 1007. Maintenance of Properties............................................................................49
Section 1008. Insurance............................................................................................50
Section 1009. Statement by Officers as to Default..................................................................50
Section 1010. Filing and Provision of Certain Commission Reports...................................................50
Section 1011. Limitation on Indebtedness and Disqualified Capital Stock............................................50
Section 1012. Limitation on Restricted Payments....................................................................51
Section 1013. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries........................52
Section 1014. Limitation on Transactions with Affiliates...........................................................53
Section 1015. Limitation on Asset Sales............................................................................53
Section 1016. Limitation on Certain Liens..........................................................................55
Section 1017. Conduct of Business..................................................................................55
Section 1018. Payments for Consent.................................................................................55
Section 1019. Stay, Extension and Usury Laws.......................................................................56
ARTICLE ELEVEN............................................................................................................56
</TABLE>
ii
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<TABLE>
<S> <C>
REDEMPTIONS AND REPURCHASES OF NOTES......................................................................................56
Section 1101. Right of Redemption..................................................................................56
Section 1102. Applicability of Article.............................................................................56
Section 1103. Election to Redeem; Notice to Trustee................................................................56
Section 1104. Determination of Notes to Be Redeemed or Repurchased.................................................56
Section 1105. Notice of Redemption.................................................................................57
Section 1106. Deposit of Redemption Price..........................................................................57
Section 1107. Notes Payable on Redemption Date.....................................................................58
Section 1108. Notes Redeemed in Part...............................................................................58
Section 1109. Offer to Purchase Notes upon Change of Control.......................................................58
Section 1110. Procedure for Offers to Purchase Notes...............................................................59
Section 1111. Effect of Purchase Notice............................................................................61
Section 1112. Deposit of Purchase Price............................................................................61
Section 1113. Notes Purchased in Part..............................................................................61
Section 1114. Covenant to Comply With Securities Laws Upon Purchase of Notes.......................................62
Section 1115. Repayment to the Company.............................................................................62
ARTICLE TWELVE............................................................................................................63
COLLATERAL MATTERS........................................................................................................62
Section 1201. Unsecured Obligations; Approval of Collateral Documents and other Note Documents.....................62
Section 1202. Required Collateral; Further Assurances..............................................................62
Section 1203. Amendment to the Collateral Documents and other Note Documents Without Consent of Holders............64
Section 1204. Amendment to the Collateral Documents and other Note Documents with Consent of Holders...............65
Section 1205. Release of Collateral under Certain Circumstances....................................................65
Section 1206. Release and Substitution of Collateral -- Trust Indenture Act Compliance.............................65
Section 1207. Release Upon Termination of the Company's Obligations................................................66
Section 1208. Release..............................................................................................66
ARTICLE THIRTEEN..........................................................................................................67
GUARANTY..................................................................................................................67
Section 1301. Subsidiary Guarantee.................................................................................67
Section 1302. Nature of Subsidiary Guarantee.......................................................................67
Section 1303. Authorization........................................................................................68
Section 1304. Certain Waivers......................................................................................68
Section 1305. No Subrogation; Certain Agreements...................................................................69
Section 1306. Bankruptcy No Discharge..............................................................................70
Section 1307. Severability of Void Obligations under Subsidiary Guarantee..........................................70
Section 1309. Subordination........................................................................................71
ARTICLE FOURTEEN..........................................................................................................71
</TABLE>
iii
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<TABLE>
<S> <C>
LEGAL DEFEASANCE AND COVENANT DEFEASANCE..................................................................................71
Section 1401. Option to Effect Legal Defeasance or Covenant Defeasance.............................................71
Section 1402. Legal Defeasance and Discharge.......................................................................71
Section 1403. Covenant Defeasance..................................................................................71
Section 1404. Conditions to Legal or Covenant Defeasance...........................................................72
Section 1405. Deposited U.S. Dollars and U.S. Government Obligations to be Held in Trust; Other Miscellaneous
Provisions...........................................................................................73
Section 1406. Repayment to the Company.............................................................................74
Section 1407. Reinstatement........................................................................................74
Section 1408. Termination of Obligations Upon Cancellation of the Notes............................................74
ARTICLE FIFTEEN...........................................................................................................76
SUBORDINATION.............................................................................................................75
Section 1501. Agreement To Subordinate.............................................................................75
Section 1502. Liquidation, Dissolution, Bankruptcy.................................................................75
Section 1503. Default on Senior Indebtedness.......................................................................75
Section 1504. Acceleration of Payment of Notes.....................................................................76
Section 1505. When Distribution Must Be Paid Over..................................................................76
Section 1506. Subrogation..........................................................................................76
Section 1507. Relative Rights......................................................................................76
Section 1508. Subordination May Not Be Impaired by Company.........................................................77
Section 1509. Rights of Trustee and Paying Agent...................................................................77
Section 1510. Distribution or Notice to Representative.............................................................77
Section 1511. Article Fifteen Not To Prevent Events of Default or Limit Right To Accelerate........................77
Section 1512. Trust Moneys Not Subordinated........................................................................78
Section 1513. Trustee Entitled to Rely.............................................................................78
Section 1514. Trustee To Effectuate Subordination..................................................................78
Section 1515. Trustee Not Fiduciary for Holders of Senior Indebtedness.............................................78
Section 1516. Reliance by Holders of Senior Indebtedness on Subordination Provisions...............................79
Section 1517. Trustee's Compensation Not Prejudiced................................................................79
ARTICLE SIXTEEN...........................................................................................................80
MISCELLANEOUS.............................................................................................................79
Section 1601. No Recourse Against Others...........................................................................79
</TABLE>
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INDEX OF SCHEDULES
Schedule I - Subsidiary Guarantors
Schedule 101A - Existing Indebtedness
Schedule 101B - Existing Liens
Schedule 1201 - Collateral Documents
EXHIBITS
--------
Exhibit A - Form of Note Certificate
Exhibit B-1 - Form of Subsidiary Guarantee
Exhibit B-2 - Form of Addendum to Subsidiary Guarantee
Exhibit C-1 - Form of Company Pledge Agreement
Exhibit C-2 - Form of Subsidiary Pledge Agreement
Exhibit D-1 - Form of Company Security Agreement
Exhibit D-2 - Form of Subsidiary Security Agreement
Exhibit E - Form of Subsidiary Mortgage (Deed of Trust)
Exhibit F - Subordination Agreement
v
<PAGE>
DEFINED TERMS
This appendix lists all of the defined terms in the Indenture and indicates the
page on which the Indenture defines them.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Acceleration......................................................................................... 29
Act.................................................................................................. 2,19
Addendum to Subsidiary Guarantee..................................................................... 2
Additional Interest.................................................................................. 2
Affiliate............................................................................................ 2
Affiliate Transaction................................................................................ 54
Agent................................................................................................ 3
Applicable Law....................................................................................... 3
Asset Sale........................................................................................... 54
Asset Sale Purchase Offer............................................................................ 3
Asset Sale Purchase Price............................................................................ 3
Average Life......................................................................................... 3
Bankruptcy Code...................................................................................... 3
Beneficiaries........................................................................................ 3
Blockage Notice...................................................................................... 77
Board of Directors................................................................................... 3
Board Resolution..................................................................................... 3
Business Day......................................................................................... 4
Capital Stock........................................................................................ 4
Capitalized Lease Obligations........................................................................ 4
Cash Equivalent...................................................................................... 4
Change of Control.................................................................................... 59
Change of Control Purchase Offer..................................................................... 59
Change of Control Purchase Price..................................................................... 59
Code................................................................................................. 5
Collateral........................................................................................... 5
Collateral Documents................................................................................. 5
Commencement Date.................................................................................... 5
Commission........................................................................................... 5
Common Stock......................................................................................... 5
Company.............................................................................................. 1,5
Company Pledge Agreement............................................................................. 5
Company Security Agreement........................................................................... 5
Consolidated Net Worth............................................................................... 5
Consolidated Subsidiary.............................................................................. 5
Corporate Trust Office............................................................................... 6
Covenant Defeasance.................................................................................. 73
Default.............................................................................................. 6
Default Rate......................................................................................... 6
Defaulted Interest................................................................................... 27
Delivery Date........................................................................................ 6
Disqualified Capital Stock........................................................................... 6
Equity Interests..................................................................................... 6
</TABLE>
vi
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<TABLE>
<S> <C>
ERISA....................................................................................................... 6
Event of Default............................................................................................ 29
Excess Proceeds............................................................................................. 55
Exchange Act................................................................................................ 6
Excluded Assets............................................................................................. 6
Existing Equity Holder...................................................................................... 6
Existing Indebtedness....................................................................................... 7
Fair Market Value........................................................................................... 7
Fleet....................................................................................................... 1
GAAP........................................................................................................ 7
Governmental Approval....................................................................................... 7
Governmental Authority...................................................................................... 7
Guarantee................................................................................................... 7
Holder...................................................................................................... 7
Incur....................................................................................................... 7
Incurred.................................................................................................... 7
Incurrence.................................................................................................. 7
Indebtedness................................................................................................ 7
Indenture................................................................................................... 8
Initial Period.............................................................................................. 22
Interest.................................................................................................... 8
Interest Payment Date....................................................................................... 8
Investment.................................................................................................. 8
Issue Date.................................................................................................. 8
Legal Defeasance............................................................................................ 72
Lien........................................................................................................ 8
Material Subsidiary......................................................................................... 8
Maturity.................................................................................................... 9
Moody's..................................................................................................... 9
Mortgage.................................................................................................... 9
Negative Pledge Assets...................................................................................... 9
Net Cash Proceeds........................................................................................... 9
Net Proceeds................................................................................................ 9
Note Certificate............................................................................................ 22
Note Documents.............................................................................................. 9
Note Party.................................................................................................. 9
Notes....................................................................................................... 1
Obligations................................................................................................. 68
Obligor..................................................................................................... 10
Officers' Certificate....................................................................................... 10
Opinion of Counsel.......................................................................................... 10
Order....................................................................................................... 15
Outstanding................................................................................................. 10
Paying Agent................................................................................................ 48
Payment Blockage Period..................................................................................... 77
Payment Default............................................................................................. 29
Permitted Intercompany Loan Collateral...................................................................... 11
Permitted Intercompany Secured Loan......................................................................... 11
Permitted Investments....................................................................................... 11
Permitted Liens............................................................................................. 11
Permitted Purchase Money Indebtedness....................................................................... 13
Person...................................................................................................... 13
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C>
Predecessor Note................................................................................. 13
Prepaid Interest................................................................................. 22
Purchase Date.................................................................................... 60
Purchase Notice.................................................................................. 61
Purchase Offer................................................................................... 13
Purchase Price................................................................................... 13
Qualified Capital Stock.......................................................................... 13
Redemption Date.................................................................................. 14
Redemption Price................................................................................. 14
Refinancing...................................................................................... 14
Refinancing Indebtedness......................................................................... 14
Register......................................................................................... 48
Registrar........................................................................................ 48
Registration Default............................................................................. 14
Registration Rights Agreement.................................................................... 14
Registration Statement........................................................................... 14
Regular Record Date.............................................................................. 15
Reinvestment Period.............................................................................. 54
Related Business................................................................................. 15
Representative................................................................................... 15
Request.......................................................................................... 15
Responsible Officer.............................................................................. 15
Restricted Investment............................................................................ 15
Restricted Payment............................................................................... 15
S&P.............................................................................................. 16
Secondary Notes.................................................................................. 23
Secured Obligations.............................................................................. 16
Securities Act................................................................................... 16
Senior Indebtedness.............................................................................. 16
Special Record Date.............................................................................. 27
Specified Permitted Indebtedness................................................................. 16
Stated Maturity.................................................................................. 17
Subordinated Indebtedness........................................................................ 17
Subsidiary....................................................................................... 17
Subsidiary Guarantee............................................................................. 1, 17
Subsidiary Guarantor............................................................................. 17
Subsidiary Pledge Agreement...................................................................... 17
Subsidiary Security Agreement.................................................................... 17
Taxes............................................................................................ 17
Transfer Restricted Stock........................................................................ 17
Trust Indenture Act.............................................................................. 18
Trustee.......................................................................................... 1, 18, 74
U.S. Government Obligations...................................................................... 73
US Dollars....................................................................................... 18
Wholly Owned..................................................................................... 18
Working Capital Replacement Facility............................................................. 18
Yuba............................................................................................. 18
</TABLE>
viii
<PAGE>
INDENTURE, dated as of July 17, 1996, by and among USTRAILS INC., a Nevada
corporation (hereinafter called the "COMPANY"), each Subsidiary of the Company
set forth on Schedule I (each a Subsidiary Guarantor), any Person that may from
time to time become a party hereto as a Subsidiary Guarantor (as defined below)
by executing and delivering to the Trustee an Addendum to Subsidiary Guarantee
(as defined below), and FLEET NATIONAL BANK, a national banking association
("FLEET"), as trustee (hereinafter called the "TRUSTEE").
RECITALS OF THE COMPANY
A. The Company has duly authorized the creation, execution and delivery
of $40,241,000 principal amount Senior Subordinated Pay-in-Kind Notes due 2003,
plus the additional principal amount of Senior Subordinated Pay-in-Kind Notes
issued pursuant to Section 301 (the "NOTES"), of substantially the tenor and
amount hereinafter set forth, and to provide for the Notes, the Company has duly
authorized the execution and delivery of this Indenture.
B. All things necessary have been done to make the Notes, when executed
by the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms.
RECITALS OF THE SUBSIDIARY GUARANTORS
C. Each Subsidiary of the Company set forth on Schedule I has duly
authorized its guarantee of the Notes and certain other obligations of the
Company as set forth in Article Thirteen hereof and endorsed on the Notes
(together with any Addendum to Subsidiary Guarantee, collectively, the
"SUBSIDIARY GUARANTEE"), and to provide therefor, has duly authorized the
execution and delivery of this Indenture.
D. All things necessary have been done to make the Subsidiary Guarantee,
when executed by the Subsidiary Guarantors and endorsed on Notes authenticated
and delivered hereunder and duly issued by the Company, the valid obligations of
the Subsidiary Guarantors and to make this Indenture a valid agreement of the
Subsidiary Guarantors, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
1
<PAGE>
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless otherwise defined herein, all accounting terms have the
meanings assigned to them in accordance with GAAP, and unless otherwise
provided herein, all accounting determinations shall be made in accordance
with GAAP;
(d) Article, Section and other references to any subdivision in this
Indenture are to this Indenture, and the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other subdivision;
(e) references to the plural include the singular, the singular
includes the plural, the part includes the whole, and "including" is not
limiting;
(f) references in this Indenture to any agreement, other document or
law "as amended" or "as amended from time to time," or to "amendments" of
any document or law, shall include any amendments, supplements,
replacements, renewals or other modifications from time to time, provided
in the case of modifications to documents, such modifications are
permissible under the Note Documents; and
(g) references in this Indenture to any law include regulations
promulgated thereunder from time to time.
"ACT" when used with respect to any Holder has the meaning specified in
Section 104.
"ADDENDUM TO SUBSIDIARY GUARANTEE" means any Addendum to Subsidiary
Guarantee between any Subsidiary Guarantor and the Trustee, substantially in the
form of Exhibit B-2, together with any amended Subsidiary Guarantee endorsement
that may be included on the Notes pursuant to Section 906.
"ADDITIONAL INTEREST" means additional interest in the event of a
Registration Default as provided in Section 301.
"AFFILIATE" means (i) any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
of its Subsidiaries, (ii) any spouse, immediate family member, or other relative
who has the same principal residence of any Person described in clause (i)
above, and (iii) any trust in which any Person described in clause (i) or (ii)
above has a beneficial interest. For purposes of this definition, the term
"control" means (a) the power to direct the management and policies of a Person,
directly or through one or more intermediaries, whether through the ownership of
voting securities, by contract, or otherwise, or (b) the beneficial ownership of
any class of voting Capital Stock of a Person (on a fully diluted basis) or of
warrants or other rights to acquire such class of Capital Stock (whether or not
exercisable) (1) in respect of Section 1014, of 10% or more or (2) in respect of
all other provisions of this Indenture, of 25% or more.
2
<PAGE>
"AFFILIATE TRANSACTION" is defined in Section 1014.
"AGENT" means any Registrar, Paying Agent, co-registrar, co-paying agent or
other agent appointed pursuant to Section 1002.
"APPLICABLE LAW" means all applicable provisions of all (i) constitutions,
treaties, statutes, laws, rules, regulations and ordinances of any Governmental
Authority, (ii) Governmental Approvals and (iii) orders, decisions, judgments,
awards and decrees of any Governmental Authority.
"ASSET SALE PURCHASE OFFER" is an offer the purchase Notes by the Company
pursuant to Section 1015(d).
"ASSET SALE PURCHASE PRICE" means the price at which the Company offers to
purchase Notes pursuant to Section 1015(d).
"AVERAGE LIFE" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal (or redemption) payment of such security or
instrument multiplied by the amount of such principal (or redemption) payment by
(ii) the sum of all such principal (or redemption) payments.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Section 101 et seq.), as amended from time to time, or any successor statute.
"BENEFICIARIES" means the Holders and the Trustee.
"BLOCKAGE NOTICE" is defined in Section 1503.
"BOARD OF DIRECTORS" means, with respect to any Note Party, (i) in the case
of a corporation, the board of directors of such Note Party or, except for
purposes of Sections 1004, 1014 and 1015, any duly authorized committee of that
board, (ii) in the case of a partnership ultimately controlled by a corporate
general partner or other corporation, the "Board of Directors" of the general
partner or corporation, as specified in clause (i), and (iii) in the case of a
partnership ultimately controlled by one or more general partners who are
individuals, all such individuals. Unless otherwise indicated, "BOARD OF
DIRECTORS" means the Board of Directors of the Company.
"BOARD RESOLUTION" means, with respect to any Note Party, (i) in the case
of a corporation, a copy of a resolution certified by the Secretary or an
Assistant Secretary of such Note Party and (ii) in the case of a partnership
ultimately controlled by a corporate general partner or other corporation, a
resolution certified by the Secretary or an Assistant Secretary of the general
partner or corporation, to have been duly adopted by the Board of Directors of
such Note Party and to be in full force and effect on the date of such
certification, and delivered to the Trustee. In the case of a Note Party that
is a partnership ultimately controlled by one or more general partners who are
individuals, "BOARD RESOLUTION" means a resolution of all such individuals
certified by all of them to have been duly adopted by them and to be in full
force and effect on the date of such certification, and delivered to the
Trustee. Unless otherwise indicated, "BOARD RESOLUTION" means a Board
Resolution of the Company.
3
<PAGE>
"BUSINESS DAY" means any day other than a Saturday, Sunday or a legal
holiday in the states of Connecticut, New York, Texas, or any other relevant
State.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, any
obligation that is required to be classified and accounted for as a capital
lease on the face of a balance sheet of such Person prepared in accordance with
GAAP. The amount of such obligation shall be the capitalized amount thereof,
determined in accordance with GAAP, and the stated maturity thereof shall be the
date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be terminated by the lessee without
payment of a penalty, and any refinancing or replacement of such obligation; and
such obligations shall be deemed secured by a Lien on any property or assets to
which such lease relates.
"CAPITAL STOCK" means, with respect to any Person, any and all shares of
stock, partnership or other interests, participations or other equivalents of or
interests in (however designated) such Person, including each class of common
stock and preferred stock of such Person, but excluding convertible
Indebtedness.
"CASH EQUIVALENT" means (i) any evidence of Indebtedness with a maturity of
two years or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof, provided that
the full faith and credit of the United States of America is pledged in support
thereof; (ii) demand and time deposits and certificates of deposit or acceptance
with a maturity of 180 days or less of any financial institution that is a
member of the Federal Reserve System having combined capital and surplus and
undivided profits of not less than $250,000,000; (iii) commercial paper with a
maturity of 270 days or less issued by a corporation that is not an Affiliate of
the Company and is organized under the laws of any state of the United States or
the Director of Columbia and rated at least A-1 by S&P or at least P-1 by
Moody's; (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any commercial bank meeting the specifications of clause (ii) above;
(v) overnight bank deposits and bankers acceptances at any commercial bank
meeting the qualifications specified in clause (ii) above; (vi) deposits
available for withdrawal on demand with any commercial bank not meeting the
qualifications specified in clause (ii) above but which is a local depository
bank, provided all deposits in the local depository bank do not exceed $100,000
in the aggregate at any one time; (vii) deposits available for withdrawal on
demand with any commercial bank not meeting the qualifications specified in
clause (ii) above but which is a lender (or bank affiliate thereof) under the
Senior Secured Credit Facility or any Working Capital Replacement Facility,
provided all such deposits do not exceed $5,000,000 in the aggregate at any one
time; (viii) demand and time deposits and certificates of deposit with any
commercial bank organized in the United States not meeting the qualifications
specified in clause (ii) above, provided that such deposits and certificates
support bond, letter of credit and other similar types of obligations incurred
in the ordinary course of business; and (ix) investments in money market or
other mutual funds substantially all of whose assets comprise securities of the
types described in clauses (i) through (v) above.
"CHANGE OF CONTROL PURCHASE OFFER" and "CHANGE OF CONTROL PURCHASE PRICE"
each is defined in Section 1109(a).
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and as interpreted by the regulations promulgated and rulings issued
thereunder and by relevant judicial authorities.
4
<PAGE>
"COLLATERAL" means any assets of the Company, the Subsidiary Guarantors or
any of their respective Subsidiaries securing the Senior Indebtedness as of the
date the Senior Indebtedness is satisfied and discharged in full and defined as
"Collateral" in any of the Collateral Documents, but excluding the Excluded
Assets.
"COLLATERAL DOCUMENTS" means, collectively, the Company Pledge Agreement,
the Company Security Agreement, the Subsidiary Pledge Agreement, the Subsidiary
Security Agreement, the Mortgages and any security documents entered into by the
Company or any Subsidiary to secure their respective obligations under the Note
Documents, in each case as amended from time to time as permitted herein.
"COMMENCEMENT DATE" means the date a Registration Default occurs.
"COMMISSION" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"COMMON STOCK" means the Company's common stock, par value $.01 per share.
"COMPANY" means the Person named as the "Company" in the Preamble, until a
successor Person shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such successor Person.
"COMPANY PLEDGE AGREEMENT" means the Company Pledge Agreement between the
Company and the Trustee, substantially in the form of Exhibit C-1, as from time
to time amended.
"COMPANY SECURITY AGREEMENT" means the Company Security Agreement between
the Company and the Trustee, substantially in the form of Exhibit D-1, as from
time to time amended.
"CONSOLIDATED NET WORTH" of any Person at any date means the aggregate of
capital, surplus and retained earnings of such Person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such Person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
equity) the amount of capital, surplus and accrued but unpaid dividends
attributable to any Disqualified Capital Stock or treasury stock.
"CONSOLIDATED SUBSIDIARY" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired), the financial
statements of which shall be (or should have been) consolidated for financial
statement reporting purposes with the financial statements of such Person in
accordance with GAAP.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at 777 Main
Street, Hartford, Connecticut 06115, facsimile number (860) 986-7920, Attention:
Corporate Trust Department.
"DEFAULT" means any event that, after notice or lapse of time or both,
would become an Event of Default.
5
<PAGE>
"DEFAULT RATE" means, for purposes of any Note Document, 14% per annum.
"DEFAULTED INTEREST" is defined in Section 306.
"DELIVERY DATE" means the date the Collateral Documents are executed and
delivered to the Trustee, which shall be substantially contemporaneously with
the date all of the Company's obligations under the Senior Indebtedness have
been satisfied and discharged in full and all Liens securing the Senior
Indebtedness have been released by the holders of the Senior Indebtedness or the
Representative of such holders.
"DISQUALIFIED CAPITAL STOCK" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or repurchased
(including at the option of the holder thereof) by such Person or any of its
Subsidiaries, in whole or in part, on or prior to a date that is 91 days after
the Stated Maturity.
"EQUITY INTERESTS" means, with respect to any Person, Capital Stock of such
Person and all warrants, options or other rights to acquire such Capital Stock
(but excluding any debt security that is convertible into, or exchangeable for,
such Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as from
time to time amended.
"EVENT OF DEFAULT" is defined in Section 501.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED ASSETS" means cash, Cash Equivalents, any other assets of the
Company or any of its Subsidiaries that secure a Working Capital Replacement
Facility and any assets of a type or kind, or in an amount, not required as
collateral for the Senior Indebtedness in accordance with the terms thereof.
"EXISTING AFFILIATE" means any Affiliate of the Company as of June 1, 1996,
together with such Affiliate's Affiliates as of such date.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company or its
Subsidiaries in existence on the Issue Date and listed on Schedule 101A.
"FAIR MARKET VALUE" means, with respect to any property, a price which
could, in the ordinary course, be negotiated in an arm's-length transaction
between unrelated parties, neither of whom is under pressure or compulsion to
complete the transaction.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"GOVERNMENTAL APPROVAL" means an authorization, consent, approval, permit,
license, registration or filing with any Governmental Authority.
6
<PAGE>
"GOVERNMENTAL AUTHORITY" with respect to any Person, means any nation, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any government authority, agency,
department, board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof, and any tribunal or
arbitrator(s) of competent jurisdiction in each case, having jurisdiction or
authority over such Person.
"GUARANTEE" means any guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligation. "GUARANTEE," when used as a verb, has a
correlative meaning.
"HOLDER" means a Person in whose name a Note is registered in the Register.
"INCUR" means, with respect to any Indebtedness, Disqualified Capital Stock
or other obligation of any Person, that such Person incurs, assumes, creates,
Guarantees or otherwise becomes directly or indirectly liable therefor.
"INCURRED" and "INCURRENCE" have correlative meanings.
"INDEBTEDNESS" means, with respect to any Person, without duplication, (a)
all liabilities and obligations, contingent or otherwise, of or with respect to
such Person, (i) in respect of borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) evidenced by bonds, notes, debentures or similar instruments,
(iii) representing the balance deferred and unpaid of the purchase price of any
property or services, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation or (vi) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(b) all obligations of such Person under "interest rate swap," "cap" or "collar"
obligations, foreign currency hedges and similar agreements; (c) all liabilities
of others of the kind described in the preceding clause (a) or (b) that such
Person has Guaranteed or that is otherwise its legal liability and all
obligations to purchase, redeem or acquire any Capital Stock; (d) all
obligations secured by a Lien (other than a Permitted Lien not described in
clause (g) of the definition of "Permitted Lien") not securing any liability or
obligation that would itself constitute Indebtedness to which the property or
assets (including leasehold interests and any other tangible or intangible
property rights) of such Person are subject, whether or not the obligations
secured thereby shall have been assumed by or shall otherwise be such Person's
legal liability, provided that the amount of such obligations shall be limited
to the lesser of the Fair Market Value of the assets or property to which such
Lien attaches and the amount of the obligation so secured; and (e) any and all
deferrals, renewals, extensions, refinancings and refundings (whether direct or
indirect) of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (a), (b), (c) or (d), or this
clause (e), whether or not between or among the same parties.
"INDENTURE" means this instrument as originally executed and as from time
to time supplemented or otherwise amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall be
deemed to include the provisions relating to the Subsidiary Guarantee from time
to time contained herein.
"INITIAL PERIOD" is defined in Section 301.
7
<PAGE>
"INTEREST" means interest, including any Additional Interest.
"INTEREST PAYMENT DATE" means each July 15 and January 15, commencing
January 15, 1997.
"INVESTMENT" by any Person in any other Person means (without duplication)
(a) the acquisition by such Person (whether for cash, property, services,
securities or otherwise) of Equity Interests, bonds, notes, debentures,
partnership or other ownership interests or other securities of such other
Person or any agreement to make any such acquisition; (b) the making by such
Person of any deposit with, or advance, loan or other extension of credit to,
such other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other Person) or any commitment to make any such advance,
loan or extension; (c) the entering into by such Person of any Guarantee of, or
other contingent obligation with respect to, Indebtedness or other liability of
such other Person; or (d) the making of any capital contribution by such Person
to such other Person
"ISSUE DATE" means July 18, 1996.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge
or encumbrance of any kind with respect to such asset (including any agreement
to give any lien). A Person shall be deemed to own subject to a Lien any asset
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreements, Capital Lease Obligation or other title
retention agreement relating to such asset.
"MATERIAL SUBSIDIARY" means a Consolidated Subsidiary representing at least
5% of the book value of the total assets of the Company and its Consolidated
Subsidiaries determined in accordance with GAAP.
"MATURITY" when used with respect to any Note, means the date on which the
entire principal of such Note becomes due and payable as provided therein or in
this Indenture, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"MOODY'S" means Moody's Investor Service, Inc. or any successor.
"MORTGAGE" means a mortgage or deed of trust and related assignment of
rents between the Company or any Subsidiary that owns or leases any campground
or other significant real estate asset and the Trustee, granting a Lien on such
campground or other real estate securing such Subsidiary's obligations under the
Note Documents (including under the Subsidiary Guarantee (in the case of a
Subsidiary Guarantor) and any Permitted Intercompany Loans) and substantially in
the form of Exhibit E, as amended from time to time as permitted herein.
"NEGATIVE PLEDGE ASSETS" means the Excluded Assets.
"NET CASH PROCEEDS" means the aggregate amount of US Dollars and Cash
Equivalents received by the Company or any Subsidiary in respect of an Asset
Sale or the sale of Capital Stock or Subordinated Debt, less the sum of all
reasonable fees, commissions and other out-of-pocket expenses incurred in
connection with such Asset Sale or sale, including the amount (estimated
reasonably and in good faith by the Company, as evidenced by a Board Resolution)
of income, franchise, sales and other applicable taxes to be paid by
8
<PAGE>
the Company or such Subsidiary in connection with such Asset Sale or sale (as
reasonably determined by the Company in good faith based upon then applicable
average tax rates and giving effect to all applicable deductions, credits and
other allowances and payments under tax sharing agreements), and after giving
effect to the repayment of all Indebtedness secured by, and which became due and
payable as a result of the sale of the subject assets or such sale of such
Capital Stock or Subordinated Debt, other than the Notes and Senior
Indebtedness, provided that Net Cash Proceeds shall in no event be less than
zero.
"NET PROCEEDS" means, the aggregate Net Cash Proceeds and Fair Market Value
of property (determined as of the time of receipt in good faith by the Board of
Directors of the Company), other than securities of the Company or any of its
Subsidiaries, received by the Company after the payment of expenses, taxes,
commissions, discounts and the like incurred in connection therewith.
"NOTE CERTIFICATE" is defined in Section 201.
"NOTE DOCUMENTS" means, collectively, the Notes, this Indenture (including
the Subsidiary Guarantee) and the Collateral Documents, in each case as amended
from time to time as permitted herein.
"NOTE PARTY" means any Obligor.
"NOTES" is defined in the Preamble and includes the Secondary Notes and the
provisions relating to the Subsidiary Guarantee contained therein.
"OBLIGATIONS" is defined in Article 1301.
"OBLIGOR" means the Company or any Subsidiary Guarantor.
"OFFICERS' CERTIFICATE" means, with respect to any Note Party, (i) in the
case of a corporation or a partnership ultimately controlled by a corporate
general partner or other corporation, a certificate stating such and signed by
the Chairman of the Board, the President, a Vice President or the Treasurer, and
by the Secretary or an Assistant Secretary, of such Note Party, general partner
or corporation, as the case may be, and delivered to the Trustee, and (ii) in
the case of a Note Party that is a partnership ultimately controlled by one or
more general partners who are individuals, a certificate of all such individuals
stating such and delivered to the Trustee. Unless otherwise indicated,
"OFFICERS' CERTIFICATE" means an Officers' Certificate of the Company.
"OPINION OF COUNSEL" means a written opinion in form and substance, and
from legal counsel (who may be counsel for a Note Party), satisfactory to the
Person entitled to receive such opinion hereunder, as applicable, which opinion
may be subject to any necessary and customary qualifications, exceptions and
limitations. In the case of any Opinion of Counsel as to the enforceability of
any document, such qualifications, exceptions and limitations shall include that
such opinion is subject to bankruptcy, insolvency, reorganization, moratorium,
arrangement or other similar laws relating to creditors' rights generally, and
general principles of equity (regardless whether considered in a proceeding at
law or in equity), including concepts of materiality, reasonableness, good faith
and fair dealing and the possible unavailability of specific performance or
other equitable relief.
9
<PAGE>
"OUTSTANDING" when used with respect to Notes means, subject to Article
Fourteen, as of the date of determination, all Notes, including Secondary Notes,
theretofore authenticated and delivered under this Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than any Obligor) in trust or set aside and segregated in
trust by the Company (if any Obligor shall act as Paying Agent) for the Holders
of such Notes; provided that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(ii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than any such
Notes in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in whose
hands the Notes are valid obligations of the Obligors;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (A) Notes owned
by the Company, any Obligor or any other obligor upon the Notes shall be
disregarded and deemed not to be Outstanding, and (B) upon the occurrence and
during the continuance of a Default or Event of Default Notes owned by any
Affiliate of the Company or such other Obligor shall be disregarded and deemed
not to be Outstanding, except that in determining whether the Trustee shall be
indemnified or protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes as to which the
Trustee has received an Officers' Certificate stating that (or as to which the
Trustee otherwise knows that) such Notes are so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the reasonable satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not an Obligor or any Affiliate of any Obligor.
"PAYING AGENT" is defined in Section 1002.
"PAYMENT BLOCKAGE NOTICE" is defined in Section 1503.
"PERMITTED INTERCOMPANY SECURED LOAN" means any loan made by the Company to
any Subsidiary that (i) is evidenced by a promissory note, (ii) is secured by a
Lien on substantially all assets of such Subsidiary other than assets of a type
or kind, or in any amount, not required to be pledged as Collateral pursuant to
this Indenture, which Lien shall be subject only to a prior Lien on the same
assets, if any, securing the Senior Indebtedness or, after the Delivery Date,
Subsidiary Guarantee, and (iii) together with a promissory note and any related
Collateral and Liens, is pledged to secure the Senior Indebtedness, or after the
Delivery Date is pledged to the Trustee for the benefit of the Holders.
"PERMITTED INTERCOMPANY LOAN COLLATERAL" means, with respect to any
Permitted Intercompany Secured Loan, such Permitted Intercompany Secured Loan,
the related promissory note and Collateral Documents (to the extent they secure
such loan), the
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Collateral and Liens thereunder, and all related rights, powers, remedies and
privileges of the Company thereunder.
"PERMITTED INVESTMENTS" means any (i) Investments in the Company,
(ii) Investments in a Wholly Owned Subsidiary or in a Person engaged in a
Related Business which, upon the making of such Investment, will become a Wholly
Owned Subsidiary, provided that such Subsidiary is not subject to any
encumbrance or restriction (other than under the Senior Secured Credit Facility)
that has the effect of restricting the payment by such Subsidiary of dividends
to the Company or any Subsidiary Guarantor or the payment by such Subsidiary of
Indebtedness owed to the Company or any Subsidiary Guarantor or reducing the
amount of any such dividends or payments, (iii) Investments in another Person
engaged in a Related Business in connection with a consolidation, merger or
disposition of assets permitted by Section 801 and Section 1015,
(iv) Investments in another Person engaged in a Related Business which is not,
or will not (upon the making of such Investment) become a Wholly-Owned
Subsidiary, provided that the aggregate amount invested in all such Persons
shall not exceed $1,000,000 at any time outstanding, (v) Investments in Cash
Equivalents, (vi) any securities received in connection with Asset Sales to the
extent permitted by Section 1015, (vii) Investments paid for with Qualified
Capital Stock in a Person engaged in a Related Business, (viii) payments
required pursuant Article Nine of the By-Laws of the Company and the transfer
restrictions of the Transfer Restricted Stock, and (ix) payments in respect of
dissenters' rights to holders of not more than 5% of the Company's Capital
Stock.
"PERMITTED LIENS" means any of the following:
(a) Liens arising by reason of any judgment, decree or order of any court
only to the extent for an amount and for a period not resulting in an Event of
Default with respect thereto and so long as such Lien is being contested in good
faith and is adequately bonded, and any appropriate legal proceedings that may
have been duly initiated for the review of such judgment, decree or order shall
not have been finally adversely terminated or the period within which such
proceedings may be initiated shall not have expired;
(b) Security for the performance of bids, tenders, trade, contracts (other
than contracts for the payment of money) or leases, surety bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business or appeal bonds, and public and statutory bonds;
(c) Liens (other than Liens arising under ERISA for taxes, assessments or
other governmental charges not yet due or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or Subsidiary in accordance with
GAAP;
(d) Liens of carriers, warehousemen, mechanics, landlords, materialmen,
repairmen or other like Liens arising by operation of law in the ordinary course
of business (other than Liens arising under ERISA) and consistent with industry
practices and Liens on deposits made to obtain the release of such Liens if
(i) the underlying obligations are not overdue for a period of more than 90 days
or (ii) such Liens are being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto are maintained on the
books of the Company or Subsidiary in accordance with GAAP; and banker's liens
and rights of set off arising in the ordinary cause of business;
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(e) Easements, rights of way, zoning and similar restrictions and other
similar encumbrances or title defects incurred in the ordinary course of
business and consistent with industry practices that, in the aggregate, are not
substantial in amount, and that do not in any case materially detract from the
value of the property subject thereto (as such property is used by the Company
or a Subsidiary) or interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries; provided that any such Liens are not
incurred in connection with any borrowing of money or any commitment to loan any
money or to extend any credit;
(f) rights of members and other customers arising in the ordinary course of
business from memberships, rights to use or related or similar interests in
campgrounds, resorts, or other facilities (whether arising from the holding of
such memberships, rights to use or related or similar interests, by applicable
law or otherwise);
(g) leases, subleases, permits or other rights to use or occupy property
owned or hereafter acquired by the Company or any of its Subsidiaries other than
Capitalized Lease Obligations;
(h) Pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security legislation;
(i) Liens, incurred in connection with the incurrence of Refinancing
Indebtedness in compliance with the terms hereof with respect to Indebtedness
secured by Liens, provided (i) such Liens do not extend to any additional
property or assets and (ii) such Liens are no more adverse to the interests of
Holders than the Liens replaced or extended thereby;
(j) Such Liens and items described in paragraph (e) above in existence and
outstanding on the Issue Date as are permitted under the terms of the Senior
Indebtedness;
(k) Liens that secure Indebtedness of any Person existing at the time such
Person becomes a Subsidiary of the Company or is merged or consolidated into or
with the Company or a Subsidiary of the Company, provided that such Liens do not
extend to or cover any other property or assets and were not put in place in
anticipation of such acquisition;
(l) Liens in favor of the Trustee (or, in the case of Liens securing
Permitted Intercompany Secured Loans, the Company or any Subsidiary Guarantor)
under the Collateral Documents;
(m) Liens in favor of the Company or any Subsidiary Guarantor, which are
assigned to the Trustee as Collateral for the Notes or the Subsidiary Guarantee,
as applicable; and
(n) Liens of the Company or its Subsidiaries in existence on the Issue
Date, and set forth in Schedule 101B.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means Indebtedness that is incurred
to finance the acquisition or lease after the Issue Date of newly acquired or
leased trailers, vehicles and other movable equipment, fixtures and other
equipment used in connection
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with the operation of any campground, resort or other asset, and any refinancing
or replacement of such Indebtedness.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a country or political subdivision thereof or any
agency or instrumentality of such country or subdivision.
"PREDECESSOR NOTE" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 305 in exchange for a mutilated Note
or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the
same debt as the mutilated, lost, destroyed or stolen Note.
"PREPAID INTEREST" is defined in Section 301.
"PURCHASE DATE" is defined in Section 1110(b).
"PURCHASE OFFER" means a Change of Control Purchase Offer or Asset Sale
Purchase Offer, as applicable.
"PURCHASE PRICE" means the Change of Control Purchase Price or Asset Sale
Purchase Price, as applicable.
"QUALIFIED CAPITAL STOCK" means any Capital Stock or Equity Interest of the
Company that is not Disqualified Capital Stock.
"REDEMPTION DATE" when used with respect to any Notes to be redeemed means
the date fixed for such redemption by or pursuant to this Indenture.
"REDEMPTION PRICE" when used with respect to any Note to be redeemed means
the price at which it is to be redeemed pursuant to this Indenture.
"REFINANCING" is defined in the definition of "Refinancing Indebtedness."
"REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "REFINANCING"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, with a liquidation preference, not to exceed the
sum of (i) the reasonable and customary fees and expenses Incurred in connection
with the Refinancing, including any prepayment premium or penalty, plus (ii) the
lesser of (A) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock
so Refinanced and (B) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing; provided that (1) Refinancing
Indebtedness of any Subsidiary of the Company shall only be used to Refinance
outstanding Indebtedness or Disqualified Capital Stock of such of Subsidiary,
(2) Refinancing Indebtedness shall (x) not have an Average Life shorter than the
Indebtedness or Disqualified Capital Stock to be so refinanced at the time of
such
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refinancing and (y) in all respects, be no less subordinated, if applicable, to
the rights of Holders pursuant to the Notes than was the Indebtedness or
Disqualified Capital Stock to be refinanced, (3) such Refinancing Indebtedness
shall have no installment of principal (or redemption) scheduled to come due
earlier than the scheduled maturity of any installment of principal of the
Indebtedness (or Disqualified Capital Stock) to be so refinanced that was
scheduled to come due prior to the Stated Maturity and (4) such Refinancing
Indebtedness shall have no installment of interest payable in cash without the
Company's option to pay such interest in kind earlier than the installments of
cash interest on the Indebtedness to be refinanced.
"REGISTER" and "REGISTRAR" are defined in Section 1002.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated the Issue Date between the Company and the Trustee.
"REGISTRATION DEFAULT" means (i) the failure by the Company to file the
Registration Statement within 180 days of the Issue Date, (ii) the Registration
Statement is not effective within 271 days of the Issue Date or (iii) the
Registration Statement has ceased to be effective prior to the date all Transfer
Restricted Securities (as defined in the Registration Rights Agreement) have
been disposed of pursuant to the Registration Statement, without being succeeded
within 30 days by an additional Registration Statement being filed and declared
effective.
"REGISTRATION STATEMENT" means the "Registration Statement" as defined in
the Registration Rights Agreement.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
means the July 1 or January 1 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"RELATED BUSINESS" means the ownership, operation or management of
campgrounds (whether or not membership based), resorts or other facilities in
the vacation or recreation industry, and the provision of reservations or other
services related thereto, as well as sales and marketing activities related
thereto, conducted or proposed in good faith to be conducted by the Company or
any of its Subsidiaries and any and all materially related businesses conducted
or proposed in good faith to be conducted by the Company or any of its
Subsidiaries in support of and ancillary to the foregoing.
"REPRESENTATIVE" means the trustee, agent or representative (if any) for an
issue of Indebtedness.
"REQUEST" or "ORDER" means, with respect to the Company or any other
Obligor, a written request or order signed in the name of any Obligor by its
Chairman of the Board, its Chief Executive Officer or President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee. Unless otherwise indicated,
"REQUEST" or "ORDER" means a Request or Order of the Company.
"RESPONSIBLE OFFICER" when used with respect to the Trustee means any
officer within the Corporate Trust Group (or any successor or similar group) of
the Trustee, including any Vice President, any Assistant Vice President, any
Assistant Secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers,
who shall, in any case, be responsible for the
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administration of this document or have familiarity with it, and also means,
with respect to particular corporate trust matters, any other officer to whom
such matter is referred because of his or her knowledge of and familiarity with
the particular subject.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED PAYMENT" means with respect to any Person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity Interests
of such Person or any Subsidiary of such Person (other than dividends or
distributions payable in Equity Interests (other than Disqualified Capital
Stock) of the Company, dividends or distributions payable to the Company or any
Subsidiary and pro rata dividends or distributions payable to a minority
stockholder of a Subsidiary), (b) any payment on account of the purchase,
redemption or other acquisition or retirement for value of Equity Interests of
such Person or any Subsidiary of such Person other than any such Equity
Interests owned by the Company or any Subsidiary (but excluding (i) payments
required by Article Nine of the Company's By-Laws and the Transfer Restricted
Stock and (ii) payments in respect of dissenters' rights to holders of not more
than 5% of the Company's Capital Stock), (c) any purchase, redemption or other
acquisition or retirement for value of, or any payment in respect of any
defeasance of, any Subordinated Indebtedness, directly or indirectly, by such
Person or a Subsidiary of such Person prior to the scheduled maturity, any
scheduled repayment of principal, or scheduled sinking fund payment, as the case
may be, of such Indebtedness and (d) any Restricted Investment by such Person.
"S&P" means Standard & Poor's Corporation or any successor.
"SECONDARY NOTES" is defined in Section 301.
"SECURED OBLIGATIONS" means, with respect to any Obligor, any and all
present and future obligations and liabilities of such Obligor of every type and
description to the Beneficiaries under the Note Documents, whether for
principal, premium (if any), interest, expenses, indemnities or other amounts,
in each case whether due or not due, absolute or contingent, voluntary or
involuntary, liquidated or unliquidated, determined or undetermined, now or
hereafter existing, renewed or restructured, whether or not from time to time
decreased or extinguished and later increased, created or Incurred, whether or
not arising after the commencement of a proceeding under the Bankruptcy Code
(including post-petition interest) and whether or not allowed or allowable as a
claim in any such proceeding, and whether or not recovery of any such obligation
or liability may be barred by a statute of limitations or such obligation or
liability may otherwise be unenforceable.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" means Indebtedness under or pursuant to the Loan and
Security Agreement, dated as of July 10, 1996, between the Company and Foothill
Capital Corporation, (including, without limitation, all credit, guarantee and
collateral documents in respect thereof), whether outstanding on the Issue Date
or thereafter incurred, as the same may be amended, modified, extended,
refinanced or replaced from time to time, provided that the final maturity
thereof is not extended more than one year after the initial final maturity
thereof. Any Subordinated Indebtedness, the proceeds of which are used to
refinance the Senior Indebtedness, shall not be Senior Indebtedness.
"SPECIFIED PERMITTED INDEBTEDNESS" means: (a) Indebtedness (i) in respect
of bankers' acceptances, letters of credit and performance bonds (to the extent
that incurrence
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thereof does not result in the incurrence of any obligation for the payment of
borrowed money of others), all in the ordinary course of business, in amounts
and for the purposes customary in the Company's and its Subsidiaries industry,
(ii) arising under any appeal or reimbursement obligations with respect to any
judgment, which judgment does not constitute a Default or Event of Default or
(iii) constituting reimbursement obligations with respect to letters of credit
in respect of workers' compensation claims, provided, that the aggregate
principal amount of such Indebtedness outstanding at any time (including any
Existing Indebtedness of like kind or Refinancing Indebtedness with respect to
such Indebtedness), may not exceed $5,000,000; or (b) Indebtedness representing
the balance deferred and unpaid of the purchase price of any property or
services used in the ordinary course of the business of the Company and its
Subsidiaries that would constitute ordinarily a trade payable to trade creditors
(other than accounts payable or other obligations to trade creditors arising in
the ordinary course of business that have remained unpaid for greater than 90
days, unless such payable or obligation is being contested in good faith and
adequate reserves therefor have been established in accordance with GAAP.
"SPECIAL RECORD DATE" is defined in Section 306.
"STATED MATURITY" when used with respect to any security, means the date
specified in such security as the fixed date on which the principal of such
security is due and payable.
"SUBORDINATED INDEBTEDNESS" means all Indebtedness of the Company or of its
Subsidiaries that (a) is unsecured, (b) is subordinated in right of payment to
the prior payment in full in cash of the Notes or the Subsidiary Guarantee or
Permitted Intercompany Secured Loans owing by such Subsidiary to the same extent
as the Notes and the Subsidiary Guarantee are subordinated to the Senior
Indebtedness, (c) provides that interest thereon may be paid in cash only after
July 15, 2000, (d) matures after the July 15, 2003 and (e) has an Average Life
not shorter than that applicable to the Notes .
"SUBSIDIARY" means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person or (ii) any other Person (other than a corporation)
in which such Person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof has at least a majority ownership interest. Unless
otherwise specified, "Subsidiary" means any Subsidiary of the Company.
"SUBSIDIARY GUARANTEE" is defined in the Recitals to this instrument.
"SUBSIDIARY GUARANTOR" means (i) each Subsidiary of the Company set forth
on Schedule I and (ii) each other Wholly Owned Subsidiary who may become a party
to the Subsidiary Guarantee by executing and delivering to the Trustee an
Addendum to Subsidiary Guarantee and endorsing the Notes pursuant to Section
906, subject, however, to Sections 1004 and 1015(c).
"SUBSIDIARY PLEDGE AGREEMENT" means the Subsidiary Pledge Agreement among
the Subsidiaries of the Company (other than Yuba) and the Trustee substantially
in the form of Exhibit C-2, as from time to time amended as permitted herein.
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"SUBSIDIARY SECURITY AGREEMENT" means the Subsidiary Security Agreement
among the Subsidiaries of the Company (other than Yuba) and the Trustee
substantially in the form of Exhibit D-2, as amended from time to time as
permitted herein.
"TAXES" means any present or future income, stamp and other taxes, charges,
fees, levies, duties, imposts, withholdings or other assessments, together with
any interest and penalties, additions to tax and additional amounts imposed by
any federal, state, local or foreign taxing authority upon any Person.
"TRANSFER RESTRICTED STOCK" means the Common Stock of the Company
contractually subjected to restrictions on transfer substantially the same as
those imposed by Article Nine of the By-Laws of the Company.
"TRUSTEE" means the Person named as the "Trustee" in the Preamble, until a
successor Trustee shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean such successor Trustee.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed, except as provided in Section
905.
"US DOLLARS" means lawful currency of the United States.
"WHOLLY OWNED" means, with respect to any Subsidiary of the Company, that
all the issued and outstanding Capital Stock of such Subsidiary is owned by the
Company, directly or through other Wholly Owned Subsidiaries, as the case may
be.
"WORKING CAPITAL REPLACEMENT FACILITY" means a credit facility for working
capital purposes (including, without limitation, all credit, guarantee and
collateral documents in respect thereof) not exceeding $10,000,000 in principal
amount at any time outstanding that refinances or replaces the Senior Secured
Credit Facility (as such credit facility for working capital purposes may be
amended, modified, extended, refinanced or replaced from time to time).
"YUBA" means Yuba Investment Company, a California corporation.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by any Obligor to the Trustee to take any
action under any provision of this Indenture, such Obligor shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture (including any covenants compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with and, where expressly provided herein, an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with, except that, in the case of any such application
or request as to which the furnishing of such documents is specifically required
by any provision of this Indenture relating to such particular application or
request, or both, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include (a) a statement that each
individual signing such certificate or opinion has read such covenant or
condition and the definitions herein relating thereto; (b) a brief statement as
to the nature and scope of the examination or investigation
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upon which the statements or opinions contained in such certificate or opinion
are based; (c) a statement that, in the opinion of such individual, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (d) a statement as to whether, in the opinion of such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of any Obligor may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which its certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the relevant Obligor stating that
the information with respect to such factual matters is in the possession of
such Obligor, unless such counsel knows that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in Person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee, and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "ACT" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section 104.
(b) The record date for determining the Holders entitled to give or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture shall be the first date on which a signed
instrument or instruments embodying or evidencing any of the foregoing is
delivered to the Trustee, and, where it is hereby expressly required, to the
Company.
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Notwithstanding the foregoing, the Company may, but shall not be obligated
to, fix a record date for the purpose of determining the Holders entitled to
consent to any amendment, supplement or waiver of any provision of this
Indenture or to any indenture supplemental hereto, provided that (i) the Company
gives prior written notice of such record date to the Trustee, the Registrar and
the Holders and (ii) any such Act of the Holders shall become effective within
60 days after such record date.
(c) The fact and date of the execution by any Person of any such instrument
or writing may be established in any reasonable manner that the Trustee deems
sufficient, which shall include but not be limited to, notarization of such
instrument.
(d) The ownership of Notes shall be proved by the Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Note shall bind every future Holder of the
same Note or the Holder of every Note issued upon the transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, suffered or
omitted to be done by the Trustee, any Paying Agent or any Obligor in reliance
thereon, whether or not notation of such action is made upon such Note.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND OBLIGORS.
Except as otherwise provided herein, any request, demand, authorization,
direction, notice, consent, waiver or Act of Holders or other document provided
or permitted by this Indenture to be made upon, given or furnished to, or filed
with,
(a) the Trustee by any Holder or by any Obligor shall be sufficient for
every purpose hereunder if made, in writing, and sent via registered or
certified mail, telegraph, telefax, telex, cable or overnight delivery service
to the Trustee at its Corporate Trust Office or at any other address previously
furnished in writing to such Obligor and the Holders by the Trustee; or
(b) any Obligor by the Trustee or by any Holder shall be sufficient for
every purpose (except as provided in Section 501(c)) hereunder if in writing and
sent via registered or certified mail, telegraph, telefax, telex, cable or
overnight delivery service to the such Obligor addressed to it at (1) with
respect to the Company, 2711 LBJ Freeway, Suite 200, Dallas, Texas, 75234,
Attention: Chief Financial Officer, facsimile number (214)488-5008 and (2) with
respect to the Subsidiary Guarantors, at the address set forth on Schedule I, or
at any other address previously furnished in writing to the Trustee by such
Obligor.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and sent via certified or registered mail, telegraph, telefax,
cable or overnight delivery service, to each Holder affected by such event, at
its address as it appears in the Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice.
In any case where notice is so provided to Holders, neither the failure to
provide such notice, nor any defect in any such notice, to any particular Holder
shall affect the sufficiency of such notice with respect to any other Holders.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such
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notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with another
provision hereof that is then required to be included in this Indenture by any
of the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Obligors and the
Trustee shall bind their respective successors and assigns, whether so expressed
or not.
SECTION 110. SEVERABILITY CLAUSE.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, express or implied, shall give
to any Person (other than the parties hereto and their successors hereunder, any
Agent and the Holders), any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Notes shall be governed by, and construed in
accordance with, the laws (other than the conflict of laws rules except those
set forth in New York General Obligations Law (s) 5-1301) of the State of New
York.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, Purchase Date
or Stated Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of interest or principal (and premium, if any) need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, Redemption Date, Purchase Date
or at the Stated Maturity but interest shall continue to accrue with respect to
such payment for the period from and after such Interest Payment Date,
Redemption Date, Purchase Date or Stated Maturity, as the case may be, to the
next succeeding Business Day.
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SECTION 114. EXHIBITS AND SCHEDULES
All of the Exhibits attached to this Indenture shall be deemed incorporated
herein by reference and part of this Indenture.
ARTICLE TWO
NOTE FORMS
SECTION 201. FORMS GENERALLY.
Notes shall be substantially in the form of Exhibit A, which Exhibit
includes the Trustee's certificate of authentication relating thereto (the "NOTE
CERTIFICATE"). Notes shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Notes, as evidenced by their execution
of the Notes. Each Note shall include provisions relating to the Subsidiary
Guarantee, which shall be substantially in the form of Exhibit B-1. Any portion
of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The definitive Notes shall be typed, printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 202. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes. Until so exchanged, temporary Notes shall be
entitled to the same rights, benefits and privileges under this Indenture as
definitive Notes authenticated and delivered hereunder.
ARTICLE THREE
THE NOTES
SECTION 301. TITLE AND TERMS OF THE NOTES.
The aggregate principal amount of Notes that may be authenticated and
delivered under this Indenture, excluding Secondary Notes, is limited to
$40,241,000, except for Notes authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section
202, 303, 304, 305, 906, 1108, or 1113.
The Notes shall be known and designated as the "Senior Subordinated Pay-In-
Kind Notes due 2003" of the Company. Their Stated Maturity shall be July 15,
2003, and they shall bear interest (a) through and including January 15, 1998
(the "INITIAL PERIOD") at 17-1/2% per annum and (b) after January 15, 1998 at
12% per annum, accruing from the Issue
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Date (or, in the case of Notes issued after the Issue Date, the respective dates
of issuance thereof), payable (i) during the Initial Period (A) in the amount of
$40.59 per $1,000 of principal amount on the Issue Date to holders of record on
the Issue Date (the "PREPAID INTEREST") and (B) at 12% per annum semiannually on
each Interest Payment Date to the holders of record of Outstanding Notes on the
immediately preceding Regular Record Date and (ii) after the Initial Period,
semiannually on each Interest Payment Date to the Holders of the Outstanding
Notes on the immediately preceding Regular Record Date. In addition, if a
Registration Default has occurred and is continuing, the Notes will bear
additional interest (the "ADDITIONAL INTEREST") at the rate of $0.10 per week
per $1,000 principal amount of Notes higher than the interest rate then payable
on the Notes, from the Commencement Date to and through the date such
Registration Default no longer exists. If any interest is not paid when due,
such overdue interest shall bear interest, payable in arrears on each Interest
Payment Date and on demand, at the Default Rate. The Prepaid Interest shall be
paid in cash. The Company may, at its option and in its sole discretion, issue
additional Notes ("SECONDARY NOTES") in lieu of cash payment of any or all of
the interest due on any Interest Payment Date occurring on or prior to July 15,
2000; provided that so long as the Senior Indebtedness is outstanding interest
on each Interest Payment Date occurring on or prior to July 15, 2000 shall be
paid only by the issuance of Secondary Notes. If the Company issues Secondary
Notes in lieu of cash payment, in whole or in part, of interest due on any
Interest Payment Date occurring on or prior to July 15, 2000, pursuant to this
paragraph, it shall give notice to the Trustee not less than 5 Business Days
prior to the relevant Interest Payment Date, and shall instruct the Trustee upon
Order of the Company given not less than 5 or more than 45 days prior to such
Interest Payment Date to authenticate Secondary Notes, dated such Interest
Payment Date, in a principal amount equal to the amount of interest not paid in
cash in on such Interest Payment Date. Each issuance of Secondary Notes in lieu
of cash payments of interest on the Notes shall be made pro rata with respect to
the Outstanding Notes and the Company shall have the right to aggregate amounts
of interest payable in the form of Secondary Notes to a Holder of Outstanding
Notes and issue to such Holder a single Secondary Note in payment thereof. Any
Secondary Note may be denominated a separate series if the Company deems it
necessary to do so in order to comply with any Applicable Law, with appropriate
distinguishing designations. At no time shall the maximum aggregate interest
rate borne by the Notes exceed the maximum amount permitted under Applicable
Law.
The principal of (and premium, if any) and interest (including Additional
Interest) on the Notes shall be payable at such office or agency of the Company
as may be maintained for such purpose. Notwithstanding any provisions of this
Indenture to the contrary, if the Company and a Holder shall so agree, payments
of interest on and principal of any Note shall be made by the Paying Agent
directly to the Holder of such Note by check or Note Certificates representing
Secondary Notes mailed to the Holder of such Note at its address set forth in
the Register, without any requirement of surrender of such Note. In any such
case, if the Trustee shall then act as Paying Agent, the Company shall deliver
written instructions to the Trustee at least 15 days prior to the relevant
payment date requesting that such payment will be so made. Unless a new
instruction is delivered to the Trustee at least 15 days prior to any subsequent
payment date, the Trustee shall make any payment due on any such subsequent
payment date in accordance with the previous instructions. The Company will
indemnify and hold harmless the Trustee against and from any loss, liability or
expense (including attorneys' fees) resulting from any act or omission to act on
the part of the Company or any such Holder in connection with any such agreement
or which the Trustee may incur as a result of making any payment in accordance
with any such agreement.
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The payment of the Notes is guaranteed pursuant to the Subsidiary Guarantee
in favor of the Beneficiaries. The Notes shall be repurchased by the Company,
at the option of the Holders, pursuant to Section 1109. The Notes shall be
redeemable as provided in Article Eleven.
Each Holder acknowledges that the Notes have not been registered under the
Securities Act or any other applicable securities law and may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities law,
pursuant to an exemption therefrom and may be transferred only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, or (c) pursuant to any other available
exemption from the registration requirements of the Securities Act. The Company
reserves the right prior to any offer, sale or other transfer of the Notes
pursuant to clause (c) above to require the delivery of an opinion of counsel,
certifications and/or information satisfactory to the Company. Each certificate
for Notes will contain a legend substantially to the following effect:
THESE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER
THESE NOTES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THESE NOTES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (C) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO IT.
SECTION 302. DENOMINATIONS.
The Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 and any integral multiple of $1,000, except that
Secondary Notes or Notes issued upon registration of transfer of such Secondary
Notes may be in denominations of other than $1,000; provided, subject to the
proviso set forth in the second paragraph of Section 301, that the Company may
at its option pay cash in lieu of issuing Secondary Notes in any denominations
of less than $1,000.
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SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Notes shall be executed on behalf of each Obligor by its Chairman of
the Board, its Chief Executive Officer or President or one of its Vice
Presidents. The signature of any of these officers on the Notes may be manual
or facsimile.
Notes bearing the manual or facsimile signatures of individuals who were at
any time the proper officers of any Obligor shall bind such Obligor,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Notes executed by all Obligors to the Trustee
for authentication, together with an Order for the authentication and delivery
of such Notes and, if required by the Trust Indenture Act, an Opinion of
Counsel; and the Trustee in accordance with such Order shall authenticate and
deliver such Notes as provided in this Indenture and not otherwise.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein duly executed by
the Trustee by manual signature of an authorized officer, and such certificate
upon any Note shall be conclusive evidence, and the only evidence, that such
Note has been duly authenticated and delivered hereunder.
If any Obligor, pursuant to Article Eight, shall be consolidated or merged
with or into any other Person or shall sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties and assets to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which such Obligor shall have been merged, or the
Person that shall have received a disposition as aforesaid, shall have executed
an indenture supplemental hereto with the Trustee pursuant to Article Eight, any
of the Notes authenticated or delivered prior to such consolidation, merger, or
disposition may, from time to time, at the request of the successor Person, be
exchanged for other Notes executed in the name of the successor Person and all
other Obligors, with such changes in phraseology and form as may be appropriate,
but otherwise in substance of like tenor as the Notes surrendered for such
exchange and of like principal amount; and the Trustee, upon Request of the
successor Person, shall authenticate and deliver Notes as specified in such
request for the purpose of such exchange. If Notes shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section 303 in exchange or substitution for or upon registration of
transfer of any Notes, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all Notes at the time
Outstanding for Notes authenticated and delivered in such new name.
SECTION 304. REGISTRATION OF TRANSFER AND EXCHANGE.
(a) When Notes are presented to the Registrar with a request to register
the transfer of the Notes, to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar shall register the
transfer or make the exchange as requested; provided, however, that the Notes
presented or surrendered for
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registration of transfer or exchange shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Registrar, duly
executed by the Holder thereof or by such Holder's attorney, duly authorized in
writing.
(b) To permit registrations of transfers and exchanges, the Company and the
Subsidiary Guarantors shall execute and the Trustee shall authenticate Notes at
the Registrar's request. No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charges payable
in connection therewith (other than any such transfer taxes or similar
governmental charges payable upon exchanges or transfer pursuant to
Sections 202, 906, 1108 and 1113).
(c) All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Obligors, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(d) The Company shall not be required (i) to issue, register the transfer
of or exchange any Note during a period beginning at the opening of business 15
days before the mailing of a notice of redemption of or of an offer to
repurchase the Notes selected for redemption or repurchase and ending at the
close of business on the day of such mailing, (ii) to register the transfer of
or exchange any Note so selected for redemption in whole or in part, except in
the case of any Note to be redeemed in part, the portion thereof not to be
redeemed, or (iii) to register the transfer of or exchange any Note in respect
of which a Purchase Notice has been given to any Paying Agent until the earlier
of (1) such time as such notice has been withdrawn in accordance with Section
1111 or (2) the Purchase Date.
SECTION 305. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
In the event any Note is mutilated, lost, stolen or destroyed, the Company
may execute and the Trustee may authenticate and deliver a new Note in lieu of
such mutilated, lost, stolen or destroyed Note, of like maturity and
denomination as that mutilated, lost, stolen or destroyed. Any mutilated Note
shall first be surrendered to the Trustee; and in the case of any lost, stolen
or destroyed Note, there shall first be furnished to the Trustee by the Person
in whose name the Note is registered evidence of such loss, theft or destruction
satisfactory to it together with indemnity satisfactory to it. In the event any
such Note shall have matured or shall have been redeemed, instead of issuing a
replacement Note, upon the furnishing of evidence of such loss, theft, or
destruction together with indemnity satisfactory to it, by the Person in whose
name such Note is registered, the Trustee may pay the same without surrender
thereof upon receipt of the aforementioned indemnity. The Trustee may charge
the Holder or owner of such Note with its reasonable fees and expenses in
connection with such replacement.
Every new Note issued pursuant to this Section 305 in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Obligors, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section 305 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
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SECTION 306. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Note that is payable, and is paid or duly provided for, on
or before 30 Business Days following any Interest Payment Date, shall be paid by
the Paying Agent to the Person in whose name that Note (or one or more
Predecessor Notes) is registered at the close of business on the Regular Record
Date for such interest.
Any interest on any Note that is payable, but is not so paid or duly
provided for, on or before 30 Business Days following any Interest Payment Date
(herein called "DEFAULTED INTEREST") shall forthwith cease to be payable to the
Holder of record on the relevant Regular Record Date by virtue of having been
such Holder; and such Defaulted Interest shall be paid by the Company to the
Persons in whose names the Notes (or their respective Predecessor Notes) are
registered at the close of business on the day fixed by the Company to determine
which Holders shall receive the payment of Defaulted Interest (the "SPECIAL
RECORD DATE"). The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Note, and shall deposit with the
Trustee an amount of money or Secondary Notes equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest by 10:00 a.m. (New
York time) on the Business Day immediately preceding the payment date, to be
held in trust for the benefit of the Persons entitled to such Defaulted Interest
as in this Section provided. In the name and at the expense of the Company, the
Trustee shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be sent via registered or certified
mail, telegraph, telefax, telex, cable or overnight delivery service, to each
Holder at its address as it appears in the Register, provided that the Company
shall deliver notice to the Trustee at least 15 days' prior to the date notice
is to be given to the Holders. The Trustee shall pay such Defaulted Interest
forthwith to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered on such Special Record Date.
Subject to the foregoing provisions of this Section 306, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, that were carried by such other Note.
SECTION 307. PERSONS DEEMED OWNERS.
Prior to and at the time of due presentment for registration of transfer,
the Obligors, the Trustee and any agent of the Company or the Trustee shall
treat the Person in whose name any Note is registered as the owner of such Note
for the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 306) interest on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the Obligors, the
Trustee nor any agent of the Company or the Trustee shall be affected by notice
to the contrary.
SECTION 308. CANCELLATION.
All Notes surrendered for payment, repurchase, redemption or for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation any
other Notes previously authenticated and delivered hereunder that the Company
may have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Trustee. No Notes shall be authenticated in lieu
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of or in exchange for any Notes canceled as provided in this Section 308, except
as expressly permitted by this Indenture. All canceled Notes held by the Trustee
shall be destroyed and a certificate of destruction issued by the Trustee to
each Obligor.
SECTION 309. INTEREST COMPUTATION.
Interest on the Notes shall be computed on the basis of a 360-day year
consisting of 12 months of 30 days each.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(i) all Notes theretofore authenticated and delivered (other than (A) Notes
that have been destroyed, lost or stolen and that have been replaced or paid as
provided in Section 305 and (B) Notes for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(ii) all such Notes not theretofore delivered to the Trustee for
cancellation (A) have become due and payable, or (B) will become due and payable
at their Stated Maturity within one year, or (C) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving of
notice or redemption by the Trustee in the name, and at the expense, of the
Company, and the Obligors have deposited or caused to be deposited with the
Trustee in trust (and subject to a first priority Lien in favor of the Trustee
on behalf of the Holders) for such purpose, together with a statement by the
Obligors that such deposit is irrevocable, U.S. Dollars in an amount sufficient
to pay and discharge the entire indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Notes that have become
due and payable) or to the Stated Maturity or Redemption Date, as the case may
be;
(b) each Obligor has paid or caused to be paid all other sums payable
hereunder by such Obligor
(c) each Obligor has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with; and
(d) each Obligor has complied with Section 314(c) of the Trust Indenture
Act in connection with such satisfaction and discharge.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Obligors to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subsection (ii) of subsection
(a) of this Section 401, the obligations of the Trustee under Section 402 and
the last paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly if the Trustee is then the Paying
Agent or through any other Paying Agent designated by the Company (including the
Company acting as its own Paying Agent), to the Persons entitled thereto, of the
principal (and premium, if any) and interest for whose payment such money has
been deposited with the Trustee.
ARTICLE FIVE
EVENTS OF DEFAULTS AND REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"EVENT OF DEFAULT", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default, whether voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) the failure by the Company to pay any installment of interest on the
Notes as and when due and payable and the continuance of any such failure for 30
days; or
(b) the failure by the Company to pay all or any part of the principal of,
or premium, if any, on the Notes when and as the same becomes due and payable at
Stated Maturity, upon redemption pursuant to Sections 1101 and 1107, upon
repurchase pursuant to Section 1109, by acceleration or otherwise, including
failure to make payment of any Purchase Price or Redemption Price, as and when
due; or
(c) except to the extent covered elsewhere in this Section 501, default in
any material respect in the performance or breach of any covenant,
representation or warranty of any Note Party in any Note Document and
continuance of such default or breach for the period and after the notice
specified below; or
(d) default under any indenture, loan agreement, mortgage, bond,
promissory note or other agreement or instrument (other than any Note Document),
under which there may be issued or by which there may be secured or evidenced
any (x) Senior Indebtedness or (y) any other Indebtedness for money borrowed by
the Company or any Subsidiary, or the payment of which is Guaranteed by the
Company or any Subsidiary, whether such Indebtedness exists on the Issue Date or
is created or Incurred thereafter, and such default is either (i) caused by a
failure to pay when due principal or interest on such Indebtedness within any
grace period applicable thereto (a "PAYMENT DEFAULT") or (ii) results in or
requires the prepayment, repurchase, redemption, or defeasance of any such
Indebtedness prior to its express maturity, or requires that the Company or any
Subsidiary offer to take any of the foregoing actions (any such event, an
"ACCELERATION") and, in each case in respect of clause (y), the principal amount
of such Indebtedness, together with the principal
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amount of any other such Indebtedness under which there has been a Payment
Default or with respect to which there has been an Acceleration, aggregates
$2,000,000 or more; or
(e) the Company or any Subsidiary shall suffer any final judgments, writs
of attachment or similar processes in excess of $2,000,000 in the aggregate
(except to the extent covered by insurance) and that remain unstayed and
unsatisfied, not bonded and not discharged for a period of 60 consecutive days
after entry thereof; or
(f) a decree, judgment or order by a court of competent jurisdiction shall
have been entered adjudging the Company or any of its Material Subsidiaries as
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization of the Company or such Material Subsidiary under any bankruptcy
or similar law, and such decree or order shall have continued undischarged and
unstayed for a period of 90 days; or a decree or order of a court of competent
jurisdiction over the appointment of a receiver, liquidator, trustee or assignee
in bankruptcy or insolvency of the Company or such Material Subsidiary, or of
the property of any such person, or for the winding up for liquidation of the
affairs of any such person, shall have been entered, and such decree, judgment
or order shall have remained in force undischarged and unstayed for a period of
90 days; or the Company or any of its Material Subsidiaries shall institute
proceedings to be adjudicated a voluntary bankrupt, or shall consent to the
filing of a bankruptcy proceeding against it, or shall file a petition or answer
or consent seeking reorganization under any bankruptcy or similar law or similar
statute, or shall consent to the filing of any such petition, or shall consent
to the appointment of a custodian, receiver, liquidator, trustee or assignee in
bankruptcy or insolvency of it or any of its assets or property, or shall make a
general assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or shall become
insolvent or fail generally to pay its debts as they become due; or
(g) the Subsidiary Guarantee shall be held invalid or unenforceable in any
judicial proceeding as against any Subsidiary Guarantor or the payment
obligations of any Subsidiary Guarantor under the Subsidiary Guarantee in
accordance with the terms thereof shall for any reason cease to be valid and
binding on such Subsidiary Guarantor, or the validity or enforceability of the
Subsidiary Guarantee shall be contested or disavowed by any Subsidiary
Guarantor; or
(h) after the Delivery Date, any Collateral Document shall for any reason
(other than pursuant to the terms thereof or of Article Twelve and except for
Permitted Liens permitted to exist hereunder) cease to create a Lien with the
required priority in any of the Collateral purported to be covered thereby, to
the extent required by Sections 1020 or 1202 or any such Collateral Document,
for a period of more than 10 days.
A Default under subsection (c) is not an Event of Default until the Trustee
or the Holders of at least 30% in principal amount of the Outstanding Notes
notify the Company of the Default and the Company does not cure the Default
within 30 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default."
SECTION 502. ACCELERATION OF MATURITY: RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in Section
501(f)) occurs and is continuing, then and in every such case the Trustee or the
Holders of not less than 30% in principal amount of the Outstanding Notes may
declare the principal of all the
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Notes to be due and payable immediately by a notice in writing to the Company
(and to the Trustee if given by the Holders). Upon any such declaration such
principal shall become due and payable. If an Event of Default specified in
Section 501(f) occurs and is continuing, then the principal of all the Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after such declaration of acceleration has been made and before
a judgment or decree for payment of the money due has been obtained by the
Trustee as hereinafter in this Article Five provided, or all or any portion of
the Collateral shall have been sold, otherwise disposed of or otherwise applied
or foreclosed upon, Holders who hold or are owed a majority in principal amount
of the Notes Outstanding, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay (i) all overdue interest on all Notes, (ii)the principal of (and premium, if
any, on) any Notes that have become due otherwise than by such declaration of
acceleration and interest thereon as provided herein , (iii) to the extent that
payment of such interest is lawful, interest upon overdue interest at the
Default Rate; and
(b) all Events of Default, other than the non-payment of principal of the
Notes that has become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if
(a) default is made in the payment of any interest on any Note when such
interest becomes due and payable and continues for 30 days thereafter, or
(b) default is made in the payment of the principal of (or premium, if any,
on) any Note at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Notes, the whole amount then due and payable on such Notes for
principal (and premium, if any) and interest, with interest upon the overdue
principal (and premium, if any) and upon overdue installments of interest, at
the Default Rate; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the agreed
upon compensation (including the expenses, disbursements and advances of the
Trustee, its agents and counsel).
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may (or, at the
direction of Holders of not less than 30% of the Outstanding Notes shall), in
addition to any other remedies available to it, institute a judicial proceeding
for the collection of the sums so due and unpaid and may prosecute such
proceeding to judgment or final decree, and may enforce the same against the
Company, any Subsidiary Guarantor or any other obligor upon the Notes
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and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company, any Subsidiary Guarantor or any other
obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
The Trustee may, in connection with the matters covered by the two preceding
paragraphs, take such actions under the Collateral Documents as shall be
required or available thereunder.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, any Subsidiary Guarantor or any
other obligor upon the Notes or the property of the Company, such Subsidiary
Guarantor or such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the agreed upon
compensation (including the expenses, disbursements and advances of the Trustee,
its agents and counsel)) and of the Holders allowed in such judicial proceeding,
and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the agreed upon compensation (including the
expenses, disbursements and advances of the Trustee, its agents and counsel),
and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production
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thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name and as trustee of an express
trust, and any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Notes in respect of which such judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money or property collected by the Trustee pursuant to this Article
Five, the Subsidiary Guarantee or the other Note Documents shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest, upon presentation of the Notes and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid upon the Notes
for principal (and premium, if any) and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such Notes for
principal (and premium, if any) and interest;
THIRD: To the ratable payment of all other amounts due the Beneficiaries
under the Note Documents; and
FOURTH: To the payment of the remainder, if any, to the Company, its
successors or assigns or to whomsoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Notes shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder gives written notice to the Trustee stating that an Event
of Default is continuing;
(b) Holders of not less than 30% in principal amount of the Outstanding
Notes shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee hereunder and not
withdrawn such request;
(c) such Holder or Holders have offered to the Trustee indemnity reasonably
satisfactory to it against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
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(e) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of any
Note shall have the right on the terms stated herein, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 306) interest on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption, on the
Redemption Date or in the case of repurchase, on the Purchase Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, the Obligors, the Trustee and the
Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as provided in Section 305, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
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SECTION 512. CONTROL BY HOLDERS.
The Holders of 66 2/3% in principal amount of the Outstanding Notes shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee (including under the Collateral
Documents), or exercising any trust or power conferred on the Trustee, provided
that
(a) such direction shall not be in conflict with any rule of law or with
this Indenture, and
(b) the Trustee may take any other action deemed proper by the Trustee that
is not inconsistent with such direction.
SECTION 513. WAIVERS OF PAST DEFAULTS.
The Holders of a majority in aggregate principal amount of Outstanding
Notes, by notice to the Trustee, may on behalf of the Holders of all the Notes
waive any past default hereunder and its consequences, except a default (a) in
the payment of the principal of (or premium, if any) or interest on any Note, or
(b) in respect of a covenant or provision hereof that under Article Nine cannot
be modified or amended without the consent of the Holder of each Outstanding
Note affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by its
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 514 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Note on or after the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on or after the Redemption Date or, in the case of repurchase, on or
after the Purchase Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
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(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and the other Note
Documents to which it is a party, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform, as to form, to the requirements of this Indenture but need not
verify the accuracy of the contents thereof.
(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
the other Note Documents to which it is a party, and use the same degree of care
and skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of its own affairs.
(c) No provision of this Indenture or any other Note Document shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that
(i) this subsection (c) shall not be construed to limit the effect
of subsection (a) of this Section 601;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of 66 2/3% in principal amount of the Outstanding
Notes relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture or the other Note
Documents; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or under the other Note
Documents, or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture or any other Note Document relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 601.
(e) The provisions of Sections 315(a) and (d) of the Trust Indenture Act
are hereby excluded from this Indenture.
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All references in this Section 601 shall be deemed to include the Trustee's
duties under the other Note Documents.
SECTION 602. NOTICE OF DEFAULTS.
Within 45 days after the occurrence of any default hereunder, unless such
default shall have been cured or waived, the Trustee shall transmit by mail to
all Holders, as their names and addresses appear in the Register, notice of such
default hereunder known to the Trustee. Except in the case of a default in the
payment of principal of (or premium, if any) or interest on any Note or in the
payment of any Redemption Price or Purchase Price, the Trustee may withhold such
notice if and so long as the board of directors, the executive committee or a
committee of its Responsible Officers in good faith determines that withholding
such notice is in the interests of the Holders. The provisions of Section
315(b) of the Trust Indenture Act are hereby excluded from this Indenture.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any Officers' Certificate, written order, Order, Request,
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Request or Order and any resolution of the Board of
Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate or an Opinion of Counsel, or both;
(d) the Trustee may consult with counsel of its own choosing and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee security or indemnity reasonably satisfactory to it against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any Officers' Certificate, written order, Order or Request,
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
debt or other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
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investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney during regular business hours
and upon reasonable prior notification;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) except with respect to Section 1001 (including the payment as and when
due of any Redemption Price or Purchase Price), the Trustee shall have no duty
to inquire as to the performance of the covenants set forth in Article Ten. In
addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default under Section 501(a) or 501(b)
or (ii) any Default or Event of Default of which (or of the facts forming the
basis of which) the Trustee shall have received written notification or obtained
actual knowledge.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein and in the Notes, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Obligors, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes. Subject to Section 601, the Trustee shall not be
accountable for the use or application by the Company of Notes or the proceeds
thereof.
SECTION 605. MAY HOLD NOTES.
The Trustee, any Paying Agent, any Registrar or any other Agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Notes, and, subject to Sections 608 and 613, may otherwise deal with
the Obligors with the same rights it would have if it were not Trustee, Paying
Agent, Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received except as expressly set forth
herein and as otherwise agreed with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees to the following:
(a) to pay to the Trustee from time to time such compensation and fees for
all services rendered by it hereunder and under the other Note Documents as
shall be agreed by the Company and the Trustee (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust);
(b) except as otherwise expressly provided herein, to reimburse the Trustee
upon its request for all expenses, disbursements and advances incurred or made
by the
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Trustee in accordance with any provision of this Indenture or the other Note
Documents (including the compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense (including the compensation, expenses and
disbursements of its agents and counsel) incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust and its duties hereunder and under the other Note
Documents, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder or thereunder; and
(d) to make such other payments to the Trustee as may be required to be
made by any of the other Note Documents.
The provisions of this Section 607 shall survive termination of the
Indenture.
SECTION 608. CORPORATE TRUSTEE REQUIRED.
(a) There shall at all times be a Trustee hereunder that shall be a
corporation organized and doing business under the laws of the United States of
America or of any State thereof, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$100,000,000, subject to supervision or examination by Federal or State
authority and, to the extent there is such an institution eligible and willing
to serve. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then, for the purposes of this Section 608, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article Six.
(b) The Trustee shall comply with Section 310(b) of the Trust Indenture
Act.
(c) No Obligor nor any person directly or indirectly controlling,
controlled by, or under common control with such Obligor shall serve as Trustee.
SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article Six shall become effective until the
acceptance of appointment by the successor Trustee under Section 610.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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(c) The Trustee may be removed at any time by an Act of the Holders of
66 2/3% in principal amount of the Notes Outstanding, delivered to the Trustee
and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with the provisions of Section
310(b) of the Trust Indenture Act,
(ii) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or by
any Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee, or (B) subject to Section 514 and Section 315(e) of the Trust Indenture
Act, any Holder of a Note who has been a bona fide Holder of a Note for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Notes delivered to the Company
and the retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders of the Notes
and accepted appointment in the manner hereinafter provided, any Holder of a
Note who has been a bona fide Holder for at least six months may, subject to
Section 514 and Section 315(e) of the Trust Indenture Act, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Notes as their names and addresses appear in the Register. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all
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the rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments to more fully and certainly vest
in and confirm to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article. Both the retiring Trustee and the successor Trustee shall be
entitled to receive an Opinion of Counsel stating that all conditions precedent
have been complied with and that the appointment of such successor Trustee is
enforceable against the Company, subject to bankruptcy, insolvency,
reorganization, moratorium, arrangement or other similar laws relating to
creditors' rights generally, and general principles of equity (regardless
whether considered in a proceeding at law or in equity), including concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or other equitable relief.
SECTION 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion, consolidation or otherwise to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
SECTION 612. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act. A
Trustee who has resigned or been removed shall be subject to Section 311(a) of
the Trust Indenture Act to the extent indicated therein.
SECTION 613. PAYING AGENT; REGISTRAR.
(a) Each Paying Agent or Registrar (other than the Company) shall be a
corporation organized and doing business under the laws of the United States of
America or of any State and having a combined capital and surplus of at least
$100,000,000.
(b) Each Agent may resign at any time by giving written notice thereof to
the Company. The Company, by a Board Resolution and upon giving written notice
thereof to the Agent, may remove each Agent at any time.
(c) If any Agent shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of any Agent for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Agent.
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(d) The Company shall give notice of each resignation and each removal of
any Agent and each appointment of a successor Agent by mailing written notice of
such event by first-class mail, postage prepaid, to the Trustee. Each notice
shall include the name and address of the successor Agent.
(e) The Trustee is hereby initially appointed Paying Agent and Registrar.
(f) The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee in writing of the name and address of any such Agent.
(g) The Paying Agent agrees that until the earlier of (i) July 16, 2000 and
(ii) receipt of a notice from the holder of the Senior Indebtedness or its
Representative that the Senior Indebtedness has been satisfied and discharged in
full, any moneys deposited by the Company for the payment of interest on the
Notes shall be repaid to the Company.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
(a) The Company will furnish or cause to be furnished to the Trustee
(i) semiannually, not more than five Business Days after each Regular
Record Date pertaining to the Notes, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of Notes
as of such Regular Record Date, and
(ii) at such other times as the Trustee may request in writing, within
30 days after receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such
list is furnished;
provided, however, that if and so long as the Trustee shall be the Registrar, no
such list need be furnished.
(b) If and whenever the Company or any Affiliate acquires any Notes, the
Company shall within 10 Business Days after such acquisition by the Company and
within 10 Business Days after the date on which it obtains knowledge of any such
acquisition by an Affiliate, provide the Trustee with written notice of such
acquisition, the aggregate principal amount acquired (to the extent known by the
Company), the Holder from whom such Notes were acquired and the date of such
acquisition.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Registrar. The
Trustee may destroy any list furnished to it as provided in Section 701 upon
receipt of a new list so furnished.
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(b) If three or more Holders (referred to as "applicants" in this
Section 702(b)) apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Note for a period of at
least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders with respect
to their rights under this Indenture or under the Notes and is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall, within five Business Days after the receipt
of such application, at its election, either:
(i) afford to such applicants access to the information preserved at
the time by the Trustee in accordance with the provisions of
Section 702(a); or
(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by the Trustee, in accordance with the provisions of Section 702(a), and as
to the approximate cost of mailing to such Holders the form of proxy or
other communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder whose name and address appears in the information preserved
at the time by the Trustee in accordance with the provisions of
Section 702(a), a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five Business Days
after such tender the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the Holders of Notes or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objection specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of any order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met, and shall enter an order so declaring, the Trustee shall mail copies
of such material to all such Holders with reasonable promptness after the entry
of such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Notes, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 312(b)
of the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
To the extent required by the Trust Indenture Act, on or before July 15 of
each year commencing with the first July 15 after the date of this Indenture,
the Trustee shall transmit by mail to the Company and to all Holders, if
required, as provided in Section 313(c) of the Trust Indenture Act, a brief
report dated as of the immediately preceding May 15 that
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complies with Section 313(a) of the Trust Indenture Act. The Trustee also shall
comply with Section 313(b) of the Trust Indenture Act.
If and so long as this Indenture is qualified under the Trust Indenture
Act, a copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the Notes
are listed, with the Commission and with the Company. The Company will notify
the Trustee if and when the Notes are listed on any stock exchange.
SECTION 704. REPORTS BY COMPANY.
If and so long as this Indenture is qualified under the Trust Indenture
Act, the Company shall:
(a) file with the Trustee, within 15 days after the Company is required to
file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) that the Company may be required to file with the Commission pursuant
to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not
required to file information, documents or reports pursuant to either of such
Sections, then it shall file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the Commission, such
of the supplementary and periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations; and
(c) transmit by mail to all Holders, as provided in Section 313(c) of the
Trust Indenture Act, within five days after the filing thereof with the Trustee,
summaries of any information, documents and reports required to be filed by the
Company pursuant to subsections (a) and (b) of this Section 704 as may be
required by rules and regulations prescribed from time to time by the
Commission.
The Obligors shall also comply with the other provisions of Section 314(a)
of the Trust Indenture Act to the extent such provisions are applicable.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY AND SUBSIDIARIES MAY CONSOLIDATE, ETC., ONLY ON
CERTAIN TERMS.
The Company shall not, and shall cause its Subsidiaries not to, consolidate
with or merge with or into or wind up into another Person or directly or
indirectly, sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or
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assets (computed on a consolidated basis), whether in a single transaction or a
series of related transactions, to another Person or group of affiliated
Persons, other than the Company or a Subsidiary of the Company, unless
(a) either (i) the Company or such Subsidiary, as the case may be, is the
continuing entity or (ii) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture or
other appropriate document all of the obligations of the Company or such
Subsidiary, as the case may be, in connection with the Note Documents to which
the Company or the Subsidiary, as the case may be, was a party (including any
Liens thereunder);
(b) no Default or Event of Default shall exist or shall occur immediately
after giving effect to such transaction;
(c) immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the surviving or transferee entity is at
least equal to the Consolidated Net Worth of the Company or such Subsidiary, as
the case may be, immediately prior to such transaction (exclusive of amounts
paid in respect of dissenters' rights); and
(d) the Company or such Person shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel stating that such consolidation,
merger or disposal of all or substantially all of the assets and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, comply with this Article Eight and that all conditions
precedent herein provided for relating to such transaction have been satisfied.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation, merger or disposal of all or substantially all of
the assets of the Company or such Subsidiary in accordance with Section 801, the
successor corporation formed by such consolidation or into which the Company or
such Subsidiary, as the case may be, is merged or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right and
power of, the Company or such Subsidiary, as the case may be, under the Note
Documents to which the Company or Subsidiary is a party, including the
Subsidiary Guarantee, if applicable, with the same effect as if such successor
corporation had been named therein as the Company or such Subsidiary, as the
case may be. The Company or such Subsidiary will be required to ensure, by
executing and delivering appropriate instruments and opinions of counsel, that
if the Trustee purported to hold a Lien on the Collateral immediately prior to
such consolidation, merger or disposal of all or substantially all of the assets
of the Company or such Subsidiary, the Trustee continues to hold such Lien with
the required priority on all Collateral for the benefit of the holders of the
Notes. Thereafter, except in the case of a lease, the Company or such Subsidiary
shall be discharged from all obligations and covenants under this Indenture and
the Notes.
SECTION 803. REDEMPTION.
The provisions of this Article Eight shall not impair the Holders' right of
repurchase following a Change of Control as provided in Section 1109 herein.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Obligors, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto (which term shall include any
Addendum to Subsidiary Guarantee), in form satisfactory to the Trustee, for any
of the following purposes:
(a) to evidence the succession of another Person to any Obligor, and the
assumption by any such successor of the covenants of such Obligor herein and in
the Notes;
(b) to add to the covenants of the Obligors for the benefit of the
Holders, or to surrender any right or power herein conferred upon any Obligor;
(c) to cure any ambiguity, to correct or supplement any provision herein
that may be defective or inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising under
this Indenture that shall not be inconsistent with the provisions of this
Indenture; provided that, in each case, such provisions shall not adversely
affect the interests of the Holders;
(d) to evidence, and provide for the acceptance of, the appointment of a
successor Trustee hereunder;
(e) to comply with Section 1015(c), 1208 or 1309 hereof; or
(f) to comply with any requirement of the Commission or state securities
regulators in connection with the qualification of the Indenture under the Trust
Indenture Act or any registration or qualification of the Notes under the
Securities Act or state securities laws.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
(a) Except as otherwise provided in Section 902(b), with the written
consent of the Holders of 66 2/3% in principal amount of the Outstanding Notes,
by Act of such Holders delivered to the Company and the Trustee, the Obligors,
when authorized by a Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating or waiving any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that (i) no such supplemental
indenture (and no amendment of any other Note Document) shall, without the
consent of the Holder of each Outstanding Note affected thereby,
(A) extend the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption or repurchase thereof, or change the coin or currency in which
the principal of any Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment after the Stated Maturity thereof (or, in the case of
redemption, after the Redemption Date or, in the case of repurchase, after
the
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Purchase Date), or affect the ranking (in terms of right or time of
payment) of the Notes or the Subsidiary Guarantee,
(B) release any Subsidiary Guarantor from the Subsidiary Guarantee or
amend Article Thirteen, except as contemplated by Article Eight or Section
901,
(C) except as provided in Section 1205 or the Collateral Documents,
release any Collateral, permit the creation of any Lien senior to or
ranking equally with the Lien of any Collateral Document, deprive the
Holders of the security of the Collateral, or amend Section 1015, 1016,
1202, 1204 or 1205,
(D) reduce the percentage in principal amount of the Outstanding
Notes the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture,
(E) modify any provision of Article Eleven or the definitions used
therein if the effect of such modification or waiver is to decrease the
amount of any payment required to be made by the Company thereunder or
extend the maturity date of such payment, or
(F) modify any of the provisions of this Section 902 or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Note affected thereby; and
(b) It shall not be necessary for any Act of Holders under this Section
902 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act and such notice shall approve the substance
thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article Nine or the modifications
thereby of the trusts created by this Indenture, the Trustee shall receive, and
(subject to Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating that this Indenture, as amended by such supplemental indenture,
constitutes the legal, valid and binding obligation of all Obligors, enforceable
against each of them in accordance with its terms.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby and entitled to the benefits thereof (including the benefit of
any Addendum to Subsidiary Guarantee).
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SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article Nine shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article Nine may, and shall if required by the
Trustee, bear a notation in form acceptable to the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Board
of Directors, to any such supplemental indenture may be prepared and executed by
the Obligors and authenticated and delivered by the Trustee in exchange for
Outstanding Notes. Without limitation of Section 904, (a) in the case of any
Addendum to Subsidiary Guarantee, whether or not any or all new Notes are so
executed, authenticated and exchanged for previously Outstanding Notes, the
Subsidiary Guarantor added to the Subsidiary Guarantee by such Addendum shall be
obligated with respect to the Subsidiary Guarantee as if all Outstanding Notes
had been exchanged for Notes executed by all Obligors, including such Subsidiary
Guarantor, or (b) in the case of the release of a Subsidiary Guarantor pursuant
to the terms hereof, whether or not any or all new Notes are so executed,
authenticated and exchanged for previously Outstanding Notes, such Subsidiary
Guarantor shall be released from the Subsidiary Guarantee as if all Outstanding
Notes had been exchanged for Notes not executed by such Subsidiary Guarantor.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company will duly and punctually pay the principal of (and premium, if
any) and interest on the Notes in accordance with the terms of the Notes and
this Indenture.
SECTION 1002. MAINTENANCE OF REGISTER; REGISTRAR, AND PAYING AGENT.
The Company shall maintain or cause to be maintained and in such locations
as it shall determine: (i) an office or agency where securities may be presented
for registration of transfer or for exchange (the "REGISTRAR"); and (ii) an
office or agency where Notes may be presented for payment (the "PAYING AGENT").
The Registrar shall keep a register of the Notes and of their transfer and
exchange (the "REGISTER"). The Company may appoint one or more co-registrars,
and one or more additional paying agents. The terms "Paying Agent" and
"Registrar" include any additional paying agent or co-registrar.
SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of (and premium, if any) or interest on
any of the Notes, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act; provided that, with respect to any such
sums, such trust shall arise and be enforceable only on and after the date on
which payment is due
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with regard to such sums; and only to the extent payment is then due and only as
to funds actually segregated and appropriated to such payments.
If the Company has other Paying Agents (including, without limitation, the
Trustee), the Company will, before 10:00 a.m. New York time on the Business Day
immediately preceding the due date the principal of (and premium, if any), or
interest on, any Notes, deposit with the Paying Agent a sum in same day funds
or, if applicable, Secondary Notes, sufficient to pay the principal (and
premium, if any) or interest so becoming due, such property to be held in trust
for the benefit of the Persons entitled to such principal, premium or interest,
and (unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of such action or any failure so to act.
Any amounts from time to time deposited with the Paying Agent for the
payment of principal, premium (if any), interest, Redemption Price or Purchase
Price pursuant to this Section 1003 or Section 1106 or 1112 shall be invested by
the Paying Agent in such Cash Equivalents as the Company may direct in a written
notice to the Paying Agent or, if no such notice is given, be held uninvested
until the due date of such amount.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section 1003, that such
Paying Agent will:
(a) hold all sums or Secondary Notes held by it for the payment of the
principal of (and premium, if any) or interest on Notes in trust for the benefit
of the Persons entitled thereto until such sums or Secondary Notes shall be paid
to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any other
Obligor upon the Notes) in the making of any payment of principal (and premium,
if any) or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Order
direct any Paying Agent to pay, to the Trustee all sums or Secondary Notes held
in trust by the Company or such Paying Agent, such sums and Secondary Notes to
be held by the Trustee upon the same trusts as those upon which such sums and
Secondary Notes were held by the Company or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Any money or Secondary Notes deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of the principal of
(and premium, if any) or interest on any Note and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money or Secondary Notes, and all liability of the Company as trustee thereof,
shall
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thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, the City of New York, notice that such money or
Secondary Notes remain unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money or Secondary Notes then
remaining will be repaid to the Company.
SECTION 1004. CORPORATE EXISTENCE AND KEEPING OF BOOKS.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate,
partnership or other existence, rights (charter and statutory) and franchises
the Company and each Subsidiary; provided, however, that the existence of any
Subsidiary and any rights and franchises of the Company or any Subsidiary of the
Company, may be terminated if the Board of Directors determines that such
termination is in the best interests of the Company and is not disadvantageous
to the Holders in any material respect.
The Company will keep, and cause each of its Subsidiaries to keep, proper
records and books of account, in which full and correct entries shall be made of
all financial transactions and the assets and business of the Company and each
such Subsidiary in accordance with GAAP in all material respects.
SECTION 1005. [RESERVED].
SECTION 1006. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (a) all Taxes levied or imposed upon the
Company or any Subsidiary or any of their respective properties and (b) all
lawful claims for labor, materials and supplies, that, if unpaid, might by
Applicable Law become a Lien upon the property of the Company or any Subsidiary;
provided, however, that, except as otherwise provided in the Note Documents, the
Company and any such Subsidiary shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim (i)
that is being contested in good faith by appropriate proceedings and for which
adequate reserves have been established as required by GAAP or (ii) if the
failure to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim would not have a material adverse effect on the
financial condition, results of operations, business or properties of the
Company and its Subsidiaries taken as a whole.
SECTION 1007. MAINTENANCE OF PROPERTIES.
The Company will cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of the business of the
Company and its Subsidiaries to be maintained and kept in good condition, repair
and working order and will cause to be made all necessary repairs thereto, all
as in the judgment of the Company may be necessary so that the business of the
Company and its Subsidiaries may be properly conducted in all material respects;
provided, however, that nothing in this Section 1007 shall prevent the Company
and its Subsidiaries from discontinuing the maintenance of any of
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such properties if such discontinuance is, in the judgment of the Board of
Directors, desirable in the conduct of the business of the Company and its
Subsidiaries.
SECTION 1008. INSURANCE.
The Company and its Subsidiaries shall have in effect customary insurance
against such risks, on terms, with deductibles (or self-insurance) and in
amounts as are customarily carried by similar businesses.
SECTION 1009. STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company will deliver to the Trustee, on or before a date not more
than 45 days after the end of the first, second and third fiscal quarters of
each Fiscal Year of the Company and not more than 90 days after the end of each
Fiscal Year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not, after a review under each signer's
supervision of the activities of the Company and its Subsidiaries during such
fiscal quarter or Fiscal Year, as the case may be, and of the Company and its
Subsidiaries' performance under this Indenture and the other Note Documents, to
the best knowledge, based on such review, of the signers thereof, a Default or
Event of Default has occurred during such fiscal quarter or Fiscal Year that is
continuing, as the case may be, and, if there has been a Default or Event of
Default that is continuing, specifying each Default or Event of Default and the
nature and status thereof. Each such statement shall comply with Section
314(a)(4) of the Trust Indenture Act.
(b) When the Company is aware that any Default, or Event of Default or if
any holder or the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice to the Company or
takes any other action of which the Company is aware with respect to a claimed
default, the Company shall deliver to the Trustee by registered or certified
mail or by telegram, telex or facsimile transmission an Officers' Certificate
specifying such event, notice or other action within three Business Days after
the Company becomes aware of its occurrence.
(c) On or before each Regular Record Date, the Company shall deliver to
the Trustee an Officer's Certificate stating whether any Additional Interest has
accrued and, if so, the aggregate amount thereof per $1,000 in principal amount
of Notes.
SECTION 1010. FILING AND PROVISION OF CERTAIN COMMISSION REPORTS.
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee, within 15 days after it is or would have been required to file such
with the Commission, annual and quarterly financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the Commission if the Company were subject to the requirements of
Section 13 or 15(d) of the Exchange Act, together with management's discussion
and analysis of financial condition and results of operations that would be so
required.
SECTION 1011. LIMITATION ON INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK.
Except as otherwise provided in this Section 1011, the Company shall not,
and shall not permit any of its Subsidiaries to Incur (including as a result of
an acquisition, merger or
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consolidation) any Indebtedness or any Disqualified Capital Stock (the
exceptions set forth below not being exclusive of one another).
(a) The Company and its Subsidiaries may incur Indebtedness under the Note
Documents.
(b) The Company and its Subsidiaries may Incur Existing Indebtedness.
(c) The Company and its Subsidiaries may Incur Senior Indebtedness and any
Working Capital Replacement Facility.
(d) The Company and its Subsidiaries may incur Specified Permitted
Indebtedness.
(e) The Company and its Subsidiaries may incur (i) Permitted Purchase
Money Indebtedness and Capitalized Lease Obligations not exceeding $9,000,000 in
principal amount (excluding Existing Indebtedness and any Refinancing
Indebtedness in respect thereof) at any time outstanding and (ii) unsecured
Indebtedness not exceeding $500,000 in principal amount (excluding Existing
Indebtedness and any Refinancing Indebtedness in respect thereof) at any time
outstanding.
(f) The Company and its Subsidiaries may incur Refinancing Indebtedness
with respect to any Indebtedness or Disqualified Capital Stock, as applicable,
described in this covenant other than clauses (c) and (e).
(g) The Company may incur Indebtedness to any Wholly Owned Subsidiary of
the Company, and any Wholly Owned Subsidiary of the Company may incur
Indebtedness to any other Wholly Owned Subsidiary or to the Company; provided
that such obligations, in each case, shall either be a Permitted Intercompany
Secured Loan or be unsecured and subordinated pursuant to a Subordination
Agreement substantially in the form of Exhibit F in all respects to the prior
payment in full in cash of the Company's or Wholly Owned Subsidiary's
obligations pursuant to the Note Documents (other than with respect to payment
of interest if no Default or Event of Default shall have occurred and be
continuing at the time of any payment of or with respect thereto); provided that
any such Indebtedness of a Subsidiary which is not a Subsidiary Guarantor shall
comply with all requirements of a Permitted Intercompany Secured Loan.
(h) The Company may incur Subordinated Indebtedness, provided that the Net
Cash Proceeds thereof are used for the substantially concurrent redemption,
repurchase, acquisition or retirement of Senior Indebtedness or the Notes.
SECTION 1012. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries to,
make, directly or indirectly, any Restricted Payment, provided, however, that
the foregoing will not prohibit:
(a) the redemption, repurchase or other acquisition or retirement of
Capital Stock from the substantially concurrent sale of Qualified Capital Stock
or Capital Stock that is Common Stock;
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(b) the defeasance, redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness with the Net Proceeds received by the
Company from the substantially concurrent sale of Qualified Capital Stock or
Subordinated Indebtedness of the Company or in exchange for Qualified Capital
Stock or Subordinated Indebtedness of the Company, which Subordinated
Indebtedness (i) (A) is at least as subordinated in ranking to the Notes as, (B)
has an Average Life not shorter than, and (C) has no installment (contingent or
otherwise) of principal or liquidation amount (including upon the happening of
an event or the passage of time) due before any installment of principal of, the
Subordinated Indebtedness being so defeased, redeemed, repurchased, acquired or
retired and (ii) has a principal amount (or, if such Indebtedness is issued at
less than its principal amount, has an original issue price, as determined in
accordance with GAAP) not to exceed the sum of (A) the lesser of (x) the
principal amount of such Subordinated Indebtedness being so defeased, redeemed,
repurchased, acquired or retired in exchange therefor and (y) if such
Subordinated Indebtedness being acquired was issued with an original issue
discount, the accreted value thereof (as determined in accordance with GAAP) at
the time of such transaction, plus (B) the out-of-pocket expenses Incurred by
the Company or Subsidiary in connection with the acquisition or retirement of
such Subordinated Indebtedness or the sale of or its exchange for such Qualified
Capital Stock or Subordinated Indebtedness, including without limitation any
redemption, prepayment or similar premium paid with respect to such acquisition
or retirement.
SECTION 1013. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, assume or suffer to exist any consensual
encumbrance or restriction on the ability of any such Subsidiary to pay
dividends or make other distributions on the Capital Stock of such Subsidiary or
pay any obligation to the Company or any of its Subsidiaries or otherwise
transfer assets or make or pay loans or advances to the Company or any of its
Subsidiaries, except
(a) restrictions imposed by the Note Documents,
(b) customary non-assignment provisions restricting subletting or
assignment of any lease entered into in the ordinary course of business,
consistent with industry practices,
(c) encumbrances and restrictions imposed by the terms of any Senior
Indebtedness,
(d) restrictions under any agreement relating to any property, assets, or
business acquired by the Company or its Subsidiaries, which restrictions existed
at the time of acquisition, were not put in place in anticipation of such
acquisition and are not applicable to any Person, other than the Person acquired
or to any property, assets or business other than the property, assets and
business of the Person so acquired,
(e) rights of members and other customers arising in the ordinary cause of
business from memberships, rights to use or related or similar interests in
campgrounds, resorts or other facilities (whether arising from the holding of
such memberships, rights to use or related or similar interests, by applicable
law or otherwise),
(f) any such contractual encumbrance or restriction in existence as of the
Issue Date,
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(g) any restrictions with respect to Capital Stock or assets, as the case
may be, of a Subsidiary of the Company imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary,
(h) any such contractual encumbrance imposed by or in connection with the
incurrence of any Permitted Purchase Money Indebtedness and Capitalized Lease
Obligations permitted pursuant to clause (e) of Section 1012, provided such
encumbrance does not have the effect of restricting (otherwise than upon
foreclosure) the payment of dividends to the Company or any Subsidiary Guarantor
or the payment of Indebtedness owed to the Company or any Subsidiary Guarantor
or reducing the amount of any such dividends or payments, and
(i) replacements of restrictions imposed pursuant to clauses (a) through
(g) that are no more restrictive than those being replaced.
SECTION 1014. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Subject to subsection (b) below, the Company shall not, and shall not
permit any of its Subsidiaries to, enter into, renew or extend any transaction
or series of related transactions with any Affiliate (an "AFFILIATE
TRANSACTION"), unless (i) the Affiliate Transaction is on terms at least as
favorable to the Company or such Subsidiary, as the case may be, as those that
could have been obtained in a comparable transaction with an unaffiliated third
party; (ii) in the case of an Affiliate Transaction (including any series of
related transactions) with a value to either party in excess of $1,000,000, a
majority of the independent members of the Board of Directors has determined in
good faith that such Affiliate Transaction complies with clause (i), as
evidenced by a Board Resolution; and (iii) in the case of any Affiliate
Transaction (including any series of related transactions) with an aggregate
value (to either party) in excess of $5,000,000, the Company or such Subsidiary,
prior to consummation thereof, obtains a written favorable opinion as to the
fairness of such transaction to the Company or such Subsidiary from a financial
point of view from any national or regional independent investment banking firm.
(b) Subsection (a) above shall not apply to any of the following: (i)
transactions between one or more Subsidiary Guarantors or between the Company
and one or more Subsidiary Guarantors, (ii) Restricted Payments permitted to be
made under Section 1012, (iii) customary directors' fees, and other
compensation, stock option grants and indemnities, (iv) extensions of and
payments made with respect to Permitted Intercompany Loans, or unsecured
subordinated Indebtedness permitted to be incurred under clause (g) of Section
1011 or (v) employment, consulting and related agreements entered into by the
Company or any of its Subsidiaries with their respective officers, employees or
directors in the ordinary course of business.
SECTION 1015. LIMITATION ON ASSET SALES.
(a) Subject to subsection (b) below, the Company shall not, and shall not
permit any of its Subsidiaries to, in one transaction or a series of related
transactions, (i) convey, sell, lease, transfer, assign or otherwise dispose of,
directly or indirectly, any of its property, business or assets or (ii) engage
in any sale or other transfer or issuance of any Capital Stock of any Subsidiary
of the Company, whether by the Company or a Subsidiary of the Company, or
through the issuance, sale or transfer of Capital Stock by a Subsidiary of the
Company (an "ASSET SALE"), unless
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(A) within 180 days after the date of the Asset Sale (the
"REINVESTMENT PERIOD"), the Net Cash Proceeds therefrom are either (1)
applied to the repayment of Senior Indebtedness or (2) either (x)
reinvested in assets or property directly related to a Related Business of
the Company or such Subsidiary (or the Company or such Subsidiary shall
have entered into a binding obligation to make such an investment) or (y)
applied to the repurchase from Holders of the maximum principal amount of
Notes that may be purchased out of that portion, if any, of the Net Cash
Proceeds of such Asset Sale that is not applied to the Senior Indebtedness
pursuant to clause (1) or reinvested pursuant to clause (x) within the
Reinvestment Period ("EXCESS PROCEEDS"), which repurchase may be made in
any manner selected by the Company, including, without limitation, open
market purchases, privately negotiated transactions, redemptions pursuant
to Section 1101, or an Asset Sale Purchase Offer pursuant to subsection (d)
below,
(B) in the case of any Asset Sale (or series of related Asset Sales)
for Net Proceeds in excess of $1,250,000, at least 80% of the value of such
consideration for such Asset Sale consists of US Dollars or Cash
Equivalents,
(C) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect to, on a pro
forma basis, such Asset Sale, and
(D) the Board of Directors of the Company determines in good faith
that the Company or such applicable Subsidiary receives Fair Market Value
for such Asset Sale.
(b) Notwithstanding the provisions of the foregoing subsection (a) and
subsection (c) below:
(i) the Company and its Subsidiaries may in the ordinary course of
business and consistent with past practices, convey, sell, lease, transfer,
assign, or otherwise dispose of assets acquired and held for resale in the
ordinary course of business;
(ii) the Company and its Subsidiaries may convey, sell, lease,
transfer or otherwise dispose of assets in connection with a transaction
covered and permitted by Section 801;
(iii) the Company and its Subsidiaries may sell damaged, worn out or
other obsolete property or abandon property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Subsidiary, as applicable;
and
(iv) the Company and its Subsidiaries may convey, sell, lease,
transfer, assign, or otherwise dispose of assets at no less than fair value
to the extent that the Net Cash Proceeds for any Asset Sale (or series of
related Asset Sales) does not exceed $1,000,000.
(c) In case of any Asset Sale of all the Capital Stock of a Subsidiary
Guarantor which sale is otherwise permissible hereunder, so long as the
Outstanding Notes have not been declared immediately due and payable pursuant to
Section 502, the Subsidiary Guarantor shall be automatically released from the
Subsidiary Guarantee upon receipt by
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the Trustee of a Board Resolution and an Officers' Certificate to the effect
that such Asset Sale complies with the provisions of this Section and that,
pursuant to this Section 1015(c), the Subsidiary Guarantor is released from the
Subsidiary Guarantee. If requested by the Subsidiary Guarantor, the Trustee
shall execute and deliver such confirmations of such release as the Company may
reasonably request.
(d) If the Company shall elect to apply Excess Proceeds as provided in
this Section 1015(d), within 30 days after the Company delivers to the Trustee
notice to such effect, the Trustee shall select, in the manner specified in
Section 1104, the Notes or portions thereof as to which the Company will make an
Asset Sale Purchase Offer, unless the Asset Sale Purchase Offer will be made as
to all Outstanding Notes. Within 15 days after delivery of such a notice, the
Company will, or will cause the Trustee to, send to each Holder of Notes whose
Notes have been selected to be offered to be repurchased by the Company, at its
address appearing in the Register, by registered or certified mail, telegraph,
telefax, telex, cable or overnight delivery, an offer to repurchase such Notes
or a portion thereof determined in accordance with Section 1104.
SECTION 1016. LIMITATION ON CERTAIN LIENS.
The Company shall not, and shall not permit its Subsidiaries to, directly
or indirectly, create, incur, assume or suffer to exist any Lien in or on any
right, title or interest to any of their properties or assets, except
(i) Permitted Liens,
(ii) Liens that secure the Senior Secured Credit Facility or any
Working Capital Replacement Facility,
(iii) Liens created by the Collateral Documents, and
(iv) Liens that secure Permitted Purchase Money Indebtedness and
Capitalized Lease Obligations permitted to be incurred under clause (e) of
Section 1011, which Liens shall not attach to any assets other than the
assets financed thereby.
SECTION 1017. CONDUCT OF BUSINESS.
Neither the Company nor any Subsidiary will directly or indirectly engage,
to any significant extent, in any line or lines of business activity other than
in a Related Business.
SECTION 1018. PAYMENTS FOR CONSENT.
The Company shall not, and shall cause its Subsidiaries not to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the other Note Documents unless such consideration is offered to be
paid or agreed to be paid to all Holders that consent, waive or agree to amend
in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
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SECTION 1019. STAY, EXTENSION AND USURY LAWS.
Each of the Company, the Subsidiary Guarantors and their respective
Subsidiaries covenants (to the extent permissible under Applicable Law) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law, wherever enacted, now or at any time hereafter in force, that would
prohibit or forgive the Company or the Subsidiary Guarantors from paying all or
any portion of the principal of, premium, if any, or interest on the Notes and
amounts from time to time payable under the Subsidiary Guarantees, in each case
as contemplated herein, or that may materially affect the covenants or the
performance of this Indenture or the other Note Documents in a manner
inconsistent with the provisions of this Indenture or such Note Documents and
(to the extent that it may lawfully do so) each of the Company and the
Subsidiary Guarantors, hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE ELEVEN
REDEMPTIONS AND REPURCHASES OF NOTES
SECTION 1101. RIGHT OF REDEMPTION.
(a) The Notes may be redeemed, at the election of the Company, as a whole
or from time to time in part, at 100% of principal amount, subject to the
conditions specified in the Form of Note Certificate attached as Exhibit A.
(b) All references in Sections 1101 through 1108 to "Holder" shall include
any beneficial owner of Notes.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture or the Notes, shall be
made in accordance with such provision and this Article Eleven.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Notes pursuant to Section 1101
shall be evidenced by a Board Resolution. The Company shall, at least 45 days
and no more than 60 days prior to the Redemption Date fixed by the Company,
(a) deliver an Officers' Certificate to the Trustee notifying the Trustee of
such Redemption Date and of the principal amount of Notes to be redeemed and
(b) provide the Trustee with an Opinion of Counsel stating that such redemption
is authorized or permitted by this Indenture.
SECTION 1104. DETERMINATION OF NOTES TO BE REDEEMED OR REPURCHASED.
If less than all of the Outstanding Notes are to be redeemed or
repurchased, the particular Notes or portions thereof to be redeemed shall be
determined on a pro rata basis, by lot or by such other method determined by the
Trustee to be fair and appropriate (subject to compliance with the requirements
of any securities exchange or trading system on which the Notes are then listed
or approved for trading) in principal amounts of $1,000 or integral
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multiples thereof (provided Secondary Notes may be in principal amounts of less
than $1,000) from the Outstanding Notes not previously called for redemption or
repurchase.
The Trustee shall promptly notify the Company and each Registrar in writing
of the Notes to be redeemed or repurchased and, in the case of any Notes which
will be redeemed or repurchased in part, the principal amount thereof to be
redeemed or repurchased.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption or repurchase of Notes shall relate,
in the case of any Note redeemed or repurchased or to be redeemed or repurchased
only in part, to the portion of the principal amount of such Note that has been
or is to be redeemed or repurchased.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Notes to be redeemed, at its address appearing in the Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of a Note to be redeemed in part, the principal
amount) of the particular Notes to be redeemed;
(d) that on the Redemption Date the Redemption Price will become due and
payable upon each such Note or portion thereof, and that interest thereon shall
cease to accrue on and after such date; and
(e) the place or places where such Notes are to be surrendered for payment
of the Redemption Price.
Notice of redemption of Notes to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company, provided that the text of any such
notice shall be determined by the Company.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in same day funds by 10:00 a.m. New York time on the Business Day
immediately preceding the Redemption Date sufficient to pay the Redemption Price
of, and if the Redemption Date shall not be an Interest Payment Date, accrued
interest on, all the Notes or portions thereof that are to be redeemed on that
date.
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SECTION 1107. NOTES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Notes to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price herein specified and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest to the
Redemption Date) such Notes shall cease to bear interest. Upon the later of the
Redemption Date or surrender of any such Note for redemption in accordance with
such notice, such Note shall be paid by the Company at the Redemption Price
together with accrued interest to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Notes, or one or more Predecessor
Notes, registered as such on the relevant Regular Record Dates according to the
terms and provisions of Section 306.
If any Note called for redemption shall not be so paid or be duly provided
for upon the later of the Redemption Date or surrender thereof for redemption,
the principal and premium, if any, shall, until paid, bear interest from the
Redemption Date as provided herein.
SECTION 1108. NOTES REDEEMED IN PART.
Any Note which is to be redeemed only in part shall be surrendered to the
Paying Agent or Registrar (with, if the Company, the Paying Agent, the Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, the Paying Agent, the Registrar or
the Trustee duly executed by the Holder thereof or its attorney duly authorized
in writing), and the Obligors shall execute and the Trustee shall authenticate
and deliver to the Holder of such Note, without service charge, a new Note or
Notes, of any authorized denomination as requested by such Holder in an
aggregate principal amount equal to, and in exchange for, the unredeemed portion
of the principal of the Note so surrendered.
SECTION 1109. OFFER TO PURCHASE NOTES UPON CHANGE OF CONTROL.
(a) If a Change of Control (as defined below) shall occur, the Company
shall offer (a "CHANGE OF CONTROL PURCHASE OFFER") to purchase from Holders of
the Notes, and shall purchase from Holders accepting such offer, Notes, at a
purchase price equal to 101% of the aggregate principal amount of the Notes,
plus accrued and unpaid interest to the Purchase Date (the "CHANGE OF CONTROL
PURCHASE PRICE"), subject to satisfaction by or on behalf of the Holder of the
requirements set forth in Section 1110(c). "CHANGE OF CONTROL" means (i) a sale,
lease or transfer of all or substantially all of the Company's assets (other
than by way of merger or consolidation) to any Person or group (as such terms
are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) other
than the Existing Affiliates, (ii) the liquidation or dissolution of the
Company, (iii) the time that the Company first determines or reasonably should
have known that any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) other
than Existing Affiliate is or becomes the "beneficial owner" (as such term is
used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable,
except that a "person" shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly (including as a result of a merger or consolidation), of more than
50% of the total voting power in the aggregate of all classes of
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Capital Stock then outstanding of the Company normally entitled to vote in
elections of directors, or (iv) during any period of 12 consecutive months after
the Issue Date, individuals who at the beginning of such period constituted the
Board of Directors of the Company together with any new directors whose election
by such Board or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office.
(b) In the event that at the time of Change of Control the terms of any
Senior Indebtedness prohibits the repurchase of Notes pursuant to this Section,
then within 30 days following the Change of Control, the Company shall notify
the holders of such Senior Indebtedness that a Change of Control has occurred
and the Company shall either (1) repay in full the Senior Indebtedness or offer
to repay in full such Senior Indebtedness and repay the Senior Indebtedness held
by each holder who has accepted such offer or (2) obtain the requisite consent
under the Senior Indebtedness to permit the purchase of the Notes under Section
1109(a).
(c) Within 15 Business Days after fulfilling its obligation under Section
1109(b), the Company shall give written notice of a Change of Control to the
Trustee. Within 15 days after the Trustee receives such notice, the Trustee
shall send, via registered or certified mail, telegraph, telefax, telex, cable
or overnight delivery, a copy of such written notice to each Holder (and to
beneficial owners if required by Applicable Law). The Trustee shall be under no
obligation to ascertain the occurrence of a Change of Control or to give notice
with respect thereto other than as provided above upon receipt of the written
notice of Change of Control from the Company. The Trustee may conclusively
assume, in the absence of written notice to the contrary from the Company, that
no Change of Control has occurred.
SECTION 1110. PROCEDURE FOR OFFERS TO PURCHASE NOTES.
(a) Any notice to Holders given pursuant to Section 1015(d) or 1109(c)
shall include a form of Purchase Notice (as defined below) and shall state:
(i) that the Company thereby offers to repurchase at the applicable
Purchase Price such of the Holder's Notes as shall be specified therein
(or, in the case of a Change of Control Purchase Offer, all Notes of such
Holder);
(ii) in the case of a Change of Control Purchase Offer, the events
causing the Change of Control and the date on which such Change of Control
is deemed to have occurred for purposes of this Section 1110;
(iii) the date by which the Purchase Notice must be given;
(iv) the date as of which Notes will be purchased pursuant to the
Purchase Offer (the "PURCHASE DATE"), which, (A) in the case of a Change of
Control Purchase Offer, shall be the date 20 Business Days (unless a longer
period is required by Applicable Law) after the date on which the notice to
the Holders is sent pursuant to Section 1109(c), or (B) subject to clause
(A) of Section 1015(a), in the case of any other Purchase Offer, shall be a
date specified by the Company that is no earlier than 30 days nor later
than 60 days from the date such notice is mailed;
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(v) the name and address of the Paying Agent;
(vi) that Notes must be surrendered to the Paying Agent at the
office of the Paying Agent to collect payment;
(vii) that the Purchase Price for any Notes as to which a Purchase
Notice has been duly given and not withdrawn will be paid on the later of
(A) the Purchase Date and (B) the first Business Day following the date of
surrender of such Notes as described in clause (vi);
(viii) the procedures the Holder must follow to exercise rights under
Section 1109 and this Section 1110 and a brief description of those rights;
and
(ix) the procedures for withdrawing a Purchase Notice.
If any such notice is given by the Trustee at the Company's request,
the text of such notice shall be determined by the Company.
(b) A Holder may exercise its rights under Section 1109 and this Section
1110 by delivering to the Paying Agent at the office of the Paying Agent a
written notice of purchase (a "PURCHASE NOTICE") at any time prior to the close
of business on the third Business Day prior to the Purchase Date, stating:
(i) the certificate numbers of the Notes that the Holder will
deliver to be purchased; and
(ii) the portion of the principal amount of the Notes that the
Holder will deliver to be purchased, which portion must be $1,000 or an
integral multiple thereof (provided that Secondary Notes may be in a
principal amount of less than $1,000).
The delivery of such Notes (together with all necessary endorsements) to
the Paying Agent at the office of the Paying Agent prior to, on or after the
Purchase Date shall be a condition to the receipt by the Holder of the Purchase
Price therefor; provided that such Purchase Price shall be so paid pursuant to
this Section 1110 only if the Notes so delivered shall conform in all respects
to the description thereof set forth in the related Purchase Notice.
Notwithstanding anything herein to the contrary, any Holder delivering to
the Paying Agent at the office of the Paying Agent the Purchase Notice
contemplated by this Section 1110(b) shall have the right to withdraw such
Purchase Notice in accordance with Section 1111.
The Paying Agent shall promptly notify the Company by telecopier of the
receipt by the former of any Purchase Notice or written notice of withdrawal
thereof.
The Company shall purchase from the Holder thereof, pursuant to this
Section 1110, all or a portion of a Note if the principal amount of such portion
is $1,000 or an integral multiple of $1,000 (provided that Secondary Notes may
be purchased in a principal amount of less than $1,000). Provisions of this
Indenture that apply to the purchase of all of a Note also apply to the purchase
of a portion of such Note.
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SECTION 1111. EFFECT OF PURCHASE NOTICE.
Upon receipt by the Company or the Paying Agent of any Purchase Notice, the
Holder of the Note in respect of which such Purchase Notice was given shall
(unless such Purchase Notice is withdrawn as specified in the following two
paragraphs of this Section 1111) thereafter be entitled to receive solely the
applicable Purchase Price with respect to such Note. Such Purchase Price shall
be paid to such Holder on the later of (a) the applicable Purchase Date with
respect to such Note (provided the conditions in Section 1110(b) have been
satisfied) and (b) the first Business Day following the date of delivery of such
Note to the Paying Agent at the office of the Paying Agent by the Holder thereof
in the manner required by Section 1110(b).
A Purchase Notice may be withdrawn before or after delivery by the Holder
to the Paying Agent at the office of the Paying Agent of the Note to which such
Purchase Notice relates, by means of a written notice of withdrawal delivered by
the Holder to the Paying Agent at the office of the Paying Agent at any time
prior to the close of business on the third Business Day prior to the Purchase
Date, specifying, as applicable:
(a) the certificate number and series of the Note in respect of which such
notice of withdrawal is being submitted,
(b) the principal amount of the Note with respect to which such notice of
withdrawal is being submitted, and
(c) the principal amount, if any, of such Note that remains subject to the
original Purchase Notice, and that has been or will be delivered for purchase by
the Company.
The Paying Agent will promptly return to the respective Holders thereof any
Notes with respect to which a Purchase Notice has been withdrawn in compliance
with this Indenture.
SECTION 1112. DEPOSIT OF PURCHASE PRICE.
No later than 10:00 a.m. (local time at the office of the Paying Agent) on
the Business Day immediately preceding the Purchase Date, the Company shall
deposit with the Trustee or with the Paying Agent (or, if the Company or a
Subsidiary or an Affiliate of the Company of them is acting as the Paying Agent,
shall segregate and hold in trust, or cause to be segregated and held in trust,
as provided in Section 1003) an amount of cash sufficient to pay the aggregate
Purchase Price of all the Notes or portions thereof that are to be purchased as
of the Purchase Date. Upon such deposit or segregation, all Notes or portions
thereof that are to be purchased shall cease to bear interest after the Purchase
Date.
SECTION 1113. NOTES PURCHASED IN PART.
Any Note that is to be purchased only in part shall be surrendered to the
Paying Agent at the office of the Paying Agent or Registrar (with, if the
Company, the Paying Agent, the Registrar or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company, the Paying Agent, the Registrar and the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing) and the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Note, without service charge, a new Note or Notes, of any
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authorized denomination as requested by such Holder in an aggregate principal
amount equal to, and in exchange for, the portion of the principal amount of the
Note so surrendered that is not purchased.
SECTION 1114. COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF
NOTES.
In connection with any offer to purchase or purchase of Notes under Section
1109 or 1110, the Company shall comply with all applicable Federal and state
securities laws so as to permit the rights and obligations under Sections 1109
or 1110 to be exercised to the greatest extent practicable in the time and in
the manner specified in such Sections.
SECTION 1115. REPAYMENT TO THE COMPANY.
The Trustee and the Paying Agent shall return to the Company upon written
Order any cash that remains unclaimed, together with interest, if any, accrued
thereon, held by them for the payment of the Purchase Price two years after the
related Purchase Date
ARTICLE TWELVE
COLLATERAL MATTERS
SECTION 1201. UNSECURED OBLIGATIONS; APPROVAL OF COLLATERAL DOCUMENTS AND
OTHER NOTE DOCUMENTS.
(a) By its acceptance of its Note, each Holder agrees that during the
period any Senior Indebtedness is outstanding and until the Delivery Date
occurs, the obligations represented by the Notes are general unsecured
obligations of the Company.
(b) By acceptance of its Note, each Holder agrees to the substance of the
terms and provisions of the Collateral Documents listed on Schedule 1201, with
such changes as are required by Applicable Law in the relevant jurisdiction and
the Collateral on the Delivery Date, and all other Collateral Documents and Note
Documents from time to time entered into pursuant to (and as amended from time
to time pursuant to) the provisions of this Indenture and the other Note
Documents.
(c) As among the Holders, the Collateral as constituted on the Delivery
Date or thereafter constituted shall be held for the equal and ratable benefit
of the Holders without preference, priority or distinction of any Holder over
any other Holder by reason of differences in time of issuance of the Notes held
by such Holders, sale or otherwise, as security for the Secured Obligations of
the Obligors.
SECTION 1202. REQUIRED COLLATERAL; FURTHER ASSURANCES.
(a) Except as otherwise expressly provided herein and the other Note
Documents, at all times after the receipt by the Trustee of an instrument or
instruments executed by the holders of the Senior Indebtedness or their
Representative evidencing the satisfaction and discharge in full of the Senior
Indebtedness and the release of any Lien securing the Senior Indebtedness, and
if any Notes remain Outstanding,
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(i) the Company will grant a Lien to secure the Secured Obligations
of the Company covering all of the property of the Company (except such as
may have been disposed of without violation of the other provisions hereof)
securing the Senior Indebtedness as of the date the Senior Indebtedness was
satisfied and discharged in full (but excluding the Excluded Assets)
(except such as may have been disposed of without violation of the other
provisions hereof) and the Trustee will enter into or accept the Collateral
Documents to which the Company is a party.
(ii) each Subsidiary Guarantor will grant a Lien to secure the
Subsidiary Guarantee of each Subsidiary Guarantor covering all of such
Subsidiary Guarantor's property (except such as may have been disposed of
without violation of the other provisions hereof) securing the Senior
Indebtedness as of the date the Senior Indebtedness was satisfied and
discharged in full (but excluding the Excluded Assets) and the Trustee will
enter into or accept the Collateral Documents to which the Subsidiary
Guarantors are a party.
(b) The Company shall furnish to the Trustee:
(i) On the Delivery Date, an Opinion of Counsel stating that, in
the opinion of such counsel, all recordings, filings and other actions
contemplated by such Collateral Documents necessary to make effective or
perfect the Lien have been taken, reciting such actions;
(ii) On or prior to each anniversary of the Delivery Date, an
Opinion of Counsel, dated as of such date, either (A) stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and re-filing
of the Collateral Documents, or financing statements, continuation
statements or other instruments of further assurance, as is necessary to
maintain the Liens of the Collateral Documents to the extent required
hereby, until the next such anniversary, and reciting the details of such
action, or (B) stating that, in the opinion of such counsel, no such action
is necessary to maintain such Liens
(c) If, at any time, the Collateral Documents do not create the Liens
required by or otherwise do not comply with this Section 1202, the relevant Note
Parties shall as soon as reasonably practicable and from time to time, at their
own expense, (i) execute and deliver, and file and record with all applicable
Governmental Authorities, such additional Collateral Documents, (ii) use their
best efforts to obtain any approvals or consents or remove any restrictions or
encumbrances and (iii) take such other steps, as in each case may be necessary
such that all Collateral is at all times subject to the Liens required by and
otherwise complies with this Section 1202.
(d) If, at any time after the Delivery Date, Liens are required to be
created on (i) assets acquired after the Delivery Date (including assets
acquired in connection with an Asset Sale), (ii) assets that previously
constituted Excluded Assets, (iii) assets or Capital Stock of a Person that was
not previously a Subsidiary, or (iv) any other assets not previously subject to
a Lien securing the Secured Obligations, the relevant Note Party shall take all
necessary steps toward the creation of such Liens within 10 days after the
acquisition of such assets or the date on which such assets first ceased to
constitute Excluded Assets or such Person first constituted a Subsidiary, or the
date on which such Liens are first required to exist hereunder, as applicable.
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(fe The Company will (and will cause each of its Subsidiaries to) execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments as reasonably may be
required from time to time in order (i)to carry out more effectively the
purposes of the Collateral Documents, (ii)to subject to the Liens created by
any of the Collateral Documents any of the properties, rights or interests
required to be encumbered thereby, (iii)to perfect and maintain the validity,
effectiveness and priority of any of the Collateral Documents and the Liens
intended to be created thereby and (iv)to better assure, convey, grant, assign,
transfer, preserve, protect and confirm to the Trustee any of the rights granted
or now or hereafter intended by the parties thereto to be granted to the Trustee
or the Company under the Collateral Documents or under any other instrument
executed in connection therewith.
SECTION 1203. AMENDMENT TO THE COLLATERAL DOCUMENTS AND OTHER NOTE
DOCUMENTS WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend any Collateral Document, and the
Company and the Trustee may amend any other Note Document (other than this
Indenture and the Notes), without notice to or the consent of any Holder:
(a) to evidence the succession of another Person to any Note Party, and
the assumption by any such successor of the covenants of the Note Party in such
Note Documents;
(b) to add to the covenants, conditions and restrictions of any Note Party
for the benefit of the Holders or to surrender any right or power conferred upon
any Note Party in any such Note Document;
(c) to cure any ambiguity, to correct or supplement any provision in any
such Note Document that may be defective or inconsistent with any other
provision therein, or to make any other provisions with respect to matters or
questions arising under any such Note Document, which shall not be inconsistent
with the provisions of this Indenture and the other Note Documents; provided
that, in each case, such provisions shall not adversely affect the interests of
the Holders;
(d) to evidence, and provide for the acceptance of, the appointment of a
successor Trustee;
(e) to comply with any requirement of the Commission in connection with
the qualification of this Indenture under the Trust Indenture Act;
(f) to comply with the Trust Indenture Act in connection with the Lien
granted in any Collateral Document; or
(g) to make amendments required by Section 1202.
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SECTION 1204. AMENDMENT TO THE COLLATERAL DOCUMENTS AND OTHER NOTE
DOCUMENTS WITH CONSENT OF HOLDERS.
(a) Except as otherwise provided in Section 902 or in the other Note
Documents, with the written consent of Holders of at least 66 2/3% in principal
amount of the Notes Outstanding, by Act of the Holders delivered to the Trustee,
any Note Party may enter into, when authorized by a Board Resolution, and the
Trustee may enter into or consent to, any amendment of any Collateral Document
or other Note Document (other than this Indenture and the Notes), without
further notice to any Holder.
(b) It shall not be necessary for the Act of the Holders under this
Section 1204 to approve the particular form of any proposed amendment, but it
shall be sufficient if such Act approves the substance thereof.
Notwithstanding any provisions to the contrary in this Section 1204, prior
to the execution of any such amendment, the Trustee shall be entitled to receive
an Opinion of Counsel stating that the conditions precedent to the execution of
such amendment have been complied with and that such an amendment is permitted
under the terms of the applicable Note Documents.
SECTION 1205. RELEASE OF COLLATERAL UNDER CERTAIN CIRCUMSTANCES.
(a) Notwithstanding the provisions of Section 1204 and Section 902, each
Note Party may without any release or consent by the Trustee Agent or any Holder
sell, lease, transfer, convey or otherwise dispose of any Collateral, and the
Lien of the Collateral Documents shall be deemed released automatically upon
such disposition without any action on the part of the Trustee, provided Section
1015 and any other applicable provisions of this Indenture and the relevant
Collateral Documents are complied with.
(b) All Liens under the Collateral Documents with respect to the assets of
the relevant Subsidiary Guarantor shall be automatically released upon the
release of any Subsidiary Guarantor from the Subsidiary Guarantee pursuant to
Section 1015(c) upon the receipt by the Trustee of a Board Resolution and an
Officers' Certificate certifying that such release complies with this Section
1205, and without any release or consent by the Trustee or any Holder. The
Trustee shall execute and deliver such confirmations of such releases as the
Company may reasonably request.
SECTION 1206. RELEASE AND SUBSTITUTION OF COLLATERAL -- TRUST INDENTURE
ACT COMPLIANCE.
At all times after qualification of this Indenture under the Trust
Indenture Act:
(a) To the extent applicable, the Obligors shall comply with Section 314
of the Trust Indenture Act relating to the release of property or securities
from the Lien of any Collateral Document, except to the extent permitted by the
Commission or "no action" advice from the staff thereof on terms not
inconsistent with the provisions of this Indenture.
(b) The release of any Collateral from the Lien of any Collateral Document
or the subordination of any Lien of any Collateral Document shall not be deemed
to impair such Lien or the Collateral under the Collateral Documents in
contravention of the provisions of this Indenture or such Collateral Document if
and to the extent the Collateral
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or Lien is released or subordinated pursuant to, and in accordance with, this
Indenture and such Collateral Document.
SECTION 1207. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS.
(a) If (i) each Obligor delivers an Officers' Certificate certifying that
all of its obligations under this Indenture have been indefeasibly satisfied and
discharged by complying with the provisions of Article Four or Fourteen hereof
or (ii)all Outstanding Notes issued under this Indenture shall have been
surrendered to the Trustee for cancellation, the Trustee, subject to compliance
by the Obligors with Section 1206, shall deliver to the Note Parties a
certificate stating that the Trustee, on behalf of the Beneficiaries, disclaims
and has given up any and all rights it has in or to the Collateral, and any
rights it has under the Collateral Documents, and, upon and after the receipt by
the Note Parties of such certificate, the Trustee shall no longer be deemed to
hold the Lien in the Collateral for the benefit of the Beneficiaries.
(b) Any release of Collateral made in compliance with this Section 1207
shall not be deemed to impair the Lien under the Collateral Documents or the
Collateral thereunder in contravention of the provisions of this Indenture or
the Collateral Documents.
(c) Nothing in this Section 1207 shall impair the first priority Lien and
trust created pursuant to Article Four or Fourteen in any funds or securities
deposited with the Trustee pursuant to such Articles.
SECTION 1208. RELEASE.
So long as the Outstanding Notes have not been declared to be immediately
due and payable pursuant to Section 502, the Company shall be suffered and
permitted to, except as otherwise expressly prohibited under this Indenture or
the Collateral Documents, and to cause its Subsidiaries to, possess, use,
manage, operate and enjoy the property subject to the Liens of the Collateral
Documents and to collect, receive, use, invest and spend the rents, issues,
tolls, profits, revenues, income, products and proceeds from the Collateral
freely and without let or hindrance on the part of the Trustee or of the Holders
and to deal with, exercise any and all rights under, receive and enforce
performance under, and adjust and settle all matters relating to performance of,
choses in action, leases and contracts.
In addition, the Company shall have the right, from time to time if the
Outstanding Notes have not been declared to be immediately due and payable
pursuant to Section 502, without any application to or release from or consent
by the Trustee to, and to cause its Subsidiaries to sell or otherwise dispose
of, free from the Liens of the Indenture and Collateral Documents, any assets of
the Company or its Subsidiaries subject to the Liens of the Collateral
Documents.
The Trustee shall, from time to time, upon application by the Company
execute a written instrument (including a disclaimer, release or quitclaim) to
confirm any release under this Section 1208, upon receipt by the Trustee of,
where the particular release requires an action of the Board of Directors under
Applicable Law, a Board Resolution requesting the same and expressing any
required judgments, and an Officers' Certificate describing in reasonable detail
the property affected thereby.
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ARTICLE THIRTEEN
GUARANTY
SECTION 1301. SUBSIDIARY GUARANTEE.
The Subsidiary Guarantors unconditionally and jointly and severally
guaranty and promise to pay to each Beneficiary, on demand made at any time
while an Event of Default exists, in lawful money of the United States of
America, any and all Obligations of the Company from time to time owed to the
Beneficiaries. The term "OBLIGATIONS" means any and all present and future
obligations and liabilities of the Company of every type and description to the
Beneficiaries under the Note Documents, whether for principal, premium (if any),
interest, expenses, indemnities or other amounts, in each case whether due or
not due, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, whether or not arising after the
commencement of a proceeding under the Bankruptcy Code (including post-petition
interest) and whether or not allowed or allowable as a claim in any such
proceeding, and whether or not recovery of any such obligation or liability may
be barred by a statute of limitations or such obligation or liability may
otherwise be unenforceable. All Obligations shall be conclusively presumed to
have been created in reliance on the Subsidiary Guarantee. The Subsidiary
Guarantee is a continuing guarantee of the Obligations and, except as otherwise
provided in Section 1015(c), may not be revoked and shall not otherwise
terminate unless and until any and all Obligations have been indefeasibly paid
and performed in full.
SECTION 1302. NATURE OF SUBSIDIARY GUARANTEE.
The liability of each Subsidiary Guarantor under the Subsidiary Guarantee
is independent of and not in consideration of or contingent upon the liability
of the Company or any other Obligor and a separate action or actions may be
brought and prosecuted against any Subsidiary Guarantor, whether or not any
action is brought or prosecuted against the Company or any other Obligor or
whether the Company or any other Obligor is joined in any such action or
actions. The Subsidiary Guarantee given by each Subsidiary Guarantor shall be
construed as a continuing, absolute and unconditional guaranty of payment (and
not merely of collection) without regard to:
(a) the legality, validity or enforceability of the Notes, this Indenture
or any other Note Document, any of the Obligations, any Lien or Collateral or
the Subsidiary Guarantee given by any other Subsidiary Guarantor;
(b) any defense (other than payment), set-off or counterclaim that may at
any time be available to the Company or any other Obligor against, and any right
of setoff at any time held by, any Beneficiary; or
(c) any other circumstance whatsoever (with or without notice to or
knowledge of any Subsidiary Guarantor or any other Obligor), whether or not
similar to any of the foregoing, that constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company or any other Obligor,
in bankruptcy or in any other instance.
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Any payment by any Obligor or other circumstance that operates to toll any
statute of limitations applicable to such Obligor shall also operate to toll the
statute of limitations applicable to each Subsidiary Guarantor.
SECTION 1303. AUTHORIZATION.
Each Subsidiary Guarantor authorizes each Beneficiary, without notice to or
further assent by such Subsidiary Guarantor, and without affecting any
Subsidiary Guarantor's liability hereunder (regardless of whether any
subrogation or similar right that such Subsidiary Guarantor may have or any
other right or remedy of such Subsidiary Guarantor is extinguished or impaired),
from time to time to do any or all of the following:
(a) permit the Company to increase or create Obligations, or terminate,
release, compromise, subordinate, extend, accelerate or otherwise change the
amount or time, manner or place of payment of, or rescind any demand for payment
or acceleration of, the Obligations or any part thereof, consent or enter into
supplemental indentures or otherwise amend the terms and conditions of the Note
Documents or any provision thereof;
(b) take and hold Collateral from the Company or any other Person, perfect
or refrain from perfecting a Lien on such Collateral, and exchange, enforce,
subordinate, release (whether intentionally or unintentionally), or take or fail
to take any other action in respect of, any such Collateral or Lien or any part
thereof;
(c) exercise in such manner and order as it elects in its sole discretion,
fail to exercise, waive, suspend, terminate or suffer expiration of, any of the
remedies or rights of such Beneficiary against the Company or any other Obligor
in respect of any Obligations or any Collateral;
(d) release, add or settle with any Obligor in respect of the Subsidiary
Guarantee or the Obligations;
(e) accept partial payments on the Obligations and apply any and all
payments or recoveries from such Obligor or Collateral to such of the
Obligations as any Beneficiary may elect in its sole discretion, whether or not
such Obligations are secured or Guaranteed;
(f) refund at any time, at such Beneficiary's sole discretion, any
payments or recoveries received by such Beneficiary in respect of any
Obligations or Collateral; and
(g) otherwise deal with the Company, any other Obligor and any Collateral
as such Beneficiary may elect in its sole discretion.
SECTION 1304. CERTAIN WAIVERS.
Each Subsidiary Guarantor waives to the extent permitted by Applicable Law:
(a) the right to require the Beneficiaries to proceed against the Company
or any other Obligor, to proceed against or exhaust any Collateral or to pursue
any other remedy in any Beneficiary's power whatsoever and the right to have the
property of the Company or any other Obligor first applied to the discharge of
the Obligations;
(b) all rights and benefits under Applicable Law purporting to reduce a
guarantor's obligations in proportion to the obligation of the principal or
providing that the
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obligation of a surety or guarantor must neither be larger nor in other respects
more burdensome than that of the principal;
(c) the benefit of any statute of limitations affecting the Obligations or
any Subsidiary Guarantor's liability hereunder;
(d) any requirement of marshaling or any other principle of election of
remedies;
(e) any right to assert against any Beneficiary any defense (legal or
equitable), set-off, counterclaim and other right that any Subsidiary Guarantor
may now or any time hereafter have against the Company or any other Obligor;
(f) presentment, demand for payment or performance (including diligence in
making demands hereunder), notice of dishonor or nonperformance, protest,
acceptance and notice of acceptance of this Subsidiary Guarantee, and, except to
the extent expressly required by the Note Documents, all other notices of any
kind, including (i)notice of any action taken or omitted by the Beneficiaries
in reliance hereon, (ii)notice of any default by the Company or any other
Obligor, (iii)notice that any portion of the Obligations is due, (iv)notice of
any action against the Company or any other Obligor, or any enforcement of other
action with respect to any Collateral, or the assertion of any right of any
Beneficiary hereunder; and
(g) all defenses that at any time may be available to any Subsidiary
Guarantor by virtue of any valuation, stay, moratorium or other law now or
hereafter in effect
SECTION 1305. NO SUBROGATION; CERTAIN AGREEMENTS.
(A) EACH SUBSIDIARY GUARANTOR WAIVES ANY AND ALL RIGHTS OF SUBROGATION,
INDEMNITY OR REIMBURSEMENT, AND ANY AND ALL BENEFITS OF AND RIGHTS TO ENFORCE
ANY POWER, RIGHT OR REMEDY THAT ANY BENEFICIARY MAY NOW OR HEREAFTER HAVE IN
RESPECT OF THE OBLIGATIONS AGAINST THE COMPANY OR ANY OTHER OBLIGOR (OTHER THAN
RIGHTS OF CONTRIBUTION FROM OTHER SUBSIDIARY GUARANTORS), ANY AND ALL BENEFITS
OF AND RIGHTS TO PARTICIPATE IN ANY COLLATERAL, WHETHER REAL OR PERSONAL
PROPERTY, NOW OR HEREAFTER HELD BY ANY BENEFICIARY, AND ANY AND ALL OTHER RIGHTS
AND CLAIMS (AS DEFINED IN THE BANKRUPTCY CODE) ANY SUBSIDIARY GUARANTOR MAY HAVE
AGAINST THE COMPANY, UNDER APPLICABLE LAW OR OTHERWISE, AT LAW OR IN EQUITY, BY
REASON OF ANY PAYMENT UNDER THE SUBSIDIARY GUARANTEE, UNLESS AND UNTIL THE
OBLIGATIONS SHALL HAVE BEEN PAID IN FULL.
(b) Each Subsidiary Guarantor assumes the responsibility for being and
keeping itself informed of the financial condition of each other Obligor and of
all other circumstances bearing upon the risk of nonpayment of the Obligations
or the Subsidiary Guarantee of any other Subsidiary Guarantor that diligent
inquiry would reveal, and agrees that the Beneficiaries shall have no duty to
advise any Subsidiary Guarantor of information regarding such condition or any
such circumstances.
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SECTION 1306. BANKRUPTCY NO DISCHARGE.
(a) Without limiting Section 1302, the Subsidiary Guarantee shall not be
discharged or otherwise affected by any bankruptcy, reorganization or similar
proceeding commenced by or against the Company or any other Obligor, including
(i) any discharge of, or bar or stay against collecting, all or any part of the
Obligations in or as a result of any such proceeding, whether or not assented to
by any Beneficiary, (ii) any disallowance of all or any portion of any
Beneficiary's claim for repayment of the Obligations, (iii) any use of cash or
other collateral in any such proceeding, (iv) any agreement or stipulation as to
adequate protection in any such proceeding, (v) any failure by any Beneficiary
to file or enforce a claim against the Company or any other Obligor or its
estate in any bankruptcy or reorganization case, (vi) any amendment,
modification, stay or cure of any Beneficiary's rights that may occur in any
such proceeding, (vii) any election by any Beneficiary under Section 1112(b)(2)
of the Bankruptcy Code, or (viii) any borrowing or grant of a Lien under
Section 364 of the Bankruptcy Code. Each Subsidiary Guarantor understands and
acknowledges that by virtue of this Subsidiary Guarantee, it has specifically
assumed any and all risks of any such proceeding with respect to the Company and
each other Obligor.
(b) Notwithstanding anything in this Article Thirteen to the contrary, any
Event of Default under Section 501(f) of this Indenture shall render all
Obligations automatically due and payable for purposes of the Subsidiary
Guarantee, without demand on the part of the Trustee or any Holder.
(c) Notwithstanding anything to the contrary herein contained, the
Subsidiary Guarantee (and any Lien on the Collateral securing the Subsidiary
Guarantee or the Obligations) shall continue to be effective or be reinstated,
as the case may be, if at any time any payment, or any part thereof, of any or
all of the Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned by any Beneficiary
in connection with any bankruptcy, reorganization or similar proceeding
involving the Company, any other Obligor or otherwise, if the proceeds of any
Collateral are required to be returned by such Beneficiary under any such
circumstances, or if any Beneficiary elects to return any such payment or
proceeds or any part thereof in its sole discretion, all as though such payment
had not been made or such proceeds not been received.
SECTION 1307. SEVERABILITY OF VOID OBLIGATIONS UNDER SUBSIDIARY
GUARANTEE.
The obligations of any Subsidiary Guarantor hereunder shall be limited to
the maximum amount that would not render its obligations hereunder subject to
avoidance under Section 548 of the Bankruptcy Code or any applicable provisions
of comparable state law.
SECTION 1308. ADDITIONAL SUBSIDIARY GUARANTORS.
Each Subsidiary that executes and delivers to the Trustee from time to time
an Addendum to Subsidiary Guarantee after the Issue Date shall be a Subsidiary
Guarantor as if such Subsidiary had been a signatory to this Indenture, and no
such Addendum to Subsidiary Guarantee must be executed and delivered by any
other Obligors. Each Obligor hereby consents to any such Addendum, whether or
not it receives notice thereof. Except as otherwise provided by Section 1015,
each Wholly Owned Subsidiary shall be Subsidiary
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Guarantors at all times (except such Wholly-Owned Subsidiaries of the Company on
the Issue Date not included on Schedule I).
SECTION 1309. SUBORDINATION.
The obligations of each Subsidiary Guarantor under the Subsidiary Guarantee
are subordinate to the obligations of such Subsidiary Guarantor under any
Guarantee of the Senior Indebtedness of the Company to the extent and in the
manner that the Indebtedness evidenced by the Notes is subordinate to the
obligations of the Company under the Senior Indebtedness of the Company under
Article Fifteen. By acceptance of this Subsidiary Guarantee, the Holders agree
to be bound by the foregoing provisions.
ARTICLE FOURTEEN
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may at its option at any time elect to have Section 1402 or
Section 1403 applied to all outstanding Notes upon compliance with the
conditions set forth below in this Article Fourteen.
SECTION 1402. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 1401 of the option applicable to
this Section 1402, the Company and the Subsidiary Guarantors shall be discharged
from their obligations with respect to all outstanding Notes on the date the
conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For
this purpose, such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Notes, and this Indenture shall cease to be of further effect as to all
outstanding Notes and the Subsidiary Guarantee except as to rights of Holders to
receive payments which shall thereafter be deemed to be "Outstanding" only for
the purposes of Section 1405 and the other Sections of this Indenture referred
to in (a) and (b) below, and to have satisfied all its other obligations under
such Notes and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Notes to receive solely from
the trust fund described in Section 1404, and as more fully set forth in such
section, payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (b) the Company's and the Subsidiary
Guarantors' obligations with respect to such Notes under Sections 304, 305, 802
and 1003, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's and the Subsidiary Guarantors' in obligations in
connection therewith and (d) this Article Fourteen. Subject to compliance with
this Article Fourteen, the Company may exercise its option under this Section
1402 notwithstanding the prior exercise of its option under Section 1403 with
respect to the Notes.
SECTION 1403. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 1401 of the option applicable to
this Section 1403, the Company and the Subsidiary Guarantors shall be released
from their obligations under the covenants contained in Articles Eight and Ten
(except Sections 1001,
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1002, 1004 and 1006) with respect to the outstanding Notes on and after the date
the conditions set forth below are satisfied (hereinafter "COVENANT
DEFEASANCE"), and the Notes shall thereafter be deemed not Outstanding for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Notes, the Company and the Subsidiary Guarantors need not comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document, but, except as
specified above, the remainder of this Indenture (including the Subsidiary
Guarantee) and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 1401 of the option applicable to this Section
1403, the events specified in clause (c) (to the extent they relate to any of
the covenants from which the Company and the Subsidiary Guarantors are being
released pursuant to this Section 1403) and clauses (d) through (h) of Section
501 shall not constitute Events of Default.
SECTION 1404. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
1402 or Section 1403 to the Outstanding Notes:
(a) the Company shall irrevocably deposit or cause to be deposited with
the Trustee (or another trustee satisfying the requirements of Section 608) who
shall agree to comply with the provisions of this Article Fourteen applicable to
it) as trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of such Notes, (a) US Dollars in an amount, or (b) U.S. Government
Obligations that through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, US Dollars in an amount, or (c) a
combination thereof, in such amounts, as in each case will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge, (i) the principal of, premium, if any, and
interest on the outstanding Notes on the stated date for payment thereof or on
the redemption date, as the case may be, of such principal or installment of
principal, premium, if any, or interest on such Notes, and the Trustee on behalf
of the Holders must have a valid, perfected, exclusive security interest in such
trust; provided, however, that the Trustee shall have been irrevocably
instructed to apply such US Dollars and the proceeds of such U.S. Government
Obligations to such payments with respect to the Notes. For purposes of this
Article Fourteen, "U.S. GOVERNMENT OBLIGATIONS" means direct non-callable of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
(b) in the case of an election under Section 1402, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the
Trustee confirming that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (ii) since the date
hereof, there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the Outstanding Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Legal Defeasance and
will
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<PAGE>
be subject to Federal income tax in the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 1403, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the
Trustee confirming that the Holders of the Outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to Federal income tax in the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default with respect to the Notes shall have
occurred and be continuing on the date of such deposit or, insofar as
Section 501(f) is concerned, at any time in the period ending on the ninety-
first (91st) day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such period);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company and the Subsidiary Guarantors shall have delivered to the
Trustee Officers' Certificates stating that the deposit made by the Company
pursuant to its election under Section 1402 or 1403 was not made with the intent
of preferring the Holders of such Notes over any other creditors of the Company
or such Subsidiary Guarantors or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or such Subsidiary
Guarantors or others; and
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, each stating that
all conditions precedent provided for relating to either the Legal Defeasance
under Section 1402 or the Covenant Defeasance under Section 1403 (as the case
may be) have been complied with as contemplated by this Section 1404.
SECTION 1405. DEPOSITED US DOLLARS AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 1406, all US Dollars and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 1405, the "TRUSTEE") pursuant
to Section 1404 in respect of the outstanding Notes shall be held in trust (and
subject to a first priority Lien in favor of the Trustee on behalf of the
Holders) and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent as the Trustee may determine, to the Holders of such Notes of all sums due
and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law. Anything in this Article Fourteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any U.S. Dollars or U.S. Government
Obligations held by it as provided in Section 1404 that, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereto delivered to the Trustee (which may be the opinion
delivered
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under Section 1404(a)), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 1406. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable, shall be paid to
the Company on its request, and the Holder of such Note shall thereafter look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the issuers.
SECTION 1407. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Dollars or U.S.
Government Obligations in accordance with Section 1402 or 1403, as the case may
be, by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's and the Subsidiary Guarantors' obligations under this Indenture
(including the Subsidiary Guarantee) and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 1402 or 1403
until such time as the Trustee or Paying Agent is permitted to apply such money
in accordance with Section 1402 and 1403, as the case may be; provided, however,
that, if the Company makes any payment of principal of, premium, if any, or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the cash held by the Trustee or Paying Agent.
SECTION 1408. TERMINATION OF OBLIGATIONS UPON CANCELLATION OF THE NOTES.
In addition to the Company's rights under Sections 1402 and 1403, the
Company and the Subsidiary Guarantors may terminate all of their obligations
under this Indenture (subject to Section 1407) when:
(a) either (i) all such Outstanding Notes theretofore authenticated and
delivered (other than Notes that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 305) have been delivered to
the Trustee for cancellation, or (ii) all such Notes not theretofore delivered
to the Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest to the Stated Maturity of the Notes;
(b) the Company has paid all sums payable hereunder; and
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(c) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent specified
herein relating to the satisfaction and discharge of this Indenture have been
complied with, and that such satisfaction and discharge will not result in a
breach or violation of, or constitute a Default under, this Indenture or any
other instrument to which the Company, any Subsidiary Guarantor or any of their
Subsidiaries is a party or by which it or their property is bound.
ARTICLE FIFTEEN
SUBORDINATION
SECTION 1501. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes is subordinated in right of payment, to the
extent and in the manner provided in this Article Fifteen, to the prior payment
in full of all Senior Indebtedness and that the subordination is for the benefit
of and enforceable by the holders of Senior Indebtedness. The Notes shall in all
respects rank pari passu with all other Indebtedness of the Company, other than
Subordinated Indebtedness, and only Indebtedness of the Company which is Senior
Indebtedness shall rank senior to the Notes in accordance with the provisions
set forth herein. All provisions of this Article Fifteen shall be subject to
Section 1512.
SECTION 1502. LIQUIDATION, DISSOLUTION, BANKRUPTCY.
Upon any payment or distribution of the assets of the Company to creditors
upon a total or partial liquidation or a total or partial dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its respective property:
(a) holders of Senior Indebtedness shall be entitled to receive payment in
full of the Senior Indebtedness before Holders shall be entitled to receive any
payment of principal of or interest on the Notes; and
(b) until the Senior Indebtedness is paid in full, any payment or
distribution to which Holders would be entitled but for this Article Fifteen
shall be made to holders of Senior Indebtedness as their interests may appear.
SECTION 1503. DEFAULT ON SENIOR INDEBTEDNESS.
The Company may not pay the principal of, premium (if any) or interest
(other than a payment in Secondary Notes) on the Notes or make any deposit
pursuant to Section 401 or Section 1404 and may not repurchase, redeem or
otherwise retire any Notes (collectively, "pay the Notes") if (i) any Senior
Indebtedness is not paid when due or (ii) any other default on Senior
Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated
in accordance with its terms unless, in either case, (x) the default has been
cured or waived and any such acceleration has been rescinded or (y) such Senior
Indebtedness has been paid in full; provided, however, that the Company may pay
the Notes without regard to the foregoing if the Company and the Trustee receive
written notice approving such payment from the Representative of the Senior
Indebtedness with respect to which either of the events in clause (i) or (ii) of
this sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the
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<PAGE>
preceding sentence) with respect to any Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company may not pay the Notes
(other than a payment in Secondary Notes) for a period (a "PAYMENT BLOCKAGE
PERIOD") commencing upon the receipt by the Company and the Trustee of written
notice (a "BLOCKAGE NOTICE") of such default from the Representative of such
Senior Indebtedness specifying an election to effect a Payment Blockage Period
and ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee (with a copy to the Company)
from the Person or Persons who gave such Blockage Notice, (ii) by repayment in
full of such Senior Indebtedness or (iii) because the default giving rise to
such Blockage Notice is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section), unless the holders of such
Senior Indebtedness or the Representative of such holders shall have accelerated
the maturity of such Senior Indebtedness, the Company may resume payments on the
Notes after such Payment Blockage Period. Not more than one Blockage Notice may
be given in any consecutive 360-day period, irrespective of the number of
defaults with respect to Senior Indebtedness during such period; provided,
however, that in no event may the total number of days during which any Payment
Blockage Period or Periods is in effect exceed 179 days in the aggregate during
any 360 consecutive day period.
SECTION 1504. ACCELERATION OF PAYMENT OF NOTES.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify the holders of the Senior Indebtedness (or their
Representative) of the acceleration. If any Senior Indebtedness is outstanding,
the Company may not pay the Notes until five Business Days after such holders or
the Representative of the Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if this Article Fifteen
otherwise permits payment at that time.
SECTION 1505. WHEN DISTRIBUTION MUST BE PAID OVER.
If a distribution is made to Holders that because of this Article Fifteen
should not have been made to them, the Holders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 1506. SUBROGATION.
After all Senior Indebtedness is paid in full and until the Notes are paid
in full, Holders shall be subrogated to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness. A
distribution made under this Article Fifteen to holders of Senior Indebtedness
which otherwise would have been made to Holders is not, as between the Company
and Holders, a payment by the Company on Senior Indebtedness.
SECTION 1507. RELATIVE RIGHTS.
This Article Fifteen defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
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<PAGE>
(a) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and interest
on the Notes in accordance with their terms, or
(b) prevent the Trustee or any Holder from exercising its available
remedies upon an Event of Default, subject to the rights of holders of Senior
Indebtedness to receive distributions otherwise payable to Holders.
SECTION 1508. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Company or its failure to comply with this Indenture.
SECTION 1509. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding Section 1503, the Trustee or Paying Agent may continue to
make payments on the Notes and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments and shall
be entitled to assume conclusively that no such facts exist unless, not less
than two Business Days prior to the date of such payment, the Trustee receives
an Officers' Certificate to the effect that payment may not be made under this
Article Fifteen or notice in writing to that effect signed by or on behalf of
the Company, the Registrar or co-registrar, the Paying Agent, a Representative
or a holder of Senior Indebtedness (who in the case of a Representative or
holder of Senior Indebtedness shall have been certified by the Company or
otherwise established to the reasonable satisfaction of the Trustee to be such
Representative or holder); provided, however, that, if an issue of Senior
Indebtedness has a Representative, only the Representative may give the notice.
The Company shall give prompt written notice to the Trustee of any facts which
would prohibit any payment of monies to or by the Trustee, and the Trustee shall
not be charged with knowledge of the curing of any default or the elimination of
any other fact or condition preventing such payment or distribution unless and
until the Trustee shall have actual knowledge thereof or shall have received an
Officers' Certificate or written notice to that effect.
SECTION 1510. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION 1511. ARTICLE FIFTEEN NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE.
The failure to make a payment pursuant to the Notes by reason of any
provision in this Article Fifteen shall not be construed as preventing the
occurrence of an Event of Default. Nothing in this Article Fifteen shall have
any effect on the right of the Holders or the Trustee to accelerate the maturity
of the Notes.
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<PAGE>
SECTION 1512. TRUST MONEYS NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary, payments from
money or the proceeds of U.S. Government Obligations held in trust under Article
Four or Article Fourteen by the Trustee for the payment of principal of and
interest on the Notes shall not be subordinated to the prior payment of any
Senior Indebtedness or subject to the restrictions set forth in this Article
Fifteen, and none of the Holders shall be obligated to pay over any such amount
to the Company or any other creditor of the Company.
SECTION 1513. TRUSTEE ENTITLED TO RELY.
Upon any payment or distribution pursuant to this Article Fifteen, the
Trustee and the Holders shall be entitled to rely (i) upon any order or decree
of a court of competent jurisdiction in which any proceedings of the nature
referred to in Section 1502 are pending, (ii) upon a certificate of the
liquidating trustee or agent or other Person making such payment or distribution
to the Trustee or to the Holders or (iii) upon the Representatives for the
holders of Senior Indebtedness for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Fifteen. In the event that the
Trustee determines, in good faith, that evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article Fifteen, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Senior Indebtedness held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and other facts pertinent to the rights of such Person under this Article
Fifteen, and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment. The provisions of Sections 601 and 603 shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article Fifteen.
SECTION 1514. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder by accepting a Note authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Holders and the holders of Senior
Indebtedness as provided in this Article Fifteen and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 1515. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Holders or the Company or any other Person,
money or assets to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article Fifteen or otherwise.
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SECTION 1516. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON SUBORDINATION
PROVISIONS.
Each Holder by accepting a Note acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of the Notes,
to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively
to have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
SECTION 1517. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article shall apply to amounts due to the Trustee pursuant
to other sections of this Indenture.
ARTICLE SIXTEEN
MISCELLANEOUS
SECTION 1601. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as such, of any
Note Party shall not have any liability for any obligations of such Note Party
under the Notes, this Indenture or the other Note Documents or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability.
.* * * * *
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This Indenture may be signed in any number of counterparts with the
same effect as if the signatures to each counterpart were upon a single
instrument, and all such counterparts together shall be deemed an original of
this Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
USTRAILS INC., a Nevada corporation
By: /s/ William J. Shaw
----------------------------------
Name: William J. Shaw
--------------------------------
Title: President
--------------------------------
FLEET NATIONAL BANK
By: /s/ Phillip G. Kane
----------------------------------
Name: Phillip G. Kane
---------------------------------
Title: Vice President
--------------------------------
THOUSAND TRAILS (CANADA) INC.,
a British Columbia corporation
By: /s/ William J. Shaw
---------------------------------
Name:
William J. Shaw
------------------------------------
Title: President
------------------------------------
TT OFFSHORE, LTD., a Virginia corporation
By: /s/ William J. Shaw
------------------------------------
Name: William J. Shaw
------------------------------------
Title: President
------------------------------------
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<PAGE>
NATIONAL AMERICAN CORPORATION,
a Nevada Corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
LML RESORT CORPORATION,
an Alabama corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
RESORT LAND CORPORATION,
an Arkansas corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
LAKE TANSI VILLAGE, INC.,
a Delaware corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
SHOREWOOD CORPORATION,
a Georgia corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
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<PAGE>
TANSI RESORT, INC.,
a Georgia corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
INDIAN LAKES WILDERNESS PRESERVE
CORPORATION, an Indiana corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
--------------------------------------
DIXIE RESORT CORPORATION,
a Mississippi corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
RECREATION PROPERTIES, INC.,
a Mississippi corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
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CARRIAGE MANOR CORPORATION,
a North Carolina corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
LAKE ROYALE CORPORATION,
a North Carolina corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
GL LAND DEVELOPMENT INC.,
an Oklahoma corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
BEECH MOUNTAIN LAKES CORPORATION,
a Pennsylvania corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
QUAIL HOLLOW VILLAGE, INC.,
a Pennsylvania corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
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<PAGE>
RECREATION LAND CORPORATION,
a Pennsylvania corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
WOLF RUN MANOR CORP.,
a Pennsylvania corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
CAROLINA LANDING CORPORATION,
a South Carolina corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
FOXWOOD CORPORATION,
a South Carolina corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
THE KINSTON CORPORATION,
a South Carolina corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
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<PAGE>
CHEROKEE LANDING CORPORATION,
a Tennessee corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
CHIEF CREEK CORPORATION,
a Tennessee corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
NATCHEZ TRACE WILDERNESS
PRESERVE CORPORATION,
a Tennessee corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
QUAIL HOLLOW PLANTATION CORPORATION,
a Tennessee corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
WESTERN FUN CORPORATION,
a Texas corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
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<PAGE>
WESTWIND MANOR CORPORATION,
a Texas corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
UST WILDERNESS MANAGEMENT
CORPORATION, a Nevada corporation
By: /s/ William J. Shaw
---------------------------------------
Name: William J. Shaw
-------------------------------------
Title: President
------------------------------------
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SCHEDULES OMITTED
<PAGE>
EXHIBIT A
FORM OF SENIOR SUBORDINATED PAY-IN-KIND NOTES
[Face of Note]
SENIOR SUBORDINATED PAY-IN-KIND NOTES DUE 2003 OF
USTRAILS INC.
$_______ PRINCIPAL AMOUNT OF NOTES
No. __
THIS CERTIFIES THAT ___________________________________________ (the "Holder")
is the owner of Notes in the aggregate principal amount specified above.
This Note Certificate represents the foregoing principal amount of Senior
Subordinated Pay-In-Kind Notes due 2003 (the "Notes") of USTrails Inc., a Nevada
corporation (including any successor under the Indenture hereinafter referred
to, the "Company").
The Company, as obligor, promises to pay to _____________________ or
registered assigns, the principal sum of $____________ on July 15, 2003.
Interest Payment Dates: July 15 and January 15 (each an "Interest Payment
Date").
Record Dates: July 1 and January 1 (whether or not a Business Day)(each a
"Regular Record Date").
The Notes were issued with original issue discount for Federal income tax
purposes. Information regarding the issue price of the Notes, total amount of
original issue discount on the Notes, the issue date of the Notes, and the yield
to maturity of the Notes can be obtained at the address of the Company specified
on the reverse hereof.
SEE REVERSE FOR TRANSFER RESTRICTIONS
<PAGE>
[Back of Certificate]
Senior Subordinated Pay-in-Kind Note Due 2003
THESE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THESE NOTES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, OR (C) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENT OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
IT.
1. Interest. USTrails Inc., a Nevada corporation (the "Company"),
promises to pay interest on the principal amount of the Notes represented by
this Note Certificate (i) through and including January 15, 1998 (the "Initial
Period") at 17-1/2% per annum and (ii) after January 15, 1998 at 12% per annum.
The Company shall pay interest (i) during the Initial Period (A) in the amount
of $40.59 per $1,000 principal amount on the Issue Date (the "Prepaid Interest")
to holders of record on the Issue Date and (B) at 12% per annum semiannually on
each Interest Payment Date to the holders of record (each a "Holder") of
Outstanding Notes on the immediately preceding Regular Record Date and (ii)
after the Initial Period, semiannually on each Interest Payment Date to the
Holders of the Outstanding Notes on the immediately preceding Regular Record
Date. The Prepaid Interest shall be paid in cash and the holder of record on
the Issue Date by its acceptance of these Notes acknowledges receipt in full of
such Prepaid Interest. The Company may, in its sole discretion, issue
additional Notes ("Secondary Notes") in lieu of cash payment of any or all of
the interest due on any Interest Payment Date occurring on or prior to July 15,
2000 provided, on or prior to July 15, 2000, so long as the Senior Indebtedness
is outstanding interest shall be paid only by the issuance of Secondary Notes.
If the Company issues Secondary Notes in lieu of cash payment, in whole or in
part, of interest due on any Interest Payment Date occurring on or prior to July
15, 2000 pursuant to this paragraph, it shall give notice to the Trustee not
less than 5 Business Days prior to the relevant Interest Payment Date, and shall
instruct the Trustee upon Order of the Company given not less than 5 or more
than 45 days prior to such Interest Payment Date) to authenticate Secondary
Notes, dated such Interest Payment Date, in a principal amount equal to the
amount of interest not paid in cash in respect of this note on such Interest
Payment Date. Each issuance of Secondary Notes in lieu of cash payments of
interest on the Notes shall be made pro rata with respect to the outstanding
Notes. Any such Secondary Notes shall be subject to the same terms (including
maturity date and rate of interest from time to time payable thereon) as this
Note except, as the case may be, with respect to the title, issuance date and
aggregate principal amount. The term Notes shall include Secondary Notes that
may be issued under the Indenture. Interest on the Notes represented by this
Note Certificate will accrue from the most recent date to which interest
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<PAGE>
has been paid or, if no Interest has been paid on such Notes, from the first
date on which the Notes represented by this Note Certificate was originally
issued. Interest will be computed on the basis of a 360-day year of twelve 30-
day months. To the extent lawful, the Company shall pay interest on overdue
installments of interest at the rate of 14% per annum.
2. Additional Interest. If a Registration Default has occurred and is
continuing, the Notes represented by this Note Certificate will bear Additional
Interest, at the rate of $0.10 per week higher than the interest rate then
payable on the Notes per $1,000 principal amount of Notes, from the date such
Registration Default occurs (the "Commencement Date") to and through the date
such Registration Default no longer exists. Installments of Additional Interest
will become due and payable semiannually on the next occurring Interest Payment
Date to the Holders at the close of business on the Regular Record Date
immediately preceding such Interest Payment Date. All references in this Note
Certificate to "interest" include the amount of unpaid Additional Interest due
and payable. At no time shall the maximum aggregate interest rate borne by this
Note exceed the maximum amount permitted under Applicable Law.
3. Method of Payment. The Company shall pay interest on the Notes
(except Defaulted Interest) to Holders of Notes at the close of business on the
Regular Record Date for the Interest Payment Date even if Notes are canceled
after the Regular Record Date and on or before the Interest Payment Date. If the
Company and a Holder shall so agree, Holders shall not be required to surrender
the Notes to collect principal payments and premium payments, if any. The
Company shall pay principal, premium if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts (or, pursuant to paragraph 2 hereof, in Secondary Notes).
The payment of the Notes to Holders is guaranteed pursuant to the
Subsidiary Guarantee by the Subsidiary Guarantors.
4. Paying Agent and Registrar. Fleet National Bank, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar.
5. Indenture. The Company issued the Notes under an Indenture dated as
of July 17, 1996 ("Indenture") by and among the Company, each Subsidiary of the
Company set forth on Schedule I to the Indenture, as Subsidiary Guarantors, and
the Trustee. The terms of the Notes include those stated in the Indenture and
those terms made a part thereof by reference to the Trust Indenture Act of 1939,
as amended, as in effect on the date of the Indenture (the "Trust Indenture
Act"). The Notes are subject to, and qualified by, all such terms, certain of
which are summarized herein, and Holders are referred to the Indenture and the
Act for a statement of such terms. Capitalized terms not defined herein have the
meaning given to them in the Indenture.
6. Optional Redemption. The Company may redeem all or a portion of the
Notes at any time after the Issue Date at 100% of principal amount, plus accrued
and unpaid interest.
7. Redemption and Repurchase in Part. If less than all of the
Outstanding Notes are to be redeemed or repurchased, the particular Notes or
portions thereof to be redeemed shall be determined on a pro rata basis, by lot
or by any other method
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<PAGE>
determined by the Trustee to be fair and appropriate, subject to compliance with
the requirements of any national securities exchange on which the Notes are then
listed.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at such Holder's registered address. On and after the
redemption date, interest shall cease to accrue on the Notes or portions thereof
called for redemption.
If this Note is redeemed subsequent to a Regular Record Date with respect
to any Interest Payment Date specified above and on or prior to such Interest
Payment Date, then any interest will be paid to the Person in whose name this
Note is registered at the close of business on such Regular Record Date.
9. Asset Sale. Subject to certain exceptions, the Company must
repurchase Notes in a principal amount equal to the maximum principal amount of
Notes that may be purchased out of that portion of Net Cash Proceeds of any
Asset Sale that is not applied to Senior Indebtedness or reinvested in a Related
Business within 180 days of such Asset Sale. Such repurchase may be made in any
manner selected by the Company, including, without limitation, open market
purchases, privately negotiated transactions, redemption or an Asset Sale
Purchase Offer.
10. Change of Control Purchase Offer. If a Change of Control has
occurred, each Holder of the Notes will have the right, at such Holder's option,
subject to the terms and conditions of the Indenture, to require the Company to
repurchase all or any part of such Holder's Notes. Such offer must be commenced
within 45 Business Days after the Company repays, or offers to repay, in full
the Senior Indebtedness or obtains the consent of the holders of the Senior
Indebtedness to permit repurchase of the Notes, at a cash price equal to 101% of
the principal amount of the Notes to be purchased, plus accrued and unpaid
interest to the purchase date.
11. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000
(provided that Secondary Notes or Notes issued upon registration of transfer of
such Secondary Notes may be in denominations of other than $1,000). The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. As a condition to transfer, the Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
The Registrar need not exchange or register the transfer of any Note or portion
of a Note selected for redemption in whole or in part, or with respect to which
a Purchase Notice has been given. Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before the mailing of a notice of
redemption or offer to repurchase with respect to such Notes.
12. Persons Deemed Owners. The registered holder of a Note may be treated
as its owner for the purpose of receiving payment and, subject to the exception
set forth under the caption "Method of Payment" above, interest (including
Additional Interest) and for all other purposes.
13. Amendments and Waivers. Subject to certain exceptions, the Indenture
or the Notes may be amended with the consent of the Holders of at least 66-2/3%
in principal amount of the Outstanding Notes, and any existing default may be
waived with the consent of the Holders of a majority in principal amount of the
Outstanding Notes. Without the
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<PAGE>
consent of any Holder, the Indenture or the Notes may be amended: to provide for
assumption of any Obligor's obligations to Holders by another Person; to add to
the covenants of the Obligors for the benefit of the Holders or to surrender any
right or power conferred upon any Obligor; to cure any ambiguity, defect or
inconsistency; to appoint a successor Trustee; to add a Subsidiary Guarantor and
to release a Subsidiary Guarantor under certain circumstances; to release
collateral security under certain circumstances; or to comply with any
requirement to effect the qualification of the Indenture under the Trust
Indenture Act or any registration or qualification of the Notes under securities
laws.
14. Defaults and Remedies. If an Event of Default as set forth in the
Indenture occurs and is continuing, the Trustee or the Holders of at least 30%
in principal amount of the Outstanding Notes may declare the principal of all
the Notes to be due and payable immediately, except that in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, all
Outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
a majority in principal amount of the Outstanding Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of principal, or
premium (if any) or interest or in the payment of any Purchase Price) if it
determines that withholding notice is in their interests. The Company must
furnish quarterly and annual compliance certificates to the Trustee.
15. Trustee Dealings with the Company. The Indenture contains certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90 days
or resign.
16. No Recourse Against Others. A director, officer, employee, stockholder
or incorporator, as such, of any Note Party shall not have any liability for any
obligations of such Note Party under the Notes, the Indenture or other Note
Documents or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the Notes.
17. Authentication. This Note shall not be valid until authenticated by
the manual signature of an authorized officer of the Trustee.
18. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (=Uniform Gifts to
Minors Act).
19. Collateral Documents and Collateral. During the period that any
Senior Indebtedness is outstanding, whether in existence on the date hereof or
later incurred, and until the Delivery Date the obligations represented by this
Note are general unsecured obligations of the Company. Substantially
contemporaneously with the discharge in full of the Company's obligations in
respect of the Senior Indebtedness, the Company will grant the liens
contemplated by and the Trustee will enter into or accept the Collateral
Documents listed on Schedule 1201 to the Indenture and accept delivery of the
Collateral
5
<PAGE>
specified therein. By acceptance of its Notes, each Holder agrees to the
substance of all terms and provisions of such Collateral Documents and all other
Note Documents from time to time entered into pursuant to (and as amended from
time to time pursuant to) the provisions of the Indenture and the other Note
Documents. As among Holders, the Collateral shall be held for the equal and
ratable benefit of the Holders without preference, priority or distinction of
any Holder over any other Holder by reason of differences in time of issuance of
the Notes held by such Holders, sale or otherwise, as security for the Secured
Obligations of the Obligors.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture, which has in it the text of this Note in larger
type. Requests may be made to:
USTrails Inc.
2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
Attention: Chief Financial Officer
20. Subordination. The Notes are subordinated to the Senior Indebtedness,
as defined in the Indenture. To the extent provided in the Indenture, the
Senior Indebtedness must be paid before the Notes may be paid. The Company
agrees, and each Holder by accepting a Note agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoints the Trustee as attorney-in-fact for such purpose.
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to:
- --------------------------------------------------
| |
- --------------------------------------------------
(Insert assignee's social security or tax identification number.)
- ------------------------------------
- ------------------------------------
- ------------------------------------
- ------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint:
- ------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.
Date:
------------------------------
Signed:
----------------------------
(Sign exactly as your name appears on the fact of this Note)
Signature Guarantee:
- ------------------------------------
NOTICE: The signature must be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.
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<PAGE>
EXHIBIT B-1
FORM OF SUBSIDIARY GUARANTEE
The Subsidiary Guarantors set forth on Schedule I hereto (hereinafter
referred to as "Subsidiary Guarantors," which term includes any successor or
assign under the Indenture dated as of July 17, 1996 by and among USTrails Inc.,
a Nevada corporation (the "Company"), each Subsidiary of the Company set forth
on Schedule I, and Fleet National Bank, a national banking association, as
trustee (the "Trustee") (the "Indenture")) have irrevocably, unconditionally and
jointly and severally guaranteed (i) the due and punctual payment of the
principal of, premium, if any, and interest on the Company's Senior Subordinated
Pay-In-Kind Notes due 2003 in an aggregate principal amount of $40,241,000, plus
the additional principal amount of Senior Subordinated Pay-in-Kind Notes issued
pursuant to Section 301 of the Indenture (the "Notes"), whether at stated
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal and interest, if any, of the Notes, to the extent
lawful, and the due and punctual performance of all other Obligations of the
Company to the Holders of Notes or the Trustee, all subject to the terms and
limitations set forth in ARTICLE THIRTEEN of the Indenture, (ii) in case of any
extension of time of payment or renewal of any Notes, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise,
and (iii) the payment of any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights
under this Subsidiary Guarantee.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in ARTICLE THIRTEEN of the Indenture and reference is hereby made to
such Indenture for the precise terms of this Subsidiary Guarantee.
The obligations of the Subsidiary Guarantor under this Subsidiary Guarantee
are subordinated to the obligations of the Subsidiary Guarantor under any
Guarantee by it of the Senior Indebtedness to the extent and in the manner set
forth in the Indenture.
No director, officer, employee, stockholder or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
this Subsidiary Guarantee by reason of his, her or its status as such director,
officer, employee, stockholder or incorporator.
This is a continuing guarantee and, except as otherwise provided in Section
1015(c) of the Indenture, shall remain in full force and effect and shall be
binding upon each Subsidiary Guarantor and its successors and assigns until full
and final payment of all of the Company's Obligations and shall inure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee, or assignee, all subject to the
terms and conditions hereof. This is a guarantee of payment and not of
collectability.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of an authorized officer.
THE TERMS OF ARTICLE THIRTEEN OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Subsidiary Guarantee
--------------------
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<PAGE>
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
Subsidiary Guarantors:
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
By:
------------------------------
Name:
Title:
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
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EXHIBIT B-2
FORM OF ADDENDUM TO SUBSIDIARY GUARANTEE
Pursuant to Section 1308 of the Indenture dated as of July 17, 1996 by and
among USTrails Inc., a Nevada corporation (the "Company"), each Subsidiary of
the Company set forth on Schedule I thereto, and Fleet National Bank, a
national banking association, as trustee (the "Trustee"), the undersigned hereby
agrees, represents and acknowledges that it is a Subsidiary Guarantor under the
Indenture for all purposes, and jointly and severally with all other Subsidiary
Guarantors under the Indenture as may exist from time to time, as if it had been
a signatory to the Indenture.
The undersigned hereby irrevocably and unconditionally guarantees (i) the
due and punctual payment of the principal of, premium, if any, and interest on
the Company's Senior Subordinated Pay-in-Kind Notes due 2003 in an aggregate
principal amount of $40,241,000, plus the additional principal amount of Senior
Subordinated Pay-in-Kind Notes issued pursuant to Section 301 of the Indenture
(the "Notes"), whether at stated maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal and interest, if any,
of the Notes, to the extent lawful, and the due and punctual performance of all
other Obligations of the Company to the Holders of Notes or the Trustee, all
subject to the terms and limitations set forth in ARTICLE THIRTEEN of the
Indenture, (ii) in case of any extension of time of payment or renewal of any
Notes or any such other Obligations, that the same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise, and (iii) the payment
of any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Holder in enforcing any rights under this
Addendum to Subsidiary Guarantee.
The obligations of the undersigned Subsidiary Guarantor to the Holders and
to the Trustee pursuant to this Addendum to Subsidiary Guarantee and the
Indenture are expressly set forth in ARTICLE THIRTEEN of the Indenture and
reference is hereby made to such Indenture for the precise terms of this
Addendum to Subsidiary Guarantee.
The obligations of the Subsidiary Guarantor under this subsidiary Guarantee
are subordinated to the obligations of the Subsidiary Guarantor under any
Guarantee by it of the Senior Indebtedness to the extent and in the manner set
forth in the Indenture.
No director, officer, employee, stockholder or incorporator, as such, past,
present or future, of the undersigned Subsidiary Guarantor shall have any
liability under this Addendum to Subsidiary Guarantee by reason of his or its
status as such director, officer, employee, stockholder or incorporator.
This is a continuing guarantee and, except as otherwise provided in Section
1015(c) of the Indenture, shall remain in full force and effect and shall be
binding upon the undersigned Subsidiary Guarantor and its successors and assigns
until full and final payment of all of the Company's Obligations and shall inure
to the benefit of the successors and assigns of the Trustee and the Holders and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a guarantee of payment and
not of collectibility.
Addendum to Subsidiary Guarantee
--------------------------------
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THE TERMS OF ARTICLE THIRTEEN OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
The undersigned Subsidiary Guarantor hereby represents and warrants as
follows:
(i) The undersigned has been duly incorporated or organized and
is validly existing as a corporation, partnership or other entity in
good standing under the laws of the jurisdiction in which it is
chartered or organized. The undersigned is duly qualified and in good
standing as a foreign corporation, partnership or other entity in each
jurisdiction in which the character or location of its assets or
properties (owned, leased or licensed) or the nature of its business
makes such qualification necessary, except for such jurisdictions
where the failure to so qualify would not have a material adverse
effect on the assets or properties, business, results of operations or
financial condition of the Company and its Subsidiaries taken as a
whole. The undersigned has all requisite corporate, partnership or
other power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits
(collectively, "Permits") of and from all governmental or regulatory
bodies or any other person or entity to (i) own, lease and license its
assets and properties and conduct its businesses as now being
conducted and as proposed to be conducted, (ii) to enter into, deliver
and perform its obligations under this Addendum to Subsidiary
Guarantee and the Operative Documents to the extent it is, becomes or
is deemed a party thereto. The undersigned has fulfilled and performed
in all material respects all of its obligations with respect to such
Permits, and the undersigned is not in material violation of any term
or provision of any such Permits, nor has any event occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or which could result in any material impairment
of the rights of the undersigned. No such Permit contains a materially
burdensome restriction.
(ii) Neither the execution, delivery and performance of its
obligations under this Addendum to Subsidiary Guarantee, or the
Indenture or any of the other Note Documents to the extent the
undersigned is, becomes or is deemed to be a party thereto, by the
undersigned nor the consummation of any of the transactions
contemplated hereby or thereby will give rise to a right to terminate
or accelerate the due date of any payment due under, or conflict with
or result in the breach of any term or provision of, or constitute a
default (or an event which with notice or lapse of time or both would
constitute a default) under, or require any consent or waiver under,
or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or any
Subsidiary pursuant to the terms of, any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Company
or any Subsidiary is a party or by which it or any of its properties
or businesses is bound, or any franchise, license, Permit, judgment,
decree, order, statute, rule or regulation applicable to the
undersigned or violate any provision of the charter, by-laws,
partnership agreement or other organizational document of the
Addendum to Subsidiary Guarantee
--------------------------------
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<PAGE>
undersigned, except for such consents or waivers which have already
been obtained and are in full force and effect, or require any
authorization, consent, order, license, certificate or Permit of or
from any governmental or regulatory body under any Federal, state or
local law except for those which have been obtained.
(iii) All necessary corporate, partnership or other action has
been duly and validly taken by the undersigned to authorize the
execution, delivery and performance of this Addendum to Subsidiary
Guarantee, the Indenture and each other Note Document to which it is,
will become or is or will be deemed a party in connection with the
transaction for which this Addendum to Subsidiary Guarantee is
required under the terms of the Indenture.
(iv) This Addendum to Subsidiary Guarantee constitutes the
legal, valid and binding obligation of the undersigned, enforceable
against the undersigned in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles. Each of the Indenture and the other Note Documents will
constitute the legal, valid and binding obligation of the undersigned
to the extent it is, becomes or is deemed a party thereto, enforceable
against the undersigned in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
Subsidiary Guarantor:
-----------------------------------
By:
--------------------------------
Name:
Title:
Addendum to Subsidiary Guarantee
--------------------------------
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EXHIBIT C-1
FORM OF COMPANY PLEDGE AGREEMENT
--------------------------------
COMPANY PLEDGE AGREEMENT dated as of _______________ (as may be
amended from time to time, the "Agreement") between USTrails Inc., a Nevada
---------
corporation (the "Pledgor"), and Fleet National Bank, a national banking
-------
association ("Fleet"), as Trustee, as collateral agent for the Persons that now
-----
or in the future are holders of the Notes (as defined below) issued under the
Indenture described below (the "Holders") (in such capacity, Fleet or any
-------
successor in such capacity is referred to herein as the "Collateral Agent").
----------------
R E C I T A L S
---------------
A. Pursuant to an Indenture dated as of July 17, 1996 (as
supplemented or otherwise amended from time to time, the "Indenture") by and
---------
among the Pledgor, the Subsidiary Guarantors and Fleet, as trustee thereunder
(the "Trustee"), the Pledgor will issue Senior Subordinated Pay-In-Kind Notes
due 2003 in an aggregate principal amount of up to $40,241,000, plus the
additional principal amount of Senior Subordinated Pay-In-Kind Notes issued
pursuant to Section 301 of the Indenture (the "Notes"), subject to the terms and
-----
conditions set forth in the Indenture.
B. The Pledgor is the owner of certain shares of capital stock
described on Schedule B-1 (the "Pledged Stock"), and certain Permitted
-------------
Intercompany Loans described on Schedule B-2 (together with any and all
Permitted Intercompany Notes and any other notes, security agreements, pledge
agreements, mortgages, deeds of trust, and other collateral documents from time
to time evidencing or securing such Permitted Intercompany Loans, whether or not
described in such Schedule, and any and all Liens, rights, powers, remedies and
privileges related to any such Permitted Intercompany Loan, the "Pledged Debt";
------------
the Pledged Stock and the Pledged Debt being collectively the "Pledged
-------
Collateral").
- ----------
C. It is a condition to the issuance of the Notes under the Indenture
that the Pledged Collateral and the other collateral described herein be pledged
to the Collateral Agent, for the benefit of itself, the Trustee and the Holders
(together with their respective successors and assigns, collectively, the
"Secured Parties"), as set forth herein.
- ----------------
A G R E E M E N T
-----------------
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Form of Company Pledge Agreement
--------------------------------
<PAGE>
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
-------------------------------
Section 1.1 Definitions. Unless otherwise defined in this Agreement,
-----------
terms with initial capital letters not otherwise defined herein have the
respective meanings set forth in the Indenture. In addition, the following terms
with initial capital letters have the following meanings:
"Charges" means all federal, state, county, city, municipal or other
-------
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.
"Collateral" has the meaning set forth in Section 2.1
----------
"Contractual Obligation" means, as applied to any Person, any
----------------------
provision of any security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement, or other instrument to which
that Person is a party or by which it or any of its owned properties is bound or
to which it or any of its owned properties is subject.
"Event of Default" has the meaning set forth in Section 5.1.
----------------
"Pledged Debt Consent" has the meaning set forth in Section 3.5.1.
--------------------
"Proceeds" has the meaning set forth in Section 2.1.5.
--------
"Secured Obligations" has the meaning set forth in Section 2.2.
-------------------
"Security Interest" has the meaning set forth in Section 2.1.
-----------------
"Supplemental Documentation" means financing statements, continuation
--------------------------
statements, consents, acknowledgments, assignments, schedules of Collateral and
any other instruments or documents necessary or requested by the Collateral
Agent (i) to perfect and maintain perfected the Security Interest in any
Collateral or (ii) to enable the Collateral Agent to receive all interest,
dividends and distributions from time to time paid with respect to, and all
Proceeds of, all Collateral which the Collateral Agent is entitled to receive
hereunder.
"UCC" means the Uniform Commercial Code (as amended from time to time)
---
of the State of Texas.
Section 1.2. Related Matters.
---------------
1.2.1. Terms Used in the UCC. Unless the context clearly otherwise
---------------------
requires, all terms used and not otherwise defined herein that are used or
defined in Article 9 or 8 (or any equivalent subpart) of the UCC have the same
meanings herein.
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1.2.2. Construction. Unless the context of this Agreement clearly
------------
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, and "including" is not
limiting. The words "hereof", "herein", "hereby", "hereunder" and similar terms
in this Agreement refer to this Agreement as a whole (including the Preamble,
the Recitals and all Schedules and Exhibits and not to any particular provision
of this Agreement. Article, section, subsection, exhibit, recital, preamble and
schedule references in this Agreement are to this Agreement unless otherwise
specified. References in this Agreement to any agreement, other document or law
"as amended" or "as may be amended from time to time," or to amendments of any
document or law, shall include any amendments, supplements, replacements,
renewals or other modifications.
1.2.3. Determinations. Any determination or calculation contemplated by
--------------
this Agreement that is made by the Collateral Agent shall be final and
conclusive and binding upon the Pledgor, in the absence of manifest error.
References in this Agreement to "determination" by the Collateral Agent include
good faith estimates (in the case of quantitative determinations) and good faith
beliefs (in the case of qualitative determinations). All references herein to
"discretion" of the Collateral Agent (or terms of similar import) shall mean
"absolute and sole discretion." All consents and other actions of the Collateral
Agent contemplated by this Agreement may be given, taken, withheld or not taken
in the Collateral Agent's discretion (whether or not so expressed), except as
otherwise expressly provided herein.
1.2.4. Governing Law. Except to the extent otherwise required under
-------------
Applicable Law, the UCC shall govern the attachment, perfection, priority and
enforcement of the Security Interest and all other matters to which the UCC
applies pursuant to the terms thereof. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
1.2.5. Headings. The Article and Section headings used in this Agreement
--------
are for convenience of reference only and shall not affect the construction
hereof.
1.2.6. Severability. If any provision of this Agreement or any Lien or
------------
other right hereunder shall be held to be invalid, illegal or unenforceable
under Applicable Law in any jurisdiction, such provision, Lien or other right
shall be ineffective only to the extent of such invalidity, illegality or
unenforceability, which shall not affect any other provisions herein or any
other Lien or right granted hereby or the validity, legality or enforceability
of such provision, Lien or right in any other jurisdiction.
1.2.7. Exhibits and Schedules. All of the appendices, exhibits and
----------------------
schedules attached to this Agreement shall be deemed incorporated herein by
reference.
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ARTICLE 2.
THE SECURITY INTEREST; SECURED OBLIGATIONS
------------------------------------------
Section 2.1. Security Interest. To secure the payment and performance of
-----------------
the Secured Obligations as and when due, the Pledgor hereby grants, conveys,
pledges, assigns and transfers to the Collateral Agent, for the benefit of the
Secured Parties, a security interest (the "Security Interest") in, all right,
-----------------
title, claim and interest of the Pledgor in and to the following property,
whether now owned and existing or hereafter acquired or arising, and wherever
located (such property being, collectively, the "Collateral"):
----------
2.1.1. The Pledged Collateral and all certificates and instruments
representing or evidencing the Pledged Collateral, together with, in the case of
Pledged Debt included therein, any and all interest coupons (if any) attached
thereto and any and all notes, security agreements, pledge agreements,
mortgages, deeds of trust and other security and loan documents from time to
time evidencing or securing such indebtedness;
2.1.2. Any and all securities issued by any issuer of the Pledged Stock,
or any successor thereto, that the Pledgor acquires or has the right to acquire
from time to time in any manner in substitution for or in addition to any of the
foregoing and any and all certificates and instruments representing or
evidencing such securities;
2.1.3. Any and all additions to or replacements of the foregoing;
2.1.4. Any and all rights, powers, remedies and privileges of the
Pledgor under or with respect to any of the foregoing; and
2.1.5. Any and all proceeds and products of any of the foregoing,
whether now held and existing or hereafter acquired or arising, including any
and all cash, securities, instruments and other property from time to time paid,
payable or otherwise distributed in respect of or in exchange for any or all of
the foregoing (collectively, the "Proceeds"). "Proceeds" shall include (i) any
-------- --------
options, warrants, securities or other property issued and delivered by the
issuer of or obligor on any Collateral as a stock dividend or distribution in
connection with any reclassification, increase or reduction of capital or issued
or delivered in connection with any merger or other reorganization and (ii) any
property received upon liquidation or dissolution of any issuer of or obligor on
any Collateral or upon or in respect of any distribution of capital.
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Section 2.2. Secured Obligations. The Security Interest shall secure the
-------------------
due and punctual payment and performance of any and all present and future
obligations and liabilities of the Pledgor of every type or description to any
Secured Party, or any Person entitled to indemnification under the Indenture or
any other Note Document:
2.2.1. arising under or in connection with the Indenture, whether for
principal of or premium (if any) or interest on the Notes, expenses, indemnities
or other amounts (including attorneys' fees and expenses); or
2.2.2. arising under or in connection with this Agreement or any other
Note Document, including for reimbursement of amounts permitted to be advanced
or expended by the Collateral Agent (i) to satisfy amounts required to be paid
by the Pledgor under this Agreement or any other Note Document for claims and
Charges, together with interest thereon to the extent provided or (ii) to
maintain or preserve any Collateral or to create, perfect, continue or protect
any Collateral or the Security Interest therein, or its priority;
in each case whether due or not due, direct or indirect, joint and/or several,
absolute or contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, now or hereafter existing, renewed or restructured,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, whether or not arising after the commencement of a
proceeding under the Bankruptcy Code (including post-petition interest) and
whether or not recovery of any such obligation or liability may be barred by a
statute of limitations or such obligation or liability may otherwise be
unenforceable (all obligations and liabilities described in this Section 2.2.
are collectively referred to as the "Secured Obligations").
-------------------
ARTICLE 3.
WARRANTIES AND REPRESENTATIONS
------------------------------
The Pledgor makes the following representations and warranties, all of
which shall survive until termination of this Agreement pursuant to Section 6.7.
Section 3.1. Filings, Etc. Duly executed financing statements
------------
containing a correct description of the Collateral have been delivered to the
Collateral Agent for filing in every governmental office in every state, county
and other jurisdiction in which the principal place of business or the chief
executive office of the Pledgor is located, and in each other jurisdiction in
which such action is necessary to establish a valid and perfected Lien in favor
of the Collateral Agent in all Collateral in which a Lien may be perfected by
filing, and no further or subsequent filing, recording or registration is
necessary in any such jurisdiction, except as provided under Applicable Law with
respect to the filing of continuation statements.
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Section 3.2. Locations of Offices and Names. (i) The Pledgor's chief
------------------------------
executive office and principal place of business is located at the address set
forth on Schedule 3.2., (ii) all other places of business of the Pledgor and all
other locations at which any books and records related to any Collateral are
located are set forth on Schedule 3.2., including computer programs, printouts
and other computer materials, (iii) the Pledgor's federal tax identification
number is set forth on Schedule 3.2. and (iv) there are no prior or current
trade or legal names used to identify the Pledgor in its business or in the
ownership of its properties other than those set forth on Schedule 3.2.
Section 3.3. Title to Collateral; Validity and Perfection of Security
--------------------------------------------------------
Interest; Absence of Other Liens.
- --------------------------------
3.3.1. Subject to Permitted Liens, the Pledgor has good and marketable
title to all Collateral. The Security Interest constitutes a valid and, upon
delivery of all Pledged Collateral to the Collateral Agent pursuant to Section
4.1. and filing of financing statements covering the Collateral with the
appropriate Governmental Authorities, perfected Lien in all of the Collateral
that secures payment and performance of the Secured Obligations.
3.3.2. The Collateral is free and clear of all Liens other than the
Security Interest and other Permitted Liens.
Section 3.4. Regarding the Pledged Stock. Schedule 3.4 sets forth the
---------------------------
number of authorized and the number of issued shares of each class of Capital
Stock of each issuer of Pledged Stock. The Pledged Stock includes all issued and
outstanding shares of capital stock of each issuer thereof. All outstanding
Capital Stock of each such issuer has been duly authorized, validly issued and
is fully paid and non-assessable. There are no outstanding options, warrants,
convertible securities or other rights, contingent or absolute, to acquire any
Capital Stock of any such issuer, except as set forth on Schedule 3.4.
Section 3.5. Regarding the Pledged Debt.
--------------------------
3.5.1. The Pledgor has delivered to the Collateral Agent a Consent and
Acknowledgment in substantially the form of Exhibit 3.5., duly executed by each
obligor on Pledged Debt (each, a "Pledged Debt Consent"). Each Pledged Debt
--------------------
Consent is in full force and effect and constitutes a legal, valid and binding
obligation of the obligor on the Pledged Debt subject thereto.
3.5.2. Except as disclosed on Schedule 3.5, (i) the Pledged Debt
constitutes the legal, valid and binding obligations of the respective obligors
thereunder in the amount thereof set forth on Schedule B-2, (ii) no Pledged Debt
is in default and (iii) there are no setoffs or counterclaims or disputes
existing or asserted with respect to any Pledged Debt.
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ARTICLE 4.
COVENANTS AND AGREEMENTS
------------------------
Section 4.1. Delivery of Pledged Collateral, Etc.
-----------------------------------
4.1.1 On the date hereof, the Pledgor is delivering to the Collateral
Agent certificates or instruments in respect of all Pledged Collateral that
exists on such date, the physical possession of which is necessary in order for
the Security Interest to be perfected or delivery of which was requested by the
Collateral Agent to assure the priority of the Security Interest therein. The
Pledgor shall deliver to the Collateral Agent promptly after acquisition thereof
all Pledged Collateral acquired after the date hereof. All Pledged Collateral
shall be in suitable form for transfer by delivery, or be duly endorsed to the
order of the Collateral Agent or accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Collateral Agent. Subject only to the revocable right specified in Section 4.7.,
the Collateral Agent shall have the right, at any time in its discretion and
without notice to any Pledgor, to transfer to or to register in the name of the
Collateral Agent or its nominee any or all the Collateral. It is expressly
acknowledged that such registration of the Collateral in the name of the
Collateral Agent or its nominee is solely for the purpose of assuring that the
Collateral Agent receives all cash and stock dividends and other property from
time to time distributed with respect to the Collateral and shall not be deemed
to constitute the Collateral Agent the owner (beneficial or otherwise) of any
Collateral for any other purpose, except to the extent contemplated by Section
4.7. or Article 5. Without limitation, the Collateral Agent shall not be deemed
to "control" the Collateral or the issuer thereof for purposes of any Applicable
Laws (including securities, environmental, tax, bankruptcy or other laws but
excluding the UCC) as a result of the Collateral being registered in the name of
the Collateral Agent. In addition, the Collateral Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing
Pledged Collateral for certificates or instruments of smaller or larger
denominations.
4.1.2. Without limiting Section 4.1.1., but subject to Section 4.7.1.2.,
if the Pledgor receives or becomes entitled to receive any securities issued by
any issuer of Pledged Stock, or any successor thereto, in any manner in
substitution for or in addition to the Pledged Stock, or if the Pledgor shall
become entitled to receive or shall receive any securities or other property in
addition to, in substitution of, as a conversion of, or in exchange for, any of
the Pledged Stock or any other Collateral, or shall receive or become entitled
to receive any interest or other payment in respect of any Pledged Debt, the
Pledgor shall receive the same as the agent for the Collateral Agent, and shall
hold the same in trust for and deliver the same promptly to the Collateral Agent
in the exact form in which received, together with appropriate instruments of
transfer or assignments in blank, to be held by the Collateral Agent as
Collateral hereunder.
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Section 4.2. Further Assurances. The Pledgor shall, at its own expense,
------------------
perform such acts as may be necessary, or that the Collateral Agent may request
at any time, to assure the attachment, perfection and priority of the Security
Interest, to exercise the rights and remedies of the Collateral Agent hereunder
or to carry out the intent of this Agreement. Without limitation, the Pledgor
shall execute and deliver (or cause any third party to execute and deliver) to
the Collateral Agent, at any time and from time to time, all Supplemental
Documentation, in form and substance acceptable to the Collateral Agent.
Section 4.3. Power of Attorney. The Pledgor hereby irrevocably appoints
-----------------
(the appointment being irrevocable because it is coupled with an interest) the
Collateral Agent and its employees and agents as the Pledgor's true and lawful
attorneys-in-fact, with full power of substitution, to do all things (i)
required to be done by the Pledgor under this Agreement or the other Note
Documents and (ii) that the Collateral Agent may reasonably deem necessary or
advisable to assure the attachment, perfection and first priority of the
Security Interest or otherwise to exercise the rights and remedies of the
Collateral Agent hereunder or carry out the intent of this Agreement (including
by voting any Collateral as contemplated by Section 4.7.), in each case
irrespective of whether a Default or Event of Default then exists (except as
otherwise provided herein) and at the Pledgor's expense. Without limitation, the
Collateral Agent and its officers and agents shall be entitled to do all of the
following, as fully as the Pledgor might:
4.3.1. to sign the name of the Pledgor on any Supplemental Documentation
and to deliver and file such Supplemental Documentation to or with such Persons
as the Collateral Agent, in its discretion, may elect; and
4.3.2. to affix, by facsimile signature or otherwise, the general or
special endorsement of the Pledgor, in such manner as the Collateral Agent shall
deem advisable, to any Pledged Collateral that has been delivered to or obtained
by the Collateral Agent without appropriate endorsement or assignment.
In addition, during the existence of an Event of Default, the
Collateral Agent or its employees or agents may, without notice to the Pledgor
and at such time or times as the Collateral Agent in its discretion may
determine, in the Pledgor's or in the Collateral Agent's name collect any and
all amounts due to the Pledgor from obligors with respect to any Pledged Debt by
legal proceedings or otherwise. The Collateral Agent shall be under no
obligation whatsoever to take any of the foregoing actions. Absent bad faith or
willful misconduct, the Collateral Agent and its shareholders, directors,
officers, employees and agents shall have no liability or responsibility for any
act taken with respect thereto. A copy of this Agreement and, if applicable, a
statement by the Collateral Agent that an Event of Default exists shall be
conclusive evidence of the Collateral Agent's right to act under this Section
4.3. as against all third parties.
Section 4.4. Changes of Locations of Collateral, Offices, Name or
----------------------------------------------------
Structure. The Pledgor shall give the Collateral Agent 15 Business Days' notice
- ---------
of the
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adoption of a trade name or change in its name, chief executive office,
principal place of business, identity or corporate structure.
Section 4.5. Payment of Charges and Claims. The Pledgor shall pay (i)
-----------------------------
all Charges imposed upon any Collateral and (ii) all claims that have become due
and payable and, under Applicable Law, have or may become Liens upon any
Collateral, in each case before any penalty shall be incurred with respect
thereto. If the Pledgor fails to pay or obtain the discharge of any Charge,
claim or Lien required to be paid or discharged under this Section 4.5. and
asserted against any Collateral, the Pledgor shall so notify the Collateral
Agent and, regardless of whether such notice is given, the Collateral Agent may,
at any time and from time to time, in its discretion and without waiving or
releasing any obligation of the Pledgor under this Agreement or the other Note
Documents or waiving any Default or Event of Default, make such payment, obtain
such discharge or take such other action with respect thereto as the Collateral
Agent deems advisable.
Section 4.6. Duty of Care; Indemnification.
-----------------------------
4.6.1. The Collateral Agent shall not have any duty of care with respect
to the Collateral, other than an obligation to exercise reasonable care with
respect to Collateral in its possession; provided that (i) the Collateral Agent
--------
shall be deemed to have exercised reasonable care if Collateral in its
possession is accorded treatment substantially comparable to that which the
Collateral Agent accords its own property and (ii) the Collateral Agent shall
have no obligation to take any actions to preserve rights against other parties
with respect to any Collateral. Without limitation, the Collateral Agent shall
(A) bear no risk or expense with respect to any Collateral and (B) have no duty
with respect to calls, conversions, presentments, maturities, notices or other
matters relating to Collateral, or to maximize interest or other returns with
respect thereto.
4.6.2. The Pledgor hereby agrees to indemnify and hold harmless the
Collateral Agent and its directors, officers, employees and agents against any
and all claims, actions, liabilities, costs and expenses of any kind or nature
whatsoever (including fees and disbursements of counsel) that may be imposed on,
incurred by, or asserted against any of them, in any way relating to or arising
out of this Agreement or any action taken or omitted by them hereunder, except
to the extent a court holds in a final and nonappealable judgment that they
resulted from the gross negligence or willful misconduct of such Persons against
and from all such obligations and liabilities.
4.6.3. The Collateral Agent may at any time deliver or redeliver the
Collateral or any part thereof to the Pledgor and the receipt of any of the same
by the Pledgor shall be complete and full acquittance for the Collateral so
delivered, and the Collateral Agent thereafter shall be discharged from any
liability or responsibility therefor.
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Section 4.7. Voting and Other Consensual Rights; Distributions.
-------------------------------------------------
4.7.1. So long as no Default shall exist:
4.7.1.1. The Pledgor shall be entitled to exercise any and all
voting rights pertaining to any Collateral (other than the Pledged Debt), for
any purpose not inconsistent with the terms of this Agreement and the other Note
Documents; provided, however, that the Pledgor shall not exercise any such right
-------- -------
if it would result in a Default or an Event of Default or have a material
adverse effect on any one or more of the following: (i) the business, assets,
results of operations or financial condition of the Pledgor and its Subsidiaries
taken as a whole, (ii) the ability of the Pledgor to perform its obligations
hereunder the Notes, the Indenture or under any other Note Document to which it
is a party or (iii) the Collateral or the Security Interest.
4.7.1.2. Except as otherwise provided herein, the Pledgor shall
be entitled to receive and retain and use free of the Security Interest any and
all cash and other property paid or otherwise distributed in respect of the
Collateral; provided, however, that any and all (i) dividends and other
-------- -------
distributions paid or payable other than in cash or in the form of Pledged
Collateral, (ii) cash paid upon or in respect of any of the Pledged Collateral
upon or in respect of the liquidation or dissolution of any issuer thereof or
upon or in respect of any distribution of capital or redemption or exchange of
any Pledged Collateral and (iii) cash paid with respect to the principal of, or
in redemption or exchange of, any Pledged Debt, shall be delivered to the
Collateral Agent, in the exact form received, to be held as Collateral
hereunder.
4.7.2. So long as a Default shall exist, at the sole option of the
Collateral Agent, any or all rights of the Pledgor to exercise voting and other
consensual rights and to receive cash and other property distributed in respect
of Collateral as permitted by Sections 4.7.1.1. and 4.7.1.2. above, shall cease,
and the Collateral Agent, if and when it notifies the Pledgor of the exercise of
such option, shall have the sole right to exercise any or all such voting rights
and receive and to hold as Collateral any or all such cash and other property.
4.7.3. For so long as a Default shall exist, the Collateral Agent, to
the exclusion of the Pledgor, shall be entitled to exercise all rights, powers,
remedies and privileges of the Pledgor under the respective Permitted
Intercompany Notes relating to the Pledged Debt and other Permitted Intercompany
Loan Collateral (whether exercisable at any time or only during the existence of
a Default or Event of Default as defined therein), and all performance of the
obligor under the Permitted Intercompany Notes and other Permitted Intercompany
Loan Collateral shall be rendered only to the Collateral Agent, as if the
Collateral Agent were the beneficiary thereunder; provided that the rights,
--------
powers, remedies and privileges of the Collateral Agent under the Permitted
Intercompany Loan Collateral shall be no greater than those of the Pledgor
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thereunder. Without limitation, such rights shall include all rights of
reimbursement and indemnity.
4.7.4. For so long as a Default shall exist:
4.7.4.1. The Pledgor shall promptly, upon becoming aware thereof,
notify the Collateral Agent of the existence of any material default or event of
default under or with respect to any Pledged Debt.
4.7.4.2. The Pledgor shall not, without the prior written consent
of the Collateral Agent (which consent may be withheld in the Collateral Agent's
discretion):
4.7.4.2.1. amend (including by way of waiver) any
provision of any of the Permitted Intercompany Loan Collateral, or
4.7.4.2.2. exercise any rights, powers, remedies and
privileges of the Pledgor under the respective Permitted Intercompany Loan
Collateral; provided that the Pledgor shall file a proof of claim in respect of
--------
the Pledged Debt in any proceeding under the Bankruptcy Code or any similar
proceeding as and when required therein.
4.7.5. Notwithstanding Sections 4.7.3. and 4.7.4., while no
Default exists, the Pledgor shall be entitled to receive and retain and use free
of the Security Interest any and all interest and principal from time to time
paid or payable in cash with respect to the Permitted Intercompany Notes
evidencing any Pledged Debt; provided that this Section 4.7.5. (i) shall not
--------
apply to any other amounts required to be paid under the Permitted Intercompany
Notes and (ii) shall not apply to any interest or principal paid or payable
while a Default exists, all of which shall be paid directly to the Collateral
Agent, to be held as Collateral hereunder.
4.7.6. All cash and other property required to be delivered to
the Collateral Agent hereunder shall, if received by the Pledgor, be received in
trust for the benefit of the Collateral Agent, be segregated from the other
property of the Pledgor, and promptly be delivered to the Collateral Agent in
the same form as so received (with any appropriate endorsements or assignments).
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ARTICLE 5.
EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
-------------------------------------------------
Section 5.1. Event of Default. The occurrence of one or more "Events of
----------------
Default" (as defined in the Indenture) shall constitute an "Event of Default"
hereunder.
Section 5.2. Remedies. If there occurs an Event of Default, then,
--------
whether or not all the Secured Obligations shall have become immediately due and
payable:
5.2.1. In addition to all its other rights, powers and remedies under
this Agreement and Applicable Law, the Collateral Agent shall have, and may
exercise, any and all of the rights, powers and remedies of a secured party
under the UCC, all of which rights, powers and remedies shall be cumulative and
not exclusive, to the extent permitted by Applicable Law.
5.2.2. The Collateral Agent shall have the right, all at the Collateral
Agent's sole option and as the Collateral Agent in its discretion may deem
necessary or advisable, to do any or all of the following:
5.2.2.1. to foreclose the Security Interest by any available
judicial procedure or without judicial process;
5.2.2.2. to notify obligors on the Collateral that the
Collateral has been assigned to the Collateral Agent and that all payments
thereon are to be made directly and exclusively to or as specified by the
Collateral Agent;
5.2.2.3. to collect by legal proceedings or otherwise (including
by foreclosure of any Lien securing Pledged Debt) all dividends, distributions,
interest, principal or other sums now or hereafter payable upon or on account of
the Collateral;
5.2.2.4. to enter into any extension or reorganization agreement
or any other agreement relating to or affecting the Collateral and, in
connection therewith, deposit or surrender control of any Collateral or accept
other property in exchange therefor;
5.2.2.5. to settle, compromise or release, on terms acceptable
to the Collateral Agent, in whole or in part, any amounts owing on the
Collateral or any disputes with respect thereto;
5.2.2.6. to receive, open and dispose of all mail addressed to
the Pledgor and notify postal authorities to change the address for delivery
thereof to such address as the Collateral Agent may designate, provided that the
-------- ----
Collateral Agent agrees that it will promptly deliver over to the Pledgor any
such opened mail as does not relate to the Collateral; and
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5.2.2.7. to exercise any and all other rights, powers,
privileges and remedies of an owner of the Collateral, including rights of
conversion, exchange or subscription or other rights or upon the exercise by the
Pledgor or the Collateral Agent of any right, power or privilege pertaining to
the Collateral, the right to deposit and deliver any and all of the Collateral
to any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Collateral Agent may determine to
be appropriate, all without liability except to account for property actually
received by it, but the Collateral Agent shall have no duty to the Pledgor to
exercise any such right, power or privilege and shall not be responsible for any
failure so to do or delay in so doing.
5.2.3. The Collateral Agent shall have the right to sell or otherwise
dispose of all or any Collateral at public or private sale or sales, with such
notice as may be required by Section 5.4., in lots or in bulk, at any exchange,
over the counter or at any of the Collateral Agent's offices or elsewhere, for
cash or on credit, with or without representations or warranties, all as the
Collateral Agent, in its discretion, may deem advisable. The Collateral need not
be present at any such sales. If sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be retained by
the Collateral Agent until the sale price is paid by the purchaser thereof, but
the Collateral Agent shall not incur any liability in case any such purchaser
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. The Collateral
Agent shall not be obligated to make any sale of the Collateral regardless of
notice of sale having been given. The Collateral Agent may purchase all or any
part of the Collateral at public or, if permitted by Applicable Law, private
sale, and in lieu of actual payment of the purchase price, the Collateral Agent
may apply against such purchase price any amount of the Secured Obligations. The
Pledgor agrees that any sale of Collateral conducted by the Collateral Agent in
accordance with the foregoing provisions of this Section shall be deemed to be a
commercially reasonable sale under Section 9-504 of the UCC.
5.2.4. The Collateral Agent shall not be required to register or qualify
any of the Collateral that constitutes securities under applicable state or
federal securities laws in connection with any sale or other disposition thereof
if such disposition is effected in a manner that complies with all applicable
federal and state securities laws. The Collateral Agent shall be authorized,
with respect to any disposition that is not so registered or qualified, to
restrict (if it deems it advisable to do so) the prospective bidders or
purchasers to persons who will represent and agree that they are "accredited
investors" or "qualified institutional buyers" under Applicable Law and
purchasing the Collateral for their own account for investment and not with a
view to the distribution or sale thereof. If any such Collateral is sold at
private sale, the Pledgor agrees that if such Collateral is sold in a manner
that the Collateral Agent in good faith believes to be reasonable under the
circumstances then existing, then (i) the sale shall be deemed to be
commercially reasonable in all respects, (ii) the Pledgor shall not be entitled
to a credit against the Secured Obligations in an amount in excess of the
purchase price, and (iii) the Collateral Agent shall not incur any liability or
Form of Company Pledge Agreement
--------------------------------
13
<PAGE>
responsibility to the Pledgor in connection therewith, notwithstanding the
possibility that a substantially higher price might have been realized at a
public sale. The Pledgor recognizes that a ready market may not exist for such
Collateral if it is not regularly traded on a recognized securities exchange,
and that a sale by the Collateral Agent of any such Collateral for an amount
substantially less than the price that might have been achieved had the
Collateral been so traded may be commercially reasonable in view of the
difficulties that may be encountered in attempting to sell Collateral that is
privately traded.
Section 5.3. Application of Proceeds.
-----------------------
5.3.1. Any cash proceeds received by the Collateral Agent in respect of
any sale of, collection from, or other realization upon, all or any part of the
Collateral following the occurrence of an Event of Default may be held by the
Collateral Agent as Collateral and/or then or at any time thereafter applied as
follows:
5.3.1.1. first, to the Collateral Agent to pay all advances,
charges, costs and expenses payable to the Collateral Agent pursuant to Section
6.1.; and
5.3.1.2. second, to pay the Secured Obligations in the order set
forth in the Indenture.
5.3.2. The Pledgor and any other Person then obligated therefor shall
pay to the Collateral Agent on demand any deficiency with regard to the Secured
Obligations that may remain after such sale, collection or realization of, from
or upon the Collateral.
5.3.3. Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Collateral Agent. The application of proceeds by the Collateral Agent shall be
without prejudice to the Collateral Agent' rights as against the Pledgor or
other Persons with respect to any Secured Obligations that may then be or remain
unpaid.
5.3.4. If at any time after an Event of Default the Pledgor receives any
collections upon or other Proceeds of any Collateral, whether in the form of
cash, notes or otherwise, such Proceeds shall be received in trust for the
Collateral Agent and the Pledgor shall keep all such Proceeds separate and apart
from all other funds and property so as to be capable of identification as the
property of the Collateral Agent and promptly deliver such Proceeds to the
Collateral Agent in the identical form received.
Section 5.4. Notice of Sale. Unless the Collateral is perishable or
--------------
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Collateral Agent will send or otherwise make available to
the Pledgor reasonable notice of the time and place of any public sale or of the
time on or after which any private sale of any Collateral is to be made. The
Pledgor agrees that any notice
Form of Company Pledge Agreement
--------------------------------
14
<PAGE>
required to be given by the Collateral Agent of a sale or other disposition of
Collateral, or any other intended action by the Collateral Agent, that is
received in accordance with the provisions set forth in Section 6.4. ten days
prior to such proposed action shall constitute commercially reasonable and fair
notice thereof to the Pledgor. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor and such sale may, without further notice, be made at the time and
place to which it was so adjourned. The Pledgor hereby waives any right to
receive notice of any public or private sale of any Collateral except as
expressly provided for in this Section 5.4.
ARTICLE 6.
GENERAL
-------
Section 6.1. Collateral Agent's Expenses, Including Attorneys' Fees.
------------------------------------------------------
Regardless of the occurrence of a Default or Event of Default, the Pledgor
agrees to pay to the Collateral Agent any and all advances, charges, costs and
expenses, including the reasonable fees and expenses of counsel and any experts
or agents, that the Collateral Agent may reasonably incur in connection with (i)
the administration of this Agreement, including any amendment hereto, or any
workout or restructuring, (ii) the creation, perfection or continuation of the
Security Interest or protection of its priority or the Collateral, including the
discharging of any prior or junior Lien or adverse claim against the Collateral
or any part thereof that is not permitted hereby or by the Indenture, (iii) the
custody, preservation or sale of, collection from, or other realization upon,
any of the Collateral, (iv) the exercise or enforcement of any of the rights,
powers or remedies of the Collateral Agent under this Agreement or under
Applicable Law (including attorneys' fees and expenses incurred by the
Collateral Agent in the collection of Collateral deposited with the Collateral
Agent and amounts incurred in connection with the operation, maintenance or
foreclosure of the Security Interest) or any bankruptcy proceeding or (v) the
failure by the Pledgor to perform or observe any of the provisions hereof. All
such amounts and all other amounts payable hereunder shall be payable on demand,
together with interest at the Default Rate.
Section 6.2. Amendments and Other Modifications. No amendment of any
----------------------------------
provision of this Agreement (including a waiver thereof or consent relating
thereto) shall be effective unless the same shall be in writing and signed by
the Collateral Agent. Any waiver or consent relating to any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Pledgor in any case shall
entitle the Pledgor to any other or further notice or demand in similar or other
circumstances.
Section 6.3. Cumulative Remedies; Failure or Delay. The rights and
-------------------------------------
remedies provided for under this Agreement are cumulative and are not exclusive
of any rights and remedies that may be available to the Collateral Agent under
Applicable Law, the other Note Documents or otherwise. No failure or delay on
the part of the Collateral Agent in the exercise of any power, right or remedy
under this Agreement shall impair
Form of Company Pledge Agreement
--------------------------------
15
<PAGE>
such power, right or remedy or shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude other or
further exercise of such or any other power, right or remedy.
Section 6.4. Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid) or
by prepaid telex, telecopy or telegram, and shall be deemed given when received
by the intended recipient thereof. Unless otherwise specified in a notice given
in accordance with the foregoing provisions of this Section 6.4., notices and
other communications shall be given to the parties hereto at their respective
addresses (or to their respective telex or telecopier numbers) set forth in
Schedule 105 of the Indenture.
Section 6.5. Successors and Assigns. This Agreement shall be binding
----------------------
upon and, subject to the next sentence, inure to the benefit of the Pledgor and
the Collateral Agent and their respective successors and assigns. The Pledgor
shall not assign or transfer any of its rights or obligations hereunder without
the prior written consent of the Collateral Agent. The benefits of this
Agreement shall pass automatically with any assignment of the Secured
Obligations (or any portion thereof), to the extent of such assignment.
Section 6.6. Payments Set Aside. Notwithstanding anything to the
------------------
contrary herein contained, this Agreement, the Secured Obligations and the
Security Interest shall continue to be effective or be reinstated, as the case
may be, if at any time any payment, or any part thereof, of any or all of the
Secured Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned by the Collateral
Agent in connection with any bankruptcy, reorganization or similar proceeding
involving the Pledgor, any other party liable with respect to the Secured
Obligations or otherwise, if the proceeds of any Collateral are required to be
returned by the Collateral Agent under any such circumstances or if the
Collateral Agent reasonably elects to return any such payment or proceeds or any
part thereof in its discretion, all as though such payment had not been made or
such proceeds not been received. Without limiting the generality of the
foregoing, if prior to any such rescission, invalidation, declaration,
restoration or return, this Agreement shall have been canceled or surrendered or
the Security Interest or any Collateral shall have been released or terminated
in connection with such cancellation or surrender, this Agreement and the
Security Interest and such Collateral shall be reinstated in full force and
effect, and such prior cancellation or surrender shall not diminish, discharge
or otherwise affect the obligations of the Pledgor in respect of the amount of
the affected payment or application of proceeds, the Security Interest or such
Collateral.
Section 6.7. Continuing Security Interest; Termination. Except as
-----------------------------------------
otherwise provided in the Indenture with respect to the release of Collateral
under certain circumstances, this Agreement shall create a continuing security
interest in the Collateral and, except as provided below, the Security Interest
and all agreements, representations and warranties made herein shall survive
until, and this Agreement shall terminate only
Form of Company Pledge Agreement
--------------------------------
16
<PAGE>
upon, the indefeasible payment in full of the Secured Obligations. Any
investigation at any time made by or on behalf of the Collateral Agent shall not
diminish the right of the Collateral Agent to rely on any such agreements,
representations or warranties herein.
Notwithstanding anything in this Agreement or Applicable Law to the
contrary, the agreements of the Pledgor set forth in Sections 4.6.2. and 6.1.
shall survive the payment of all other Secured Obligations and the termination
of this Agreement.
Section 6.8. Waiver and Estoppel. Except as otherwise provided in this
-------------------
Agreement, the Pledgor hereby waives: (i) presentment, protest, notice of
dishonor, release, compromise, settlement, extension or renewal and any other
notice of or with respect to the Secured Obligations and hereby ratifies and
confirms whatever the Collateral Agent may do in this regard; (ii) notice prior
to taking possession or control of any Collateral or any bond or security that
might be required by any court prior to allowing the Collateral Agent to
exercise any of their rights, powers or remedies; (iii) the benefit of all
valuation, appraisement, redemption and exemption laws; (iv) any rights to
require marshaling of the Collateral upon any sale or otherwise to direct the
order in which the Collateral shall be sold; (v) any set-off; and (vi) any
rights to require the Collateral Agent to proceed against any Person, proceed
against or exhaust any Collateral or any other security interests or guaranties
or pursue any other remedy in the Collateral Agent's power, or to pursue any of
such rights in any particular order or manner, and any defenses arising by
reason of any disability or defense of any Person.
Section 6.9. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Form of Company Pledge Agreement
--------------------------------
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<PAGE>
Section 6.10. Complete Agreement. This Agreement, together with the
------------------
exhibits and schedules hereto and the other Note Documents, is intended by the
parties as a final expression of their agreement regarding the subject matter
hereof and as a complete and exclusive statement of the terms and conditions of
such agreement.
Section 6.11. Limitation of Liability. No claim shall be made by the
-----------------------
Pledgor against the Collateral Agent or the Affiliates, directors, officers,
employees or agents of the Collateral Agent for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or under any other theory of liability arising out of or related to the
transactions contemplated by this Agreement and the other Note Documents, or any
act, omission or event occurring in connection therewith; and the Pledgor hereby
waives, releases and agrees not to sue upon any claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor.
Section 6.12. Conflicting Agreements; Collateral Specifically Covered
-------------------------------------------------------
by Other Agreements. To the extent the terms and provisions of this Agreement
- -------------------
conflict with the terms and provisions of the Company Security Agreement or any
other Collateral Document, the terms and provisions of this Agreement shall
govern as they relate to the Collateral.
Section 6.13. Subsidiary Pledge Agreement. The Collateral Agent hereby
---------------------------
acknowledges that it is holding certain collateral pledged pursuant to the
Subsidiary Pledge Agreement from time to time delivered to it, among other
things, for the Pledgor, as collateral agent. The Pledgor hereby appoints the
Collateral Agent as its collateral agent for the foregoing purpose and agrees
that, in so holding such collateral, the Collateral Agent shall be entitled to
the immunities, indemnities and protections set forth in Section 4.6 of the
Subsidiary Pledge Agreement and in the Indenture, mutatis mutandis.
Form of Company Pledge Agreement
--------------------------------
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first set forth above.
Pledgor:
-------
USTRAILS INC., a Nevada corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Collateral Agent:
----------------
FLEET NATIONAL BANK, a national banking
association, as Trustee, as Collateral Agent
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Form of Company Pledge Agreement
--------------------------------
19
<PAGE>
SCHEDULE B-1
PLEDGED STOCK
-------------
Form of Company Pledge Agreement - Schedule B-1
-----------------------------------------------
1
<PAGE>
SCHEDULE B-2
PLEDGED DEBT
------------
Permitted Intercompany Loans
Form of Company Pledge Agreement - Schedule B-2
-----------------------------------------------
1
<PAGE>
SCHEDULE 3.2.
SCHEDULE OF LOCATIONS AND NAMES
-------------------------------
Pledgor's Chief Executive Office and Principal Place of Business
All Other Places of Business of the Pledgor and All Other Locations at
Which any Books and Records Related to the Collateral are Located
Pledgor's Federal Tax Identification Number
Prior or Current Trade or Legal Names
Form of Company Pledge Agreement - Schedule 3.2.
-----------------------------------------------
1
<PAGE>
SCHEDULE 3.4.
CAPITALIZATION OF ISSUERS OF PLEDGED STOCK
------------------------------------------
Form of Company Pledge Agreement - Schedule 3.4.
------------------------------------------------
1
<PAGE>
SCHEDULE 3.5.
DEFAULTS, SET-OFFS, ETC. WITH RESPECT TO PLEDGED DEBT
-----------------------------------------------------
Form of Company Pledge Agreement - Schedule 3.5.
------------------------------------------------
1
<PAGE>
EXHIBIT 3.5.
CONSENT AND ACKNOWLEDGMENT
---------------------------
(PLEDGED DEBT)
--------------
To: FLEET NATIONAL BANK ("Fleet"), as Trustee, as Collateral Agent under that
-----
certain Company Pledge Agreement referred to in the Indenture dated as of
July 17, 1996, relating to the Notes referred to below (as in effect on the
date hereof, the "Indenture")
---------
1. Pursuant to a COMPANY PLEDGE AGREEMENT dated as of July ___, 1996 (as
amended from time to time, the "Company Pledge Agreement") by and between
------------------------
USTrails Inc., a Nevada corporation (the "Pledgor"), and Fleet, as trustee,
-------
collateral agent and representative for the Persons that now or in the future
are holders of the Notes (as defined below) issued under the Indenture described
below (the "Holders") (in such capacity, Fleet or any successor in such capacity
-------
is referred to herein as the "Collateral Agent"), the Pledgor has granted a
----------------
security interest in, among other things, certain indebtedness owed by the
undersigned to the Pledgor (together with all notes, credit agreements, security
agreements, pledge agreements, mortgages, deeds of trust and other security and
loan documents evidencing or securing such indebtedness and all Liens, rights,
remedies, powers, remedies and privileges of the Pledgor relating thereto, the
"Permitted Intercompany Loan Collateral").
- ---------------------------------------
The undersigned hereby:
1. Consents to the security interest of the Collateral Agent in the
Permitted Intercompany Loan Collateral.
2. Agrees that upon receipt by the undersigned of notice from the
Collateral Agent that a Default exists:
(a) the undersigned shall pay and deliver all cash or other property
from time to time payable or otherwise distributable in respect of the Permitted
Intercompany Loan Collateral directly to the Collateral Agent, without any
defense, set-off, recoupment or deduction of any kind; and
(b) the undersigned will deliver directly to the Collateral Agent any
notes and other instruments executed after the date hereof from time to time
evidencing any indebtedness of the undersigned to the Pledgor.
3. Confirms that the Permitted Intercompany Loan Collateral is in full
force and effect on the date hereof and agrees that the Permitted Intercompany
Loan Collateral will not be amended or otherwise modified without the prior
written consent of the Collateral Agent.
Form of Company Pledge Agreement - Consent and Acknowledgment
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<PAGE>
4. Expressly waives as against the Collateral Agent any setoff or other
defense against payment and performance by the undersigned under the Permitted
Intercompany Loan Collateral and any claim against the Collateral Agent, whether
arising under the Permitted Intercompany Loan Collateral or otherwise.
5. Each of the undersigned hereby acknowledges that, pursuant to the
terms of the Company Pledge Agreement:
(a) For so long as a Default shall exist, the Collateral Agent, to the
exclusion of the Pledgor, shall be entitled to exercise all rights, powers,
remedies and privileges of the Pledgor under the Permitted Intercompany Loan
Collateral (whether exercisable at any time or only during the existence of a
Default or Event of Default as defined therein), and all performance of the
Obligor thereunder shall be rendered only to the Collateral Agent, as if the
Collateral Agent were the lender, secured party or beneficiary thereunder,
provided that the rights, powers, remedies and privileges of the Collateral
- --------
Agent under the Permitted Intercompany Loan Collateral shall be no greater than
those of the Pledgor thereunder. Without limitation, such rights shall include
all rights of reimbursement and indemnity.
(b) For so long as a Default shall exist:
(i) The Pledgor shall promptly, upon becoming aware thereof,
notify the Collateral Agent of the existence of any material default or event of
default under or with respect to any Pledged Debt.
(ii) The Pledgor shall not, without the prior written consent of
the Collateral Agent (which consent may be withheld in the Collateral Agent's
discretion):
(A) amend, supplement or otherwise modify (including by
way of waiver) any provision of any of the Permitted Intercompany Loan
Collateral, or
(B) exercise any rights, powers, remedies and privileges
of the Pledgor under the Permitted Intercompany Loan Collateral; provided that
--------
the Pledgor shall file a proof of claim in respect of the Pledged Debt in any
proceeding under the Bankruptcy Code or any similar proceeding as and when
required therein.
(c) Notwithstanding subsections (a) and (b), while no Default exists,
the Pledgor shall be entitled to receive and retain (but not accelerate, make
demand for or enforce) and use free of the Security Interest any and all
interest and principal from time to time paid or payable in cash with respect to
the Collateral; provided that this subsection (c) (i) shall not apply to any
other amounts required to be paid under the Permitted Intercompany Loan
Collateral and (ii) shall not apply to any interest or principal paid or payable
while a Default exists, all of which shall be paid directly to the Collateral
Agent, to be held as Permitted Intercompany Loan Collateral hereunder.
Form of Company Pledge Agreement - Consent and Acknowledgment
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2
<PAGE>
6. Each of the undersigned represents and warrants that it is familiar
with the provisions of the Company Pledge Agreement, consents thereto and agrees
that (i) any action taken by the Pledgor in violation of the above provision
shall be without any force or effect (except that the Collateral Agent shall be
entitled to receive and retain as Permitted Intercompany Loan Collateral any and
all proceeds of any such actions) and (ii) subject to Section 5(c), the
Collateral Agent shall be conclusively deemed entitled to take any action the
Pledgor is entitled to take under the Permitted Intercompany Loan Collateral.
All terms with initial capital letters not otherwise defined herein have
the meanings set forth in the Company Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Acknowledgment as of December 19, 1995.
____________________________
Form of Company Pledge Agreement - Consent and Acknowledgment
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3
<PAGE>
EXHIBIT C-2
FORM OF SUBSIDIARY PLEDGE AGREEMENT
-----------------------------------
SUBSIDIARY PLEDGE AGREEMENT dated as of _______________ (as may be
amended from time to time, the "Agreement") among the corporations named as
---------
"Pledgors" on the signature pages hereof (each, individually, a "Pledgor" and
-------
all, collectively, the "Pledgors"), USTrails Inc., a Nevada corporation
--------
(including its successors and assigns, "Company"), and Fleet National Bank, a
-------
national banking association ("Fleet"), as Trustee, as collateral agent for (i)
-----
the Trustee (as defined below) and the Persons that now or in the future are
holders of the Notes (as defined below) issued under the Indenture described
below (the "Holders") and (ii) Company (in such capacities, and in its capacity
-------
as transferee of Company's interests hereunder pursuant to the terms of the
Company Pledge Agreement (as defined below), Fleet or any successor in such
capacity is referred to herein as the "Collateral Agent").
----------------
R E C I T A L S
- - - - - - - -
A. The Pledgors are Wholly Owned Subsidiaries of Company and the
owners of certain shares of capital stock described on Schedule A-1 (the
"Pledged Stock" or the "Specified Collateral").
- -------------- --------------------
B. Pursuant to the Indenture dated as of July 17, 1996 (as may be
amended from time to time, the "Indenture"), by and among Company, the
---------
Subsidiary Guarantors and Fleet, as trustee thereunder, (the "Trustee"), Company
-------
will issue Senior Subordinated Pay-In-Kind Notes due 2003 in an aggregate
principal amount of up to $40,241,000, plus the additional principal amount of
Senior Subordinated Pay-In-Kind Notes issued pursuant to Section 301 of the
Indenture (the "Notes").
-----
C. Pursuant to a guarantee included in the Indenture (as may be
amended from time to time, the "Subsidiary Guarantee"), the Subsidiary
--------------------
Guarantors have Guaranteed the obligations of Company under the Notes, the
Indenture and the other Note Documents to which Company is a party.
D. Company may make from time to time in the future Permitted
Intercompany Loans to its Subsidiaries. To evidence the Permitted Intercompany
Loans, if any, each subsidiary will execute and deliver upon receipt of the loan
proceeds to Company a promissory note.
E. Pursuant to the Indenture, the Permitted Intercompany Loans and
the Subsidiary Guarantee are required to be secured by, among other things, this
Agreement.
F. Pursuant to a Company Pledge Agreement dated as of the date hereof
(as may be amended from time to time, the "Company Pledge Agreement") between
------------------------
Company and the Collateral Agent, Company has pledged all Permitted
Form of Subsidiary Pledge Agreement
-----------------------------------
<PAGE>
Intercompany Loans and the related Permitted Intercompany Notes and collateral
hereunder as collateral for Company's obligations under the Notes, the Indenture
and the other Note Documents to which Company is a party.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
-------------------------------
Section 1.1. Definitions. Unless otherwise defined in this Agreement,
------- -----------
terms with initial capital letters not otherwise defined herein have the
respective meanings set forth in the Indenture. In addition, the following terms
with initial capital letters have the following meanings:
"Applicable Priority" means, with respect to the Senior Lien, first
-------------------
priority and, with respect to the Junior Lien, second priority, subject only to
the Senior Lien.
"Charges" means all federal, state, county, city, municipal or other
-------
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.
"Collateral" has the meaning set forth in Section 2.1.
----------
"Contractual Obligation" means, as applied to any Person, any
----------------------
provision of any security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement, or other instrument to which
that Person is a party or by which it or any of its owned properties is bound or
to which it or any of its owned properties is subject.
"Event of Default" has the meaning set forth in Section 5.1.
----------------
"Junior Lien" has the meaning set forth in Section 2.2.
-----------
"Permitted Intercompany Loan Obligations" has the meaning set forth in
---------------------------------------
Section 2.2.
"Pledged Collateral" has the meaning set forth in Section 4.1.1.
------------------
"Proceeds" has the meaning set forth in Section 2.1.
--------
"Secured Obligations" has the meaning set forth in Section 2.2.
-------------------
Form of Subsidiary Pledge Agreement
-----------------------------------
2
<PAGE>
"Secured Parties" means, collectively, the Collateral Agent, the
---------------
Trustee, the Holders, and, solely with respect to the Junior Lien, Company, and
the respective successors and permitted assigns of such Persons.
"Security Interest" has the meaning set forth in Section 2.1.
-----------------
"Senior Lien" has the meaning set forth in Section 2.2.
-----------
"Subsidiary Guarantee Obligations" has the meaning set forth in
--------------------------------
Section 2.2.
"Supplemental Documentation" means financing statements, continuation
--------------------------
statements, consent, acknowledgments, assignments, schedules of Collateral and
any other instruments or documents necessary or requested by the Collateral
Agent (i) to perfect and maintain perfected the Security Interest on any
Collateral or (ii) to enable the Collateral Agent to receive all interest,
dividends and distributions from time to time paid with respect to, and all
Proceeds of, all Collateral which the Collateral Agent is entitled to receive
hereunder.
"UCC" means the Uniform Commercial Code (as amended from time to time)
---
of the State of Texas.
Section 1.2. Related Matters.
---------------
1.2.1. Terms Used in the UCC. Unless the context clearly otherwise
---------------------
requires, all lower-case terms used and not otherwise defined herein that are
used or defined in Article 9 or 8 (or any equivalent subpart) of the UCC have
the same meanings herein.
1.2.2. Construction. Unless the context of this Agreement clearly
------------
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, and "including" is not
limiting. The words "hereof", "herein", "hereby", "hereunder" and similar terms
in this Agreement refer to this Agreement as a whole (including the Preamble,
the Recitals and all Schedules and Exhibits) and not to any particular provision
of this Agreement. Article, section, subsection, exhibit, recital, preamble and
schedule references in this Agreement are to this Agreement unless otherwise
specified. References in this Agreement to any agreement, other document or law
"as amended" or "as may be amended from time to time" or to amendments of any
document or law shall include any amendments, supplements, replacements,
renewals or other modifications.
1.2.3. Determinations. Any determination or calculation contemplated
--------------
by this Agreement that is made by the Collateral Agent shall be final and
conclusive and binding upon each Pledgor and Company, in the absence of manifest
error. References in this Agreement to "determination" by the Collateral Agent
include good faith estimates (in the case of quantitative determinations) and
good
Form of Subsidiary Pledge Agreement
-----------------------------------
3
<PAGE>
faith beliefs (in the case of qualitative determinations). All references herein
to "discretion" of the Collateral Agent (or terms of similar import) shall mean
"absolute and sole discretion." All consents and other actions of the Collateral
Agent contemplated by this Agreement may be given, taken, withheld or not taken
in the Collateral Agent's discretion (whether or not so expressed), except as
otherwise expressly provided herein.
1.2.4. Governing Law. Except to the extent otherwise required under
-------------
Applicable Law, the UCC shall govern the attachment, perfection, priority and
enforcement of the Security Interest and all other matters to which the UCC
applies pursuant to the terms thereof. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
1.2.5. Headings. The Article and Section headings used in this
--------
Agreement are for convenience of reference only and shall not affect the
construction hereof.
1.2.6. Severability. If any provision of this Agreement or any Lien
------------
or other right hereunder shall be held to be invalid, illegal or unenforceable
under Applicable Law in any jurisdiction, such provision, Lien or other right
shall be ineffective only to the extent of such invalidity, illegality or
unenforceability, which shall not affect any other provisions herein or any
other Lien or right granted hereby or the validity, legality or enforceability
of such provision, Lien or right in any other jurisdiction.
1.2.7. Exhibits and Schedules. All of the appendices, exhibits and
----------------------
schedules attached to this Agreement shall be deemed incorporated herein by
reference.
ARTICLE 2.
THE SECURITY INTEREST; SECURED OBLIGATIONS
------------------------------------------
Section 2.1. Security Interest. To secure the payment and performance
-----------------
of the Secured Obligations as and when due, each Pledgor hereby grants, conveys,
pledges, assigns and transfers (a) to the Collateral Agent, as agent and
representative for the equal and ratable benefit of the Trustee and the Holders
and (b) with respect to each Pledgor that is a recipient of a Permitted
Intercompany Loan, to the Collateral Agent, as agent and representative of
Company, a security interest (collectively, the "Security Interest") in, all
-----------------
right, title, claim and interest of such Pledgor in and to the following
property, whether now owned and existing or hereafter acquired or arising, and
wherever located (such property being, collectively, the "Collateral"):
----------
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2.1.1. The Specified Collateral and all certificates and instruments
representing or evidencing the Specified Collateral;
2.1.2. Any and all securities or other interests issued by any issuer
of the Specified Collateral, or any successor thereto, that any Pledgor acquires
or has the right to acquire from time to time in any manner in substitution for
or in addition to any of the foregoing and any and all certificates and
instruments representing or evidencing such securities or interests;
2.1.3. Any and all additions to or replacements for any of the
foregoing;
2.1.4. Any and all rights, powers, remedies and privileges of such
Pledgor under or with respect to any of the foregoing;
2.1.5. Any and all proceeds and products of any of the foregoing,
whether now held and existing or hereafter acquired or arising, including any
and all cash, securities, instruments and other property from time to time paid,
payable or otherwise distributed in respect of or in exchange for any or all of
the foregoing (collectively, the "Proceeds"). "Proceeds" shall include (i) any
-------- --------
options, warrants, securities or other property issued or delivered by the
issuer of any Collateral as a stock dividend or distribution in connection with
any reclassification, increase or reduction of capital or issued or delivered in
connection with any merger or other reorganization and (ii) any property
received upon the liquidation or dissolution of any issuer of any Collateral or
upon or in respect of any distribution of capital.
Section 2.2. Secured Obligations.
-------------------
2.2.1. The Security Interest shall secure:
2.2.1.1. with respect to each Pledgor that is a Subsidiary
Guarantor, the due and punctual payment and performance of any and all present
and future obligations and liabilities such Subsidiary Guarantor of every type
or description to any Secured Party, arising under or in connection with the
Subsidiary Guarantee, whether for principal of, or premium, if any, or interest
(including Contingent Interest) on, the Notes, expenses, indemnities or other
amounts (including attorneys' fees and expenses) (collectively, the "Subsidiary
----------
Guarantee Obligations");
- ---------------------
2.2.1.2. with respect to each Pledgor, the due and punctual
payment and performance of any and all present and future obligations and
liabilities of such Pledgor of every type or description to Company (the assigns
of which shall include the Collateral Agent, as agent for the Trustee and the
Holders, pursuant to the Company Pledge Agreement), arising under or in
connection with any Permitted Intercompany Note signed by it or any Permitted
Intercompany Loan evidenced thereby, whether for principal thereof, or premium,
if any, or interest thereon,
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expenses, indemnities or other amounts (including attorneys' fees and expenses)
(collectively, the "Permitted Intercompany Loan Obligations"); and
---------------------------------------
2.2.1.3. with respect to each Pledgor, the due and punctual
payment and performance of any and all present and future obligations and
liabilities of such Pledgor of every type or description to any Secured Party,
arising under or in connection with this Agreement or any other Note Document,
including for reimbursement of amounts permitted to be advanced or expended by
the Collateral Agent (i) to satisfy amounts required to be paid by the Pledgor
under this Agreement or any other Note Document for claims and Charges, together
with interest thereon to the extent provided, or (ii) to maintain or preserve
any Collateral or to create, perfect, continue or protect any Collateral or the
Security Interest therein, or its priority;
in each case whether due or not due, direct or indirect, joint and/or
several, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, whether or not arising after the
commencement of a proceeding under the Bankruptcy Code (including post-petition
interest) and whether or not allowed or allowable as a claim in any such
proceeding (all obligations and liabilities described in this Section 2.2.,
including, without limitation, the Subsidiary Guarantee Obligations and the
Permitted Intercompany Loan Obligations, are collectively referred to herein as
the "Secured Obligations").
-------------------
Section 2.3. Subordination of Junior Lien. With respect to any
----------------------------
Pledgor that is both a Guarantor and an obligor with respect to a Permitted
Intercompany Loan, the Security Interest granted by such Pledgor to the
Collateral Agent as security for Permitted Intercompany Loan Obligations (the
"Junior Lien") shall at all times be and remain unconditionally subordinate,
-----------
junior and subject to the Security Interest granted by such Pledgor to the
Collateral Agent as security for the Subsidiary Guarantee Obligations (the
"Senior Lien"). The Senior Lien shall at all times be and remain unconditionally
-----------
superior and prior in right of payment and enforcement to the Junior Lien,
regardless of (i) the order or time as of which these Liens are granted or
attach to any or all of the Collateral, (ii) the order or time of UCC or other
filings or recordings, physical possessing of any of the Collateral or other
steps of perfection, (iii) whether the debt secured by the Senior Lien is
outstanding on the date hereof or hereafter incurred or arising and, if
hereafter incurred or arising, whether incurred or arising pursuant to
commitment or otherwise, (iv) any amendment to the Subsidiary Guarantee or (v)
any other circumstance, whether or not similar to any of the foregoing, that
might otherwise cause such subordination to become unenforceable or otherwise
without force and effect; provided that this subordination shall be without any
--------
force or effect with respect to any Collateral (or any distribution at any time
made with respect thereto) if, and to the extent that, a court of appropriate
jurisdiction shall issue an order avoiding, subordinating or otherwise
invalidating the Senior Lien on such Collateral. The parties hereto intend that
the Junior
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Lien shall at all times be separate and apart from the Senior Lien,
notwithstanding that the holder of both such Liens may be the Collateral Agent,
and that such liens shall not be merged.
ARTICLE 3.
WARRANTIES AND REPRESENTATIONS
------------------------------
Each Pledgor makes the following representations and warranties, all
of which shall survive until termination of this Agreement pursuant to Section
6.7.
Section 3.1. Organization, Powers and Good Standing. Each Pledgor is
--------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite corporate
power and authority and the legal right to own and operate its properties and to
carry on its business as heretofore conducted and proposed to be conducted. Each
Pledgor has all requisite corporate power and authority to enter into this
Agreement and the other Note Documents to which it is a party and to carry out
the transactions contemplated hereby and thereby. Each Pledgor possesses all
Governmental Approvals, in full force and effect, free from burdensome
restrictions, that are necessary for the ownership, maintenance and operation of
its properties and conduct of its business as now conducted, and is not in
violation thereof. Each Pledgor is duly qualified and in good standing as a
foreign corporation in each state where the nature of its business activities
conducted or properties owned or leased requires it to be so qualified except
where the failure to do so would not have a material adverse effect on the
business, assets, results of operations or financial condition of such Pledgor,
the ability of such Pledgor to perform its obligations hereunder or the
Collateral or Security Interest.
Section 26. Authorization, Binding Effect, No Conflict, Etc. The
-----------------------------------------------
execution, delivery and performance by each Pledgor of this Agreement and each
other Note Document to which it is a party have been duly authorized by all
necessary corporate action. This Agreement and each such other Note Document
have been duly executed and delivered by each Pledgor party thereto and such
agreements are the legal, valid and binding obligations of such Pledgor,
enforceable against it in accordance with their respective terms, except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally. The execution, delivery and performance by any Pledgor of this
Agreement and each other Note Document to which such Pledgor is a party, and the
consummation of the transactions contemplated hereby or thereby, or the exercise
by the Collateral Agent of any of the voting and other rights or remedies
hereunder, do not and will not (i) violate any provision of the charter or
bylaws of such Pledgor, (ii) conflict with, result in a breach of or constitute
(or, with the giving of notice or lapse of time, or both, constitute) a default
under, or require the approval or consent of any Person pursuant to, any
Contractual Obligation
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of such Pledgor or violate any provision of Applicable Law binding on such
Pledgor or (iii) result in the creation or imposition of any Lien (other than a
Permitted Lien) of any nature whatsoever upon any of such Pledgor's assets
except for Liens created under this Agreement and the other Note Documents.
Except for filings and recordings in connection with the perfection of Liens
created by the Loan Documents, all of which have been made and are in full force
and effect, no Governmental Approval is or will be required in connection with
the execution, delivery and performance by any Pledgor of this Agreement or any
other Note Document to which any Pledgor is a party, or the consummation of the
transactions contemplated hereby or thereby, or the exercise by the Collateral
Agent of any of the voting and other rights or remedies hereunder, or to ensure
the legality, validity or enforceability hereof or thereof, except as may be
required in connection with the disposition of Collateral by laws affecting the
offering and sale of securities generally.
Section 3.3. Filings, Etc. Duly executed financing statements
------------
containing a correct description of the Collateral have been delivered to the
Collateral Agent for filing in every governmental office in every state, county
and other jurisdiction in which the principal place of business or the chief
executive office of any Pledgor is located and in each other jurisdiction in
which such action is necessary to establish a valid and perfected Lien in favor
of the Collateral Agent in all Collateral in which a Lien may be perfected by
filing, and no further or subsequent filing, recording or registration is
necessary in any such jurisdiction, except as provided under Applicable Law with
respect to the filing of continuation statements.
Section 3.4. Locations of Offices and Names. (i) Each Pledgor's chief
------------------------------
executive office and principal place of business is located at the address set
forth on Schedule 3.4., (ii) all other places of business of the Pledgors and
all other locations at which any tangible Collateral or books and records
related to any Collateral are located are set forth on Schedule 3.4., (iii) each
Pledgor's federal tax identification number is set forth on Schedule 3.4. and
(iv) there are no prior or current trade or legal names used to identify any
Pledgor in its business or in the ownership of its properties other than those
set forth on Schedule 3.4.
Section 3.5. Title to Collateral; Validity and Perfection of Security
--------------------------------------------------------
Interest; Absence of Other Liens.
- --------------------------------
3.5.1. Subject to Permitted Liens, the Pledgors have good and
marketable title to all Collateral. The Security Interest constitutes a valid
and, upon delivery of all Pledged Collateral to the Collateral Agent pursuant to
Section 4.1. and the filing of financing statements covering the Collateral with
the appropriate Governmental Authorities, perfected Lien in all of the
Collateral that secures payment and performance of the Secured Obligations.
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3.5.2. The Collateral is free and clear of all Liens other than the
Security Interest and other Permitted Liens.
Section 3.6. Regarding the Pledged Stock. Schedule 3.6. sets forth
---------------------------
the number of authorized and the number of issued shares of each class of
Capital Stock of each issuer of Pledged Stock. The Pledged Stock includes all
issued and outstanding shares of Capital Stock of each issuer thereof. All
outstanding Capital Stock of each such issuer has been duly authorized, validly
issued and is fully paid and non-assessable. There are no outstanding options,
warrants, convertible securities or other rights, contingent or absolute, to
acquire any Capital Stock of any such issuer, except as set forth on Schedule
3.6.
ARTICLE 4.
COVENANTS AND AGREEMENTS
------------------------
Section 4.1. Delivery of Pledged Collateral, Etc.
-----------------------------------
4.1.1. On the date hereof, each Pledgor is delivering to the
Collateral Agent certificates or instruments in respect of all Specified
Collateral that exists on such date, the physical possession of which is
necessary in order for the Security Interest to be perfected or delivery of
which was requested by the Collateral Agent to assure the priority of the
Security Interest therein (such Collateral being "Pledged Collateral"). Each
------------------
Pledgor shall deliver to the Collateral Agent promptly after acquisition thereof
all Pledged Collateral acquired after the date hereof. All Pledged Collateral
shall be in suitable form for transfer by delivery, or be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. Subject only to the revocable
rights specified in Section 4.7., the Collateral Agent shall have the right, at
any time in its discretion and without notice to any Pledgor, to transfer to or
to register in the name of the Collateral Agent or its nominee any or all of the
Collateral. It is expressly acknowledged that such registration of the
Collateral in the name of the Collateral Agent or its nominee is solely for the
purpose of assuring that the Collateral Agent receives all cash and stock
dividends and other property from time to time distributed with respect to the
Collateral and shall not be deemed to constitute the Collateral Agent the owner
(beneficial or otherwise) of any Collateral for any other purpose, except to the
extent contemplated by Section 4.7. and Article 5. Without limitation, the
Collateral Agent shall not be deemed to "control" the Collateral or the issuer
thereof for purposes of any Applicable Laws (including securities,
environmental, tax, bankruptcy or other laws, but excluding the UCC) as a result
of the Collateral being registered in the name of the Collateral Agent. In
addition, the Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Specified Collateral for
certificates or instruments of smaller or larger denominations.
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4.1.2. Without limiting subsection 4.1.1., but subject to Section
4.7.1.2., if any Pledgor receives or becomes entitled to receive any securities
issued by any issuer of Specified Collateral, or any successor thereto, in any
manner in substitution for or in addition to the Pledged Collateral, or if any
Pledgor shall become entitled to receive or shall receive any securities or
other property in addition to, in substitution of, as a conversion of, or in
exchange for, any of the Pledged Collateral or any other Collateral, such
Pledgor shall receive the same as the agent for the Collateral Agent, and shall
hold the same in trust for and deliver the same promptly to the Collateral Agent
in the exact form in which received, together with appropriate instruments of
transfer or assignments in blank, to be held by the Collateral Agent as
Collateral hereunder.
Section 4.2. Further Assurances. Each Pledgor shall, at its own
------------------
expense, promptly perform such acts as may be necessary, or that the Collateral
Agent may request at any time, to assure the attachment, perfection and
Applicable Priority of the Security Interest, to exercise the rights and
remedies of the Secured Parties hereunder or to carry out the intent of this
Agreement. Without limitation, each Pledgor shall execute and deliver (or cause
any third party to execute and deliver) to the Collateral Agent, at any time and
from time to time, all Supplemental Documentation, in form and substance
acceptable to the Collateral Agent.
Section 4.3. Power of Attorney. Each Pledgor hereby irrevocably
-----------------
appoints (the appointment being irrevocable because it is coupled with an
interest) the Collateral Agent and its employees and agents as such Pledgor's
true and lawful attorneys-in-fact, with full power of substitution, do all
things (i) required to be done by such Pledgor under this Agreement or the other
Note Documents and (ii) that the Collateral Agent may deem reasonably necessary
or advisable to assure the attachment, perfection and Applicable Priority of the
Security Interest or otherwise to exercise the rights and remedies of the
Secured Parties hereunder or carry out the intent of this Agreement (including
by voting any Collateral as contemplated by Section 4.7.), in each case
irrespective of whether a Default or Event of Default then exists (except as
otherwise provided herein) and at the Pledgor's expense. Without limitation, the
Collateral Agent and its officers and agents shall be entitled to do all of the
following, as fully as any Pledgor might:
4.3.1. to sign the name of such Pledgor on any Supplemental
Documentation and to deliver and file such Supplemental Documentation to or with
such Persons as the Collateral Agent, in its discretion, may elect; and
4.3.2. to affix, by facsimile signature or otherwise, the general or
special endorsement of any Pledgor, in such manner as the Collateral Agent shall
deem advisable, to any Specified Collateral that has been delivered to or
obtained by the Collateral Agent without appropriate endorsement or assignment.
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The Collateral Agent shall be under no obligation whatsoever to take
any of the foregoing actions. Absent bad faith or willful misconduct, the
Collateral Agent and its shareholders, directors, officers, employees and agents
shall have no liability or responsibility for any act taken with respect
thereto. A copy of this Agreement and, if applicable, a statement by the
Collateral Agent that an Event of Default exists shall be conclusive evidence of
the Collateral Agent's right to act under this Section 4.3. as against all third
parties.
Section 4.4. Changes of Locations of Collateral, Offices, Name or
----------------------------------------------------
Structure. The Pledgors shall give the Collateral Agent 15 Business Days' notice
- ---------
prior to the adoption of any trade name or any change of name, chief executive
office, principal place of business, identity or corporate structure.
Section 4.5. Payment of Charges and Claims. Each Pledgor shall
-----------------------------
promptly pay (i) all Charges imposed upon any Collateral, and (ii) all claims
that have become due and payable and, under Applicable Law, have or may become
Liens upon any Collateral, in each case before any penalty shall be incurred
with respect thereto. If any Pledgor fails to pay or obtain the discharge of any
Charge, claim or Lien required to be paid or discharged under this Section 4.5.
and asserted against any Collateral, such Pledgor shall so notify the Collateral
Agent and, regardless of whether such notice is given, the Collateral Agent may,
at any time and from time to time, in its discretion and without waiving or
releasing any obligation of such Pledgor under this Agreement or the other Note
Documents or waiving any Default or Event of Default, make such payment, obtain
such discharge or take such other action with respect thereto as the Collateral
Agent deems advisable.
Section 4.6. Continuing Obligations of the Pledgors; Duty of Care;
-----------------------------------------------------
Indemnification.
- ---------------
4.6.1. Anything herein to the contrary notwithstanding, (i) the
relevant Pledgor shall remain liable under the respective Governing Agreement to
the extent set forth therein to perform its duties and obligations thereunder,
and shall receive all allocations of income, gain, expense, loss and other
items, to the same extent as if this Agreement had not been executed, (ii) the
exercise by the Collateral Agent of any of its rights hereunder shall not
release any Pledgor from any of its duties or obligations under such Governing
Agreement, and (iii) the Secured Parties shall not have any obligation or
liability, and shall receive no allocations of income, gain, expense, loss or
other items, under such Governing Agreement or Applicable Law by reason of this
Agreement, nor shall the Secured Parties be obligated to perform any of the
obligations or duties of any Pledgor thereunder, to make any payment of Taxes or
other amounts, to make any inquiry as to the nature or sufficiency of any
payment received by such Pledgor or the Collateral Agent or the sufficiency of
any performance by any party under such Governing Agreement or to take any
action to collect or enforce any claim for payment assigned hereunder. The
Secured Parties shall not by reason of this
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Agreement or the exercise of any remedies hereunder become responsible or liable
in any manner or to any extent for the obligations and liabilities of any
Interest Issuer or any Pledgor, whether now existing or hereafter incurred.
4.6.2. The Collateral Agent shall not have any duty of care with
respect to the Collateral, other than an obligation to exercise reasonable care
with respect to Collateral in its possession; provided that (i) the Collateral
--------
Agent shall be deemed to have exercised reasonable care if Collateral in its
possession is accorded treatment substantially comparable to that which the
Collateral Agent accords its own property and (ii) the Collateral Agent shall
have no obligation to take any actions to preserve rights against other parties
with respect to any Collateral. Without limitation, the Collateral Agent shall
(A) bear no risk or expense with respect to any Collateral and (B) have no duty
with respect to calls, conversions, presentments, maturities, notices or other
matters relating to Collateral, or to maximize interest or other returns with
respect thereto.
4.6.3. Each Pledgor hereby agrees to indemnify and hold harmless the
Collateral Agent and its directors, officers, employees and agents against any
and all claims, actions, liabilities, costs and expenses of any kind or nature
whatsoever (including fees and disbursements of counsel) that may be imposed on,
incurred by, or asserted against any of them, in any way relating to or arising
out of this Agreement or any action taken or omitted by them hereunder
(including such obligations and liabilities of the Interest Issuer or of any
Pledgor for Taxes), except to the extent a court holds in a final and
nonappealable judgment that they resulted from the gross negligence or willful
misconduct of such Persons against and from all such obligations and
liabilities.
4.6.4. The Collateral Agent may at any time deliver or redeliver the
Collateral or any part thereof to any Pledgor and the receipt of any of the same
by such Pledgor shall be complete and full acquittance for the Collateral so
delivered, and the Collateral Agent thereafter shall be discharged from any
liability or responsibility therefor.
Section 4.7. Voting and Other Consensual Rights; Distributions.
--------------------------------------------------
4.7.1. So long as no Default shall exist:
4.7.1.1. Each Pledgor shall be entitled to exercise any and
all voting and management rights pertaining to any Collateral, for any purpose
not inconsistent with the terms of this Agreement and the other Note Documents;
provided, however, that such Pledgor shall not exercise any such right if it
- -------- -------
would result in a Default or an Event of Default or have a material adverse
effect on: (i) the business, assets, results of operations or financial
condition of Company and its Subsidiaries taken as a whole, (ii) the ability of
such Pledgor to perform its obligations hereunder or
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under any other Note Document to which it is a party or (iii) the Collateral or
the Security Interest.
4.7.1.2. Except as otherwise provided herein, each Pledgor
shall be entitled to receive and retain and use free of the Security Interest
any and all cash and other property paid or otherwise distributed in respect of
the Collateral; provided, however, that any and all (i) dividends and other
-------- -------
distributions paid or payable other than in cash or in the form of Pledged
Stock, and (ii) cash paid upon or in respect of any of the Specified Collateral
upon or in respect of the liquidation or dissolution of any issuer thereof or
upon or in respect of any distribution of capital or redemption or exchange of
any Specified Collateral, shall be delivered to the Collateral Agent, in the
exact form received, to be held as Collateral hereunder.
4.7.2. So long as a Default shall exist, at the sole option of the
Collateral Agent, any or all rights of the Pledgors to exercise voting and
management rights and to receive cash and other property distributed in respect
of Collateral as permitted by Sections 4.7.1.1. and 4.7.1.2., shall cease, at
the option of the Collateral Agent, and the Collateral Agent, if and when it
notifies the Pledgors of the exercise of such option, shall have the sole right
to exercise any or all such voting rights and receive and to hold as Collateral
any or all such cash and other property.
4.7.3. All cash and other property required to be delivered to the
Collateral Agent hereunder shall, if received by any Pledgor, be received in
trust for the benefit of the Secured Parties, be segregated from the other
property of the Pledgors, and promptly be delivered to the Collateral Agent in
the same form as so received (with any appropriate endorsements or assignments).
ARTICLE 5.
EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
-------------------------------------------------
Section 5.1. Event of Default. The occurrence of one or more "Events
----------------
of Default" (as defined in the Indenture shall constitute an "Event of Default"
hereunder.
Section 5.2. Remedies. If there occurs an Event of Default, then,
--------
whether or not all the Secured Obligations shall have become immediately due and
payable:
5.2.1. In addition to all its other rights, powers and remedies under
this Agreement and Applicable Law, the Collateral Agent shall have, and may
exercise, any and all of the rights, powers and remedies of a secured party
under the UCC, all of which rights, powers and remedies shall be cumulative and
not exclusive, to the extent permitted by Applicable Law.
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5.2.2. The Collateral Agent shall have the right, all at the
Collateral Agent's sole option and as the Collateral Agent in its discretion may
deem necessary or advisable, to do any or all of the following:
5.2.2.1. to foreclose the Security Interest by any available
judicial procedure or without judicial process;
5.2.2.2. to notify obligors on the Collateral that the
Collateral has been assigned to the Collateral Agent and that all payments
thereon are to be made directly and exclusively to or as specified by the
Collateral Agent;
5.2.2.3. to collect by legal proceedings or otherwise all
dividends, distributions, interest, principal or other sums now or hereafter
payable upon or on account of the Collateral;
5.2.2.4. to exercise all rights and powers under the
Governing Agreements; and
5.2.2.5. to exercise any and all other rights, powers,
privileges and remedies of an owner of the Collateral, including rights of
conversion, exchange or subscription or other rights or upon the exercise by any
Pledgor or the Collateral Agent of any right, power or privilege pertaining to
the Collateral, the right to deposit and deliver any and all of the Collateral
to any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Collateral Agent may determine to
be appropriate, all without liability except to account for property actually
received by it, but the Collateral Agent shall have no duty to the Pledgors to
exercise any such right, power or privilege and shall not be responsible for any
failure so to do or delay in so doing.
5.2.3. The Collateral Agent shall have the right to sell or otherwise
dispose of all or any Collateral at public or private sale or sales, with such
notice as may be required by Section 5.4., in lots or in bulk, at any exchange,
over the counter or at any of the Collateral Agent's offices or elsewhere, for
cash or on credit, with or without representations or warranties, all as the
Collateral Agent, in its discretion, may deem advisable. The Collateral need not
be present at any such sales. If sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be retained by
the Collateral Agent until the sale price is paid by the purchaser thereof, but
the Collateral Agent shall not incur any liability in case any such purchaser
shall fail to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may be sold again upon like notice. The Collateral
Agent shall not be obligated to make any sale of the Collateral regardless of
notice of sale having been given. The Collateral Agent may purchase all or any
part of the Collateral at public or, if permitted by Applicable Law, private
sale, and in lieu of actual payment of the purchase price, the Collateral Agent
may apply against such purchase price any amount
Form of Subsidiary Pledge Agreement
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of the Secured Obligations. Each Pledgor agrees that any sale of Collateral
conducted by the Collateral Agent in accordance with the foregoing provisions of
this Section shall be deemed to be a commercially reasonable sale under Section
9-504 of the UCC.
5.2.4. The Collateral Agent shall not be required to register or
qualify any of the Collateral that constitutes securities under applicable state
or federal securities laws in connection with any sale or other disposition
thereof if such disposition is effected in a manner that complies with all
applicable federal and state securities laws. The Collateral Agent shall be
authorized, with respect to any disposition that is not so registered or
qualified, to restrict (if it deems it advisable to do so) the prospective
bidders or purchasers to persons who will represent and agree that they are
"accredited investors" or "qualified institutional buyers" under Applicable Law
and purchasing the Collateral for their own account for investment and not with
a view to the distribution or sale thereof. If any such Collateral is sold at
private sale, each Pledgor agrees that if such Collateral is sold in a manner
that the Collateral Agent in good faith believes to be reasonable under the
circumstances then existing, then (i) the sale shall be deemed to be
commercially reasonable in all respects, (ii) such Pledgor shall not be entitled
to a credit against the Secured Obligations in an amount in excess of the
purchase price, and (iii) the Collateral Agent shall not incur any liability or
responsibility to any Pledgor in connection therewith, notwithstanding the
possibility that a substantially higher price might have been realized at a
public sale. Each Pledgor recognizes that a ready market may not exist for such
Collateral if it is not regularly traded on a recognized securities exchange,
and that a sale by the Collateral Agent of any such Collateral for an amount
substantially less than the price that might have been achieved had the
Collateral been so traded may be commercially reasonable in view of the
difficulties that may be encountered in attempting to sell Collateral that is
privately traded.
Section 5.3. Application of Proceeds.
-----------------------
5.3.1. Any cash proceeds received by the Collateral Agent in respect
of any sale of, collection from, or other realization upon, all or any part of
the Collateral following the occurrence of an Event of Default may be held by
the Collateral Agent as Collateral and/or then or at any time thereafter applied
as follows:
5.3.1.1. first, to the Collateral Agent to pay all advances,
charges, costs and expenses payable to the Collateral Agent pursuant to Section
6.1.;
5.3.1.2. second, to pay the Subsidiary Guarantee Obligations
in the order set forth in the Indenture with respect to the obligations of
Company underlying such obligations; and
5.3.1.3. third, to pay accrued interest on and principal of
Permitted Intercompany Loans.
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<PAGE>
5.3.2. Each Pledgor and any other Person then obligated therefor
shall pay to the Collateral Agent on demand any deficiency with regard to the
Secured Obligations that may remain after such sale, collection or realization
of, from or upon the Collateral.
5.3.3. Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Collateral Agent. The application of proceeds by the Collateral Agent shall be
without prejudice to the Collateral Agent' rights as against any Pledgor or
other Persons with respect to any Secured Obligations that may then be or remain
unpaid.
5.3.4. If at any time after an Event of Default any Pledgor or
Company receives any collections upon or other Proceeds of any Collateral,
whether in the form of cash, notes or otherwise, such Proceeds shall be received
in trust for the Secured Parties (or the Collateral Agent and Holders, in the
case of Proceeds received by Company) and such Pledgor or Company shall keep all
such Proceeds separate and apart from all other funds and property so as to be
capable of identification as the property of the Secured Parties and promptly
deliver such Proceeds to the Collateral Agent in the identical form received.
Section 5.4. Notice of Sale. Unless the Collateral is perishable or
--------------
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Collateral Agent will send or otherwise make available to
each Pledgor reasonable notice of the time and place of any public sale or of
the time on or after which any private sale of any Collateral is to be made.
Each Pledgor agrees that any notice required to be given by the Collateral Agent
of a sale or other disposition of Collateral, or any other intended action by
the Collateral Agent, that is received in accordance with the provisions set
forth in Section 6.4. ten days prior to such proposed action shall constitute
commercially reasonable and fair notice thereof to the Pledgors. The Collateral
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Each Pledgor hereby
waives any right to receive notice of any public or private sale of any
Collateral or other security for the Secured Obligations except as expressly
provided for in this Section 5.4.
ARTICLE 6.
GENERAL
-------
Section 6.1. Collateral Agent's Expenses, Including Attorneys' Fees.
------------------------------------------------------
Regardless of the occurrence of a Default or Event of Default, the Pledgors
jointly and severally agree to pay to the Collateral Agent any and all advances,
charges, costs and expenses, including the reasonable fees and expenses of
counsel and any
Form of Subsidiary Pledge Agreement
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<PAGE>
experts or agents, that the Collateral Agent may reasonably incur in connection
with (i) the administration of this Agreement, including any amendment thereto,
or any workout or restructuring, (ii) the creation, perfection or continuation
of the Security Interest or protection of its priority or the Collateral,
including the discharging of any prior or junior Lien or adverse claim against
the Collateral or any part thereof that is not permitted hereby or by the
Indenture, (iii) the custody, preservation or sale of, collection from, or other
realization upon, any of the Collateral, (iv) the exercise or enforcement of any
of the rights, powers or remedies of the Collateral Agent under this Agreement
or under Applicable Law (including attorneys' fees and expenses incurred by the
Collateral Agent in the collection of Collateral deposited with the Collateral
Agent and amounts incurred in connection with the operation, maintenance or
foreclosure of the Security Interest) or any bankruptcy proceeding or (v) the
failure by any Pledgor to perform or observe any of the provisions hereof. All
such amounts and all other amounts payable hereunder shall be payable on demand,
together with interest at the Default Rate.
Section 6.2. Amendments and Other Modifications. No amendment of any
----------------------------------
provision of this Agreement (including a waiver thereof or consent relating
thereto) shall be effective unless the same shall be in writing and signed by
the Collateral Agent. Any waiver or consent relating to any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on any Pledgor in any case shall
entitle such Pledgor to any other or further notice or demand in similar or
other circumstances. Each Person that becomes a Pledgor after the date hereof
makes the representations and warranties set forth in Article 3. Notwithstanding
the first sentence of this Section, such Pledgor may amend Schedules A-1 and
3.6. to provide the information contemplated thereby with respect to such
Pledgor and its Collateral, and the consent of the Collateral Agent will not be
required for such amendment.
Section 6.3. Cumulative Remedies; Failure or Delay. The rights and
-------------------------------------
remedies provided for under this Agreement are cumulative and are not exclusive
of any rights and remedies that may be available to the Collateral Agent under
Applicable Law , the other Note Documents or otherwise. No failure or delay on
the part of the Collateral Agent in the exercise of any power, right or remedy
under this Agreement shall impair such power, right or remedy or shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude other or further exercise of such or any other power,
right or remedy.
Section 6.4. Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid) or
by prepaid telex, telecopy or telegram, and shall be deemed given when received
by the intended recipient thereof. Unless otherwise specified in a notice given
in accordance with the foregoing provisions of this Section 6.4., notices and
other communications shall be
Form of Subsidiary Pledge Agreement
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<PAGE>
given to the parties hereto at their respective addresses (or to their
respective telex or telecopier numbers) indicated on Schedule 105 of the
Indenture.
Section 6.5. Successors and Assigns. This Agreement shall be binding
----------------------
upon and, subject to the next sentence, inure to the benefit of each Pledgor and
the Collateral Agent and their respective successors and assigns. No Pledgor
shall assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Collateral Agent. The benefits of this Agreement
shall pass automatically with any assignment of the Secured Obligations (or any
portion thereof), to the extent of such assignment.
Section 6.6. Payments Set Aside. Notwithstanding anything to the
------------------
contrary herein contained, this Agreement, the Secured Obligations and the
Security Interest shall continue to be effective or be reinstated, as the case
may be, if at any time any payment, or any part thereof, of any or all of the
Secured Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned by any Secured
Party in connection with any bankruptcy, reorganization or similar proceeding
involving any Pledgor, any other party liable with respect to the Secured
Obligations or otherwise, if the proceeds of any Collateral are required to be
returned by such Secured Party under any such circumstances or if any Secured
Party reasonably elects to return any such payment or proceeds or any part
thereof in its discretion, all as though such payment had not been made or such
proceeds not been received. Without limiting the generality of the foregoing, if
prior to any such rescission, invalidation, declaration, restoration or return,
this Agreement shall have been cancelled or surrendered or the Security Interest
or any Collateral shall have been released or terminated in connection with such
cancellation or surrender, this Agreement and the Security Interest and such
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the Pledgors in respect of the amount of the affected payment or
application of proceeds, the Security Interest or such Collateral.
Section 6.7. Continuing Security Interest; Termination. Except as
-----------------------------------------
otherwise provided in the Indenture with respect to the release of Collateral
under certain circumstances, this Agreement shall create a continuing security
interest in the Collateral and, except as provided below, the Security Interest
and all agreements, representations and warranties made herein shall survive
until, and this Agreement shall terminate only upon, the indefeasible payment in
full of the Secured Obligations. Any investigation at any time made by or on
behalf of any Secured Party shall not diminish the right of the any Secured
Party to rely on any such agreements, representations or warranties herein.
Notwithstanding anything in this Agreement or Applicable Law to the contrary,
the agreements of the Pledgors set forth in Sections 4.6.3. and 6.1. shall
survive the payment of all other Secured Obligations and the termination of this
Agreement.
Form of Subsidiary Pledge Agreement
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<PAGE>
Section 6.8. Waiver and Estoppel. Except as otherwise provided in
-------------------
this Agreement, each Pledgor hereby waives: (i) presentment, protest, notice of
dishonor, release, compromise, settlement, extension or renewal and any other
notice of or with respect to the Secured Obligations and hereby ratifies and
confirms whatever the Collateral Agent may do in this regard; (ii) notice prior
to taking possession or control of any Collateral or any bond or security that
might be required by any court prior to allowing the Collateral Agent to
exercise any of their rights, powers or remedies; (iii) the benefit of all
valuation, appraisement, redemption and exemption laws; (iv) any rights to
require marshalling of the Collateral upon any sale or otherwise to direct the
order in which the Collateral shall be sold; (v) any set-off; and (vi) any
rights to require the Collateral Agent to proceed against any Person, proceed
against or exhaust any Collateral or any other security interests or guaranties
or pursue any other remedy in the Collateral Agent' power, or to pursue any of
such rights in any particular order or manner, and any defenses arising by
reason of any disability or defense of any Person.
Section 6.9. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same Agreement.
Section 6.10. Complete Agreement. This Agreement, together with the
------------------
exhibits and schedules hereto and the other Note Documents, is intended by the
parties as a final expression of their agreement regarding the subject matter
hereof and as a complete and exclusive statement of the terms and conditions of
such agreement.
Section 6.11. Limitation of Liability. No claim shall be made by any
-----------------------
Pledgor against the Collateral Agent or the Affiliates, directors, officers,
employees or agents of the Collateral Agent for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or under any other theory of liability arising out of or related to the
transactions contemplated by this Agreement and the other Note Documents, or any
act, omission or event occurring in connection therewith; and each Pledgor
hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
Section 6.12. Conflicting Agreements; Collateral Specifically Covered
-------------------------------------------------------
by Other Agreements. To the extent the terms and provisions of this Agreement
- -------------------
conflict with the terms and provisions of the Subsidiary Security Agreement or
any other Collateral Document, the terms and provisions of this Agreement shall
govern as they relate to the Collateral.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first set forth above.
Pledgors:
--------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Company:
-------
USTRAILS INC., a Nevada corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Form of Subsidiary Pledge Agreement
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<PAGE>
Collateral Agent:
----------------
FLEET NATIONAL BANK, a national banking
association, as Collateral Agent
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Form of Subsidiary Pledge Agreement
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<PAGE>
SCHEDULE A-1
PLEDGED STOCK
-------------
Form of Subsidiary Pledge Agreement - Schedule A-1
--------------------------------------------------
<PAGE>
SCHEDULE 3.4.
SCHEDULE OF LOCATIONS AND NAMES
-------------------------------
(Corporate Office)
Entity Chief Executive Office Other Locations Fed. Tax I.D.#
- --------------------------------------------------------------------------------
Form of Subsidiary Pledge Agreement - Schedule 3.4
--------------------------------------------------
<PAGE>
SCHEDULE 3.6.
CAPITALIZATION OF ISSUERS OF PLEDGED STOCK
------------------------------------------
Number of No. of Percentage
Pledgor Issuer Class of Authorized Issued of Total
- ------- ------ -------- ---------- ------ --------
Stock Shares Shares Outstanding
----- ------ ------ -----------
Form of Subsidiary Pledge Agreement - Exhibit 3.6
-------------------------------------------------
<PAGE>
EXHIBIT D-1
FORM OF
-------
COMPANY SECURITY AGREEMENT
--------------------------
COMPANY SECURITY AGREEMENT, dated as of ______________ (as may be
amended from time to time, the "Agreement"), by and between USTrails Inc., a
---------
Nevada corporation (the "Grantor"), and Fleet National Bank, a national banking
-------
association ("Fleet"), as Trustee for the Persons that now or in the future are
-----
holders of the Notes (as defined below) issued under the Indenture described
below (the "Holders") (the "Trustee").
------- -------
R E C I T A L S
- - - - - - - -
A. Pursuant to an Indenture dated as of July 17, 1996 (as
supplemented or otherwise amended from time to time, the "Indenture") by and
---------
among the Grantor, the Subsidiary Guarantors and Fleet, as trustee (the
"Trustee"), the Grantor will issue $40,241,000 principal amount Senior
Subordinated Pay-In-Kind Notes due 2003, plus the additional principal amount of
Senior Subordinated Pay-in-Kind Notes issued pursuant to Section 301 of the
Indenture (the "Notes"), subject to the terms and conditions set forth in the
-----
Indenture. Capitalized terms defined in the Indenture shall, unless otherwise
defined herein, have the meanings given them in the Indenture.
B. Under the Indenture a security interest in the Collateral
described herein is required to be granted to the Trustee, for the benefit of
itself, and the Holders (together with their respective successors and assigns,
collectively, the "Secured Parties") on the Delivery Date, as set forth herein.
---------------
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
Section 1.1. Definitions. The following terms with initial capital
-----------
letters have the following meanings:
"Accounts" has the meaning set forth in Section 2.1.
--------
"Account Debtor" means any Person who is or who may become obligated
--------------
to the Grantor on any Receivable.
"Charges" means all federal, state, county, city, municipal or other
-------
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.
"Chattel Paper" has the meaning set forth in Section 2.1.
-------------
"Event of Default" has the meaning set forth in Section 5.1.
----------------
Form of Company Security Agreement
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<PAGE>
"Excluded Assets" means, collectively, "Excluded Assets" as defined in
---------------
the Indenture and "Pledged Collateral" as defined in the Company Pledge
Agreement.
"Notes Receivable" has the meaning set forth in Section 2.1.2.
----------------
"Pledged Collateral" has the meaning set forth in Section 4.8.
------------------
"Permitted Liens" means, collectively, "Permitted Liens" as defined in
---------------
the Indenture.
"Permitted Sales" has the meaning set forth in Section 4.7.
---------------
"Proceeds" has the meaning set forth in Section 2.1.14.
--------
"Receivables" means Accounts, Notes Receivable, Chattel Paper and
-----------
other rights to the payment of money.
"Secured Obligations" has the meaning set forth in Section 2.2.
-------------------
"Secured Parties" has the meaning set forth in Recital B.
---------------
"Security Interest" has the meaning set forth in Section 2.1.
-----------------
"Supplemental Documentation" means financing statements, continuation
--------------------------
statements, warehouse receipts, bills of lading, assignments of accounts,
patents, trademarks or copyrights, schedules of Collateral, mortgages and other
instruments or documents necessary or requested by the Trustee (i) to create,
perfect and maintain perfected the Security Interest in any Collateral or (ii)
to so that the Trustee receives all interest, dividends and distributions from
time to time paid with respect to, and all Proceeds of, all Collateral the
Trustee is entitled to receive hereunder.
"UCC" means the Uniform Commercial Code (as amended from time to time)
---
of the State of Texas.
Section 1.2. Related Matters. 1.2.1. Terms Used in the UCC. Unless the
--------------- ---------------------
context clearly otherwise requires, all lower-case terms used and not otherwise
defined herein that are used or defined in Article 9 (or any equivalent subpart)
of the UCC have the same meanings herein.
1.2.2. Construction. Unless the context of this Agreement
------------
clearly requires otherwise, references to the plural include the singular, the
singular includes the plural, the part includes the whole, and "including" is
not limiting. The words "hereof," "herein," "hereby," "hereunder" and similar
terms in this Agreement refer to this Agreement as a whole (including the
Preamble, the Recitals and all Schedules and Exhibits, but subject to Section
1.2.5) and not to any particular provision of this Agreement. Article, section,
subsection, exhibit, recital, preamble and schedule references in this Agreement
are to this Agreement unless otherwise specified. References in this Agreement
to any agreement, other document or law "as amended" or "as may be amended from
time to time," or to amendment of any document or law, shall include any
amendments, supplements, replacements, renewals or other modifications.
1.2.3. Determinations. Any determination or calculation
--------------
contemplated by this Agreement that is made by the Trustee shall be final and
conclusive and binding upon the Grantor, in the absence of manifest error.
References in this Agreement to
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<PAGE>
"determination" by the Trustee include good faith estimates (in the case of
quantitative determinations) and good faith beliefs (in the case of qualitative
determinations). All references herein to "discretion" of the Trustee (or terms
of similar import) shall mean "absolute and sole discretion." All consents and
other actions of the Trustee contemplated by this Agreement may be given, taken,
withheld or not taken in the Trustee's discretion (whether or not so expressed),
except as otherwise expressly provided herein.
1.2.4. Governing Law. Except to the extent otherwise required under
-------------
Applicable Law, the UCC shall govern the attachment, perfection, priority and
enforcement of the Security Interest and all other matters to which the UCC
applies pursuant to the terms thereof. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
1.2.5. Headings. The Article and Section headings used in this
--------
Agreement are for convenience of reference only and shall not affect the
construction hereof.
1.2.6. Severability. If any provision of this Agreement or any Lien or
------------
other right hereunder shall be held to be invalid, illegal or unenforceable
under Applicable Law in any jurisdiction, such provision, Lien or other right
shall be ineffective only to the extent of such invalidity, illegality or
unenforceability, which shall not affect any other provisions herein or any
other Lien or right granted hereby or the validity, legality or enforceability
of such provision, Lien or right in any other jurisdiction.
1.2.7. Exhibits and Schedules. All of the appendices, exhibits and
----------------------
schedules attached to this Agreement shall be deemed incorporated herein by
reference.
ARTICLE 2.
THE SECURITY INTEREST; SECURED OBLIGATIONS
------------------------------------------
Section 2.1. Security Interest. To secure the payment and performance
-----------------
of the Secured Obligations as and when due, the Grantor hereby grants, conveys,
pledges, assigns and transfers to the Trustee for the benefit of the Secured
Parties, a security interest (the "Security Interest") in, all right, title,
-----------------
claim, estate and interest of the Grantor in and to all property and interests
in property, subject to Permitted Liens and other than Excluded Assets, whether
now owned and existing or hereafter acquired or arising, and wherever located
(such property and interests in property, other than Excluded Assets, being,
collectively, the "Collateral"), including the following (except as such
----------
constitute Excluded Assets), in each case subject to Permitted Liens:
2.1.1. Any and all rights to payment for goods sold or leased
or for services rendered, including any such rights evidenced by Chattel Paper,
whether due or to become due and whether or not earned by performance (excluding
any such rights evidenced by Notes Receivable, the "Accounts");
--------
2.1.2. Any and all negotiable instruments, promissory notes,
acceptances, drafts, checks, certificates of deposit and other writings that
evidence a right to the payment of money by any other Person, including the
writings listed on Schedule 2.1.2. (the "Notes Receivable");
----------------
2.1.3. Any and all chattel paper, including writings that
evidence both a monetary obligation and a security interest in or lease of
specific goods (the "Chattel Paper");
-------------
2.1.4. Any and all rights to payment:
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<PAGE>
2.1.4.1. to the extent not included in Accounts, Notes Receivable
or Chattel Paper, receivable from any credit card company (such as Visa,
Mastercard, American Express and Diner's Club), whether arising out of or
relating to the sale of lodging, goods and services by the Grantor or otherwise;
and
2.1.4.2. of money not listed above and any and all rights,
titles, interests, securities, Liens and guaranties evidencing, securing,
guaranteeing payment of or in any way relating to any Receivables;
2.1.5. Any and all goods that may at any time be held for sale or
lease or to be furnished under any contract of service, be so leased or
furnished, or constitute raw materials, work in process, parts, supplies or
materials that are or might be used or consumed in a business or in connection
with the manufacture, selling or leasing of such goods ("Inventory");
---------
2.1.6. Any and all equipment and other goods (excluding Inventory),
including the following personal property (together with all related property
described in Section 2.1.12., the "Equipment"):
---------
2.1.6.1. machinery, machine tools, office machinery (including
computers, typewriters and duplicating machines), motor vehicles, trailers,
rolling stock, motors, pumps, controls, tools, parts, works of art, furniture,
furnishings and trade fixtures, all athletic equipment and supplies, and all
molds, dies, drawings, blueprints, reports, catalogs and computer programs
related to any of the above;
2.1.6.2. ships, boats, barges and vessels (whether under
construction or completed, and any and all masts, bowsprits, boilers, engines,
sails, fittings, anchors, cables, chains, riggings, tackle, apparel, furniture,
capstans, outfits, tools, pumps, gears, appliances, fittings and spare and
replacement parts and all other appurtenances, accessories and additions,
improvements and replacements thereto, whether on board or not on board, in or
to any ship, boat, barge or vessel;
2.1.6.3. stones, wood, steel and other materials used or to be
used in the building, construction, repair, renovation, refurbishment or
otherwise with respect to Improvements (as defined in any Mortgage to which the
Grantor is a party) or ships, boats, barges or vessels;
2.1.7. Any and all fixtures, including machinery, equipment or
appliances for generating, storing or distributing air, water, heat,
electricity, light, fuel or refrigeration, for ventilating or sanitary purposes,
elevators, safes, laundry, kitchen and athletic equipment, trade fixtures, and
telephone, television and other communications equipment (the "Fixtures");
--------
2.1.8. Any and all documents, whether or not negotiable, including
bills of lading, warehouse receipts, trust receipts and the like (the
"Documents");
---------
2.1.9. Any and all stocks, bonds, general and limited partnership
interests, joint venture interests, limited liability company interests and
other securities, subscription rights, options, warrants, puts, calls and other
rights with respect thereto, and investment and brokerage accounts (the
"Securities"), including those listed on Schedule 2.1.9;
----------
2.1.10. Any and all general intangibles and contract rights (together
with any property listed under Section 2.1.4. above, the "General Intangibles"),
-------------------
including the following:
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<PAGE>
2.1.10.1. insurance policies and all rights and claims therein or
thereunder (including prepaid and unearned premiums), including insurance
against casualty (including by fire or earthquake) or liability (including
against environmental cleanup costs), title insurance, business interruption
insurance and builders risk insurance, whether covering personal or real
property;
2.1.10.2. any and all leases of real or personal property,
licensing agreements and other contracts (including the contracts listed on
Schedule 2.1.10.2.);
2.1.10.3. any and all Governmental Approvals, including permits,
licenses, certificates of use and occupancy (or their equivalents) and zoning
and other approvals, and tax and other refunds, compensation, awards, payments
and relief given or made by any Governmental Authority (including condemnation
awards) (the "Approvals"); and
---------
2.1.10.4. deposits, surety and other bonds, choses and things in
action, goodwill, computer programs, computer software (including all source and
object codes, all media of any type or nature on which such source or object
codes are reproduced, copied, stored or maintained), technology processes,
proprietary information, patents, patent applications, copyrights, copyright
applications, trademarks, trademark applications, service marks, trade and other
names, trade secrets and customer lists, including the intellectual property
rights listed on Schedule 2.1.10.4.
2.1.11. Any and all books and records (including ledgers,
correspondence, credit files, computer software, computer storage media and
electronically recorded data) pertaining to the Grantor or any of the foregoing
and all equipment, receptacles, containers and cabinets therefor;
2.1.12. Any and all accessions, appurtenances, components, repairs,
repair parts, spare parts, renewals, improvements, replacements, substitutions
and additions to, of or with respect to any of the foregoing;
2.1.13. Any and all rights, remedies, powers and privileges of the
Grantor with respect to any of the foregoing; and
2.1.14. Any and all proceeds and products of any of the foregoing,
whether now held and existing or hereafter acquired or arising (collectively,
the "Proceeds"). "Proceeds" shall include (i) whatever is now or hereafter
-------- --------
received by the Grantor upon the sale, exchange, collection, other disposition
or operation of any item of Collateral, whether such proceeds constitute
accounts, general intangibles, instruments, securities, documents, letters of
credit, chattel paper, deposit accounts, money, goods or other personal
property, (ii) any items that are now or hereafter acquired by the Grantor with
any Proceeds of Collateral, (iii) any amounts now or hereafter payable under any
insurance policy by reason of any loss of or damage to any Collateral or the
business of the Grantor, (iv) all rights to payment and payments for hotel room
occupancy (and related reservations) and the sale of services or products in
connection therewith and (v) the right to further transfer, including by pledge,
mortgage, license, assignment or sale, any of the foregoing, provided that
--------
Proceeds shall not include any Excluded Assets.
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Section 2.2. Secured Obligations. The Security Interest shall secure
-------------------
the due and punctual payment and performance of any and all present and future
obligations and liabilities of the Grantor of every type or description to any
Secured Party under the Indenture or any other Note Document:
2.2.1. arising under or in connection with the Indenture,
whether for principal of or premium (if any) or interest on the Notes, expenses,
indemnities or other amounts (including attorneys' fees and expenses); or
2.2.2. arising under or in connection with this Agreement or any
other Note Document, including for reimbursement of amounts permitted to be
advanced or expended by the Trustee (i) to satisfy amounts required to be paid
by the Grantor under this Agreement or any other Note Document for claims and
Charges, together with interest thereon to the extent provided or (ii) to
maintain or preserve any Collateral or to create, perfect, continue or protect
any Collateral or the Security Interest therein, or its priority;
in each case whether due or not due, direct or indirect, joint and/or several,
absolute or contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, now or hereafter existing, renewed or restructured,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, whether or not arising after the commencement of a
proceeding under the Bankruptcy Code (including post-petition interest) and
whether or not recovery of any such obligation or liability may be barred by a
statute of limitations or such obligation or liability may otherwise be
unenforceable (all obligations and liabilities described in this Section 2.2.
are collectively referred to as the "Secured Obligations").
-------------------
ARTICLE 3.
WARRANTIES AND REPRESENTATIONS
------------------------------
The Grantor makes the following representations and warranties, all of
which shall survive until termination of this Agreement pursuant to Section 6.7.
Section 3.1. Filings, Etc. 3.1.1. Duly executed financing statements
------------
containing a correct description of the Collateral have been delivered to the
Trustee for filing in every governmental office in every state, county and other
jurisdiction in which the principal or any other place of business or the chief
executive office of the Grantor, or any portion of the Collateral, is located
and in each jurisdiction in which such action is necessary to establish a valid
and perfected Lien in favor of the Trustee in all Collateral in which a Lien may
be perfected by filing, and no further or subsequent filing, recording or
registration is necessary in any such jurisdiction, except as provided under
Applicable Law with respect to the filing of continuation statements.
3.1.2. All Pledged Collateral has been delivered to the Trustee
to the extent required hereby.
3.1.3. The Grantor has executed and delivered to the Trustee for
filing with the United States Patent and Trademark Office a written notice in
the form of Exhibit 3.1.3. (a "Notice of Security Interest in Patents and
------------------------------------------
Trademarks"), duly completed and executed, with respect to each patent, patent
- ----------
application, trademark, servicemark, trademark application and servicemark
application in which the Grantor has an interest.
3.1.4. All other Supplemental Documentation necessary to perfect
the Security Interest with respect to all Patents, Trademarks and Copyrights (as
defined in
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Section 3.5.) has been delivered to the Trustee for filing in the appropriate
governmental office.
Section 3.2. Locations of Collateral, Offices and Names. (i) The
------------------------------------------
Grantor's chief executive office and principal place of business is located at
the address set forth on Schedule 3.2., (ii) all other places of business of the
Grantor and all other locations at which any tangible Collateral or books and
records related to any Collateral are (or during the past four months were)
located are set forth on Schedule 3.2., (iii) the Grantor's federal tax
identification number is set forth on Schedule 3.2., and (iv) there are no prior
or current trade or legal names used to identify the Grantor in its business or
in the ownership of its properties other than those set forth on Schedule 3.2.
Section 3.3. Title to Collateral; Validity and Perfection of Security
--------------------------------------------------------
Interest; Absence of Other Liens. 3.3.1. Subject to the Permitted Liens, the
- --------------------------------
Grantor has good and marketable title to, or valid and subsisting leasehold
interests in, all Collateral reflected on its financial statements as being
owned or leased by it and "rights" in all other Collateral within the meaning of
Section 9-203 of the UCC.
3.3.2. The Security Interest constitutes a valid and, upon the
filing of financing statements covering the Collateral and other documents
referred to in Section 3.1. with the appropriate Governmental Authorities or
other Persons referred to in such Section, perfected Lien in all of the
Collateral and secures payment and performance of the Secured Obligations. The
Collateral is free and clear of all Liens other than the Security Interest and
other Permitted Liens.
3.3.3. Except for financing statements in favor of the Trustee,
the Grantor has filed no now-effective financing statement covering the
Collateral.
Section 3.4. Notes Receivable. Schedule 2.1.2. lists all Notes
----------------
Receivable of the Grantor. There are no setoffs or counterclaims or disputes
existing or asserted with respect to any such Notes Receivable.
Section 3.5. Patents, Trademarks and Copyrights. Schedule 2.1.10.4.
----------------------------------
lists all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights and copyright applications
(collectively, "Patents, Trademarks and Copyrights") in which the Grantor has an
----------------------------------
interest. Except as disclosed on Schedule 2.1.10.4., all Patents, Trademarks and
Copyrights are valid and enforceable and the relevant Grantor is the sole and
exclusive owner of each of the Patents, Trademarks and Copyrights, free and
clear of any Liens other than Liens permitted under the Indenture (including
licenses, shop rights and covenants not to sue listed on Schedule 2.1.10.4.
ARTICLE 4.
COVENANTS AND AGREEMENTS
------------------------
Section 4.1. Further Assurances. The Grantor shall, at its own
------------------
expense, perform such acts as may be necessary, or that the Trustee may request
at any time, to assure the attachment and perfection of the Security Interest,
to exercise the rights and remedies of the Trustee hereunder or to carry out the
intent of this Agreement. Without limitation, the Grantor shall execute and
deliver (or cause any third party to execute and deliver) to the Trustee, at any
time and from time to time, all Supplemental Documentation, in form and
substance acceptable to the Trustee.
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Section 4.2. Inspection and Verification. The Grantor shall keep or
---------------------------
cause to be kept accurate and complete records of the Collateral at the
Grantor's chief executive office. The Trustee and its employees and agents shall
have the right, at all times during the Grantor's usual business hours upon
reasonable notice, to (i) inspect, and verify the quality, quantity, value and
condition of, or any other matter relating to, the Collateral, (ii) inspect all
records relating thereto and to make (or require the Grantor to provide) copies
of such records and (iii) enter upon all premises upon which any of the
Collateral is located. Notwithstanding the foregoing, the Trustee shall not
contact third parties in making such inspection or verification unless an Event
of Default shall then exist.
Section 4.3. Power of Attorney. The Grantor hereby irrevocably
-----------------
appoints (the appointment being irrevocable because it is coupled with an
interest) the Trustee and its employees and agents as the Grantor's true and
lawful attorneys-in-fact, with full power of substitution, (i) to do all things
required to be done by the Grantor under this Agreement or the other Note
Documents and (ii) to do all things that the Trustee may deem necessary or
advisable to assure the attachment, perfection and priority of the Security
Interest or otherwise to exercise the rights and remedies of the Trustee
hereunder or carry out the intent of this Agreement, in each case irrespective
of whether a Default or Event of Default then exists (except as provided in
Section 4.3.5.,) and at the Grantor's expense. Without limitation, the Trustee
and its officers and agents shall be entitled to do all of the following, as
fully as the Grantor might:
4.3.1. to sign the name of the Grantor on any Supplemental
Documentation and to deliver and file such Supplemental Documentation to or with
such Persons as the Trustee, in its discretion, may elect;
4.3.2. to sign any certificate of ownership, registration card,
application therefor, affidavits or documents necessary to transfer title to any
of the Collateral, to receive and receipt for all licenses, registration cards
and certificates of ownership;
4.3.3. to affix, by facsimile signature or otherwise, the
general or special endorsement of the Grantor, in such manner as the Trustee
shall deem advisable, to any Pledged Collateral that has been delivered to or
obtained by the Trustee without appropriate endorsement or assignment; and
4.3.4. if the Grantor at any time fails to obtain or maintain
any of the policies of insurance on the Collateral as required under Section
1008 of the Indenture, with endorsements as provided therein, or fails to pay
any premium in whole or in part when due under such policies, to obtain and
maintain such policies of insurance and pay such premiums and take such other
action with respect thereto as the Trustee deems advisable.
4.3.5. during the existence of an Event of Default, without
notice to the Grantor and at such time or times as the Trustee in its discretion
may determine, in the Grantor's or in the Trustee's name:
4.3.5.1. collect any and all amounts due to the Grantor
from Account Debtors with respect to Receivables by legal proceedings or
otherwise;
4.3.5.2. make, settle and adjust any claims under
insurance policies and make any decisions with respect thereto; and
4.3.5.3. attend and vote at any and all meetings of the
holders of Securities and to execute any and all written consents of such
holders with the same effect as if
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<PAGE>
the Grantor had personally attended and voted at such meetings or had personally
signed such consents.
The Trustee shall be under no obligation whatsoever to take any of the
foregoing actions, and absent bad faith or willful misconduct, the Trustee and
its shareholders, directors, officers, employees and agents shall have no
liability or responsibility for any act taken or omitted with respect thereto.
A copy of this Agreement and, if applicable, a statement by the Trustee that an
Event of Default exists shall be conclusive evidence of the Trustee's right to
act under this Section 4.3. as against all third parties.
Section 4.4. Changes of Locations of Collateral, Offices, Name or
----------------------------------------------------
Structure. The Grantor shall not remove any Collateral, books or records to, or
- ---------
keep any Collateral, books or records or do business at, a location not set
forth on Schedule 3.2., adopt a trade name or change its name, chief executive
office, principal place of business, identity or corporate structure without
first giving the Trustee 15 Business Days' prior written notice of such removal,
change or adoption.
Section 4.5. Payment of Charges and Claims. The Grantor shall pay (i)
-----------------------------
all Charges imposed upon any Collateral and (ii) all claims (including claims
for labor, services and materials) that have become due and payable and, under
Applicable Law, have or may become Liens (other than Permitted Liens) upon any
Collateral, in each case before any penalty shall be incurred with respect
thereto; provided that, unless foreclosure, levy or similar proceedings shall
-------------
have commenced, the Grantor need not pay or discharge any such Charges or claims
so long as the validity or amount thereof is being contested in good faith and
by appropriate proceedings and so long as adequate reserves therefor have been
established in accordance with GAAP. If the Grantor fails to pay or obtain the
discharge of any Charge, claim or Lien required to be paid or discharged under
this Section 4.5. and asserted against portion of the Collateral, the Trustee
may, at any time and from time to time, in its discretion and without waiving or
releasing any obligation of the Grantor under this Agreement or the other Note
Documents or waiving any Default or Event of Default, make such payment, obtain
such discharge or take such other action with respect thereto as the Trustee
deems advisable.
Section 4.6. Continuing Obligations of the Grantor; Indemnity. 4.6.1.
------------------------------------------------
The Grantor shall remain liable to observe and perform all agreements and other
obligations relating to or included in the Collateral (the "Contractual
-----------
Obligations") in accordance with their respective terms. The Trustee shall not
- -----------
have any duty, obligation or liability under or with respect to any such
Contractual Obligations, whether by reason or arising out of this Agreement, the
receipt by the Trustee of any payment relating to any such Contractual
Obligation or otherwise, and the Grantor agrees to indemnify and hold harmless
the Trustee from any and all such obligations and liabilities.
4.6.2. The Trustee shall have no duty of care with respect to
the Collateral, except that the Trustee shall have an obligation to exercise
reasonable care with respect to Collateral in its possession; provided that (i)
--------
the Trustee shall be deemed to have exercised reasonable care if Collateral in
its possession is accorded treatment substantially comparable to that which such
the Trustee accords its own property, and (ii) the Trustee shall have no
obligation to take any actions to preserve rights against other parties or
property with respect to any Collateral. Without limitation, the Trustee shall
(A) bear no risk or expense with respect to any Collateral and (B) have no duty
with respect to calls, conversions, presentments, maturities, notices or other
matters relating to Pledged Collateral, or to maximize interest or other returns
with respect thereto.
4.6.3. The Trustee may at any time deliver or redeliver the
Collateral or any part thereof to the Grantor and the receipt of any of the same
by the Grantor shall be
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<PAGE>
complete and full acquittance for the Collateral so delivered, and the
Trustee thereafter shall be discharged from any liability or responsibility
therefor.
4.6.4. The Grantor hereby agrees to indemnify and hold harmless
the Trustee and its directors, officers, employees and agents against any and
all claims, actions, liabilities, costs and expenses of any kind or nature
whatsoever (including fees and disbursements of counsel) that may be imposed on,
incurred by, or asserted against any of them, in any way relating to or arising
out of this Agreement or any action taken or omitted by them hereunder, except
to the extent a court holds in a final and nonappealable judgment that they
resulted from the gross negligence or willful misconduct of such Persons against
and from all such obligations and liabilities.
Section 4.7. Sale of Collateral; Further Encumbrances. The Grantor
----------------------------------------
shall not (i) except for dispositions of Inventory in the ordinary course of the
Grantor's business and other dispositions not prohibited by the Indenture or the
other Note Documents (collectively, "Permitted Sales") sell, lease or otherwise
---------------
dispose of any Collateral, or any interest therein, or (ii) grant or suffer to
exist any Lien in or on any Collateral (except Liens permitted under the
Indenture) or sign or authorize the filing of any financing statement with
respect to any of the Collateral (except with respect to Liens permitted under
the Indenture). Concurrently with any Permitted Sale, the Security Interest
shall automatically be released from the Collateral so disposed of; provided,
--------
however that the Security Interest shall continue in the Proceeds thereof. If
- -------
any Collateral, or any interest therein, is disposed of in violation of these
provisions, the Security Interest shall continue in such Collateral or interest
notwithstanding such disposition, the Person to which the Collateral or interest
is being transferred shall be bound by this Agreement, and the Grantor shall
deliver all Proceeds thereof to the Trustee to be held as Collateral hereunder.
Section 4.8. Delivery of Pledged Collateral. The Grantor shall deliver
------------------------------
to the Trustee, together with appropriate endorsements or documentation of
assignment thereof acceptable to the Trustee, any and all Notes Receivable or
Chattel Paper having a face amount, negotiable Documents evidencing title to any
Collateral having a fair market value, and all certificated Securities having a
fair market value, individually or in the aggregate, equal to or greater than
$100,000 (collectively, the "Pledged Collateral").
------------------
Section 4.9. Protection of Security; Notice of Levy. The Grantor
--------------------------------------
shall, at its own cost and expense, take any and all actions necessary to defend
title to the Collateral against all Persons and against all claims and demands
and to preserve, protect and defend the Security Interest and the priority
thereof, against any adverse Liens not permitted under the Note Documents. The
Grantor will promptly notify the Trustee of any attachment or other legal
process levied against any Collateral.
Section 4.10. Equipment and Fixtures. The Grantor, at its expense,
----------------------
shall cause the Equipment and Fixtures to be maintained and preserved in the
same condition, repair and working order as when new, ordinary wear and tear
excepted.
ARTICLE 5.
EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
-------------------------------------------------
Section 5.1. Event of Default. The occurrence of one or more "Events
----------------
of Default" (as defined in the Indenture) shall constitute an "Event of
Default."
Section 5.2. Remedies. If an Event of Default occurs, then whether or
--------
not all the Secured Obligations shall have become immediately due and payable:
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5.2.1. In addition to all its other rights, powers and remedies under
this Agreement and Applicable Law, the Trustee shall have, and may exercise, any
and all of the rights, powers and remedies of a secured party under the UCC, all
of which rights, powers and remedies shall be cumulative and not exclusive, to
the extent permitted by Applicable Law.
5.2.2. The Trustee shall have the right, all at the Trustee's sole
option and as the Trustee in its discretion may deem necessary or advisable, to
do any or all of the following:
5.2.2.1. to foreclose the Security Interest by any available
judicial procedure or without judicial process;
5.2.2.2. to enter upon the premises of the Grantor or any other
place or places where Collateral is located through self-help and without
judicial process, without giving the Grantor notice and opportunity for a
hearing on the validity of the Trustee's claim and without any obligation to pay
rent;
5.2.2.3. to inspect and appraise the Collateral and to prepare,
repair, assemble or process the Collateral for sale, lease or other disposition;
5.2.2.4. to remove Collateral to the premises of the Trustee or
any other location selected by the Trustee, for such time as the Trustee may
desire, for any purpose not prohibited hereby;
5.2.2.5. to apply any Collateral or any other assets of the
Grantor in the possession of the Trustee to the Secured Obligations;
5.2.2.6. to notify Account Debtors and other obligors on the
Collateral that the Collateral has been assigned to the Trustee and that all
payments thereon are to be made directly and exclusively to or as specified by
the Trustee;
5.2.2.7. to collect by legal proceedings or otherwise all
dividends, distributions, interest, principal or other sums now or hereafter
payable upon or on account of the Collateral;
5.2.2.8. to enter into any extension or reorganization agreement
or any other agreement relating to or affecting the Collateral and, in
connection therewith, deposit or surrender control of any Collateral or accept
other property in exchange therefor;
5.2.2.9. to settle, compromise or release, on terms acceptable to
the Trustee, in whole or in part, any amounts owing on the Collateral or any
insurance thereof or relating thereto or any disputes with respect thereto or
such insurance;
5.2.2.10. to receive, open and dispose of all mail addressed to
the Grantor and notify postal authorities to change the address for delivery
thereof to such address as the Trustee may designate, provided that the Trustee
-------------
agrees that it will promptly deliver over to the Grantor any such opened mail as
does not relate to the Collateral;
5.2.2.11. to exercise all rights and powers under Contractual
Obligations included in the Collateral, including the Project Contracts; and
5.2.2.12. to exercise any and all other rights, powers,
privileges and remedies of an owner of the Collateral.
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<PAGE>
5.2.3. The Grantor shall, at the Trustee' request, assemble the
Collateral and make it available to the Trustee at a place to be designated by
the Trustee. The Grantor shall make available to the Trustee all computer and
other equipment of the Grantor containing books and records pertaining to the
Collateral (and the assistance of the employees of the Grantor having
responsibility for such equipment) and to use such computer and other equipment
at no charge for the purpose of obtaining information pertaining to the
Collateral, including by making copies of computer and other files and records.
5.2.4. Until the Trustee is able to effect a sale, lease or other
disposition of Collateral or any part thereof, the Trustee shall have the right
to use, process or operate the Collateral or any part thereof to the extent that
it deems appropriate for the purpose of preserving Collateral or its value or
for any other purpose deemed appropriate by the Trustee. The Trustee shall have
the right, without notice or demand, either in person or by agent, and without
regard to the adequacy of any security for the Secured Obligations, to take
possession of the Collateral or any part thereof and to collect and receive the
rents, issues, profits, income and proceeds thereof. Taking possession of the
Collateral shall not cure, waive or affect an Event of Default or notice thereof
or invalidate any act done pursuant to such notice.
5.2.5. The Trustee may, if it so elects, as a matter of strict right
and without regard to the then value of the Collateral, seek the appointment of
a receiver or keeper to take possession of Collateral and to enforce any of the
Trustee's remedies with respect to such appointment without prior notice or
hearing. The rights, remedies and powers of any receiver appointed by a court
shall be as ordered by the court.
5.2.6. The Trustee shall have the right to sell, lease, or otherwise
dispose of all or any Collateral in its then existing condition, or after any
further assembly, manufacturing or processing thereof, at public or private sale
or sales, with such notice as may be required by Section 5.4., in lots or in
bulk, for cash or on credit, with or without representations or warranties, all
the Trustee, in its discretion, may deem advisable. The Trustee shall not be
obligated to make any sale of the Collateral regardless of notice of sale having
been given. If sale of all or any part of the Collateral is made on credit or
for future delivery, the Collateral so sold may be retained by the Trustee until
the sale price is paid by the purchaser or purchasers thereof, but the Trustee
shall not incur any liability in case any such purchaser or purchasers shall
fail to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may be sold again upon like notice. The Trustee shall
have the right to conduct such sales on the Grantor's premises or elsewhere and
shall have the right to use the Grantor's premises without charge for such sales
for such duration as the Trustee deem necessary or advisable. The Collateral
need not be present at any such sales. To the extent necessary or desirable, in
the judgment of the Trustee, to enable the Trustee to dispose of Collateral
following an Event of Default, the Trustee is authorized, without any obligation
for rent, license fees or other charge, to use the supplies, equipment,
facilities and space at the Grantor's place of business and is hereby granted a
license or other right to use, without charge, the Patents, Trademarks and
Copyrights, trade secrets, names, trade names, customer lists, labels,
advertising matter, and all property of a similar nature that the Grantor owns
or is entitled to use, as it pertains to any Collateral, in preparing,
repairing, assembling, processing, advertising for sale or lease or otherwise in
connection with the disposition of any Collateral, and the Grantor's rights
under all licenses and all franchise agreements shall to such extent and for
such purpose inure to the Trustee' benefit. The Trustee may purchase all or any
part of the Collateral at public or, if permitted by Applicable Law, private
sale, and in lieu of actual payment of the purchase price, the Trustee may apply
against such purchase price any amount of the Secured Obligations. The Grantor
agrees that any sale of Collateral conducted by the Trustee in accordance with
the foregoing provisions of this Section and Section 5.3. shall be deemed to be
a commercially reasonable sale under Section 9-504 of the UCC.
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Section 5.3. Application of Proceeds.
-----------------------
5.3.1. Any cash proceeds received by the Trustee in respect of
any sale of, collection from, or other realization upon, all or any part of the
Collateral following the occurrence of an Event of Default (including insurance
proceeds) may be held by the Trustee as Collateral and/or then or at any time
thereafter applied as follows:
5.3.1.1. first, to the Trustee to pay all advances,
charges, costs and expenses payable to the Trustee pursuant to Section 6.1.; and
5.3.1.2. second, to pay the Secured Obligations in the
order set forth in the Indenture.
5.3.2. The Grantor and any other Person then obligated therefor
shall pay to the Trustee on demand any deficiency with regard to the Secured
Obligations that may remain after such sale, collection or realization of, from
or upon the Collateral.
5.3.3. Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Trustee. The application of proceeds by the Trustee shall be without prejudice
to the Trustee's rights as against the Grantor or other Persons with respect to
any Secured Obligations that may then be or remain unpaid.
5.3.4. If at any time after an Event of Default the Grantor
receives any collections upon or other Proceeds of any Collateral, whether in
the form of cash, Notes Receivable or otherwise, such Proceeds shall be received
in trust for the Trustee and the Grantor shall keep all such Proceeds separate
and apart from all other funds and property so as to be capable of
identification as the property of the Trustee and promptly deliver such Proceeds
to the Trustee in the identical form received.
Section 5.4. Notice of Sale. Unless the Collateral is perishable or
--------------
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Trustee will send or otherwise make available to the
Grantor reasonable notice of the time and place of any public sale or of the
time on or after which any private sale of any Collateral is to be made. The
Grantor agrees that any notice required to be given by the Trustee of a sale or
other disposition of Collateral, or any other intended action by the Trustee,
that is received in accordance with the provisions set forth in Section 6.4. ten
days prior to such proposed action, shall constitute commercially reasonable and
fair notice thereof to the Grantor. The Trustee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor and such sale may, without further notice, be made at the time and
place to which it was so adjourned. The Grantor hereby waives any right to
receive notice of any public or private sale of any Collateral or other security
for the Secured Obligations except as expressly provided for in this Section
5.4.
ARTICLE 6.
GENERAL
-------
Section 6.1. Trustee's Expenses, Including Attorneys' Fees.
---------------------------------------------
Regardless of the occurrence of a Default or Event of Default, the Grantor
agrees to pay to the Trustee any and all advances, charges, costs and expenses,
including the reasonable fees and expenses of counsel and any experts or agents,
that the Trustee may reasonably incur in connection with (i) the administration
of this Agreement, including any amendment thereto or any workout or
restructuring, (ii) the creation, perfection or continuation of the Security
Interest or protection
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of its priority or the Collateral, including the discharging of any prior or
junior Lien or adverse claim against the Collateral or any part thereof that is
not permitted hereby or by the Indenture, (iii) the custody, preservation or
sale of, collection from, or other realization upon, any of the Collateral, (iv)
the exercise or enforcement of any of the rights, powers or remedies of the
Trustee under this Agreement or under Applicable Law (including attorneys' fees
and expenses incurred by the Trustee in the collection of Collateral deposited
with the Trustee and amounts incurred in connection with the operation,
maintenance or foreclosure of the Security Interest) or any bankruptcy
proceeding or (v) the failure by the Grantor to perform or observe any of the
provisions hereof. All such amounts and all other amounts payable hereunder
shall be payable on demand, together with interest at the Default Rate.
Section 6.2. Amendments and Other Modifications. No amendment of any
----------------------------------
provision of this Agreement (including a waiver thereof or consent relating
thereto) shall be effective unless the same shall be in writing and signed by
the Grantor and the Trustee. Any waiver or consent relating to any provision of
this Agreement shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Grantor in any
case shall entitle the Grantor to any other or further notice or demand in
similar or other circumstances.
Section 6.3. Cumulative Remedies; Failure or Delay. The rights and
-------------------------------------
remedies provided for under this Agreement are cumulative and are not exclusive
of any rights and remedies that may be available to the Trustee under Applicable
Law, the other Note Documents or otherwise. No failure or delay on the part of
the Trustee in the exercise of any power, right or remedy under this Agreement
shall impair such power, right or remedy or shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or remedy
preclude other or further exercise of such or any other power, right or remedy.
Section 6.4. Notices, Etc. All notices and other communications under
------------
this Agreement shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid) or
by prepaid telex, telecopy or telegram, and shall be deemed given when received
by the intended recipient thereof. Unless otherwise specified in a notice given
in accordance with the foregoing provisions of this Section 6.4., notices and
other communications shall be given to the parties hereto at their respective
addresses (or to their respective telex or telecopier numbers) indicated on
Schedule 105 of the Indenture.
Section 6.5. Successors and Assigns. This Agreement shall be binding
----------------------
upon and, subject to the next sentence, inure to the benefit of the Grantor and
the Trustee and their respective successors and assigns. The Grantor shall not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Trustee. The benefits of this Agreement shall pass
automatically with any assignment of the Secured Obligations (or any portion
thereof), to the extent of such assignment.
Section 6.6. Payments Set Aside. Notwithstanding anything to the
------------------
contrary herein contained, this Agreement, the Secured Obligations and the
Security Interest shall continue to be effective or be reinstated, as the case
may be, if at any time any payment, or any part thereof, of any or all of the
Secured Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned by the Trustee in
connection with any bankruptcy, reorganization or similar proceeding involving
the Grantor, any other party liable with respect to the Secured Obligations or
otherwise, if the proceeds of any Collateral are required to be returned by the
Trustee under any such circumstances, or if the Trustee reasonably elects to
return any such payment or proceeds or any part thereof in its discretion, all
as though such payment had not been made or such proceeds not been received.
Form of Company Security Agreement
----------------------------------
14
<PAGE>
Without limiting the generality of the foregoing, if prior to any such
rescission, invalidation, declaration, restoration or return, this Agreement
shall have been canceled or surrendered or the Security Interest or any
Collateral shall have been released or terminated in connection with such
cancellation or surrender, this Agreement and the Security Interest and such
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, discharge or otherwise affect the
obligations of the Grantor in respect of the amount of the affected payment or
application of proceeds, the Security Interest or such Collateral.
Section 6.7. Continuing Security Interest; Termination. Except as
-----------------------------------------
otherwise provided in the Indenture with respect to the release of Collateral
under certain circumstances, this Agreement shall create a continuing security
interest in the Collateral and, except as provided below, the Security Interest
and all agreements, representations and warranties made herein shall survive
until, and this Agreement shall terminate only upon, the indefeasible payment
and performance in full of the Secured Obligations. Any investigation at any
time made by or on behalf of the Trustee shall not diminish the right of the
Trustee to rely on any such agreements, representations or warranties herein.
Notwithstanding anything in this Agreement or Applicable Law to the
contrary, the agreements of the Grantor set forth in Sections 4.6.1., 4.6.4. and
6.1. shall survive the payment of all other Secured Obligations and the
termination of this Agreement.
Section 6.8. Waiver and Estoppel. Except as otherwise provided in this
-------------------
Agreement, the Grantor hereby waives: (i) presentment, protest, notice of
dishonor, release, compromise, settlement, extension or renewal and any other
notice of or with respect to the Secured Obligations and hereby ratifies and
confirms whatever the Trustee may do in this regard; (ii) notice prior to taking
possession or control of any Collateral or any bond or security that might be
required by any court prior to allowing the Trustee to exercise any of their
rights, powers or remedies; (iii) the benefit of all valuation, appraisement,
redemption and exemption laws; (iv) any rights to require marshaling of the
Collateral upon any sale or otherwise to direct the order in which the
Collateral shall be sold; (v) any set-off and (vi) any rights to require the
Trustee to proceed against any Person, proceed against or exhaust any Collateral
or any other security interests or guaranties or pursue any other remedy in the
Trustee's power, or to pursue any of such rights in any particular order or
manner, and any defenses arising by reason of any disability or defense of any
Person.
Section 6.9. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 6.10. Complete Agreement. This Agreement, together with the
------------------
exhibits and schedules hereto and the other Note Documents, is intended by the
parties as a final expression of their agreement regarding the subject matter
hereof and as a complete and exclusive statement of the terms and conditions of
such agreement.
Section 6.11. Limitation of Liability. No claim shall be made by the
-----------------------
Grantor against the Trustee or the Affiliates, directors, officers, employees or
agents of the Trustee for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or under any other theory
of liability arising out of or related to the transactions contemplated by this
Agreement and the other Note Documents, or any act, omission or event occurring
in connection therewith; and the Grantor hereby waives, releases and agrees not
to sue upon any claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor.
Form of Company Security Agreement
----------------------------------
15
<PAGE>
Section 6.12. Subsidiary Security Agreement. The Trustee hereby
-----------------------------
acknowledges that it is holding certain collateral pledged pursuant to the
Subsidiary Security Agreement from time to time delivered to it, among other
things, for the Grantor, as Trustee. The Grantor hereby appoints the Trustee as
its Trustee for the foregoing purpose and agrees that, in so holding such
collateral, the Trustee shall be entitled to the immunities, indemnities and
protections set forth in Section 4.6 of the Subsidiary Security Agreement and in
the Indenture, mutatis mutandis.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first set forth above.
Grantor:
-------
USTRAILS INC., a Nevada corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Trustee:
-------
FLEET NATIONAL BANK, a national banking
association, as Trustee
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Form of Company Security Agreement
----------------------------------
16
<PAGE>
SCHEDULE 2.1.2.
NOTES RECEIVABLE
----------------
Company Security Agreement - Schedule 2.1.2.
--------------------------------------------
<PAGE>
SCHEDULE 2.1.10.2.
CONTRACTS
---------
Company Security Agreement - Schedule 2.1.10.2
----------------------------------------------
<PAGE>
SCHEDULE 2.1.10.4.
INTELLECTUAL PROPERTY RIGHTS
----------------------------
Company Security Agreement - Schedule 2.1.10.4
----------------------------------------------
<PAGE>
SCHEDULE 3.2.
LOCATIONS AND NAMES
-------------------
Company Security Agreement - Schedule 3.2
-----------------------------------------
<PAGE>
EXHIBIT 3.1.3.
NOTICE OF SECURITY INTEREST IN PATENTS AND TRADEMARKS
-----------------------------------------------------
NOTICE IS HEREBY GIVEN that USTrails Inc., a Nevada corporation
(the "Grantor"), with an office located at _________________, and Fleet
-------
National Bank, as Trustee (the "Trustee"), with an office located at
-------
________________, on behalf of the trustee and the holders of certain Notes
issued under an Indenture dated as of July ___, 1996 (collectively, the
"Secured Parties"), have entered into a Security Agreement dated as of
----------------
_______________ (as amended from time to time, the "Security Agreement").
------------------
Pursuant to the Security Agreement, the Grantor has granted,
conveyed, pledged, assigned and transferred to the Trustee, for the benefit of
the Secured Parties, a security interest in, (a) the registered patents,
applications for registration of patents, and licenses of registered patents
listed in Schedule A hereto, and (b) the registered trademarks and service
marks, applications for registration of trademarks and service marks, and
licenses of registered trademarks and service marks listed in Schedule B
hereto, together with the goodwill of the business symbolized thereby, to
secure the payment, performance and observance of the Secured Obligations as
defined in the Security Agreement.
The Commissioner of Patents and Trademarks is requested to record
this notice in its records.
Dated: ________________
USTRAILS INC, a Nevada corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Company Security Agreement - Schedule 3.1.3
-------------------------------------------
1
<PAGE>
SCHEDULE A
TO
NOTICE OF SECURITY INTEREST IN PATENTS AND TRADEMARKS
FROM
USTRAILS INC.
1. Patents.
-------
Patent Registration No. Registration Date
2. Applications for Federal Registration of Patents.
------------------------------------------------
Patent Serial No. Filing Date
Company Security Agreement - Schedule 3.1.3
-------------------------------------------
2
<PAGE>
SCHEDULE B
TO
NOTICE OF SECURITY INTEREST IN PATENTS AND TRADEMARKS
FROM
USTRAILS INC.
1. Federal Trademark and Service Mark Registrations.
------------------------------------------------
Trademark/Service Mark Registration No. Registration Date
2. Trademark and Service Mark Applications for Federal Registration.
----------------------------------------------------------------
Trademark/Service Mark Serial No. Filing Date
Company Security Agreement - Schedule 3.1.3
-------------------------------------------
3
<PAGE>
State of }
-------------------------}
County of }
------------------------}
On DATE before me, NAME, TITLE OF OFFICER ,
-------------------------- --------------------------------------
personally appeared NAME(S) OF SIGNERS ,
---------------------------------------------
[_] personally known to me - OR - [_] proved to me on the basis of
satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
----------------------------------
SIGNATURE OF NOTARY
Company Security Agreement - Schedule 3.1.3
-------------------------------------------
4
<PAGE>
EXHIBIT D-2
FORM OF SUBSIDIARY SECURITY AGREEMENT
-------------------------------------
SUBSIDIARY SECURITY AGREEMENT, dated ___________ (as may be
amended from time to time, the "Agreement") among the corporations named as
---------
"Grantors" on the signature pages hereof (each individually a "Grantor" and all,
-------
collectively, the "Grantors"), USTrails Inc., a Nevada corporation (including
--------
its successors and assigns, "Company") and Fleet National Bank, a national
-------
banking association ("Fleet"), as trustee for (i) itself as Trustee under the
-----
Indenture dated as of July 17, 1996 (as such may be amended from time to time,
the "Indenture"), by and among the Company, the Grantors and Fleet, as trustee
---------
(in such capacity, the "Trustee"), and for Persons that now or in the future are
-------
holders of the Notes (as defined below) issued under the Indenture (the
"Holders") and (ii) the Company (in such capacities, and in its capacity as
-------
transferee of the Company's interests hereunder pursuant to the terms of the
Company Pledge Agreement (as defined below), Fleet or any successor in such
capacity is referred to herein as the "Collateral Agent"). Capitalized terms
----------------
defined in the Indenture shall, unless otherwise defined herein, have the
meanings given them in the Indenture.
R E C I T A L S
- - - - - - - -
A. The Grantors are Wholly Owned Subsidiaries of the Company.
B. Pursuant to the Indenture the Company will issue $40,241,000
principal amount of Senior Subordinated Pay-In-Kind Notes, plus the additional
principal amount of Senior Subordinated Pay-in-Kind Notes issued pursuant to
Section 301 of the Indenture (the "Notes").
-----
C. Pursuant to a guarantee (as may be amended from time to time, the
"Subsidiary Guarantee") included in the Indenture, the Grantors have jointly and
--------------------
severally guaranteed the obligations of the Company under the Notes, the
Indenture and the other Note Documents to which the Company is a party.
D. The Company may, from time to time in the future, make Permitted
Intercompany Secured Loans to the Subsidiaries referred to in the Indenture. To
evidence the Permitted Intercompany Secured Loans, each of the Subsidiaries will
execute and deliver upon receipt of the loan proceeds to the Company a
promissory note.
E. Pursuant to the Indenture, the Permitted Intercompany Secured
Loans and the Subsidiary Guarantee are required to be secured by, among other
things, this Agreement and the Collateral described herein.
F. Pursuant to a Company Pledge Agreement dated as of the date hereof
(as may be amended from time to time, the "Company Pledge Agreement") by and
------------------------
between the Company and the Collateral Agent, the Company has pledged all
Permitted Intercompany Secured Loans and the related promissory notes (the
"Permitted Intercompany Secured Notes") and the collateral hereunder as
- -------------------------------------
collateral for the Company's obligations under the Notes, the Indenture and the
other Note Documents to which the Company is a party.
Form of Subsidiary Security Agreement
-------------------------------------
<PAGE>
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
Section 1.1. Definitions. Terms with initial capital letters not
-----------
otherwise defined herein have the respective meanings set forth in the
Indenture. In addition, the following terms with initial capital letters have
the following meanings:
"Accounts" has the meaning set forth in Section 2.1.
--------
"Account Debtor" means any Person who is or who may become obligated
--------------
to any Grantor on any Receivable.
"Applicable Priority" means, with respect to the Senior Lien, first
-------------------
priority and, with respect to the Junior Lien, second priority, subject only to
the Senior Lien.
"Charges" means all federal, state, county, city, municipal or other
-------
taxes, levies, assessments or charges that, if not paid when due, may result in
a Lien of any Governmental Authority against Collateral.
"Chattel Paper" has the meaning set forth in Section 2.1.
-------------
"Event of Default" has the meaning set forth in Section 5.1.
----------------
"Excluded Assets" means, collectively, "Excluded Assets" as defined in
---------------
the Indenture and "Pledged Collateral" as defined in the Subsidiary Pledge
Agreement.
"Permitted Intercompany Loan Obligations" has the meaning set forth in
---------------------------------------
Section 2.2.1.2.
"Pledged Collateral" has the meaning set forth in Section 4.8.
------------------
"Proceeds" has the meaning set forth in Section 2.1.14.
--------
"Receivables" means Accounts, Notes Receivable, Chattel Paper and
-----------
other rights to the payment of money.
"Secured Obligations" has the meaning set forth in Section 2.2.
-------------------
"Secured Parties" means, collectively, the Collateral Agent, the
---------------
Trustee, the Holders, and, solely with respect to the Junior Lien, the Company
and the respective successors and permitted assigns of such Persons.
Form of Subsidiary Security Agreement
-------------------------------------
2
<PAGE>
"Security Interest" has the meaning set forth in Section 2.1.
-----------------
"Senior Lien" has the meaning set forth in Section 2.3.
-----------
"Subsidiary Guarantee Obligations" has the meaning set forth in
--------------------------------
Section 2.2.1.1.
"Supplemental Documentation" means financing statements, continuation
--------------------------
statements, warehouse receipts, bills of lading, assignment of accounts,
patents, trademarks or copyrights, schedules of Collateral, mortgages and other
instruments or documents necessary or requested by the Collateral Agent (i) to
create, perfect and maintain perfected the Security Interest on any Collateral,
or (ii) so that the Collateral Agent receives all interest, dividends and
distributions from time to time paid with respect to, and all other Proceeds of,
all Collateral the Collateral Agent is entitled to receive hereunder.
"UCC" means the Uniform Commercial Code (as amended from time to time)
---
of the State of Texas.
Section 1.2. Related Matters. 1.2.1. Terms Used in the UCC. Unless
--------------- ---------------------
the context clearly otherwise requires, all lower-case terms used and not
otherwise defined herein that are used or defined in Article 9 (or any
equivalent subpart) of the UCC have the same meanings herein.
1.2.2. Construction. Unless the context of this Agreement clearly
------------
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, and "including" is not
limiting. The words "hereof," "herein," "hereby," "hereunder" and similar terms
in this Agreement refer to this Agreement as a whole (including the Preamble,
the Recitals and all Schedules and Exhibits, but subject to Section 1.2.5) and
not to any particular provision of this Agreement. Article, section, subsection,
exhibit, recital, preamble and schedule references in this Agreement are to this
Agreement unless otherwise specified. References in this Agreement to any
agreement, other document or law "as amended" or "as may be amended from time to
time," or to amendments of any document or law, shall include any amendments,
supplements, replacements, renewals or other modifications.
1.2.3. Determinations. Any determination or calculation contemplated
--------------
by this Agreement that is made by the Collateral Agent shall be final and
conclusive and binding upon each Grantor and Company, in the absence of manifest
error. References in this Agreement to "determination" by the Collateral Agent
include good faith estimates (in the case of quantitative determinations) and
good faith beliefs (in the case of qualitative determinations). All references
herein to "discretion" of the Collateral Agent (or terms of similar import)
shall mean "absolute and sole discretion." All consents and other actions of the
Collateral Agent contemplated by this Agreement may be given, taken, withheld or
not taken in the Collateral Agent's discretion (whether or not so expressed),
except as otherwise expressly provided herein.
1.2.4. Governing Law. Except to the extent otherwise required under
-------------
Applicable Law, the UCC shall govern the attachment, perfection, priority and
enforcement of the Security
Form of Subsidiary Security Agreement
-------------------------------------
3
<PAGE>
Interest and all other matters to which the UCC applies pursuant to the
terms thereof. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Texas.
1.2.5. Headings. The Article and Section headings used in this
--------
Agreement are for convenience of reference only and shall not affect the
construction hereof.
1.2.6. Severability. If any provision of this Agreement or any Lien or
------------
other right hereunder shall be held to be invalid, illegal or unenforceable
under Applicable Law in any jurisdiction, such provision, Lien or other right
shall be ineffective only to the extent of such invalidity, illegality or
unenforceability, which shall not affect any other provisions herein or any
other Lien or right granted hereby or the validity, legality or enforceability
of such provision, Lien or right in any other jurisdiction.
1.2.7. Exhibits and Schedules. All of the appendices, exhibits and
----------------------
schedules attached to this Agreement shall be deemed incorporated herein by
reference.
ARTICLE 2.
THE SECURITY INTEREST; SECURED OBLIGATIONS
------------------------------------------
Section 2.1. Security Interest. To secure the payment and performance
-----------------
of the Secured Obligations as and when due, each Grantor hereby grants, conveys,
pledges, assigns and transfers (a) to the Collateral Agent, as agent and
representative for the equal and ratable benefit of the Trustee and the Holders,
and (b) if such Grantor is the recipient of a Permitted Intercompany Secured
Loan, to the Collateral Agent, as agent and representative of the Company, a
security interest (collectively, the "Security Interest") in, all right, title,
-----------------
claim, estate and interest of such Grantor in and to all property and interests
in property, other than Excluded Assets, whether now owned and existing or
hereafter acquired or arising, and wherever located (such property and interests
in property, subject to Permitted Liens and other than Excluded Assets, being,
collectively, the "Collateral"), including the following (except as such
----------
constitutes Excluded Assets):
2.1.1. Any and all rights to payment for goods sold or leased or for
services rendered, including any such rights evidenced by Chattel Paper, whether
due or to become due and whether or not earned by performance (excluding any
such rights evidenced by Notes Receivable, the "Accounts");
--------
2.1.2. Any and all negotiable instruments, promissory notes,
acceptances, drafts, checks, certificates of deposit and other writings that
evidence a right to the payment of money by any other Person, including the
writings listed on Schedule 2.1.2 (the "Notes Receivable");
----------------
2.1.3. Any and all chattel paper, including writings that evidence
both a monetary obligation and a security interest in or lease of specific goods
(the "Chattel Paper");
-------------
Form of Subsidiary Security Agreement
-------------------------------------
4
<PAGE>
2.1.4. Any and all rights to payment:
2.1.4.1. to the extent not included in Accounts, Notes
Receivable or Chattel Paper, receivable from any credit card company (such as
Visa, Mastercard, American Express and Diner's Club), whether arising out of or
relating to the sale of lodging, goods and services by any Grantor or otherwise;
2.1.4.2. of money not listed above and any and all rights,
titles, interests, securities, Liens and guaranties evidencing, securing,
guaranteeing payment of or in any way relating to any Receivables;
2.1.5. Any and all goods that may at any time be held for sale or
lease or to be furnished under any contract of service, be so leased or
furnished, or constitute raw materials, work in process, parts, supplies or
materials that are or might be used or consumed in a business or in connection
with the manufacture, selling or leasing of such goods ("Inventory");
---------
2.1.6. Any and all equipment and other goods (excluding Inventory),
including the following personal property (together with all related property
described in Section 2.1.12 the "Equipment"):
---------
2.1.6.1. machinery, machine tools, office machinery (including
computers, typewriters and duplicating machines), motor vehicles, trailers,
rolling stock, motors, pumps, controls, tools, parts, works of art, furniture,
furnishings and trade fixtures, all athletic equipment and supplies, and all
molds, dies, drawings, blueprints, reports, catalogs and computer programs
related to any of the above;
2.1.6.2. stones, wood, steel and other materials used or to be
used in the building, construction, repair, renovation, refurbishment or
otherwise with respect to Improvements (as defined in any Mortgage to which such
Grantor is a party) or ships, boats, barges or vessels;
2.1.7. Any and all fixtures, including machinery, equipment or
appliances for generating, storing or distributing air, water, heat,
electricity, light, fuel or refrigeration, for ventilating or sanitary purposes,
elevators, safes, laundry, kitchen and athletic equipment, trade fixtures, and
telephone, television and other communications equipment (the "Fixtures");
--------
2.1.8. Any and all documents, whether or not negotiable, including
bills of lading, warehouse receipts, trust receipts and the like (the
"Documents");
---------
2.1.9. Any and all stocks, bonds, general and limited partnership
interests, joint venture interests, limited liability company interests and
other securities, subscription rights, options, warrants, puts, calls and other
rights with respect thereto, and investment and brokerage accounts (the
"Securities"), including those specified on Schedule 2.1.9;
----------
2.1.10. Any and all general intangibles and contract rights (together
with any property listed under Section 2.1.4. above, the "General Intangibles"),
-------------------
including the following:
Form of Subsidiary Security Agreement
-------------------------------------
5
<PAGE>
2.1.10.1. insurance policies and all rights and claims therein or
thereunder (including prepaid and unearned premiums), including insurance
against casualty (including by fire or earthquake) or liability (including
against environmental cleanup costs), title insurance, business interruption
insurance and builders risk insurance, whether covering personal or real
property;
2.1.10.2. any and all leases of real or personal property, licensing
agreements and other contracts (including the contracts listed on Schedule
2.1.10.2.),;
2.1.10.3. any and all Governmental Approvals, including permits,
licenses, certificates of use and occupancy (or their equivalents) and zoning
and other approvals, and tax and other refunds, compensation, awards, payments
and relief given or made by any Governmental Authority (including condemnation
awards) (the "Approvals");
---------
2.1.10.4. deposits, surety and other bonds, choses and things in
action, goodwill, computer programs, computer software (including all source and
object codes, all media of any type or nature on which such source or object
codes are reproduced, copied, stored or maintained), technology processes,
proprietary information, patents, patent applications, copyrights, copyright
applications, trademarks, trademark applications, service marks, trade and other
names, trade secrets and customer lists, including the intellectual property
rights listed on Schedule 2.1.10.4.;
2.1.11. Any and all books and records (including ledgers, correspondence,
credit files, computer software, computer storage media and electronically
recorded data) pertaining to such Grantor or any of the foregoing and all
equipment, receptacles, containers and cabinets therefor;
2.1.12. Any and all accessions, appurtenances, components, repairs, repair
parts, spare parts, renewals, improvements, replacements, substitutions and
additions to, of or with respect to any of the foregoing;
2.1.13. Any and all rights, remedies, powers and privileges of such
Grantor with respect to any of the foregoing; and
2.1.14. Any and all proceeds and products of any of the foregoing, whether
now held and existing or hereafter acquired or arising, including all rents,
issues, income and profits of or from any of the foregoing (collectively, the
"Proceeds"). "Proceeds" shall include (i) whatever is now or hereafter received
-------- --------
by any Grantor upon the sale, exchange, collection, other disposition or
operation of any item of Collateral, whether such proceeds constitute accounts,
general intangibles, instruments, securities, documents, letters of credit,
chattel paper, deposit accounts, money, goods or other personal property, (ii)
any items that are now or hereafter acquired by any Grantor with any Proceeds of
Collateral, (iii) any amounts now or hereafter payable under any insurance
policy by reason of any loss of or damage to any Collateral or the business of
any Grantor, (iv) all rights to payment and payments for hotel room occupancy
(and related reservations) and the sale of services or products in connection
therewith and (v) the right to
Form of Subsidiary Security Agreement
-------------------------------------
6
<PAGE>
further transfer, including by pledge, mortgage, license, assignment or sale,
any of the foregoing, provided that Proceeds shall not include any Excluded
--------
Assets.
Section 2.2. Secured Obligations. 2.2.1. The Security Interest
-------------------
shall secure:
2.2.1.1. with respect to each Grantor that is a Subsidiary
Guarantor, the due and punctual payment and performance of any and all present
and future obligations and liabilities of such Subsidiary Guarantor of every
type or description to any Secured Party, arising under or in connection with
the Subsidiary Guarantee, whether for principal of, or premium, if any, or
interest on the Notes, expenses, indemnities or other amounts (including
attorneys' fees and expenses) (collectively, the "Subsidiary Guarantee
--------------------
Obligations");
- -----------
2.2.1.2. with respect to each Grantor, the due and punctual
payment and performance of any and all present and future obligations and
liabilities of such Grantor of every type or description to the Company (the
assigns of which shall include the Collateral Agent, as agent for the Trustee
and the Holders pursuant to the Company Pledge Agreement), arising under or in
connection with any Permitted Intercompany Secured Note signed by it or any
Permitted Intercompany Secured Loan evidenced thereby, whether for principal
thereof, or premium, if any, or interest thereon, expenses, indemnities or other
amounts (including attorneys' fees and expenses) (collectively, the "Permitted
---------
Intercompany Loan Obligations"); and
- -----------------------------
2.2.1.3. with respect to each Grantor, the due and punctual
payment and performance of any and all present and future obligations and
liabilities of such Grantor of every type or description to any Secured Party,
arising under or in connection with this Agreement or any other Note Document,
including for reimbursement of amounts permitted to be advanced or expended by
the Collateral Agent (i) to satisfy amounts required to be paid by the Grantor
under this Agreement or any other Note Document for claims and Charges, together
with interest thereon to the extent provided, or (ii) to maintain or preserve
any Collateral or to create, perfect, continue or protect any Collateral or the
Security Interest therein, or its priority;
in each case whether due or not due, direct or indirect, joint and/or several,
absolute or contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, now or hereafter existing, renewed or restructured,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, whether or not arising after the commencement of a
proceeding under the Bankruptcy Code (including post-petition interest) and
whether or not allowed or allowable as a claim in any such proceeding (all
obligations and liabilities described in this Section 2.2., including, without
limitation, the Subsidiary Guarantee Obligations and the Permitted Intercompany
Loan Obligations, are collectively referred to herein as the "Secured
-------
Obligations").
- -----------
Section 2.3. Subordination of Junior Lien. With respect to any
----------------------------
Grantor that is both a Subsidiary Guarantor and an obligor with respect to a
Permitted Intercompany Secured Loan, the Security Interest granted by such
Grantor to the Collateral Agent as security for Permitted Intercompany Loan
Obligations (the "Junior Lien") shall at all times be and remain
-----------
Form of Subsidiary Security Agreement
-------------------------------------
7
<PAGE>
unconditionally subordinate, junior and subject to the Security
Interest granted by such Grantor to the Collateral Agent as security for the
Subsidiary Guarantee Obligations (the "Senior Lien"). The Senior Lien shall at
-----------
all times be and remain unconditionally superior and prior in right of payment
and enforcement to the Junior Lien, regardless of (i) the order or time as of
which these Liens are granted or attach to any or all of the Collateral, (ii)
the order or time of UCC or other filings or recordings, physical possessing of
any of the Collateral or other steps of perfection, (iii) whether the debt
secured by the Senior Lien is outstanding on the date hereof or hereafter
incurred or arising and, if hereafter incurred or arising, whether incurred or
arising pursuant to commitment or otherwise, (iv) any amendment to the
Subsidiary Guarantee, and (v) any other circumstance, whether or not similar to
any of the foregoing, that might otherwise cause such subordination to become
unenforceable or otherwise without force and effect; provided that this
--------
subordination shall be without any force or effect with respect to any
Collateral (or any distribution at any time made with respect thereto) if, and
to the extent that, a court of appropriate jurisdiction shall issue an order
avoiding, subordinating or otherwise invalidating the Senior Lien on such
Collateral. The parties hereto intend that the Junior Lien shall at all times
be separate and apart from the Senior Lien, notwithstanding that the holder of
both such Liens may be the Collateral Agent, and that such Liens shall not be
merged.
ARTICLE 3.
WARRANTIES AND REPRESENTATIONS
------------------------------
Each Grantor makes the following representations and warranties, all
of which shall survive until termination of this Agreement pursuant to Section
6.7.
Section 3.1. Organization, Powers and Good Standing. Each Grantor is
--------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite corporate
power and authority and the legal right to own and operate its properties and to
carry on its business as heretofore conducted and proposed to be conducted. Each
Grantor has all requisite corporate power and authority to enter into this
Agreement and the other Note Documents to which it is a party and to carry out
the transactions contemplated hereby and thereby. Each Grantor possesses all
Governmental Approvals, in full force and effect, free from burdensome
restrictions, that are necessary for the ownership, maintenance and operation of
its properties and conduct of its business as now conducted, and is not in
violation thereof. Each Grantor is duly qualified and in good standing as a
foreign corporation in each state where the nature of its business activities
conducted or properties owned or leased requires it to be so qualified, except
where the failure to do so would not have a material adverse effect on the
business, assets, results or operations or financial condition of such Grantor,
the ability of such Grantor to perform its obligations hereunder or the
Collateral or Security Interest.
Section 3.2. Authorization, Binding Effect, No Conflict, Etc. The
-----------------------------------------------
execution, delivery and performance by each Grantor of this Agreement and each
other Note Document to which it is a party have been duly authorized by all
necessary corporate action. This Agreement and each such other Note Document
have been duly executed and delivered by
Form of Subsidiary Security Agreement
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<PAGE>
each Grantor party thereto and such agreements are the legal, valid and binding
obligations of such Grantor, enforceable against it in accordance with their
respective terms, except as enforcement may be limited by equitable principles
and by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to creditors' rights generally. The execution, delivery and performance
by any Grantor of this Agreement and each other Note to which such Grantor is a
party, and the consummation of the transactions contemplated hereby or thereby,
or the exercise by the Collateral Agent of any of the voting and other rights or
remedies hereunder, do not and will not (i) violate any provision of the charter
or bylaws of such Grantor, (ii) conflict with, result in a breach of or
constitute (or, with the giving of notice or lapse of time, or both, constitute)
a default under, or require the approval or consent of any Person pursuant to
any agreement or other obligation of such Grantor relating to or included in the
Collateral or violate any provision of Applicable Law binding on such Grantor or
(iii) result in the creation or imposition of any Lien (other than a Permitted
Lien) of any nature whatsoever upon any of such Grantor's assets except for
Liens created under this Agreement and the other Note Documents. Except for
filings and recordings in connection with the perfection of Liens created by the
Loan Documents, all of which have been made and are in full force and effect, no
Governmental Approval is or will be required in connection with the execution,
delivery and performance by any Grantor of this Agreement or any other Note
Document to which any Grantor is a party, or the consummation of the
transactions contemplated hereby or thereby, or the exercise by the Collateral
Agent of any of the voting and other rights or remedies hereunder, or to ensure
the legality, validity or enforceability hereof or thereof, except as may be
required in connection with the disposition of Collateral by laws affecting the
offering and sale of securities generally.
Section 3.3. Filings, Etc. 3.3.1. Duly executed financing
------------
statements containing a correct description of the Collateral have been
delivered to the Collateral Agent for filing in every governmental office in
every state, county and other jurisdiction in which the principal or any other
place of business or the chief executive office of any Grantor, or any portion
of the Collateral, is located and in each jurisdiction in which such action is
necessary to establish a valid and perfected Applicable Priority Lien in favor
of the Collateral Agent in all Collateral in which a Lien may be perfected by
filing, and no further or subsequent filing, recording or registration is
necessary in any such jurisdiction, except as provided under Applicable Law with
respect to the filing of continuation statements.
3.3.2. All Pledged Collateral has been delivered to the Collateral
Agent to the extent required hereby.
3.3.3. Each Grantor has executed and delivered to the Collateral
Agent for filing with the United States Patent and Trademark Office a written
notice in the form of Exhibit 3.3.3. (a "Notice of Security Interest in Patents
--------------------------------------
and Trademarks"), duly completed and executed, with respect to each patent,
- --------------
patent application, trademark, servicemark, trademark application and
servicemark application in which such Grantor has an interest.
Form of Subsidiary Security Agreement
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<PAGE>
3.3.4. All other Supplemental Documentation necessary to perfect the
Security Interest with respect to all Patents, Trademarks and Copyrights (as
defined in Section 3.7.) has been delivered to the Collateral Agent for filing
in the appropriate governmental office.
Section 3.4. Locations of Collateral, Offices and Names. (i) Each
------------------------------------------
Grantor's chief executive office and principal place of business is located at
the address set forth on Schedule 3.4., (ii) all other places of business of the
Grantors and all other locations at which any tangible Collateral or books and
records related to any Collateral are (or during the past four months were)
located are set forth on Schedule 3.4., (iii) each Grantor's federal tax
identification number is set forth on Schedule 3.4., and (iv) there are no prior
or current trade or legal names used to identify any Grantor in its business or
in the ownership of its properties other than those set forth on Schedule 3.4.
Section 3.5. Title to Collateral; Validity and Perfection of Security
--------------------------------------------------------
Interest; Absence of Other Liens. 3.5.1. Subject to Permitted Liens, each
- --------------------------------
Grantor has good and marketable title to, or valid and subsisting leasehold
interests in, all Collateral reflected on its financial statements as being
owned or leased by it and "rights" in all other Collateral within the meaning of
Section 9-203 of the UCC.
3.5.2. The Security Interest constitutes a valid and upon the filing
of financing statements covering the Collateral and other documents referred to
in Section 3.3. with the appropriate Governmental Authorities or other Persons
referred to in such Section, perfected Applicable Priority Lien in all of the
Collateral and secures payment and performance of the Secured Obligations. The
Collateral is free and clear of all Liens other than the Security Interest and
other Permitted Liens.
3.5.3. Except for financing statements in favor of the Collateral
Agent, no Grantor has filed any currently effective financing statement covering
the Collateral, except with respect to Permitted Liens.
Section 3.6. Notes Receivable. Schedule 2.1.2. lists all Notes
----------------
Receivable of each Grantor. There are no setoffs or counterclaims or disputes
existing or asserted with respect to any such Notes Receivable.
Section 3.7. Patents, Trademarks and Copyrights. Schedule 2.1.10.4.
----------------------------------
lists all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights and copyright applications
(collectively, "Patents, Trademarks and Copyrights") in which any Grantor has an
----------------------------------
interest. Except as disclosed on Schedule 2.1.10.4., all Patents, Trademarks and
Copyrights are valid and enforceable and the relevant Grantor is the sole and
exclusive owner of each of the Patents, Trademarks and Copyrights, free and
clear of any Liens other than Liens permitted under the Indenture (including
licenses, shop rights and covenants not to sue listed on Schedule 2.1.10.4.)
Form of Subsidiary Security Agreement
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<PAGE>
ARTICLE 4.
COVENANTS AND AGREEMENTS
------------------------
Section 4.1. Further Assurances. Each Grantor shall, at its own
------------------
expense, promptly perform such acts as may be necessary, or that the Collateral
Agent may request at any time, to assure the attachment, perfection and
Applicable Priority of the Security Interest, to exercise the rights and
remedies of the Secured Parties hereunder or to carry out the intent of this
Agreement. Without limitation, each Grantor shall execute and deliver (or cause
any third party to execute and deliver) to the Collateral Agent, at any time and
from time to time, all Supplemental Documentation, in form and substance
acceptable to the Collateral Agent.
Section 4.2. Inspection and Verification. Each Grantor shall keep or
---------------------------
cause to be kept accurate and complete records of the Collateral at such
Grantor's chief executive office. The Collateral Agent and its employees and
agents shall have the right, at all times during such Grantor's usual business
hours, upon reasonable notice, to (i) inspect, and verify the quality, quantity,
value and condition of, or any other matter relating to, the Collateral, (ii)
inspect all records relating thereto and to make (or require such Grantor to
provide) copies of such records, and (iii) enter upon all premises upon which
any of the Collateral is located. Notwithstanding the foregoing, the Collateral
Agent shall not contact third parties in making such inspection or verification
unless an Event of Default shall then exist.
Section 4.3. Power of Attorney. Each Grantor hereby irrevocably
-----------------
appoints (the appointment being irrevocable because it is coupled with an
interest) the Collateral Agent and its employees and agents as such Grantor's
true and lawful attorneys-in-fact, with full power of substitution, to do (a)
all things required to be done by such Grantor under this Agreement or the other
Note Documents and (b) to do all things that the Collateral Agent may deem
necessary or advisable to assure the attachment, perfection and Applicable
Priority of the Security Interest or otherwise to exercise the rights and
remedies of the Secured Parties hereunder or carry out the intent of this
Agreement, in each case irrespective of whether a Default or Event of Default
then exists (except as provided in Section 4.3.5.) and at such Grantor's
expense. Without limitation, the Collateral Agent and its officers and agents
shall be entitled to do all of the following, as fully as any Grantor might:
4.3.1. to sign the name of such Grantor on any Supplemental
Documentation and to deliver and file such Supplemental Documentation to or with
such Persons as the Collateral Agent, in its discretion, may elect;
4.3.2. to sign any certificate of ownership, registration card,
application therefor, affidavits or documents necessary to transfer title to any
of the Collateral, to receive and receipt for all licenses, registration cards
and certificates of ownership;
4.3.3. to affix, by facsimile signature or otherwise, the general or
special endorsement of any Grantor, in such manner as the Collateral Agent shall
deem advisable, to any Pledged Collateral that has been delivered to or obtained
by the Collateral Agent without appropriate endorsement or assignment; and
Form of Subsidiary Security Agreement
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<PAGE>
4.3.4. if such Grantor at any time fails to obtain or maintain any of
the policies of insurance on the Collateral as required under Section 1008 of
the Indenture, with endorsements as provided therein, or fails to pay any
premium in whole or in part when due under such policies, to obtain and maintain
such policies of insurance and pay such premiums and take such other action with
respect thereto as the Collateral Agent deems advisable.
4.3.5. during the existence of an Event of Default, without notice to
any Grantor and at such time or times as the Collateral Agent in its discretion
may determine, in any Grantor's or in the Collateral Agent's name:
4.3.5.1. collect any and all amounts due to any Grantor from
Account Debtors with respect to Receivables by legal proceedings or otherwise;
4.3.5.2. make, settle and adjust any claims under insurance
policies and make any decisions with respect thereto; and
4.3.5.3. attend and vote at any and all meetings of the
holders of Securities and to execute any and all written consents of such
holders with the same effect as if such Grantor had personally attended and
voted at such meetings or had personally signed such consents.
The Collateral Agent shall be under no obligation whatsoever to take
any of the foregoing actions, and absent bad faith or willful misconduct, the
Collateral Agent and its shareholders, directors, officers, employees and agents
shall have no liability or responsibility for any act taken or omitted with
respect thereto. A copy of this Agreement and, if applicable, a statement by
the Collateral Agent that an Event of Default exists shall be conclusive
evidence of the Collateral Agent's right to act under this Section 4.3. as
against all third parties.
Section 4.4. Changes of Locations of Collateral, Offices, Name or
----------------------------------------------------
Structure. No Grantor shall remove any Collateral, books or records to, or keep
- ---------
any Collateral, books or records or do business at, a location not set forth on
Schedule 3.4., adopt a trade name or change its name, chief executive office,
principal place of business, identity or structure without first giving the
Collateral Agent 15 Business Days prior written notice of such removal, change
or adoption.
Section 4.5. Payment of Charges and Claims. Each Grantor shall
-----------------------------
promptly pay (i) all Charges imposed upon any Collateral, and (ii) all claims
(including claims for labor, services and materials) that have become due and
payable and, under Applicable Law, have or may become Liens (other than
Permitted Liens) upon any Collateral, in each case before any penalty shall be
incurred with respect thereto; provided that, unless foreclosure, levy or
-------- ----
similar proceedings shall have commenced, such Grantor need not pay or discharge
any such Charges or claims so long as the validity or amount thereof is being
contested in good faith and by appropriate proceedings and so long as adequate
reserves therefor have been established in accordance with GAAP. If any Grantor
fails to pay or obtain the discharge of any Charge, claim or Lien required to be
paid or discharged under this Section 4.5. and asserted against portion of the
Collateral, the Collateral Agent may, at any time and from time to time, in its
Form of Subsidiary Security Agreement
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12
<PAGE>
discretion and without waiving or releasing any obligation of such Grantor under
this Agreement or the other Note Documents or waiving any Default or Event of
Default, make such payment, obtain such discharge or take such other action with
respect thereto as the Collateral Agent deems advisable.
Section 4.6. Continuing Obligations of the Grantors; Indemnity. 4.6.1
-------------------------------------------------
Each Grantor shall remain liable to observe and perform all agreements
and other obligations relating to or included in the Collateral (the
"Contractual Obligations") in accordance with their respective terms. No
- ------------------------
Secured Party shall have any duty, obligation or liability under or with respect
to any such Contractual Obligations, whether by reason or arising out of this
Agreement, the receipt by any Secured Party of any payment relating to any such
Contractual Obligation or otherwise, and the Grantors agree to indemnify and
hold harmless the Secured Parties from any and all such obligations and
liabilities.
4.6.2. The Secured Parties shall not have any duty of care with
respect to the Collateral, other than an obligation to exercise reasonable care
with respect to Collateral in the Collateral Agent's possession; provided that
--------
(i) the Collateral Agent shall be deemed to have exercised reasonable care if
Collateral in its possession is accorded treatment substantially comparable to
that which the Collateral Agent accords its own property, and (ii) the
Collateral Agent shall have no obligation to take any actions to preserve rights
against other parties or property with respect to any Collateral. Without
limitation, the Collateral Agent shall (A) bear no risk or expense with respect
to any Collateral and (B) have no duty with respect to calls, conversions,
presentments, maturities, notices or other matters relating to Pledged
Collateral, or to maximize interest or other returns with respect thereto.
4.6.3. The Collateral Agent may at any time deliver or redeliver the
Collateral or any part thereof to any Grantor and the receipt of any of the same
by such Grantor shall be complete and full acquittance for the Collateral so
delivered, and the Collateral Agent thereafter shall be discharged from any
liability or responsibility therefor.
4.6.4. Each Grantor hereby agrees to indemnify and hold harmless the
Collateral Agent and its directors, officers, employees and agents against any
and all claims, actions, liabilities, costs and expenses of any kind or nature
whatsoever (including fees and disbursements of counsel) that may be imposed on,
incurred by, or asserted against any of them, in any way relating to or arising
out of this Agreement or any action taken or omitted by them hereunder, except
to the extent a court holds in a final and nonappealable judgment that they
resulted from the gross negligence or willful misconduct of such Persons against
and from all such obligations and liabilities.
Section 4.7. Sale of Collateral; Further Encumbrances. No Grantor
----------------------------------------
shall (i) except for dispositions of Inventory in the ordinary course of such
Grantor's business and other dispositions not prohibited by the Indenture or the
other Note Documents (collectively, "Permitted Sales"), sell, lease or otherwise
dispose of any Collateral, or any interest therein, or (ii) grant or suffer to
exist any Lien in or on any Collateral (except Liens permitted under the
Indenture) or sign or authorize the filing of any financing statement with
respect to any of
Form of Subsidiary Security Agreement
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<PAGE>
the Collateral (except with respect to Permitted Liens). Concurrently with any
Permitted Sale, the Security Interest shall automatically be released from the
Collateral so disposed of; provided, however that the Security Interest shall
-----------------
continue in the Proceeds thereof. If any Collateral, or any interest therein, is
disposed of in violation of these provisions, the Security Interest shall
continue in such Collateral or interest notwithstanding such disposition, the
Person to which the Collateral or interest is being transferred shall be bound
by this Agreement, and such Grantor shall deliver all Proceeds thereof to the
Collateral Agent to be held as Collateral hereunder.
Section 4.8. Delivery of Pledged Collateral. Each Grantor shall
------------------------------
deliver to the Collateral Agent, together with appropriate endorsements or
documentation of assignment thereof acceptable to the Collateral Agent, any and
all Notes Receivable or Chattel Paper having a face amount, negotiable Documents
evidencing title to any Collateral having a fair market value, and all
certificated Securities having a fair market value, individually or in the
aggregate, equal to or greater than $100,000 (collectively, the "Pledged
-------
Collateral").
- ----------
Section 4.9. Protection of Security; Notice of Levy. Each Grantor
--------------------------------------
shall, at its own cost and expense, take any and all actions necessary to defend
title to the Collateral against all Persons and against all claims and demands
and to preserve, protect and defend the Security Interest and the priority
thereof, against any adverse Liens not permitted under the Note Documents. Each
Grantor will promptly notify the Collateral Agent of any attachment or other
legal process levied against any Collateral.
Section 4.10. Equipment and Fixtures; Casualty.
--------------------------------
4.10.1. Each Grantor, at its expense, shall cause the Equipment and
Fixtures to be maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted.
ARTICLE 5.
EVENTS OF DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
-------------------------------------------------
Section 5.1. Event of Default. The occurrence of one or more "Events
----------------
of Default" (as defined in the Indenture) shall constitute an "Event of
Default."
Section 5.2. Remedies. If an Event of Default occurs, then, whether or
--------
not all the Secured Obligations shall have become immediately due and payable:
5.2.1. In addition to all its other rights, powers and remedies under
this Agreement and Applicable Law, the Collateral Agent shall have, and may
exercise, any and all of the rights, powers and remedies of a secured party
under the UCC, all of which rights, powers and remedies shall be cumulative and
not exclusive, to the extent permitted by Applicable Law.
Form of Subsidiary Security Agreement
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<PAGE>
5.2.2. The Collateral Agent shall have the right, all at the
Collateral Agent's sole option and as the Collateral Agent in its discretion may
deem necessary or advisable, to do any or all of the following:
5.2.2.1. to foreclose the Security Interest by any available
judicial procedure or without judicial process;
5.2.2.2. to enter upon the premises of any Grantor or any other
place or places where Collateral is located through self-help and without
judicial process, without giving any Grantor notice and opportunity for a
hearing on the validity of the Collateral Agent's claim and without any
obligation to pay rent;
5.2.2.3. to inspect and appraise the Collateral and to prepare,
repair, assemble or process the Collateral for sale, lease or other disposition;
5.2.2.4. to remove Collateral to the premises of the Collateral
Agent or any other location selected by the Collateral Agent, for such time as
the Collateral Agent may desire, for any purpose not prohibited hereby;
5.2.2.5. to apply any Collateral or any other assets of any
Grantor in the possession of the Collateral Agent to the Secured Obligations;
5.2.2.6. to notify Account Debtors and other obligors on the
Collateral that the Collateral has been assigned to the Collateral Agent and
that all payments thereon are to be made directly and exclusively to or as
specified by the Collateral Agent;
5.2.2.7. to collect by legal proceedings or otherwise all
dividends, distributions, interest, principal or other sums now or hereafter
payable upon or on account of the Collateral;
5.2.2.8. to enter into any extension or reorganization agreement
or any other agreement relating to or affecting the Collateral and, in
connection therewith, deposit or surrender control of any Collateral or accept
other property in exchange therefor;
5.2.2.9. to settle, compromise or release, on terms acceptable to
the Collateral Agent, in whole or in part, any amounts owing on the Collateral
or any insurance thereof or relating thereto or any disputes with respect
thereto or such insurance;
5.2.2.10. to receive, open and dispose of all mail addressed to
any Grantor and notify postal authorities to change the address for delivery
thereof to such address as the Collateral Agent may designate, provided that the
-------- ----
Collateral Agent agrees that it will promptly deliver over to such Grantor any
such opened mail as does not relate to the Collateral;
Form of Subsidiary Security Agreement
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<PAGE>
5.2.2.11. to exercise all rights and powers under Contractual
Obligations included in the Collateral, including the Project Contracts,
including any right of termination; and
5.2.2.12. to exercise any and all other rights, powers,
privileges and remedies of an owner of the Collateral.
5.2.3. Each Grantor shall, at the Collateral Agent's request,
assemble the Collateral and make it available to the Collateral Agent at a place
to be designated by the Collateral Agent. Each Grantor shall make available to
the Collateral Agent all computer and other equipment of such Grantor containing
books and records pertaining to the Collateral (and the assistance of the
employees of such Grantor having responsibility for such equipment) and to use
such computer and other equipment at no charge for the purpose of obtaining
information pertaining to the Collateral, including by making copies of computer
and other files and records.
5.2.4. Until the Collateral Agent is able to effect a sale, lease or
other disposition of Collateral or any part thereof, the Collateral Agent shall
have the right to use, process or operate the Collateral or any part thereof to
the extent that it deems appropriate for the purpose of preserving Collateral or
its value or for any other purpose deemed appropriate by the Collateral Agent.
The Collateral Agent shall have the right, without notice or demand, either in
person or by agent, and without regard to the adequacy of any security for the
Secured Obligations, to take possession of the Collateral or any part thereof
and to collect and receive the rents, issues, profits, income and proceeds
thereof. Taking possession of the Collateral shall not cure, waive or affect an
Event of Default or notice thereof or invalidate any act done pursuant to such
notice.
5.2.5. The Collateral Agent may, if it so elects, as a matter of
strict right and without regard to the then value of the Collateral, seek the
appointment of a receiver or keeper to take possession of Collateral and to
enforce any of the Collateral Agent' remedies with respect to such appointment
without prior notice or hearing. The rights, remedies and powers of any receiver
appointed by a court shall be as ordered by the court.
5.2.6. The Collateral Agent shall have the right to sell, lease, or
otherwise dispose of all or any Collateral in its then existing condition, or
after any further assembly, manufacturing or processing thereof, at public or
private sale or sales, with such notice as may be required by Section 5.4., in
lots or in bulk, for cash or on credit, with or without representations or
warranties, all the Collateral Agent, in its discretion, may deem advisable. The
Collateral Agent shall not be obligated to make any sale of the Collateral
regardless of notice of sale having been given. If sale of all or any part of
the Collateral is made on credit or for future delivery, the Collateral so sold
may be retained by the Collateral Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. The Collateral Agent shall have the right to
conduct such sales on any Grantor's premises or elsewhere and shall have the
right to use such Grantor's premises without charge for such sales for such
duration as the Collateral Agent deem necessary or advisable. The Collateral
need not be present at any such sales. To the extent necessary or desirable, in
the judgment of the Collateral Agent, to enable the
Form of Subsidiary Security Agreement
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<PAGE>
Collateral Agent to dispose of Collateral following an Event of Default, the
Collateral Agent is authorized, without any obligation for rent, license fees or
other charge, to use the supplies, equipment, facilities and space at each
Grantor's place of business and is hereby granted a license or other right to
use, without charge, the Patents, Trademarks and Copyrights, trade secrets,
names, trade names, customer lists, labels, advertising matter, and all property
of a similar nature that each Grantor owns or is entitled to use, as it pertains
to any Collateral, in preparing, repairing, assembling, processing, advertising
for sale or lease or otherwise in connection with the disposition of any
Collateral, and each Grantor's rights under all licenses and all franchise
agreements shall to such extent and for such purpose inure to the Collateral
Agent's benefit. The Collateral Agent may purchase all or any part of the
Collateral at public or, if permitted by Applicable Law, private sale, and in
lieu of actual payment of the purchase price, the Collateral Agent may apply
against such purchase price any amount of the Secured Obligations. Each Grantor
agrees that any sale of Collateral conducted by the Collateral Agent in
accordance with the foregoing provisions of this Section and Section 5.3. shall
be deemed to be a commercially reasonable sale under Section 9-504 of the UCC.
Section 5.3. Application of Proceeds.
-----------------------
5.3.1. Any cash proceeds received by the Collateral Agent in respect
of any sale of, collection from, or other realization upon, all or any part of
the Collateral following the occurrence of an Event of Default (including
insurance proceeds) may be held by the Collateral Agent as Collateral and/or
then or at any time thereafter applied as follows:
5.3.1.1. first, to the Collateral Agent to pay all advances,
charges, costs and expenses payable to the Collateral Agent pursuant to Section
6.1.;
5.3.1.2. second, to pay the Subsidiary Guarantee in the order set
forth in the Indenture with respect to the obligations of Company underlying
such obligations; and
5.3.1.3. third, to pay accrued interest on and principal of
Permitted Intercompany Loans.
5.3.2. Each Grantor and any other Person then obligated therefor shall
pay to the Collateral Agent on demand any deficiency with regard to the Secured
Obligations that may remain after such sale, collection or realization of, from
or upon the Collateral.
5.3.3. Payments received from any third party on account of any
Collateral shall not reduce the Secured Obligations until paid in cash to the
Collateral Agent. The application of proceeds by the Collateral Agent shall be
without prejudice to the Collateral Agent's rights as against any Grantor or
other Persons with respect to any Secured Obligations that may then be or remain
unpaid.
5.3.4. If at any time after an Event of Default any Grantor or Company
receives any collections upon or other Proceeds of any Collateral, whether in
the form of cash, Notes Receivable or otherwise, such Proceeds shall be received
in trust for the Secured Parties (or the Collateral Agent and Holders, in the
case of Proceeds received by Company) and such
Form of Subsidiary Security Agreement
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<PAGE>
Grantor or Company shall keep all such Proceeds separate and apart from all
other funds and property so as to be capable of identification as the property
of the Secured Parties and promptly deliver such Proceeds to the Collateral
Agent in the identical form received.
Section 5.4. Notice of Sale. Unless the Collateral is perishable or
--------------
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Collateral Agent will send or otherwise make available to
each Grantor reasonable notice of the time and place of any public sale or of
the time on or after which any private sale of any Collateral is to be made.
Each Grantor agrees that any notice required to be given by the Collateral Agent
of a sale or other disposition of Collateral, or any other intended action by
the Collateral Agent, that is received in accordance with the provisions set
forth in Section not less than 10 days, prior to such proposed action, shall
constitute commercially reasonable and fair notice thereof to the Grantors. The
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Each
Grantor hereby waives any right to receive notice of any public or private sale
of any Collateral or other security for the Secured Obligations except as
expressly provided for in this Section 5.4.
ARTICLE 6.
GENERAL
-------
Section 6.1. Collateral Agent's Expenses, Including Attorneys' Fees.
------------------------------------------------------
Regardless of the occurrence of a Default or Event of Default, the Grantors
jointly and severally agree to pay to the Collateral Agent any and all advances,
charges, costs and expenses, including the reasonable fees and expenses of
counsel and any experts or agents, that the Collateral Agent may reasonably
incur in connection with (i) the administration of this Agreement, including any
amendment thereto or any workout or restructuring, (ii) the creation, perfection
or continuation of the Security Interest or protection of its priority or the
Collateral, including the discharging of any prior or junior Lien or adverse
claim against the Collateral or any part thereof that is not permitted hereby or
by the Indenture, (iii) the custody, preservation or sale of, collection from,
or other realization upon, any of the Collateral, (iv) the exercise or
enforcement of any of the rights, powers or remedies of the Collateral Agent
under this Agreement or under Applicable Law (including attorneys' fees and
expenses incurred by the Collateral Agent in the collection of Collateral
deposited with the Collateral Agent and amounts incurred in connection with the
operation, maintenance or foreclosure of the Security Interest) or any
bankruptcy proceeding, the Collateral Agent's due inscription and recordation in
the Registry of home port of the Vessel or (v) the failure by any Grantor to
perform or observe any of the provisions hereof. All such amounts and all other
amounts payable hereunder shall be payable on demand, together with interest at
the Default Rate.
Section 6.2. Amendments and Other Modifications. No amendment of any
----------------------------------
provision of this Agreement (including a waiver thereof or consent relating
thereto) shall be
Form of Subsidiary Security Agreement
-------------------------------------
18
<PAGE>
effective unless the same shall be in writing and signed by the Grantors and the
Collateral Agent. Any waiver or consent relating to any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on any Grantor in any case shall
entitle such Grantor to any other or further notice or demand in similar or
other circumstances. Each Person that becomes a Grantor after the date hereof
makes the representations set forth in Sections 3.1. through 3.7.
Notwithstanding the first sentence of this Section, such Grantor may amend
Schedules 2.1.2., 2.1.9., 2.1.10.2., 2.1.10.4. and 3.4. to provide the
information contemplated thereby with respect to such Grantor and its
Collateral, and the consent of the Collateral Agent will not be required for
such amendment.
Section 6.3. Cumulative Remedies; Failure or Delay. The rights and
-------------------------------------
remedies provided for under this Agreement are cumulative and are not exclusive
of any rights and remedies that may be available to the Secured Parties under
Applicable Law, the other Note Documents or otherwise. No failure or delay on
the part of the Collateral Agent in the exercise of any power, right or remedy
under this Agreement shall impair such power, right or remedy or shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude other or further exercise of such or any other power,
right or remedy.
Section 6.4. Notices, Etc. All notices and other communications under
------------
this Agreement shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid) or
by prepaid telex, telecopy or telegram, and shall be deemed given when received
by the intended recipient thereof. Unless otherwise specified in a notice given
in accordance with the foregoing provisions of this Section 6.4., notices and
other communications shall be given to the parties hereto at their respective
addresses (or to their respective telex or telecopier numbers) indicated on
Schedule 105 of the Indenture.
Section 6.5. Successors and Assigns. This Agreement shall be binding
----------------------
upon and, subject to the next sentence, inure to the benefit of each Grantor and
the Collateral Agent and their respective successors and assigns. No Grantor
shall assign or transfer any of its rights or obligations hereunder without the
prior written consent of the Collateral Agent. The benefits of this Agreement
shall pass automatically with any assignment of the Secured Obligations (or any
portion thereof), to the extent of such assignment.
Section 6.6. Payments Set Aside. Notwithstanding anything to the
------------------
contrary herein contained, this Agreement, the Secured Obligations and the
Security Interest shall continue to be effective or be reinstated, as the case
may be, if at any time any payment, or any part thereof, of any or all of the
Secured Obligations is rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be restored or returned by any Secured
Party in connection with any bankruptcy, reorganization or similar proceeding
involving any Grantor, any other party liable with respect to the Secured
Obligations or otherwise, if the proceeds of any Collateral are required to be
returned by such Secured Party under any such circumstances, or if any Secured
Party reasonably elects to return any such payment or
Form of Subsidiary Security Agreement
-------------------------------------
19
<PAGE>
proceeds or any part thereof in its discretion, all as though such payment had
not been made or such proceeds not been received. Without limiting the
generality of the foregoing, if prior to any such rescission, invalidation,
declaration, restoration or return, this Agreement shall have been cancelled or
surrendered or the Security Interest or any Collateral shall have been released
or terminated in connection with such cancellation or surrender, this Agreement
and the Security Interest and such Collateral shall be reinstated in full force
and effect, and such prior cancellation or surrender shall not diminish,
discharge or otherwise affect the obligations of the Grantors in respect of the
amount of the affected payment or application of proceeds, the Security Interest
or such Collateral.
Section 6.7. Continuing Security Interest; Termination. Except as
-----------------------------------------
otherwise provided in the Indenture with respect to the release of Collateral
under certain circumstances, this Agreement shall create a continuing security
interest in the Collateral and, except as provided below, the Security Interest
and all agreements, representations and warranties made herein shall survive
until, and this Agreement shall terminate only upon, the indefeasible payment
and performance in full of the Secured Obligations. Any investigation at any
time made by or on behalf of the Secured Parties shall not diminish the right of
the Secured Parties to rely on any such agreements, representations or
warranties herein. Notwithstanding anything in this Agreement or Applicable Law
to the contrary, the agreements of the Grantors set forth in Sections 4.6.1.,
4.6.4. and 6.1. shall survive the payment of all other Secured Obligations and
the termination of this Agreement.
Section 6.8. Waiver and Estoppel. Except as otherwise provided in this
-------------------
Agreement, each Grantor hereby waives: (i) presentment, protest, notice of
dishonor, release, compromise, settlement, extension or renewal and any other
notice of or with respect to the Secured Obligations and hereby ratifies and
confirms whatever the Collateral Agent may do in this regard; (ii) notice prior
to taking possession or control of any Collateral or any bond or security that
might be required by any court prior to allowing the Collateral Agent to
exercise any of their rights, powers or remedies; (iii) the benefit of all
valuation, appraisement, redemption and exemption laws; (iv) any rights to
require marshalling of the Collateral upon any sale or otherwise to direct the
order in which the Collateral shall be sold; (v) any set-off; and (vi) any
rights to require the Collateral Agent to proceed against any Person, proceed
against or exhaust any Collateral or any other security interests or guaranties
or pursue any other remedy in the Collateral Agent' power, or to pursue any of
such rights in any particular order or manner, and any defenses arising by
reason of any disability or defense of any Person.
Section 6.9. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 6.10. Complete Agreement. This Agreement, together with the
------------------
exhibits and schedules hereto and the other Note Documents, is intended by the
parties as a final expression of their agreement regarding the subject matter
hereof and as a complete and exclusive statement of the terms and conditions of
such agreement.
Form of Subsidiary Security Agreement
-------------------------------------
20
<PAGE>
Section 6.11. Limitation of Liability. No claim shall be made by any
-----------------------
Grantor against the Secured Parties or the Affiliates, directors, officers,
employees or agents of the Secured Parties for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or under any other theory of liability arising out of or related to the
transactions contemplated by this Agreement and the other Note Documents, or any
act, omission or event occurring in connection therewith; and each Grantor
hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
Form of Subsidiary Security Agreement
-------------------------------------
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first set forth above.
Grantors:
--------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Form of Subsidiary Security Agreement
-------------------------------------
22
<PAGE>
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
The Company:
-----------
USTRAILS INC., a Nevada corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Form of Subsidiary Security Agreement
-------------------------------------
23
<PAGE>
Collateral Agent:
----------------
FLEET NATIONAL BANK, a national banking
association, as Collateral Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Form of Subsidiary Security Agreement
-------------------------------------
24
<PAGE>
State of }
--------------------------}
County of }
-------------------------}
On before me, , personally appeared ,
------------ ---------------- --------------
[_] personally known to me - OR - [_] proved to me on the basis of satisfactory
evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
Witness my hand and official seal.
-------------------------------------
SIGNATURE OF NOTARY
Form of Subsidiary Security Agreement
-------------------------------------
25
<PAGE>
State of }
---------------------------}
County of }
--------------------------}
On DATE before me, NAME, TITLE OF OFFICER , personally
------------------ -------------------------------------
appeared NAME(S) OF SIGNERS,
----------------------------------------------
[_] personally known to me - OR - [_] proved to me on the basis of satisfactory
evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
Witness my hand and official seal.
----------------------------------------
SIGNATURE OF NOTARY
Form of Subsidiary Security Agreement
-------------------------------------
26
<PAGE>
SCHEDULE 2.1.2.
NOTES RECEIVABLE
----------------
Form of Subsidiary Security Agreement - Schedule 2.1.2
------------------------------------------------------
1
<PAGE>
SCHEDULE 2.1.9.
SECURITIES
----------
Form of Subsidiary Security Agreement - Schedule 2.1.9
------------------------------------------------------
1
<PAGE>
SCHEDULE 2.1.10.2.
CONTRACTS
---------
Form of Subsidiary Security Agreement - Schedule 2.1.10.2
---------------------------------------------------------
1
<PAGE>
SCHEDULE 2.1.10.4.
INTELLECTUAL PROPERTY RIGHTS
----------------------------
Form of Subsidiary Security Agreement - Schedule 2.1.10.4
---------------------------------------------------------
1
<PAGE>
SCHEDULE 3.4.
LOCATIONS AND NAMES
-------------------
Form of Subsidiary Security Agreement - Schedule 3.4
----------------------------------------------------
1
<PAGE>
EXHIBIT 3.3.3.
FORM OF
-------
NOTICE OF SECURITY INTEREST IN PATENTS AND TRADEMARKS
-----------------------------------------------------
NOTICE IS HEREBY GIVEN that [insert name of Grantor], a ________ (the
"Grantor") with an office located at [insert address of Grantor], and Fleet
-------
National Bank, a national banking association, as Trustee, as collateral agent
(the "Collateral Agent"), with an office located at _________________, on behalf
----------------
of the trustee and the holders of certain Notes issued under an Indenture dated
as of July ___, 1996 and on behalf of USTrails Inc., a Nevada corporation
(collectively, the "Secured Parties"), have entered into a Subsidiary Security
---------------
Agreement dated as of July _____, 1996 (as may be amended from time to time, the
"Security Agreement").
------------------
Pursuant to the Security Agreement, the Grantor has granted, conveyed,
pledged, assigned and transferred to the Collateral Agent, for the equal and
ratable benefit of the Secured Parties, a security interest in, (a) the
registered patents, applications for registration of patents, and licenses of
registered patents listed in Schedule A hereto and (b) the registered trademarks
and service marks, applications for registration of trademarks and service
marks, and licenses of registered trademarks and service marks listed in
Schedule B hereto, together with the goodwill of the business symbolized
thereby, to secure the payment, performance and observance of the Secured
Obligations as defined in the Security Agreement.
The Commissioner of Patents and Trademarks is requested to record this
notice in its records.
Dated: ________________
[GRANTOR]
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
Form of Subsidiary Security Agreement - Exhibit 3.8
---------------------------------------------------
1
<PAGE>
SCHEDULE A
TO
NOTICE OF SECURITY INTEREST IN PATENTS AND TRADEMARKS
FROM
[INSERT NAME OF GRANTOR]
1. Patents.
Patent Registration No. Registration Date
2. Applications for Federal Registration of Patents.
Patent Serial No. Filing Date
Form of Subsidiary Security Agreement - Exhibit 3.8
---------------------------------------------------
2
<PAGE>
SCHEDULE B
TO
NOTICE OF SECURITY INTEREST IN PATENTS AND TRADEMARKS
FROM
[INSERT NAME OF GRANTOR]
1. Federal Trademark and Service Mark Registrations.
Trademark/Service Mark Registration No. Registration Date
2. Trademark and Service Mark Applications for Federal Registration.
Trademark/Service Mark Serial No. Filing Date
Form of Subsidiary Security Agreement - Exhibit 3.8
---------------------------------------------------
3
<PAGE>
State of }
---------------------------------}
County of }
--------------------------------}
On before me, , personally appeared ,
-------------- --------------- -------------
[_] personally known to me - OR - [_] proved to me on the basis of satisfactory
evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
Witness my hand and official seal.
----------------------------------------
SIGNATURE OF NOTARY
Form of Subsidiary Security Agreement - Exhibit 3.8
---------------------------------------------------
4
<PAGE>
EXHIBIT E
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
FORM OF PERMANENT DEED OF TRUST,
SECURITY AGREEMENT AND FIXTURE FILING
WITH ASSIGNMENT OF RENTS
________________________, a _________ corporation,
TRUSTOR,
FLEET NATIONAL BANK,
a national banking association
BENEFICIARY
______________________________________
TRUSTEE
Dated as of _________________, 199__
- --------------------------------------------------------------------------------
<PAGE>
FORM OF PERMANENT DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING WITH
---------------------------------------------------------------------------
ASSIGNMENT OF RENTS
-------------------
THIS PERMANENT DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING WITH
ASSIGNMENT OF RENTS ("Deed of Trust") is made as of the _____ day of
-------------
____________, 199__ by ________________________, a ___________ corporation,
having its principal office at __________________________________ ("Trustor"),
-------
in favor of _________________ ("Trustee"), and Fleet National Bank, a national
-------
banking association, having its principal corporate trust office at 777 Main
Street, Hartford, Connecticut, 06115 ("Fleet"), as collateral agent for (i) the
-----
Note Trustee (as defined below) and the Persons that now or in the future are
holders of the Notes (as defined below) issued under the Indenture described
below (the "Holders"), [(include the following if Trustor is a Subsidiary
-------
Guarantor): and (ii) USTrails, Inc., a Nevada corporation (including its
successors and assigns, "Company")] (in such capacities, "), [(include the
following if Trustor is a Subsidiary Guarantor): and in its capacity as
transferee of Company's interests hereunder pursuant to the terms of the Company
Pledge Agreement (as defined below),] Fleet or any successor in such capacity is
referred to herein as the "Beneficiary"). Certain capitalized terms are defined
-----------
in Section 1.1 below. Unless otherwise defined herein, capitalized terms herein
shall have the meanings given them in the Indenture.
R E C I T A L S
---------------
[(Include the following Recital A if Trustor is a Subsidiary Guarantor):
A. Trustor is a Subsidiary of Company.]
B. Pursuant to the Indenture dated as of July 17, 1996, (as supplemented
and otherwise amended from time to time, the "Indenture"), by and among
---------
[Trustor/Company], the Subsidiary Guarantors and Fleet as trustee thereunder (in
such capacity, the "Note Trustee"), [Trustor/Company] has issued up to
------------
$40,241,000 principal amount of Senior Subordinated Pay-In-Kind Notes due 2003,
plus the additional amount of Senior Subordinated Pay-In-Kind Notes issued
pursuant to Section 301 of the Indenture (collectively, the "Notes").
-----
(Include the following Recital C if Trustor is the Company:
[C. Pursuant to the Indenture, the Secured Obligations of Trustor are
required to be secured by, among other things, this Deed of Trust.]
(Include the following Recitals C, D, E and F if Trustor is a Subsidiary
Guarantor):
[C. Pursuant to a guarantee included in the Indenture (as amended from
time to time, the "Subsidiary Guarantee"), the Subsidiary Guarantors (including
--------------------
Trustor) have Guaranteed the obligations of Company under the Notes, the
Indenture and the other Note Documents to which Company is a party.
1
<PAGE>
D. Company has made, and may make from time to time in the future,
Permitted Intercompany Secured Loans (for purposes hereof, "Permitted
---------
Intercompany Loans") to the Subsidiaries referred to in the Indenture (including
- -------------
Trustor). To evidence the Permitted Intercompany Loans each of the Subsidiaries
has executed and delivered (or will execute and deliver upon receipt of the loan
proceeds) to Company a promissory note (for purposes hereof, a "Permitted
---------
Intercompany Note").
- -----------------
E. Pursuant to the Indenture, the Permitted Intercompany Loans and the
Subsidiary Guarantee of Trustor are required to be secured by, among other
things, this Deed of Trust.
F. Pursuant to a Company Pledge Agreement dated as of _________________
(as amended from time to time, the "Company Pledge Agreement") by and between
------------------------
Company and the Collateral Agent, Company has pledged all Permitted Intercompany
Loans and the related Permitted Intercompany Notes and the Trust Estate
hereunder as collateral for Company's obligations under the Notes, the Indenture
and the other Note Documents to which Company is a party.]
WITNESSETH:
TRUSTOR DOES HEREBY IRREVOCABLY GRANT, BARGAIN, SELL, TRANSFER, CONVEY AND
ASSIGN to Trustee, its successors and assigns, IN TRUST, WITH POWER OF SALE, for
the benefit and security of (i) Beneficiary, as agent and representative for the
equal and ratable benefit of Trustee and the Holders and (ii) to Beneficiary, as
agent and representative for ______________, under and subject to the terms and
conditions hereinafter set forth, the following, subject to the Permitted Liens
and Section 10.23, and excluding in each and every case all Excluded Assets and
Proceeds of Excluded Assets:
GRANTING CLAUSE ONE
[Land]
All of Trustor's right, title and interest in the real property, located in
the County of _________, State of _________, described in Exhibit A attached
hereto and by this reference incorporated herein (the "Land").
GRANTING CLAUSE TWO
[Improvements]
TOGETHER WITH, any and all structures, buildings, facilities and
improvements now or hereafter erected on the Land, including, but not limited
to, the Fixtures (as defined below) (collectively, the "Improvements") (the Land
------------
and Improvements are referred to collectively as the "Property").
--------
For purposes of this Deed of Trust, fixtures shall be deemed to include, to
the full extent allowed by law, Fixtures (as defined below), and all other
equipment and machinery now or at any time hereafter owned by Trustor and
located or included in or on or appurtenant to the Property and used in
connection therewith and which are or become so related to the real property
encumbered hereby that an interest arises in them under real estate law which
may include, but is not limited to: all docks, piers, barges, vessels,
machinery, equipment (including without limitation pipes, furnaces, conveyors,
drums, fire sprinklers and alarm systems, and air conditioning, heating,
2
<PAGE>
refrigerating, electronic monitoring, food storage, food processing (including
restaurant fixtures), trash and garbage removal and maintenance equipment),
office equipment, all built-in tables, chairs, planters, desks, sofas, shelves,
lockers and cabinets, laundry equipment, all safes, furnishings, appliances
(including iceboxes, refrigerators, fans, heaters, water heaters and
incinerators), rugs, carpets and other floor coverings, draperies and drapery
rods and brackets, awnings, window shades, venetian blinds, curtains, lamps,
chandeliers and other lighting fixtures.
GRANTING CLAUSE THREE
[Rents, etc.]
TOGETHER WITH, all rents, issues and profits, including, without
limitation, all rights to payment for campground occupancy by campground guests,
which includes any payment or monies received or to be received in whole or in
part, whether actual or deemed to be, for the sale of services or products in
connection therewith and/or in connection with such occupancy and advance
registration fees by campground guests (collectively the "Rents"), subject to
-----
the license hereinafter given to Trustor to collect and apply such Rents.
GRANTING CLAUSE FOUR
[Leases, including Deposits and Advance Rentals]
TOGETHER WITH, all leasehold estate, right, title and interest of Trustor
in and to all leases or subleases covering the Property or any portion thereof
now or hereafter existing or entered into, and all right, title, claim, estate
and interest of Trustor thereunder, including, without limitation, all claims of
the lessor thereunder, cash or security deposits, advance rentals, and any and
all deposits or payments of similar nature.
GRANTING CLAUSE FIVE
[Options to Purchase, etc.]
TOGETHER WITH, all right, title and interest of Trustor, if any, in and to
all options and other rights to purchase or lease the Property or any portion
thereof or interest therein, if any, and any greater estate in the Property
owned or hereafter acquired by Trustor.
GRANTING CLAUSE SIX
[All Additional Interests]
TOGETHER WITH, all additional interests, estate, water and water rights or
other claims, both in law and in equity, which Trustor now has or may hereafter
acquire in the Property and all right, title and interest of Trustor in and to
all extensions, improvements, betterments, renewals, substitutes and
replacements of, and all additions and appurtenances to, the Trust Estate (as
defined below), hereafter acquired by or released to Trustor or constructed,
assembled or placed by Trustor on the Property and in each such case, the
foregoing shall be deemed a part of the Property and shall become subject to the
lien of this Deed of Trust as fully and completely, and with the same priority
and effect, as though now owned by Trustor and
3
<PAGE>
specifically described herein, without any further mortgage, conveyance,
assignment or other act by Trustor.
GRANTING CLAUSE SEVEN
[Easements, etc.]
TOGETHER WITH, all easements, rights-of-way and rights used in connection
with the Property or as a means of access thereto or which are otherwise of
benefit thereto to the users thereof, and all tenements, hereditaments and
appurtenances thereof and thereto.
GRANTING CLAUSE EIGHT
[Street Right-of-Way, etc.]
TOGETHER WITH, all right, title and interest of Trustor, now owned or
hereafter acquired, in and to any land lying within the right-of-way of any
street, open or proposed, adjoining the Property, and any and all sidewalks,
alleys and strips and gores of land adjacent to or used in connection with the
Property.
GRANTING CLAUSE NINE
[Personalty]
TOGETHER WITH, all right, title and interest of Trustor in all tangible and
intangible personal property now or at any time hereafter located on or
appurtenant to the Property and used or useful in connection with the management
or operation of the Property, including, without limitation, the Personalty.
GRANTING CLAUSE TEN
[Condemnation Awards, etc.]
TOGETHER WITH, all the estate, interest, right, title, other claim or
demand, which Trustor now has or may hereafter acquire in any and all awards
made for the taking by eminent domain, or by any proceeding or purchase in lieu
thereof, of the whole or any part of the Trust Estate, including, without
limitation, any awards resulting from a change of grade of streets and awards
for severance damages.
GRANTING CLAUSE ELEVEN
[Insurance Proceeds]
TOGETHER WITH, all the estate, interest, right, title and other claim or
demand which Trustor now has or may hereafter acquire with respect to the
proceeds of insurance in effect with respect to all or any part of the Trust
Estate.
GRANTING CLAUSE TWELVE
[Claims for Damages, etc.]
TOGETHER WITH, all the estate, interest, right, title and other claim or
demand which Trustor now has or may hereafter acquire against anyone with
respect to
4
<PAGE>
any damage to all or any part of the Trust Estate, including, without
limitation, damage arising from any defect in or with respect to the design or
construction of all or any part of the Improvements and damage resulting
therefrom.
GRANTING CLAUSE THIRTEEN
[Deposits, Advance Payments and Refunds of Insurance,
Utilities, etc.]
TOGETHER WITH, all deposits or other security or advance payments including
rental payments made by or on behalf of Trustor to others, and all refunds made
by others to Trustor, with respect to (i) insurance policies relating to all or
any part of the Trust Estate, (ii) utility service for all or any part of the
Trust Estate, (iii) cleaning, maintenance, repair, or similar services for all
or any part of the Trust Estate, (iv) refuse removal or sewer service for all or
any part of the Trust Estate, (v) rental of equipment, if any, used in the
operation, maintenance or repair by or on behalf of Trustor of all or any part
of the Trust Estate, and (vi) parking or similar services or rights afforded to
all or any part of the Trust Estate.
GRANTING CLAUSE FOURTEEN
[Water Rights, etc.]
TOGETHER WITH, all water rights and rights to the use of water that are now
or that may be hereinafter used in connection with the said Property, or any
part thereof, or any improvements or appurtenances thereto.
The entire estate, property and interest hereby conveyed to Trustee (other
than Excluded Assets and Proceeds of Excluded Assets) may hereafter be referred
to as the "Trust Estate."
------------
FOR THE PURPOSE OF SECURING:
(Include the following Paragraph A if Trustor is the Company):
A. The due and punctual payment and performance of any and all present and
future obligations and liabilities of Trustor of every type or description to
any Secured Party, arising under the Note Documents, whether for principal of,
or premium, if any, or interest on the Notes, expenses, indemnities or other
amounts (collectively, the "Obligations");
-----------
(Include the following Paragraph A if Trustor is a Subsidiary Guarantor):
A. The due and punctual payment and performance of any and all present and
future obligations and liabilities of Trustor of every type or description to
any Secured Party, arising under or in connection with the Subsidiary Guarantee,
whether for principal of, or premium, if any, or interest on the Notes,
expenses, indemnities or other amounts (including attorneys' fees and expenses)
(collectively, the "Obligations") and the due and punctual payment and
-----------
performance of any and all present and future obligations and liabilities of
Trustor of every type or description to Company (the assigns of which shall
include Beneficiary, as agent for Trustee and the Holders pursuant to the
Company Pledge Agreement), arising under or in connection with any Permitted
Intercompany Note signed by it or any Permitted Intercompany Loan evidenced
thereby, whether for principal thereof, or premium, if any, or interest
5
<PAGE>
thereon, expenses, indemnities or other amounts (including attorneys' fees and
expenses) (collectively, the "Permitted Intercompany Loan Obligations");
---------------------------------------
B. The due and punctual payment and performance of any and all present and
future obligations and liabilities of Trustor of every type or description to
any Secured Party, arising under or in connection with this Deed of Trust or any
other Note Document, including for reimbursement of amounts permitted to be
advanced or expended by Beneficiary (i) to satisfy amounts required to be paid
by Trustor under this Deed of Trust or any other Note Document for claims and
Charges, together with interest thereon to the extent provided, or (ii) to
protect the Trust Estate, together with interest thereon to the extent provided;
and
[C. INSERT STATE SPECIFIC REQUIREMENTS, IF ANY, WITH RESPECT TO FUTURE
ADVANCES.]
[I]n each case whether due or not due, direct or indirect, joint and/or
several, absolute or contingent, voluntary or involuntary, liquidated or
unliquidated, determined or undetermined, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, whether or not arising after the
commencement of a proceeding under the Bankruptcy Code (including post-petition
interest) and whether or not allowed or allowable as a claim in any such
proceeding (all obligations and liabilities described herein, including, without
limitation, the Obligations and the Permitted Intercompany Loan Obligations, are
collectively referred to herein as the "Secured Obligations").
-------------------
(Include the following if Trustor is a Subsidiary Guarantor):
The Lien granted by Trustor as security for Permitted Intercompany Loan
Obligations (the "Junior Lien") shall at all times be and remain unconditionally
-----------
subordinate, junior and subject to the Lien granted by Trustor as security for
the Obligations (the "Senior Lien"). The Senior Lien shall at all times be and
-----------
remain unconditionally superior and prior in right of payment and enforcement to
the Junior Lien, regardless of (i) the order or time as of which these Liens are
granted or attach to any or all of the Trust Estate, (ii) the order or time of
recording or other steps of perfection, (iii) whether the debt secured by the
Senior Lien is outstanding on the date hereof or hereafter incurred or arising
and, if hereafter incurred or arising, whether incurred or arising pursuant to
commitment or otherwise, (iv) any amendment to the Subsidiary Guarantee, and (v)
any other circumstance, whether or not similar to any of the foregoing, that
might otherwise cause such subordination to become unenforceable or otherwise
without force and effect; provided that this subordination shall be without any
--------
force or effect with respect to any portion of the Trust Estate (or any
distribution at any time made with respect thereto) if, and to the extent that,
a court of appropriate jurisdiction shall issue an order avoiding, subordinating
or otherwise invalidating the Senior Lien on such portion of the Trust Estate.
The parties hereto intend that the Junior Lien shall at all times be separate
and apart from the Senior Lien, notwithstanding that the beneficiary of both
such Liens may be the Beneficiary, and that such Liens shall not be merged.]
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR HEREBY COVENANTS AND
AGREES AS FOLLOWS:
6
<PAGE>
ARTICLE 1.
DEFINITIONS AND RELATED MATTERS
-------------------------------
Section 1.1. Certain Defined Terms.
----------- ---------------------
The following terms shall have the following meanings:
"Accounts" has the meaning set forth in Section 8.1.1.
--------
"Applicable Priority" means, with respect to the Senior Lien, first
-------------------
priority subject to the Permitted Liens and, with respect to the Junior Lien,
second priority, subject only to the Senior Lien and the Permitted Liens.
"Beneficiary" has the meaning set forth in the Preamble.
-----------
"Chattel Paper" has the meaning set forth in Section 8.1.3.
-------------
"Documents" has the meaning set forth in Section 8.1.8.
---------
"Equipment" has the meaning set forth in Section 8.1.6
---------
"Fixtures" has the meaning set forth in Section 8.1.7.
--------
"General Intangibles" has the meaning set forth in Section 8.1.10.
-------------------
"Governmental Authority" the term "Governmental Authority" shall mean the
----------------------
United States, the state, the county, the city, or any other political
subdivision in which the Trust Estate is located, and any other political
subdivision, agency, or instrumentality exercising jurisdiction over Trustor,
any of its current or former Affiliates or the Trust Estate.
"Improvements" has the meaning set forth in Granting Clause Two.
------------
"Inventory" has the meaning set forth in Section 8.1.5.
---------
"Junior Lien" has the meaning set forth hereinabove.
-----------
"Land" has the meaning set forth in Granting Clause One.
----
"Leases" means any and all leasehold interests, or occupancy rights,
------
including subleases and tenancies, affecting or covering any portion of the
Property, but excluding any leases under which Trustor is the lessee.
"Legal Requirements" shall mean (a) any and all present and future judicial
------------------
decisions, statutes, rulings, rules, regulations, permits, certificates or
ordinances of any Governmental Authority applicable to Trustor, any of its
current or former Affiliates or the Trust Estate, including, but not limited to,
those respecting the ownership, use, occupancy, possession, operation,
maintenance, alteration, repair or reconstruction thereof, (b) Trustor's or such
Affiliates' presently or subsequently effective Bylaws and Articles of
Incorporation, or any instruments establishing any partnership, limited
partnership, joint venture, trust or other form of business association (if
either, both or all by any of same), (c) any and all Purchase Contracts, Leases
and other contracts (written or oral) of any nature to which Trustor or such
Affiliates may be bound
7
<PAGE>
affecting the Trust Estate and (d) any and all restrictions, reservations,
conditions, easements or other covenants or agreements of record affecting the
Trust Estate.
"Notes Receivable" has the meaning set forth in Section 8.1.2.
----------------
"NRS" means the Nevada Revised Statutes in effect from time to time.
---
"Permitted Intercompany Loan Obligations" has the meaning set forth in
---------------------------------------
paragraph B under the section entitled "Securing."
"Permitted Lien" means any lien permitted under Section 1016 of the
--------------
Indenture, provided that such lien is not senior to the Liens of this Deed of
--------
Trust.
"Personalty" has the meaning set forth in Section 8.1.
----------
"Proceeds" has the meaning set forth in Section 8.1.17.
--------
"Property" has the meaning set forth in Granting Clause Two.
--------
"Public Waters" means any river, lake, stream, sea, ocean, gulf, bay or
-------------
other public body of water.
"Receivables" means accounts, Notes Receivable, Chattel Paper and other
-----------
rights to the payment of money.
"Receiver" means any trustee, receiver, custodian, fiscal agent, liquidator
--------
or similar officer.
"Rents" has the meaning set forth in Granting Clause Three.
-----
"Secured Parties" means, collectively, the Collateral Agent, the Trustee,
---------------
the Holders, [(include the following if Trustor is a Subsidiary Guarantor): and,
solely with respect to the Junior Lien, Company,] and the respective successors
and permitted assigns of such Persons.
"Senior Lien" has the meaning set forth hereinabove.
-----------
"Obligations" has the meaning set forth hereinabove.
-----------
"Trademarks" means trademarks, servicemarks and trade names (including
----------
without limitation, the trademarks listed on (insert appropriate schedule to
Company Security Agreement or Subsidiary Security Agreement, as applicable), all
registrations and applications to register such trademarks, servicemarks and
trade names and all renewals thereof, and the goodwill of the business
associated with or relating to such trademarks, servicemarks and trade names,
including without limitation any and all licenses and rights granted to use any
trademark, servicemark or trade name owned by any other Person.
"Trust Estate" has the meaning set forth at the end of the Granting
------------
Clauses.
"UCC" means the Uniform Commercial Code (as amended from time to time) of
---
the State in which the Land is situated.
Section 1.2. Related Matters.
---------------
8
<PAGE>
1.2.1. Terms Used in the UCC.
----------------------
Unless the context clearly otherwise requires, all lower-case terms used
and not otherwise defined herein that are used or defined in Article 9 (or any
equivalent subpart) of the UCC have the same meanings herein.
1.2.2. Construction.
------------
Unless the context of this Deed of Trust clearly requires otherwise,
references to the plural include the singular, the singular includes the plural,
the part includes the whole, and "including" is not limiting. The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Deed of
Trust refer to this Deed of Trust as a whole (including the Preamble, the
Recitals and all Schedules and Exhibits, but subject to Section 1.2.4.) and not
to any particular provision of this Deed of Trust. Article, section,
subsection, exhibit, recital, preamble and schedule references in this Deed of
Trust are to this Deed of Trust unless otherwise specified. References in this
Deed of Trust to any agreement, other document or law "as amended" or "as may be
amended from time to time," or to amendments of any document or law, shall
include any amendments, supplements, replacements, renewals or other
modifications.
1.2.3. Governing Law.
-------------
The provisions of this Deed of Trust with respect to the creation,
perfection and enforcement of the liens and security interests created hereby
shall be governed by, and construed in accordance with, the laws (other than the
rules regarding conflicts of laws) of the State in which the Land is situated,
provided that, with respect to any portion of the Trust Estate (other than
- --------
Personalty) that is located outside the State of ________, the law of the state
in which such property is located shall govern to the extent, and only to the
extent, necessary to permit the Beneficiary to enforce its rights, powers and
remedies hereunder. Except as provided in the preceding provisions of this
Section 1.2.3, this Deed of Trust shall be governed by, and construed in
accordance with, the laws (other than the rules regarding conflicts of laws) of
the State of __________.
1.2.4. Headings.
--------
The Article and Section headings used in this Deed of Trust are for
convenience of reference only and shall not affect the construction hereof.
1.2.5. Severability.
------------
If any provision of this Deed of Trust or any Lien or other right hereunder
shall be held to be invalid, illegal or unenforceable under Applicable Law in
any jurisdiction, such provision, Lien or other right shall be ineffective only
to the extent of such invalidity, illegality or unenforceability, which shall
not affect any other provisions herein or any other Lien or right granted hereby
or the validity, legality or enforceability of such provision, Lien or right in
any other jurisdiction.
1.2.6. Exhibits and Schedules.
----------------------
All of the appendices, exhibits and schedules attached to this Deed of
Trust shall be deemed incorporated herein by reference.
9
<PAGE>
ARTICLE 2.
WARRANTY OF TITLE
-----------------
Trustor warrants that (i) it is the lawful owner of the Trust Estate, (ii)
this Deed of Trust is a valid and enforceable Applicable Priority Lien on the
Trust Estate, subject only to Permitted Liens and Section 10.24, and Trustor
will maintain and preserve the Liens and Applicable Priority of this Deed of
Trust until the Secured Obligations have been discharged in full, (iii) it has
good, right and lawful authority to grant and encumber the Trust Estate as
provided in and by this Deed of Trust, (iv) it will, to the extent required by
the Indenture, forever warrant and defend its grant made herein against any and
all claims and demands of all Persons claiming by, through or under Trustor,
except as to the Permitted Liens and subject to Section 10.24, and (v) Trustor
has, to the extent required by the Indenture and subject to Section 10.24, good
and indefeasible title to the Trust Estate, free and clear of all material
defects, Liens, encumbrances, security interests, restrictions, exceptions and
easements, except the Permitted Liens.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
------------------------------
Trustor hereby represents and warrants to Beneficiary and Trustee that:
Section 3.1. Compliance with Laws.
--------------------
To the best knowledge of Trustor, except as otherwise disclosed in writing
to Beneficiary, the Trust Estate and the proposed and actual use thereof comply
in all material respects with all Applicable Law and there is no proceeding
pending or, to the best knowledge of Trustor, threatened before any court,
quasi-judicial body, Governmental Authority or administrative agency relating to
the validity of the Collateral Documents or the proposed or actual use of the
Trust Estate.
Section 3.2. Condemnation.
------------
Except as disclosed in writing to Beneficiary, there are no pending or, to
the best knowledge of Trustor, threatened condemnation or eminent domain
proceedings against the Trust Estate or any part thereof.
Section 3.3. Litigation.
----------
To the best knowledge of Trustor, except as disclosed in writing to
Beneficiary, there are no pending or threatened actions, claims, proceedings,
investigations, suits or proceedings before any Governmental Authority to which
Trustor is a party or relating to the construction, operation or ownership of
the Trust Estate or any part thereof.
10
<PAGE>
ARTICLE 4.
AFFIRMATIVE COVENANTS
---------------------
Trustor hereby covenants to and agrees with Beneficiary as follows:
Section 4.1. Secured Obligations of Trustor.
------------------------------
Trustor will perform its Secured Obligations arising under this Deed of
Trust and shall continue to be liable for the performance of its Secured
Obligations arising under this Deed of Trust until discharged in full,
notwithstanding any actions of partial foreclosure that may be brought hereunder
to recover any amount or amounts expended by Beneficiary on behalf of Trustor in
order to cure any of Trustor's defaults or to satisfy any of Trustor's
obligations or covenants under any agreement relating to the Trust Estate and to
which Trustor is a party or by which the Trust Estate is bound.
Section 4.2. Other Reports.
Trustor shall provide from time to time such additional information
regarding Trustor or the Trust Estate as Beneficiary may reasonably request.
Section 4.3. Other Reports.
Trustor shall, at its own expense, perform such acts as may be necessary,
or that Beneficiary may reasonably request at any time, to execute, acknowledge
and deliver all such additional papers and instruments (including, without
limitation, a declaration of no setoff) and all such further assurances of title
and will do or cause to be done all further acts and things as may be proper or
reasonably necessary to carry out the purpose hereof and to subject to the Liens
hereof any property intended by the terms hereof to be covered thereby and any
renewals, additions, substitutions, replacements or betterments thereto.
Section 4.4. FIRPTA Affidavit.
Trustor hereby represents and warrants to Beneficiary, under penalty of
perjury:
(i) Trustor's U.S. Taxpayer Identification Number is _______________;
(ii) Trustor's business address is____________________; and
(iii) Trustor is not a "foreign Person" within the meaning of Sections
1445 and 7701 of the Code (i.e., Trustor is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate as those terms
are defined in the Code and regulations promulgated thereunder).
Trustor agrees to indemnify, defend, protect and hold Beneficiary and
Beneficiary's agents harmless of, from and against any and all loss, liability,
costs, damages, claims or causes of action including reasonable attorneys' fees,
costs and expenses which may be actually incurred by Beneficiary or
Beneficiary's agents by reason of any failure of any representation or warranty
made by Trustor in this Section 4.4 to be true and correct in all respects,
including, but not limited to, any liability for failure to withhold any amount
required under Code Section 1445 in the event of foreclosure or other transfer
of the Property.
11
<PAGE>
Section 4.4. Liens.
-----
Trustor shall pay and promptly discharge, at Trustor's cost and expense,
all Liens upon the Trust Estate, or any part thereof or interest therein other
than the Permitted Liens. Trustor shall have the right to contest in good faith
the validity of any such Lien, provided Trustor shall first post such bond or
furnish such other security as may be required by law to release such Lien or
shall have established adequate reserves therefor in accordance with GAAP, and
provided further that Trustor shall thereafter diligently proceed to cause such
Lien to be removed and discharged. If Trustor shall fail to discharge any such
Lien, then, in addition to any other right or remedy of Beneficiary, Beneficiary
may, but shall not be obligated to discharge the same, either by paying the
amount claimed to be due, or by procuring the discharge of such Lien by
depositing in court a bond for the amount claimed or otherwise giving security
for such Lien, or in such manner as is or may be prescribed by law. Any amount
so paid by Beneficiary shall bear interest at the Default Rate from the date of
payment by Beneficiary, shall constitute an additional Secured Obligation
secured hereby, prior to any right, title or interest in or claim upon the Trust
Estate attaching or accruing subsequent to the Senior Lien of this Deed of
Trust, shall be secured by this Deed of Trust and shall be payable by Trustor to
Beneficiary upon demand.
Section 4.6. Inspection.
----------
Trustor shall permit Beneficiary, upon 24 hours' prior notice, to enter
upon and inspect, during normal business hours, the Property and the
construction and operation thereof, for such purposes reasonably deemed
necessary by Beneficiary; provided, however, that no such prior notice shall be
-------- -------
necessary and such inspection may occur at any time if (i) Beneficiary
reasonably believes that an emergency exists or is imminent or (ii) the giving
or delivery of such notice is prohibited or stayed by Applicable Laws; and
provided, further, that Beneficiary shall use reasonable, good faith efforts to
- -------- -------
avoid interfering with Trustor's business operations on the Property, including
all rights of Purchasers as defined in Section 10.23.
ARTICLE 5.
NEGATIVE COVENANTS
------------------
Trustor hereby covenants to and agrees with Beneficiary that except as
permitted by the Indenture, Trustor shall not hypothecate, encumber, sell,
convey, assign, lease, transfer, alienate, or otherwise dispose of its interest
in the Trust Estate or any part thereof, either voluntarily or by operation of
law, including, without limitation, by foreclosure, attachment, merger,
consolidation or dissolution affecting Trustor or any interest in the Property
or Trustor.
ARTICLE 6.
CASUALTIES AND CONDEMNATION
---------------------------
Section 6.1. Casualties.
----------
Trustor will notify Beneficiary in writing promptly after loss or damage
caused by fire, wind or other casualty to any material portion of the Property.
12
<PAGE>
Section 6.2. Condemnation.
------------
Trustor, immediately upon obtaining knowledge of the institution of any
proceedings for the condemnation of the entire Property or any material portion
thereof, will notify Trustee and Beneficiary of the pendency of such
proceedings. Trustee and Beneficiary may participate in any such proceedings
and Trustor from time to time will deliver to Beneficiary all instruments
requested by Beneficiary to permit such participation; provided, however, that
-------- -------
Trustor shall have the sole right to participate in and settle any and all such
proceedings unless an Event of Default then exists. In any such condemnation
proceedings Beneficiary may be represented by counsel selected by Beneficiary at
the sole cost and expense of Trustor.
ARTICLE 7.
REMEDIES OF BENEFICIARY
-----------------------
Section 7.1. Event of Default.
----------------
The occurrence of one or more "Events of Default" (as defined in the
Indenture) shall constitute an "Event of Default."
Section 7.2. Remedies.
--------
At any time after an Event of Default, Beneficiary may, to the maximum
extent permitted by Applicable Laws:
7.2.1. In person, by agent, or by a receiver, and without regard to the
adequacy of security, the solvency of Trustor or any other matter, Beneficiary
may (i) enter upon and take possession of the Property, or any part thereof, in
its own name or in the name of Trustee and (ii) sue for or otherwise collect
the Rents, issues and profits thereof and apply the same, less costs and
expenses of operation and collection, including reasonable attorneys' fees
actually incurred, to the Secured Obligations, all in such order as Beneficiary
may determine. The entering upon and taking possession of said Property, the
collection of such Rents, issues and profits and the application thereof as
aforesaid shall not cure or waive any default or notice of default hereunder or
invalidate any act done pursuant to such notice, or deprive Beneficiary of the
benefits of any indemnity set forth herein;
7.2.2. Commence an action to foreclose this Deed of Trust in the manner
provided by Applicable Law for the foreclosure of mortgages or deeds of trust of
real property;
7.2.3. Deliver to Trustee such notices, authorizations and requests as may
be required under Applicable Law to enable the Trustee to commence and complete
foreclosure of the liens and security interests of this Deed of Trust in
accordance with Applicable Laws;
7.2.4. If the Secured Obligation become or are declared immediately due
and payable pursuant to Section 502 of the Indenture and Trustor fails to make
such payment as and when due, then Beneficiary may waive its Liens against any
parcel of the Property or all or any portion of the Fixtures or Personalty
attached to the Property, to the extent such property is determined to be
environmentally impaired, and to exercise any and all rights of an unsecured
creditor against Trustor and all of Trustor's assets for the recovery of any
deficiency, including, but not limited to,
13
<PAGE>
seeking an attachment order. TRUSTOR ACKNOWLEDGES AND AGREES THAT
NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXPRESS OR IMPLIED, IN THIS DEED OF
TRUST OR IN ANY OF THE OTHER NOTE DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY
NONRECOURSE OR EXCULPATORY LANGUAGE, IF ANY), TRUSTOR SHALL BE PERSONALLY LIABLE
FOR ANY RECOVERY DESCRIBED IN THIS PARAGRAPH 7.2.4 AND SUCH LIABILITY SHALL NOT
BE LIMITED TO THE AMOUNT OF THE NOTES;
7.2.5. With respect to any Personalty, proceed as to both the real and
personal property in accordance with Beneficiary's rights and remedies in
respect of the Property, or proceed to sell said Personalty separately and
without regard to the Property in accordance with Beneficiary's rights and
remedies; and/or
7.2.6. Pursue any and all other remedies it may have, at law or in equity,
or under any other document or instrument, except as otherwise provided in the
Indenture.
Section 7.3. Power of Sale.
-------------
Should Beneficiary elect to foreclose by exercise of the power of sale
herein contained, Beneficiary shall notify Trustee and shall deposit with
Trustee this Deed of Trust and the appropriate Permitted Intercompany Note and
such receipts and evidence of expenditures made and secured hereby as Trustee
may require.
[The following provisions to be conformed to applicable state law.]
7.3.1. Upon receipt of such notice from Beneficiary, Trustee shall cause to
be recorded, published and delivered to Trustor notices of default and sale to
be given in accordance with the applicable provisions of NRS Chapter 107.
Trustee shall, without demand on Trustor, after lapse of such time as may then
be required by Applicable Laws and after recordation of such notice of default
and after notice of sale having been given as required by law, sell the Trust
Estate at the time and place of sale fixed by it in said notice of sale, either
as a whole, or in separate lots or parcels or items as Trustee shall deem
expedient, and in such order as it may determine, at public auction to the
highest bidder for cash in lawful money of the United States payable at the time
of sale. Trustee shall deliver to such purchaser or purchasers thereof its good
and sufficient deed or deeds conveying the property so sold, but without any
covenant or warranty, express or implied. The recitals in such deed of any
matters or facts shall be conclusive proof of the truthfulness thereof. Any
Person, including, without limitation, Trustor or Beneficiary, may purchase at
such sale and Trustor hereby covenants to warrant and defend the title of such
purchaser or purchasers against the claims of all Persons claiming by, through
or under Trustor. If allowed by law, Beneficiary, if it is the purchaser, may
apply the amount of the Secured Obligations then due and payable toward payment
of the purchase price. Trustor hereby waives its right, if any, to require that
the Property be sold as separate tracts or units in the event of foreclosure.
7.3.2. Trustee, upon such sale, shall make (without any covenant or
warranty, express or implied), execute and, after due payment made, deliver to
purchaser or purchasers, or his or their heirs or assigns, a deed or deeds, or
other record or records of interest, as the case may be, in and to the Property
so sold that shall convey to the purchaser all the title and interest of Trustor
in the Property (or the portion thereof sold), and after deducting all costs,
fees and expenses of Trustee and of this Trust, including costs of evidence of
title in connection with sale, shall apply the proceeds of sale to payment of
(i) all sums expended under the terms hereof, not then repaid, with
14
<PAGE>
accrued interest at the Default Rate and (ii) all other sums then secured hereby
and the remainder, if any, to the Person or Persons legally entitled thereto.
7.3.3. Trustee may postpone sale of all or any portion of the Trust Estate
by public announcement at such time and place of sale, or as otherwise permitted
by Applicable Laws, and from time to time thereafter may postpone such sale by
public announcement at the time fixed by the preceding postponement or
subsequently noticed sale, and without further notice make such sale at the time
fixed by the last postponement, or may, in its discretion, give a new notice of
sale. Beneficiary may rescind any notice of default at any time before Trustee's
sale by executing a notice of rescission and recording the same. The recordation
of such notice of rescission shall constitute a cancellation of any prior
declaration of default and demand for sale. The exercise by Beneficiary of the
right of rescission shall not constitute a waiver of any default then existing
or subsequently occurring, or impair the right of Beneficiary to execute other
declarations of default and demand for sale, or notices of default and of
election to cause the Property to be sold. nor otherwise affect the Note
Documents or this Deed of Trust, or any of the rights, obligations or remedies
of Beneficiary or Trustee hereunder.
Section 7.4. Proof of Default.
----------------
In the event of a sale of the Property, or any part thereof, and the
execution of a deed or deeds therefor, the recital therein of default, and of
recording notice of breach and election of sale, and of the elapsing of the
required time (if any) between the foregoing recording and the following notice,
and of the giving of notice of sale, and of a demand by Beneficiary, or its
successors or assigns, that such sale should be made, shall be conclusive proof
of such default, recording, election, elapsing of time, and of the due giving of
such notice, and that the sale was regularly and validly made on due and proper
demand by Beneficiary, its successors or assigns; and any such deed or deeds
with such recitals therein shall be effectual and conclusive against Trustor,
its successors and assigns, and all other Persons; and the receipt for the
purchase money recited or contained in any deed executed to the purchaser as
aforesaid shall be sufficient discharge to such purchaser from all obligations
to see to the proper application of the purchase money.
Section 7.5. Protection of Security.
----------------------
If an Event of Default shall have occurred and be continuing, then
Beneficiary or Trustee, but without obligation so to do, upon at least 15 days
prior written notice to Trustor and without releasing Trustor from any
obligations or defaults hereunder, may: (i) make payment or otherwise perform
such obligations of Trustor upon which such Event of Default is based in such
manner and to such extent as either may reasonably deem necessary to protect the
security hereof, Beneficiary and Trustee being authorized to enter upon the
Property for such purpose; (ii) appear in and defend any action or proceeding
purporting to affect, in any manner whatsoever, the Secured Obligations, the
security hereof or the rights or powers of Beneficiary or Trustee; (iii) pay,
purchase or compromise any encumbrance, charge or lien (other than Permitted
Liens) that in the judgment of Beneficiary or Trustee is prior or superior to or
ranks equally with the Junior Lien hereof; and (iv) in exercising any such
powers, pay necessary expenses, employ counsel and pay attorneys' fees. Trustor
hereby agrees to repay within thirty (30) days after receipt of written demand
all reasonable sums actually expended by Trustee or Beneficiary pursuant to this
Section 7.5 with interest at the Default Rate from the date of expenditure by
Beneficiary, and such sums, with interest, shall be secured hereby.
15
<PAGE>
Section 7.6. Receiver.
--------
If an Event of Default shall have occurred and be continuing, Beneficiary,
as a matter of strict right and without regard to the then value of the
Property, shall have the right to apply to any court having jurisdiction to
appoint a Receiver or Receivers of the Property. Any such Receiver or Receivers
shall have all the powers and duties of receivers under Applicable Laws in like
or similar cases and all the powers and duties of Beneficiary in case of entry
as provided in this Deed of Trust, and shall continue as such and exercise all
such powers until the date of confirmation of sale, unless such receivership is
sooner terminated.
Section 7.7. Curing of Defaults.
------------------
7.7.1. If Trustor shall at any time fail to perform or comply with any of
the terms, covenants and conditions required on Trustor's part to be performed
and complied with under this Deed of Trust or any other Note Document relating
to the Trust Estate (after the lapse of any cure period provided therein), then
Beneficiary, and without waiving or releasing any of the Secured Obligations,
may (but shall be under no obligation to), subject to the provisions of any of
the aforesaid agreements:
7.7.2. Make any payments thereunder payable by Trustor and take out, pay
for and maintain any of the insurance policies provided for therein, and/or
7.7.3. After the expiration of any applicable grace period and subject to
Trustor's rights to contest certain obligations specifically granted hereby and
in the Indenture, perform any such other acts thereunder on the part of Trustor
to be performed and enter upon the Property and incur reasonable attorneys' fees
and expenses for such purpose.
7.7.4. The making by Beneficiary of such payment out of Beneficiary's own
funds shall not, however, be deemed to cure such default by Trustor, and the
same shall not be so cured unless and until Trustor shall have reimbursed
Beneficiary within the applicable cure period for such payment including
interest at the Default Rate from the date of such expenditure. All sums so
paid and all reasonable costs and expenses actually incurred and paid by
Beneficiary in connection with the performance of any such act, together with
interest on unpaid balances thereof at the Default Rate from the respective
dates of Beneficiary's making of each such payment, shall be secured by the lien
of this Deed of Trust, prior to any right, title or interest in or claim upon
the Property attaching or accruing subsequent to the lien of this Deed of Trust,
and shall be payable by Trustor to Beneficiary within thirty (30) days after
receipt of written demand.
Section 7.8. Remedies Cumulative.
-------------------
All remedies of Beneficiary provided for herein are cumulative and shall be
in addition to any and all other rights and remedies provided in the other
Collateral Documents or provided by Applicable Law, including any banker's lien
and right of offset. The exercise of any right or remedy by Beneficiary
hereunder shall not in any way constitute a cure or waiver of default hereunder
or under the Collateral Documents, or invalidate any act done pursuant to any
notice of default, or prejudice Beneficiary in the exercise of any of its rights
hereunder or under the Collateral Documents unless, in the exercise of said
rights, all Secured Obligations are fully discharged.
16
<PAGE>
ARTICLE 8.
SECURITY AGREEMENT AND FIXTURE FILING
-------------------------------------
Section 8.1. Grant of Security Interest.
--------------------------
To secure the payment and performance of the Secured Obligations as and
when due, Trustor (as debtor) hereby grants, conveys, pledges, assigns and
transfers (i) to Beneficiary (as secured party), as agent and representative for
the equal and ratable benefit of Trustee and the Holders and (b) to Beneficiary,
as agent and representative of the Company, security interests (collectively,
the "Security Interest") in, all right, title, claim, estate and interest in and
-----------------
to all property , other than Excluded Assets, now or hereafter affixed to,
located on or at the Property (which term, for the purposes of this Section 8.1.
shall not include the Personalty) or used in connection with the operation of
the Property (hereinafter collectively referred to as "Personalty") whether now
----------
owned and existing or hereafter acquired or arising, and wherever located,
including, without limitation, the following, subject to the Permitted Liens and
rights of Purchasers as defined in Section 10.24 and expressly excluding in each
case any Excluded Assets or Proceeds thereof:
8.1.1. Any and all rights to payment for goods sold or leased or for
services rendered, including any such rights evidenced by Chattel Paper, whether
due or to become due and whether or not earned by performance (excluding any
such rights evidenced by Notes Receivable, the "Accounts");
--------
8.1.2. Any and all negotiable instruments, promissory notes, acceptances,
drafts, checks, certificates of deposit and other writings that evidence a right
to the payment of money by any other Person, including the writings listed on
(appropriate schedule to Company Security Agreement or Subsidiary Security
Agreement, as applicable) (the "Notes Receivable");
----------------
8.1.3. Any and all chattel paper, including writings that evidence both a
monetary obligation and a security interest in or lease of specific goods (the
"Chattel Paper");
- --------------
8.1.4. Any and all rights to payment:
8.1.4.1. To the extent not included in Accounts, Notes Receivable or
Chattel Paper, receivable from any credit card company (such as Visa,
Mastercard, American Express and Diner's Club), whether arising out of or
relating to the sale of lodging, goods and services by any Trustor or otherwise;
and
8.1.4.2. Of money not listed above and any and all rights, titles,
interests, securities, Liens and guaranties evidencing, securing, guaranteeing
payment of or in any way relating to any Receivables;
8.1.5. Any and all goods that may at any time be held for sale or lease or
to be furnished under any contract of service, be so leased or furnished, or
constitute raw materials, work in process, parts, supplies or materials that are
or might be used or consumed in a business or in connection with the
manufacture, selling or leasing of such goods ("Inventory");
17
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8.1.6. Any and all equipment and other goods (excluding Inventory),
including the following personal property (together with all related property
described in Section 8.1.15 (the "Equipment");
8.1.6.1. Machinery, machine tools, office machinery (including computers,
typewriters and duplicating machines), motor vehicles, trailers, rolling stock,
motors, pumps, controls, tools, parts, works of art, furniture, furnishings and
trade fixtures, all athletic equipment and supplies, and all molds, dies,
drawings, blueprints, reports, catalogs and computer programs related to any of
the above;
8.1.6.2. Ships, boats, barges and vessels (whether under construction or
completed) and any and all masts, bowsprits, boilers, engines, sails, fittings,
anchors, cables, chains, riggings, tackle, apparel, furniture, capstans,
outfits, tools, pumps, gears, appliances, fittings and spare and replacement
parts and all other appurtenances, accessories and additions, improvements and
replacements thereto, whether on board or not on board, in or to any ship, boat,
barge or vessel;
8.1.6.3. Stones, wood, steel and other materials used or to be used in the
building, construction, repair, renovation, refurbishment or otherwise with
respect to the Improvements or ships, boats, barges or vessels;
8.1.7. Any and all fixtures, including machinery, equipment or appliances
for generating, storing or distributing air, water, heat, electricity, light,
fuel or refrigeration, for ventilating or sanitary purposes, elevators, safes,
laundry, kitchen and athletic equipment, trade fixtures, and telephone,
television and other communications equipment (the "Fixtures");
8.1.8. Any and all documents, whether or not negotiable, including bills
of lading, warehouse receipts, trust receipts and the like (the "Documents");
8.1.9. Any and all stocks, bonds, general and limited partnership
interests, joint venture interests and other securities, subscription rights,
options, warrants, puts, calls and other rights with respect thereto, and
investment and brokerage accounts (the "Securities");
8.1.10. Any and all general intangibles and contract rights (together with
any property listed under Section 8.1.15 relating thereto, the "General
Intangibles"), including the following:
8.1.10.1. Insurance policies and all rights and claims therein or
thereunder (including prepaid and unearned premiums), including insurance
against casualty (including by fire or earthquake) or liability (including
against environmental cleanup costs), title insurance, business interruption
insurance and builders risk insurance, whether covering personal or real
property;
8.1.10.2. Any and all leases of real or personal property, licensing
agreements and other contracts (including all leases and the contracts listed on
(appropriate schedule to Company Security Agreement or Subsidiary Security
Agreement, as applicable), and all guaranties, warranties, royalties, license
fees and rights under such contracts including those described on (appropriate
schedule to Company Security Agreement or Subsidiary Security Agreement, as
applicable);
8.1.11. Any and all Governmental Approvals, including permits, licenses,
certificates of use and occupancy (or their equivalents) and zoning and other
approvals,
18
<PAGE>
and tax and other refunds, compensation, awards, payments and relief given or
made by any Governmental Authority (including condemnation awards) (the
"Approvals");
8.1.12. Deposits, surety and other bonds, choses and things in action,
goodwill, computer programs, computer software (including all source and object
codes, all media of any type or nature on which such source or object codes are
reproduced, copied, stored or maintained), technology processes, proprietary
information, patents, patent applications, copyrights, copyright applications,
trademarks, trademark applications, service marks, trade and other names, trade
secrets and customer lists, including the intellectual property rights listed on
(appropriate schedule to Company Security Agreement or Subsidiary Security
Agreement, as applicable);
8.1.13. Any and all architectural and engineering drawings, plans,
specifications, studies, reports and other materials;
8.1.14. Any and all books and records (including ledgers, correspondence,
credit files, computer software, computer storage media and electronically
recorded data) pertaining to such Trustor or any of the foregoing and all
equipment, receptacles, containers and cabinets therefor;
8.1.15. Any and all accessions, appurtenances, components, repairs, repair
parts, spare parts, renewals, improvements, replacements, substitutions and
additions to, of or with respect to any of the foregoing;
8.1.16. Any and all rights, remedies, powers and privileges of such
Trustor with respect to any of the foregoing; and
8.1.17. Any and all proceeds and products of any of the foregoing, whether
now held and existing or hereafter acquired or arising, including all rents,
issues, income and profits of or from any of the foregoing (collectively, the
"Proceeds"). "Proceeds" shall include (i) whatever is now or hereafter received
by Trustor upon the sale, exchange, collection, other disposition or operation
of any item of Personalty, whether such proceeds constitute accounts, general
intangibles, instruments, securities, documents, letters of credit, chattel
paper, deposit accounts, money, goods or other personal property, (ii) any items
that are now or hereafter acquired by Trustor with any Proceeds of Personalty,
(iii) any amounts now or hereafter payable under any insurance policy by reason
of any loss of or damage to any Personalty or the business of Trustor, (iv) all
rights to payment and payments for hotel room occupancy (and related
reservations) and the sale of services or products in connection therewith and
(v) the right to further transfer, including by pledge, mortgage, license,
assignment or sale, any of the foregoing, provided that "Proceeds" shall not
include Excluded Assets.
Section 8.2. Remedies, etc.
--------------
This Deed of Trust constitutes a security agreement with respect to the
Personalty, in which Beneficiary is granted a security interest hereunder, and
Beneficiary shall have all of the rights and remedies of a secured party under
the UCC and the other Collateral Documents as well as all other rights and
remedies available at law or in equity. Upon the occurrence and during the
continuance of any Event of Default hereunder, Beneficiary shall have (i) the
right to cause any of the Personalty which is personal property to be sold at
any one or more public or private sales as permitted by Applicable Laws and
apply the proceed thereof to the Secured Obligations, (ii) the right to collect
and apply to the Secured Obligations any Personalty
19
<PAGE>
which is cash, Notes Receivable, other rights to payment or Chattel Paper, and
(iii) all other rights and remedies, whether at law, in equity, or by statute as
are available to secured creditors under Applicable Laws. Any such disposition
may be conducted by an employee or agent of Beneficiary or Trustee. To the
maximum extent permitted by Applicable Law, any Person, including both Trustor
and Beneficiary, shall be eligible to purchase any part or all of such
Personalty at any such disposition. Beneficiary shall give Trustor at least 10
days' prior written notice of the time and place of any public sale or other
disposition of such Personalty or of the time of or after which any private sale
or any other intended disposition is to be made, and if such notice is sent to
Trustor in the manner provided for the mailing of notices herein, it is hereby
deemed such notice shall be and is commercially reasonable notice to Trustor.
Section 8.3. Expenses.
--------
Reasonable expenses actually incurred of retaking, holding, preparing for
sale, selling or the like shall be borne by Trustor and shall include
Beneficiary's and Trustee's reasonable attorneys' fees and legal expenses.
Section 8.4. Fixture Filing.
--------------
8.4.1. This Deed of Trust shall be effective as a Financing Statement
filed as a fixture filing from the date of the recording hereof in accordance
with the Uniform Commercial Code in effect in the state, where the Land is
situated. In connection therewith, the addresses of Trustor as debtor ("Debtor")
and Beneficiary as secured party ("Secured Party") are set forth in the
Indenture, a copy of which is attached hereto. The address of Beneficiary, as
the Secured Party, is also the address from which information concerning the
security interest may be obtained by any interested party.
8.4.1.1. The property subject to this fixture filing is described in
Sections 8.1.6 and 8.1.7.
8.4.1.2. Portions of the property subject to this fixture filing as
identified in Section 8.4.1.1 above are or are to become fixtures related to the
real estate described on Exhibit A to this Deed of Trust.
8.4.1.3.
---------------------------------
Secured Party is:
8.4.1.4.
---------------------------------
Debtor is:
---------------------------------
8.4.1.5
---------------------------------
The record owner
of the Property is:
---------------------------------
8.4.2. In the event Trustor shall fail, beyond any applicable notice and
grace periods, to make any payment or perform any covenant related to any
security interest in favor of any Person other than Beneficiary, Beneficiary
may, at its option, within 15 days after notice to Trustor or if Beneficiary's
immediate action is reasonably necessary
20
<PAGE>
to protect the lien hereof or its security for the Secured Obligations, at any
time without prior notice to Trustor, pay the amount secured by such security
interest, and the amount so paid shall be (i) secured by this Deed of Trust and
shall be a lien on the Property enjoying the same priorities vis-a-vis the
estates and interests encumbered hereby as the Senior Lien of this Deed of
Trust, (ii) added to the amount of the Secured Obligations, and (iii) payable
within 30 days after receipt of written demand with interest at the Default Rate
from the time of such payment; or Beneficiary shall have the privilege of
acquiring by assignment from the holder of such security interest any and all
contract rights, accounts receivable, chattel paper, negotiable or non-
negotiable instruments and other evidence of Trustor's indebtedness secured by
such fixtures, and, upon acquiring such interest by assignment, shall have the
right to enforce the security interest as assignee thereof, in accordance with
the terms and provisions of the UCC, as amended or supplemented, and in
accordance with other Applicable Laws.
ARTICLE 9.
ASSIGNMENT OF RENTS
-------------------
Section 9.1. Assignment of Rents.
-------------------
Subject to Section 9.2, the Permitted Liens and the rights of Purchasers
under Section 10.24, Trustor hereby absolutely and unconditionally assigns and
transfers to Beneficiary all of the Rents, whether now due, past due or to
become due, and hereby gives to and confers upon Beneficiary the right, power
and authority to collect such Rents and apply the same to the Secured
Obligations secured hereby. Trustor irrevocably appoints Beneficiary its true
and lawful attorney, at the option of Beneficiary at any time while an Event of
Default exists, to demand, receive and enforce payment, to give receipts,
releases and satisfactions, and to sue, either in the name of Trustor or in the
name of Beneficiary, for all such Rents and apply the same to the Secured
Obligations secured hereby. It is understood and agreed that neither the
foregoing assignment of Rents to Beneficiary nor the exercise by Beneficiary or
any of its rights or remedies under this Deed of Trust shall be deemed to make
Beneficiary a "mortgagee-in-possession" or otherwise responsible or liable in
any manner with respect to the Property or the use, occupancy, enjoyment or
operation of all or any portion thereof, unless and until Beneficiary, in person
or by its own agent, assumes actual possession thereof, nor shall appointment of
a Receiver for the Property by any court at the request of Beneficiary or by
agreement with Trustor or the entering into possession of the Property or any
part thereof by such Receiver be deemed to make Beneficiary a "mortgagee-in-
possession" or otherwise responsible or liable in any manner with respect to the
Property or the use, occupancy, enjoyment or operation of all or any portion
thereof.
Section 9.2. Collection of Rents.
-------------------
Notwithstanding anything to the contrary contained herein, so long as no
Event of Default with respect to the Notes shall occur and be continuing,
Trustor shall have a license, revocable upon the occurrence and during the
continuance of an Event of Default, to collect all Rents from the Property and
to retain, use and enjoy the same and to otherwise exercise all rights with
respect thereto, subject to the terms hereof. Upon the occurrence and during
the continuance of an Event of Default, the license hereinabove granted to
Trustor shall, without the requirement of the giving of notice or taking of any
action by any party, be revoked, and Beneficiary shall have the complete right
and authority to exercise and enforce any and all of its rights and remedies
provided herein or by Applicable Laws.
21
<PAGE>
ARTICLE 10.
MISCELLANEOUS
-------------
Section 10.1. Beneficiary's Expenses, Including Attorneys' Fees.
-------------------------------------------------
Regardless of the occurrence of a Default or Event of Default, Trustor
agrees to pay to Beneficiary any and all advances, charges, costs and expenses,
including the reasonable fees and expenses of counsel and any experts or agents,
that Beneficiary may reasonably incur in connection with (i) the administration
of this Deed of Trust, including any amendment thereto or any workout or
restructuring, (ii) the creation, perfection or continuation of the Liens of
this Deed of Trust or protection of their priority or the Trust Estate,
including the discharging of any prior or junior Lien or adverse claim against
the Trust Estate or any part thereof that is not permitted hereby or by the
Indenture, (iii) the custody, preservation or sale of, collection from, or other
realization upon, any of the Trust Estate, (iv) the exercise or enforcement of
any of the rights, powers or remedies of Beneficiary under this Deed of Trust or
under Applicable Laws (including attorneys' fees and expenses incurred by
Beneficiary in connection with the operation, maintenance or foreclosure of the
Liens of this Deed of Trust) or any bankruptcy proceeding or (v) the failure by
Trustor to perform or observe any of the provisions hereof. All such amounts
and all other amounts payable hereunder shall be payable on demand, together
with interest at the Default Rate.
Section 10.2. Indemnity.
---------
Trustor hereby agrees to indemnify and hold harmless the Trustee and
Beneficiary against (A) any and all transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery of this Deed of Trust and the other Collateral Documents,
and (B) any and all claims, actions, liabilities, costs and expenses of any kind
or nature whatsoever (including fees and disbursements of counsel) that may be
imposed on, incurred by, or asserted against any of them, in any way relating to
or arising out of this Deed of Trust or any action taken or omitted by them
hereunder, except to the extent that they resulted from the gross negligence or
willful misconduct of Trustee.
Section 10.3. Waivers; Modifications in Writing.
---------------------------------
No amendment of any provision of this Deed of Trust (including a waiver
thereof or consent relating thereto) shall be effective unless the same shall be
in writing and signed by Beneficiary and Trustor. Any waiver or consent
relating to any provision of this Deed of Trust shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand on Trustor in any case shall entitle Trustor to any other or further
notice or demand in similar circumstances, except as otherwise provided herein
or as required by law.
Section 10.4. Cumulative Remedies; Failure or Delay.
-------------------------------------
The rights and remedies provided for under this Deed of Trust are
cumulative and are not exclusive of any rights and remedies that may be
available to Beneficiary under Applicable Laws, the other Note Documents or
otherwise. No failure or delay on the part of Beneficiary in the exercise of
any power, right or remedy under this Deed of Trust shall impair such power,
right or remedy or shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude other or further
exercise of such or any other power, right or remedy.
22
<PAGE>
Section 10.5. Successors and Assigns.
----------------------
This Agreement shall be binding upon and, subject to the next sentence,
inure to the benefit of Trustor and Beneficiary and their respective successors
and assigns. Trustor shall not assign or transfer any of its rights or
obligations hereunder without the prior written consent of Beneficiary. The
benefits of this Deed of Trust shall pass automatically with any assignment of
the Secured Obligations (or any portion thereof), to the extent of such
assignment.
Section 10.6. Independence of Covenants.
-------------------------
All covenants under this Deed of Trust shall each be given independent
effect so that, if a particular action or condition is not permitted by any such
covenant, the fact that it would be permitted by another covenant or by an
exception thereto shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or condition exists.
Section 10.7. Change of Law.
-------------
In the event of the passage, after the date of this Deed of Trust, of any
law changing in any way the laws now in force for the taxation of mortgages,
deeds of trust, or debts secured by mortgage or deed of trust (other than laws
imposing taxes on income), or the manner of the collection of any such taxes, so
as to materially affect adversely the rights of Beneficiary under this Deed of
Trust, then an Event of Default shall be deemed to have occurred under Section
501 of the Indenture; provided, however, that no Event of Default shall be
-------- -------
deemed to have occurred (i) if Trustor, within thirty (30) days after the
passage of such law, shall assume the payment of any tax or other charge so
imposed upon Beneficiary for the period remaining until discharge in full of the
Secured Obligations; provided, however, that such assumption is permitted by
-------- -------
Applicable Laws, (ii) if the adverse effect upon Beneficiary of such tax or
other charge is not material, or (iii) if and so long as Trustor, at its
expense, shall contest the amount or validity or application of any such tax or
other charge by appropriate legal proceedings promptly initiated and conducted
in good faith and with due diligence; provided that (A) neither the Property nor
--------
any substantial part thereof will be in danger of being sold, forfeited,
terminated, canceled, or lost as a result of such contest and (B) except in the
case of a tax or charge junior to the Senior Lien and the Junior Lien of this
Deed of Trust, Trustor shall have posted such bond or furnished such other
security as may be required by law to release such tax or charge.
Section 10.8. No Waiver.
---------
No waiver by Beneficiary of any Default or breach by Trustor hereunder
shall be implied from any omission by Beneficiary to take action on account of
such Default if such Default persists or is repeated, no express waiver shall
affect any Default other than the Default in the waiver, and such waiver shall
be operative only for the time and to the extent therein stated. Waivers of any
covenant, term or condition contained herein shall not be construed as a waiver
of any subsequent breach of the same covenant, term or condition. The consent
or approval by Beneficiary to or of any act by Trustor requiring further consent
or approval shall not be deemed to waive or render unnecessary the consent or
approval to or of any subsequent similar act.
23
<PAGE>
Section 10.9. Notices.
-------
All notices and other communications under this Deed of Trust shall be in
writing and shall be personally delivered or sent by prepaid courier, by
overnight, registered or certified mail (postage prepaid) or by prepaid telex,
telecopy or telegram, and shall be deemed given when received by the intended
recipient thereof; provided that any notices with respect to foreclosure of the
liens and security interests hereof shall be given in accordance with any
contrary requirements of Applicable Law. Unless otherwise specified in a notice
given in accordance with the foregoing provisions of this Section 10.9., notices
and other communications shall be given to the parties hereto at their
respective addresses (or to their respective telex or telecopier numbers)
indicated in the Indenture or, in the case of the Trustee, Schedule 10.9.
Section 10.10. Survival.
--------
The covenants and agreements herein contained shall bind and inure to the
benefit of Beneficiary and Trustor and their successors and assigns.
Section 10.11. References to Foreclosure.
-------------------------
References hereto to "foreclosure" and related phrases shall be deemed
references to the appropriate procedure in connection with Trustee's private
power of sale, any judicial foreclosure proceeding, and any deed given in lieu
of any such Trustee's sale or judicial foreclosure.
Section 10.12. Joinder of Foreclosure.
----------------------
Should Beneficiary hold any other or additional security for the payment
and performance of any Secured Obligation, its sale or foreclosure, upon any
default in such payment or performance, in the sole discretion of Beneficiary,
may be prior to, subsequent to, or joined or otherwise contemporaneous with any
sale or foreclosure hereunder. Except as otherwise provided in the Indenture,
in addition to the rights herein specifically conferred, Beneficiary, at any
time and from time to time, may exercise any right or remedy now or hereafter
given by law to beneficiaries under deeds of trust generally, or to the holders
of any obligations of the kind hereby secured.
Section 10.13. Rights and Secured Obligations of Beneficiary and Trustee.
---------------------------------------------------------
At any time or from time to time, without liability therefor and without
notice, and without releasing or otherwise affecting the liability of any Person
for payment of any Secured Obligations, Beneficiary at its sole discretion and
only in writing may subordinate the Liens or either of them, or charge hereof to
the extent not prohibited by the Indenture. Beneficiary and Trustee shall,
however, promptly upon Trustor's request from time to time, join in the
following actions (including the execution and delivery of documents) as Trustor
determines are reasonably necessary for the development, use and operation of
the Trust Estate: (i) the making of any map or plat of the Property, (ii) the
granting, creating, amending and modifying of any customary easements,
covenants, conditions and restrictions with respect to the Property and (iii)
the application for and prosecution of any development, building, use and
similar permits and land use and utility approvals and installations regarding
the Property; provided, however, that Beneficiary and Trustee shall not be
-------- -------
required to join in or take any such action (a) while an Event of Default
exists, (b) to the extent such action would impair the Liens of this Deed of
Trust or the Applicable Priority thereof or (c) to the extent prohibited by the
Indenture. Any such request shall be accompanied by an
24
<PAGE>
Officers' Certificate complying with Section 102 of the Indenture (with all
references to "Indenture" being made to this Deed of Trust). [Upon written
request of Beneficiary and surrender of this Deed of Trust to Trustee for
cancellation, and upon payment to Trustee of its reasonable fees and expenses
actually incurred, Trustee shall cancel and reconvey this Deed of Trust; THIS
PROVISION TO BE MODIFIED TO REFLECT APPLICABLE STATE LAW REQUIREMENTS.]
Section 10.14. Copies.
------
Trustor will promptly give to Beneficiary copies of all notices of material
violations relating to the Property that Trustor receives from any Governmental
Authority.
Section 10.15. Subordination.
-------------
This Deed of Trust shall become subject and subordinate in whole or in part
(but not with respect to priority of entitlement to any insurance proceeds,
damages, awards, or compensation resulting from damage to the Property or
condemnation or exercise of power of eminent domain), to any and all contracts
of sale and/or any and all leases of all or any part of the Property upon the
execution by Beneficiary and recording thereof in the official records of the
county in which the Land is situated of a unilateral declaration to that effect.
Section 10.16. Personalty Security Instruments.
-------------------------------
Trustor covenants and agrees that if Beneficiary at any time holds
additional security for any Secured Obligations secured hereby, it may enforce
the terms thereof or otherwise realize upon the same, at its option, either
before or concurrently herewith or after a sale is made hereunder, and may apply
the proceeds upon the Secured Obligations without affecting the status or of
waiving any right to exhaust all or any other security, including the security
hereunder, and without waiving any breach or Default or any right or power
whether exercised hereunder or contained herein or in any such other security.
Section 10.17. Suits to Protect Property.
-------------------------
Without limitation of Section 1202 of the Indenture, Trustor covenants and
agrees to appear in and defend any action or proceeding the consequence of
which, if successful, would be that the Liens, or either of them, of this Deed
of Trust would not satisfy the requirements as to extent, perfection or priority
set forth in Section 1202 of the Indenture; and to pay all reasonable costs and
expenses actually incurred by Trustee and Beneficiary, including cost of
evidence of title and attorneys' fees in a reasonable sum, in any such action or
proceeding in which Beneficiary and/or Trustee may appear or be made a party.
Section 10.18. Trustor Waiver of Rights.
------------------------
Trustor waives the benefit of all laws now existing or that hereafter may
be enacted providing for (i) any appraisement before sale of any portion of the
Trust Estate, and (ii) the benefit of all laws that may be hereafter enacted in
any way extending the time for the enforcement of the Secured Obligations or
creating or extending a period of redemption from any sale made in collecting
said debt. To the full extent Trustor may do so, Trustor agrees that Trustor
will not at any time insist upon, plead, claim or take the benefit or advantage
of any law now or hereafter in
25
<PAGE>
force providing for any appraisement, valuation, stay, extension or redemption,
and Trustor, for Trustor, Trustor's heirs, devisees, representatives, successors
and assigns, and for any and all Persons ever claiming any interest in the Trust
Estate, to the extent permitted by law, hereby waives and releases all rights of
redemption, valuation, appraisement, stay of execution, and marshaling in the
event of foreclosure of the liens hereby created. If any law referred to in this
Section 10.18. and now in force, of which Trustor, Trustor's heirs, devisees,
representatives, successors and assigns or other Person might take advantage
despite this Section 10.18, shall hereafter be repealed or cease to be in force,
such law shall not thereafter be deemed to preclude the application of this
Section 10.18. To the extent permitted by Applicable Laws, Trustor expressly
waives and relinquishes any and all rights and remedies which Trustor may have
or be able to assert by reason of the laws of the State of Nevada pertaining to
the rights and remedies of sureties.
Section 10.19. Charges for Statements.
----------------------
Trustor agrees to pay Beneficiary's customary charge, to the maximum amount
permitted by Applicable Laws, for any statement regarding the Secured
Obligations requested by Trustor or in its behalf, which statements Beneficiary
hereby agrees to provide from time to time following request by Trustor.
Section 10.20. Complete Agreement.
------------------
This Deed of Trust, together with the exhibits and schedules hereto, and
the other Note Documents, is intended by the parties as a final expression of
their agreement regarding the subject matter hereof and is intended as a
complete and exclusive statement of the terms and conditions of such agreement.
Section 10.21. Payments Set Aside.
------------------
Notwithstanding anything to the contrary herein contained, this Deed of
Trust, the Secured Obligations and the Liens and Security Interest of this Deed
of Trust shall continue to be effective or be reinstated, as the case may be, if
at any time any payment, or any part thereof, of any or all of the Secured
Obligations is rescinded, invalidated, declared to be fraudulent or preferential
or otherwise required to be restored or returned by Beneficiary in connection
with any bankruptcy, reorganization or similar proceeding involving Trustor, any
other party liable with respect to the Secured Obligations or otherwise, if the
proceeds of the Trust Estate are required to be returned by Beneficiary under
any such circumstances, or if Beneficiary reasonably elects to return any such
payment or proceeds or any part thereof in its discretion, all as though such
payment had not been made or such proceeds not been received. Without limiting
the generality of the foregoing, if prior to any such rescission, invalidation,
declaration, restoration or return, this Deed of Trust shall have been
terminated, released and/or reconveyed and the Liens and Security Interest or
any of the Trust Estate shall have been released or terminated in connection
with such termination, release and/or reconveyance, this Deed of Trust and the
Liens and Security Interest and such portion of the Trust Estate shall be
reinstated in full force and effect, and such prior termination, release and/or
reconveyance shall not diminish, discharge or otherwise affect the obligations
of Trustor in respect of the amount of the affected payment or application of
proceeds, the Lien, the Security Interest or such portion of the Trust Estate.
26
<PAGE>
Section 10.22. Substitution.
------------
Beneficiary may at any time, without giving notice to Trustor or the
original or successor Trustee, and without regard to the willingness or
inability of any original or successor Trustee to execute this trust, appoint
another Person or succession of Persons to act as Trustee, and such appointee in
the execution of this trust shall have all the powers vested in and obligations
imposed upon Trustee. Should Beneficiary be a corporation or unincorporated
association, then any officer thereof may make such appointment.
Section 10.23. Choice of Forum.
---------------
10.23.1. Subject to Section 10.23.2, all actions or proceedings arising in
connection with this Deed of Trust shall be tried and litigated in state or
Federal courts located in the county in which the Land is situated, unless such
actions or proceedings are required to be brought in another court to obtain
subject matter jurisdiction over the matter in controversy. TRUSTOR WAIVES ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT
--------------------
IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 10.23.1.
10.23.2. Nothing contained in this Section shall preclude Beneficiary from
bringing any action or proceeding arising out of or relating to this Deed of
Trust in any court not referred to in Section 10.23.1. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, SERVICE OF PROCESS, SUFFICIENT FOR PERSONAL JURISDICTION IN
ANY ACTION AGAINST TRUSTOR, MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO ITS ADDRESS INDICATED IN SCHEDULE 10.9 HEREOF.
Section 10.24. Rights of Purchasers Under Contracts:
------------------------------------
(a) For purposes of this Section 10.24 the following terms shall have the
respective meanings assigned to them:
(i) "Affiliate" shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, the Trustor.
(ii) "Purchase Contract" shall mean an agreement between Trustor or any
of its current or future Affiliates and a Purchaser evidencing the
Purchaser's title to, estate or interest in, or right or license to use the
Trust Estate (or any portion thereof) and the facilities located thereon,
whether such agreement be in the form of a membership contract, an
agreement for the acquisition of an undivided interest, a timeshare
interest or a lot or any other similar agreement.
(iii) "Purchaser" shall mean a person who enters into a Purchase
Contract with Trustor or any of its current or future Affiliates and
thereby obtains title to, an estate or interest in, or license or the right
to use the Trust Estate (or any portion thereof) and the facilities located
thereon.
(b) Notwithstanding any provision in this Deed of Trust to the contrary,
Trustor and Beneficiary hereby acknowledge, covenant and agree as follows:
27
<PAGE>
(i) To the fullest extent required by any Legal Requirements, the
rights of Trustor and Beneficiary in and to the Trust Estate shall be
subject to the rights of Purchasers in and to the Trust Estate, regardless
of when such Purchasers acquire their interests in the Trust Estate;
(ii) In the event that Beneficiary or any of Beneficiary's successors
and assigns acquires title to the Trust Estate through foreclosure, deed in
lieu of foreclosure or otherwise, Beneficiary and its successors and
assigns shall (A) acquire title to the Trust Estate subject to the rights
of Purchasers to use the Trust Estate to the extent required by the
Purchase Contracts and (B) be obligated to continue to use the Trust Estate
to the extent required by any Legal Requirements and to refrain from using
the Trust Estate in any manner which would materially interfere with the
exercise of the rights of Purchasers to use the Trust Estate to the extent
required by the Purchase Contracts; provided, however, that neither
-------- -------
Beneficiary nor any of its successors or assigns shall have any obligation
to assume the obligations of Trustor under the Purchase Contracts and
provided, further, that neither Beneficiary nor any of its successors or
-------- -------
assigns shall have any liability for, or with respect to, such obligations.
(iii) Notwithstanding the provisions of Section 10.24(b)(ii) above, in
the event Beneficiary or any of its successors and assigns acquires title
to the Trust Estate through foreclosure, deed in lieu of foreclosure or
otherwise and such party desires or intends to use the Trust Estate other
than as required by Section 10.24(b)(ii), such party shall first be
obligated to either (A) offer title to, or possession of the Trust Estate
to an association of Purchasers who would be obligated to operate the Trust
Estate as required by Section 10.24(b)(ii) or (B) obtain a commitment from
another entity which would then obtain title to, or possession of the Trust
Estate and be obligated to operate the Trust Estate as required by Section
10.24(b)(ii).
(c) The covenants contained in this Section 10.24 (i) may be enforced by
each Purchaser of a Purchase Contract provided that such Purchaser is not in
default under its Purchase Contract, (ii) shall be effective as between each
Purchaser and Beneficiary despite any rejection or cancellation of the
Purchaser's Purchase Contract during any bankruptcy proceeding of Trustor and
(iii) shall inure to the benefit of and be binding upon the successors and
assigns of Trustor and Beneficiary, including any party which acquires title to
the Trust Estate through foreclosure or deed in lieu of foreclosure.
28
<PAGE>
IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be executed as
of the day and year first above written.
____________________________________
By: ____________________________________
Its.: __________________________________
__________________________________
By: ____________________________________
Its.: __________________________________
29
<PAGE>
STATE OF _____________ )
) SS:
COUNTY OF ____________ )
On _____________________, before me, _____________________ a Notary Public in
and for said State, personally appeared _____________________, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
Person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the Person(s), or the entity upon behalf of which the Person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
___________________________________
(Seal)
STATE OF _____________ )
) SS:
COUNTY OF ____________ )
On _____________________, before me, _____________________ a Notary Public in
and for said State, personally appeared _____________________, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the
Person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the Person(s), or the entity upon behalf of which the Person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
___________________________________
(Seal)
30
<PAGE>
SCHEDULE 10.9
ADDRESSES
---------
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF LAND
<PAGE>
EXHIBIT B
DESCRIPTION OF LEASES
<PAGE>
EXHIBIT F
INTERCOMPANY SUBORDINATION AGREEMENT
INTERCOMPANY SUBORDINATION AGREEMENT, dated as of July 17, 1996, made by
USTRAILS, INC., a Nevada corporation (the "Company"), and the wholly-owned
subsidiaries of the Company that are listed on the signature pages hereof (the
Borrower and each of which may be a "Debtor" or a "Subordinated Creditor" and
all of which, including the Borrower, may be referred to collectively as the
"Debtors" or the "Subordinated Creditors") in favor of Fleet National Bank
("Fleet") (the "Collateral Agent") pursuant to an indenture (as may be amended
from time to time, the "Indenture") dated July 17, 1996, of the Company and
certain of its subsidiaries to Fleet, as Trustee for the holders of the
Company's Senior Subordinated Pay-in-Kind Notes due 2003.
Unless otherwise defined in this Agreement, capitalized terms herein shall
have the meanings given them in the Indenture.
PRELIMINARY STATEMENTS:
-----------------------
A. The Company and the Subsidiary Guarantors executed the Indenture on
July 17, 1996, in connection with the Company's issuance of the Notes. The
Company is an Obligor under the Notes, and the Subordinated Guarantors, some of
which are Subordinated Creditors hereunder, have guaranteed the Company's
obligations under the Notes and Note Documents.
B. Under the terms of the Indenture, the Company may incur Indebtedness to
any of its Wholly-Owned Subsidiaries, and any such Wholly-Owned Subsidiary may
incur Indebtedness to any other Wholly-Owned Subsidiary or to the Company,
provided that such obligations, in each case, shall either be a Permitted
Intercompany Secured Loan or be unsecured and subordinated, pursuant to this
Intercompany Subordination Agreement, in all respects to the prior payment in
full and cash of the Company's or Wholly-Owned Subsidiaries' obligations
pursuant to the Note Documents.
C. Each Debtor is now or may hereafter be indebted or otherwise obligated
to one or more of the Subordinated Creditors in various amounts and may
hereafter from time to time become further indebted or otherwise obligated, as
the case may be, to one or more of the Subordinated Creditors. Each Debtor's
indebtedness now or hereafter existing (whether created directly or acquired by
assignment or otherwise and whether evidenced by a note, instrument, book entry,
oral understanding or otherwise) to any Subordinated Creditor, and interest and
premiums, if any, thereon and other amounts payable in respect thereof, are
herein referred to as "Subordinated Debt".
NOW, THEREFORE, in consideration of the premises and in connection with the
issuance of the Notes, each Subordinated Creditor and each Debtor hereby agrees
as follows:
SECTION 1. Agreement to Subordinate. Each Subordinated Creditor (with
------------------------
respect to Subordinated Debt owed to it) and each Debtor (with respect to
Subordinated Debt owed by it) agrees that all Subordinated Debt is and shall be
subordinate, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full, in cash, of all obligations of
<PAGE>
the Debtor now or hereafter existing under the Notes and the Note Documents,
including any extensions, modifications, substitutions, amendments and renewals
thereof, whether for principal, interest (including interest accruing after the
filing of a petition initiating any proceeding referred to in Section 3(a)),
fees, expenses, indemnification or otherwise (all such obligations being the
"Obligations").
SECTION 2. No Payment on the Subordinated Debt. Each Subordinated
-----------------------------------
Creditor (with respect to Subordinated Debt owed to it) agrees not to ask,
demand, sue for, take or receive from any Debtor, directly or indirectly, in
cash or other property or by set-off or in any other manner (including without
limitation from or by way of Collateral), payment of all or any of the
Subordinated Debt unless and until the Obligations shall have been paid in full;
provided, however, that each Subordinated Creditor may receive and each Debtor
- --------- -------
may make payments in respect of the Subordinated Debt if, at the time of making
such payment and immediately after giving effect thereto, (i) no Default or
Event of Default shall have occurred and be continuing and (ii) the Subordinated
Creditor receiving such payment shall not have received notice from the
Collateral Agent to the effect that such payments are no longer to be made by
such Debtor. For the purposes of this Agreement, the Obligations shall not be
deemed to have been paid in full unless and until the holders or owners of the
Obligations shall have indefeasibly received payment in full of the Obligations
in cash.
SECTION 3. In Furtherance of Subordination. Each Subordinated Creditor
-------------------------------
(with respect to Subordinated Debt owed to it) agrees as follows:
(a) Upon any distribution of all or any of the assets of any Debtor
to creditors of such Debtor upon the dissolution, winding up, liquidation,
arrangement, reorganization, adjustment, protection, relief, or composition
of such Debtor or its debts, whether in any bankruptcy, insolvency,
arrangement, reorganization, receivership, relief or similar proceedings or
upon an assignment for the benefit of creditors or any other marshalling of
the assets and liabilities of such Debtor or otherwise, any payment or
distribution of any kind (whether in cash, property or securities) which
otherwise would be payable or deliverable upon or with respect to the
Subordinated Debt shall be paid or delivered directly to the Collateral
Agent for application (in the case of cash) to or as collateral or (in the
case of non-cash property or securities) for the payment or prepayment of
all or any part of the Obligations in such order and manner as the
Collateral Agent may elect until the Obligations shall have been paid in
full.
(b) If any proceeding referred to in subsection (a) above is
commenced by or against a Debtor:
(i) the Collateral Agent is hereby irrevocably authorized and
empowered (in its own name or in the name of each Subordinated
Creditor of such Debtor or otherwise), but shall have no obligation,
to demand, sue for, collect and receive every payment or distribution
referred to in subsection (a) above and give acquittance therefor and
to file claims and proofs of claim and take such other action
(including without limitation voting all Subordinated Debt or
enforcing any security interest or other lien securing payment of the
Subordinated Debt) as it
2
<PAGE>
may deem necessary or advisable for the exercise or enforcement of any
of the rights or interests of the Collateral Agent hereunder; and
(ii) each Subordinated Creditor shall duly and promptly take
such action as the Collateral Agent may reasonably request (A) to
collect the Subordinated Debt owing to such Subordinated Creditor for
account of the Collateral Agent and to file appropriate claims or
proofs of claim in respect of such Subordinated Debt, (B) to execute
and deliver to the Collateral Agent such powers of attorney,
assignments, or other instruments as it may request in order to enable
it to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Subordinated Debt,
and (C) to collect and receive, for account of the Collateral Agent,
any and all payments or distributions which may be payable or
deliverable upon or with respect to the Subordinated Debt.
(c) All payments or distributions upon or with respect to the
Subordinated Debt which are received by a Subordinated Creditor contrary to
the provisions of this Agreement shall be received in trust for the benefit
of the Collateral Agent, shall be segregated from other funds and property
held by such Subordinated Creditor and shall be forthwith paid over to the
Collateral Agent in the same form as so received (with any necessary
endorsement) to be held by the Collateral Agent as collateral for, and/or
then or at any time thereafter be applied in whole or in part by the
Collateral Agent for the ratable benefit of the Holders of the Notes
against, all or any part of the Obligations in such order and manner as the
Collateral Agent may elect.
(d) The Collateral Agent is hereby authorized to demand specific
performance of this Agreement, whether or not a Debtor shall have complied
with any of the provisions hereof applicable to it, at any time when a
Subordinated Creditor shall have failed to comply with any of the
provisions of this Agreement applicable to it. Each Subordinated Creditor
hereby irrevocably waives any defense based on the adequacy of a remedy at
law which might be asserted as a bar to such remedy of specific
performance.
(e) All instruments evidencing Subordinated Debt shall be promptly
delivered to and held by or on behalf of the Collateral Agent and shall be
in suitable form for transfer by delivery. Each Subordinated Creditor
hereby agrees that it shall not make any loan constituting Subordinated
Debt unless any instruments evidencing such Subordinated Debt shall be
promptly delivered to and held by or on behalf of the Collateral Agent.
SECTION 4. Additional Condition On Certain Subordinated Debt. Any other
-------------------------------------------------
provision of this Agreement notwithstanding, no Debtor other than the Company
and the Subsidiary Guarantors may incur any Subordinated Debt unless such
Subordinated Debt complies with all requirements of a Permitted Intercompany
Secured Loan under the Indenture
SECTION 5. No Commencement of Any Proceeding. Each Subordinated Creditor
---------------------------------
agrees that, so long as any of the Obligations shall remain unpaid, it will not
commence, or join with any creditor other than the Collateral Agent in
commencing, any proceeding referred to in Section 3(a).
3
<PAGE>
SECTION 6. Confirmation of Waiver of Rights of Subrogation. Each
-----------------------------------------------
Subordinated Creditor agrees that no payment or distribution to the Collateral
Agent pursuant to the provisions of this Agreement shall entitle a Subordinated
Creditor to exercise any rights of subrogation in respect thereof, all of which
are expressly waived herein.
SECTION 7. Subordination Legend: Further Assurances. Each Subordinated
----------------------------------------
Creditor (with respect to Subordinated Debt owing to it) and each Debtor (with
respect to Subordinated Debt owed by it) will cause each instrument or document
evidencing the Subordinated Debt to be endorsed with the following legend:
"The indebtedness evidenced by this instrument or document is subordinated
to the prior payment in full of the Obligations (as defined in the
Intercompany Subordination Agreement hereinafter referred to) pursuant to,
and to the extent provided in, the Intercompany Subordination Agreement
dated as of July 17, 1996 by the maker hereof and payee named herein and
others in favor of Fleet National Bank, as Collateral Agent."
Each Subordinated Creditor (with respect to Subordinated Debt owing to it) and
each Debtor (with respect to Subordinated Debt owed by it) will further mark
their respective books of account in such a manner as shall be effective to give
proper notice of the effect of this Agreement. At the request of the Collateral
Agent, each Subordinated Creditor will (with respect to Subordinated Debt owing
to it), in the case of any Subordinated Debt which is not evidenced by an
instrument or document, cause such Subordinated Debt to be evidenced by an
appropriate instrument or instruments endorsed with the above legend. Each
Subordinated Creditor (with respect to Subordinated Debt owing to it) and each
Debtor (with respect to Subordinated Debt owed by it) will, at its expense and
at any time and from time to time, promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary,
or that the Collateral Agent may request, in order to protect any right or
interest granted or purported to be granted hereby or to enable the Collateral
Agent to exercise and enforce its rights and remedies hereunder.
SECTION 8. No Change in or Disposition of Subordinated Debt. Each
------------------------------------------------
Subordinated Creditor will not, without the consent of the Collateral Agent:
(a) cancel or otherwise discharge any of the Subordinated Debt (except for
payments made in accordance with Section 2) or subordinate any of the
Subordinated Debt to any Indebtedness other than the Obligations;
(b) sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Debt, except pursuant to the Collateral Documents; or
(c) permit the terms of any of the Subordinated Debt to be changed in any
manner, except to the extent that such Subordinated Debt, as changed, would be
Indebtedness that is permitted under Section 1101 of the Indenture.
SECTION 9. Agreements by Each Debtor. (a) Each Debtor agrees that it will
-------------------------
not make any payment of any of the Subordinated Debt under which it is indebted,
or take any other action, in contravention of the provisions of this Agreement.
4
<PAGE>
(b) Each Debtor agrees that upon request of the Collateral Agent it will
promptly deliver to the Collateral Agent a schedule setting forth all
Subordinated Debt under which it is indebted as of the date of such request.
SECTION 10. Obligations Hereunder Not Affected. All rights and interests
----------------------------------
of the Banks and the Collateral Agent hereunder, and all agreements and
obligations of each Subordinated Creditor and each Debtor under this Agreement,
shall remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of the Notes, the Indenture, any
other Note Document, or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations, or any other amendment or waiver of or
any consent to departure from the Notes or Indenture or any other Note Document;
(c) any enforcement of any Note Document, including the taking, holding or
sale of any Collateral, or any termination or release of any Collateral from the
Liens created by any Note Document, or the non-perfection of any Liens created
by any Note Document;
(d) any refusal of payment by the Collateral Agent, in whole or in part,
from any obligor or guarantor in connection with any of the Obligations, whether
or not with notice to, or further assent by, or any reservation of rights
against, any Subordinated Creditor; or
(e) any other circumstance which might otherwise constitute a defense
available to, or discharge of, a Debtor or a Subordinated Creditor or third
party guarantor or surety.
This Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Obligations is rescinded or
must otherwise be returned by the Collateral Agent, or any other Person upon the
insolvency, bankruptcy or reorganization of a Debtor or otherwise, all as though
such payment had not been made.
SECTION 11. Waiver. (a) Each Subordinated Creditor hereby waives
------
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Obligations and this Agreement and any requirement that the
Collateral Agent protect, secure, perfect or insure any security interest or
Lien or any property subject thereto or exhaust any right or take any action
against a Debtor or any other Person or any Collateral.
(b) Each Subordinated Creditor hereby waives any right to require the
Collateral Agent or any other Person to proceed against any Note Party or any
other Person, or proceed against or exhaust any Collateral, or pursue any other
remedy in the power of the Collateral Agent or any other Person.
SECTION 12. Representations and Warranties. Each Subordinated Creditor
------------------------------
(with respect to the Subordinated Debt owing to it) and each Debtor (with
respect to Subordinated Debt owed to it) hereby represents and warrants as
follows:
5
<PAGE>
(a) The Subordinated Debt now outstanding, true and complete copies of
instruments, if any, evidencing which have been furnished to the Collateral
Agent, has been duly authorized by such Debtor, has not been amended or
otherwise modified, and constitutes the legal, valid and binding obligation of
such Debtor enforceable against such Debtor in accordance with its terms. There
exists no default in respect of any such Subordinated Debt.
(b) Each Subordinated Creditor owns the Subordinated Debt now outstanding
free and clear of any Lien or any rights of others, except for Liens created
under the Collateral Documents.
SECTION 13. Amendments. Etc. No amendment or waiver of any provision of
----------------
this Agreement nor consent to any departure by a Subordinated Creditor or by a
Debtor therefrom shall in any event be effective unless the same shall be in
writing and signed by the Collateral Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 14. Expenses. Each Subordinated Creditor and each Debtor jointly
--------
and severally agree to pay, upon demand, to the Collateral Agent the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel, which the Collateral Agent may incur in connection with the
exercise or enforcement of any of the rights or interests of the Collateral
Agent hereunder.
SECTION 15. Addresses for Notices. All notices and other communications
---------------------
provided for or permitted hereunder shall, unless otherwise stated herein, be in
writing (including telefax communication), and if to a Subordinated Creditor or
a Debtor, telefaxed or delivered to it, care of the Company, addressed to it at
the Company's address set forth in the Indenture, if to the Collateral Agent,
telefaxed, telexed or delivered to it, at the address of the Collateral Agent
specified in the Indenture, or, as to each party at such other address as shall
be designated by such party in a written notice to each other party complying as
to delivery with the terms of this Section. All such notices and other
communications shall, when mailed, telegraphed, telexed, cabled or faxed, be
effective when mailed, delivered to the telegraph company, confirmed by telex
answerback, delivered to the cable company or confirmed received in the case of
a facsimile, in each case addressed as aforesaid.
SECTION 16. No Waiver; Remedies. No failure on the part of the Collateral
-------------------
Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 17. Continuing Agreement: Assignments Under. This Agreement is a
----------------------------------------
continuing agreement and shall remain in full force and effect until the
Obligations shall have been paid in full, be binding upon each Subordinated
Creditor, each Debtor and their respective successors and assigns, and inure to
the benefit of and be enforceable by the Collateral Agent and its successors,
transferees and assigns.
6
<PAGE>
SECTION 18. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective as to each party hereto when a counterpart hereof shall
have been signed by such party.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
--------- ---
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS.
7
<PAGE>
IN WITNESS WHEREOF, each Subordinated Creditor and each Debtor has caused this
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above-written.
USTRAILS INC., a Nevada corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FLEET NATIONAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THOUSAND TRAILS (CANADA) INC.,
a British Columbia corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
TT OFFSHORE, LTD., a Virginia corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
8
<PAGE>
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LML RESORT CORPORATION,
an Alabama corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
RESORT LAND CORPORATION,
an Arkansas corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LAKE TANSI VILLAGE, INC.,
a Delaware corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SHOREWOOD CORPORATION,
a Georgia corporation
By:
--------------------------------
Name:
-------------------------------
Title:
------------------------------
9
<PAGE>
TANSI RESORT, INC.,
a Georgia corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
INDIAN LAKES WILDERNESS PRESERVE
CORPORATION, an Indiana corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
DIXIE RESORT CORPORATION,
a Mississippi corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
RECREATION PROPERTIES, INC.,
a Mississippi corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
10
<PAGE>
CARRIAGE MANOR CORPORATION,
a North Carolina corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LAKE ROYALE CORPORATION,
a North Carolina corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
GL LAND DEVELOPMENT INC.,
an Oklahoma corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BEECH MOUNTAIN LAKES CORPORATION, a
Pennsylvania corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
QUAIL HOLLOW VILLAGE, INC.,
a Pennsylvania corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
11
<PAGE>
RECREATION LAND CORPORATION,
a Pennsylvania corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WOLF RUN MANOR CORP.,
a Pennsylvania corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CAROLINA LANDING CORPORATION,
a South Carolina corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FOXWOOD CORPORATION,
a South Carolina corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE KINSTON CORPORATION,
a South Carolina corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
12
<PAGE>
CHEROKEE LANDING CORPORATION,
a Tennessee corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CHIEF CREEK CORPORATION,
a Tennessee corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
NATCHEZ TRACE WILDERNESS PRESERVE
CORPORATION,
a Tennessee corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
QUAIL HOLLOW PLANTATION CORPORATION,
a Tennessee corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WESTERN FUN CORPORATION,
a Texas corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
13
<PAGE>
WESTWIND MANOR CORPORATION,
a Texas corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
UST WILDERNESS MANAGEMENT
CORPORATION, a Nevada corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
14
<PAGE>
EXHIBIT 4.37
FORM of Senior Subordinated Pay-in-Kind Note Due 2003
<PAGE>
Exhibit 4.37
REGISTERED [LOGO] REGISTERED
[R ] [ ]
USTRAILS INC
SENIOR SUBORDINATED PAY-IN-KIND NOTES DUE 2003 OF
USTRAILS INC.
SEE REVERSE FOR TRANSFER RESTRICTIONS
CUSIP 917326 AC 4
THIS CERTIFIES THAT
(the "Holder") is the owner of Notes in the aggregate principal amount specified
above.
This Note Certificate represents the foregoing principal amount of Senior
Subordinated Pay-In-Kind Notes due 2003 (the "Notes") of USTrails Inc, a Nevada
corporation (including any successor under the Indenture hereinafter referred to
the "Company").
The Company, as obligor promises to pay to the Holder or registered
assigns, the principal sum of $ on July 15 2003.
Interest Payment Dates: July 15 and January 15 (each an "Interest Payment
Date").
Record Dates: July 1 and January 1 (whether or not a Business Day),(each a
"Regular Record Date").
The Notes were issued with original issue discount for Federal Income tax
purposes. Information regarding the issue price of the Notes,total amount of
original issue discount on the Notes, the issue date of the Notes, and the yield
to maturity of the Notes can be obtained at the address of the Company specified
on the reverse hereof.
Dated USTRAILS INC.
Authenticated: FLEET NATIONAL BANK
By: ? [SEAL] ? By
Signature Illegeble Signature Illegeble
Authorized Office ? President
<PAGE>
SENIOR SUBORDINATED PAY-IN-KIND NOTE DUE 2003
1. Interest. USTrails Inc., a Nevada corporation (the "Company"), promises
to pay interest on the principal amount of the Notes represented by this Note
Certificate (i) through and including January 15, 1998 (the "Initial Period") at
17 1/2% per annum and (ii) after January 15, 1998 at 12% per annum. The Company
shall pay interest (i) during the Initial Period (A) in the amount of $40.59 per
$1,000 principal amount on the Issue Date (the "Prepaid Interest") to holders of
record on the Issue Date and (B) at 12% per annum semiannually on each Interest
Payment Date to the holders or record (each a "Holder") of Outstanding Notes on
the immediately preceding Regular Record Date and (ii) after the initial
Period, semiannually on each Interest Payment Date to the Holders of the
Outstanding Notes on the immediately preceding Regular Record Date. The Prepaid
Interest shall be paid in cash and the holder of record on the Issue Date by its
acceptance of these Notes acknowledges receipt in full of such Prepaid Interest.
The Company may, in its sole discretion, issue additional Notes ("Secondary
Notes") in lieu of cash payment of any or all of the interest due on any
Interest Payment Date occurring on or prior to July 15, 2000 provided, on or
prior to July 15, 2000, so long as the Senior Indebtedness is outstanding
interest shall be paid only by the issuance of Secondary Notes. If the Company
issues Secondary Notes in lieu of cash payment, in whole or in part, of interest
due on any Interest Payment Date occurring on or prior to July 15, 2000 pursuant
to this paragraph, it shall give notice to the Trustee not less than 5 Business
Days prior to the relevant Interest Payment Date, and shall instruct the Trustee
upon Order of the Company given not less than 5 or more than 45 days prior to
such Interest Payment Date) to authenticate Secondary Notes, dated such Interest
Payment Date, in a principal amount equal to the amount of interest not paid in
cash in respect of this note on such Interest Payment Date. Each issuance of
Secondary Notes in lieu of cash payments of interest on the Notes shall be made
pro rata with respect to the outstanding Notes. Any such Secondary Notes shall
be subject to the same terms (including maturity date and rate of interest from
time to time payable thereon) as this Note except, as the case may be, with
respect to the title, issuance date and aggregate principal amount. The term
Notes shall include Secondary Notes that may be issued under the Indenture.
Interest on the Notes represented by this Note Certificate will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid on such Notes, from the first date on which the Notes represented by this
Note Certificate was originally issued. Interest will be computed on the basis
of a 360-day year of twelve 30-day months. To the extent lawful, the Company
shall pay interest on overdue installments of interest at the rate of 14% per
annum.
2. Additional Interest. If a Registration Default has occurred and is
continuing, the Notes represented by this Note Certificate will bear Additional
Interest, at the rate of $0.10 per week higher than the interest rate then
payable on the Notes per $1,000 principal amount of Notes, from the date such
Registration Default occurs (the "Commencement Date") to and through the date
such Registration Default no longer exists. Installments of Additional Interest
will become due and payable semiannually on the next occurring Interest Payment
Date to the Holders at the close of business on the Regular Record Date
immediately preceding such Interest Payment Date. All references in this Note
Certificate to "interest" include the amount of unpaid Additional Interest due
and payable. At no time shall be maximum aggregate interest rate borne by this
Note exceed the maximum amount permitted under Applicable Law.
3. Method of Payment. The Company shall pay interest on the Notes (except
Defaulted Interest) to Holders of Notes at the close of business on the Regular
Record Date for the Interest Payment Date even if Notes are canceled after the
Regular Record Date and on or before the Interest Payment Date. If the Company
and a Holder shall so agree, Holders shall not be required to surrender the
Notes to collect principal payments and premium payments, if any. The Company
shall pay principal, premium if any, and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts for, pursuant to paragraph 2 hereof, in Secondary Notes).
The payment of the Notes to Holders is guaranteed pursuant to the
Subsidiary Guarantee by the Subsidiary Guarantors.
4. Paying Agent and Registrar. Fleet National Bank, a national banking
association (the "Trustee"), will act as Paying Agent and Registrar.
5. Indenture. The Company issued the Notes under an indenture dated as of
July 17, 1996 ("Indenture") by and among the Company, each Subsidiary of the
Company set forth on Schedule I to the Indenture, as Subsidiary Guarantors, and
the Trustee. The terms of the Notes include those stated in the Indenture and
those terms made a part thereof by reference to the Trust Indenture Act of 1939,
as amended, as in effect on the date of the Indenture (the "Trust Indenture
Act"). The Notes are subject to and qualified by, all such terms, certain of
which are summarized herein, and Holders are referred to the Indenture and the
Act for a statement of such terms. Capitalized terms not defined herein have
the meaning given to them in the Indenture.
6. Optional Redemption. The Company may redeem all or a portion of the
Notes at any time after the Issue Date at 100% of principal amount, plus accrued
and unpaid interest.
7. Redemption and Repurchase in Part. If less than all of the Outstanding
Notes are to be redeemed or repurchased, the particular Notes or portions
thereof to be redeemed shall be determined on a pro rata basis, by lot or by any
other method determined by the Trustee to be fair and appropriate, subject to
compliance with the requirements of any national securities exchange on which
the Notes are then listed.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at such Holder's registered address. On and after the
redemption date, interest shall cease to accrue on the Notes or portions thereof
called for redemption.
If this Note is redeemed subsequent to a Regular Record Date with respect
to any Interest Payment Date specified above and on or prior to such Interest
Payment Date, then any interest will be paid to the Person in whose name this
Note is registered at the close of business on such Regular Record Date.
9. Asset Sale. Subject to certain exceptions, the Company must repurchase
Notes in a principal amount equal to the maximum principal amount of Notes that
may be purchased out of that portion of Net Cash Proceeds of any Asset Sale that
is not applied to Senior Indebtedness or reinvested in a Related Business
within 180 days of such Asset Sale. Such repurchase may be made in any manner
selected by the Company, including, without limitation, open market purchases,
privately negotiated transactions, redemption or an Asset Sale Purchase Offer.
10. Change of Control Purchase Offer. If a Change of Control has occurred,
each Holder of the Notes will have the right, at such Holder's option, subject
to the terms and conditions of the Indenture, to require the Company to
repurchase all or any part of such Holder's Notes. Such offer must be commenced
within 45 Business Days after the Company repays, or offers to repay, in full
the Senior indebtedness or obtains the consent of the holders of the Senior
Indebtedness to permit repurchase of the Notes, at a cash price equal to 101% of
the principal amount of the Notes to be purchased, plus accrued and unpaid
interest to the purchase date.
11. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations $1,000 and integral multiples of $1,000
(provided that Secondary Notes or Notes issued upon registration of transfer of
such Secondary Notes may be in denominations of other that $1,000). The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. As a condition to transfer, the Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
The Registrar need not exchange or register the transfer of any Note or portion
of a Note selected for redemption in whole or in part or with respect to which a
Purchase Notice has been given. Also it need not exchange or register the
transfer of any Notes for a period of 15 days before the mailing of notice of
redemption or offer to repurchase with respect to such Notes.
12. Persons Deemed Owners. The registered holder of an Note may be treated
as its owner for the purpose of receiving payment and, subject to the exception
set forth under the caption "Method of Payment" above, interest (including
Additional Interest) and for all other purposes.
13. Amendments and Waivers. Subject to certain exceptions, the Indenture
or the Notes may be amended with the consent of the Holders of at least 66 2/3%
in principal amount of the Outstanding Notes, and any existing default may be
waived with the consent of the Holders of a majority in principal amount of the
Outstanding Notes. Without the consent of any Holder,the Indenture of the Notes
may be amended: to provide for assumption of any Obligor's obligations to
Holders by another Person; to add to the covenants of the Obligors for the
benefit of the Holders or to surrender any right or power conferred upon any
Obligor; to cure any ambiguity, defect or inconsistency; to appoint a successor
Trustee; to advice Subsidiary Guarantor and to release a Subsidiary Guarantor
under certain circumstances; to release collateral security under certain
circumstances; or to comply with any requirement to effect the qualification of
the Indenture under the Trust Indenture Act of any registration or qualification
of the Notes under securities laws.
14. Defaults and Remedies. If an Event of Default as set forth in the
Indenture occurs and is continuing, the Trustee or the Holders of at least 30%
in principal amount of the Outstanding Notes may declare the principal of all
the Notes to be due and payable immediately, except that in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, all
Outstanding Notes will become due and payable without futher action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
a majority in principal amount of the Outstanding Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of principal, or
premium (if any) or interest can be payment of any Purchase Price) if it
determines that withholding notice is in their interests. The Company must
furnish quarterly and annual compliance certificates to the Trustee.
15. Trustee Dealings with the Company. The Indenture contains certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90 days
or resign.
16. No Recourse Against Others. A director, officer, employee, stockholder
or incorporator, as such, of any Note Party shall not have any liability for any
obligations of such Note Party under the Notes, the Indenture or other Note
Documents or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the Notes.
17. Authentication. This Note shall not be valid until authenticated by
the manual signature of an authorized officer of the Trustee.
18. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common). TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), U/G/M/A (= Uniform Gifts to
Minors Act).
19. Collateral Documents and Collateral. During the period that any Senior
Indebtedness is outstanding, whether in existence on the date hereof or later
incurred, and until the Delivery Date the obligations represented by this Notes
are general unsecured obligations of the Company. Substantially
contemporaneously with the discharge in full of the Company's obligations in
respect of the Senior Indebtedness, the Company will grant the liens
contemplated by and the Trustee will enter into or accept the Collateral
Documents listed on Schedule 1201 to the Indenture and accept delivery of the
Collateral specified therein. By acceptance of its Notes, each Holder agrees to
the substance of all terms and provisions of such Collateral Documents and all
other Note Documents from time to time entered into pursuant to (and as amended
from time to time pursuant to) the provisions of the indenture and the other
Note Documents. As among Holders, the Collateral shall be held for the equal and
ratable benefit of the Holders without preference priority or distinction of any
Holder over any other Holder by reason of differences in time of issuance of the
Notes held by such Holders, sale or otherwise, as security for the Secured
Obligations of the Obligors.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture, which has in it the text of this Note in larger
type. Requests may be made to:
USTrails Inc.
2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
Attention:Chief Financial Officer
20. Subordination. The Notes are subordinated to the Senior Indebtedness,
as defined in the Indenture. To the extent provided in the Indenture, the
Senior Indebtedness must be paid before the Notes may be paid. The Company
agrees, and each Holder by accepting a Note agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoint the Trustee as attorney-in-fact for such purpose.
ASSIGNMENT FORM
To Assign this Note, fill in the form below;
I or we assign and transfer this Note to:
- ----------------------------------------------------
- ----------------------------------------------------
(Insert assignee's social or tax identification
number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint:
_____________________________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.
Date:______________________________ Signature Guarantee:
Signed:____________________________ __________________________________________
(Signed exactly as your NOTICE: The signature must be guaranteed
name appears on the face on by an eligible guarantor institution
this Note) (banks, stockbrokers, savings and loan
associations and credit unions with
membership in an approved signature
guarantee medallion program), pursuant to
Rule 17 Ad-15 promulgated under the
Securities Exchange Act of 1934, as
amended.
<PAGE>
________________________________________________________________________________
EXHIBIT 4.38
------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JULY 17, 1996
BY AND BETWEEN
USTRAILS INC.
AND
FLEET NATIONAL BANK, AS TRUSTEE
________________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
SECTION 1. DEFINITIONS................................................ 1
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT....................... 3
SECTION 3. SHELF REGISTRATION......................................... 3
SECTION 4. REGISTRATION PROCEDURES.................................... 5
SECTION 5. REGISTRATION EXPENSES...................................... 9
SECTION 6. INDEMNIFICATION............................................ 10
SECTION 7. MISCELLANEOUS.............................................. 13
7.1 REMEDIES................................................... 13
7.2 NO INCONSISTENT AGREEMENTS................................. 13
7.3 ADJUSTMENTS AFFECTING THE TRANSFER RESTRICTED SECURITIES OR
THE SENIOR EXCHANGE NOTES.................................. 13
7.4 AMENDMENTS AND WAIVERS..................................... 13
7.5 NOTICES.................................................... 14
7.6 SUCCESSORS AND ASSIGNS..................................... 14
7.7 COUNTERPARTS............................................... 14
7.8 HEADINGS................................................... 15
7.9 GOVERNING LAW.............................................. 15
7.10 SEVERABILITY............................................... 15
7.11 ENTIRE AGREEMENT........................................... 15
</TABLE>
i
<PAGE>
DEFINED TERMS
This appendix lists all of the defined terms in the Registration Rights
Agreement and indicates the page on which the Agreement defines them.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Advice................................................................ 8
Affiliate............................................................. 1
Agreement............................................................. 1
Collateral Documents.................................................. 1
Common Stock.......................................................... 1
Company............................................................... 1
Deadline.............................................................. 3
Exchange Act.......................................................... 1
Exchange Offer........................................................ 1
Exchanging Noteholders................................................ 1
Filing Date........................................................... 3
Holder................................................................ 1
Indenture............................................................. 1
Losses................................................................ 10
Majority.............................................................. 2
NASD.................................................................. 2
Permitted Restrictions................................................ 6
Person................................................................ 2
PIK Notes............................................................. 1, 2
PPM................................................................... 1
Prospectur............................................................ 2
Registration Expenses................................................. 9
</TABLE>
ii
<PAGE>
Registration Statement................................................... 2
Restricted Common Stock.................................................. 2
Restricted PIK Notes..................................................... 2
SEC...................................................................... 2
Securities Act........................................................... 2
Shelf Registration....................................................... 3
Stop Order............................................................... 9
Subsidiary Guarantors.................................................... 1
TIA...................................................................... 2
Trustee.................................................................. 1
iii
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of July 17, 1996, by and between USTrails Inc., a Nevada
corporation (the "Company"), and Fleet National Bank, as trustee (the
"Trustee").
This Agreement is made pursuant to (i) an Exchange Offer (the
"Exchange Offer") pursuant to a Private Placement Memorandum dated June 28,
1996, as supplemented by the Supplement to Private Placement Memorandum dated
July 15, 1996 (the "PPM") and the related Letter of Transmittal, under which the
Company offered certain holders of USTrails Inc. 12% Secured Notes due 1998 and
Additional Series 12% Secured Notes due 1998 (collectively the "1998 Notes") the
opportunity to exchange their Secured Notes for the Exchange Consideration
described in the PPM, which includes (a) the Company's Senior Subordinated Pay-
In-Kind Notes due 2003 (the "PIK Notes") and shares of common stock of the
Company, par value $.01 per share (the "Common Stock "); and (ii) an Indenture,
dated as of July 17, 1996, of the Company and certain subsidiaries of the
Company (the "Subsidiary Guarantors") to the Trustee, in respect to the PIK
Notes. In order to induce the Holders of the 1998 Notes to enter into the
Exchange Offer, the Company has agreed that as a condition of the closing of the
transactions contemplated under the Exchange Offer and such Indenture, the
Company would provide the registration rights set forth in this Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
All capitalized terms used herein and not otherwise defined shall have
the meaning given to them in the Indenture. As used in this Agreement, the
following capitalized terms shall have the following meanings:
1998 Notes: As defined in the preamble.
----------
Advice: As defined in Section 4(d) hereof.
------
Affiliate: As defined in the Indenture.
---------
Collateral Documents: As defined in the Indenture.
--------------------
Deadline: As defined in Section 3(a) hereof.
--------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchanging Noteholders: A holder of the 1998 Notes participating in
----------------------
the Exchange Offer.
Holder: The term "Holder" with respect to a security means the holder
------
of record thereof.
Indenture: The Indenture, dated as of the date hereof between the
---------
Company and the Trustee, as such Indenture is amended or supplemented from time
to time in accordance with the terms thereof, pursuant to which the PIK Notes
are being issued and certain other Transfer Restricted Securities may be issued
in accordance with the terms thereof.
<PAGE>
Majority: A Majority of the Transfer Restricted Securities is a
--------
majority in principal amount of the Restricted PIK Notes then outstanding,
except that, in respect to a Registration Statement in
which only Restricted Common Stock is being sold, a Majority of
Transfer Restricted Securities means a majority of such Restricted
Common Stock.
NASD: National Association of Securities Dealers, Inc.
----
PIK Notes: The Notes as defined in the Indenture.
---------
Person: An individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agenc political subdivision
thereof.
Prospectus: The prospectus included in any Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other
amendments thereto (including post-effective amendments) and all material
incorporated by reference in such prospectus.
Registration Expenses: As defined in Section 5 (a) hereof.
---------------------
Registration Statement: Any registration statement of the Company
----------------------
which covers any of the Transfer Restricted Securities, pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement (including post-effective
amendments), all exhibits and all material incorporated by reference in such
registration statement.
Restricted PIK Notes: All PIK Notes that upon original issuance
--------------------
thereof, are Transfer Restricted Securities, provided that when any PIK Note (i)
has been effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it or (ii) has been
distributed to the public pursuant to and in accordance with Rule 144 (or any
similar rule) under the Securities Act or (iii) has been transferred by an
Exchanging Noteholder to another Person (other than by operation of law, or to
another Exchanging Noteholder), such PIK Note shall cease to be a Restricted PIK
Note.
Restricted Common Stock: The shares of Common Stock that upon original
-----------------------
issuance are Transfer Restricted Securities, provided that when any Common Stock
(i) has been effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it or (ii) has been
distributed to the public pursuant to Rule 144 (or any similar rule) under the
Securities Act or (iii) has been transferred by an Exchanging Noteholder to
another Person (other than by operation of law, or to another Exchanging
Noteholder), such Common Stock shall cease to be Restricted Common Stock.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended.
--------------
Shelf Registration: The Shelf Registration defined in Section 3 here
------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
2
<PAGE>
Transfer Restricted Securities: All PIK Notes and the Common Stock
------------------------------
received by the Exchanging Noteholders in the Exchange Offer and Secondary Notes
issued in respect of PIK Notes until the earliest to occur of (i) the period of
years set forth in Rule 144(k) under the Securities Act (which is currently
three years), (ii) the date on which such Transfer Restricted Securities have
been effectively registered under the Securities Act and disposed of in
accordance with a Registration Statement, (iii) the date on which such Transfer
Restricted Securities have been distributed to the public pursuant to Rule 144
under the Securities Act or are salable pursuant to Rule 144(k) under the
Securities Act, or (iv) a transfer of such Transfer Restricted Securities by an
Exchanging Noteholder to another Person (other than by operation of law, or to
another Exchanging Noteholder).
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
The securities entitled to the benefits of this Agreement are the
Transfer Restricted Securities.
SECTION 3. SHELF REGISTRATION
(a) The Company shall file a "shelf" registration with respect to all
Restricted PIK Notes and all Restricted Common Stock on any appropriate form
pursuant to Rule 415 (or any similar rule that may be adopted by the SEC) under
the Securities Act (the "Shelf Registration") on a date (the "Filing Date")
following the date of this Agreement, but in no event later than January 13,
1997, and shall use its good faith efforts to have such Shelf Registration
declared effective by the SEC as soon as practicable thereafter, but in no event
later than April 14, 1997 (the "Deadline"). The Company shall notify the Trustee
in writing promptly upon the making of the filing.
(b) Neither the Company nor any of its security Holders shall have the
right to include any of the Company's securities other than Transfer Restricted
Securities in the Shelf Registration.
(c) If the Holders of a Majority of the Transfer Restricted Securities
to be registered in the Shelf Registration so, with the consent of the Company,
which consent shall not be unreasonably withheld or delayed, an offering of
Transfer Restricted Securities pursuant to the Shelf Registration may be
effected in the form of an underwritten offering. In such event, and if the
managing underwriters advise the Company and the Holders of such Transfer
Restricted Securities in writing that in their opinion that either (i) the
amount of Transfer Restricted Securities proposed to be sold in such offering or
(ii) the inclusion of either Restricted PIK Notes or Restricted Common Stock in
such offering would interfere with the successful marketing of such offering or
adversely affect the price of such offering, there shall be included in such
underwritten offering (x) the amount of such Transfer Restricted Securities
which in the opinion of such underwriters can be sold, and such amount shall be
allocated pro rata among the Holders of such Transfer Restricted Securities on
the basis of the principal amount of Transfer Restricted Securities requested to
be included by such Holders, or (y) solely Restricted PIK Notes or Restricted
Common Stock, as the case may be.
(d) If any of the Transfer Restricted Securities covered by the Shelf
Registration are to be sold in an underwritten offering, the investment bank or
investment banks that will administer the offering will be selected by the
Holders of a Majority of such
3
<PAGE>
Transfer Restricted Securities included in such offering; provided, that such
--------
investment bank shall be reasonably satisfactory to the Company.
(e) The Company shall use its good faith efforts to keep the Shelf
Registration continuously effective until all the Transfer Restricted Securities
covered by the Shelf Registration have been disposed of pursuant to the terms of
a Registration Statement.
(f) The Company agrees (1) not to effect any public or private offer,
sale or distribution of any of its securities similar to those being registered
pursuant to this Section 4, or any securities convertible into or exchangeable
or exercisable for such securities, including, without limitation, a sale
pursuant to Regulation D under the Securities Act, (i) during the 10-day period
prior to, and during the 45-day period beginning with, the effectiveness of a
Registration Statement filed under this Section 3 to the extent timely requested
in writing by a Holder of the Transfer Restricted Securities or the managing
underwriters (except pursuant to registrations on Form S-4 or S-8 or any
successor form to such Forms) and (ii) during the 20-day period following
receipt by the Company of a notice in writing from a Holder or Holders of at
least 10% of the aggregate principal amount of the Transfer Restricted
Securities of an intention to sell Transfer Restricted Securities pursuant to an
effective Registration Statement filed under this Section 3, and (2) to
use reasonable efforts to cause each Holder of 5% or more of its securities
similar to those being registered pursuant to this Section 3, or any securities
convertible into or exchangeable or exercisable for such securities (other than
the Transfer Restricted Securities) purchased from the Company at any time on or
after the date of this Agreement to agree not to effect any public sale or
distribution of any such securities during such periods, including, without
limitation, a sale pursuant to Rule 144 under the Securities Act.
(g) The parties agree that the Holders of the Transfer Restricted
Securities will suffer damages if the Company fails to fulfill its obligations
under Section 3(a) and (c) and that it would not be feasible to ascertain the
extent of such damages with precision. If the Company has an obligation to file
a Registration Statement pursuant to Section 3(a) or 3(c), and such Registration
Statement (i) is not filed on or prior to January 13, 1997, (ii) is not declared
effective by the SEC on or prior to the Deadline or (iii) has ceased to be
effective prior to the date all Transfer Restricted Securities have been
disposed of without being succeeded within 30 days by an effective Registration
Statement (each a "Default Date"), then from the later of the applicable Default
Date or the date on which the Company becomes so obligated, the interest rate
borne by the PIK Notes shall be increased, as liquidated damages and not as a
penalty, to a rate that is ten cents ($.10) per week per $1,000 principal amount
higher than the interest rate then payable on the PIK Notes (the "Shelf Interest
Rate Increase"). The interest rate borne by the PIK Notes shall be reduced by
the amount of any Shelf Interest Rate Increase on and after the date, if any, on
which a Registration Statement with respect to the Shelf Registration is filed
or declared effective. Notwithstanding the foregoing, at no time shall the
maximum aggregate interest rate borne by the PIK Notes (including the Shelf
Interest Rate Increase) exceed the maximum amount permitted under applicable
usury laws.
SECTION 4. REGISTRATION PROCEDURES
(a) In connection with the Shelf Registration, the Company will use
its good faith efforts to effect such registration to permit the sale of the
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and pursuant thereto the Company will use its
good faith efforts to:
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(i) Prepare and file with the SEC a Registration Statement relating
to the applicable registration on any appropriate form under the Securities Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof and
shall include all financial statements, cooperate and assist in any filings
required to be made with the NASD, and use its best efforts to cause any such
Registration Statement to become effective; provided, (i) that before the
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initial filing of any Registration Statement or any Prospectus, the Company will
furnish to the Trustee, on behalf of the Holders of the Transfer Restricted
Securities covered by any such Registration Statement no later than 5 days prior
to filing and the underwriters, if any, on a timely basis, copies of all such
documents proposed to be filed, and will use its best efforts to reflect in each
such document, when so filed with the SEC, such comments as any of such Holders
and underwriters reasonably may propose and (ii) that the Company shall furnish
to the Trustee, on behalf of the Holders of the Transfer Restricted Securities
covered by any such Registration Statement and the underwriters, if any,
promptly upon their request, copies of all documents relating to such
Registration Statement filed with the SEC.
(ii) Prepare and file with the SEC such amendments and post-
effective amendments to any such Registration Statement as may be necessary to
keep such Registration Statement effective for the period set forth in Section
3(e); cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by any such Registration
Statement during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such Registration
Statement or supplement to the related Prospectus.
(iii) Notify the Holders of Transfer Restricted Securities and the
managing underwriters, if any, promptly (and, if requested by any such Persons,
confirm such advice in writing) (1) when the Prospectus or any Prospectus
supplement or post-effective amendment relating to such Transfer Restricted
Securities has been filed, and, with respect to any Registration Statement or
any post-effective amendment relating to such Restricted Securities, when the
same has become effective, (2) of any request by the SEC for amendments or
supplements to such Registration Statement or the Prospectus relating to such
Transfer Restricted Securities or for additional information, (3) of the
issuance by the SEC of any Stop Order suspending the effectiveness of such
Registration Statement or the initiation of any proceedings for that purpose,
(4) if at any time prior to the consummation of any underwritten offering the
representations and warranties of the Company contemplated by paragraph (xv)
below cease to be true and correct, (5) of the receipt by the Company of a
notification with respect to the suspension of the qualification of such
Transfer Restricted Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (6) of the existence of any
fact which makes untrue any statement of a material fact made in such
Registration Statement, the Prospectus relating to such Transfer Restricted
Securities or any document incorporated therein by reference or which requires
the making of any changes in such Registration Statement, the Prospectus
relating to such Transfer Restricted Securities or any document incorporated
therein by reference in order to make the statements therein not misleading.
(iv) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement at the earliest
possible moment, including filing a subsequent "shelf" Registration Statement if
required by the SEC to obtain the withdrawal of such order.
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(v) If reasonably requested by the managing underwriter or
underwriters or a majority of the Holders of Transfer Restricted Securities
being sold in connection with an underwritten offering, immediately incorporate
in a Prospectus supplement or post-effective amendment such information as the
managing underwriters and the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities being sold agree should be
reasonably included therein relating to the sale of the Transfer Restricted
Securities, including, without limitation, information with respect to the
principal amount of Transfer Restricted Securities, as the case may be, being
sold to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten offering of
the Transfer Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(vi) Provide a copy of any document which is to be filed or
incorporated by reference as an exhibit into any Registration Statement or the
Prospectus related thereto (after initial filing of any such Registration
Statement) to counsel to the selling Holders of Transfer Restricted Securities
registered pursuant thereto and to the managing underwriters, if any, promptly
upon their request after having received timely notice.
(vii) Furnish to each selling Holder of Transfer Restricted
Securities and each managing underwriter, without charge, at least one conformed
copy of the Registration Statement registering such Transfer Restricted
Securities and any amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference).
(viii) Deliver to each selling Holder of Transfer Restricted
Securities and the underwriters, if any, without charge, as many copies of the
Prospectus relating to the registration of such Transfer Restricted Securities
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request. The Company consents to the use of such
Prospectus or any amendment or supplement thereto by each of the selling Holders
of Transfer Restricted Securities and the underwriters, if any, in connection
with the offering and sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto, as contemplated thereby.
(ix) Prior to any public offering of Transfer Restricted Securities,
register, or qualify or cooperate with the selling Holders of Transfer
Restricted Securities, the underwriters, if any, and their respective counsel in
connection with the registration or qualification of, such Transfer Restricted
Securities for offer and sale under the securities or "blue sky" laws of such
jurisdictions as any seller or underwriter may reasonably request in writing and
do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of such Transfer Restricted Securities covered
by a Registration Statement; provided, that the Company will not be required to
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qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject.
(x) Subject to the restrictions imposed by Article 9 of the
Company's By-laws and the Contractual Transfer Restrictions (the "Permitted
Restrictions"), cooperate with the selling Holders of Transfer Restricted
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing such Transfer Restricted
Securities to be sold, not bearing any restrictive legends other than the
Permitted Restrictions, and in a form eligible for deposit with The Depository
Trust Company if
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permitted subject the Permitted Restrictions; and enable such Transfer
Restricted Securities to be in such denominations and registered in such names
as the managing underwriters, if any, may request at least two business days
prior to any sale of such Transfer Restricted Securities made by such
underwriters.
(xi) Use its best efforts to cause the Transfer Restricted Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Transfer Restricted Securities, subject to
the proviso contained in clause (ix) above.
(xii) If any fact contemplated by clause (iii)(6) of this Section
4(a) shall exist, prepare a supplement or post-effective amendment to the
applicable Registration Statement or, as soon as practicable, the related
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Transfer Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(xiii) Cause all Transfer Restricted Securities covered by a
Registration Statement to be listed on each securities exchange or NASDAQ, on
which similar securities issued by the Company are then listed, if requested by
the Holders of a majority in aggregate principal amount of such PIK Notes or the
Holders of a majority of the Restricted Common Stock, as the case may be, or the
managing underwriters, if any.
(xiv) Provide a CUSIP number for all Transfer Restricted Securities,
not later than the effective date of a Registration Statement.
(xv) Enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith as may
reasonably be required in order to expedite or facilitate the disposition of
such Transfer Restricted Securities, and in connection with any such
underwriting agreement entered into by the Company, (1) make such
representations and warranties to the Holders of such Transfer Restricted
Securities and the underwriters, in form, substance and scope as are customarily
made by issuers to underwriters in primary underwritten offerings; (2) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters and the Holders of a Majority of the Transfer Restricted
Securities being sold) addressed to each selling Holder and the underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Holders
and underwriters; (3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the underwriters
and, to the extent permitted, the selling Holders of Transfer Restricted
Securities, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters issued by independent
certified accountants in connection with primary underwritten offerings; (4) set
forth in full or incorporate by reference in the underwriting agreement the
indemnification provisions and procedures of Section 6 hereof with respect to
all parties to be indemnified pursuant to said Section 6; and (5) deliver such
documents and certificates as may be reasonably requested by the Holders of a
Majority of the Transfer Restricted Securities being sold and the managing
underwriters to evidence compliance with clause (1) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company pursuant to this clause (xv). The above shall be done at
each
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closing under such underwriting or similar agreement, as and to the extent
required thereunder.
(xvi) Make available for inspection by a representative of the
Holders of a Majority of the Transfer Restricted Securities any underwriter
participating in any disposition pursuant to such applicable Registration
Statement, and any attorney or accountant retained by the sellers or
underwriter, all pertinent financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney, or accountant in connection with
such Registration Statement; provided, that any records, information, or
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documents that are designated by the Company in writing as confidential shall be
kept confidential by such Persons unless disclosure of such records,
information, or documents is required by law or by a court or administrative
order.
(xvii) The Company shall cause the Indenture to be qualified
under the TIA not later than the effective date of a Registration Statement
filed pursuant to the PIK Notes Shelf Registration and, in connection therewith,
cooperate with the Trustee and the Holders of the Restricted PIK Notes, to
effect such changes to the Indenture as may be required for such Indenture to be
so qualified in accordance with the terms of the TIA; and execute, and use its
best efforts to cause such Trustee to execute, all documents as may be required
to effect such changes and all other forms and documents required to be filed
with the SEC to enable such Indenture to be so qualified in a timely manner.
(xviii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make generally available to its
security Holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of the 12-month
period (or 90 days, if such period is a fiscal year) following the effective
date of such Registration Statement.
(b) The Company may require each Person who beneficially owns or holds
of record the Transfer Restricted Securities as to which any registration is
being effected to furnish to the Company such information regarding such Person
and the distribution of such securities as the Company may from time to time
reasonably request in writing. Each such Person agrees to furnish promptly to
the Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Person not materially
misleading.
(c) With respect to any underwritten Shelf Registration, each Holder
of Transfer Restricted Securities participating in such Shelf Registration
agrees (i) to sell such Holder's Transfer Restricted Securities on the basis
provided in any underwriting arrangements approved by or on behalf of such
Holder and (ii) to complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and documents required under the terms of
such underwriting arrangements.
(d) Each Holder of Transfer Restricted Securities agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
written notice from the Company of the existence of any fact of the kind
described in Section 4(a)(iii)(6) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section
4(b)(xii) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the Prospectus. In the event the Company shall
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give any such notice or receive notice of any order suspending the
effectiveness of the Registration Statement (a "Stop Order"), the time periods
referred to in Section 4(a)(ii) hereof and the time periods regarding the
effectiveness of the Registration Statement set forth in Section 3 hereof, as
the case may be, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
4(a)(iii)(6) hereof or the receipt of the Stop Order, as the case may be, to
and including the date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 4(a)(xii) hereof,
shall have received the Advice, or shall have been notified by the Company that
the Stop Order has been withdrawn, as the case may be.
SECTION 5. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation:
(i) all registration and filing fees and expenses (including
filings made with the NASD, if any);
(ii) fees and expenses of compliance with federal securities or
state or other jurisdiction's "blue sky" laws;
(iii) expenses of printing (including, without limitation,
printing certificates for the PIK Notes and the Common Stock, subject to section
4(a)(x), in a form eligible for deposit with Depository Trust Company and/or
certificated form, as the case may be, and prospectuses) and delivery services;
(iv) fees and disbursements of counsel for the Company and for
the Holders of the Transfer Restricted Securities (subject to the provisions of
Section 5(b) hereof);
(v) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit elected
by the Company or required by applicable securities laws and "cold comfort"
letters required by or incident to such performance);
(vi) reasonable expenses and disbursements of underwriters
(excluding discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals relating to the
distribution of the Transfer Restricted Securities or legal expenses of any
Person other than the Company, the underwriters and the selling security
Holders);
(vii) fees and expenses associated with any NASD filing required
to be made in connection with the Registration Statement, including, if
applicable, the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained in accordance with the rules
and regulations of the NASD. All such expenses listed in subsections (i) - (vii)
are herein called "Registration Expenses"; and
(viii) fees and expenses of listing the Transfer Restricted
Securities on any securities exchange in accordance with Section 4(a)(xiii)
hereof.
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The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, rating
agency fees and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with the Shelf Registration, the Company will
reimburse the Holders of Transfer Restricted Securities being tendered or
registered for the reasonable fees and disbursements of not more than one
counsel chosen by the Holders of a Majority of such Transfer Restricted
Securities.
(c) Notwithstanding the foregoing, the Holders of the Transfer
Restricted Securities being registered shall pay all underwriting discounts and
commissions attributable to the sale of such Transfer Restricted Securities, the
fees and disbursements of any counsel or other advisors or experts retained by
such Holders (severally or jointly), other than such counsel as provided above,
and all registration expenses to the extent required by applicable law.
SECTION 6. INDEMNIFICATION
(a) With respect to the Registration Statement the Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each Holder of
Transfer Restricted Securities, each Person who controls such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and each of such Holders' and control Persons' affiliates, the officers,
directors, partners, agents, counsel, and employees against all losses, claims,
damages, liabilities and expenses (including, without limitation, any and all
legal and other costs, expenses or disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise and the costs,
expenses and disbursements of investigating, preparing or defending any such
action, suit, proceeding or investigation, whether or not in connection with
litigation in which an indemnified party is a party and whether or not involving
a third party, and, subject to Section 6(c), all amounts paid in settlement of a
claim or litigation) (collectively, the "Losses") as and when incurred, arising
out of, based upon or in connection with (i) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary Prospectus or in any application or other document or
communication (in this Section 8 collectively called an "application") executed
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify the
Transfer Restricted Securities under the "blue sky" or securities laws thereof
or filed with the SEC, any securities exchange or any insurance commission or
authority, or arising out of, based upon or in connection with any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such Losses are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information (a) relating to a Person
claiming indemnification hereunder, furnished in writing to the Company by or on
behalf of such a Person expressly for use in the Registration Statement or (b)
made in any preliminary Prospectus if a copy of the Prospectus (as amended or
supplemented) was not sent or given by or on behalf of such Person claiming
indemnification hereunder to the Person asserting any such Loss, if required by
law so to have been delivered, at or prior to the written confirmation of the
sale of the Transfer Restricted Securities as required by the Securities Act,
and the Prospectus (as so amended or supplemented) would have completely
corrected such untrue statement or omission, provided, however, that the Company
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shall have furnished copies in accordance with Section 4(a)(viii) hereof of such
Prospectus (as so amended or supplemented) to such Person claiming
indemnification hereunder, or (ii) any
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breach of any representation, warranty, covenant or agreement of the Company
contained herein. The Company will also indemnify underwriters participating in
the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Holders of Transfer
Restricted Securities, if requested in connection with a Registration Statement
relating to the Shelf Registration.
(b) In connection with a Registration Statement relating to the Shelf
Registration pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities will furnish to the Company in writing such information as
the Company reasonably requests for use in connection with any Registration
Statement, Prospectus or preliminary Prospectus and agrees, severally and not
jointly, to indemnify and hold harmless, to the full extent permitted by law,
the Company, its directors and officers who sign the Registration Statement and
each Person who controls the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), and each of the Company's and
such control Persons' affiliates, officers, directors, partners, agents, counsel
and employees against any Losses resulting from any untrue or alleged untrue
statement of a material fact or any omission or alleged omission of a material
fact required to be stated in the Registration Statement or Prospectus or
preliminary Prospectus or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that the same resulted from
or are contained in any information relating to such Holder furnished in writing
by such Holder to the Company specifically for use in such Registration
Statement, Prospectus or preliminary Prospectus. In no event shall the liability
of any selling Holder of Transfer Restricted Securities hereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon the
sale of the Transfer Restricted Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters participating in the distribution, to the same extent as provided
above with respect to information furnished in writing by such Persons relating
to such Persons specifically for use in any preliminary Prospectus, Prospectus
or Registration Statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt notice to the indemnifying party of any claim with respect to which it
seeks indemnification; provided, that the failure to deliver such notice
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shall not relieve the indemnifying party of its indemnification obligations
hereunder, except and only to the extent that the omission to so notify
materially prejudices the indemnified party in the defense of such claims,
and (ii) permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party (including,
to the extent any settlement involves the payment of money, the right to
settle any such claim or proceeding); provided, however, that any Person
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entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Person
unless (a) the indemnifying party has agreed to pay such fees or expenses,
or (b) the indemnifying party shall have failed to assume the defense of
such claim and employ counsel reasonably satisfactory to such Person or (c)
in the judgment of any such Person, based upon advice of independent
counsel, there may be one or more legal defenses available to it which are
different from or additional to those available to the indemnifying person,
or a conflict of interest or potential conflict of interest exists between
such Person and the indemnifying party in respect of such claims (in which
case, if the Person notifies the indemnifying party in writing that such
Person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such claim on behalf of such Person). The indemnifying party
will not be subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld or delayed).
No indemnified party will be required to consent to
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entry of any judgment or entry into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party will not, in connection with substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim (in addition to all local counsel which are necessary
in the opinion of counsel for such indemnified party in order to adequately
represent such Person), unlessthere may be one or more legal defenses available
to it which are differentfrom or additional to those available to the other
indemnified persons, in which event the indemnifying party shall be obligated to
pay the fees and expenses of, such additional counsel or counsels and local
counsel.
(d) If a claim for indemnification provided for in the preceding
clauses (a) and (b) is made but it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) that such indemnification
may not be enforced in such case, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by the indemnified party as a result of such Loss in such proportion as
is appropriate to reflect the relative benefits received by the indemnified
party, on the one hand, and the indemnifying party, on the other hand, or, if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits of such parties, but also
the relative fault of the indemnified party and the indemnifying party, as well
as any other relevant equitable considerations; provided, that no Holder of
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Transfer Restricted Securities shall be required to contribute in an amount
greater than the dollar amount of the proceeds received by such Holder with
respect to the sale of the Transfer Restricted Securities giving rise to the
indemnification obligation under this Section 6. The relative benefits received
by the Company on the one hand shall be the total proceeds from the sale of the
Transfer Restricted Securities received by the Company, and the relative
benefits received by each of the Holders shall be the total proceeds received by
such Holder with respect to the sale of the Transfer Restricted Securities
giving rise to the indemnification obligation. The relative fault of the Company
on the one hand and the Holder of Transfer Restricted Securities on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company on the one hand or
by the Holder of Transfer Restricted Securities on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by an
indemnified party shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this clause (d) except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 6 if such indemnification were available or sufficient.
(e) The indemnity and contribution agreements contained in this
Section 6 are in addition to any liability that the indemnifying Persons may
otherwise have to the indemnified Persons referred to above.
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SECTION 7. MISCELLANEOUS
7.1 REMEDIES
Each Holder of Transfer Restricted Securities, in addition to being
entitled to exercise all rights provided herein, in the Indenture, and granted
by law, including recovery of damages, will be entitled to specific performance
of its rights under this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Agreement and hereby agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.
7.2 NO INCONSISTENT AGREEMENTS.
The Company will not on or after the date of this Agreement enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Company has not
previously entered into any agreement granting any registration rights of its
outstanding securities to any Person. The rights granted to the Holders of
Transfer Restricted Securities hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the Holders of the Company's
securities under any other agreements.
7.3 ADJUSTMENTS AFFECTING THE TRANSFER RESTRICTED SECURITIES OR THE SENIOR
EXCHANGE NOTES.
The Company will not take any action, or to the extent within its
control, permit any change to occur, with respect to the Transfer Restricted
Securities which would adversely affect the ability of the Holders of such
securities to include such securities in a registration undertaken pursuant to
this Agreement.
7.4 AMENDMENTS AND WAIVERS.
The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given unless the Company has obtained the written consent of
the Holders of 66 2/3% of the outstanding Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of Transfer
Restricted Securities whose securities are being registered pursuant to a Shelf
Registration and that does not directly or indirectly affect the rights of other
Holders of Transfer Restricted Securities whose securities are not being
registered pursuant to such Shelf Registration may be given only by the Holders
of a Majority of the Transfer Restricted Securities being tendered or
registered.
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7.5 NOTICES.
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(1) if to the Trustee, initially at the address given by the Trustee
in the Indenture or thereafter at an address given in accordance
with the provisions of this Section 7.5, with a copy to Shipman &
Goodwin, One American Row, Hartford, Connecticut 06103-2819,
Attention: Deborah Smith Frisone.
(2) if to the Company, initially at its address set forth in the
Indenture and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section, with
a copy to Gibson, Dunn & Crutcher, 1717 Main Street, Dallas,
Texas 75201, Attention: Irwin F. Sentilles, III, Esq.
(3) If to a Holder, in care of the Trustee pursuant to clause (1)
above.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
To the extent any Holders of Transfer Restricted Securities have
received notice from an agent of the Company at the Company's direction
conforming to the requirements for such notice set forth herein and in
accordance with the terms hereof, such notice shall be deemed to have been given
in accordance with the terms hereof.
7.6 SUCCESSORS AND ASSIGNS.
This Agreement shall, subject to clause (iv) in the definition of
Transfer Restricted Securities, inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
7.7 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
14
<PAGE>
7.8 HEADINGS.
The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
7.9 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW
RULES THEREOF.
7.10 SEVERABILITY.
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
7.11 ENTIRE AGREEMENT.
This Agreement together with the Indenture and the Exchange Offer
(including the exhibits and schedules thereto) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities issued pursuant to the Exchange Offer. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
USTRAILS INC.
By: /s/ William J. Shaw
---------------------------------
Name: William J. Shaw
--------------------------
Title: President
--------------------------
FLEET NATIONAL BANK, as Trustee
By: /s/ Phillip G. Kane
---------------------------------
Name: Phillip G. Kane
----------------------------
Title Vice President
----------------------------
16
<PAGE>
EXHIBIT 10.19
LOAN AND SECURITY AGREEMENT
by and between
USTRAILS INC.
NATIONAL AMERICAN CORPORATION
THOUSAND TRAILS, INC.
and the
Party Borrowers Signatory Hereto
and
FOOTHILL CAPITAL CORPORATION
Dated as of July 10, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
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<S> <C>
1. DEFINITIONS AND CONSTRUCTION......................................... 1
1.1 Definitions.................................................... 1
1.2 Accounting Terms............................................... 15
1.3 Code........................................................... 15
1.4 Construction................................................... 15
1.5 Schedules and Exhibits......................................... 16
2. INTENTIONALLY DELETED................................................ 16
3. LOAN AND TERMS OF PAYMENT............................................ 16
3.1 Revolving Advances............................................. 16
3.2 Account Loan................................................... 17
3.3 Term Loan...................................................... 17
3.4 Overadvances................................................... 17
3.5 Interest: Rate, Payments, and Calculations..................... 17
3.6 Crediting Payments; Application of Collections................. 19
3.7 Statements of Obligations...................................... 19
3.8 Fees........................................................... 19
4. CONDITIONS; TERM OF AGREEMENT........................................ 21
4.1 Conditions Precedent to the Initial Advance to Borrower........ 21
4.2 Conditions Precedent to All Advances........................... 23
4.3 Term........................................................... 24
4.4 Effect of Termination.......................................... 24
4.5 Early Termination or Paydown by Borrower....................... 24
4.6 Termination Upon Event of Default.............................. 24
4.7 Post Closing Date Obligations of Borrower...................... 25
5. CREATION OF SECURITY INTEREST........................................ 25
5.1 Grant of Security Interest..................................... 25
5.2 Negotiable Collateral.......................................... 26
5.3 Collection of Accounts, General Intangibles, Negotiable
Collateral.................................................... 26
5.4 Sales of Portions of the Real Property; Application of
Proceeds...................................................... 26
5.5 Delivery of Additional Documentation Required.................. 27
5.6 Power of Attorney.............................................. 28
5.7 Right to Inspect............................................... 28
6. REPRESENTATIONS AND WARRANTIES....................................... 28
6.1 No Prior Encumbrances.......................................... 28
6.2 Eligible Accounts.............................................. 29
6.3 Location of Chief Executive Office; FEIN....................... 29
6.4 Borrower's Corporate Ownership................................. 29
6.5 Due Organization and Qualification............................. 29
6.6 Due Authorization; No Conflict................................. 29
6.7 Litigation..................................................... 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.8 No Material Adverse Change in Financial Condition............. 30
6.9 Solvency...................................................... 30
6.10 Employee Benefits............................................ 30
6.11 Environmental Condition...................................... 31
6.12 Compliance With The ADA...................................... 31
6.13 Real Property................................................ 31
6.14 Intentionally Deleted........................................ 32
6.15 Inter-Company Indebtedness................................... 32
6.16 Reliance by Foothill; Cumulative............................. 32
7. AFFIRMATIVE COVENANTS............................................... 33
7.1 Accounting System............................................. 33
7.2 Collateral Reports............................................ 33
7.3 Schedules of Accounts......................................... 33
7.4 Financial Statements, Reports, Certificates................... 33
7.5 Tax Returns................................................... 34
7.6 Title to Equipment............................................ 34
7.7 Maintenance of Equipment...................................... 35
7.8 Taxes......................................................... 35
7.9 Insurance..................................................... 35
7.10 Financial Covenants.......................................... 36
7.11 No Setoffs or Counterclaims.................................. 37
7.12 Compliance with Laws......................................... 37
7.13 Employee Benefits............................................ 37
7.14 Environmental Condition...................................... 38
7.15 Compliance With The ADA...................................... 39
7.16 Post Closing Date Issues..................................... 39
7.17 The Real Property............................................ 39
7.18 Certificates of Title........................................ 40
8. NEGATIVE COVENANTS.................................................. 40
8.1 Indebtedness.................................................. 40
8.2 Liens......................................................... 41
8.3 Restrictions on Fundamental Changes........................... 41
8.4 Extraordinary Transactions and Disposal of Assets............. 41
8.5 Change Name................................................... 41
8.6 Guarantee..................................................... 41
8.7 Restructure................................................... 42
8.8 Prepayments................................................... 42
8.9 Change of Control............................................. 42
8.10 Capital Expenditures......................................... 42
8.11 Distributions................................................ 42
8.12 Accounting Methods........................................... 42
8.13 Investments.................................................. 42
8.14 Transactions with Affiliates................................. 42
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.15 Suspension................................................... 43
8.16 Compensation................................................. 43
8.17 Use of Proceeds.............................................. 43
9. EVENTS OF DEFAULT................................................... 43
10. FOOTHILL'S RIGHTS AND REMEDIES..................................... 45
10.1 Rights and Remedies.......................................... 45
10.2 Remedies Cumulative.......................................... 47
10.3 Foreclosure Not A Discharge.................................. 47
11. WAIVERS; INDEMNIFICATION........................................... 48
11.1 Demand; Protest; etc......................................... 48
11.2 Foothill's Liability for Collateral.......................... 48
11.3 Indemnification.............................................. 48
12. TAXES AND EXPENSES REGARDING THE COLLATERAL........................ 48
13. NOTICES............................................................ 49
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................... 49
15. DESTRUCTION OF BORROWER'S DOCUMENTS................................ 50
16. GENERAL PROVISIONS................................................. 50
16.1 Effectiveness................................................ 50
16.2 Successors and Assigns....................................... 50
16.3 Section Headings............................................. 51
16.4 Interpretation............................................... 51
16.5 Severability of Provisions................................... 51
16.6 Amendments in Writing........................................ 51
16.7 Counterparts................................................. 51
16.8 Revival and Reinstatement of Obligations..................... 51
16.9 Lending Relationship......................................... 52
16.10 Joint and Several Liability of Borrower..................... 52
16.11 Third Party Beneficiaries.................................. 52
16.12 Further Assurances with Respect to the Real Property....... 52
16.13 Integration................................................ 52
SCHEDULES................................................................... 61
SCHEDULE ERP................................................................ 61
SCHEDULE KPML............................................................... 63
SCHEDULE RP DEF............................................................. 64
SCHEDULE P-1................................................................ 76
SCHEDULE 4.1(G)............................................................. 77
SCHEDULE 4.7................................................................ 80
SCHEDULE 5.4................................................................ 81
SCHEDULE 5.9................................................................ 84
SCHEDULE 7.17(A)............................................................ 92
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SCHEDULES
---------
Schedule ERP Excluded Real Property
Schedule KPML Known Prior Monetary Liens
Schedule RP DEF Real Property Definitions
Schedule P-1 Permitted Liens
Schedule 4.1(g) Real Property to be Mortgaged at the Closing Date
Schedule 4.7 Real Property to be Mortgaged Within Ninety Days
of Closing Date
Schedule 5.4 Real Property to be Sold
Schedule 5.9 Litigation
Schedule 7.17(a) Real Property to be Mortgaged on a Best Efforts
Basis
</TABLE>
iv
<PAGE>
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT, is entered into as of July
10, 1996, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, and USTRAILS INC., a Nevada
corporation ("Trails"), NATIONAL AMERICAN CORPORATION, a Nevada corporation
("NAC"), THOUSAND TRAILS, INC., a Washington corporation ("TTrails"), and the
party borrowers signatory hereto: (each, individually and collectively, jointly
and severally, a "Borrower"), with their chief executive office located at 2711
LBJ Freeway, Suite 200, Dallas, Texas, 75234.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
----------------------------
1.1 Definitions. As used in this Agreement, the following terms
-----------
shall have the following definitions:
"Account Debtor" means any Person who is or who may become
--------------
obligated under, with respect to, or on account of an Account.
"Account Note" has the meaning set forth in Section 3.2 hereof.
------------ -----------
"Accounts" means all currently existing and hereafter arising
--------
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the rendition of services by
Borrower, or the sale of campground memberships, timeshare intervals and
interests, undivided real estate interests, lots and other inventory,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Act" means all present and future laws, regulations, statutes,
---
common law, rules, ordinances, codes, licenses, permits, orders, approvals,
plans, authorizations, concessions, franchises, and similar items of any
federal, state, or local government, instrumentality, or body, as the same may
be amended, modified, or supplemented from time to time and that are related to
Hazardous Substances.
"ADA" means the Americans with Disabilities Act, 42 U.S.C.
---
(S)(S)12101, et. seq., and all applicable rules and regulations promulgated
thereunder.
"Advance" or "Advances" has the meaning set forth in Section
-------
3.1.
"Affiliate" means, as applied to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, "control" as applied to any Person
means the possession, directly or indirectly, of
1
<PAGE>
the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Loan and Security Agreement and any
---------
extensions, riders, supplements, schedules, amendments, or modifications to or
in connection with this Loan and Security Agreement.
"Authorized Officer" means any officer of Borrower.
------------------
"Average Unused Portion of Revolving Maximum Amount" means (a)
--------------------------------------------------
the Revolving Maximum Amount; less (b) the actual Daily Balance of advances made
----
by Foothill under Section 3.1 that were outstanding during the immediately
-----------
preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
---------------
U.S.C. S 101 et seq.), as amended, and any successor statute.
------
"Borrower" has the meaning set forth in the preamble to this
--------
Agreement.
"Borrower's Books" means all of Borrower's books and records
----------------
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; all
membership and mailing lists; and all computer programs, disc or tape files,
printouts, runs, or other computer prepared information, and the equipment
containing such information.
"Business Day" means any day which is not a Saturday, Sunday,
------------
or other day on which national banks are authorized or required to close.
"Cash Equivalents" means (i) any evidence of Indebtedness with
----------------
a maturity of two years or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof, provided that the full faith and credit of the United States of America
--------
is pledged in support thereof, (ii) demand and time deposits and certificates of
deposit or acceptance with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $250,000,000, (iii)
commercial paper with a maturity of 270 days or less issued by a corporation
that is not an Affiliate of the Company and is organized under the laws of any
state of the United States or the District of Columbia and rated at least A-1 by
Standard & Poor's Corporation or at least P-1 by Moody's Investor Service, Inc.;
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any commercial bank meeting the specifications of clause (ii) above; (v)
overnight bank deposits and bankers acceptances at any commercial bank meeting
the qualifications specified in clause (ii) above; (vi) deposits available for
withdrawal on demand with any commercial bank not meeting the qualifications
specified in clause (ii) above but which is a local depository bank, provided
--------
all deposits in the local depository bank
2
<PAGE>
do not exceed $100,000 in the aggregate at any one time; (vii) deposits
available for withdrawal on demand with any commercial bank not meeting the
qualifications specified in clause (ii) above but which is a lender (or bank
affiliate thereof) under this Agreement, provided all such deposits do not
--------
exceed $5,000,000 in the aggregate at any one time; (viii) demand and time
deposits and certificates of deposit with any commercial bank organized in the
United States not meeting the qualifications specified in clause (ii) above,
provided that such deposits and certificates support bond, letter of credit and
- --------
other similar types of obligations incurred in the ordinary course of business;
and (ix) investments in money market or other mutual funds substantially all of
whose assets comprise securities of the types described in clauses (i) through
(v) above.
"Cash Proceeds" means the cash or cash equivalents arising out
-------------
of the sale of any of Borrower's assets, including, without limitation, the
Accounts, the Equipment, the General Intangibles, the Inventory, the Negotiable
Collateral, the Real Property, and the Excluded Real Property.
"Change of Control" means (i) the sale, lease or transfer of
-----------------
all or substantially all of Trails' assets to any "person" or "group" (as such
terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act)
(ii) the liquidation or dissolution of Trails, (iii) the time that Trails first
determines or reasonably should have known that any "person" or "group" (as such
terms are used for purposes of sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable), other than SC Fundamental, Inc. and its Affiliates
or the Existing Affiliates is or becomes the "beneficial owner" (as such term is
used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable,
except that a "person" shall be deemed to have "beneficial ownership" of all
shares that any such "person" has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power in the aggregate of all
classes of Capital Stock then outstanding of Trails normally entitled to vote in
elections of directors or (iv) during any period of 12 consecutive months after
the Issue Date, individuals who at the beginning of such period constituted the
Board of Directors of Trails (together with any new directors whose election by
such Board of whose nomination for election by the stockholders of Trails was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Trails then in office.
"Closing Date" means the date of the initial advance.
------------
"Code" means the California Uniform Commercial Code.
----
"Collateral" means each of the following: the Accounts;
----------
Borrower's Books; the Cash Proceeds; the Equipment; the General Intangibles; the
Inventory; the Negotiable Collateral; the Real Property; any money, or other
assets of Borrower which now or hereafter come into the possession, custody, or
control of Foothill; and the proceeds and products, whether tangible or
intangible, of any of the foregoing including proceeds of insurance covering any
or all of the Collateral, and any and all Accounts, Borrower's Books, Cash
Proceeds, Equipment, General
3
<PAGE>
Intangibles, Inventory, Negotiable Collateral, the Real Property, the Excluded
Real Property, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof. For purposes of the Cultus Lake (BC) Property, Collateral additionally
means all of Borrower's present and after-acquired personal property wherever
situate including but not limited to goods (including inventory, equipment
(equipment includes, without limitation, machinery, tools, apparatus, plant,
furniture, fixtures, aircraft and vehicles of whatsoever nature and kind) but
excluding consumer goods), chattel paper, documents of title, instruments,
intangibles, money and securities.
"Daily Balance" means the amount of an Obligation owed at the
-------------
end of a given day.
"Defeasance Letter" means a letter, in form and substance
-----------------
reasonably satisfactory to Foothill, from Trustee respecting the amount
necessary to defease the Indenture Secured Notes and obtain a termination or
release of all of the security interests or liens existing in favor of Trustee
in and to the properties or assets of Borrower.
"Dilution Paydown" means, as of the date of any determination,
----------------
a mandatory principal paydown on the Account Note in an amount equal to One
Dollar ($1.00) for each One Dollar ($1.00) by which "dilution" occurs. For
purposes of this definition, "dilution" is equal to a comparison of two numbers
at the date of any computation. The first number is a number representing (i)
the face amount of the Account Note plus the Term Note at the Closing Date,
----
minus (ii) principal reductions made resulting from collections on the Accounts
which existed on the Closing Date. The second number is an amount represented by
multiplying the Eligible Accounts at the time of computation by seventy five
percent (75%). To the extent that the second number is lower than the first
number, the difference constitutes the mandatory Dilution Paydown.
"Early Paydown Premium" has the meaning set forth in Section
--------------------- -------
4.5.
- ---
"EBITDA" means earnings before interest expense, taxes,
------
depreciation, and amortization and excluding losses and gains from sales of
assets, extraordinary items, other non-recurring items, and interest income on
Accounts, as calculated on a trailing twelve (12) month basis.
"Eligible Accounts" means those Accounts created by or owned by
-----------------
Borrower in the ordinary course of business that strictly comply with all of
Borrower's representations and warranties to Foothill, that have been current
for the last three required payments, and that are and at all times shall
continue to be reasonably acceptable to Foothill in all respects; provided,
--------
however, that standards of eligibility may be fixed and revised from time to
- -------
time by Foothill in Foothill's reasonable credit judgment. Eligible Accounts
shall not include the following:
4
<PAGE>
(a) Accounts with respect to which the Account Debtor is an
officer, employee, Affiliate, or agent of Borrower;
(b) Accounts with respect to which the Account Debtor is not a
resident of the United States or Canada;
(c) Accounts with respect to which Borrower is liable to the
Account Debtor;
(d) Accounts with respect to which the Account Debtor disputes
liability or makes any claim with respect thereto, or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(e) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(f) Accounts that are payable in other than United States or
Canadian Dollars;
(g) Accounts that are the subject of litigation or which are
the subject of governmental action which could reasonably be expected to
adversely affect collectability.
"Equipment" means all of Borrower's present and hereafter
---------
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), boats, kayaks,
paddle boats, jon boats, boats of every description, wharfs, canoes, water sport
equipment, sporting goods, tools, yurts, bicycles, equestrian related equipment,
parts, dies, jigs, goods (other than consumer goods or farm products), wherever
located, and any interest of Borrower in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, or any predecessor, successor, or
superseding laws of the United States of America, together with all regulations
promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) which, within the meaning of Section 414 of the IRC, is: (i) under
common control with Borrower; (ii) treated, together with Borrower, as a single
employer; (iii) treated as a member of an affiliated service group of which
Borrower is also treated as a member; or (iv) is otherwise aggregated with the
Borrower for purposes of the employee benefits requirements listed in IRC
Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a
-----------
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan; (ii)
a Prohibited Transaction with respect to any Plan; (iii) a complete or partial
withdrawal by Borrower or any ERISA Affiliate
5
<PAGE>
from a Multiemployer Plan; (iv) the complete or partial withdrawal of Borrower
or an ERISA Affiliate from a Qualified Plan during a plan year in which it was,
or was treated as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts which, under
the provisions of any Plan or applicable law, Borrower or any ERISA Affiliate is
required to make; (vi) the filing of a notice of intent to terminate, or the
treatment of a plan amendment as a termination, under Sections 4041 or 4041A of
ERISA other than a standard termination under Section 4041(b); (vii) an event or
condition which might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Qualified Plan or Multiemployer Plan; (viii) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate;
and (ix) a violation by a Plan fiduciary of the applicable requirements of
Sections 404 or 405 of ERISA, or the exclusive benefit rule under Section 403(c)
of ERISA, for which Borrower or any ERISA Affiliate may be directly or
indirectly liable.
"Excluded Real Property" are the items of real property set
----------------------
forth on Schedule ERP.
"Existing Affiliate" means any Affiliate of Trails as of June
------------------
1, 1996, together with its Affiliates as of such date.
"Event of Default" has the meaning set forth in Section 9.
---------------- ---------
"FEIN" means Federal Employer Identification Number.
----
"Foothill" has the meaning set forth in the preamble to this
--------
Agreement.
"Foothill Expenses" means all: costs or expenses (including
-----------------
taxes, photocopying, notarization, telecommunication and insurance premiums)
required to be paid by Borrower under any of the Loan Documents that are paid or
advanced by Foothill; documentation, filing, recording, publication, appraisal
(including periodic Collateral appraisals conducted by third parties, in
addition to the fees set forth in Section 3.8(f)(ii); provided however, that
unless there shall have occurred an Event of Default, appraisal fees incurred by
Foothill other than annual appraisals conducted on the Collateral shall not be
included in the definition of Foothill Expenses), real estate survey, real
property taxes on any of the Real Property (should Foothill elect to pay them),
environmental audit, and search fees assessed, paid, or incurred by Foothill in
connection with Foothill's transactions with Borrower; costs and expenses
incurred by Foothill in preserving the value of the Collateral; costs and
expenses incurred by Foothill in the disbursement of funds to Borrower (by wire
transfer or otherwise); charges paid or incurred by Foothill resulting from the
dishonor of checks; costs and expenses paid or incurred by Foothill to correct
any default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated; costs and expenses paid
or incurred by Foothill in examining Borrower's Books; costs and expenses of
third party claims or
6
<PAGE>
any other suit paid or incurred by Foothill in enforcing or defending the Loan
Documents; and Foothill's reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or the Obligations), defending, or concerning the Loan
Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
----
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
-------------------
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, chooses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringements, claims, computer
programs, computer discs, computer tapes, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds, and tax refund claims), other
than goods and Accounts.
"Hazardous Substances" means:
(a) those substances as defined as "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in the Comprehensive
Environmental Response, Compensation and Liability Act, Resource Conservation
and Recovery Act, 42 U.S.C. (S)(S)6901 et seq. ("RCRA"), or the Hazardous
-- ---
Materials Transportation Act, 49 U.S.C. Section 1801 et seq.;
-- ---
(b) those substances designated as a "hazardous substance"
under or pursuant to the Federal Water Pollution Control Act, 33 U.S.C.
(S)(S)1257 et seq., or defined as a "hazardous waste" under or pursuant to RCRA;
-- ---
(c) those substances listed in the United States Department of
Transportation Table (40 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and
(d) such other substances, materials and wastes which are
regulated under any act, or which are classified as hazardous or toxic under any
Act.
All of the statutes, acts, codes, sections and tables listed
above shall include all amendments, modifications and supplements thereto,
together with all regulations promulgated pursuant to such statutes, acts,
codes, sections and tables.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
------------
money; (b) all obligations of Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of Borrower
in respect of letters of credit, letter of
7
<PAGE>
credit guaranties, bankers acceptances, interest rate swaps, controlled
disbursement accounts, or other financial products; (c) all obligations under
capitalized leases; (d) all obligations or liabilities of others secured by a
lien or security interest on any property or asset of Borrower, irrespective of
whether such obligation or liability is assumed; and (e) any obligation of
Borrower guaranteeing or intended to guarantee (whether guaranteed, endorsed,
co-made, discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Indemnified Persons" means Foothill and its parents,
-------------------
subsidiaries and affiliates, attorneys, and each of their officers, directors,
agents, employees, trustees, receivers, executors, and administrators, and the
heirs, successors, and assigns of all of the foregoing.
"Indenture Secured Notes" means those certain 12% Secured Notes
-----------------------
Due 1998 and Additional Series 12% Secured Notes Due 1998, issued by USTrails
Inc.
"Insolvency Proceeding" means any proceeding commenced by or
---------------------
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Internal Rate of Return Fee" means a fee payable to Foothill
---------------------------
upon the termination of this Agreement computed as follows: If (i) $31,430,000
is greater than; (ii), the sum of each month's PT divided by 1.01135 to the T/n/
power; (iii) the fee shall equal the number representing the difference between
(i) and (ii) multiplied by 1.01135 to the F power.
As used in this Definition,
"T/o/" is the Closing Date.
"T/1/" is .5 on August 1, 1996.
"T/N/" represents a number which increases by 1 for
every month-end thereafter, until the date of
calculation.
"F" equals T/N/ at the date of calculation.
"PT" equals the sum of total principal paid plus
interest accruing pursuant to Section 3.5(a) on the
--------------
Obligations, minus the sum of all Advances during each
-----
month.
For example, if PT equals $1,000,000, $2,500,000, and $27,500,000 on
August 1, 1996 (T = 0.5), September 1, 1996 (T = 1.5), and October 1, 1996 (T =
2.5), respectively, the calculation is represented as follows:
8
<PAGE>
$1,000,000 + $2,500,000 + $27,500,000
---------- ---------- -----------
1.01135 to 1.01135 to the 1.01135 to the
the _ power 1 _ power 2 _ power
WHICH IS CALCULATED AS
$1,000,000 + $2,500,000 + $27,500,000
---------- ---------- -----------
1.00565899 1.01707 1.028617
WHICH IS CALCULATED AS
$994,372.86 + $2,458,033.46 + $26,734,926.66
Since $994,372.86 plus $2,458,033.46 plus $26,734,926.66 equals
---- ----
$30,187,332.98, the $30,187,332.98 number is subtracted from $31,430,000,
resulting in the number $1,242,667.02 which is multiplied by 1.028617, resulting
in an Internal Rate of Return Fee of $1,278,228.42.
"Intellectual Property Security Agreement" means that certain
----------------------------------------
Intellectual Property Security Agreement entered into concurrently herewith
between Borrower and Foothill whereby Borrower grants to Foothill a security
interest in the property described therein.
"Inventory" means all present and future inventory in which
---------
Borrower has any interest, including lots, timeshare intervals, goods held for
sale or lease or to be furnished under a contract of service and all of
Borrower's present and future raw materials, work in process, finished goods,
and packing and shipping materials, wherever located, and any documents of title
representing any of the above.
"IRC" means the Internal Revenue Code of 1986, as amended, and
---
the regulations thereunder.
"Known Prior Monetary Liens" means (i) that certain lien
--------------------------
securing an indebtedness held by Central Savings & Loan which encumbers the Pio
Pico (CA) Property; (ii) that certain lien securing an indebtedness held by Land
Titles (Taylor) which encumbers the Palm Springs (CA) Property; (iii) that
certain lien securing an indebtedness collected by Winwood Agency #0169 which
encumbers the Wilderness Lakes (CA) Property; (v) that certain lien securing an
indebtedness held by Betty Avilo which also encumbers the Wilderness Lakes (CA)
Property; (vi) that certain lien securing an indebtedness collected by Capital
Realty which encumbers the Windsor (CA) Property; and (vii) that certain lease
covering a portion of the Lake Tawakoni (TX) Property, all as more fully set
forth in Schedule KPML.
"Lien Reserve" means the aggregate sum of (i) the aggregate sum
------------
represented by all monetary liens, other than Known Prior Monetary Liens and
Permitted Liens referred to in clause (c) of the definition thereof and, to the
extent the obligations secured thereby are not delinquent or are secured by cash
or its equivalent, the Permitted Liens referred to in clauses (g),
9
<PAGE>
(i) or (m) of such definition, which are senior in priority to Foothill's lien
(including those referenced in Section 9.9, but only to the extent noted
-----------
therein); (ii) the aggregate sum represented by delinquent real property taxes
owing on the Real Property; plus (iii) sums in excess of Five Million Dollars
----
($5,000,000) disclosed by liens for which there is no indication other than a
preliminary title report, policy or commitment that such lien secures
outstanding debt; plus (iv) sums in excess of Two Million Dollars ($2,000,000),
----
such reserve amount to be determined by Foothill, acting in good faith, by which
Foothill believes that portions of the Real Property, except the South Jetty
(OR) Property, have declined in value due to unacceptable non-monetary liens,
such reserve limited, however, to eighty-five percent (85%) of the appraised
value of such affected properties, computed as if the defect was not present.
"Loan Documents" means this Agreement, the Lock Box Agreements,
--------------
the Mortgages, the Account Note, the Term Note, the Pledge Agreements, the
Intellectual Property Security Agreement, any other note or notes executed by
Borrower and payable to Foothill, and any other agreement entered into in
connection with this Agreement.
"Lock Box" has the meaning provided in the respective Lock Box
--------
Agreements.
"Lock Box Agreements" means those certain Lockbox Operating
-------------------
Procedural Agreements and Depository Account Agreements, in form and substance
satisfactory to Foothill, each of which is among Borrower, Foothill, and one of
the Lock Box Banks.
"Lock Box Bank" means Union Bank of California.
-------------
"Losses" shall mean any and all losses, liabilities, contingent
------
liabilities, damages, obligations, claims, contingent claims, actions, suits,
proceedings, disbursements, penalties, costs, and expenses (including, without
limitation, actual attorneys' fees and costs of counsel retained by Foothill to
monitor the proceedings and actions of Borrower in satisfying its obligations
hereunder, and to advise and represent Foothill with respect to matters related
hereto, including, without limitation, fees incurred pursuant to 11 U.S.C.) and
all other professional or consultants' fees and expenses), whether or not an
action or proceeding is commenced or threatened.
"Maximum Amount" means the sum of the Revolving Maximum Amount
--------------
plus the then outstanding balances of the Account Note and the Term Note.
"Mortgages" means one or more mortgages, deeds of trust, or
---------
deeds to secure debt, executed by Borrower in favor of Foothill, the form and
substance of which shall be satisfactory to Foothill, that encumber the Real
Property and the related improvements thereto.
"Multiemployer Plan" means a multiemployer plan as defined in
------------------
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which
employees of Borrower or an
10
<PAGE>
ERISA Affiliate participate or to which Borrower or any ERISA Affiliate
contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's present and
---------------------
future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities (including the shares of stock of subsidiaries of
Borrower), documents, and chattel paper.
"Obligations" means all loans, advances, debts, principal,
-----------
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), premiums, liabilities (including all amounts charged
to Borrower's loan account pursuant to any agreement authorizing Foothill to
charge Borrower's loan account), obligations, fees (including Early Paydown
Premiums), lease payments, guaranties, covenants, and duties owing by Borrower
to Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents, by any note or other instrument (including the Account Note and
the Term Note), or pursuant to any other agreement between Foothill and
Borrower, and irrespective of whether for the payment of money), whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 3.4.
----------- -----------
"PBGC" means the Pension Benefit Guaranty Corporation as
----
defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security interests held
---------------
by Foothill; (b) liens and security interests set forth on Schedule P-1 attached
------------
hereto; (c) purchase money security interests and liens of lessors under
capitalized leases to the extent that the acquisition or lease of the underlying
asset was permitted under Section 8.10, and so long as the security interest or
------------
lien only secures the purchase price of the asset; (d) exceptions listed in the
title insurance or commitment therefor to be delivered by Borrower hereunder in
respect of the Real Property; (e) the Known Prior Monetary Liens; (f) junior
liens arising by reason of any judgment, decree or order of any court only to
the extent, for an amount, and for a period not resulting in an Event of Default
with respect thereto and so long as such Lien is being contested in good faith
and is adequately bonded and any appropriate legal proceedings that may have
been duly initiated for the review of such judgment, decree or order shall not
have been finally adversely terminated or the period within which such
proceedings may be initiated shall not have expired; (g) security for the
performance of bids, tenders, trade, contracts (other than contracts for the
payment of money) or leases, surety bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business or
appeal bonds, and public and statutory bonds; (h) liens (other than Liens
arising under "ERISA") for taxes, assessments or other governmental charges not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of Borrower in accordance with GAAP unless the
11
<PAGE>
failure to so pay during the contest period results in an uncurable liability or
such contest period extends beyond one year prior to a curtailment of redemption
rights or uncurable liability; (i) liens of carriers, warehousemen, mechanics,
landlords, materialmen, repairmen or other like Liens arising by operation of
law in the ordinary court of business (other than Liens arising under ERISA) and
consistent with industry practices and Liens on deposits made to obtain the
release of such Liens if (y) the underlying obligations are not overdue for a
period of more than 90 days; or (z) such Liens are being contested in good faith
and by appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of Borrower in accordance with GAAP, and unasserted
banker's liens and rights of set off arising in the ordinary cause of business;
(j) easements, rights of way, zoning and similar restrictions and other similar
encumbrances incurred in the ordinary course of business and consistent with
industry practices that do not detract from the use of the property by Borrower
or interfere with the ordinary conduct of the business of the Borrower; provided
that any such Liens are not incurred in connection with any borrowing of money
or any commitment to loan any money or to extend any credit; (k) rights of
members and other customers arising in the ordinary cause of business from
memberships, rights to use or related or similar interest in campgrounds,
resorts, or other facilities (whether arising from the holding of such
memberships, rights to use or related or similar interests, by applicable law or
otherwise); (l) leases, subleases, permits or other rights to use or occupy
property owned or hereafter acquired by Borrower; or (m) pledges made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security legislation.
"Person" means and includes natural persons, corporations,
------
limited partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
"Plan" means an employee benefit plan (as defined in Section
----
3(3) of ERISA) which Borrower or any ERISA Affiliate sponsors or maintains or to
which Borrower or any ERISA Affiliate makes, is making, or is obligated to make
contributions, including any Multiemployer Plan or Qualified Plan.
"Pledge Agreements" means those certain seven (7) pledge
-----------------
agreements entered into concurrently herewith whereby (i) Trails pledges to
Foothill all of the issued and outstanding shares of stock which it owns and all
of the notes, evidences of indebtedness, guaranties and security for the
repayment of approximately Twenty-Seven Million Five Hundred Seventy-Seven
Thousand Dollars ($27,577,000) owed to it by NAC; (ii) NAC pledges to Foothill
all of the issued and outstanding shares of stock which it owns; (iii) Foxwood
Corporation pledges to Foothill all of the issued and outstanding shares of
stock which it owns; (iv) Dixie Resort Corporation pledges to Foothill all of
the issued and outstanding shares of stock which it owns; (v) Lake Tansi Village
pledges to Foothill all of the issued and outstanding shares of stock which it
owns; (vi) Western Fun Corporation pledges to Foothill all of the issued and
outstanding shares of
12
<PAGE>
stock which it owns; and (vii) Recreation Land Corporation pledges to Foothill
all of the issued and outstanding shares of stock which it owns.
"Prohibited Transaction" means with respect to a Plan, any
----------------------
transaction described in Section 406 of ERISA which is not exempt by reason of
Section 408 of ERISA, or a class or individual administrative exemption, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c) of the IRC or a class or individual administrative
exemption.
"Property to be Mortgaged After the Closing Date" means the
-----------------------------------------------
property set forth on Schedules 4.7 & 7.17(a) and, to the extent required
-----------------------
herein, Schedule ERP.
"Qualified Plan" means a pension plan (as defined in Section
--------------
3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the IRC
which Borrower or any ERISA Affiliate sponsors, maintains, or to which any such
person makes, is making, or is obligated to make, contributions, or, in the case
of a multiple-employer plan (as described in Section 4064(a) of ERISA), has made
contributions at any time during the immediately preceding period covering at
least five (5) plan years, but excluding any Multiemployer Plan.
"Real Property" means the Alabama Property, the Arizona
-------------
Property, the BC Property, the California Property, the Florida Property, the
Illinois Property, the Indiana Property, the Michigan Property, the Mississippi
Property, the Missouri Property, the Nevada Property, the New Jersey Property,
the North Carolina Property, the Ohio Property, the Oregon Property, the
Pennsylvania Property, the South Carolina Property, the Tennessee Property, the
Texas Property, the Virginia Property, the Washington Property, and the
Wisconsin Property, and the Property to be Mortgaged After the Closing Date. The
definitions of each of the foregoing are set forth in Schedule RP DEF attached
hereto.
"Reference Rate" means the variable rate of interest, per
--------------
annum, most recently announced by Norwest Bank Minnesota, national association,
or any successor to the foregoing institutions, as its "prime rate" or
"reference rate," as the case may be, irrespective of whether such announced
rate is the best rate available from such financial institution.
"Remediate" and "Remediation" shall include, but not be limited
--------- -----------
to, the investigation of the environmental condition of the Real Property, the
preparation of any feasibility studies, reports or remedial plans, and the
performance of any cleanup, abatement, removal, remediation, containment,
operation, maintenance, monitoring or restoration work, whether on or off of the
Real Property.
"Reportable Event" means with respect to a Qualified Plan, any
----------------
event described in ERISA Section 4043(c) (other than Subsections (c)(7) and
(c)(9)) of ERISA or any other subsection for which the PBGC has waived the
requirement of reporting such event to the PBGC within thirty days of
incurrence.)
13
<PAGE>
"Revolving Maximum Amount" means (a) Twenty-Five Million
------------------------
Dollars ($25,000,000), which such amount is permanently reduced to lower amounts
by the sum of: (i) commencing on September 1, 1996, and on the first day of each
and every month thereafter, $150,000; and (ii) the greater of, (y) the sum of
---
(1) an amount equal to the aggregate net cash proceeds of all sales of
Collateral pursuant to Section 5.4 (other than the last paragraph thereof), or
as otherwise approved by Foothill; plus (2) 100% of Account collections, once
----
the Account Note has been paid down to $0, and the Term Note has been paid down
to $0 or is fully secured by cash; or (z) the amount set forth below opposite
--
the applicable date of reduction:
On or after December 31, 1996 $ 500,000
On or after June 30, 1997 $ 3,000,000
On or after December 31, 1997 $ 6,750,000
On or after June 30, 1998 $10,500,000
On or after December 31, 1998 $14,250,000
On or after June 30, 1999 $18,000,000
(b) The foregoing notwithstanding, (i) on September 1, 1997,
the Revolving Maximum Amount shall be the lower of One Million Dollars
($1,000,000) over the otherwise determined Revolving Maximum Amount on that date
computed in accordance with the formula set forth in (a) above, or Twenty
Million Fifty Thousand Dollars ($20,050,000); (ii) on October 1, 1997, the
Revolving Maximum Amount shall be the lower of Two Million Dollars ($2,000,000)
over the otherwise determined Revolving Maximum Amount on that date, computed in
accordance with the formula set forth in (a) above, or Nineteen Million Nine
Hundred Thousand Dollars ($19,900,000); and (iii) on November 1, 1997, the
Revolving Maximum Amount shall be the lower of Two Million Dollars ($2,000,000)
over the otherwise determined Revolving Maximum Amount on that date, computed in
accordance with the formula set forth in (a) above, or Nineteen Million Seven
Hundred Fifty Thousand Dollars ($19,750,000).
(c) On December 1, 1997, and each month thereafter, the
Revolving Maximum Amount shall be computed in accordance with (a) above.
"Satisfied Indebtedness Liens" means liens of record which
----------------------------
secure obligations which Borrower maintains have been satisfied in full and
which should be released or reconveyed.
"Solvent" means, with respect to any Person on a particular
-------
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such
14
<PAGE>
Person is able to realize upon its properties and assets and pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (d) such Person does not intend to, and does
not believe that it will, incur debts beyond such Person's ability to pay as
such debts mature, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's properties and assets would constitute unreasonably small capital
after giving due consideration to the prevailing practices in the industry in
which such Person is engaged. In computing the amount of contingent liabilities
at any time, it is intended that such liabilities will be computed at the amount
that, in light of all the facts and circumstances existing at such time,
represents the amount that reasonably can be expected to become an actual or
matured liability.
"Tangible Net Worth" means, as of the date any determination
------------------
thereof is to be made, the difference of: (a) Borrower's total stockholder's
equity or deficit; minus (b) the sum of: (i) all intangible assets of Borrower;
-----
and (ii) all amounts due to Borrower from Affiliates, calculated on a
consolidated basis.
"Term Note" has the meaning set forth in Section 3.3 hereof.
--------- -----------
"Title Company" means Chicago Title Insurance Company.
-------------
"Trustee" means Fleet National Bank as indenture trustee of the
-------
Indenture Secured Notes.
"Unfunded Benefit Liability" means with respect to a Qualified
--------------------------
Plan the excess of a Plan's benefit liabilities (as defined in Section
4001(a)(16) of ERISA) over the current value of such Plan's assets, determined
in accordance with the assumptions used by the Plan's actuaries for funding the
Plan pursuant to Section 412 of the IRC for the applicable plan year.
"Voidable Transfer" has the meaning set forth in Section 16.8.
----------------- ------------
1.2 Accounting Terms. All accounting terms not specifically
----------------
defined herein shall be construed in accordance with GAAP. When used herein, the
term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower on a consolidated
basis unless the context clearly requires otherwise .
1.3 Code. Any terms used in this Agreement which are defined in
----
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this Agreement clearly
------------
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit
15
<PAGE>
references are to this Agreement unless otherwise specified. Any reference in
this Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable. To the extent that items are specifically addressed
in this Agreement and any other Loan Document, and such provisions are in
conflict with one another (but not supplementary to one another), then the
provisions of this Agreement shall govern.
1.5 Schedules and Exhibits. All of the schedules and exhibits
----------------------
attached to this Agreement shall be deemed incorporated herein by reference.
2. INTENTIONALLY DELETED.
---------------------
3. LOAN AND TERMS OF PAYMENT.
-------------------------
3.1 Revolving Advances.
------------------
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make revolving advances ("Advances": individually, an
"Advance") to Borrower in an amount not to exceed the Revolving Maximum Amount
minus the Lien Reserve.
- -----
(b) Foothill shall have no obligation to make advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the Maximum Amount or to the extent that the Obligations outstanding at any time
under Sections 3.1, 3.2, & 3.3 exceed Thirty Five Million Dollars ($35,000,000).
------------------------
(c) All net proceeds from sales of Collateral pursuant to
Section 5.4, (other than the last paragraph thereof), or sale of other
- -----------
Collateral as previously approved by Foothill shall be applied to the Advances
until the outstanding balance thereof is zero Dollars ($0.00). At such time as
the Account Note is repaid in full and the Term Note is either repaid in full or
fully secured by cash, all collections on the Accounts shall be applied to repay
the outstanding Advances.
(d) All Advances shall constitute Obligations.
(e) Foothill is authorized to make advances under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Officer of Borrower. Borrower agrees to establish
and maintain a single designated deposit account for the purpose of receiving
the proceeds of the advances requested by Borrower and made by Foothill
hereunder. Unless otherwise agreed by Foothill and Borrower, any advance
requested by Borrower and made by Foothill hereunder shall be made to such
designated deposit account. Amounts borrowed pursuant to this Section 3.1 may be
-----------
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
16
<PAGE>
3.2 Account Loan. (a) Foothill has agreed to make a term loan to
------------
Borrower in the amount of Six Million Four Hundred Thirty-Five Thousand Dollars
($6,435,000), to be evidenced by a secured promissory note (the "Account Note"),
of even date herewith, executed by Borrower in favor of Foothill.
(b) All collections on the Accounts shall be applied daily to
permanently reduce the principal amount of the Account Note. At such time as
there are no Advances outstanding, all net proceeds of sales of Collateral
pursuant to Section 5.4, (other than the last paragraph thereof), or sale of
-----------
other Collateral as previously approved by Foothill shall be applied to
permanently reduce the Account Note. There shall be mandatory principal
reduction payments to the extent a monthly Dilution Paydown calculation so
requires. Interest on the Account Note shall be payable monthly in arrears on
the first day of each month.
(c) All amounts evidenced by the Account Note shall constitute
Obligations.
3.3 Term Loan. (a) Foothill has agreed to make a term loan to
---------
Borrower in the original principal amount of Six Million Five Hundred Sixty-Five
Thousand Dollars ($6,565,000), to be evidenced by a secured promissory note (the
"Term Note"), of even date herewith, executed by Borrower in favor of Foothill.
(b) No principal reduction payments may be made on the Term
Note during the term of this Agreement until Foothill's counsel advises it that
there are no adverse mortgage or intangible tax consequences therefrom. Interest
on the Term Note shall be payable monthly, in arrears, on the first of each
month.
(c) At such time as the Account Note is repaid in full, all
collections on the Accounts shall be held as Collateral to secure the Term Loan,
and in the event that in addition there are no Advances outstanding under
Section 3.1 all net proceeds of sales of Collateral pursuant to Section 5.4
- ----------- -----------
(other than the last paragraph thereof) shall be held by Foothill as Collateral
to secure the Term Loan (and shall earn interest thereon at the rate or rates
paid by Norwest Bank Minnesota, national association, from time to time on its
taxable money market fund) until such time as payment of the Term Note is
permitted by Section 3.3(b).
(d) All amounts evidenced by the Term Note shall constitute
Obligations.
3.4 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations then due and payable by Borrower to Foothill is greater than the sum
of funds advanced on the Account Note, the Term Note, and the Revolving Maximum
Amount (an "Overadvance"), Borrower immediately shall pay to Foothill, in cash,
the amount of such excess to be used by Foothill to repay such Obligations.
3.5 Interest: Rate, Payments, and Calculations.
------------------------------------------
17
<PAGE>
(a) Interest Rate. All Obligations shall bear interest, on
the actual Daily Balance, at a per annum rate of two and three-quarter (2 3/4)
percentage points above the Reference Rate.
(b) Default Rate. All Obligations shall bear interest, from
and after the occurrence and during the continuance of an Event of Default, at a
per annum rate equal to five and three-quarter (5 3/4) percentage points above
the Reference Rate.
(c) Minimum Interest. In no event shall the rate of interest
chargeable hereunder be less than nine percent (9%) per annum. To the extent
that interest accrued hereunder at the rate set forth herein (including the
minimum interest rate) would yield less than the foregoing minimum amount, the
interest rate chargeable hereunder for the period in question automatically
shall be deemed increased to that rate that would result in the minimum amount
of interest being accrued and payable hereunder.
(d) Interest Payments. Interest hereunder (on all the
Obligations, except contingent and unliquidated Obligations) shall be due and
payable on the first day of each month during the term hereof, in arrears.
Borrower hereby authorizes Foothill, at its option, without prior notice to
Borrower, to charge such interest, all Foothill Expenses (as and when incurred),
and all installments or other payments due under the Account Note and the Term
Note or any other note or other Loan Document to revolving Advances, which
amounts shall thereafter accrue interest at the rate then applicable hereunder.
Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(e) Computation. The Reference Rate as of this date is eight
and one-quarter percent (8 1/4%) per annum. In the event the Reference Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Reference Rate. The rates of interest charged hereunder
shall be based upon the daily Reference Rate in effect during the month. All
interest and fees chargeable under the Loan Documents shall be computed on the
basis of a three hundred sixty (360) day year for the actual number of days
elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, the Account
Note, or the Term Note, plus any other amounts paid in connection herewith,
exceed the highest rate permissible under any law that a court of competent
jurisdiction shall, in a final determination, deem applicable. Borrower and
Foothill, in executing this Agreement and the Account Note, the Term Note, and
the other loan Documents, intend to legally agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
-------- -------
anything contained herein or in the Account Note, the Term Note, or any of the
other Loan Documents to the contrary notwithstanding, if said rate or rates of
interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement and the Account Note and
---- -----
the Term Note, Borrower is and shall be liable only for the payment of such
maximum as allowed by law, and payment
18
<PAGE>
received from Borrower in excess of such legal maximum, whenever received, shall
be applied to reduce the principal balance of the Obligations to the extent of
such excess. All interest paid or agreed to be paid by Borrower shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full period until payment in full of the Obligations (including
the period of any extension hereof) so that the interest hereon for such full
period shall not exceed interest computed at the maximum lawful rate. This
paragraph shall control all agreements between Borrower and Foothill.
3.6 Crediting Payments; Application of Collections. The receipt of
----------------------------------------------
any wire transfer of funds, check, or other item of payment by Foothill (whether
from transfers to Foothill by the Lock Box Bank pursuant to the Lock Box
Agreements or otherwise) immediately shall be applied to provisionally reduce
the Obligations in the manner which the daily reports prepared by Borrower
disclose are collections resulting from asset sales, contract collections, and
other miscellaneous revenues, but shall not be considered a payment on account
unless such wire transfer is of immediately available federal funds and is made
to the appropriate deposit account of Foothill or unless and until such check or
other item of payment is honored when presented for payment. From and after the
Closing Date, Foothill shall be entitled to charge Borrower for three (3)
Business Days of 'clearance' at the applicable rates set forth in Sections
--------
3.5(a) and 3.5(b) on all collections, checks, wire transfers, or other items of
- -----------------
payment that are received by Foothill (regardless of whether forwarded by the
Lock Box Bank to Foothill, whether provisionally applied to reduce the
Obligations, or otherwise). This across-the-board three (3) Business Day
clearance charge on all receipts is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's facility to Borrower, and shall
apply irrespective of the characterization of whether receipts are owned by
Borrower or Foothill, and irrespective of the level of Borrower's Obligations to
Foothill. Should any check or item of payment not be honored when presented for
payment, then Borrower shall be deemed not to have made such payment, and
interest shall be recalculated accordingly. Anything to the contrary contained
herein notwithstanding, any wire transfer, check, or other item of payment shall
be deemed received by Foothill only if it is received into Foothill's Operating
Account (as such account is identified in the Lock Box Agreements) on or before
11:00 a.m. Los Angeles time. If any wire transfer, check, or other item of
payment is received into Foothill's Operating Account (as such account is
identified in the Lock Box Agreements) after 11:00 a.m. Los Angeles time it
shall be deemed to have been received by Foothill as of the opening of business
on the immediately following Business Day.
3.7 Statements of Obligations. Foothill shall render statements to
-------------------------
Borrower of the Obligations, including principal, interest, fees, and including
an itemization of all charges and expenses constituting Foothill Expenses owing,
and such statements shall be conclusively presumed to be correct and accurate
and constitute an account stated between Borrower and Foothill unless, within
thirty (30) days after receipt thereof by Borrower, Borrower shall deliver to
Foothill by registered, certified mail, or telecopy at its address specified in
Section 13, written objection thereto describing the error or errors contained
- ----------
in any such statements.
3.8 Fees. Borrower shall pay to Foothill the following fees:
----
19
<PAGE>
(a) Closing Fee. A one time closing fee of Three Hundred
Eighty Thousand Dollars ($380,000) which is fully earned upon execution of this
Agreement and is due and payable by Borrower to Foothill in connection with this
Agreement on the Closing Date;
(b) Agency Fee. A one time agency fee of One Hundred Ninety
Thousand Dollars ($190,000) which is fully earned upon execution of this
Agreement and is due and payable by Borrower to Foothill in connection with this
Agreement on the Closing Date;
(c) "Bridge" Fee. A one time bridge fee of Two Hundred Eighty
Five Thousand Dollars ($285,000), which is earned, in full, on the Closing Date
and is due and payable by Borrower to Foothill in connection with this Agreement
on the Closing Date;
(d) Unused Line Fee. On the first day of each month during
the term of this Agreement, a fee in an amount equal to one half of one percent
(1/2%) per annum times the Average Unused Portion of the Revolving Maximum
Amount;
(e) IRR Fee. A fee upon payment in full of the Obligations
computed as set forth in the definition of Internal Rate of Return Fee equal to
the sum necessary to cause Foothill's annualized internal rate of return on all
the Obligations outstanding from time to time to equal fourteen and one-half
percent (14 1/2%), taking into account the interest income payable pursuant to
Sections 3.5(a) & (c) and the fees payable pursuant to Sections 3.8(a) & (b),
- --------------------- ---------------------
but excluding all other fees, costs or Foothill Expenses;
(f) Financial Examination, Documentation, and Appraisal Fees.
(i) Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination of Borrower performed by Foothill or its agents; (ii) Foothill's
customary appraisal fee of One Thousand Five Hundred Dollars ($1,500) per day
per appraiser, plus out-of-pocket expenses for each appraisal of the Collateral
performed by Foothill or its agents; and, (iii) on each anniversary of the
Closing Date, Foothill's fee of Five Thousand Dollars ($5,000) per year for its
loan documentation review: provided there shall not have occurred an Event of
Default or provided that facts or circumstances which would cause a prudent
lender to believe that a prospective Event of Default is about to occur,
Borrower shall not be charged more frequently than quarterly for the financial
examinations set forth in Section 3.8(f)(i) and shall not be charged more
-----------------
frequently than annually for the appraisals set forth in Section 3.8(f)(ii); and
------------------
(g) Covenant Fee. To the extent applicable in accordance with
Sections 7.16 and 9.2, a fee payable at the annual rate of one-half of one
- ---------------------
percent (1/2%) of the actual Daily Balance of the Obligations during each month.
(h) Servicing Fee. On the first day of each month during the
term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to Seven Thousand Five Hundred
Dollars ($7,500) per month.
20
<PAGE>
4. CONDITIONS; TERM OF AGREEMENT.
-----------------------------
4.1 Conditions Precedent to the Initial Advance to Borrower. The
-------------------------------------------------------
obligation of Foothill to make the initial advance to Borrower is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before July 17, 1996;
(b) TTrails shall have merged into Trails;
(c) All of the subsidiaries of NAC shall have merged into NAC,
except the following:
(i) Western Fun Corporation;
(ii) Carolina Landing Corporation;
(iii) Cherokee Landing Corporation;
(iv) Recreation Properties, Inc.;
(v) Dixie Resort Corporation;
(vi) Natchez Trace Wilderness Preserve Corporation;
(vii) LML Resort Corporation;
(viii) The Villas of Hickory Hills, Inc.;
(ix) Lake Royale Corporation;
(x) Carriage Manor Corporation;
(xi) Beech Mountain Lakes;
(xii) Recreation Land Corporation;
(xiii) Wolf Run Corporation;
(xiv) Quail Hollow Village, Inc.;
(xv) Foxwood Corporation;
(xvi) Lake Tansi Village Inc;
(xvii) Westwind Manor Corporation;
21
<PAGE>
(xviii) Tansi Resort Inc.;
(xix) Wolf Run Manor Corporation;
(xx) Quail Hollow Plantation Corp.;
(xxi) Chief Creek Corporation;
(xxii) GL Land Development Corp.;
(xxiii) The Kinston Corporation; and
(xxiv) Resort Land Corporation.
(d) Foothill shall be provided assurances by the Trustee that
concurrently with the funding provided for in this Section 4.1, the Trustee
-----------
shall exchange and redeem the Indenture Secured Notes in accordance with that
certain Private Placement Memo dated June 28, 1996 as supplemented July 15,
1996;
(e) After giving effect to the mergers contemplated in
Sections 4.1 (b) & (c), and the costs and fees associated with the redemption
- ---------------------
and exchange contemplated in Section 4.1(d), Borrower shall have available in
--------------
cash and availability for Advances a sum in excess of Six Million Dollars
($6,000,000);
(f) Trustee shall have executed and delivered the Defeasance
Letter in form and substance satisfactory to Foothill, together with UCC
termination statements, and other documentation evidencing the termination of
its liens and security interests in and to the properties and assets of
Borrower;
(g) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
(i) the Lock Box Agreements;
(ii) the Account Note;
(iii) the Term Note;
(iv) the Mortgages set forth on Schedule 4.1(g);
---------------
(v) the Pledge Agreements; and
(vi) the Intellectual Property Security Agreement.
(h) Foothill shall have received the original stock
certificates and stock powers for the stock which is subject to the Pledge
Agreements.
22
<PAGE>
(i) Foothill shall have received a certificate from the
Secretary or an Assistant Secretary of each Borrower attesting to the
resolutions of Borrower's Boards of Directors authorizing its execution and
delivery of this Agreement and the other Loan Documents to which such Borrower
is a party and authorizing specific officers of Borrower to execute same;
(j) Foothill shall have received copies of each Borrower's By-
laws and Articles or Certificates of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary or an Assistant
Secretary of each Borrower;
(k) Foothill shall have received a certificate of corporate
status with respect to each Borrower, dated within twenty (20) days of the
Closing Date, by the Secretary of State of the state of incorporation of each
Borrower, which certificate shall indicate that such Borrower is in good
standing in such state;
(l) Foothill shall have received certificates of corporate
status with respect to each Borrower, each dated within twenty (20) days of the
Closing Date, such certificates to be issued by the Secretary of State of the
states in which its failure to be duly qualified or licensed would have a
material adverse effect on the financial condition or properties and assets of
any Borrower, which certificates shall indicate that such Borrower is in good
standing, except in states where such Borrower only commenced doing business as
a result of the mergers;
(m) Foothill shall have received the certificates for the
policies of insurance, together with the endorsements for such policies, as are
required by Section 7.9 hereof, the form and substance of which shall be
-----------
satisfactory to Foothill and its counsel;
(n) Foothill shall have received the originals of each of the
Accounts;
(o) Foothill shall have received each of the Mortgages set
forth in Schedule 4.1(g), duly executed, and each shall have been recorded in
the appropriate county recording office, or Foothill shall be provided with
"gap" coverage satisfactory to it by Title Company;
(p) Foothill shall have received assurances from Title Company
regarding the post closing issuance of title insurance policies, in the form set
forth in Section 4.7;
-----------
(q) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
and
(r) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
4.2 Conditions Precedent to All Advances. The following shall be
------------------------------------
conditions precedent to all advances:
23
<PAGE>
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such advance as though made on and as of such
date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Event of Default or event which with the giving of
notice or passage of time would constitute an Event of Default shall have
occurred and be continuing on the date of such advance, nor shall either result
from the making of the advance; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the making of such advance shall
have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
4.3 Term. This Agreement shall become effective upon the execution
----
and delivery hereof by Borrower and Foothill and shall continue in full force
and effect for a term ending on the date that is three (3) years from the
Closing Date. The foregoing notwithstanding, Foothill shall have the right to
terminate its obligation to make advances hereunder or permit Borrower to
utilize proceeds from any of the Collateral immediately and without notice upon
the occurrence and during the continuation of an Event of Default.
4.4 Effect of Termination. On the date of termination, all
---------------------
Obligations immediately shall become due and payable without notice or demand.
No termination of this Agreement, however, shall relieve or discharge Borrower
of Borrower's duties, Obligations, or covenants hereunder, and Foothill's
continuing security interests in the Collateral shall remain in effect until all
Obligations (other than contingent unliquidated Obligations pursuant to Section
-------
11.3) have been fully and finally discharged and Foothill's obligation to
- ----
provide advances hereunder is terminated.
4.5 Early Termination or Paydown by Borrower. Borrower has the
----------------------------------------
option, at any time upon thirty (30) days prior written notice to Foothill, to
terminate this Agreement by paying to Foothill, in cash, the Obligations,
without premium or the payment of a fee, UNLESS the early termination or paydown
------
results from a refinancing or recapitalization of any Borrower, in which such
event the Obligations shall be paid in full, together with a premium (the "Early
Paydown Premium") equal to the greater of: (a) the total interest owing for the
immediately preceding six (6) month period; or (b) Five Hundred Thousand Dollars
($500,000). The Early Paydown Premium shall be due and owing should Borrower
reduce the Obligations with any borrowed money; however the Borrower can prepay
the Obligations from time to time without premium using cash flow generated from
its business operations. The Early Paydown Premium is in addition to the
Internal Rate of Return Fee.
4.6 Termination Upon Event of Default. If Foothill terminates this
---------------------------------
Agreement upon the occurrence of an Event of Default that intentionally is
caused by Borrower for the purpose, in Foothill's reasonable judgment, of
avoiding payment of the Early Paydown Premium provided in Section 4.5, in view
-----------
of the impracticability and extreme difficulty of ascertaining actual
24
<PAGE>
damages and by mutual agreement of the parties as to a reasonable calculation of
Foothill's lost profits as a result thereof, Borrower shall pay to Foothill upon
the effective date of such termination, a premium in an amount equal to the
Early Paydown Premium. The Early Paydown Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Paydown Premium provided for in this Section 4.6 shall be
-----------
deemed included in the Obligations.
4.7 Post Closing Date Obligations of Borrower. Commencing on the
-----------------------------------------
Closing Date, and continuing thereafter until fully and finally resolved to the
satisfaction of Foothill, in its reasonable business judgement, Borrower shall
diligently and continuously seek to provide Foothill with the following:
(a) Foothill shall have received searches reflecting the
filing of its financing statements and fixture filings (other than in Tennessee)
which shall disclose no filings against any of the Collateral not set forth in
Schedule P-1, other than purchase money security interests in individual pieces
of equipment which in the aggregate do not exceed fifty thousand dollars
($50,000);
(b) Foothill shall have received ALTA 1970 Form Lenders
Policies of Title Insurance in form and content acceptable to Foothill, in its
judgment using the same business standards when evaluating non-monetary
exceptions which it used when evaluating the preliminary title reports delivered
to it by Title Company prior to the Closing Date, on the Real Property
identified on Schedules 4.1(g) and 4.7, excluding the portion of the Real
------------------------
Property consisting of timeshare weeks. The policies or commitments: (i) shall
not disclose prior monetary liens on any of the insured Real Property, (y)
except for the Known Prior Monetary Liens, and (z) Satisfied Indebtedness Liens,
which such liens in the aggregate do not exceed Five Million Dollars
($5,000,000); (ii) shall not disclose any other prior monetary liens for which
there is an indication other than such policy or commitment that such lien
secures outstanding debt; and (iii) shall not disclose unacceptable non-monetary
liens or title defects for properties, except the South Jetty (OR) Property,
which in the aggregate have appraised values in excess of Two Million Dollars
($2,000,000); and
(c) Foothill shall have received no less than seven hundred
and sixty (760) duly executed certificates of title with respect to that portion
of the Collateral representing travel trailers for which Borrower has obtained
certificates of title;
5. CREATION OF SECURITY INTEREST.
-----------------------------
5.1 Grant of Security Interest. Borrower hereby grants to Foothill
--------------------------
a continuing security interest in all currently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Foothill's security interests in
the Collateral shall attach to all Collateral without further act on the part of
Foothill or
25
<PAGE>
Borrower. Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, Borrower has no authority, express or implied, to
dispose of any item or portion of the Collateral, other than: (i) the sale of
retail inventory sold to the general public, campground memberships, undivided
tenancy in common interests, timeshare intervals, and resort property lots to
members of the general public, consistent with past business practices; (ii)
damaged, worn-out or obsolete items of Equipment, or to abandon the same,
provided such Equipment is no longer necessary for the proper conduct of
Borrower's business; (iii) Real Property sold in accordance with the provisions
of Section 5.4 or otherwise approved by Foothill in writing; and (iv) during any
fiscal year, up to One Hundred Thousand Dollars ($100,000) worth of Equipment.
5.2 Negotiable Collateral. In the event that any Collateral,
---------------------
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and assign
such Negotiable Collateral to Foothill and deliver physical possession of such
Negotiable Collateral to Foothill.
5.3 Collection of Accounts, General Intangibles, Negotiable
-------------------------------------------------------
Collateral.
- ----------
(a) Foothill, Borrower, and the Lock Box Bank shall enter into
the Lock Box Agreements, in form and substance satisfactory to Foothill in its
sole discretion, pursuant to which all of Borrower's cash receipts, checks, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds) will be forwarded to Foothill on a daily
basis. At any time, Foothill or Foothill's designee may: (a) notify customers or
Account Debtors of Borrower that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein; and (b) during the continuation of an Event of
Default, collect the Accounts, General Intangibles, and Negotiable Collateral
directly and charge the reasonable collection costs and expenses to Borrower's
loan account. Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any cash receipts, checks, and other items of payment
(including, insurance proceeds, proceeds of cash sales, rental proceeds, and tax
refunds) that it receives and immediately will deliver said cash receipts,
checks, and other items of payment to Foothill in their original form as
received by Borrower.
(b) Foothill shall apply all collections on the Accounts in
accordance with Sections 3.1, 3.2 & 3.3.
-----------------------
(c) Foothill shall apply all net proceeds of sales of
Collateral pursuant to Section 5.4 hereof (other than the last paragraph
-----------
thereof) or as otherwise approved by Foothill in accordance with Sections 3.1,
-------------
3.2 & 3.3.
- ---------
5.4 Sales of Portions of the Real Property; Application of Proceeds
---------------------------------------------------------------
(a) Other than as provided in Section 5.4(b), Borrower may not sell any of the
Real Property or Excluded Real Property without Foothill's express prior written
consent which may be withheld in Foothill's sole and absolute discretion.
26
<PAGE>
(b) With Foothill's prior written consent, which may be
withheld in Foothill's sole and absolute discretion, and provided further that
there shall not have occurred an Event of Default, Foothill shall, from time to
time, provided Borrower has first fulfilled and satisfied the terms and
conditions on its part to be fulfilled pursuant to the terms of this Agreement
and this Section 5.4, provide for and deliver to escrow or to a title company, a
-----------
(partial) reconveyance of a portion of the Real Property, provided all the
following conditions are met:
(i) the sale shall occur on terms and conditions
sufficient that Foothill shall receive in cash all net proceeds of sale, net of
usual and customary closing costs borne by sellers of real property and, to the
extent applicable, payoff of secured amounts owing on Known Prior Monetary
Liens, in an amount equal to or greater than that set forth on Schedule 5.4, as
------------
consideration such (partial) reconveyance, such amount to be applied as provided
in Sections 3.1, 3.2 & 3.3. Property not included on Schedule 5.4 may not be
-----------------------
sold without Foothill's prior written consent, except as otherwise expressly
permitted in Section 5.1;
-----------
(ii) Such (partial) reconveyance shall not create a
violation of law as to the remainder of the project which is subject to the
Mortgage (including all subdivision laws);
(iii) prior to or at the time of the request for such
partial reconveyance, Borrower shall have delivered to Foothill a pro forma
settlement sheet showing the selling price of the portion of the Real Property
sought to be released, the proceeds to be forwarded to Foothill to be applied
against the Obligations secured hereby, and such other information as Foothill
shall require;
(iv) a description sufficient to show the location of
the portion of the Real Property to be released with respect to the balance of
the property not released;
(v) issuance of such title endorsements as Foothill
may reasonably require to establish the continuing priority of the lien of the
Mortgages; and
(vi) execution of an irrevocable instruction to the
escrow or title company directing that they are only authorized to record the
release of the reconveyance upon payment of the release price set forth herein.
Notwithstanding the foregoing provisions of this
Section 5.4, Borrower may sell campground memberships, timeshare intervals,
- -----------
undivided tenancy in common interests, and resort property lots to members of
the general public, consistent with past business practices without the prior
written consent of Foothill, and Foothill shall in accordance therewith, deliver
such reconveyances as are reasonably required for the sale of such interests.
5.5 Delivery of Additional Documentation Required. At any time
---------------------------------------------
upon the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, chattel mortgages, pledges,
27
<PAGE>
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of accounts, letters of authority, and
all other documents that Foothill may reasonably request, in form satisfactory
to Foothill, to perfect and continue perfected Foothill's security interests in
the Collateral and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
5.6 Power of Attorney. Borrower hereby irrevocably makes,
-----------------
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to: (a) if Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 5.5, sign the name of Borrower on any
-----------
of the documents described in Section 5.5; (b) at any time that an Event of
-----------
Default has occurred and is continuing, sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against Account Debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
Account Debtors; (c) send requests for verification of Accounts; (d) endorse
Borrower's name on any checks, notices, acceptances, money orders, drafts, or
other item of payment or security that may come into Foothill's possession; (e)
at any time that an Event of Default has occurred and is continuing , notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by Foothill, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and forward all
other mail to Borrower; (f) at any time that an Event of Default has occurred
and is continuing, make, settle, and adjust all claims under Borrower's policies
of insurance and make all determinations and decisions with respect to such
policies of insurance; and (g) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms which Foothill
determines to be reasonable, and Foothill may cause to be executed and delivered
any documents and releases which Foothill determines to be necessary. The
appointment of Foothill as Borrower's attorney, and each and every one of
Foothill's rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and Foothill's obligation to extend credit hereunder is terminated.
5.7 Right to Inspect. Foothill (through any of its officers,
----------------
employees, or agents) shall have the right, from time to time hereafter to
inspect the Real Property, Borrower's Books and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
6. REPRESENTATIONS AND WARRANTIES.
------------------------------
Borrower represents and warrants to Foothill as follows:
6.1 No Prior Encumbrances. Borrower has good and indefeasible
---------------------
title to the Collateral, free and clear of liens, claims, security interests, or
encumbrances, except for Permitted Liens.
28
<PAGE>
6.2 Eligible Accounts. The Eligible Accounts are, at the date
-----------------
hereof and as of each date on which Borrower includes them in a Borrowing Base
calculation or certification, bona fide existing obligations created by the sale
of campground memberships, undivided interests in certain resort properties,
interval interests, and residential resort lots, or the rendition of services to
Account Debtors in the ordinary course of business, unconditionally owed to
Borrower without defenses, disputes, offsets, counterclaims, or rights of return
or cancellation. All conditions precedent to the creation of the Eligible
Accounts have been satisfied without offset or counterclaim. Borrower has not
received notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any applicable Account Debtor regarding
any Account included in the Eligible Accounts.
6.3 Location of Chief Executive Office; FEIN.
----------------------------------------
(a) The chief executive office of Trails is located at the
address indicated in the preamble to this Agreement and Borrower's FEIN is 73-
2138671.
(b) The chief executive office of NAC is located at the
address indicated in the preamble to this Agreement and Borrower's FEIN is 64-
0511406.
6.4 Borrower's Corporate Ownership. As of the Closing Date and
------------------------------
each day thereafter, Trails is a publicly traded corporation, and its
subsidiaries are wholly owned, directly or indirectly, by Trails, and each
subsidiary of such subsidiaries are wholly owned subsidiaries.
6.5 Due Organization and Qualification. Except as noted in the
----------------------------------
next sentence, Borrower is duly organized and existing and in good standing
under the laws of the state of its incorporation and qualified and licensed to
do business in, and in good standing in, any state where the failure to be so
licensed or qualified could reasonably be expected to have a material adverse
effect on the business, operations, condition (financial or otherwise),
finances, or prospects of Borrower or on the value of the Collateral to
Foothill. With respect to those entities merging as contemplated in Sections
4.1(b) & (c), they will, within a reasonable time, be licensed to do business in
any state where the failure to be so licensed or qualified could reasonably be
expected to have a material adverse effect on the business, operations,
condition (financial or otherwise), finances, or prospects of Borrower or on the
value of the Collateral to Foothill.
6.6 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's corporate powers, have
been duly authorized, and are not in conflict with nor constitute a breach of
any provision contained in Borrower's Articles or Certificate of Incorporation,
or By-laws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which its properties or assets may
be bound.
6.7 Litigation. There are no actions or proceedings pending by or
----------
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims,
29
<PAGE>
complaints, actions, or prosecutions involving Borrower, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 6.7; and (c) matters arising after the date hereof which could
reasonably be expected to materially impair the prospect of repayment of the
Obligations or materially impair the value or priority of Foothill's security
interests in the Collateral.
6.8 No Material Adverse Change in Financial Condition. All
-------------------------------------------------
financial statements relating to Borrower that have been delivered by Borrower
to Foothill have been prepared consistent with GAAP and fairly present
Borrower's consolidated financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
material adverse change in the consolidation financial condition of Borrower
since the date of the latest financial statements submitted to Foothill on or
before the Closing Date.
6.9 Solvency. On a consolidated basis, Borrower is Solvent. No
--------
transfer of property is being made by Borrower and no obligation is being
incurred by Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of Borrower.
6.10 Employee Benefits. Each Plan is in compliance in all material
-----------------
respects with the applicable provisions of ERISA and the IRC. Each Qualified
Plan and Multiemployer Plan has been determined by the Internal Revenue Service
to qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under Section 501 of the IRC, and, to the
best knowledge of Borrower, nothing has occurred that would cause the loss of
such qualification or tax-exempt status. There are no outstanding liabilities
under Title IV of ERISA with respect to any Qualified Plan maintained or
sponsored by Borrower or any ERISA Affiliate, nor with respect to any Qualified
Plan to which Borrower or any ERISA Affiliate contributes or is obligated to
contribute which could reasonably be expected to have a material adverse effect
on the financial condition of Borrower. No Qualified Plan subject to Title IV of
ERISA has any Unfunded Benefit Liability which could reasonably be expected to
have a material adverse effect on the financial condition of Borrower. Neither
Borrower nor any ERISA Affiliate has transferred any Unfunded Benefit Liability
to a person other than Borrower or an ERISA Affiliate or has otherwise engaged
in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA
which could reasonably be expected to have a material adverse effect on the
financial condition of Borrower. Neither Borrower nor any ERISA Affiliate has
incurred nor reasonably expects to incur (x) any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan, or (y) any liability under Title IV of ERISA (other than
premiums due but not delinquent under Section 4007 of ERISA) with respect to a
Qualified Plan, which could, in either event, reasonably be expected to have a
material adverse effect on the financial condition of Borrower. No application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the IRC has been made with respect to any Qualified Plan. No
ERISA Event has occurred or is reasonably expected to occur with respect to any
Plan which could reasonably be expected to have a material adverse effect on the
financial
30
<PAGE>
condition of Borrower. Borrower and each ERISA Affiliate have complied in all
material respects with the notice and continuation coverage requirements of
Section 4980B of the IRC.
6.11 Environmental Condition.
-----------------------
(a) Borrower has not used Hazardous Substances at or affecting
the Real Property or the Excluded Real Property in any manner which violates any
Act governing the use, storage, treatment, transportation, manufacturing,
refinement, handling, production, or disposal of Hazardous Substances, or that
may make the owner of the Premises liable in tort under a common law public or
private nuisance action which could reasonably be expected to have a material
adverse effect on the business operations or the value of any campground or
other individual portion of the Real Property.
(b) No prior or current owner, occupant or operator of the
Real Property or the Excluded Real Property has used Hazardous Substances at or
affecting the each of the foregoing real property in any manner which violates
any Act governing the use, storage, treatment, transportation, manufacturing,
refinement, handling, production, or disposal of Hazardous Substances, or that
may make the owner of the such liable in tort under a common law public or
private nuisance action which could reasonably be expected to have a material
adverse effect on the business operations or the value of any campground or
other individual portion of the Real Property.
6.12 Compliance With The ADA.
-----------------------
(a) Borrower has made all modifications or provided all
accommodations which may be required to be made or provided by Borrower to the
Real Property pursuant to the ADA in order to accommodate the needs and
requirements of any disabled persons which if not made could reasonably be
expected to have a material adverse effect on the business operations or the
value of any campground or other individual portion of the Real Property.
(b) Borrower has received no notice or complaint regarding any
noncompliance with the ADA of any of the Real Property or of Borrower's
employment practices and, to the best of Borrower's knowledge, there has been no
threatened litigation alleging any such noncompliance by Borrower or the Real
Property which could reasonably be expected to have a material adverse effect on
the business operations or the value of any campground or other individual
portion of the Real Property.
6.13 Real Property.
-------------
(a) Each of the individual parcels of Real Property
substantially includes the amenities and improvements contained in the
definition of each, with such variations as do not materially reduce the overall
benefits purported to be provided to users thereof.
31
<PAGE>
(b) The Real Property and the Excluded Real Property
constitutes all of the real estate owned by Borrower and a single non-borrower
subsidiary.
(c) The signatories to each of the Mortgages are the lawful
fee owners of the property encumbered thereby.
(d) The Known Prior Monetary Liens secure indebtedness which
in the aggregate do not exceed Five Hundred Thousand Dollars ($500,000).
(e) There are no outstanding obligations purportedly secured
by the Satisfied Indebtedness Liens.
(f) As of the Closing Date:
(i) Schedule 4.1(g) sets forth the Real Property to be
mortgaged at the Closing Date;
(ii) Schedule 4.7 sets forth the Real Property to be
mortgaged within Ninety days of the Closing Date;
(iii) Schedule 7.17(a) sets forth the Real Property to
be mortgaged on a Best Efforts Basis;
(iv) Schedule ERP sets forth the Real Property which is
not at this time contemplated to be mortgaged;
(v) Schedule 5.4 sets forth the Real Property
contemplated to be sold, and the minimum net sale
prices for each.
6.14 Intentionally Deleted.
---------------------
6.15 Inter-Company Indebtedness.
--------------------------
(a) At all times during the term of this Agreement NAC will
owe Trails, without deduction or set-off of any kind, at least Twenty-Seven
Million Five Hundred Seventy-Seven Thousand Dollars ($27,577,000), which is
guaranteed by secured guaranties by all of its subsidiaries that are Borrowers;
provided that this Section 6.15(a) shall not prohibit loans or advances (or
repayments thereof) permitted by Section 8.8.
(b) All evidences of secured intercompany indebtednesses, and
the security therefore, will on the Closing Date be transferred to Foothill.
6.16 Reliance by Foothill; Cumulative. Each warranty and
--------------------------------
representation contained in this Agreement automatically shall be deemed
repeated with each advance and shall be conclusively presumed to have been
relied on by Foothill regardless of any investigation made or information
possessed by Foothill. The warranties and representations set forth herein shall
be
32
<PAGE>
cumulative and in addition to any and all other warranties and representations
that Borrower now or hereafter shall give, or cause to be given, to Foothill.
7. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the Obligations
(other than contingent unliquidated Obligations pursuant to Section 11.3), and
------------
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
7.1 Accounting System. Borrower shall maintain a standard and
-----------------
modern system of accounting that facilitates preparation of financial statements
in accordance with GAAP with ledger and account cards or computer tapes, discs,
printouts, and records pertaining to the Collateral which contain information as
from time to time may be reasonably requested by Foothill.
7.2 Collateral Reports. Borrower shall deliver to Foothill: (i) on
------------------
a daily basis no later than two (2) Business Days after receipt, a listing of
the net cash proceeds from sales of portions of the Real Property, collections
of principal, interest and other fees on the Accounts, and other business
revenues, listed by category, which constitute the payments received by Foothill
through the Lock Box, and such other information as Foothill shall request; (ii)
no later than the tenth (10th) day of each month during the term of this
Agreement, a detailed aging, by total, of the Accounts, a reconciliation
statement, and a summary aging, by obligee, of all accounts payable and any book
overdraft, status of campground membership sales, operating reports for each
campground, and a listing of all pending sales, and the status of each, of
portions of the Collateral to be sold as referenced in Schedule 5.4; and (iii)
from time to time at such times as Foothill may reasonably require, collection
reports, sales journals, invoices, original delivery receipts, customer's
purchase orders, and other documentation therefor. Absent such a request by
Foothill, copies of all such documentation shall be held by Borrower as
custodian for Foothill.
7.3 Schedules of Accounts. With such regularity as Foothill shall
---------------------
reasonably require, Borrower shall provide Foothill with schedules describing
all Accounts. Foothill's failure to request such schedules or Borrower's
failure to execute and deliver such schedules shall not affect or limit
Foothill's security interests or other rights in and to the Accounts.
7.4 Financial Statements, Reports, Certificates. Borrower agrees
-------------------------------------------
to deliver to Foothill: (a) as soon as available, but in any event within thirty
(30) days after the end of each month (unless such month constitutes a fiscal
quarter end month, in which such event within forty-five days, or unless such
month is a fiscal year end month, in which such event, within ninety days)
during each of Borrower's fiscal years, a consolidated balance sheet, income
statement, and cash flow statement covering Borrower's operations during such
period; and (b) as soon as available, but in any event within ninety (90) days
after the end of each of Borrower's fiscal years, consolidated financial
statements of Borrower for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Foothill and certified,
without
33
<PAGE>
any qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Foothill
stating that such accountants do not have knowledge of the existence of any
event or condition constituting an Event of Default, or that would, with the
passage of time or the giving of notice, constitute an Event of Default. Such
audited financial statements shall include a balance sheet, profit and loss
statement, and cash flow statement, and, if prepared, such accountants' letter
to management.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and
Form 8-K Current Reports, and any other filings made by Borrower with the
Securities and Exchange Commission, if any, within three (3) days of the date
within which the same are filed, or any other report, letter, or other written
communication that is provided by Borrower to its shareholders, and any other
report reasonably requested by Foothill relating to the Collateral and financial
condition of Borrower.
Each month, together with the financial statements provided
pursuant to Section 7.4(a), Borrower shall deliver to Foothill a certificate
--------------
signed by its chief financial officer to the effect that: (i) all financial
statements have been prepared consistent with GAAP and fairly present the
financial condition of Borrower and all reports, statements, or computer
prepared information of any kind or nature delivered or caused to be delivered
to Foothill hereunder fairly present the financial condition of Borrower; (ii)
Borrower is in timely compliance with all of its covenants and agreements
hereunder; (iii) the representations and warranties of Borrower contained in
this Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date of such certificate, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date); and (iv) on the date of delivery of such certificate
to Foothill there does not exist any condition or event that constitutes an
Event of Default (or, in each case, to the extent of any non-compliance,
describing such non-compliance as to which he or she may have knowledge and what
action Borrower has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
Borrower that Foothill may request. Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to
Foothill, at Borrower's expense, copies of Borrower's financial statements,
papers related thereto, and other accounting records of any nature in their
possession, and to disclose to Foothill any information they may have regarding
Borrower's business affairs and financial conditions.
7.5 Tax Returns. Borrower agrees to deliver to Foothill copies of
-----------
each of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal Revenue
Service.
7.6 Title to Equipment. Upon Foothill's request, Borrower
------------------
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Equipment.
34
<PAGE>
7.7 Maintenance of Equipment. Borrower shall keep and maintain the
------------------------
Equipment in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the operating
efficiency thereof shall at all times be maintained and preserved consistent
with past business practices.
7.8 Taxes. All assessments and taxes, whether real, personal, or
-----
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property have been paid, and shall hereafter be paid in full,
before delinquency or before the expiration of any extension period. Borrower
shall make due and timely payment or deposit of all federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Foothill, on demand, appropriate certificates attesting to the
payment thereof or deposit with respect thereto. Borrower will make timely
payment or deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits. Notwithstanding the foregoing Borrower shall
have the right to contest in good faith any such payment and may during such
contest period not pay the contested amounts unless the failure to so pay during
the contest period results in an uncurable liability or such contest period
extends beyond one year prior to a curtailment of redemption rights or uncurable
liability.
7.9 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral
(exclusive of the Real Property) insured against loss or damage by fire, theft,
explosion, sprinklers, and all other hazards and risks, and in such amounts, as
are ordinarily insured against by other owners in similar businesses. Borrower
also shall maintain business interruption, public liability, and property damage
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) Borrower will obtain and maintain insurance at the levels
and with the coverage as disclosed in the certificates of insurance delivered to
Foothill contemporaneously with the execution of this Agreement.
(c) All insurance required herein shall be written by
companies of recognized financial standing, reasonably satisfactory to Foothill.
Such insurance shall be in form reasonably satisfactory to Foothill, shall with
respect to hazard insurance and such other insurance as Foothill shall specify,
name as the loss payee thereunder Borrower and Foothill, as their interests may
appear, and shall contain a California Form 438BFU (NS) mortgagee endorsement,
or its local equivalent. Every policy of insurance referred to in this Section
shall contain an agreement by the insurer that it will not cancel such policy
except after thirty (30) days' prior written notice.
35
<PAGE>
(d) Original policies or certificates thereof satisfactory to
Foothill evidencing such insurance shall be delivered to Foothill at least
thirty (30) days prior to the expiration of the existing or preceding policies.
Borrower shall give Foothill prompt notice of any casualty loss covered by such
insurance and Foothill shall have the exclusive right to adjust all casualty
losses which individually exceed Twenty-Five Thousand Dollars ($25,000) and
which in the aggregate during any fiscal year exceed Seventy-Five Thousand
Dollars ($75,000) and which are payable under any such insurance policies
without any liability to Borrower whatsoever in respect of such adjustments. Any
monies received as payment for any loss under any insurance policy including,
but not limited to, the insurance policies mentioned above, shall be paid over
to Foothill to be applied at the option of Foothill either to the prepayment of
the Obligations without premium, in such order or manner as Foothill may elect,
or shall be disbursed to Borrower under stage payment terms satisfactory to
Foothill for application to the cost of repairs, replacements or restorations.
All restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property to destroyed prior to
such damage or destruction. Upon the occurrence of an Event of Default, all
prepaid premiums shall be applied by Foothill to the payment of the Obligations
in such order or form as Foothill shall determine.
(e) Borrower shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be maintained
under this Section 7.9, unless Foothill is included thereon as named insured
-----------
with the loss payable to Foothill under a standard California 438BFU (NS)
Mortgagee endorsement, or its local equivalent. Borrower shall immediately
notify Foothill whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies shall immediately thereafter be provided to
Foothill.
7.10 Financial Covenants. Borrower shall maintain:
-------------------
(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>
September 30, 1996 $6,250,000
December 31, 1996 $6,500,000
March 31, 1997 $6,750,000
June 30, 1997, and
each quarter end
thereafter, $7,000,000; and
</TABLE>
(b) Tangible Net Worth (Deficit). Tangible Net Worth
(Deficit) of no less than the amounts set forth below by such dates, measured on
a fiscal quarter end basis, of no less than:
<TABLE>
<S> <C>
September 30, 1996 -
June 30, 1997 ($27,500,000)
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
September 30, 1997 -
June 30, 1998 ($26,000,000)
September 30, 1998,
and thereafter ($25,000,000)
</TABLE>
7.11 No Setoffs or Counterclaims. All payments hereunder and under
---------------------------
the other Loan Documents made by or on behalf of Borrower shall be made without
setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state, or local taxes.
7.12 Compliance with Laws. Borrower shall comply with the
--------------------
requirements of all applicable laws, rules, regulations, and orders of any
governmental authority, including the Fair Labor Standards Act and the ADA, so
as to permit Borrower to uninterruptedly continue to run its business operations
at each site of the Real Property and Excluded Real Property.
7.13 Employee Benefits
-----------------
(a) Borrower shall deliver to Foothill a written statement by
the chief financial officer of Borrower specifying the nature of any of the
following events and the actions which Borrower proposes to take with respect
thereto promptly, and in any event within ten (10) days of becoming aware of any
of them, and when known, any action taken or threatened by the Internal Revenue
Service, PBGC, Department of Labor, or other party with respect thereto: (i) an
ERISA Event with respect to any Plan; (ii) the incurrence of an obligation to
pay additional premium to the PBGC under Section 4006(a)(3)(E) of ERISA with
respect to any Plan; and (iii) any lien on the assets of Borrower arising in
connection with any Plan.
(b) Borrower shall also promptly furnish to Foothill copies
prepared or received by Borrower or an ERISA Affiliate of: (i) at the request of
Foothill, each annual report (Internal Revenue Service Form 5500 series) and all
accompanying schedules, actuarial reports, financial information concerning the
financial status of each Plan, and schedules showing the amounts contributed to
each Plan by or on behalf of Borrower or its ERISA Affiliates for the most
recent three (3) plan years; (ii) all notices of intent to terminate or to have
a trustee appointed to administer any Plan; (iii) all written demands by the
PBGC under Subtitle D of Title IV of ERISA; (iv) all notices required to be sent
to employees or to the PBGC under Section 302 of ERISA or Section 412 of the
IRC; (v) all written notices received with respect to a Multiemployer Plan
concerning (x) the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA, (y) a termination described in Section 4041A of ERISA, or
(z) a reorganization or insolvency described in Subtitle E of Title IV of ERISA;
(vi) the adoption of any new Plan that is subject to Title IV of ERISA or
Section 412 of the IRC by Borrower or any ERISA Affiliate; (vii) the adoption of
any amendment to any Plan that is subject to Title IV of ERISA or Section 412 of
the IRC, if such amendment results in a material increase in benefits or
Unfunded Benefit Liability; or (viii) the commencement of contributions by
Borrower or any ERISA Affiliate to any Plan that is subject to Title IV of ERISA
or Section 412 of the IRC.
37
<PAGE>
7.14 Environmental Condition.
-----------------------
(a) Borrower shall keep or cause the Real Property and the
Excluded Real Property to be kept free of Hazardous Substances and not cause or
permit any of the foregoing real property to be used to generate, manufacture,
refine, transport, treat, store, handle, dispose, produce, or process Hazardous
Substances except in compliance with all applicable Acts which, if not complied
with, could reasonably be expected to have a material adverse effect on
Borrower's uninterruptedly continued business operations at each site of the
Real Property and Excluded Real Property.
(b) Borrower shall ensure compliance by all owners, operators,
and occupants of the Real Property and the Excluded Real Property with all
applicable Acts and will ensure that all such owners, operators and occupants
obtain and comply with any and all required approvals, registrations, or permits
which, if not complied with, could reasonably be expected to have a material
adverse effect on Borrower's uninterruptedly continued business operations at
each site of the Real Property and Excluded Real Property.
(c) Upon the reasonable request of Foothill, not to occur more
than once during the term of this Agreement, unless Foothill, acting in good
faith, reasonably believes there to be an environmental issue, Borrower shall
conduct and complete all investigations, studies, samplings, and testings
relative to Hazardous Substances at or affecting the Real Property and the
Excluded Real Property. Upon the written request of Foothill, not to occur more
than once during the term of this Agreement, unless Foothill, acting in good
faith, reasonably believes there to be an environmental issue, Borrower shall
provide Foothill at Borrower's sole cost and expense and without any liability
to Foothill, with an environmental site assessment or an environmental audit
report, or an update of such assessment or report, by an environmental
engineering firm acceptable to Foothill, all in scope, form, and content
satisfactory to Foothill, to assess with a reasonable degree of certainty the
presence or absence of Hazardous Substances and the potential cost in connection
with the Remediation of any Hazardous Substances at or related to the Real
Property and the Excluded Real Property. Upon demand of Foothill, and at
Borrower's sole cost and expense, Borrower shall promptly take all actions to
Remediate the Real Property and the Excluded Real Property which are required by
federal, state, or local governmental agency or political subdivision or which
are reasonably necessary to mitigate a spill or a violation of any Act or to
allow the continued use of the Real Property and the Excluded Real Property as
historically used. All such work shall be performed by one or more contractors
selected by Borrower and approved in advance and in writing by Foothill.
Borrower shall proceed continuously and diligently with such investigatory and
remedial actions, provided that in all cases, such actions shall be in
accordance with all applicable requirements of all Acts. Any such actions shall
be performed in a good, safe, and workmanlike manner and shall minimize any
impact on the business or occupation at or near the Real Property and the
Excluded Real Property. Borrower shall pay all costs in connection with such
investigatory and remedial activities, including but not limited to, all power
and utility costs, any and all taxes or fees that may be applicable to such
activities. Borrower shall promptly provide to Foothill copies of testing
38
<PAGE>
results and reports that are generated in compliance with the above activities.
Promptly upon completion of such investigation and Remediation, Borrower shall
permanently seal or cap all monitoring wells and test holes to industrial
standards and compliance with all Acts, remove all associated equipment, and
restore the Real Property and the Excluded Real Property to the condition
existing prior to the commencement of Remediation, which shall include, without
limitation, the repair of any surface damage, including paving caused by such
investigation or Remediation hereunder.
(d) The obligations of Borrower and the rights of Foothill
with respect to Hazardous Substances are in addition to and not in substitution
of the obligations of Borrower and the rights of Foothill under all applicable,
federal, state, and local laws, regulations, and ordinances relating to health
and safety, and protection of the environment. The obligations of Borrower and
the rights of Foothill, notwithstanding anything contained herein or in any
other document or agreement which may be construed to the contrary, (i) shall
not be subject to any antideficiency laws or protections, if any, (ii) shall
survive (y) a non-judicial sale, judicial sale or deed or other transaction in
lieu of such sale hereunder, and (z) the repayment of the Obligations. In the
event Borrower does not timely perform any of its obligations with respect to
Hazardous Substances, Foothill may perform such obligations, but is not
obligated to, at the expense of Borrower and such expense shall be added to the
Obligations and shall not cure Borrower's breach under this Agreement.
7.15 Compliance With The ADA.
-----------------------
(a) Borrower shall promptly provide Foothill with copies of
all notices or claims which may be received by Borrower and involving claims
made by any individual, entity or governmental agency as to any alleged
noncompliance of the Real Property with the requirements of the ADA.
(b) Borrower shall observe and comply in all material respects
with all obligations and requirements of the ADA as it applies to the Real
Property.
7.16 Post Closing Date Issues. Within ninety (90) days (unless
------------------------
otherwise provided in Schedule 4.7) of the Closing Date, Borrower shall have
completed all of the items set forth in Section 4.7 to the satisfaction of
-----------
Foothill in its sole and absolute discretion.
7.17 The Real Property.
-----------------
(a) Borrower shall utilize its best efforts to provide the
Mortgages identified on Schedule 7.17(a) to be delivered on a post Closing Date
----------------
basis as expeditiously as possible.
(b) Borrower shall use its best efforts to remove of record
all Satisfied Indebtedness Liens and to provide Foothill with satisfactory
evidence of same.
39
<PAGE>
(c) At any time Foothill deems itself insecure, or following
an Event of Default, Borrower shall, to the fullest extent permitted at law, and
without breaching any provision of a prior Permitted Lien, duly execute and
deliver to Foothill Mortgages encumbering the Excluded Property.
7.18 Certificates of Title. No later than 5:00 p.m., July 19,
---------------------
1996, Borrower shall cause the approximately 787 vehicle certificates of
title, but in no event fewer than 760, to be delivered to Buchalter Nemer Fields
& Younger at its Los Angeles offices, duly executed by Trustee and the
appropriate Borrower.
8. NEGATIVE COVENANTS.
------------------
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the Obligations
(other than contingent unliquidated Obligations pursuant to Section 11.3),
------------
Borrower will not do any of the following without Foothill's prior written
consent:
8.1 Indebtedness. Create, incur, assume, permit, guarantee, or
------------
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, the Account
Note, and the Term Note;
(b) Indebtedness set forth in the latest financial statements
of Borrower submitted to Foothill on or prior to the Closing Date (other than
the Indenture Secured Notes);
(c) Indebtedness evidenced by the unsecured senior
subordinated notes replacing the Indenture Secured Notes, and the PIK notes
issued in connection therewith from time to time;
(d) Indebtedness secured by Permitted Liens;
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 8.1 (and continuance or
-----------
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness;
40
<PAGE>
(f) other unsecured indebtedness which in the aggregate does
not exceed the sum of Five Hundred Thousand Dollars ($500,000);
(g) unsecured indebtedness between Borrowers, and any
modifications thereof; and
(h) the secured inter-company indebtedness assigned to
Foothill as Collateral which is referenced in Section 6.15(a).
---------------
8.2 Liens. Create, incur, assume, or permit to exist, directly or
-----
indirectly, any lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 8.1(e) and so long as the replacement liens secure only those assets or
- --------------
property that secured the original Indebtedness).
8.3 Restrictions on Fundamental Changes. Except as contemplated in
-----------------------------------
Section 4.1(c), and as otherwise expressly permitted in Section 5.4, enter into
- ------------------- -----------
any acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property, or assets,
whether now owned or hereafter acquired, or acquire by purchase or otherwise all
or substantially all of the properties, assets, stock, or other evidence of
beneficial ownership of any Person, except that (a) any Borrower may (i) merge
into any other Borrower upon thirty (30) days following delivery to Foothill of
written notice of the intended merger, and (ii) reincorporate in the State of
Delaware upon thirty (30) days following delivery to Foothill of written notice
of the intended reincorporation, and (b) Trails may issue shares of its capital
stock from time to time.
8.4 Extraordinary Transactions and Disposal of Assets. Except as
-------------------------------------------------
contemplated in Section 4.1(c) and expressly permitted in Sections 5.4 & 8.3,
enter into any transaction not in the ordinary and usual course of Borrower's
business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of Borrower's
properties or assets.
8.5 Change Name. Change Borrower's name (except that Trails may
-----------
change its name to Thousand Trails after the merger contemplated in Section
-------
4.1(c)), FEIN, corporate structure or identity, or add any new fictitious name.
- ------
8.6 Guarantee. Guarantee or otherwise become in any way liable
---------
with respect to the obligations of any Person not a Borrower except by
endorsement or instruments or items of payment for deposit to the account of
Borrower or which are transmitted or turned over to Foothill.
41
<PAGE>
8.7 Restructure. Except as contemplated in Section 4.1(c), and
----------- --------------
expressly permitted by Section 8.3 make any change in Borrower's financial
structure, the principal nature of Borrower's business operations, or the date
of its fiscal year.
8.8 Prepayments. Except in connection with a refinancing permitted
-----------
by Section 8.1(e), prepay any Indebtedness owing to any Person not a Borrower.
--------------
The foregoing notwithstanding, Borrowers may on an unsecured basis loan and
repay monies between themselves from time to time.
8.9 Change of Control. Cause, permit, or suffer, directly or
-----------------
indirectly, any Change of Control.
8.10 Capital Expenditures. Make any capital expenditure, or any
--------------------
commitment therefor, in excess of the amounts for each fiscal year set forth
below:
<TABLE>
<S> <C>
FY 97 $2,300,000
FY 98 $2,300,000
FY 99 $2,800,000
</TABLE>
8.11 Distributions. Except: (i) between Borrowers, or (ii) as
-------------
contemplated by the By-Law Amendment attached as Exhibit "D" to the Private
Placement Memorandum dated June 28, 1996, as amended, make any distribution or
declare or pay any dividends (in cash or in stock) on, or purchase, acquire,
redeem, or retire any of Borrower's capital stock, of any class, whether now or
hereafter outstanding.
8.12 Accounting Methods. Modify or change its method of accounting
------------------
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Foothill pursuant to or in accordance with this Agreement, and agrees that
Foothill may contact directly any such accounting firm or service bureau in
order to obtain such information.
8.13 Investments. Directly or indirectly make or acquire any
-----------
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution in excess of
One Hundred Thousand Dollars ($100,000) in any fiscal year, to, any Person not a
Borrower, except (i) payments as contemplated by the By-Law Amendment referred
to in Section 8.11, and (ii) investments in Cash Equivalents.
------------
8.14 Transactions with Affiliates. Directly or indirectly enter
----------------------------
into or permit to exist any material transaction with any Affiliate of Borrower
except for: (i) transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms, that are fully
42
<PAGE>
disclosed to Foothill, and that are no less favorable to Borrower than would be
obtained in arm's length transaction with a non-Affiliate, or (ii) transactions
among Borrowers.
8.15 Suspension. Suspend or go out of a substantial portion of its
----------
non-resort business, except as contemplated by Section 5.4.
-----------
8.16 Compensation. Except with respect to the enterprise bonus paid
------------
and still payable to William Shaw, increase the annual fee or per-meeting fees
paid to directors during any year by more than fifteen percent (15%) over the
prior year; pay or accrue total cash compensation, during any year, to officers
and senior management employees in an aggregate amount in excess of one hundred
fifteen percent (115%) of that paid or accrued in the prior year, exclusive of
severance payments.
8.17 Use of Proceeds. Use the proceeds of the advances made
---------------
hereunder for any purpose other than: (a) on the Closing Date, to pay such sums
as are necessary to defease the Indenture Secured Notes and all accrued fees and
expenses owing to the Trustee; (b) to pay transactional fees, costs and expenses
incurred in connection with this Agreement; and (c) thereafter, consistent with
the terms and conditions hereof, for its lawful and permitted corporate
purposes.
9. EVENTS OF DEFAULT.
-----------------
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
9.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
9.2 If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Foothill: the foregoing notwithstanding, should Borrower
breach its covenants set forth in Sections 4.7 and 7.16, Foothill shall not
---------------------
declare an Event of Default, but shall be entitled to collect the Covenant Fee
during such time as the violation of the covenant exists and continues;
9.3 If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, or agreement contained in the Mortgages;
9.4 If there is a material impairment of the prospect of repayment
of any portion of the Obligations owing to Foothill or a material impairment of
the value or priority of Foothill's security interests in the Collateral;
43
<PAGE>
9.5 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
9.6 If an Insolvency Proceeding is commenced by Borrower;
9.7 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within forty-five (45) calendar days of
the date of the filing thereof; provided, however, that, during the pendency of
-------- -------
such period, Foothill shall be relieved of its obligation to make additional
advances hereunder; (d) an interim trustee is appointed to take possession of
all or a substantial portion of the properties or assets of, or to operate all
or any substantial portion of the business of, Borrower; or (e) an order for
relief shall have been issued or entered therein;
9.8 If Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
9.9 If a notice of lien, levy, or assessment in an amount in excess
of One Hundred Thousand Dollars ($100,000)(any amount equal to or less than One
Hundred Thousand Dollars ($100,000) will decrease the Revolving Maximum Amount
by such amount for so long as such lien is outstanding) is filed of record with
respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a lien,
whether choate or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
9.10 If a judgment or other claim in an amount in excess of One
Hundred Thousand Dollars ($100,000)(any amount equal to or less than One Hundred
Thousand Dollars ($100,000) will decrease the Revolving Maximum Amount by such
amount for so long as such lien is outstanding and not sufficiently bonded)
becomes a lien or encumbrance upon any material portion of Borrower's properties
or assets;
9.11 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons resulting in a right by such
third Persons, irrespective of whether exercised, to accelerate the maturity of
Borrower's obligations thereunder;
9.12 If Borrower makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
44
<PAGE>
9.13 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn;
9.14 If (a) with respect to any Plan, there shall occur any of the
following which could reasonably be expected to have a material adverse effect
on the financial condition of Borrower: (i) the violation of any of the
provisions of ERISA; (ii) the loss by a Plan intended to be a Qualified Plan of
its qualification under Section 401(a) of the IRC; (iii) the incurrence of
liability under Title IV of ERISA; (iv) a failure to make full payment when due
of all amounts which, under the provisions of any Plan or applicable law,
Borrower or any ERISA Affiliate is required to make; (v) the filing of a notice
of intent to terminate a Plan under Sections 4041 or 4041A of ERISA; (vi) a
complete or partial withdrawal of Borrower or an ERISA Affiliate from any Plan;
(vii) the receipt of a notice by the plan administrator of a Qualified Plan that
the PBGC has instituted proceedings to terminate such Plan or appoint a trustee
to administer such Plan; (viii) a commencement or increase of contributions to,
or the adoption of or the amendment of, a Plan; and (ix) the assessment against
Borrower or any ERISA Affiliate of a tax under Section 4980B of the IRC; or (b)
the Unfunded Benefit Liability of all of the Plans of Borrower and its ERISA
Affiliates shall, in the aggregate, exceeds One Hundred Thousand Dollar
($100,000).
9.15 If: (a) there shall occur during any consecutive twelve month
period, one or more uninsured losses, thefts, damage or destruction of the Real
Property, or any part thereof, which individually exceed One Hundred Thousand
Dollars ($100,000) or which have an aggregate value in excess of One Million
Dollars ($1,000,000) inclusive of Borrower's deductible; or (b) an event of
default shall occur under any prior Permitted Lien, if any, on the Real
Property.
10. FOOTHILL'S RIGHTS AND REMEDIES.
------------------------------
10.1 Rights and Remedies. Upon the occurrence of an Event of
-------------------
Default, and, except with respect to the exercised remedy of the appointment and
service of a receiver, during the continuance of an Event of Default, Foothill
may, at its election, without notice of its election and without demand, do any
one or more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill to make advances,
but without affecting Foothill's rights and security interests in the Collateral
and without affecting the Obligations;
45
<PAGE>
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Foothill considers advisable, and in
such cases, Foothill will credit Borrower's loan account with only the net
amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Without notice to or demand upon Borrower, make such
payments and do such acts as Foothill considers necessary or reasonable to
protect its security interests in the Collateral. Borrower agrees to assemble
the Collateral if Foothill so requires, and to make the Collateral available to
Foothill as Foothill may designate. Borrower authorizes Foothill to enter the
premises where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien that in Foothill's determination appears to
conflict with its security interests and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned premises, Borrower
hereby grants Foothill a license to enter into possession of such premises and
to occupy the same, without charge, for up to one hundred twenty (120) days in
order to exercise any of Foothill's rights or remedies provided herein, at law,
in equity, or otherwise;
(f) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Foothill (including any amounts received in the Lock Boxes), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Foothill;
(g) Hold, as cash collateral, and apply in accordance
herewith, any and all balances and deposits of Borrower held by Foothill, and
any amounts received in the Lock Boxes, against the Obligations unless such
application is in violation of law or could adversely effect the full and
complete exercise of all of Foothill's rights and remedies, in which such events
Foothill shall hold, as cash collateral such sums to secure the full and final
repayment of all of the Obligations;
(h) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein or in the Mortgages) the Collateral. Foothill is hereby granted a license
or other right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's benefit;
(i) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Foothill
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
46
<PAGE>
(j) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder of a
security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 13, at least ten (10) days
----------
before the date fixed for the sale, or at least ten (10) days before the date on
or after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Collateral that
is perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than Borrower
claiming an interest in the Collateral shall be sent to such addresses as they
have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at least
five (5) days before the date of the sale in a newspaper of general circulation
in the county in which the sale is to be held;
(k) Foothill may credit bid and purchase at any public sale;
and
(l) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Foothill to Borrower.
10.2 Remedies Cumulative. Foothill's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill
shall constitute a waiver, election, or acquiescence by it.
10.3 Foreclosure Not A Discharge. Foreclosure shall not operate
---------------------------
as a discharge to Borrower's Obligations to Foothill as to Hazardous Substances
and the indemnity provisions in Section 11; and in the event Borrower tenders a
deed in lieu of foreclosure for all or part of the Real Property, Borrower shall
deliver such property to Foothill (or its designee) free of any and all
Hazardous Substances which require Remediation. The indemnity provisions in
Section 11 shall not be discharged or affected in any way by foreclosure or by
- ----------
Foothill's acceptance of a deed in lieu thereof, and the same shall continue for
a period equal to the longest living child born in Los Angeles County on January
1, 1994, plus twenty-one (21) years.
47
<PAGE>
11. WAIVERS; INDEMNIFICATION.
------------------------
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice
--------------------
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Borrower may in any way be
liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
-----------------------------------
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction of
the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to defend, indemnify, save,
---------------
and hold all Indemnified Persons harmless against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other Person arising
out of or relating to the transactions contemplated by this Agreement or any
other Loan Document including, but not limited to, those claimed by any broker
or finder, and (b) all Losses, and (c) all Losses (including attorneys' fees)
suffered or incurred by any Indemnified Person, regardless of negligence,
whether as a holder of security interests in Real Property, as mortgagee in
possession, or as successor in interest to Borrower as owner of the Real
Property by virtue of foreclosure or acceptance of a deed or other transaction
in lieu of foreclosure, or after partial or total reconveyance of the mortgage,
arising from, in respect of, as a consequence of (whether foreseeable or
unforeseeable) or in connection with the use, storage, disposal, generation,
transportation, spill, or treatment of any Hazardous Substances at or related to
the Real Property and the Excluded Real Property whether or not originating or
emanating from the Real Property and the Excluded Real Property. Such
indemnification shall not extend to the gross negligence or willful misconduct
of any Indemnified Person. This provision shall survive the termination of this
Agreement.
12. TAXES AND EXPENSES REGARDING THE COLLATERAL.
-------------------------------------------
If Borrower fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third Persons, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement or the Mortgages, then, to the extent
that Foothill determines that such failure by Borrower could have a material
adverse effect on Foothill's interests in the Collateral, in its discretion and
without prior notice to Borrower, Foothill may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves in
Borrower's loan account as Foothill deems necessary to protect Foothill from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type described in Section 7.9, and take any action with respect to such
-----------
policies as Foothill deems prudent. Any such amounts paid by Foothill shall
constitute Foothill Expenses. Any such payments made by Foothill shall not
constitute an agreement by Foothill to make
48
<PAGE>
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, security interest, encumbrance, or lien and the
receipt of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.
13. NOTICES.
-------
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, or by prepaid telex, TWX, telefacsimile, or telegram
(with messenger delivery specified) to Borrower (only one notice need be given
with respect to all Borrowers) or to Foothill, as the case may be, at its
address set forth below:
If to Borrower: USTrails Inc.
2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
Attn.: Chief Financial Officer
Telefacsimile No. (214) 488-5008
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division
Manager
Telefacsimile No. (310) 479-2690
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 13, other
----------
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by Foothill in connection with Sections 9504 or 9505 of
the Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
------------------------------------------
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN
49
<PAGE>
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER
AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
-------
14. BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
- --
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
15. DESTRUCTION OF BORROWER'S DOCUMENTS.
------------------------------------
All documents (exclusive of original Accounts and original
evidences of Collateral), schedules, invoices, agings, or other papers delivered
to Foothill may be destroyed or otherwise disposed of by Foothill four (4)
months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return. Foothill shall
keep all of the confidential information of Borrower confidential in accordance
with the standards applied to its own confidential information, except that it
may share such information to other financial institutions who may be acquiring
a participation interest in the financing contemplated hereby and who agree to
keep such information confidential.
16. GENERAL PROVISIONS.
------------------
16.1 Effectiveness. This Agreement shall be binding and deemed
-------------
effective when executed by Borrower and Foothill.
16.2 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
- -------- -------
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by
50
<PAGE>
Foothill shall release Borrower from its Obligations. Foothill may assign this
Agreement and its rights and duties hereunder and no consent or approval by
Borrower is required in connection with any such assignment. Foothill reserves
the right to sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Foothill's rights and benefits hereunder. In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third Person, Foothill shall thereafter be
released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third Person.
16.3 Section Headings. Headings and numbers have been set forth
----------------
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
16.4 Interpretation. Neither this Agreement nor any uncertainty or
--------------
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
16.5 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
16.6 Amendments in Writing. This Agreement can only be amended by
---------------------
a writing signed by both Foothill and Borrower.
16.7 Counterparts; Telefacsimile Execution. This Agreement may be
-------------------------------------
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
16.8 Revival and Reinstatement of Obligations. If the incurrence or
----------------------------------------
payment of the Obligations by Borrower or the transfer by such parties to
Foothill of any property of any such parties should for any reason subsequently
be declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
Foothill is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable
51
<PAGE>
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Foothill is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys fees of Foothill related thereto, the
liability of Borrower automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been made.
16.9 Lending Relationship. Nothing contained in the this Agreement
--------------------
or any of the other Loan Documents shall be deemed or construed by the parties
hereto or by any third party to create the relationship of principal and agent,
partnership, joint venture, or any association between Borrower and Foothill, it
being expressly understood and agreed that nothing contained in this Agreement
or the other Loan Documents shall be deemed to create any relationship between
Borrower and Foothill other than the relationship of borrower and lender.
16.10 Joint and Several Liability of Borrower. The liability of each
---------------------------------------
Borrower to Foothill is joint and several, and the relationships between them,
for purposes of the provisions of this Agreement only, shall be considered a
combination for a business purpose within the meaning of California Corporate
Code Sections 15,000 et seq.
16.11 Third Party Beneficiaries. This Agreements made and entered
-------------------------
into for the sole protection and benefit of the signatories and their permitted
successors and assigns.
16.12 Further Assurances with Respect to the Real Property. With
----------------------------------------------------
respect to items of Real Property for which Mortgages have been executed prior
to the Closing Date and for which title insurance is not being provided on the
Closing Date, Foothill and Borrower shall amend such Mortgages to reflect the
correct legal descriptions of the Real Property covered thereby after receipt of
the title policies therefor.
16.13 Integration. This Agreement, together with the other Loan
-----------
Documents, reflect the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Los Angeles, California.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: s/ Patricia McLoughlin
---------------------------------
Title: Senior Vice President
------------------------------
52
<PAGE>
"Borrower"
USTRAILS INC.
a Nevada corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
NATIONAL AMERICAN CORPORATION
a Nevada corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
53
<PAGE>
THOUSAND TRAILS, INC.
a Washington corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
THOUSAND TRAILS (CANADA) INC.,
a British Columbian corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
TT OFFSHORE, LTD.,
a Virginia corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
BEECH MOUNTAIN LAKES CORPORATION,
a Pennsylvania corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
CAROLINA LANDING CORPORATION,
a South Carolina corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
CARRIAGE MANOR CORPORATION,
a North Carolina corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
54
<PAGE>
CB RESORT CORPORATION,
a Massachusetts corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
CHEROKEE LANDING CORPORATION,
a Tennessee corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
CHIEF CREEK CORPORATION,
a Tennessee corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
DIXIE RESORT CORPORATION,
a Mississippi corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
FOXWOOD CORPORATION,
a South Carolina corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
GL LAND DEVELOPMENT CORPORATION,
an Oklahoma corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
55
<PAGE>
INDIAN LAKES WILDERNESS PRESERVE
CORPORATION,
an Indiana corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
JEFFERSON RESORT CORPORATION,
a Missouri corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
LAKE ROYALE CORPORATION,
a North Carolina corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
LAKE TANSI VILLAGE, INC.,
a Tennessee corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
LML RESORT CORPORATION,
an Alabama corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
NACO WEST CORPORATION,
a Washington corporation
By: s/ Harry J. White, Jr.
---------------------------------
56
<PAGE>
Title: Vice President
------------------------------
NATCHEZ TRACE WILDERNESS PRESERVE
CORPORATION,
a Tennessee corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
QUAIL HOLLOW PLANTATION CORPORATION,
a Tennessee corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
QUAIL HOLLOW VILLAGE, INC.,
a Pennsylvania corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
RECREATION LAND CORPORATION,
a Pennsylvania corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
RECREATION PROPERTIES, INC.,
a Mississippi corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
RESORT LAND CORPORATION,
an Arkansas corporation
57
<PAGE>
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
SHOREWOOD CORPORATION,
a Georgia corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
TANSI RESORT, INC,
a Tennessee corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
LAKE TANSI VILLAGE, INC.,
a Delaware corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
THE KINSTON CORPORATION,
a South Carolina corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
VIRGINIA LANDING CORPORATION,
a Virginia corporation
58
<PAGE>
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
59
<PAGE>
WESTERN FUN CORPORATION,
a Texas corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
WESTWIND MANOR CORPORATION,
a Texas corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
WOLF RUN MANOR CORPORATION,
a Pennsylvania corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
UST WILDERNESS MANAGEMENT CORPORATION,
a Nevada corporation
By: s/ Harry J. White, Jr.
---------------------------------
Title: Vice President
------------------------------
60
<PAGE>
SCHEDULES OMITTED
61
<PAGE>
EXHIBIT 10.20
NOTICE TO BORROWER: THIS DOCUMENT CONTAINS PROVISIONS FOR PAYMENT
AMOUNT ADJUSTMENTS AND CONTAINS PROVISIONS WHICH
REQUIRE A BALLOON PAYMENT AT MATURITY.
SECURED PROMISSORY NOTE
(Account Note)
$6,435,000 July 10, 1996
THIS SECURED PROMISSORY NOTE ("Note") is executed by USTRAILS INC., a
Nevada corporation, NATIONAL AMERICAN CORPORATION, a Nevada corporation, and the
party makers signatory hereto (each, individually and collectively, jointly and
severally, "Maker"), and is accepted by FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), for good and valuable consideration, the
receipt of which is hereby acknowledged.
1. FOR VALUE RECEIVED, the undersigned Maker hereby promises to pay
to the order of Foothill, as hereinafter provided, in such coin or currency of
the United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of Six Million
Four Hundred Thirty-Five Thousand Dollars ($6,435,000) (the "principal sum")
together with interest thereon from the date advanced until paid. Interest
shall be computed on the basis of actual days elapsed over the period of a 360-
day year at a rate (the "Interest Rate") equal to two and three quarter (2 3/4)
percentage points per year in excess of the prime rate of interest most recently
announced from time to time by Norwest Bank Minnesota, national association, or
any successor to it ("Bank"), as its "prime rate" or "reference rate,"
("Reference Rate") as the case may be, irrespective of whether such announced
rate is the best
1
<PAGE>
rate available from such financial institution, which rate shall vary
concurrently with any change in such announced rate, existing on the whole
amount of said principal sum remaining from time to time unpaid. For each month
the rate of interest charged under this Note shall be based on the actual rate
in effect during such month. In no event shall the Interest Rate be less than
nine percent (9%) per annum.
2. The Bank's Reference Rate is one of its base rates and serves as a
basis upon which effective rates of interest are calculated for loans making
reference thereto and may not be the lowest of the Bank's base rates. In the
event that the Bank shall cease to establish or publish Reference Rates, whether
so denominated or otherwise named, the Reference Rate shall be deemed to be the
highest "prime", "base" or "reference" interest rate for each calendar month, as
of the first (1st) day of each such calendar month, of the three largest (total
assets) banking institutions in the State of California then establishing or
publishing a "prime", "base" or "reference" rate of interest (in the event any
such banking institution publishes more than one such rate, the rate used shall
be the highest among those so published by such banking institution).
3. All payments shall be applied in the order and in the manner
provided for in that certain Loan and Security Agreement dated of even date
herewith entered into between Maker and Foothill ("Loan Agreement"). Any sums
not paid when due shall be added to the principal sum and shall bear interest
accordingly. In no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof, or otherwise, shall the amount paid or
agreed to be paid to Holder for the use, forbearance, or detention of the money
advanced or to be advanced hereunder exceed the highest lawful rate permissible
by law. All outstanding principal and
2
<PAGE>
interest (compound) shall bear interest during any period in which there is a
default at the Default Rate set forth in the Loan Agreement.
4. The principal sum and interest shall be due and payable on the
dates and in the manner set forth in the Loan Agreement. The entire principal
sum, together with accrued and unpaid interest thereon shall become due and
payable on the date and in the manner set forth in the Loan Agreement.
5. In no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof, or otherwise shall the amount paid or agreed
to be paid to Foothill for the use, forbearance, or detention of the money
advanced or to be advanced hereunder exceed the highest lawful rate permissible
under any law which a court of competent jurisdiction may deem applicable
hereto. If any amount is received in excess of such highest lawful rate, such
amount shall be applied by Foothill in reduction of the principal sum.
6. Should there be a payment other than a scheduled interest or
principal payment on this Note, as set forth in the Loan Agreement, Borrower may
be obligated to pay to Foothill a Early Paydown Premium, as defined and more
fully set forth in the Loan Agreement.
7. Maker, for itself and its legal representatives, successors and
assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption under the homestead exemption laws, if any, or any other
exemption or insolvency laws, and consents that Foothill may release or
surrender, exchange or substitute any real estate and/or personal property or
other collateral security now held or which may hereafter be held as security
for the payment of this Note, and may extend the
3
<PAGE>
time for payment or otherwise modify the terms of the payment of any part or the
whole of the debt evidenced hereby.
8. This Note is secured by, inter alia, those certain Mortgages (and
----- ----
Deeds of Trust), Assignments of Rents, Security Agreements, and Fixture Filings
("Mortgages": the Mortgages, the Loan Agreement and the other documents defined
as Loan Documents in the Loan Agreement are collectively referred to as the
"Loan Documents") between Maker, as Mortgagor or Trustor, and Foothill, as
Mortgagee or Beneficiary, of even date herewith and all of the terms, covenants,
and conditions of the Loan Documents and all other instruments evidencing and/or
securing the indebtedness evidenced by this Note are hereby made a part of this
Note and are deemed incorporated herein in full. Any Event of Default (as
defined in the Loan Agreement) (including, but not limited to, a default in any
of the conditions, covenants, obligations, or agreements contained in this Note)
shall constitute a default under this Note and shall entitle Foothill to
accelerate the entire indebtedness evidenced by this Note and take such other
action as may be provided for in the Loan Documents.
9. Maker agrees to pay all charges incident to, arising out of or in
connection with the preparation, execution, delivery and enforcement of this
Note, including, without limitation, all reasonable attorneys' fees and
disbursements incurred by Foothill, whether incurred prior to litigation, or in
litigation at trial, arbitration or on appeal and all expenses, including,
without limitation, reasonable attorneys' fees and disbursements incident to the
enforcement of payment of this Note, by any action or participation in, or in
connection with, a case or proceeding under 11 U.S.C. or any successor statute
thereto.
4
<PAGE>
10. THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL
BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL,
IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. EACH OF MAKER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
----- ---
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
- ----------
ACCORDANCE WITH THIS SECTION. MAKER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. MAKER AND FOOTHILL REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
5
<PAGE>
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
IN WITNESS WHEREOF, Maker has executed and delivered this Note on the
day and year first above written.
"MAKER"
USTRAILS INC.,
a Nevada corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
THOUSAND TRAILS, INC.,
a Washington corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
THOUSAND TRAILS (CANADA) INC.,
a British Columbian corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
------------------------
TT OFFSHORE, LTD.,
a Virginia corporation
6
<PAGE>
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
7
<PAGE>
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
-------------------------
CB RESORT CORPORATION,
a Massachusetts corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
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
-------------------------
8
<PAGE>
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
-------------------------
GL LAND DEVELOPMENT CORPORATION,
an Oklahoma corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
INDIAN LAKES WILDERNESS PRESERVE CORPORATION,
an Indiana corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
JEFFERSON RESORT CORPORATION,
a Missouri corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
LAKE TANSI VILLAGE, INC.,
a Delaware corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
9
<PAGE>
LAKE ROYALE CORPORATION,
a North Carolina corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
LML RESORT CORPORATION,
an Alabama corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
NACO WEST CORPORATION,
a Washington 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
-------------------------
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
-------------------------
10
<PAGE>
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
-------------------------
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
-------------------------
11
<PAGE>
THE VILLAS OF HICKORY HILLS, INC.,
a Mississippi corporation
By s/Walter B. Jaccard
--------------------------
Title: Vice President
-----------------------
VIRGINIA LANDING CORPORATION,
a Virginia corporation
By s/ Walter B. Jaccard
--------------------------
Title: Vice President
-----------------------
WESTERN FUN CORPORATION,
a Texas corporation
By s/ Walter B. Jaccard
--------------------------
Title: Vice President
-----------------------
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
----------------------
12
<PAGE>
EXHIBIT 10.21
NOTICE TO BORROWER: THIS DOCUMENT CONTAINS PROVISIONS FOR PAYMENT AMOUNT
ADJUSTMENTS AND CONTAINS PROVISIONS WHICH REQUIRE A
BALLOON PAYMENT AT MATURITY.
SECURED PROMISSORY NOTE
(Term Note)
$6,565,000 July 10, 1996
THIS SECURED PROMISSORY NOTE ("Note") is executed by USTRAILS INC., a Nevada
corporation, NATIONAL AMERICAN CORPORATION, a Nevada corporation, and the party
makers signatory hereto (each, individually and collectively, jointly and
severally, "Maker"), and is accepted by FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), for good and valuable consideration,, the
receipt of which is hereby acknowledged.
1. FOR VALUE RECEIVED, the undersigned Maker hereby promises to pay to the
order of Foothill, as hereinafter provided, in such coin or currency of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of Six Million
Five Hundred Sixty-Five Thousand Dollars ($6,565,000) (the "principal sum")
together with interest thereon from the date advanced until paid. Interest
shall be computed on the basis of actual days elapsed over the period of a 360-
day year at a rate (the "Interest Rate") equal to two and three quarter (2 3/4)
percentage points per year
<PAGE>
in excess of the prime rate of interest most recently announced from time to
time by Norwest Bank Minnesota, national association, or any successor to it
("Bank"), as its "prime rate" or "reference rate," ("Reference Rate") as the
case may be, irrespective of whether such announced rate is the best rate
available from such financial institution, which rate shall vary concurrently
with any change in such announced rate, existing on the whole amount of said
principal sum remaining from time to time unpaid. For each month the rate of
interest charged under this Note shall be based on the actual rate in effect
during such month. In no event shall the Interest Rate be less than nine percent
(9%) per annum.
2. The Bank's Reference Rate is one of its base rates and serves as a basis
upon which effective rates of interest are calculated for loans making reference
thereto and may not be the lowest of the Bank's base rates. In the event that
the Bank shall cease to establish or publish Reference Rates, whether so
denominated or otherwise named, the Reference Rate shall be deemed to be the
highest "prime", "base" or "reference" interest rate for each calendar month, as
of the first (1st) day of each such calendar month, of the three largest (total
assets) banking institutions in the State of California then establishing or
publishing a "prime", "base" or "reference" rate of interest (in the event any
such banking institution publishes more than one such rate, the rate used shall
be the highest among those so published by such banking institution).
<PAGE>
3. Interest shall be due and payable on the dates and in the manner set forth
in that certain Loan and Security Agreement dated of even date herewith entered
into between Maker and Foothill ("Loan Agreement"). The entire principal sum,
together with accrued and unpaid interest thereon shall become due and payable
on the date and in the manner set forth in the Loan Agreement. Notwithstanding
anything contained herein to the contrary, except as provided for in the Loan
Agreement, Maker may not prepay any portion of the principal sum or the interest
required herein.
4. In no contingency or event whatsoever, whether by reason of advancement of
the proceeds hereof, or otherwise shall the amount paid or agreed to be paid to
Foothill for the use, forbearance, or detention of the money advanced or to be
advanced hereunder exceed the highest lawful rate permissible under any law
which a court of competent jurisdiction may deem applicable hereto. If any
amount is received in excess of such highest lawful rate, such amount shall be
applied by Foothill in reduction of the principal sum.
5. A prepayment premium may be owing, as called for in the Loan Agreement.
6. Maker, for itself and its legal representatives, successors and assigns,
expressly waives presentment, demand, protest, notice of dishonor, notice of
non-payment, notice of
<PAGE>
maturity, notice of protest, presentment for the purpose of accelerating
maturity, diligence in collection, and the benefit of any exemption under the
homestead exemption laws, if any, or any other exemption or insolvency laws, and
consents that Foothill may release or surrender, exchange or substitute any real
estate and/or personal property or other collateral security now held or which
may hereafter be held as security for the payment of this Note, and may extend
the time for payment or otherwise modify the terms of the payment of any part or
the whole of the debt evidenced hereby.
7. This Note is secured by, inter alia, those certain Mortgages (and Deeds of
----- ----
Trust), Assignments of Rents, Security Agreements, and Fixture Filings
("Mortgages": the Mortgages, the Loan Agreement and the other documents defined
as Loan Documents in the Loan Agreement are collectively referred to as the
"Loan Documents") between Maker, as Mortgagor or Trustor, and Foothill, as
Mortgagee or Beneficiary, of even date herewith and all of the terms, covenants,
and conditions of the Loan Documents and all other instruments evidencing and/or
securing the indebtedness evidenced by this Note are hereby made a part of this
Note and are deemed incorporated herein in full. Any Event of Default (as
defined in the Loan Agreement) (including, but not limited to, a default in any
of the conditions, covenants, obligations, or agreements contained in this Note)
shall constitute a default under this Note and shall entitle Foothill to
accelerate the entire indebtedness evidenced by this Note and take such other
<PAGE>
action as may be provided for in the Loan Documents.
8. Maker agrees to pay all charges incident to, arising out of or in
connection with the preparation, execution, delivery and enforcement of this
Note, including, without limitation, all reasonable attorneys' fees and
disbursements incurred by Foothill, whether incurred prior to litigation, or in
litigation at trial, arbitration or on appeal and all expenses, including,
without limitation, reasonable attorneys' fees and disbursements incident to the
enforcement of payment of this Note, by any action or participation in, or in
connection with, a case or proceeding under 11 U.S.C. or any successor statute
thereto.
<PAGE>
9. THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL
BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL,
IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. EACH OF MAKER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
----- ---
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
- ----------
ACCORDANCE WITH THIS SECTION. MAKER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. MAKER AND FOOTHILL REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
<PAGE>
IN WITNESS WHEREOF, Maker has executed and delivered this Note on the day and
year first above written.
"MAKER"
USTRAILS INC.,
a Nevada corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
NATIONAL AMERICAN CORPORATION,
a Nevada corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
THOUSAND TRAILS, INC.,
a Washington corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
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
-----------------------------
<PAGE>
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
-------------------------
CB RESORT CORPORATION,
a Massachusetts corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
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
-------------------------
DIXIE RESORT CORPORATION,
a Mississippi corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
<PAGE>
FOXWOOD CORPORATION,
a South Carolina corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
GL LAND DEVELOPMENT CORPORATION,
an Oklahoma corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
INDIAN LAKES WILDERNESS PRESERVE CORPORATION,
an Indiana corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
JEFFERSON RESORT CORPORATION,
a Missouri corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
LAKE TANSI VILLAGE, INC.,
a Delaware corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
LAKE ROYALE CORPORATION,
a North Carolina corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
LML RESORT CORPORATION,
an Alabama corporation
By s/ Walter B. Jaccard
-----------------------------
<PAGE>
Title: Vice President
-------------------------
NACO WEST CORPORATION,
a Washington 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
-------------------------
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
-------------------------
<PAGE>
RESORT LAND CORPORATION,
an Arkansas corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
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
-------------------------
VIRGINIA LANDING CORPORATION,
a Virginia corporation
By s/ Walter B. Jaccard
-----------------------------
Title: Vice President
-------------------------
WESTERN FUN CORPORATION,
a Texas corporation
By s/ Walter B. Jaccard
-----------------------------
<PAGE>
Title: Vice President
-------------------------
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
-------------------------
<PAGE>
EXHIBIT 10.22
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement ("Pledge Agreement") is entered
into as of the 10Eday of July, 1996, between USTRAILS, a Nevada corporation, as
pledgor ("Pledgor") and FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), as pledgee, and is entered into with reference to the following
facts:
RECITALS
--------
FACT ONE: Contemporaneously herewith, Pledgor and Foothill are
--------
entering into financial agreements evidenced by that certain Loan and Security
Agreement of even date herewith (the "Loan Agreement"), and other documents as
set forth therein, whereby Foothill has agreed to loan money (the "Loan", as
defined in the Loan Agreement: all terms not otherwise defined herein shall
have the meaning set forth in the Loan Agreement) to Pledgor.
FACT TWO: The loan will be secured by, inter alia, pledges of notes
-------- ----- ----
and the security and related instruments concerning the same and pledges of
stock in the companies set forth in ExhibitE"A" attached hereto ("Stock") and
incorporated by reference hereby.
NOW THEREFORE, pursuant to the above and pursuant to the Loan
Agreement, the parties hereto agree as follows:
<PAGE>
1. PLEDGE TO FOOTHILL BY PLEDGOR
-----------------------------
Pledgor hereby grants a continuing first priority security interest
in, and pledges to Foothill all of Pledgor's right, title and interest in and to
the following items of collateral (collectively, the "Collateral"):
(a) All of Pledgor's right, title and interest in and to the notes set
forth herein in ExhibitE"B" attached hereto, and the future subsequently
pledgedEnotes and delivered by Pledgor to Foothill and endorsed to the order of
Foothill (the "Notes"), including, without limitation, the right to receive all
payments of principal and/or interest, and any and all personal and/or real
property collateral therefor, and any and all guaranties of the obligations
evidenced by the Notes (including without limitation all guaranties from
Affiliates of Pledgor) and any extensions, renewals, or substitutions of the
Notes. Foothill shall be entitled to receive any and all payments made pursuant
to or in satisfaction of the Notes. Pledgor shall execute any and all documents
required by Foothill to ensure the receipt by Foothill of such payments.
Foothill shall hold the same as collateral for the Obligations, subject to the
default provisions hereof, until satisfaction in full of all of the Obligations
(other than contingent unliquidated Obligations pursuant to Section 11.3 of the
Loan Agreement); and
(b) All proceeds of the Notes, including, but not limited to, all
accounts, instruments, chattel paper, notes, general intangibles, goods,
equipment, deposit accounts,
<PAGE>
money and whatever other tangible or intangible property is received by Pledgor
upon the sale or other disposition of the Notes, and the proceeds thereof; and
(c) All of Pledgor's right, title and interest in and to the mortgages
and deeds of trust (collectively, "Note Mortgages") securing the Notes,
including, without limitation, the right to exercise any and all rights and
privileges associated therewith, all to the same degree as if Foothill were the
owner thereof; and
(d) The Stock, including without limitation, the right to exercise any
and all rights and privileges associated therewith, together with the right to
receive dividends or stock splits therefrom, all to the same degree as if
Foothill was the owner thereof; provided, however, that Pledgor shall retain the
right to vote the Stock or grant proxies to vote the Stock and, to the extent
expressly permitted under the Loan Agreement, to receive dividends and other
distributions in respect thereof, unless there is an "Event of Default" (as
defined in the Loan Agreement) in which event Foothill has the option (but not
the obligation) to exercise voting rights on any and all of the Stock and, to
the extent distributions are expressly permitted under the Loan Agreement and
are made, to retain and apply any such dividends and distributions thereon in
accordance with the Loan Agreement.
<PAGE>
2. FOOTHILL OBLIGATIONS
--------------------
The Collateral shall secure the repayment of all Obligations.
3. PAYMENTS RECEIVED
-----------------
Any and all cash received by Foothill on respect of any of the
Collateral shall be accepted and applied in accordance with the provisions of
the Loan Agreement.
4. COVENANTS, WARRANTIES, REPRESENTATIONS AND PROMISES OF PLEDGOR
--------------------------------------------------------------
Pledgor hereby covenants, warrants, represents and promises to
Foothill that:
(i) The security interests of Foothill shall attach to the Collateral
without further act on the part of Pledgor or Foothill.
(ii) Pledgor will execute and deliver to Foothill, concurrently with
Pledgor's execution of this Pledge Agreement and at any time or times hereafter
at the request of Foothill, Stock Powers, in blank, and such other records
respecting the Collateral which Foothill is entitled to receive pursuant to the
Loan Agreement, and do any other acts in order to perfect and maintain perfected
Foothill's security interests in the Collateral and in order to fully consummate
all of the transactions contemplated under this Pledge Agreement.
(iii) That each Note and Note Mortgage is the bona fide obligation of
the maker/mortgagor, that Pledgor has good and valid title to the Collateral and
full power and authority to pledge the same, and that the Collateral is and
<PAGE>
shall remain, except as provided herein, free from any credit, deduction,
discount, allowance, defense (including usury) and any other security interests,
liens, encumbrances, or rights of recoupment or setoff.
(iv) The companies set forth on Exhibit "A" represent all of the
companies in which Pledgor has an ownership interest and the stock certificates
referenced therein represent 100% of the common and preferred stock authorized
and outstanding of each. There are no outstanding warrants with respect to any
of the companies listed on Exhibit "A".
(v) Pledgor will not authorize or permit the issuance of any
additional stock in the listed companies nor the issuance of any warrants with
respect thereto.
(vi) The Notes set forth on Exhibit "B" represent all of the notes
which Pledgor is the holder of.
5. EVENTS OF DEFAULT BY PLEDGOR
----------------------------
Pledgor shall be in default hereunder if any of the following shall
occur:
(a) Pledgor shall fail to perform, keep, or observe any term,
provision, condition, covenant, agreement, warranty, or representation contained
in this Pledge Agreement, the Loan Agreement, or any Loan Document; or
(b) There shall be a levy upon, seizure, or attachment of any portion
of the Collateral; or
(c) There shall be an Event of Default under
<PAGE>
the Loan Agreement.
6. REMEDIES UPON DEFAULT BY PLEDGOR
--------------------------------
In the event of a default by Pledgor under this Pledge Agreement,
Foothill may, at its election, and without notice and without demand, exercise
its rights and remedies under the Loan Agreement and exercise any and all other
rights and remedies of a secured party under the California Commercial Code.
In view of the fact that securities laws may impose certain
restrictions on the method by which a sale of the Collateral may be effected
after an Event of Default, Pledgor agrees that upon the occurrence and during
the continuance of an Event of Default, Foothill may from time to time attempt
to sell all or any part of the Collateral by a private placement, restricting
the bidders and prospective purchasers to those who will represent and agree
that they are purchasing for investment only and not for distribution. In so
doing, Foothill may solicit offers to buy the Collateral, or any part of it for
cash, from a limited number of investors deemed by Foothill, in its reasonable
judgment, to be responsible parties who might be interested in purchasing the
Collateral. If Foothill shall solicit such offers from not less than four (4)
such investors, then the acceptance by Foothill of the highest offer obtained
therefrom shall be deemed to be a commercially reasonable method of disposition
of such Collateral.
Notwithstanding the above, should Foothill
<PAGE>
determine that, prior to any public offering of any securities contained in the
Collateral, such securities should be registered under the Securities Act of
1933 and/or registered or qualified under any other federal or state law, and
that such registration and/or qualification is not practical, then Pledgor
agrees that it will be commercially reasonable if a private sale is arranged so
as to avoid a public offering even if offers are solicited from fewer than four
(4) investors, and even though the sales price established and/or obtained may
be substantially less than the price which would be obtained pursuant to a
public offering.
Foothill may exercise one or more or all of the foregoing rights and
remedies or any and all further rights and remedies provided for in other
agreements now or hereafter existing between Pledgor and Foothill. All of such
rights and remedies are specifically hereby made cumulative. No delay or
failure on the part of Foothill in exercising any right, privilege, remedy or
option hereunder shall operate as waiver of such or any other right, privilege,
remedy or option, and no waiver whatever shall be valid unless in writing,
signed by Foothill, and then only to the extent therein set forth.
<PAGE>
7. FOOTHILL'S DUTIES
-----------------
Foothill shall not have any duties with respect to the Collateral
other than the duty to use reasonable care if the Collateral is in its
possession. Without limiting the generality of the foregoing, Foothill shall be
under no obligation to take any steps necessary to preserve rights in the
Collateral against any other persons, to sell the same if it threatens to
decline in value, or to exercise any rights represented thereby; provided,
--------
however, Foothill may, at its option, do so, and any and all reasonable expenses
- -------
incurred in connection therewith shall be for the account of Pledgor.
8. MISCELLANEOUS PROVISIONS
------------------------
8.1 This Pledge Agreement shall be construed under, governed by, and
enforced in accordance with the laws of the State of California. The parties
agree that all actions or proceedings arising in connection with this Pledge
Agreement shall be tried and litigated only in the state and federal courts
located in the County of Los Angeles, State of California.
8.2 If any clause, provision, or right provided for herein is
unenforceable or inoperative, the remainder of this Pledge Agreement may be
enforced as if such clause, provision, or right were not contained herein.
8.3 This Pledge Agreement cannot be changed or terminated orally.
8.4 All the representations, warranties, rights, privileges, remedies
and options given to Foothill
<PAGE>
hereunder shall inure to the benefit of its successors and assigns and all of
the terms, conditions, promises, covenants, provisions, representations and
warranties contained in this Pledge Agreement shall bind the representatives,
successors and assigns of each of the parties.
8.5 In the event of litigation arising under or in connection
with this Pledge Agreement, the prevailing party shall be entitled to recover
from the losing party any and all reasonable attorneys' fees and costs incurred,
including, without limitation, fees and costs incurred pursuant to 11 U.S.C.
<PAGE>
8.6 THE VALIDITY OF THIS PLEDGE AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS PLEDGE AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT
THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. PLEDGEOR AND FOOTHILL WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 8.6. PLEDGOR AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. PLEDGOR AND FOOTHILL REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS PLEDGE AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be executed as of the date first hereinabove written.
"PLEDGOR"
USTRAILS INC.,
a Nevada corporation
By:__________s/ Walter B. Jaccard__
--------------------
Print Name:_____Walter B. Jaccard__
-----------------
Its:____________Vice President_____
--------------
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On July 16, 1996 before me, the undersigned, a notary public in and
for said State, personally appeared _______________Walter B. Jaccard___________
-----------------
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the persons whose names are subscribed to the within instrument and
acknowledged to me that they executed the same in their authorized capacities,
and that by their signatures on the instrument the persons, or the entity upon
behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature__s/_Donna Sanders___________
----------------
NOTARY PUBLIC
(SEAL)
<PAGE>
EXHIBIT A
---------
STOCK
-----
STOCK NO.
NAME OF COMPANY CERTIFICATE NO. OF SHARES
STOCKHOLDER
1. Shorewood Corporation 2 5
USTrails
Inc.
2. National American Corporation 4 1,000
USTrails
Inc.
(formerly
known as
NACO Finance
Corporation)
3. UST Wilderness Management 1 100,000
USTrails
Inc.
4. Thousand Trails (Canada), Inc. 2 1
USTrails
Inc.
(formerly
known as
Thousand
Trails,
Inc.)
5. TT Offshore, Ltd. 4 4,000
USTrails
Inc.
(formerly
known as
Thousand
Trails,
Inc.)
6. TT Offshore, Ltd. 3 6,000
USTrails
Inc.
(formerly
known as
Thousand
Trails,
Inc.)
<PAGE>
EXHIBIT B
---------
PLEDGED NOTES
-------------
<TABLE>
<CAPTION>
ORIGINAL CURRENT
PRINCIPAL AMOUNT
NOTE ISSUER NOTEHOLDER DATE AMOUNT
OWING
<S> <C> <C> <C> <C> <C>
Revolving Credit Note National American Corporation USTrails Inc. 12/31/91 $22,000,00
0
$18,648,40
1.65
Term Loan Note National American Corporation USTrails Inc. 12/31/91 $20,015,00
0
$10,765,00
0.00
</TABLE>
<PAGE>
EXHIBIT 10.23
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Loan Security Department
THIS DOCUMENT TO BE RECORDED BOTH AS
A DEED OF TRUST AND FIXTURE FILING
THIS DOCUMENT SECURES OBLIGATIONS WHICH CONTAIN
PROVISIONS FOR A VARIABLE RATE OF INTEREST
STATE OF CALIFORNIA )
) ss.
COUNTY OF PLACER )
DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT and FIXTURE
FILING made this 16 day of July, 1996, between USTRAILS INC., a Nevada
corporation, successor by merger to THOUSAND TRAILS, INC., a Washington
corporation ("Trustor") having an office at 2711 LBJ Freeway, Suite 200, Dallas,
Texas 75234, as trustor, and CHICAGO TITLE INSURANCE COMPANY, as trustee
("Trustee") and FOOTHILL CAPITAL CORPORATION, a California corporation, having
an office at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California
90025-3333, Attn: Business Finance Division Manager.
WITNESSETH
THIS DEED OF TRUST CONSTITUTES A FIXTURE FILING UNDER SECTION 9313 OF
THE UNIFORM COMMERCIAL CODE OF THE STATE OF CALIFORNIA. TO THE EXTENT THE GOODS
ARE FIXTURES UNDER THE LAWS OF THE STATE OF CALIFORNIA, THE FIXTURES ARE OR ARE
TO BECOME FIXTURES ON THE REAL PROPERTY LOCATED IN THE COUNTY OF PLACER, STATE
OF CALIFORNIA, MORE PARTICULARLY DESCRIBED ON EXHIBIT A ATTACHED HERETO. THE
NAME OF THE RECORD OWNER OF THE REAL PROPERTY IS USTRAILS INC.
FOR THE PURPOSE OF SECURING (a) the payment of an indebtedness (i) in
the amount to be determined at closing, to be paid in accordance with the terms
and with interest as set forth in that certain note (hereinafter referred to as
the "Term Note"), and (ii) in an amount to be determined at the closing of the
transactions contemplated by the Loan Agreement (as defined below) to be paid in
accordance with the terms and with the interest as set forth in that certain
account note (hereinafter referred to as the "Account Note": the Term Note,
together with the Account Note, are collectively referred to as the "Note"),
both of even date herewith and both made by Trustor, inter alia, to the order of
----- ----
Foothill Capital Corporation (Foothill Capital Corporation and any subsequent
holder of the Note being hereinafter referred to as "Beneficiary") and all
modifications, extensions and/or renewals thereof, (b) the payment and
performance of all
<PAGE>
indebtedness and obligations of Trustor arising under this Deed of
Trust and other documents executed by Trustor in connection herewith, and (c)
payment of any money advanced by Beneficiary to Trustor, or its successsors,
with interest thereon, evidenced by additional notes (indicating that they are
so secured) or by endorsement of the original notes, executed by Trustor or its
successor, and (d) the payment and performance of all indebtedness and
obligations of Trustor arising under that certain Loan and Security Agreement of
even date herewith to which, inter alia, Beneficiary and Trustor are parties
----- ----
(the "Loan Agreement") including, without limitation, those contained in Section
11 therein (any initially capitalized terms which are not otherwise defined
herein shall have the definition set forth in the Loan Agreement), and all
modifications, extensions and/or renewals thereof, Trustor has granted,
mortgaged, bargained, sold, alienated, enfeoffed, released, conveyed and
confirmed, and by these presents does grant, mortgage, bargain, sell, alienate,
enfeoff, release, convey and confirm unto the Trustee, in trust, WITH POWER OF
SALE, all its estate, right, title and interest in, to and under any and all of
the property located in the County of Placer, State of California, and more
particularly described in Exhibit A attached hereto and made a part hereof,
including all easements, rights, privileges, tenements, hereditaments and
appurtenances thereunto belonging or in anywise appertaining, and all of the
estate, right, title, interest, claim, demand, reversion or remainder whatsoever
of Trustor therein or thereto, either at law or in equity, in possession or
expectancy, now or hereafter acquired, including, without limitation, all and
singular the ways, waters, water courses, water rights and powers, liberties,
privileges, sewers, pipes, conduits, wires and other facilities furnishing
utility or other services to the property (collectively, the "Land");
TOGETHER with all of the right, title and interest of Trustor in and
to all buildings, structures and improvements now or hereafter erected on the
Land including those items defined as Equipment in the Loan Agreement
(collectively, the "Improvements"; the Land and Improvements being hereinafter
collectively referred to as the "Premises");
TOGETHER with all of the right, title and interest of Trustor in and
to the land lying in the bed of any street, road, highway or avenue in front of
or adjoining the Premises;
TOGETHER with any and all award and awards heretofore made or
hereafter to be made by any governmental authorities to the present and all
subsequent owners of the Premises which may be made with respect to the Premises
as a result of the return of excess taxes paid on the Mortgaged Property, the
exercise of the right of eminent domain, the alteration of the grade of any
street or any other injury to or decrease of value of the Premises, which said
award or awards are hereby assigned to Beneficiary and Beneficiary, at its
option, is hereby authorized, directed and empowered to collect and receive the
proceeds of any such award or awards from the authorities making the same and to
give proper receipts and acquittances therefor, and to apply the same as
hereinafter provided; and Trustor hereby covenants and agrees to and with
Beneficiary, upon request by Beneficiary, to make, execute and deliver, at
Trustor's expense, any and all assignments and other instruments sufficient for
the purpose of assigning the aforesaid award or awards to Beneficiary free,
clear and discharged of any and all encumbrances of any kind or nature
whatsoever;
TOGETHER with all Collateral (as defined in the Loan Agreement) (other
than personal property which is or at any time has become Hazardous Substances,
as defined in the Loan Agreement), including any interest therein, now or at any
time hereafter affixed to, attached to, or used in any way in connection with or
to be incorporated at any time into the Premises, or placed on any part thereof
but not attached or incorporated thereto, together with any and all replacements
thereof, appertaining and adapted to the complete and compatible use, enjoyment,
occupancy, operation or improvement of the Premises (collectively, the
"Chattels");
<PAGE>
TOGETHER with leases of the Premises or the Chattels or any part
thereof now or hereafter entered into and all right, title and interest of
Trustor thereunder, including, without limitation, cash or securities deposited
thereunder to secure performance by the lessees of their obligations thereunder
(whether such cash or securities are to be held until the expiration of the
terms of such leases or applied to one or more of the installments of rent
coming due immediately prior to the expiration of such terms) and all rights to
all insurance proceeds and unearned premiums arising from or relating to the
Premises and all other rights and easements of Trustor now or hereafter existing
pertaining to the use and enjoyment of the Premises and all right, title and
interest of Trustor in and to all declarations of covenants, conditions and
restrictions as may affect or otherwise relate to the Premises;
TOGETHER with all sales agreements, deposit receipts, escrow
agreements and other ancillary documents and agreements entered into with
respect to the sale to any purchasers of any part of the Premises, and all
deposits and other proceeds thereof;
TOGETHER with, to the extent assignable, all permits, plans, licenses,
specifications, subdivision rights, tentative tract maps, final tract maps,
security interests, contracts, contract rights or other rights as may affect or
otherwise relate to the Premises;
TOGETHER with all rights of Trustor in or to any fund, program or
trust monies and any reimbursement therefrom directly or indirectly established,
maintained or administered by any governmental authority or any other individual
or entity which is designed to or has the effect of providing funds (whether
directly or indirectly or as reimbursement) for the repair or replacement of
storage tanks (whether above or below ground) located on the Premises or the
remediation or cleanup of any spill, leakage or contamination from any such tank
or resulting from the ownership, use or maintenance of any such tank or to
compensate third parties for any personal injury or property damage;
TOGETHER with all rents, issues, profits, revenues, income and other
benefits to which Trustor may now or hereafter be entitled from the Premises or
the Chattels (which Premises, titles, interests, awards, Chattels, easements,
rents, income, benefits, ways, waters, rights, powers, liberties, privileges,
utilities, tenements, hereditaments, appurtenances, reversions, remainders,
rents, issues, profits, estate, property, possession, claims and demands, are
hereinafter collectively referred to as the "Mortgaged Property");
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, its
successors and assigns forever.
ARTICLE I
---------
And Trustor further covenants with the Trustee and Beneficiary as
follows:
SECTION 1.01. Trustor has good and marketable title to an
------------
indefeasible fee estate in the Premises subject to no lien, charge, or
encumbrance except for Permitted Liens and other liens approved by Beneficiary;
that it owns the Chattels free and clear of liens and claims, except Permitted
Liens; that this Deed of Trust is and will remain a valid and enforceable first
and prior lien on the Mortgaged Property subject only to the exceptions referred
to above; and that neither the entry nor the performance of and compliance with
this Deed of Trust, the Note, or the Loan Agreement has resulted or will result
in any violation of, or be in conflict with, or result in the creation of any
deed of trust, lien, encumbrance or charge (other than those created by the
execution and delivery of, or permitted by, this Deed of Trust, the Note or the
Loan Agreement) upon any of the properties or assets of Trustor, or constitute a
default under any deed of trust, indenture, contract, agreement, instrument,
franchise, permit, judgment, decree, order, statute, rule or regulation
applicable to Trustor. Trustor has full power and lawful authority to convey
the Mortgaged Property in the manner and form herein done or intended hereafter
to be done and will preserve such title, and will forever preserve, warrant and
defend the same unto the Trustee and
<PAGE>
Beneficiary, and will forever preserve, warrant and defend the validity and
priority of the lien hereof against the claims of all persons and parties
whomsoever.
SECTION 1.02. Intentionally Deleted.
------------ ---------------------
SECTION 1.03. Intentionally Deleted.
------------ ---------------------
SECTION 1.04. Intentionally Deleted.
------------ ---------------------
SECTION 1.05. All right, title and interest of Trustor in and to all
------------
extensions, improvements, betterments, renewals, substitutes and replacements
of, and all additions and appurtenances to, the Mortgaged Property, hereafter
acquired by, or released to, or constructed, assembled or placed by Trustor on
the Premises, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in each such case, without any further
grant, conveyance, assignment or other act by Trustor, shall become subject to
the first and prior lien and security interest of this Deed of Trust as fully
and completely, and with the same effect, as though now owned by Trustor and
specifically described in the granting clause hereof, but at any and all times
Trustor will execute and deliver to Beneficiary any and all such further
assurances, deeds of trust, conveyances or assignments thereof with respect
thereto as Beneficiary may reasonably require for the purpose of expressly and
specifically subjecting the same to the lien and security interest of this Deed
of Trust.
SECTION 1.06. Trustor will pay from time to time when the same shall
------------
become due, all lawful claims and demands of mechanics, materialmen, laborers,
and others which, if unpaid, might result in, or permit the creation of, a lien
on the Mortgaged Property or any part thereof, or on the revenues, rents,
issues, income and profits arising therefrom, except as otherwise permitted by
the Loan Agreement, and in general will do or cause to be done everything
necessary so that the lien and security interest hereof shall be fully
preserved, at the cost of Trustor, without expense to Beneficiary.
SECTION 1.07. In the event of the passage, after the date of this
------------
Deed of Trust, of any law of the State of California deducting from the value of
the Mortgaged Property for the purpose of taxing the amount of any lien thereon,
or changing in any way the laws now in force for the taxation of deeds of trust,
or debts secured thereby, for state or local purposes, or the manner of
operation of any such taxes so as to adversely affect the interest of
Beneficiary, then and in such event, Trustor shall bear and pay the full amount
of such taxes, provided that if for any reason payment by Trustor of any such
new or additional taxes would be unlawful or if the payment thereof would
constitute usury or render the Note, the Loan Agreement or the indebtedness
secured hereby wholly or partially usurious under any of the terms or provisions
of the Note, the Loan Agreement, or this Deed of Trust, or otherwise,
Beneficiary may, at its option, upon thirty (30) days' written notice to
Trustor, (i) pay that amount or portion of such taxes as renders the Note, the
Loan Agreement, or the indebtedness secured hereby unlawful or usurious, in
which event Trustor shall concurrently therewith pay the remaining lawful non-
usurious portion or balance of said taxes or (ii) release any or all of the
Mortgaged Property from the lien of the Deed of Trust at which time Beneficiary
may decrease the advance rates set forth in the Loan Agreement in amounts to be
determined by Beneficiary in its sole and absolute discretion.
SECTION 1.08. Except as permitted by the Loan Agreement, Trustor will
------------
not (i) further encumber, sell, convey or transfer any interest in, or any part
of, the Mortgaged Property, or (ii) transfer the presently existing ownership
interests in Trustor (including, without limitation, partnership or stock
ownership interests, as the case may be) so as to effectively transfer control
of Trustor named herein to any other person, firm, corporation or other entity,
without the prior written consent of Beneficiary. Any such encumbrance, sale,
conveyance or transfer made without Beneficiary's prior written consent shall be
an Event of Default hereunder.
<PAGE>
SECTION 1.09. Beneficiary and the Trustee shall have access to and
------------
the right to inspect the Premises and Chattels at all reasonable times.
SECTION 1.10. Intentionally Deleted.
------------ ---------------------
SECTION 1.11. If Trustor shall fail to perform any of the covenants
------------
contained herein on its part to be performed, after reasonable prior notice to
Trustor to the extent required under the Loan Agreement, Beneficiary may, but
shall not be required to, make advances to perform the same, or cause the same
to be performed, on Trustor's behalf, and all sums so advanced shall bear
interest, from and after the date advanced until repaid, at the lower of (i) the
maximum rate permitted by law or (ii) the default rate set forth in the Note,
shall be a lien upon the Mortgaged Property and shall, at Beneficiary's option,
be added to the indebtedness secured hereby. Trustor will repay on demand all
sums so advanced on its behalf with interest at the rate herein set forth. This
Section 1.11 shall not be construed as preventing any default by Trustor in the
observance of any covenant contained in this Deed of Trust from constituting an
Event of Default hereunder.
SECTION 1.12. Trustor will not commit any waste at or with respect to
------------
the Mortgaged Property nor will Trustor do or fail to do anything which will in
any material way increase the risk of fire or other hazard to the Premises,
Improvements or Chattels or to any part thereof. Trustor will, at all times,
maintain the Improvements and Chattels in good order and condition (their
current condition, reasonable wear and tear and damage by fire or other hazard
excepted) and will promptly make, from time to time, all repairs, renewals,
replacements, additions and improvements in connection therewith which are
needful or desirable to such end. Improvements shall not be removed, demolished
or materially altered, nor shall any Chattels be removed without the prior
written consent of Beneficiary, except as permitted by the Loan Agreement,
provided, however, that if there shall not have occurred an Event of Default,
Trustor may make appropriate replacements of Chattels, free of superior title,
liens and claims, except as permitted by the Loan Agreement, provided such
replacements are immediately made and are of a value at least equal to the value
of the Chattels removed.
SECTION 1.13. Trustor will immediately notify Beneficiary of the
------------
institution of any proceeding for the condemnation or taking by eminent domain
of any portion of the Mortgaged Property. The Trustee and Beneficiary may
participate in any such proceeding and Trustor from time to time will deliver to
Beneficiary all instruments requested by it to permit such participation. In
the event of any such condemnation proceedings, or a conveyance in lieu of such
taking, the award or compensation payable is hereby assigned to and shall be
paid to Beneficiary. Beneficiary shall be under no obligation to question the
amount of any such award or compensation and may accept the same in the amount
in which the same shall be paid, but shall have no right to bind Trustor or to
make settlement of its claim, except to the extent of the interest of the
Trustee and Beneficiary. In any such condemnation proceedings the Trustee and
Beneficiary may be represented by counsel selected by Beneficiary. The proceeds
of any award or compensation so received after reimbursement of any expenses
incurred by Beneficiary in connection with such proceedings, shall, at the
option of Beneficiary, be applied, without premium, to the repayment of the Note
and/or the sums due under the Loan Agreement in such order as Beneficiary may in
its sole discretion elect (regardless of interest payable on the award by the
condemning authority), or to the cost of restoration of the Improvement or
Chattel so taken and other terms as shall be satisfactory to Beneficiary.
SECTION 1.14. The assignment of rents, income and other benefits
------------
(collectively, "rents") contained in the granting clause of this Deed of Trust
shall be fully operative without any further action on the part of Trustor or
Beneficiary and specifically Beneficiary shall be entitled, at its option, to
the maximum extent permitted by applicable law, to all rents from the Mortgaged
Property, for application as provided for in the Loan Agreement, whether or not
Beneficiary takes possession of the Mortgaged Property. Trustor hereby further
grants to Beneficiary to the maximum extent permitted by applicable law, the
right (i) to enter upon and take possession of the Mortgaged Property for the
purpose of collecting the rents, (ii) to dispossess by the usual
<PAGE>
summary proceedings any tenant defaulting in the payment thereof to Beneficiary,
(iii) to let the Mortgaged Property or any part thereof, and (iv) to apply the
rents, after payment of all necessary charges and expenses, on account of the
indebtedness and other sums secured hereby. Such assignment and grant shall
continue in effect until the indebtedness and other sums secured hereby are
paid, the execution of this Deed of Trust constituting and evidencing the
irrevocable consent of Trustor to the entry upon and taking possession of the
Mortgaged Property by Beneficiary pursuant to such grant, whether or not sale or
foreclosure has been instituted. Neither the exercise of any rights under this
Section by Beneficiary nor the application of the rents to the indebtedness and
other sums secured hereby, shall cure or waive any Event of Default, or notice
of default hereunder or invalidate any act done pursuant hereto, but shall be
cumulative of all other rights and remedies.
The foregoing provisions hereof shall constitute an absolute and
present assignment of the rents from the Mortgaged Property, subject, however,
to the conditional permission given to Trustor to collect and use the rents
until the occurrence of an Event of Default at which time such conditional
permission shall automatically terminate; and the existence or exercise of such
right of Trustor shall not operate to subordinate this assignment, in whole or
in part, to any subsequent assignment by Trustor permitted under the provisions
of this Deed of Trust, and any such subsequent assignment by Trustor shall be
subject to the rights of the Trustee and Beneficiary hereunder.
SECTION 1.15. (a) Trustor will not (i) execute an assignment of the
------------
rents or any part thereof from the Mortgaged Property unless such assignment
shall provide that it is subject and subordinate to the assignment contained in
this Deed of Trust, and any additional or subsequent assignment executed
pursuant hereto, or (ii) except that Trustor may transact business with members,
customers and other users which are not Affiliates of Borrower of its campground
facilities in the ordinary course of business, (A) except where the lessee is in
default thereunder, terminate or consent to the cancellation or surrender of any
lease of the Mortgaged Property or of any part thereof, now existing or
hereafter to be made or (B) modify any such lease or give consent to any
assignment or subletting without Beneficiary's prior written consent, or (C)
accept prepayments of any installments of rent or additional rent to become due
under such leases, except prepayments in the nature of security for the
performance of the lessee's obligations thereunder, or (iii) in any other manner
impair in any respect, except for de minimis impairments to the Mortgaged
Property and except for sale or other dispositions permitted by the Loan
Agreement, the value of the Mortgaged Property or the security of the Trustee or
Beneficiary for the payment of the indebtedness secured hereby, or (iv) enter
into any lease prohibited under the provisions of the Loan Agreement.
(b) Trustor will not execute any lease of all or a substantial
portion of the Mortgaged Property except for actual occupancy by the lessee
thereunder, and will at all times promptly and faithfully perform, or cause to
be performed, all of the material covenants, conditions and agreements contained
in all such leases of the Mortgaged Property now or hereafter existing, on the
part of the lessor thereunder to be kept and performed. If any such lease
provides for the giving by the lessee of certificates with respect to the status
of such leases, Trustor shall exercise its right to request such certificates
within five (5) days of any demand therefor by Beneficiary.
(c) Trustor shall furnish to Beneficiary, within fifteen (15) days
after a request by Beneficiary to do so, a written statement containing the
names of all lessees for the Mortgaged Property, the terms of their respective
leases, the spaces occupied, the rentals paid and any security therefor.
(d) Trustor shall, from time to time upon request of Beneficiary,
specifically assign to Beneficiary as additional security hereunder, by an
instrument in writing in such form as may be approved by Beneficiary, all right,
title and interest of Trustor in and to any and all leases now or hereafter on
or affecting the Mortgaged Property, together with all security therefor and all
monies payable thereunder, subject to the conditional permission hereinabove
given to Trustor to
<PAGE>
collect the rentals under any such lease. Trustor shall also execute and deliver
to Beneficiary any notification, financing statement or other document
reasonably required by Beneficiary to perfect the foregoing assignment as to any
such lease.
SECTION 1.16. Each lease of the Mortgaged Property referred to in
------------
Section 1.15(b) hereof entered into after the date hereof shall provide that, in
the event of the enforcement by the Trustee or Beneficiary of the remedies
provided for by law or by this Deed of Trust, any person succeeding to the
interest of Trustor as a result of such enforcement shall not be bound by any
payment of rent or additional rent for more than one (1) month in advance,
provided, however, that nothing herein set forth shall affect or impair
the rights of Beneficiary to terminate any one or more of such leases in
connection with the exercise of its or the Trustee's remedies hereunder to the
fullest extent permitted by applicable law.
SECTION 1.17. Intentionally Deleted
------------ ---------------------
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
------------------------------
SECTION 2.01. The occurrence of any one or more of the following
------------
events shall constitute an event of default ("Event of Default") hereunder:
(a) If Trustor shall default in the payment of (i) any regular
installment of interest and/or principal on the Note as and when the same shall
have become due and payable, (ii) any other payment of interest and/or principal
due on the Note when the same shall become due and payable, whether at any
stated maturity or by acceleration or otherwise, or (iii) any other sums
required to be paid by Trustor pursuant to the Note, the Loan Agreement, or this
Deed of Trust on the date that such payments are therein or herein required to
be made; or
(b) If Trustor and/or Guarantor, if any, shall breach, or be in
default of, any of the covenants or provisions contained in the Note or this
Deed of Trust or of any chattel mortgage, other deed of trust, security
agreement or other document issued thereunder or in connection therewith or
herewith; or
(c) If there shall be an "Event of Default" under the Loan
Agreement.
Upon the occurrence of an Event of Default, and in every such case:
I. During the continuance of any Event of Default, Beneficiary
personally, or by its agents or attorneys may enter into and upon all or any
part of the Mortgaged Property, and each and every part thereof, and may exclude
the party owning the beneficial interest in same, its agents and servants wholly
therefrom; and having and holding the same, may use, operate, manage and control
the Mortgaged Property for any lawful purpose and conduct the business thereof,
either personally or by its superintendents, managers, agents, servants,
attorneys or receivers; and upon every such entry, Beneficiary, at the expense
of Trustor, from time to time, either by purchase, repairs or construction, may
maintain and restore the Mortgaged Property, whereof it shall become possessed
as aforesaid, may complete the construction of the Improvements and in the
course of such completion may make such changes in the contemplated Improvements
as it may deem desirable; may insure or reinsure the same as provided in the
Loan Agreement, and likewise, from time to time, at the expense of Trustor,
Beneficiary may make all necessary or proper repairs, renewals, replacements,
alterations, additions, betterments and improvements to the Mortgaged Property
or any part thereof and thereon as it may deem advisable; and in every such case
Beneficiary shall have the right to manage and operate the Mortgaged Property,
possessed as aforesaid, and to carry on the business thereof and exercise all
rights and powers of the party owning such property with respect thereto either
in the name of such party or otherwise as it shall deem best; and Beneficiary
shall be entitled to collect and receive all earnings, revenues, rents,
<PAGE>
issues, profits and income of the Mortgaged Property and every part thereof; and
after deducting the expenses of conducting the business thereof and of all
maintenance, repairs, replacements, alterations, additions, betterments and
improvements and all payments which may be made for taxes, assessments,
insurance, in payment of any prior deed of trust and prior or other proper
charges upon the Mortgaged Property or any part thereof, as well as just and
reasonable compensation of Beneficiary for the services of Beneficiary and for
all attorneys, counsel, agents, clerks, servants and other employees by it
properly engaged and employed, Beneficiary shall apply the moneys arising as
aforesaid, first, to the payment of any sums, other than interest and principal
on the Note or due pursuant to the Loan Agreement required to be paid by Trustor
under this Deed of Trust, second, to the payment of interest on the Note or due
pursuant to the Loan Agreement, and third, to the payment of the principal of
the Note or due pursuant to the terms of the Loan Agreement when and as the same
shall become payable (whether by acceleration or otherwise).
II. Beneficiary, at its option, may declare the entire unpaid
balance of the indebtedness secured hereby immediately due and payable by
delivery to Trustee of written declaration of default and demand for sale and
written notice of default and of election to cause the Mortgaged Property to be
sold, which notice Trustee shall cause to be duly filed for record. Beneficiary
shall also deposit with the Trustee this Deed of Trust, the Note and all
documents evidencing the expenditures secured hereby.
III. After the lapse of such time as may then be required by law
following the recordation of said notice of default, and notice of sale having
been given as then required by law, Trustee, without demand on Trustor, shall
sell the Mortgaged Property at the time and place fixed by it in said notice of
sale, either as a whole or in separate parcels, and in such order as it may
determine, at public auction to the highest bidder for cash in lawful money of
the United States, payable at time of sale. If the Mortgaged Property consists
of several known lots or parcels, Beneficiary may designate the order in which
such parcels shall be sold or offered for sale. Any person, including Trustor,
Trustee or Beneficiary, may purchase at such sale.
IV. Trustee may postpone sale of all or any portion of the
Mortgaged Property by public announcement at such time and place of sale, and
from time to time thereafter may postpone such sale by public announcement at
the time fixed by the preceding postponement.
V. On and after the occurrence of an Event of Default, Trustor
shall pay all rents, issues and profits thereafter received by Trustor from the
Mortgaged Property to Beneficiary and to the extent not paid shall hold such
amounts as trust funds for the benefit of Beneficiary and such rents, issues and
profits shall be deemed "cash collateral" of Beneficiary under 11 U.S.C., as
amended.
SECTION 2.02. (a) Trustee, after making such sale, and upon receipt
------------
of the purchase price, shall make, execute and deliver to the purchaser or
purchasers its deed or deeds conveying the Mortgaged Property so sold, but
without any covenant or warranty, express or implied, and without any
representation, express or implied, as to the existence, or lack thereof, of
Hazardous Substances on the Mortgaged Property, and shall apply the proceeds of
sale thereof to payment, FIRSTLY, of the expenses of such sale, together with
the reasonable expenses of this Trust, including Trustee's fees and cost of
evidence of title in connection with sale and revenue stamps on Trustee's deed;
SECONDLY, of all moneys paid, advanced or expended by Beneficiary under the
terms hereof, not then repaid, together with the interest thereon as herein
provided; THIRDLY, of the amount of the principal and interest on the Note or
under the Loan Agreement then remaining unpaid together with an amount which
would have been equal to the Early Paydown Premium which would have been paid by
Trustor if Trustor had voluntarily prepaid the Note and Loan Agreement;
FOURTHLY, in an amount sufficient, as determined in the sole and absolute
discretion of Beneficiary, acting in good faith, to satisfy actual or contingent
sums owing pursuant to Section 11 of the Loan Agreement ("Impound Sum"), and, if
not actually incurred, to be held by Beneficiary (not in trust, without the
accrual of interest thereon and without the obligation to segregate such funds)
for a period of seven (7) years from the date of foreclosure, thereafter to be
<PAGE>
returned to the person or persons legally entitled thereto, upon satisfactory
proof of such right; and LASTLY, the balance or surplus, if any, of such
proceeds of sale to the person or persons legally entitled thereto, upon
satisfactory proof of such right.
(b) In the event of a sale of the Mortgaged Property, or any part
thereof, and the execution of a deed or deeds therefor under these trusts, the
recitals therein of any matters or facts shall be conclusive proof of the
truthfulness thereof and of the fact that said sale was regularly and validly
made in accordance with all requirements of the laws of the State of California
and of this Deed of Trust; and any such deed or deeds, with such recitals
therein, shall be effectual and conclusive against Trustor and all other
persons; and the receipt for the purchase money recited or contained in any deed
executed to the purchaser as aforesaid shall be sufficient discharge to such
purchaser from all obligations to see to the proper application of the purchase
money according to the trusts aforesaid.
SECTION 2.03. After the happening of an Event of Default by Trustor
------------
under this Deed of Trust and immediately upon the commencement of any action,
suit or other legal proceeding by Beneficiary to obtain judgment for the
principal of, or interest on, the Note or due pursuant to the Loan Agreement and
other sums required to be paid by Trustor pursuant to any provisions of this
Deed of Trust, or of any other nature in aid of the enforcement of the Note, the
Loan Agreement, or of this Deed of Trust, Trustor will waive the issuance and
service of process and enter its voluntary appearance in such action, suit or
proceeding. Further, upon an Event of Default, Trustor hereby consents to the
appointment of a receiver or receivers of the Mortgaged Property and of all the
earnings, revenues, rents, issues, profits and income thereof. After the
happening of any such Event of Default or upon the commencement of any
proceedings to foreclose this Deed of Trust or to enforce the specific
performance hereof or in aid thereof or upon the commencement of any other
judicial proceeding to enforce any right of the Trustee or Beneficiary
hereunder, Beneficiary shall be entitled, as a matter of right, if it shall so
elect, without the giving of notice to any other party and without regard to the
adequacy or inadequacy of any security for the Deed of Trust indebtedness,
forthwith either before or after declaring all sums evidenced by the Note or due
pursuant to the Loan Agreement to be due and payable, to the appointment of such
a receiver or receivers.
SECTION 2.04. During the continuance of an Event of Default,
------------
Beneficiary shall have the following rights and remedies:
(i) Beneficiary or its employees, acting by themselves or through
a court-appointed receiver, may enter upon, possess, manage, operate, dispose
of, and contract to dispose of the Mortgaged Property or any part thereof; take
custody of all accounts; negotiate with governmental authorities with respect to
the Mortgaged Property's environmental compliance and remedial measures; take
any action necessary to enforce compliance with any Act, including but not
limited to spending rents to abate the problem; make, terminate, enforce or
modify leases of the Mortgaged Property upon such terms and conditions as
Beneficiary deems proper; contract for goods and services, hire agents,
employees, and counsel, make repairs, alterations, and improvements to the
Mortgaged Property necessary, in Beneficiary's judgment, to protect or enhance
the security hereof; incur the risks and obligations ordinarily incurred by
owners of property (without any personal obligation on the part of the
receiver); and/or take any and all other actions which may be necessary or
desirable to comply with Trustor's obligations hereunder and under the Note or
Loan Agreement. All sums realized by Beneficiary under this subparagraph, less
all costs and expenses incurred by it under this subparagraph, including
attorneys' fees, and less such sums as Beneficiary deems appropriate as a
reserve to meet future expenses under the subparagraph, shall be applied on any
indebtedness secured hereby in such order as Beneficiary shall determine.
Neither application of said sums to said indebtedness, nor any other action
taken by Beneficiary under this subparagraph shall cure or waive any Event of
Default or notice of default hereunder, or nullify the effect of any such notice
of default. Beneficiary, or any employee or agent of Beneficiary, or a receiver
appointed by a court, may take any action or proceeding hereunder without regard
to (a) the adequacy of the security for the indebtedness secured
<PAGE>
hereunder, (b) the existence of a declaration that the indebtedness secured
hereby has been declared immediately due and payable, or (c) the filing of a
notice of default.
(ii) With or without notice, and without releasing Trustor from
any obligation hereunder, to cure any default of Trustor and, in connection
therewith, Beneficiary or its agents, acting by themselves or through a court
appointed receiver, may enter upon the Mortgaged Property or any part thereof
and perform such acts and things as Beneficiary deems necessary or desirable to
inspect, investigate, assess, and protect the security hereof, including without
limitation of any of its other rights: (a) to obtain a court order to enforce
Beneficiary's right to enter and inspect the Mortgaged Property under California
Civil Code Section 2929.5, to which the decision of Beneficiary as to whether
there exists a release or threatened release of a Hazardous Substances onto the
Mortgaged Property shall be deemed reasonable and conclusive as between the
parties hereto; and (b) to have a receiver appointed under California Code of
Civil Procedure Section 564 to enforce Beneficiary's right to enter and inspect
the Mortgaged Property for Hazardous Substances. All costs and expenses incurred
by Beneficiary with respect to the audits, tests, inspections, and examinations
which Beneficiary or its agents or employees may conduct, including the fees of
the engineers, laboratories, contractors, consultants, and attorneys, shall be
paid by Trustor. All costs and expenses incurred by Trustee and Beneficiary
pursuant to this subparagraph (including without limitation court costs,
consultant fees and reasonable attorneys' fees, whether incurred in litigation
or not and whether before or after judgment) shall bear interest at the Default
Rate set forth in the Note or Loan Agreement from the date they are incurred
until said sums have been paid.
(iii) To seek a judgment that Trustor has breached its
covenants, representations and/or warranties with respect to the environmental
matters set forth in the Loan Agreement by commencing and main taining an action
or actions in any court of competent jurisdiction for breach of contract
pursuant to California Code of Civil Procedure Section 736, whether commenced
prior to or after foreclosure of the Mortgaged Property, and to seek the
recovery of any and all costs, damages, expenses, fees, penalties, fines,
judgments, indemnification payments to third parties, and other out-of-pocket
costs or expenses actually incurred by Beneficiary (collectively, the
"Environmental Costs") incurred or advanced by Beneficiary relating to the
cleanup, remediation or other response action required by any Act or to which
Beneficiary reasonably believes necessary to protect the Mortgaged Property, it
being conclusively presumed between Beneficiary and Trustor that all such
Environmental Costs incurred or advanced by Beneficiary relating to the cleanup,
remediation, or other response action of or to the Mortgaged Property were made
by Beneficiary in good faith. All Environmental Costs incurred by Beneficiary
under this subparagraph (including without limitation court costs, consultant
fees and attorneys' fees, including, without limitation, fees incurred pursuant
to 11 U.S.C., whether incurred in litigation or not and whether before or after
judgment) shall bear interest at the Default Rate from the date of expenditure
until said sums have been paid. Beneficiary shall be entitled to bid, at the
sale of the Mortgaged Property, the amount of said costs, expenses and interest
in addition to the amount of the other obligations hereby secured as a credit
bid, the equivalent of cash.
Trustor acknowledges and agrees that notwithstanding any term or
provision contained herein or in the other Loan Documents (as defined in the
Loan Agreement), the Environmental Costs shall be exceptions to any nonrecourse
or exculpatory provision of the Loan Documents, and Trustor shall be fully and
personally liable for the Environmental Costs hereunder, and such liability
shall not be limited to the original principal amount of the obligations secured
by this Deed of Trust, and Trustor's obligations shall survive the foreclosure,
deed in lieu of foreclosure, release, reconveyance, or any other transfer of the
Mortgaged Property or this Deed of Trust. For the purposes of any action
brought under this subparagraph, Trustor hereby waives the defense of laches and
any applicable statute of limitations.
(iv) To waive its lien against the Mortgaged Property or any
portion thereof, whether fixtures or personal property, to the extent such
property is found to be environmentally impaired in accordance with California
Code of Civil Procedure Section 726.5 and to exercise any
<PAGE>
and all rights and remedies of an unsecured creditor against Trustor and all of
Trustor's assets and property for the recovery of any deficiency and
Environmental Costs, including, but not limited to, seeking an attachment order
under California Code of Civil Procedure Section 483.010. As between Beneficiary
and Trustor, for purposes of California Code of Civil Procedure Section 726.5,
Trustor shall have the burden of proving that Trustor or any related party (or
any affiliate or agent of Trustor or any related party) was not in any way
negligent in permitting the release or threatened release of the Hazardous
Substances. Trustor acknowledges and agrees that notwithstanding any term or
provision contained herein or in the Note or Loan Agreement, all judgments and
awards entered against Trustor shall be exceptions to any nonrecourse or
exculpatory provision of the Loan Documents, and Trustor shall be fully and
personally liable for all judgments and awards entered against Trustor hereunder
and such liability shall not be limited to the original principal amount of the
obligations secured by this Deed of Trust and Trustor's obligations shall
survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or
any other transfer of the Mortgaged Property or this Deed of Trust. For the
purposes of any action brought under this subparagraph, Trustor hereby waives
the defense of laches and any applicable statute of limitations.
(v) Nothing contained herein shall be construed to limit any and
all rights that Beneficiary has at law or pursuant hereto.
SECTION 2.05. No remedy herein conferred upon or reserved to the
------------
Trustee or Beneficiary is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. No delay or omission of the Trustee or
Beneficiary to exercise any right or power occurring upon the Event of Default
shall impair any such right or power or shall be construed to be a waiver
thereof or an acquiescence therein; and every power and remedy given by this
Deed of Trust to the Trustee or Beneficiary may be exercised from time to time
and as often as may be deemed expedient by the Trustee or Beneficiary. Nothing
in this Deed of Trust or in the Note or Loan Agreement shall affect the
obligation of Trustor to pay the principal of and interest on, and Early Paydown
Premium payable pursuant to, the Note and Loan Agreement and all sums due under
the Loan Agreement in the manner and at the time and place therein respectively
expressed.
SECTION 2.06. To the maximum extent permitted by law: Trustor will
------------
not at any time insist upon, or plead, or in any manner whatever claim or take
any benefit or advantage of, any stay or extension or moratorium law, any
exemption from execution or sale of the Mortgaged Property or any part thereof,
wherever enacted, now or at any time hereafter in force, which may affect the
covenants and terms of performance of this Deed of Trust; nor claim, take or
insist upon any benefit or advantage of any law now or hereafter in force
providing for the marshalling of the Mortgaged Property or on the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior or subsequent to
any sale or sales thereof which may be made pursuant to any provision herein, or
pursuant to the decree, judgment or order of any court of competent
jurisdiction; nor, after any such final sale or sales, claim or exercise any
right under any statute or otherwise, to redeem the property so sold or any part
thereof; and Trustor hereby expressly waives all benefit or advantage of any
such law or laws, and covenants not to hinder, delay or impede the execution of
any power herein granted or delegated to the Trustee or Beneficiary, but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. Trustor hereby waives the right to require any sale to be
made in parcels, or the right to select parcels to be so sold, and there shall
be no requirement for marshalling of assets. Trustor hereby further waives, to
the maximum extent permitted by applicable law, any rights it may have under
applicable law relating to the prohibition of the obtaining of a deficiency
judgment by Beneficiary against Trustor.
SECTION 2.07. Intentionally Deleted.
------------ ---------------------
<PAGE>
SECTION 2.08. Without affecting the personal liability of any person,
------------
firm, corporation or other entity, including Trustor (other than any person
released pursuant hereto), for the payment of the indebtedness secured hereby,
and without affecting the lien of this Deed of Trust for the full amount of the
indebtedness remaining unpaid upon any property not reconveyed pursuant hereto,
Beneficiary and Trustee are respectively authorized and empowered as follows:
Beneficiary may, at any time and from time to time, either before or after the
maturity of the Note or the expiration of the Loan Agreement, and without
notice: (a) release any person liable for the payment of any of the
indebtedness, (b) make any agreement extending the time or otherwise altering
the terms of payment of any of the indebtedness, (c) accept additional security
therefor of any kind, (d) release any property, real or personal, securing the
indebtedness. Trustee may, without liability therefor and without notice, at
any time and from time to time so long as the lien or charge hereof shall
subsist, but only upon the written request of Beneficiary and presentation of
this Deed of Trust and the Note for endorsement: (a) consent to the making of
any map or plat of the Land, (b) join in granting any easement thereon or in
creating any covenants restricting use or occupancy thereof, (c) reconvey,
without warranty, any part of the Mortgaged Property, (d) join in any extension
agreement or in any agreement subordinating the lien or charge hereof.
SECTION 2.09. This Deed of Trust constitutes a Security Agreement
------------
under the laws of the State of California so that Beneficiary shall have and may
endorse a security interest in any or all of the Mortgaged Property which may or
might now or hereafter be or be deemed to be personal property, fixtures or
property other than real estate (collectively, "Personal Property") and Trustor
agrees to execute, as debtor, such financing statement or statements as
Beneficiary may now or hereafter reasonably request in order that such security
interest or interests may be perfected pursuant to such laws. This Deed of
Trust further constitutes a fixture filing under Sections 9313 and 9402(6) of
the California Uniform Commercial Code, as amended or recodified from time to
time; provided, however, that the execution and/or filing hereof does not imply
that the items of Personal Property included in the Mortgaged Property are or
are to become fixtures. The filing hereof as a fixture filing is intended to
protect the parties from unwarranted assertions by third parties.
Notwithstanding any release of any or all of the property included in
the Premises which is deemed "real property", any proceedings to foreclose this
Deed of Trust, or its satisfaction of record, the terms hereof shall survive as
a security agreement with respect to the security interest created hereby and
referred to above until the repayment or satisfaction in full of the obligations
of Trustor as are now or hereafter evidenced by the Note and Loan Agreement.
SECTION 2.10. During the continuance of any Event of Default,
------------
Beneficiary shall have all of the rights and remedies of a secured party under
the Uniform Commercial Code (the "Code") of the State of California, and
specifically the right to direct notice and collections of any obligation owing
to Trustor by any lessee. In addition to its rights to foreclose this Deed of
Trust, Beneficiary shall have the right to sell the Personal Property or any
part thereof, or any further, or additional, or substituted Personal Property,
at one or more times, and from time to time, at public sale or sales or at
private sale or sales, on such terms as to cash or credit, or partly for cash
and partly on credit, as Beneficiary may deem proper. Beneficiary shall have
the right to become the purchaser at any such public sale or sales, free and
clear of any and all claims, rights of equity of redemption in Trustor, all of
which are hereby waived and released. Trustor shall not be credited with the
amount of any part of such purchase price, unless, until and only to the extent
that such payment is actually received in cash. Notice of public sale, if
given, shall be sufficiently given, for all purposes, if published not less than
seven days prior to any sale, in any newspaper of general circulation
distributed in the city in which the property to be sold is located or as
otherwise required by the Code. The net proceeds of any sale of the Personal
Property which may remain after the deduction of all costs, fees and expenses
incurred in connection therewith, including, but not limited to, all advertising
expenses, broker's or brokerage commissions, documentary stamps, recording fees,
foreclosure costs, stamp taxes and counsel fees, shall be credited by
Beneficiary against the liabilities, obligations and indebtedness of Trustor to
Beneficiary secured by this Deed of Trust and evidenced by the Note or the Loan
Agreement. Any portion of the Personal Property
<PAGE>
which may remain unsold after the full payment, satisfaction and discharge of
all of the liabilities, obligations and indebtedness of Trustor to Beneficiary
shall be returned to the respective parties which delivered the same to
Beneficiary. If at any time Trustor or any other party shall become entitled to
the return of any of the Personal Property hereunder, any transfer or assignment
thereof by Beneficiary shall be, and shall recite that the same is, made wholly
without representation or warranty whatsoever by, or recourse whatsoever against
Beneficiary.
SECTION 2.11. All rights, remedies and powers provided by Sections
------------
2.01-2.10 hereof may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law in the jurisdiction in which
the Premises are located, and all such provisions are intended to be subject to
all applicable provisions of law which may be controlling in such jurisdiction
and to be limited to the extent necessary so that they will not render this Deed
of Trust invalid, illegal or unenforceable under the provisions of any
applicable law.
ARTICLE III
MISCELLANEOUS
-------------
SECTION 3.01. In the event any one or more of the provisions
------------
contained in this Deed of Trust shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Deed of Trust, but
this Deed of Trust shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
SECTION 3.02. All notices or demands by any party relating to this
------------
Deed of Trust or any other agreement entered into in connection herewith shall
be in the form set forth in the Loan Agreement.
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 3.02 other
than notices by Beneficiary in connection with Sections 9504 or 9505 of the
Code, shall be deemed received on the earlier of the date of actual receipt or
three (3) calendar days after the deposit thereof in the mail. Trustor
acknowledges and agrees that notices sent by Beneficiary in connection with
Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the
mail or transmitted by telefacsimile or other similar method permitted by law.
SECTION 3.03. Whenever in this Deed of Trust the giving of notice by
------------
mail or otherwise is required, the giving of such notice may be waived in
writing by the person or persons entitled to receive such notice.
SECTION 3.04. All of the grants, covenants, terms, obligations,
------------
provisions and conditions herein contained shall run with the land and shall
apply to, bind and inure to the benefit of, the successors and assigns of
Trustor and Beneficiary and to the successors of the Trustee.
SECTION 3.05. Intentionally Deleted.
------------ ---------------------
SECTION 3.06. It shall be lawful for the Trustee, or Beneficiary, at
------------
its election, upon the occurrence of an Event of Default, to sue out forthwith a
complaint in foreclosure upon this Deed of Trust and to proceed thereon to
judgment and execution for the recovery of all sums payable by Trustor pursuant
to the terms of this Deed of Trust without further stay, any law, usage or
custom to the contrary notwithstanding.
SECTION 3.07. Notwithstanding the appointment of any receiver,
------------
liquidator or trustee of Trustor, or of any of its property, or of the Mortgaged
Property, or any part thereof in accordance
<PAGE>
with the provisions of this Deed of Trust, the Trustee shall be entitled to
retain possession and control of all property now or hereafter held under this
Deed of Trust.
SECTION 3.08. If Trustor shall default in the payment of any sums due
------------
pursuant to the terms of the Note, the Loan Agreement, or this Deed of Trust
such default shall be, and be deemed to be, an attempt by Trustor to avoid the
Early Paydown Premium payable by Trustor pursuant to the terms of the Note and
Loan Agreement and consequently, upon a foreclosure of this Deed of Trust by
Beneficiary or the acceptance of a deed in lieu of foreclosure, Beneficiary
shall be entitled to collect such Early Paydown Premium from Trustor with the
same effect as if Trustor had voluntarily elected to prepay the principal sum
evidenced by the Note and Loan Agreement.
SECTION 3.09. Trustor hereby waives and relinquishes unto, and in
------------
favor of Beneficiary, all benefit under all laws, now in effect or hereafter
passed, to relieve Trustor in any manner from the obligations assumed and the
obligation for which this Deed of Trust is security or to reduce the amount of
the said obligation to any greater extent than the amount actually paid for the
Mortgaged Property, in any judicial proceedings upon the said obligation, or
upon this Deed of Trust.
SECTION 3.10. Neither Trustor nor any other person now or hereafter
------------
obligated for payment for all or any part of the indebtedness secured hereby
shall be relieved of such obligation by reason of the failure of Beneficiary to
comply with any request of Trustor or of any other person so obligated to take
action to foreclose on this Deed of Trust or otherwise enforce any provisions
hereof or of the Note or under the Loan Agreement or by reason of the release,
regardless of consideration, of all or any part of the security held for the
indebtedness secured hereby, or by reason of any agreement of stipulation
between any subsequent owner of the Mortgaged Property and Beneficiary extending
the time of payment or modifying the terms hereof without first having obtained
the consent of Trustor or such other person; and in the latter event Trustor and
all other such persons shall continue to be liable to make payment according to
the terms of any such extension or modification agreement, unless expressly
released and discharged in writing by Beneficiary.
SECTION 3.11. By accepting or approving anything required to be
------------
observed, performed or fulfilled or to be given to Beneficiary pursuant to this
Deed of Trust, including (but not limited to) any certificate, balance sheet,
statement of profit and loss or other financial statement, survey, appraisal or
insurance policy, Beneficiary shall not be deemed to have warranted or
represented the sufficiency, legality, effectiveness or legal effect of the
same, or of any term, provision or condition thereof, and such acceptance or
approval thereof shall not be or constitute any warranty or representation with
respect thereto by Beneficiary.
SECTION 3.12. Beneficiary may from time to time, without notice to
------------
Trustor or to the Trustee, and with or without cause and with or without the
resignation of the Trustee substitute a successor or successors to the Trustee
named herein or acting hereunder to execute this trust. Upon such appointment
and without conveyance to the successor Trustee, the latter shall be vested with
all title, powers and duties conferred upon the Trustee herein named or acting
hereunder. Each such appointment and substitution shall be made by written
document executed by Beneficiary, containing reference to this Deed of Trust and
its place of record, which when duly filed for record in the proper office,
shall be conclusive proof of proper appointment of the successor Trustee. The
procedure herein provided for substitution of the Trustee shall be conclusive of
all other provisions for substitution, statutory or otherwise.
SECTION 3.13. Intentionally Deleted.
------------ ---------------------
SECTION 3.14. Intentionally Deleted.
------------ ---------------------
SECTION 3.15. This Deed of Trust shall be governed by California law.
------------
<PAGE>
SECTION 3.16. Simultaneously with, and in addition to, the execution
------------
of this Deed of Trust, Trustor, and/or related or affiliated entities of
Trustor, has executed and delivered as security for the Note and Loan Agreement
a mortgage or deed of trust on parcels of property which may or may not be
outside the boundaries of this county. Trustor agrees that the occurrence of an
Event of Default hereunder, or under any of such other mortgages or deeds of
trust, shall be an Event of Default under each and every one of such mortgages
and deeds of trust, including this Deed of Trust, permitting Beneficiary to
proceed against any or all of the property comprising the Mortgaged Property or
against any other security for the Note and the Loan Agreement in such order as
Beneficiary, in its sole and absolute discretion may determine. Trustor hereby
waives, to the extent permitted by applicable law, the benefit of any statute or
decision relating to the marshalling of assets which is contrary to the
foregoing. Beneficiary shall not be compelled to release or be prevented from
foreclosing this instrument or any other instrument securing the Note and/or the
Loan Agreement unless all indebtedness evidenced by the Note and/or the Loan
Agreement (except for unliquidated, unasserted liabilities arising pursuant to
Section 11.3 of the Loan Agreement) and all items hereby secured shall have been
paid in full and Beneficiary shall not be required to accept any part or parts
of any property securing the Note and the Loan Agreement, as distinguished from
the entire whole thereof, as payment of or upon the Note and/or the Loan
Agreement to the extent of the value of such part or parts, and shall not be
compelled to accept or allow any apportionment of the indebtedness evidenced by
the Note and/or the Loan Agreement to or among any separate parts of said
property.
SECTION 3.17.
------------
(a) With respect to non-Affiliates only:
(i) Notwithstanding anything in this Deed of Trust to the
contrary, Beneficiary hereby covenants and agrees that:
(A) Its rights in the Resort shall be subordinate to the
rights of Purchasers from and after the recording of this instrument;
(B) In the event Beneficiary or its successors and assigns
acquires the Resort through foreclosure, trustee's sale or by deed in lieu of
foreclosure of this Deed of Trust, it shall take the Resort subject to the use
rights of Purchasers; and
(C) In the event Beneficiary or its successors and assigns
acquires the Resort through foreclosure, trustee's sale or by deed in lieu of
foreclosure of this Deed of Trust, it shall not discontinue use of the Resort or
cause or permit the Resort to be used in a manner which would prevent or
materially prevent or interfere with Purchasers from using or occupying the
Resort in the manner contemplated by the Purchasers' Camping Resort Contracts.
However, Beneficiary and its successors and assigns shall have no obligation or
liability to assume the responsibilities or obligations of Trustor under the
Camping Resort Contracts.
(ii) In the event Beneficiary obtains title to or possession of
or causes a change in the title to or possession of the Resort by foreclosure or
otherwise and does not continue to operate the Resort upon conditions no less
favorable to Purchasers than existed prior to the change of title or possession,
Beneficiary hereby agrees to either:
(A) Offer the title to or possession of the Resort to an
association of Purchasers to operate the Resort; or
(B) Obtain a commitment from another entity (which obtains
title or possession to the Resort) to undertake the responsibility of operating
the Resort.
(iii) The covenants contained herein may be enforced by each
Purchaser of a Camping Resort Contract from Trustor or any of its present or
future Affiliates, provided that the
<PAGE>
Purchaser is not in default under the terms of the Purchaser's Camping Resort
Contract. Provided an Event of Default has not occurred under this Deed of Trust
or the other Loan Documents, the covenants contained herein may be enforced by
Trustor.
(iv) The covenants contained herein shall be effective as between
each Purchaser and Beneficiary despite any rejection or cancellation of the
Purchaser's Camping Resort Contract during any bankruptcy proceedings of
Trustor.
(v) The covenants and agreements contained herein shall inure to
the benefit of and be binding upon the successors and assigns of Trustor and
Beneficiary, including any person who acquires the Resort through foreclosure or
by deed in lieu of foreclosure of this Deed of Trust.
(b) When used in this Section, each of the following terms shall be
defined as set forth below:
(i) "Purchaser" shall mean a person who enters into a Camping
Resort Contract with Trustor or any of its present or future Affiliates, whether
before or after the date hereof and thereby obtains title to, an estate or
interest in, or license or the right to use the Resort.
(ii) "Camping Resort Contract" shall mean an agreement between
Trustor or any of its present or future Affiliates, and a Purchaser evidencing
the Purchaser's title to, estate or interest in, or right or license to use the
Resort for more than 14 days in a year.
(iii) "Resort" means the campground located on or forming a part
of the Premises.
(c) The covenant of non-disturbance contained herein is made for the
benefit of Trustor and Beneficiary and each Purchaser and shall be binding upon
and inure to the benefit of Trustor and Beneficiary and their respective
successors and assigns and shall inure to the benefit of each Purchaser and his
or her respective successors and assigns. The covenant of non-disturbance
contained herein shall be deemed to be a covenant which runs with the Land.
IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be
executed as of the day and year first above written.
"TRUSTOR"
USTRAILS INC.,
a Nevada corporation
By: s/ Walter B. Jaccard
--------------------
Walter B. Jaccard,
Vice President
BENEFICIARY COVENANTS AND AGREES TO COMPLY WITH
SECTION 3.17 ABOVE.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: s/ Tricia McLoughlin
--------------------
Tricia McLoughlin
Senior Vice President
<PAGE>
STATE OF CALIFORNIA) (S)
(S) ss.
COUNTY OF LOS ANGELES (S)
On July 12, 1996, before me, Donna Sanders personally appeared Walter
B. Jaccard, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument
WITNESS my hand and official seal.
Donna Sanders
-------------
STATE OF CALIFORNIA (S)
(S) ss.
COUNTY OF LOS ANGELES (S)
On July 12, 1996, before me, Steven C. Janney personally appeared
Tricia McLoughlin, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument
WITNESS my hand and official seal.
Steven C. Janney
-----------------
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN IS SITUATED IN THE COUNTY OF PLACER, STATE OF
CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PARCEL ONE
ALL THAT PORTION OF THE NORTHWEST QUARTER OF THE NORTHEAST QUARTER OF SECTION
30, TOWNSHIP 17 NORTH, RANGE 13 EAST, MOUNT DIABLO BASE AND MERIDIAN, LYING
NORTHERLY AND EASTERLY OF THE NORTHEASTERLY LINE OF INTERSTATE 80 FREEWAY.
EXCEPTING THEREFROM THAT PORTION THEREOF LYING OUTSIDE PLACER COUNTY.
PARCEL TWO
ALL THAT PORTION OF THE EAST HALF OF THE NORTHEAST QUARTER OF SECTION 30, AND
THE NORTH HALF OF SECTION 29, TOWNSHIP 17 NORTH, RANGE 13 EAST, MOUNT DIABLO
BASE AND MERIDIAN, LYING NORTHERLY AND EASTERLY OF THE NORTHEASTERLY LINE OF
INTERSTATE 80, AS SAID LINE IS DESCRIBED IN THE DEED TO THE STATE OF CALIFORNIA,
RECORDED DECEMBER 2, 1960, IN BOOK 858 OF OFFICIAL RECORDS AT PAGE 429.
EXCEPTING THEREFROM THAT PORTION OF THE NORTH HALF OF SECTION 29, LYING EASTERLY
OF THE FOLLOWING DESCRIBED LINE:
BEGINNING AT A POINT ON THE NORTHEASTERLY LINE OF INTERSTATE 80, FROM WHICH THE
NORTHWEST CORNER OF SECTION 29, TOWNSHIP 17 NORTH, RANGE 13 EAST, MOUNT DIABLO
BASE AND MERIDIAN, BEARS THE FOLLOWING NINE (9) COURSES AND DISTANCES: (1) NORTH
60 Degress 01'51" WEST 161.77 FEET, (2) NORTH 70 Degress 03'30" WEST 178.09
FEET, (3) NORTH 74 Degrees 18'17" WEST 294.24 FEET, (4) NORTH 59 Degrees 38'33"
WEST 380.38 FEET, (5) NORTH 55 Degrees 44'00" WEST 1368.76 FEET, (6) NORTH 61
Degrees 48'47" WEST 776.43 FEET, (7) NORTH 66 Degrees 43'03" WEST 214.40 FEET,
(8) NORTH 55 Degrees 52'16" WEST 318.86 FEET AND (9) NORTH 71 Degrees 27'35"
EAST 1643.67 FEET; THENCE FROM SAID POINT OF BEGINNING NORTH 27 Degrees 45'26"
EAST 339.99 FEET; THENCE SOUTH 70 Degrees 35'00" EAST 70 FEET; THENCE NORTH
19 Degrees 25'00" EAST 100 FEET; THENCE NORTHEASTERLY IN A DIRECT LINE 580 FEET,
MORE OR LESS, TO THE EASTERLY TERMINUS OF THAT CERTAIN COURSE HAVING THE BEARING
AND DISTANCE OF SOUTH 78 Degrees 44' EAST 589.2 FEET, AS SAID COURSE IS
DESCRIBED IN THE DEED TO THE BOY SCOUTS OF AMERICA, RECORDED SEPTEMBER 8, 1971
IN BOOK 1372 OF OFFICIAL RECORDS AT PAGE 441.
ALSO EXCEPTING THEREFROM THAT PORTION THEREOF DESCRIED IN DEED TO THE STATE OF
CALIFORNIA, RECORDED DECEMBER 2, 1960 IN BOOK 858 OF OFFICIAL RECORDS AT PAGE
429.
ALSO EXCEPTING THEREFROM THAT PORTION THEREOF DESCRIED IN DEED TO THE BOY SCOUTS
OF AMERICA, RECORDED SEPTEMBER 8, 1971 IN BOOK 1372 OF OFFICIAL RECORDS AT PAGE
441.
ALSO EXCEPTING THEREFROM THAT PORTION THEREOF LYING OUTSIDE PLACER COUNTY.
<PAGE>
EXHIBIT 10.23
SCHEDULE OF SUBSTANTIALLY IDENTICAL MORTGAGES FROM
THE COMPANY AND ITS SUBSIDIARIES TO FOOTHILL CAPITAL CORPORATION
----------------------------------------------------------------
Mortgage with Power of Sale, Assignment of Rents, Security Agreement
and Fixture Filing dated as of July 10, 1996, between LML Resort Corporation and
Foothill Capital Corporation, with respect to Alpine Bay, recorded in Talladega
County, Alabama.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Verde Valley, recorded in Yavapai County, Arizona.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Anza-Borrego, recorded in San Diego County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Donner Pass, recorded in Placer County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Donner Pass, recorded in Nevada County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Idyllwild, recorded in Riverside County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Lake Minden, recorded in Yuba County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Lake of the Springs, recorded in Yuba County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Oakzanita Springs, recorded in San Diego County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Palm Springs, recorded in Riverside County, California.
<PAGE>
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Pio Pico, recorded in San Diego County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Rancho Oso, recorded in Santa Barbara County,
California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Russian River, recorded in Sonoma County,
California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to San Benito, recorded in San Benito County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to San Jose, recorded in Santa Clara County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Snowflower, recorded in Placer County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Snowflower, recorded in Nevada County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Soledad, recorded in Los Angeles County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Stagecoach, recorded in San Diego County,
California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Turtle Beach, recorded in San Joaquin County,
California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between. National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Wilderness Lakes, recorded in Riverside County,
California.
<PAGE>
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Windsor, recorded in Sonoma County, California.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Yosemite, recorded in Tuolumne County, California.
Mortgage and Security Agreement dated as of July 10, 1996, between
Thousand Trails (Canada) Inc. and Foothill Capital Corporation, with respect to
Cultus Lake, recorded, in the Province of British Columbia.
Future Advances Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. and Foothill
Capital Corporation, with respect to Orlando, recorded in Lake County, Florida.
Mortgage, Assignment of Rents, Security Agreement and Fixture
Financing Statement dated as of July 10, 1996, between USTrails Inc. and
Foothill Capital Corporation, with respect to Fox River, recorded in LaSalle
County, Illinois.
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between National American Corporation and Foothill
Capital Corporation, with respect to Indian Lakes Wilderness Preserve, recorded
in Ripley County, Indiana.
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996 between USTrails Inc. and Foothill Capital
Corporation, with respect to Horseshoe Lake, recorded in Vermillion County,
Indiana.
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 199, between USTrails Inc. and Foothill Capital
Corporation, with respect to St. Clair, recorded in St. Clair County, Michigan.
Land Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between The Villas of Hickory Hills,
Inc. to Chicago Title Insurance Company as Trustee, for the benefit of Foothill
Capital Corporation, with respect to Hickory Hill, recorded in Jackson County,
Mississippi.
Land Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between Dixie Resort Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Indian Point, recorded in Jackson County,
Mississippi.
<PAGE>
Land Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between National American Corporation
and Foothill Capital Corporation, with respect to Jefferson Resort, recorded in
Jefferson County, Missouri.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to United Title of
Nevada as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Las Vegas, recorded in Clark County, Nevada.
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between Recreation Properties, Inc. and Foothill
Capital Corporation, with respect to Chestnut Lakes, recorded in Atlantic
County, New Jersey.
Future Advance Deed of Trust, Assignment of Rents and Security
Agreement dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Forest Lake, recorded in Davie County, North Carolina.
Future Advance Deed of Trust, Assignment of Rents and Security
Agreement dated as of July 10, 1996, between Carriage Manor Corporation to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Lake Royale, recorded in Franklin County, North
Carolina.
Open-End Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. and Foothill Capital
Corporation, with respect to Kenisee Lake, recorded in Ashtabula County, Ohio.
Open-End Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. and Foothill Capital
Corporation, with respect to Wilmington, recorded in Clinton County, Ohio.
Trust Deed, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between USTrails Inc. to Key Title Insurance Company
as Trustee, for the benefit of Foothill Capital Corporation, with respect to
Bend, recorded in Deschutes County, Oregon.
Trust Deed, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between USTrails Inc. to Ticor Title Insurance
Company as Trustee, for the benefit of Foothill Capital Corporation, with
respect to Pacific City, recorded in Tillamook County, Oregon.
Trust Deed, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between National American Corporation. to Title
Guaranty Company of Oregon as Trustee, for the benefit of Foothill Capital
Corporation, with respect to South Jetty, recorded in Lane County, Oregon.
Open-End Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between Quail Hollow Village, Inc. and
Foothill Capital Corporation, with respect to Beech Mountain Lakes, recorded in
Luzerne County, Pennsylvania.
Open-End Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. and Foothill Capital
Corporation, with respect to Hershey, recorded in Lebanon County, Pennsylvania.
Open-End Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between Wolf Run Manor Corp. and Foothill
Capital Corporation, with respect to Treasure Lake, recorded in Clearfield
County, Pennsylvania.
<PAGE>
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between Carolina Landing Corporation and Foothill
Capital Corporation, with respect to Carolina Landing, recorded in Oconee
County, South Carolina.
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between The Kinston Corporation and Foothill Capital
Corporation, with respect to Foxwood (Kinston), recorded in Oconee County, South
Carolina.
Mortgage, Assignment of Rents, Security Agreement and Fixture Filing
dated as of July 10, 1996, between Foxwood Corporation and Foothill Capital
Corporation, with respect to Foxwood Hills, recorded in Oconee County, South
Carolina.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between Cherokee Landing Corporation, to
Chicago Title Insurance Company as Trustee, for the benefit of Foothill Capital
Corporation, with respect to Cherokee Landing, recorded in Hardeman County,
Tennessee.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between Natchez Trace Wilderness Preserve
Corporation, to Chicago Title Insurance Company as Trustee, for the benefit of
Foothill Capital Corporation, with respect to Natchez Trace, recorded in Lewis
County, Tennessee.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between Natchez Trace Wilderness Preserve
Corporation, to Chicago Title Insurance Company as Trustee, for the benefit of
Foothill Capital Corporation, with respect to Natchez Trace, recorded in
Lawrence County, Tennessee.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between Tansi Resort, Inc., to Chicago Title
Insurance Company as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Tansi, recorded in Cumberland County, Tennessee.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between Western Fun Corporation to
Linda Earle, Esq. as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Bay Landing, recorded in Wise County, Texas.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. to Linda Earle,
Esq. as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Colorado River, recorded in Colorado County, Texas.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. to Linda Earle,
Esq. as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Galveston Island, recorded in Galveston County, Texas.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. to Linda Earle,
Esq. as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Lake Conroe, recorded in Montgomery County, Texas.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. to Linda Earle,
Esq. as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Lake Tawakoni, recorded in Rains County, Texas.
<PAGE>
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. to Linda Earle,
Esq. as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Lake Texoma, recorded Grayson County, Texas.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. to Linda Earle,
Esq. as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Lake Whitney, recorded in Hill County, Texas.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between USTrails Inc. to Linda Earle,
Esq. as Trustee, for the benefit of Foothill Capital Corporation, with respect
to Medina Lake, recorded in Bandera County, Texas.
That this Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of July 10, 1996, between Westwind Manor Corporation, to
Linda Earle, Esq. as Trustee, for the benefit of Foothill Capital Corporation,
with respect to Westwind Manor, recorded in Wise County, Texas.
Credit Line Deed of Trust, Assignment of Rents, Security Agreement and
UCC Financing Statement Fixture Filing dated as of July 10, 1996, between
USTrails Inc. to Allison Mitchell McKee as Trustee, for the benefit of Foothill
Capital Corporation, with respect to Chesapeake Bay, recorded in Gloucester
County, Virginia.
Credit Line Deed of Trust, Assignment of Rents, Security Agreement and
UCC Financing Statement Fixture Filing dated as of July 10, 1996, between
USTrails Inc. to Allison Mitchell McKee as Trustee, for the benefit of Foothill
Capital Corporation, with respect to Lynchburg, recorded in Campbell County,
Virginia.
Credit Line Deed of Trust, Assignment of Rents, Security Agreement and
UCC Financing Statement Fixture Filing dated as of July 10, 1996, between
National American Corporation to Allison Mitchell McKee as Trustee, for the
benefit of Foothill Capital Corporation, with respect to Virginia Landing,
recorded in Accomack County, Virginia.
<PAGE>
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company and Foothill Capital Corporation, with respect
to Birch Bay, recorded in Whatcom County, Washington.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company and Foothill Capital Corporation, with respect
to Black Point, recorded in Jefferson County, Washington.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company and Foothill Capital Corporation, with respect to Chehalis,
recorded in Lewis County, Washington.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company and Foothill Capital Corporation, with respect to Leavenworth,
recorded in Chelan County Washington.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company and Foothill Capital Corporation, with respect
to Little Diamond, recorded in Pend Oreille County, Washington.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company and Foothill Capital Corporation, with respect
to Long Beach, recorded in Pacific County, Washington.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between USTrails Inc. to Chicago Title
Insurance Company and Foothill Capital Corporation, with respect to Mt. Vernon,
recorded in Skagit County, Washington.
Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated as of July 10, 1996, between National American Corporation to
Chicago Title Insurance Company and Foothill Capital Corporation, with respect
to Rainier, recorded in Lewis County, Washington.
<PAGE>
EXHIBIT 10.24
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Loan Security Department
ASSIGNMENT OF EVIDENCE OF INDEBTEDNESS
AND MORTGAGE(S)
FOR VALUE RECEIVED, the undersigned ("Assignor") hereby grants, sells,
transfers, conveys, and assigns to FOOTHILL CAPITAL CORPORATION, (a California
corporation, whose address is 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025, all of its right, title and interest in and to (i)
those certain instruments ("Instruments") described on Exhibit A attached hereto
---------
and incorporated herein by reference and (ii) all of the evidences of
indebtedness secured by the Instruments and (iii) all of the other liens,
rights, titles, equities and interests which secure the evidences of
indebtedness mentioned in (ii) above.
IN WITNESS WHEREOF, Assignor has caused this Assignment of Evidence of
Indebtedness and Mortgage(s) to be executed as of the day and year first above
written.
"ASSIGNOR"
USTRAILS INC.,
a Nevada corporation
By: s/ Harry J. White, Jr.
----------------------
Harry J. White, Jr.
Vice President
(Seal)
WITNESS:
____________________________
Print Name:___________
WITNESS:
____________________________
Print Name:___________
<PAGE>
STATE OF CALIFORNIA (S)
(S) ss.
COUNTY OF LOS ANGELES (S)
On July __, 1996, before me, ____________________ personally appeared
Harry J. White, Jr., Vice President of USTrails Inc., a Nevada corporation,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
______________________________________
2
<PAGE>
Alpine Bay/Logan Landing
Alabama
EXHIBIT A
---------
DESCRIPTION OF RECORDED DOCUMENT(S)
MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF LEASES executed by LML
RESORT CORPORATION, an Alabama corporation, dated June 25, 1990 and recorded in
the Official Records of Talladega County, State of Alabama in Book 751, at Page
30 in favor of USTRAILS INC., a Nevada corporation, formerly known as NACO
FINANCE CORPORATION;
DEED OF TRUST MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF LEASES
executed by LML RESORT CORPORATION, an Alabama corporation, dated April 15, 1991
and recorded May 2, 1991 in the Official Records of Talladega County, State of
Alabama in Book 0760, at Page 0064 in favor of USTRAILS INC., a Nevada
corporation, formerly known as NACO FINANCE CORPORATION; as amended by means of
that certain FIRST AMENDMENT TO MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF
LEASES AND RENTS dated August 2, 1991, executed by LML RESORT CORPORATION, an
Alabama corporation in favor of USTRAILS INC., a Nevada corporation and recorded
on August 13, 1991 in the Official Records of the County of Talladega, State of
Alabama in Book 0605, at Page 0496, as amended by means of that certain SECOND
AMENDMENT TO MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF LEASES AND RENTS
dated August 30, 1991, executed by LML RESORT CORPORATION, an Alabama
corporation in favor of USTRAILS INC., a Nevada corporation and recorded on
September 20, 1991 in the Official Records of the County of Talladega, State of
Alabama in Book 0751, at Page 0500.
MORTGAGE AND SECURITY AGREEMENT executed by LML RESORT CORPORATION dated
December 31, 1991, and recorded on January 27, 1992 in the Official Records of
Talladega County, State of Alabama, in Book 0760, Page 0690 in favor of USTRAILS
INC., formerly known as NACO FINANCE CORPORATION, as the same has been amended
by means of that certain FIRST AMENDMENT TO MORTGAGE AND SECURITY AGREEMENT
dated as of November 10, 1994, and recorded on April 6, 1995 in the Official
Records of Talladega County, State of Alabama, in Book 0810, Page 0265.
This assignment affects the real property described on Exhibit B attached
hereto and incorporated herein.
3
<PAGE>
EXHIBIT B
---------
(Legal Description)
4
<PAGE>
EXHIBIT 10.24
SCHEDULE OF SUBSTANTIALLY IDENTICAL ASSIGNMENTS OF
INDEBTEDNESS AND MORTGAGE BETWEEN THE COMPANY AND
ITS SUBSIDIARIES AND FOOTHILL CAPITAL CORPORATION
-------------------------------------------------
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Alpine Bay, recorded in
Talladega County, Alabama.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Verde Valley, recorded
in Yavapai County, Arizona.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Anza-Borrego, recorded
in San Diego County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Donner Pass, recorded
in Placer County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Donner Pass, recorded
in Nevada County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Idyllwild, recorded in
Riverside County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Lake Minden, recorded
in Yuba County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Lake of the Springs,
recorded in Yuba County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Oakzanita Springs,
recorded in San Diego County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Palm Springs, recorded
in Riverside County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Pio Pico, recorded in
San Diego County, California.
5
<PAGE>
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Rancho Oso, recorded in
Santa Barbara County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Russian River, recorded
in Sonoma County California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to San Benito, recorded in
San Benito County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to San Jose, recorded in
Santa Clara County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Snowflower, recorded in
Placer County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Snowflower, recorded in
Nevada County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Soledad, recorded in
Los Angeles County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Stagecoach, recorded in
San Diego County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Turtle Beach, recorded
in San Joaquin County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Wilderness Lakes,
recorded in Riverside County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Windsor, recorded in
Sonoma County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Yosemite, recorded in
Tuolumne County, California.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Cultus Lake, recorded
in the Province of British Columbia.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Orlando, recorded in
Lake County, Florida.
6
<PAGE>
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Fox River, recorded in
LaSalle County, Illinois.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Indian Lakes Wilderness
Preserve, recorded in Ripley County, Indiana.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Horseshoe Lake,
recorded in Vermillion County, Indiana.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to St. Clair, recorded in
St. Clair County, Michigan.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Hickory Hill, recorded
in Jackson County, Mississippi.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Indian Point, recorded
in Jackson County, Mississippi.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Jefferson Resort,
recorded in Jefferson County, Missouri.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Las Vegas, recorded in
Clark County, Nevada.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Chestnut Lakes,
recorded in Atlantic County, New Jersey.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Forest Lake, recorded
in Davie County, North Carolina.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Lake Royale, recorded
in Franklin County, North Carolina.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Kenisee Lake, recorded
in Ashtabula County, Ohio.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Wilmington, recorded in
Clinton County, Ohio.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Bend, recorded in
Deschutes County, Oregon.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Pacific City, recorded
in Tillamook County, Oregon.
7
<PAGE>
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to South Jetty, recorded
in Lane County, Oregon.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Beech Mountain Lakes,
recorded in Luzerne County, Pennsylvania.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Hershey, recorded in
Lebanon County, Pennsylvania.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Treasure Lake, recorded
in Clearfield County, Pennsylvania.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Carolina Landing,
recorded in Oconee County, South Carolina.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Foxwood (Kinston),
recorded in Oconee County, South Carolina.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Foxwood Hills, recorded
in Oconee County, South Carolina.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Cherokee Landing,
recorded in Hardeman County, Tennessee.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Natchez Trace, recorded
in Lewis County, Tennessee.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Natchez Trace, recorded
in Lawrence County, Tennessee.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Tansi, recorded in
Cumberland County, Tennessee.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Bay Landing, recorded
in Wise County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Colorado River,
recorded in Colorado County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Galveston Island,
recorded in Galveston County, Texas.
8
<PAGE>
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Lake Conroe, recorded
in Montgomery County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Lake Tawakoni, recorded
in Rains County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Lake Texoma, recorded
Grayson County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Lake Whitney, recorded
in Hill County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Medina Lake, recorded
in Bandera County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Westwind Manor,
recorded in Wise County, Texas.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Chesapeake Bay,
recorded in Gloucester County, Virginia.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996,
from the Company to Foothill Capital Corporation, with respect to Lynchburg,
recorded in Campbell County, Virginia.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Virginia Landing,
recorded in Accomack County, Virginia.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Birch Bay, recorded in
Whatcom County, Washington.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Black Point, recorded
in Jefferson County, Washington.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Chehalis, recorded in
Lewis County, Washington.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Leavenworth, recorded
in Chelan County Washington.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Little Diamond,
recorded in Pend Oreille County, Washington.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Long Beach, recorded in
Pacific County, Washington.
9
<PAGE>
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Mt. Vernon, recorded in
Skagit County, Washington.
Assignment of Indebtedness and Mortgage dated as of July 10, 1996, from the
Company to Foothill Capital Corporation, with respect to Rainier, recorded in
Lewis County, Washington.
10
<PAGE>
EXHIBIT 10.25
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Loan Security Department
SUBORDINATION AND INTERCREDITOR AGREEMENT
-----------------------------------------
This Subordination Agreement ("Agreement"), dated as of July 10, 1996, is
entered into between FOOTHILL CAPITAL CORPORATION, a California corporation
("Lender"), and USTRAILS INC., a Nevada corporation ("Creditor"), in light of
the following:
FACT ONE: The mortgage(s) or deed(s) of trust set forth in Exhibit A
--------
attached hereto and incorporated herein (together with any and all other
security instruments recorded against the Property, as defined below, in favor
of Creditor or any Affiliate of Creditor, and any past, present or future
amendments, modifications, restatements, or supplements to any of the foregoing
are collectively, the "Creditor Mortgage") have previously been recorded against
the real property described on Exhibit B attached hereto and incorporated herein
(the "Property") in favor of Creditor. The obligations secured by the Creditor
Mortgage are also secured by certain financing statements and other documents or
security instruments (collectively, the "Creditor Additional Liens": The
Creditor Mortgage, together with the Creditor Additional Liens are collectively,
the " Liens"). The mortgagor or trustor listed in Exhibit A, together with any
successors or assigns of such entity, is the current owner of the Property and
together with future successors or assigns is referred to herein as the
"Borrower".
FACT TWO: Contemporaneously herewith, Lender is entering into certain
--------
financing arrangements with, inter alia, Creditor and Borrower pursuant to,
----- ----
inter alia, that certain Loan and Security Agreement, of even date herewith
- ----- ----
(together with any future amendments, modifications, restatements, or
supplements thereto, the "Loan Agreement": capitalized terms not otherwise
defined herein have the meaning set forth in the Loan Agreement).
FACT THREE: Creditor is the direct or indirect parent of Borrower and is
----------
interested in the financial success of Borrower.
FACT FOUR: Contemporaneously herewith and dated of even date herewith, to
---------
secure, inter alia, Borrower's obligations to Lender under the Loan Agreement,
----- ----
Borrower is executing and delivering to Lender a mortgage or deed of trust
encumbering the Property (together with any future amendments, modifications,
restatements, or supplements thereto, the "Lender Mortgage") together with
certain financing statements and other documents or
1
<PAGE>
security instruments (collectively, the "Lender Additional Liens: the Lender
Mortgage and the Lender Additional Liens are collectively, the "Lender Liens").
FACT THREE: Creditor agrees that the Lender would not enter into the Loan
----------
Documents absent the delivery to Lender of this Agreement.
NOW, THEREFORE, Lender and Creditor agree as follows:
1. Definition of Obligations. The term "Obligations" is used in this
-------------------------
Agreement in its broadest and most comprehensive sense and shall mean all
present and future indebtedness of Borrower which may be, from time to time,
directly or indirectly incurred by Borrower, including, but not limited to, any
negotiable instruments evidencing the same, and all guaranties, debts, demands,
monies, indebtedness, liabilities, and obligations owed or to become owing,
including interest, principal, prepayment premiums, if any, "Foothill Expenses"
(as defined in the Loan Agreement), costs, and other charges, and all claims,
rights, causes of action, judgments, decrees, remedies, security interests, or
other obligations of any kind whatsoever and howsoever arising, whether
voluntary, involuntary, absolute, contingent, or by operation of law.
2. Subordination of Creditor Obligations and Liens. Any and all
-----------------------------------------------
Obligations owed to Creditor ("Creditor Obligations") including, but not limited
to, the Obligations of Borrower owing to Creditor secured by the Creditor Liens
together with any and all collateral and liens now or hereinafter securing the
Creditor Obligations, including but not limited to the Creditor Liens ("Creditor
Collateral") are hereby subordinated to any and all Obligations owed to Lender
or any assignee or refinancing lender, including, but not limited to, those
Obligations arising pursuant to the Loan Agreement or any other agreement or
agreements between Lender and Borrower, now or hereafter existing, whether
matured or not, including any interest which, but for the application of the
provisions of the Federal Bankruptcy Code, would have accrued on such amounts
(collectively, the "Lender Obligations") together with any and all collateral
and liens now or hereinafter securing the Lender Obligations, including but not
limited to the Lender Liens ("Lender Collateral"). Except as may be expressly
provided for in this Agreement or in the Loan Agreement, no payment shall be
made by Borrower on the Creditor Obligations until: (a) all of the Lender
Obligations have been indefeasibly paid by Borrower in full, in cash; and (b)
all obligations of Lender under the Loan Agreement to make loans or advances to,
or to issue or guarantee letters of credit for the account of, Borrower shall
have terminated.
3. Insolvency. In the event of any assignment by Borrower for the benefit
----------
of Borrower's creditors, of any voluntary or involuntary bankruptcy proceedings
instituted by or against Borrower, of the appointment of any receiver for
Borrower or Borrower's business or assets, or of any dissolution or other
winding up of the affairs of Borrower or of Borrower's business (collectively,
"Insolvency Proceedings"), and in all such cases respectively, the officers of
Borrower and any assignee, trustee in bankruptcy, receiver, and other person or
persons in charge, are hereby directed to pay to Lender the full amount of the
Lender Obligations (including all interest accruing, and all interest which, but
for the application of the Federal Bankruptcy Code, would have accrued, after
the commencement of any such Insolvency Proceeding), in cash, before making any
payments or distributions of any kind to Creditor. Lender is hereby irrevocably
constituted and appointed the attorney-in-fact of Creditor to demand, sue for,
collect, or receive any payments due Creditor on the Creditor Obligations in any
Insolvency Proceeding, and to file any and all proofs of claim, financing
statements, and any other documents and to take all other action (including
voting any or all of Creditor's claims in any Insolvency Proceeding), either in
Lender's name or in the name of
2
<PAGE>
Creditor, which in Lender's opinion is necessary or desirable to enable Lender
to be paid and satisfied in full prior to any payments being made to Creditor in
any Bankruptcy Proceeding.
4. Limitations on Creditor's Actions. Except as may be expressly provided
---------------------------------
for in this Agreement or in the Loan Agreement, so long as any of the Lender
Obligations remains unpaid, in whole or in part, and so long as Lender is
committed or otherwise obligated to make loans and advances to, or guarantee
letters of credit for the account of, Borrower pursuant to the Loan Agreement,
Creditor agrees not to: (i) accelerate or collect or receive, either directly
or indirectly, payment upon, by setoff or in any other manner, any portion of
the Creditor Obligations; (ii) sell, assign, exchange, redeem, transfer,
pledge, or give a security interest in the Creditor Obligations; (iii) enforce,
collect, realize upon, or apply any collateral security now or hereafter
existing for the Creditor Obligations; (iv) commence, prosecute, or participate
in any administrative, legal, or equitable action that might adversely affect
Borrower or Lender or either of their interests; (v) join in any Insolvency
Proceeding (to the extent that such action will have the affect of Creditor
receiving any amounts prior to the Lender Obligations being paid and satisfied
in full) or commence or file an involuntary Insolvency Proceeding against the
Borrower; (vi) take any lien on or security interest in any of Borrower's real
or personal property; (vii) incur any obligation to make, or receive any loans,
advances, or gifts from Borrower; and (viii) modify any of the terms and
conditions of the Creditor Obligations.
5. Legending Instruments. Creditor agrees that if part or all of the
---------------------
Creditor Obligations shall be evidenced by one or more promissory notes or other
instruments, Creditor shall place or cause to be placed on the face of each such
note and instrument a legend stating that the payment thereof is subject to the
terms of this Agreement and is subordinate to the prior payment of all of the
Lender Obligations and shall, within the later of seven (7) days after the
execution of any such promissory note or instrument or seven (7) days after the
date of this Agreement, deliver a copy of such legended promissory note or
legended instrument to Lender. Creditor agrees to mark all books of account in
such manner as to indicate that payment thereof is subordinated pursuant to the
terms of this Agreement.
6. Modification of Lender Obligations. Creditor agrees that Lender shall
----------------------------------
have absolute power and discretion, without notice to Creditor, to deal in any
manner with the Lender Obligations, including, but not by way of limitation, the
power and discretion to do any of the following: (a) any demand for payment
Creditor of any Lender Obligation may be rescinded in whole or in part, and any
Lender Obligation may be continued, and the Lender Obligations or the liability
of Borrower or any other party upon or for any part thereof, or any collateral
security or guaranty therefor, or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, modified, amended,
accelerated, compromised, waived, surrendered, or released; and (b) the Loan
Agreement and any document or instrument evidencing or governing the terms of
any other Lender Obligations or any collateral security documents or guaranties
or documents in connection with the Loan Agreement or the Lender Obligations may
be renewed, extended, amended, modified, supplemented, or terminated, in whole
or in part, as Lender may deem advisable from time to time, and any collateral
security at any time held by Lender for the payment of any of the Lender
Obligations may be sold, exchanged, waived, surrendered, or released. Creditor
will remain bound under this Agreement, and the subordination provided for
herein shall not be impaired, abridged, released, or otherwise affected
notwithstanding any such renewal, extension, modification, acceleration,
compromise, amendment, supplement, termination, sale, exchange, waiver,
surrender, or release. The Lender Obligations shall conclusively be deemed to
have been created, contracted, or incurred in reliance upon this Agreement, and
all dealings between
3
<PAGE>
Borrower and Lender shall be deemed to have been consummated in reliance upon
this Agreement.
7. Creditor's Waivers. Creditor waives: (a) any and all notice of the
------------------
creation, modification, amendment, renewal, extension, or accrual of any of the
Lender Obligations and notice of or proof of reliance by the Lender upon this
Agreement; (b) and agrees not to assert against Lender any rights which a
guarantor or surety could exercise; but nothing in this Agreement shall
constitute Creditor a guarantor or surety; (c) the right, if any, to require
Lender to marshal or otherwise require Lender to proceed to dispose of or
foreclose upon collateral in any manner or order; and (d) any right of
subrogation, contribution, reimbursement, or indemnity which it may have against
Borrower arising directly or indirectly out of this Agreement until the Lender
Obligations have been paid in full.
8. Continuing Nature of This Agreement. Notwithstanding any action or
-----------------------------------
inaction by Lender with respect to the Lender Obligations or with respect to any
collateral therefor or any guaranties thereof, this Agreement, the obligations
of Creditor owing to Lender, and Lender's rights and privileges hereunder, shall
continue until indefeasible payment in full, in cash, of all of the Lender
Obligations, including any replacement or refinancing thereof, and termination
of any obligation of Lender to make loans or advances to, or guarantee letters
of credit for the account of, Borrower. All rights, power, and remedies
hereunder shall apply to all past, present, and future Lender Obligations,
including those arising out of successive transactions which may continue,
renew, increase, decrease, or from time to time create new Lender Obligations.
The subordinations, agreements, and priorities set forth herein shall remain in
full force and effect, regardless of whether any party hereto in the future
seeks to rescind, amend, modify, terminate, or reform, by litigation or
otherwise, its respective agreements with Borrower.
9. Proceeds of Collateral. Lender and Creditor agree and understand that
----------------------
some or all of the assets of Borrower which comprise the Creditor Collateral
also comprise the Lender Collateral. These assets are referred to in this
paragraph as the Collateral. Proceeds of Collateral include insurance and
condemnation awards, settlements and proceeds (collectively, "proceeds"), and
the priorities of the Lender and Creditor set forth in this Agreement shall
apply to such proceeds. The Lender, having a senior lien on any Collateral
shall, subject to such Lender's rights under its Loan Agreement with Borrower,
have the sole and exclusive right to adjust or enforce settlement of insurance
and condemnation claims in the event of any covered theft, destruction,
casualty, other loss or actual or threatened condemnation action to such
Collateral. All proceeds of such insurance and condemnation shall inure to the
Lender named in any applicable loss payable endorsement and having a senior lien
with respect to the insured Collateral, provided, however, that after full
payment of the Lender Obligations any remaining insurance proceeds received by
the Lender shall be promptly remitted to the Creditor or to Borrower, as
applicable. The Creditor shall cooperate, if necessary, with the Lender in
effecting payment by the insurer or governmental agency to the Lender.
10. No Creditor Liens; etc. Creditor further agrees that in case Creditor
----------------------
shall, in contravention of the terms of this Agreement, take or receive any
security interest in, or lien by way of attachment, execution, or otherwise, on
any of the real or personal property of Borrower, or should take or join in any
other measure or advantage contrary to this Agreement, at any time prior to the
indefeasible payment in full, in cash, of all of the Lender Obligations, Lender
shall be entitled to have the same vacated, dissolved, and set aside by such
proceedings at law or otherwise as Lender may deem proper, and this Agreement
shall constitute full and sufficient grounds therefor and shall entitle Lender
to become a party to any
4
<PAGE>
proceedings at law or otherwise initiated by Creditor or by any other party, in
or by which Lender may deem it proper to protect Lender's interest hereunder.
11. Creditor To Receive Payments, etc. in Trust. Except as otherwise
-------------------------------------------
expressly agreed to herein, if Creditor shall receive any payments, collateral
security, or other rights in any property of Borrower in violation of this
Agreement, such payment or property shall be received by Creditor in trust for
Lender and shall immediately be delivered and transferred to Lender.
12. No Prior Subordinations. No currently effective subordinations of the
-----------------------
Creditor Obligations have previously been executed by Creditor for the benefit
of anyone else other than in respect of the Senior Subordinated PIK Notes of
Borrower, and the Senior Subordinated PIK Note subordination and any such
subordinations hereafter executed (with respect to which Creditor shall provide
notice to Lender) will be, and shall be expressed to be, subject and subordinate
to the terms of this Agreement.
13. Financial Condition of Borrower. Creditor represents and warrants to
-------------------------------
Lender that Creditor is currently informed of the financial condition of
Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Lender Obligations. Creditor
further represents and warrants to Lender that Creditor has read and understands
the terms and conditions of the Loan Agreement. Creditor hereby covenants that
Creditor will continue to keep informed of Borrower's financial condition, the
financial condition of other guarantors of the Lender Obligations, if any, and
of all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Lender Obligations.
14. Reassignment of Creditor Additional Liens. Pursuant to a certain
-----------------------------------------
assignment executed contemporaneously herewith by Creditor in favor of Lender,
Creditor has assigned the Creditor Liens to Lender as additional security for
the Obligations (as defined in the Loan Agreement). Lender agrees to reassign
the Creditor Liens to Creditor after payment in full of the Obligations (as
defined in the Loan Agreement) (other than contingent unliquidated Obligations
pursuant to Section 11.3 of the Loan Agreement).
15. Assignees, etc. This Agreement shall be binding upon the heirs,
--------------
administrators, personal representatives, successors, and assigns of Creditor,
and shall inure to the benefit of Lender's successors and assigns.
16. Additional Documents. Creditor agrees to execute and deliver, upon
--------------------
the request of Lender, such documents and instruments (appropriate for filing or
recording, if requested) as may be necessary or appropriate to fully implement
or to fully evidence the understanding and agreements contained in this
Agreement.
17. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
18. Choice of Law; Venue. The validity of this Agreement, its
--------------------
construction, interpretation, and enforcement, and the rights of the parties
hereunder, shall be determined under, governed by, and construed in accordance
with the laws of the State of California. The parties agree that all actions or
proceedings arising in connection with this Agreement shall be
5
<PAGE>
tried and litigated only in the County of Los Angeles, State of California, or
in Lender's sole discretion, such other court in which Lender shall initiate
legal or equitable proceedings and which shall have subject matter jurisdiction
over the matter in controversy. Creditor waives any rights it may have to assert
the doctrine of forum non conveniens or to object to such venue and hereby
----- --- ----------
consents to any court ordered relief.
19. Collection Costs; Attorneys' Fees. In the event it becomes necessary
---------------------------------
for either party to commence any proceedings or actions to enforce the
provisions of this Agreement, the court or body before which the same shall be
tried shall award to the prevailing party all costs and expenses thereof,
including, but not limited to, reasonable attorneys' fees and costs (including
but not limited to fees and costs incurred pursuant to 11 U.S.C.), the usual and
customary and lawfully recoverable court costs, and all other expenses in
connection therewith.
20. Legal Descriptions. Creditor shall amend the legal descriptions of
------------------
the Creditor Liens so that they are identical with the legal descriptions of the
Lender Liens.
21. Counterparts. This Agreement may be executed by the parties hereto in
------------
any number of separate counterparts. All of such counterparts, taken together,
shall constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile also shall
deliver a manually executed counterpart of this Agreement but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability and binding effect of this Agreement.
22. Waiver, Amendments, Etc. The subordination provisions contained
-----------------------
herein are for the benefit of Lender and its successors and assigns and may not
be rescinded, cancelled, amended, or modified in any way, nor, unless otherwise
expressly provided for herein, may any provision of this Agreement be waived or
changed, without the prior written consent thereto of Lender or its successors
or assigns.
23. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH OF
--------------------
LENDER AND CREDITOR EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION,
CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
DEALINGS OF CREDITOR AND LENDER WITH RESPECT TO THIS AGREEMENT, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, EACH OF LENDER AND CREDITOR HEREBY AGREES THAT ANY SUCH
ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A
COURT TRIAL WITHOUT A JURY AND THAT LENDER OR CREDITOR MAY FILE AN ORIGINAL
COUNTERPART OF THIS SECTION WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.
This Agreement has been executed and delivered as of the date set forth in
the first paragraph hereof.
6
<PAGE>
USTRAILS INC.,
a Nevada corporation
By: s/ Harry J. White, Jr.
----------------------
Print Name: Harry J. White, Jr.
Title: Vice President
Address: 2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: s/ Tricia McLoughlin
--------------------
Print Name: Tricia McLoughlin
Title: Senior Vice President
7
<PAGE>
LML Resort Corporation, an Alabama corporation, being the Borrower named in
the foregoing Subordination Agreement, hereby accepts and consents thereto and
agrees to be bound by all of the provisions thereof and to recognize all
priorities and other rights granted thereby to FOOTHILL CAPITAL CORPORATION, a
California corporation ("Lender"), and to pay Lender in accordance therewith.
Dated: July ___, 1996.
LML RESORT CORPORATION,
an Alabama corporation
By: s/ Walter B. Jaccard
--------------------
Print Name: Walter B. Jaccard
Title: Vice President
(Seal)
8
<PAGE>
STATE OF CALIFORNIA (S)
(S) ss.
COUNTY OF LOS ANGELES (S)
On July __, 1996, before me, ____________________ personally appeared
Harry J. White, Jr., Vice President of USTrails Inc., a Nevada corporation
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
___________________________
STATE OF CALIFORNIA (S)
(S) ss.
COUNTY OF LOS ANGELES (S)
On July __, 1996, before me, ____________________ personally appeared
Tricia McLoughlin, Senior Vice President of Foothill Capital Corporation, a
California corporation personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
___________________________
9
<PAGE>
STATE OF CALIFORNIA (S)
(S) ss.
COUNTY OF LOS ANGELES (S)
On July __, 1996, before me, ____________________ personally appeared
Walter B. Jaccard, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
___________________________
10
<PAGE>
Alpine Bay/Logan Landing
Alabama
EXHIBIT A
DESCRIPTION OF RECORDED DOCUMENT(S)
MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF LEASES executed by LML
RESORT CORPORATION, an Alabama corporation, dated June 25, 1990 and recorded in
the Official Records of Talladega County, State of Alabama in Book 751, at Page
30 in favor of USTRAILS INC., a Nevada corporation, formerly known as NACO
FINANCE CORPORATION;
DEED OF TRUST MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF LEASES
executed by LML RESORT CORPORATION, an Alabama corporation, dated April 15, 1991
and recorded May 2, 1991 in the Official Records of Talladega County, State of
Alabama in Book 0760, at Page 0064 in favor of USTRAILS INC., a Nevada
corporation, formerly known as NACO FINANCE CORPORATION; as amended by means of
that certain FIRST AMENDMENT TO MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF
LEASES AND RENTS dated August 2, 1991, executed by LML RESORT CORPORATION, an
Alabama corporation in favor of USTRAILS INC., a Nevada corporation and recorded
on August 13, 1991 in the Official Records of the County of Talladega, State of
Alabama in Book 0605, at Page 0496, as amended by means of that certain SECOND
AMENDMENT TO MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF LEASES AND RENTS
dated August 30, 1991, executed by LML RESORT CORPORATION, an Alabama
corporation in favor of USTRAILS INC., a Nevada corporation and recorded on
September 20, 1991 in the Official Records of the County of Talladega, State of
Alabama in Book 0751, at Page 0500.
MORTGAGE AND SECURITY AGREEMENT executed by LML RESORT CORPORATION
dated December 31, 1991, and recorded on January 27, 1992 in the Official
Records of Talladega County, State of Alabama, in Book 0760, Page 0690 in favor
of USTRAILS INC., formerly known as NACO FINANCE CORPORATION, as the same has
been amended by means of that certain FIRST AMENDMENT TO MORTGAGE AND SECURITY
AGREEMENT dated as of November 10, 1994, and recorded on April 6, 1995 in the
Official Records of Talladega County, State of Alabama, in Book 0810, Page 0265.
This assignment affects the real property described on Exhibit B
attached hereto and incorporated herein.
11
<PAGE>
EXHIBIT "B"
-----------
[LEGAL DESCRIPTION]
12
<PAGE>
EXHIBIT 10.25
SCHEDULE OF SUBSTANTIALLY IDENTICAL SUBORDINATION
AGREEMENTS BETWEEN THE COMPANY AND FOOTHILL CAPITAL CORPORATION
---------------------------------------------------------------
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Alpine Bay, recorded in Talladega
County, Alabama.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Verde Valley, recorded in Yavapai
County, Arizona.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Anza-Borrego, recorded in San
Diego County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Donner Pass, recorded in Placer
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Donner Pass, recorded in Nevada
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Idyllwild, recorded in Riverside
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lake Minden, recorded in Yuba
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lake of the Springs, recorded in
Yuba County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Oakzanita Springs, recorded in San
Diego County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Palm Springs, recorded in
Riverside County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Pio Pico, recorded in San Diego
County, California.
13
<PAGE>
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Rancho Oso, recorded in Santa
Barbara County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Russian River, recorded in Sonoma
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to San Benito, recorded in San Benito
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to San Jose, recorded in Santa Clara
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Snowflower, recorded in Placer
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Snowflower, recorded in Nevada
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Soledad, recorded in Los Angeles
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Stagecoach, recorded in San Diego
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Turtle Beach, recorded in San
Joaquin County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Wilderness Lakes, recorded in
Riverside County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Windsor, recorded in Sonoma
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Yosemite, recorded in Tuolumne
County, California.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Cultus Lake, recorded, in the
Province of British Columbia.
14
<PAGE>
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Orlando, recorded in Lake County,
Florida.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Fox River, recorded in LaSalle
County, Illinois.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Indian Lakes Wilderness Preserve,
recorded in Ripley County, Indiana.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Horseshoe Lake, recorded in
Vermillion County, Indiana.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to St. Clair, recorded in St. Clair
County, Michigan.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Hickory Hill, recorded in Jackson
County, Mississippi.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Indian Point, recorded in Jackson
County, Mississippi.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Jefferson Resort, recorded in
Jefferson County, Missouri.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Las Vegas, recorded in Clark
County, Nevada.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Chestnut Lakes, recorded in
Atlantic County, New Jersey.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Forest Lake, recorded in Davie
County, North Carolina.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lake Royale, recorded in Franklin
County, North Carolina.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Kenisee Lake, recorded in
Ashtabula County, Ohio.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Wilmington, recorded in Clinton
County, Ohio.
15
<PAGE>
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Bend, recorded in Deschutes
County, Oregon.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Pacific City, recorded in
Tillamook County, Oregon.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to South Jetty, recorded in Lane
County, Oregon.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Beech Mountain Lakes, recorded in
Luzerne County, Pennsylvania.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Hershey, recorded in Lebanon
County, Pennsylvania.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Treasure Lake, recorded in
Clearfield County, Pennsylvania.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Carolina Landing, recorded in
Oconee County, South Carolina.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Foxwood (Kinston), recorded in
Oconee County, South Carolina.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Foxwood Hills, recorded in Oconee
County, South Carolina.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Cherokee Landing, recorded in
Hardeman County, Tennessee.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Natchez Trace, recorded in Lewis
County, Tennessee.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Natchez Trace, recorded in
Lawrence County, Tennessee.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Tansi, recorded in Cumberland
County, Tennessee.
16
<PAGE>
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Bay Landing, recorded in Wise
County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Colorado River, recorded in
Colorado County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Galveston Island, recorded in
Galveston County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lake Conroe, recorded in
Montgomery County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lake Tawakoni, recorded in Rains
County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lake Texoma, recorded Grayson
County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lake Whitney, recorded in Hill
County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Medina Lake, recorded in Bandera
County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Westwind Manor, recorded in Wise
County, Texas.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Chesapeake Bay, recorded in
Gloucester County, Virginia.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Lynchburg, recorded in Campbell
County, Virginia.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Virginia Landing, recorded in
Accomack County, Virginia.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Birch Bay, recorded in Whatcom
County, Washington.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Black Point, recorded in Jefferson
County, Washington.
17
<PAGE>
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Chehalis, recorded in Lewis
County, Washington.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Leavenworth, recorded in Chelan
County Washington.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Little Diamond, recorded in Pend
Oreille County, Washington.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Long Beach, recorded in Pacific
County, Washington.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Mt. Vernon, recorded in Skagit
County, Washington.
Subordination Agreement dated as of July 10, 1996, between the Company and
Foothill Capital Corporation, with respect to Rainier, recorded in Lewis County,
Washington.
18
<PAGE>
EXHIBIT 10.30
Deloitte & Touche LLP
Logo appears here
INDEPENDENT ACCOUNTANTS' REPORT ON AGREED-UPON PROCEDURES
Harry J. White, Jr.
Vice President and
Chief Financial Officer
U.S. Trails Inc. and Subsidiaries
We have performed the procedures enumerated below, which were agreed to by Harry
J. White, Jr. and William J. Shaw, solely to assist you in determining the
correctness of the calculation of the enterprise bonus as set forth in the
accompanying schedule as required in accordance with Section 3A of the
employment agreement between U.S. Trails Inc. (the "Company") and Mr. William J.
Shaw dated May 11, 1995 (the "Agreement"). This calculation is the basis for
the payment required to be made in accordance with the Agreement. This
engagement to apply agreed-upon procedures was performed in accordance with
standards established by the American Institute of Certified Public Accountants.
The sufficiency of the procedures is solely the responsibility of the specified
users of the report. Consequently, we make no representation as to the
sufficiency of the procedures described below either for the purpose for which
this report has been requested or for any other purpose. The procedures we
performed are summarized as follows:
. Obtained a copy and read the Agreement
. Agreed the principal amount of outstanding secured notes as of June 28,
1996 to the Company's Form 10-Q for the quarterly period ended March 31,
1996
. Agreed the principal amount of secured notes mandatorily redeemed July 15,
1995 to the Company's Form 10-Q for the quarterly period ended March 31,
1996
. Agreed the principal amount of secured notes repurchased January 31, 1996
to the Company's Form 10-Q for the quarterly period ended March 31, 1996
. Agreed the number of shares of common stock outstanding as of June 28, 1996
to the Company's Form 10-Q for the quarterly period ended March 31, 1996
. Obtained the highest bid prices for the Company's secured notes and common
stock for each of the 15 trading days from June 10, 1996 to June 28, 1996
from Paine Webber Inc. and agreed such amounts to the accompanying schedule
of "Listing of Daily Price Quotes"
. Recomputed the average price (value factor) for the secured notes and
common stock for the period June 10, 1996 to June 28, 1996
<PAGE>
. Agreed the average price paid to repurchase $7,368,000 of principal
amount of secured notes on January 31, 1996 to a transaction statement for
Bear Stearns & Co., Inc.
. Recomputed "mid point percentage" as defined
. Recalculated "enterprise value" as defined
. Agreed "amount per Employment Agreement," "percentage per Employee
Agreement," "stated amount per Employment Agreement" and "75% vesting
percentage" shown on the accompanying schedule to the Employment Agreement
. Recomputed the vested portion of enterprise bonus to be $952,957 on June
29, 1996
No exceptions were found as a result of performing the procedures or in the
calculation of the enterprise bonus due to Mr. William J. Shaw in accordance
with the Agreement.
We were not engaged to, and did not, perform an audit of the financial
statements of U.S. Trails as of any time or any period, the objective of which
would be the expression of an opinion on such financial statements. Accordingly,
we do not express such an opinion. Had we performed additional procedures, other
matters might have come to our attention that would have been reported to you.
This report is intended solely for the use of the specified users listed above
in connection with determining the Enterprise Bonus set forth in the employment
agreement with Mr. William J. Shaw, and should not be used by those who have not
agreed to the procedures and taken responsibility for the sufficiency of the
procedures for their purposes.
s/ Deloitte & Touche LLP
July 8, 1996
<PAGE>
EXHIBIT 10.30 (A)
USTRAILS INC.
ENTERPRISE VALUE AND ENTERPRISE BONUS CALCULATION
ELECTION RECEIVED EFFECTIVE JUNE 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE FACTOR AMOUNT
------------------------------------------
<S> <C> <C> <C>
SECURED NOTES:
Outstanding Secured Notes, June 28, 1996 $101,454,000 0.7571 $76,813,360
Secured Notes redeemed July 15, 1995 $18,599,000 1.0000 18,599,000
Secured Notes repurchased January 31, 1996 $7,368,000 0.8550 6,299,640
--------------
101,712,000
COMMON STOCK, JUNE 28,1996 3,702,726 0.4583 1,697,083
--------------
ENTERPRISE VALUE, JUNE 28, 1996 103,409,083
Less: amount per Employment Agreement (90,000,000)
--------------
13,409,083
Percentage per Employment Agreement 5%
--------------
670,454
Plus: Stated amount per Employment Agreement 600,000
--------------
Enterprise Bonus at 100% Vesting (effective May 11, 1997) 1,270,454
75%
--------------
Vesting portion of Enterprise Bonus on June 29, 1996 $952,841
==============
</TABLE>
NOTES:
- -----
(1) The market value of Secured Notes and Common Stock outstanding on June 28,
1996, is based on the average price of the securities during the 15 trading
days immediately preceding the receipt of the Election (see Listing of
Daily Price Quotes).
(2) Scheduled redemptions of Secured Notes are valued at 100%.
(3) Repurchases of Secured Notes are valued at a defined "Mid-Point Percentage"
until the Company spends more than $10 million to repurchase or redeem
Secured Notes after July 15, 1995. The Mid-Point Percentage is the average
of the price paid of $71 and 100%.
(4) The Enterprise Bonus was 75% vested on May 11, 1996, and will be 100%
vested on May 11, 1997, if the vesting requirements are met at that date.
<PAGE>
EXHIBIT 10.30 (A)
USTRAILS INC.
LISTING OF DAILY PRICE QUOTES
FOR THE FIFTEEN TRADING DAYS PRIOR TO JUNE 29, 1996
<TABLE>
<CAPTION>
HIGHEST HIGHEST
SECURED BID COMMON BID
NOTES PRICE STOCK PRICE
- ------------- ------------ ------------- ------------
<S> <C> <C> <C>
June 28, 1996 750.000 June 28, 1996 $0.5625
June 27, 1996 750.000 June 27, 1996 $0.5625
June 26, 1996 770.000 June 26, 1996 $0.5625
June 25, 1996 778.125 June 25, 1996 $0.5625
June 24, 1996 755.000 June 24, 1996 $0.5625
June 21, 1996 755.000 June 21, 1996 $0.5000
June 20, 1996 755.000 June 20, 1996 $0.5000
June 19, 1996 755.000 June 19, 1996 $0.5625
June 18, 1996 760.000 June 18, 1996 $0.4375
June 17, 1996 760.000 June 17, 1996 $0.3125
June 14, 1996 760.000 June 14, 1996 $0.3125
June 13, 1996 768.750 June 13, 1996 $0.3125
June 12, 1996 740.000 June 12, 1996 $0.3750
June 11, 1996 750.000 June 11, 1996 $0.3750
June 10, 1996 750.000 June 10, 1996 $0.3750
------------ ------------
Average Price 757.125 Average Price $0.4583333
============ ============
</TABLE>
<PAGE>
EXHIBIT 10.30 (B)
[USTrails logo appears here]
MEMORANDUM
TO: Harry White
FROM: Bill Shaw /s/ Bill
SUBJECT: Enterprise Bonus Payment
DATE: June 29, 1996
COPY TO: Walter Jaccard
_____________________________________________________________________________
In accordance with Section 3A of my Employment Agreement with the Company dated
May 11, 1995 (the "Agreement"), this memo serves as my election to receive the
Enterprise Bonus described in the Agreement. The attached addendum provides a
calculation of the Enterprise Value and corresponding bonus amount as of the
date of this memo. The calculation will be reviewed and approved by the CPA firm
of Deloitte & Touche LLP prior to payment of the bonus. I request the bonus,
calculated at 75% vesting, to be paid on or before July 11, 1996. I also request
the remaining 25% to be paid on May 11, 1997, should the vesting requirements be
met at that date.
<PAGE>
EXHIBIT 10.36
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of September 1, 1995, between Thousand Trails,
Inc., a Washington corporation (the "Corporation"), and William J. Shaw (the
"Indemnitee").
RECITALS
A. Indemnitee is a director and/or officer of the Corporation and in such
capacity is performing valuable services to the Corporation.
B. The Corporation's Articles of Incorporation (the "Articles") provide
various rights to directors, officers, employees and agents of the
Corporation with respect to indemnification, advancement of defense
expenses and insurance.
C. The Articles specifically provide that, in addition to the rights provided
herein, the Corporation shall have the power, upon authorization of its
board of directors (the "Board"), to enter into agreements with directors,
officers, employees and agents, providing indemnification, advancement of
expenses, insurance or other funding arrangements with respect thereto.
D. Section 23B.08.560 of the Washington Business Corporation Act, as amended
(hereinafter referred to, together with Sections 23B.08.500 through
23B.08.590 of such law, as the "Statute"), specifically authorizes
Washington corporations to provide by contract that the expenses of
officers and directors incurred in defending a civil or criminal action,
suit or proceeding must be paid by the Corporation as they are incurred and
in advance of the final disposition of the action, and further provides
that the indemnification and advancement of expenses authorized in the
Statute does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
Articles of Incorporation or any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
E. The Statute as well as recent developments with respect to the terms and
availability of directors' and officers' liability insurance ("D&O
Insurance") have raised questions concerning the adequacy and reliability
of the protection afforded to directors and officers thereby and under the
Articles.
F. In order to resolve such questions and thereby induce Indemnitee to serve
or continue to serve the Corporation, the Corporation has determined and
agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's service and continued
service after the date hereof, the parties hereto agree as follows:
1. BASIC INDEMNIFICATION. The Corporation hereby indemnifies Indemnitee and
---------------------
agrees to hold Indemnitee harmless to the full extent permitted under the
Statute or any other applicable law or any successor to or redesignation or
amendment of the Statute and as further provided herein. Indemnification
under this Agreement in respect of expenses shall include, without
limitation, expenses relating to travel
Indemnification Agreement Page 1
<PAGE>
from the Indemnitee's then current residence to attend meetings,
depositions, court hearings and other similar events.
2. MAINTENANCE OF INSURANCE AND SELF-INSURANCE.
--------------------------------------------
(A) Subject only to the provisions of Section 2(b) hereof, so long as
Indemnitee shall continue to serve as a director or officer of the
Corporation, and thereafter so long as Indemnitee shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative and whether
formal or informal, by reason of the fact that Indemnitee is or was a
director or officer of the Corporation (or while such a director or
officer, served as a director, officer, employee or agent of the
Corporation or as a director, officer, trustee, partner, employee or
agent of a Subsidiary, as hereafter defined, or at the Corporation's
request, served in any such position with any other corporation,
partnership, joint venture, trust or other enterprise), the
Corporation shall seek to purchase and maintain in effect for the
benefit of Indemnitee one or more valid, binding and enforceable
policies of D&O Insurance.
(B) The Corporation shall not be required to maintain said policy or
policies of D&O Insurance in effect if said insurance is not
reasonably available or if, in the reasonable business judgment of the
Board, either (i) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (ii) such insurance
provides insufficient benefit by reason of the extent of applicable
exclusions, the limitation of the insurer's liability, the size of
retentions, or any other similar limitations under such policy.
(C) In the event the Corporation does not purchase and maintain D&O
Insurance in effect, the Corporation agrees to use its best efforts to
make, establish and fund one or more independent financial
arrangements, such as an indemnification trust, letter of credit or
security arrangement, that will, in the best judgment of the Board,
provide the greatest reasonable assurance that Indemnitee is and will
be held harmless and indemnified to the full extent permitted by law.
(D) As used in this Agreement, "Subsidiary" shall mean any corporation,
joint venture, trust, partnership, unincorporated business association
or other enterprise of which more than 50% of the outstanding capital
stock having voting power to elect a majority of the board of
directors or similar body of such enterprise is owned by the
Corporation (irrespective of whether or not, at the time capital stock
of any other class or series of such enterprise shall or might have
voting power upon the occurrence of any contingency) or which the
corporation otherwise controls or a non-profit corporation which
receives its principal financial support from the Corporation or its
Subsidiaries.
3. ADDITIONAL INDEMNITY AND ADVANCEMENT OF EXPENSES. Subject only to the
-------------------------------------------------
exclusions set forth in Section 4 hereof, and in addition to the indemnity
specified in Sections 1 and 2(c) hereof, the Corporation hereby indemnifies
and agrees to hold Indemnitee harmless against expenses (including, but not
limited to attorneys' fees and disbursements, court costs, and expert
witness fees, and against any judgments, fines, and amounts paid in
settlement) actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether
Indemnification Agreement Page 2
<PAGE>
formal or informal (including any action or suit by or in the right of the
Corporation), by reason of the fact that Indemnitee at any time (i) is or
was a director and/or officer of the Corporation, (ii) while such a
director and/or officer, is or was an officer, employee or agent of the
Corporation or a director, officer, trustee, employee, partner or agent of
a Subsidiary, or (iii) while such a director and/or officer, is or was
serving at the Corporation's request as a director, officer, trustee,
employee, partner or agent of any other organization or enterprise. The
Corporation shall promptly advance to Indemnitee or pay on Indemnitee's
behalf all such expenses or amounts actually incurred or payable by
Indemnitee.
4. LIMITATIONS ON INDEMNIFICATION BY CORPORATION. No indemnification shall be
----------------------------------------------
paid to or on behalf of Indemnitee if a final adjudication establishes that
his acts or omissions involved (i) intentional misconduct or a knowing
violation of law, (ii) conduct in violation of RCW 23B.08.310, or (iii) any
transaction with respect to which Indemnitee received a benefit in money,
property or services to which he was not legally entitled, unless the court
in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
such indemnification. The Corporation shall not be liable under this
Agreement to make any payment in connection with any claim made against the
Indemnitee to the extent that payment is actually made to the Indemnitee
under a valid and collectible policy of insurance or for an accounting of
profits made from the purchase or sale by the Indemnitee of securities of
the Corporation within the meaning of Section 16(b) of the Securities and
Exchange Act of 1934 and amendments thereto or similar provisions of any
state statutory or common law.
5. CONTRIBUTION. In order to provide for just and equitable contribution if
-------------
the indemnification provided in Sections 1, 1.2(c) and 3 is unavailable in
whole or in part, the parties agree that, in such event, in respect of any
threatened, pending or completed action, suit or proceeding in which the
Corporation is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Corporation shall contribute to the
payment of the Indemnitee's losses in an amount that is just and equitable
in the circumstances, taking into account, among other things,
contributions by other directors and officers or the Corporation pursuant
to indemnification agreements or otherwise. The Corporation and the
Indemnitee agree that, in the absence of personal enrichment, acts of
intentional fraud or dishonesty or criminal conduct on the part of the
Indemnitee, it would not be just and equitable for the Indemnitee to
contribute to the payment of Losses arising out of any action, suit,
proceeding or investigation in an amount greater than: (i) in a case where
the Indemnitee is a director of the Corporation or any Subsidiary but is
not an officer of the Corporation or such Subsidiary, the amount of fees
paid to the Indemnitee for serving as a director during the 12 months
preceding the commencement of such action, suit, or proceeding; or (ii) in
a case where the Indemnitee is a director of the Corporation or any
Subsidiary and is an officer of the Corporation or any such Subsidiary, the
amounts set forth in clause (i) plus five percent of the aggregate cash
compensation paid to the Indemnitee for service in such office(s) during
the 12 months preceding the commencement of such action, suit, or
proceeding; or (ii) in a case where the Indemnitee is only an officer of
the Corporation or any Subsidiary, five percent of the aggregate cash
compensation paid to the Indemnitee for service in such office(s) during
the 12 months preceding the commencement of such action, suit, or
proceeding. The Corporation shall contribute to the payment of losses
covered hereby to the extent not payable by the Indemnitee pursuant to the
contribution provisions set forth in the preceding sentence.
Indemnification Agreement Page 3
<PAGE>
6. CONTINUATION OF OBLIGATION. All agreements and obligations of the
---------------------------
Corporation contained herein shall continue during the period Indemnitee is
serving in any capacity described in Section 3 hereof, and shall continue
thereafter for so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact
that Indemnitee was a director or officer of the Corporation or any
Subsidiary or, while such a director or officer, served in any other
capacity referred to in this Agreement.
7. NOTIFICATION OF CLAIM. Promptly after receipt by Indemnitee of notice of
----------------------
the commencement of any action, suit or proceeding, Indemnitee will, if a
claim in respect thereof is to be made against the Corporation under this
Agreement, notify the Corporation of the commencement thereof, but the
omission to so notify the Corporation will not relieve it from any
liability which it may have to Indemnitee otherwise than under this
Agreement. The Corporation shall not be required to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent, which shall not be unreasonably
withheld.
8. REPAYMENT OF EXPENSES. Indemnitee agrees to reimburse the Corporation for
----------------------
all reasonable expenses paid or advances made by the Corporation in
connection with the defense of any civil or criminal action, suit or
proceeding against Indemnitee in the event, and only to the extent, that it
shall be ultimately determined that Indemnitee is not entitled to be
indemnified by the Corporation for such expenses under the provisions of
the Statute, the Articles of Incorporation, this Agreement or otherwise.
9. ENFORCEMENT.
------------
(A) The Corporation expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve or continue to serve the
Corporation in his or her official capacity, and acknowledges that
Indemnitee is relying on this Agreement in continuing so to serve.
(B) In the event Indemnitee is required to bring any action to enforce the
rights or to collect moneys due under this Agreement and is successful
in such action, the Corporation shall reimburse Indemnitee for all of
Indemnitee's reasonable fees and expenses in bringing and pursuing
such action.
10. BENEFIT PLANS. For purposes of this Agreement, Indemnitee's capacity as a
--------------
director and/or officer of the Corporation shall include any service by
Indemnitee as director, officer, employee, trustee or agent for, on behalf
or at the request of the Corporation which imposes duties on, or involves
services by, Indemnitee with respect to any employee benefit plan, its
participants, or beneficiaries; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and a person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner not opposed
to the best interests of the Corporation for purposes of the Statute and
this Agreement.
11. SEPARABILITY. If any provision or provisions of this Agreement shall be
-------------
held to be invalid, illegal or unenforceable for any reason whatsoever (i)
the validity, legality
Indemnification Agreement Page 4
<PAGE>
and enforceability of the remaining provisions of this Agreement (including
without limitation, all portions of any paragraphs of this Agreement
containing any such provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall not in any
way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation,
all portions of any paragraph of this Agreement containing any such
provision to be invalid, illegal or unenforceable) shall be construed to
give effect to the intent of the parties that the Corporation provide
protection to Indemnitee to the fullest enforceable extent.
12. GOVERNING LAW; SUCCESSOR; AMENDMENT AND TERMINATION; ETC.
---------------------------------------------------------
(A) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Washington, but without reference to the
conflicts of laws principles of that jurisdiction.
(B) This Agreement shall be binding upon the Corporation, its successors
and assigns (including, without limitation, any transferee of all or
substantially all of its assets and any successor by merger or
operation of law), and shall inure to the benefit of Indemnitee, his
heirs, personal representatives and assigns.
(C) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
(D) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one document.
(E) Nothing herein shall be deemed to diminish or otherwise restrict the
Indemnitee's right to indemnification or advancement of expenses under
any provision of the Articles or Bylaws of the Corporation or under
Nevada law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
INDEMNITEE: THOUSAND TRAILS, INC.
s/ William J. Shaw s/ Harry J. White, Jr
- --------------------------- ---------------------------------
William J. Shaw Harry J. White, Jr.
Vice President and Chief Financial Officer
Indemnification Agreement Page 5
<PAGE>
EXHIBIT 10.36
SCHEDULE OF SUBSTANTIALLY IDENTICAL INDEMNIFICATION AGREEMENTS
--------------------------------------------------------------
Indemnification Agreement dated as of April 24, 1990, between Thousand Trails,
Inc., a Washington corporation (the Company), and Richard L. Park, a director of
the Company.
Indemnification Agreement dated as of April 24, 1990, between the Company and
George F. Donovan, a director of the Company.
Indemnification Agreement dated as of April 24, 1990, between the Company and
Eugene B. Konecci, a director of the Company.
Indemnification Agreement dated as of April 24, 1990, between the Company and H.
Robert Bartell, Jr., a director of the Company.
Indemnification Agreement dated as of April 24, 1990, between the Company and
Lawrence Connell, a director of the Company.
Indemnification Agreement dated as of April 24, 1990, between the Company and
Lawrence W. Medford, a director of the Company.
Indemnification Agreement dated as of April 24, 1990, between the Company Joseph
E. Settle, a director of the Company.
Indemnification Agreement dated as of June 18, 1991, between the Company and
William P. Meehan, a director of the Company.
Indemnification Agreement dated as of June 18, 1991, between the Company and
Walter B. Jaccard, a director of the Company.
Indemnification Agreement dated as of June 18, 1991, between the Company and
Kenneth E. Hendrycy, a director of the Company.
Indemnification Agreement dated as of June 30, 1991, between the Company and
Charles C. Davis, a director of the Company.
Indemnification Agreement dated as of June 30, 1991, between the Company and
Glen Adams, a director of the Company.
Indemnification Agreement dated as of June 30, 1991, between the Company and
William F. Herzog, a director of the Company.
Indemnification Agreement dated as of June 30, 1991, between the Company and
Donald W. Hair, a director of the Company.
Indemnification Agreement dated as of June 30, 1991, between the Company and
Robert M. Galecke, a director of the Company.
Indemnification Agreement dated as of September 1, 1995, between the Company and
Harry J. White, Jr., a director of the Company.
Indemnification Agreement Page 6
<PAGE>
Indemnification Agreement dated as of June 30, 1991, between the Company and R.
Gerald Gelinas, a director of the Company.
Indemnification Agreement Page 7
<PAGE>
EXHIBIT 10.37
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of September 1, 1995, between National American
Corporation, a Nevada Corporation (the "Corporation"), and William J. Shaw (the
"Indemnitee").
RECITALS
A. Indemnitee is a director and/or officer of the Corporation and in such
capacity is performing valuable services to the Corporation.
B. The Corporation's Articles of Incorporation (the "Articles") provide
various rights to directors, officers, employees and agents of the
Corporation with respect to indemnification, advancement of defense
expenses and insurance.
C. The Articles specifically provide that, in addition to the rights provided
herein, the Corporation shall have the power, upon authorization of its
board of directors (the "Board"), to enter into agreements with directors,
officers, employees and agents, providing indemnification, advancement of
expenses, insurance or other funding arrangements with respect thereto.
D. Section 78.751 of the Nevada General Corporation Law, as amended
(hereinafter referred to, together with Section 78.752 of such law, as the
"Statute"), specifically authorizes Nevada corporations to provide by
contract that the expenses of officers and directors incurred in defending
a civil or criminal action, suit or proceeding must be paid by the
Corporation as they are incurred and in advance of the final disposition of
the action, and further provides that the indemnification and advancement
of expenses authorized in the Statute does not exclude any other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation or any Bylaw, agreement, vote
of stockholders or disinterested directors or otherwise.
E. The Statute as well as recent developments with respect to the terms and
availability of directors' and officers' liability insurance ("D&O
Insurance") have raised questions concerning the adequacy and reliability
of the protection afforded to directors and officers thereby and under the
Articles.
F. In order to resolve such questions and thereby induce Indemnitee to serve
or continue to serve the Corporation, the Corporation has determined and
agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's service and continued
service after the date hereof, the parties hereto agree as follows:
1. BASIC INDEMNIFICATION. The Corporation hereby indemnifies Indemnitee and
----------------------
agrees to hold Indemnitee harmless to the full extent permitted under the
Statute or any other applicable law or any successor to or redesignation or
amendment of the Statute and as further provided herein. Indemnification
under this Agreement in respect of expenses shall include, without
limitation, expenses relating to travel
Indemnification Agreement Page 1
<PAGE>
from the Indemnitee's then current residence to attend meetings,
depositions, court hearings and other similar events.
2. MAINTENANCE OF INSURANCE AND SELF-INSURANCE.
--------------------------------------------
(A) Subject only to the provisions of Section 2(b) hereof, so long as
Indemnitee shall continue to serve as a director or officer of
the Corporation, and thereafter so long as Indemnitee shall be
subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal or
investigative and whether formal or informal, by reason of the
fact that Indemnitee is or was a director or officer of the
Corporation (or while such a director or officer, served as a
director, officer, employee or agent of the Corporation or as a
director, the officer, trustee, partner, employee or agent of a
Subsidiary, as hereafter defined, or at the Corporation's
request, served in any such position with any other corporation,
partnership, joint venture, trust or other enterprise), the
Corporation shall seek to purchase and maintain in effect for the
benefit of Indemnitee one or more valid, binding and enforceable
policies of D&O Insurance.
(B) The Corporation shall not be required to maintain said policy or
policies of D&O Insurance in effect if said insurance is not
reasonably available or if, in the reasonable business judgment
of the Board, either (i) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (ii)
such insurance provides insufficient benefit by reason of the
extent of applicable exclusions, the limitation of the insurer's
liability, the size of retentions, or any other similar
limitations under such policy.
(C) In the event the Corporation does not purchase and maintain D&O
Insurance in effect, the Corporation agrees to use its best
efforts to make, establish and fund one or more independent
financial arrangements, such as an indemnification trust, letter
of credit or security arrangement, that will, in the best
judgment of the Board, provide the greatest reasonable assurance
that Indemnitee is and will be held harmless and indemnified to
the full extent permitted by law.
(D) As used in this Agreement, "Subsidiary" shall mean any
corporation, joint venture, trust, partnership, unincorporated
business association or other enterprise of which more than 50%
of the outstanding capital stock having voting power to elect a
majority of the board of directors or similar body of such
enterprise is owned by the Corporation (irrespective of whether
or not, at the time capital stock of any other class or series of
such enterprise shall or might have voting power upon the
occurrence of any contingency) or which the corporation otherwise
controls or a non-profit corporation which receives its principal
financial support from the Corporation or its Subsidiaries.
3. ADDITIONAL INDEMNITY AND ADVANCEMENT OF EXPENSES. Subject only to the
-------------------------------------------------
exclusions set forth in Section 4 hereof, and in addition to the indemnity
specified in Sections 1 and 2(c) hereof, the Corporation hereby indemnifies
and agrees to hold Indemnitee harmless against expenses (including, but not
limited to attorneys' fees and disbursements, court costs, and expert
witness fees, and against any judgments, fines, and amounts paid in
settlement) actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether
Indemnification Agreement
Page 2
<PAGE>
formal or informal (including any action or suit by or in the right of the
Corporation), by reason of the fact that Indemnitee at any time (i) is or
was a director and/or officer of the Corporation, (ii) while such a
director and/or officer, is or was an officer, employee or agent of the
Corporation or a director, officer, trustee, employee, partner or agent of
a Subsidiary, or (iii) while such a director and/or officer, is or was
serving at the Corporation's request as a director, officer, trustee,
employee, partner or agent of any other organization or enterprise. The
Corporation shall promptly advance to Indemnitee or pay on Indemnitee's
behalf all such expenses or amounts actually incurred or payable by
Indemnitee.
4. LIMITATIONS ON INDEMNIFICATION BY CORPORATION. No indemnification shall be
----------------------------------------------
paid to or on behalf of Indemnitee if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or knowing
violation of law and was material to the cause of action, unless the court
in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
such indemnification. The Corporation shall not be liable under this
Agreement to make any payment in connection with any claim made against the
Indemnitee to the extent that payment is actually made to the Indemnitee
under a valid and collectible policy of insurance or for an accounting of
profits made from the purchase or sale by the Indemnitee of securities of
the Corporation within the meaning of Section 16(b) of the Securities and
Exchange Act of 1934 and amendments thereto or similar provisions of any
state statutory or common law.
5. CONTRIBUTION. In order to provide for just and equitable contribution if
-------------
the indemnification provided in Sections 1, 1.2(c) and 3 is unavailable in
whole or in part, the parties agree that, in such event, in respect of any
threatened, pending or completed action, suit or proceeding in which the
Corporation is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Corporation shall contribute to the
payment of the Indemnitee's losses in an amount that is just and equitable
in the circumstances, taking into account, among other things,
contributions by other directors and officers or the Corporation pursuant
to indemnification agreements or otherwise. The Corporation and the
Indemnitee agree that, in the absence of personal enrichment, acts of
intentional fraud or dishonesty or criminal conduct on the part of the
Indemnitee, it would not be just and equitable for the Indemnitee to
contribute to the payment of Losses arising out of any action, suit,
proceeding or investigation in an amount greater than: (i) in a case where
the Indemnitee is a director of the Corporation or any Subsidiary but is
not an officer of the Corporation or such Subsidiary, the amount of fees
paid to the Indemnitee for serving as a director during the 12 months
preceding the commencement of such action, suit, or proceeding; or (ii) in
a case where the Indemnitee is a director of the Corporation or any
Subsidiary and is an officer of the Corporation or any such Subsidiary, the
amounts set forth in clause (i) plus five percent of the aggregate cash
compensation paid to the Indemnitee for service in such office(s) during
the 12 months preceding the commencement of such action, suit, or
proceeding; or (ii) in a case where the Indemnitee is only an officer of
the Corporation or any Subsidiary, five percent of the aggregate cash
compensation paid to the Indemnitee for service in such office(s) during
the 12 months preceding the commencement of such action, suit, or
proceeding. The Corporation shall contribute to the payment of losses
covered hereby to the extent not payable by the Indemnitee pursuant to the
contribution provisions set forth in the preceding sentence.
Indemnification Agreement Page 3
<PAGE>
6. CONTINUATION OF OBLIGATION. All agreements and obligations of the
---------------------------
Corporation contained herein shall continue during the period Indemnitee is
serving in any capacity described in Section 3 hereof, and shall continue
thereafter for so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact
that Indemnitee was a director or officer of the Corporation or any
Subsidiary or, while such a director or officer, served in any other
capacity referred to in this Agreement.
7. NOTIFICATION OF CLAIM. Promptly after receipt by Indemnitee of notice of
----------------------
the commencement of any action, suit or proceeding, Indemnitee will, if a
claim in respect thereof is to be made against the Corporation under this
Agreement, notify the Corporation of the commencement thereof, but the
omission to so notify the Corporation will not relieve it from any
liability which it may have to Indemnitee otherwise than under this
Agreement. The Corporation shall not be required to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent, which shall not be unreasonably
withheld.
8. REPAYMENT OF EXPENSES. Indemnitee agrees to reimburse the Corporation for
----------------------
all reasonable expenses paid or advances made by the Corporation in
connection with the defense of any civil or criminal action, suit or
proceeding against Indemnitee in the event, and only to the extent, that it
shall be ultimately determined that Indemnitee is not entitled to be
indemnified by the Corporation for such expenses under the provisions of
the Statute, the Articles of Incorporation, this Agreement or otherwise.
9. ENFORCEMENT.
------------
(A) The Corporation expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve or continue to serve the
Corporation in his or her official capacity, and acknowledges that
Indemnitee is relying on this Agreement in continuing so to serve.
(B) In the event Indemnitee is required to bring any action to enforce the
rights or to collect moneys due under this Agreement and is successful
in such action, the Corporation shall reimburse Indemnitee for all of
Indemnitee's reasonable fees and expenses in bringing and pursuing
such action.
10. BENEFIT PLANS. For purposes of this Agreement, Indemnitee's capacity as a
--------------
director and/or officer of the Corporation shall include any service by
Indemnitee as director, officer, employee, trustee or agent for, on behalf
or at the request of the Corporation which imposes duties on, or involves
services by, Indemnitee with respect to any employee benefit plan, its
participants, or beneficiaries; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and a person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner not opposed
to the best interests of the Corporation for purposes of the Statute and
this Agreement.
11. SEPARABILITY. If any provision or provisions of this Agreement shall be
-------------
held to be invalid, illegal or unenforceable for any reason whatsoever (i)
the validity, legality and enforceability of the remaining provisions of
this Agreement (including without
Indemnification Agreement Page 4
<PAGE>
limitation, all portions of any paragraph of this Agreement containing any
such provision held to be invalid, illegal or unenforceable),that are not
themselves invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and (ii) to the fullest extent possible, the
provisioins of this Agreement (including, without limitation, all portions
of any paragraph of this Agreement containing any such provision to be
invalid, illegal or unenforceable) shall be construed to give effect to the
intent of the parties that the Corporation provide protection to Indemnitee
to the fullest enforceable extent.
12. GOVERNING LAW; SUCCESSOR; AMENDMENT AND TERMINATION; ETC.
---------------------------------------------------------
(A) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Nevada, but without reference to the
conflicts of laws principles of that jurisdiction.
(B) This Agreement shall be binding upon the Corporation, its successors
and assigns (including, without limitation, any transferee of all or
substantially all of its assets and any successor by merger or
operation of law), and shall inure to the benefit of Indemnitee, his
heirs, personal representatives and assigns.
(C) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
(D) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one document.
(E) Nothing herein shall be deemed to diminish or otherwise restrict the
Indemnitee's right to indemnification or advancement of expenses under
any provision of the Articles or Bylaws of the Corporation or under
Nevada law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written .
INDEMNITEE: NATIONAL AMERICAN CORPORATION
s/ William J. Shaw s/ Harry J. White, Jr.
- -------------------------- ------------------------------
William J. Shaw Harry J. White, Jr.
Vice President and Chief Financial Officer
Page 5
<PAGE>
EXHIBIT 10.37
SCHEDULE OF SUBSTANTIALLY IDENTICAL INDEMNIFICATION AGREEMENTS
--------------------------------------------------------------
Indemnification Agreement dated as of June 25, 1991, between National American
Corporation, a Nevada corporation (the "Company"), and Walter B. Jaccard, a
director of the Company.
Indemnification Agreement dated as of June 25, 1991, between the Company and
Kenneth E. Hendrycy, a director of the Company.
Indemnification Agreement dated as of June 25, 1991, between the Company and
Robert Grawl, Jr., a director of the Company.
Indemnification Agreement dated as of June 25, 1991, between the Company and
William P. Meehan, a director of the Company.
Indemnification Agreement dated as of June 25, 1991, between the Company and W.
Lawrence Medford, a director of the Company.
Indemnification Agreement dated as of August 1, 1991, between the Company and
Donald W. Hair, a director of the Company.
Indemnification Agreement dated as of August 1, 1991, between the Company and
Charles C. Davis, a director of the Company.
Indemnification Agreement dated as of August 1, 1991, between the Company and
William F. Herzog, a director of the Company.
Indemnification Agreement dated as of August 1, 1991, between the Company and
Robert M. Galecke, a director of the Company.
Indemnification Agreement dated as of September 1, 1995, between the Company and
Harry J. White, Jr., a director of the Company.
Indemnification Agreement dated as of September 1, 1995, between the Company and
R. Gerald Gelinas, a director of the Company.
Indemnification Agreement dated as of September 1, 1995, between the Company and
David A. McCrum, a director of the Company.
<PAGE>
EXHIBIT 10.38
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of May 8, 1991, between NACO FINANCE
CORPORATION., a Nevada Corporation (the "Corporation"), and Donald W. Hair (the
"Indemnitee").
RECITALS
A. Indemnitee is a director and/or officer of the Corporation and in such
capacity is performing valuable services to the Corporation.
B. The Corporation's Articles of Incorporation (the "Articles") provide
various rights to directors, officers, employees and agents of the
Corporation with respect to indemnification, advancement of defense
expenses and insurance.
C. The Articles specifically provide that, in addition to the rights provided
herein, the Corporation shall have the power, upon authorization of its
board of directors (the "Board"), to enter into agreements with directors,
officers, employees and agents, providing indemnification, advancement of
expenses, insurance or other funding arrangements with respect thereto.
D. Section 78.751 of the Nevada General Corporation Law, as amended
(hereinafter referred to, together with Section 78.752 of such law, as the
"Statute"), specifically authorizes Nevada corporations to provide by
contract that the expenses of officers and directors incurred in defending
a civil or criminal action, suit or proceeding must be paid by the
Corporation as they are incurred and in advance of the financial
disposition of the action, and further provides that the indemnification
and advancement of expenses authorized in the Statute does not exclude any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under the Articles of Incorporation or any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
E. The Statute as well as recent developments with respect to the terms and
availability of directors' and officers' liability insurance ("D&O
Insurance") have raised questions concerning the adequacy and reliability
of the protection afforded to directors and officers thereby and under the
Articles.
F. In order to resolve such questions and thereby induce Indemnitee to serve
or continue to serve the Corporation, the Corporation has determined and
agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's service and continued
service after the date hereof, the parties hereto agree as follows:
1. BASIC INDEMNIFICATION. The Corporation hereby indemnifies Indemnitee and
----------------------
agrees to hold Indemnitee harmless to the full extent permitted under the
Statute or any other applicable law or any successor to or redesignation or
amendment of the Statute and as further provided herein. Indemnification
under this Agreement in respect of expenses shall include, without
limitation, expenses relating to travel from
Indemnification Agreement
page 1
<PAGE>
the Indemnitee's then current residence to attend meetings, depositions,
court hearings and other similar events.
2. MAINTENANCE OF INSURANCE AND SELF-INSURANCE.
--------------------------------------------
(A) Subject only to the provisions of Section 2(b) hereof, so long as
Indemnitee shall continue to serve as a director or officer of the
Corporation, and thereafter so long as Indemnitee shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative and whether
formal or informal, by reason of the fact that Indemnitee is or was a
director or officer of the Corporation (or while such a director or
officer, served as a director, officer, employee or agent of the
Corporation or as a director, officer, trustee, partner, employee or
agent of a Subsidiary, as hereafter defined, or at the Corporation's
request, served in any such position with any other corporation,
partnership, joint venture, trust or other enterprise), the
Corporation shall seek to purchase and maintain in effect for the
benefit of Indemnitee one or more valid, binding and enforceable
policies of D&O Insurance.
(B) The Corporation shall not be required to maintain said policy or
policies of D&O Insurance in effect if said insurance is not
reasonably available or if, in the reasonable business judgment of the
Board, either (i) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, or (ii) such insurance
provides insufficient benefit by reason of the extent of applicable
exclusions, the limitation of the insurer's liability, the size of
retentions, or any other similar limitations under such policy.
(C) In the event the Corporation does not purchase and maintain D&O
Insurance in effect, the Corporation agrees to use its best efforts to
make, establish and fund one or more independent financial
arrangements, such as an indemnification trust, letter of credit or
security arrangement, that will, in the best judgment of the Board,
provide the greatest reasonable assurance that Indemnitee is and will
be held harmless and indemnified to the full extent permitted by law.
(D) As used in this Agreement, "Subsidiary" shall mean any corporation,
joint venture, trust, partnership, unincorporated business association
or other enterprise of which more than 50% of the outstanding capital
stock having voting power to elect a majority of the board of
directors or similar body of such enterprise is owned by the
Corporation (irrespective of whether or not, at the time capital stock
of any other class or series of such enterprise shall or might have
voting power upon the occurrence of any contingency) or which the
corporation otherwise controls or a non-profit corporation which
receives its principal financial support from the Corporation or its
Subsidiaries.
3. ADDITIONAL INDEMNITY AND ADVANCEMENT OF EXPENSES. Subject only to the
-------------------------------------------------
exclusions set forth in Section 4 hereof, and in addition to the indemnity
specified in Sections 1 and 2(c) hereof, the Corporation hereby indemnifies
and agrees to hold Indemnitee harmless against expenses (including, but not
limited to attorneys' fees and disbursements, court costs, and expert
witness fees, and against any judgments, fines, and amounts paid in
settlement) actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether
Indemnification Agreement
page 2
<PAGE>
formal or informal (including any action or suit by or in the right of the
Corporation), by reason of the fact that Indemnitee at any time (i) is or
was a director and/or officer of the Corporation, (ii) while such a
director and/or officer, is or was an officer, employee or agent of the
Corporation or a director, officer, trustee, employee, partner or agent of
a Subsidiary, or (iii) while such a director and/or officer, is or was
serving at the Corporation's request as a director, officer, trustee,
employee, partner or agent of any other organization or enterprise. The
Corporation shall promptly advance to Indemnitee or pay on Indemnitee's
behalf all such expenses or amounts actually incurred or payable by
Indemnitee.
4. LIMITATIONS ON INDEMNIFICATION BY CORPORATION. No indemnification shall be
----------------------------------------------
paid to or on behalf of Indemnitee if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or knowing
violation of law and was material to the cause of action, unless the court
in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
such indemnification. The Corporation shall not be liable under this
Agreement to make any payment in connection with any claim made against the
Indemnitee to the extent that payment is actually made to the Indemnitee
under a valid and collectible policy of insurance or for an accounting of
profits made from the purchase or sale by the Indemnitee of securities of
the Corporation within the meaning of Section 16(b) of the Securities and
Exchange Act of 1934 and amendments thereto or similar provisions of any
state statutory or common law.
5. CONTRIBUTION. In order to provide for just and equitable contribution if
-------------
the indemnification provided in Sections 1, 1.2(c) and 3 is unavailable in
whole or in part, the parties agree that, in such event, in respect of any
threatened, pending or completed action, suit or proceeding in which the
Corporation is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), the Corporation shall contribute to the
payment of the Indemnitee's losses in an amount that is just and equitable
in the circumstances, taking into account, among other things,
contributions by other directors and officers or the Corporation pursuant
to indemnification agreements or otherwise. The Corporation and the
Indemnitee agree that, in the absence of personal enrichment, acts of
intentional fraud or dishonesty or criminal conduct on the part of the
Indemnitee, it would not be just and equitable for the Indemnitee to
contribute to the payment of Losses arising out of any action, suit,
proceeding or investigation in an amount greater than: (i) in a case where
the Indemnitee is a director of the Corporation or any Subsidiary but is
not an officer of the Corporation or such Subsidiary, the amount of fees
paid to the Indemnitee for serving as a director during the 12 months
preceding the commencement of such action, suit, or proceeding; or (ii) in
a case where the Indemnitee is a director of the Corporation or any
Subsidiary and is an officer of the Corporation or any such Subsidiary, the
amounts set forth in clause (i) plus five percent of the aggregate cash
compensation paid to the Indemnitee for service in such office(s) during
the 12 months preceding the commencement of such action, suit, or
proceeding; or (ii) in a case where the Indemnitee is only an officer of
the Corporation or any Subsidiary, five percent of the aggregate cash
compensation paid to the Indemnitee for service in such office(s) during
the 12 months preceding the commencement of such action, suit, or
proceeding. The Corporation shall contribute to the payment of losses
covered hereby to the extent not payable by the Indemnitee pursuant to the
contribution provisions set forth in the preceding sentence.
Indemnification Agreement
page 3
<PAGE>
6. CONTINUATION OF OBLIGATION. All agreements and obligations of the
---------------------------
Corporation contained herein shall continue during the period Indemnitee is
serving in any capacity described in Section 3 hereof, and shall continue
thereafter for so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact
that Indemnitee was a director or officer of the Corporation or any
Subsidiary or, while such a director or officer, served in any other
capacity referred to in this Agreement.
7. NOTIFICATION OF CLAIM. Promptly after receipt by Indemnitee of notice of
----------------------
the commencement of any action, suit or proceeding, Indemnitee will, if a
claim in respect thereof is to be made against the Corporation under this
Agreement, notify the Corporation of the commencement thereof, but the
omission to so notify the Corporation will not relieve it from any
liability which it may have to Indemnitee otherwise than under this
Agreement. The Corporation shall not be required to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent, which shall not be unreasonably
withheld.
8. REPAYMENT OF EXPENSES. Indemnitee agrees to reimburse the Corporation for
----------------------
all reasonable expenses paid or advances made by the Corporation in
connection with the defense of any civil or criminal action, suit or
proceeding against Indemnitee in the event, and only to the extent, that it
shall be ultimately determined that Indemnitee is not entitled to be
indemnified by the Corporation for such expenses under the provisions of
the Statute, the Articles of Incorporation, this Agreement or otherwise.
9. ENFORCEMENT.
------------
(A) The Corporation expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve or continue to serve the
Corporation in his or her official capacity, and acknowledges that
Indemnitee is relying on this Agreement in continuing so to serve.
(B) In the event Indemnitee is required to bring any action to enforce the
rights or to collect moneys due under this Agreement and is successful
in such action, the Corporation shall reimburse Indemnitee for all of
Indemnitee's reasonable fees and expenses in bringing and pursuing
such action.
10. BENEFIT PLANS. For purposes of this Agreement, Indemnitee's capacity as a
--------------
director and/or officer of the Corporation shall include any service by
Indemnitee as director, officer, employee, trustee or agent for, on behalf
or at the request of the Corporation which imposes duties on, or involves
services by, Indemnitee with respect to any employee benefit plan, its
participants, or beneficiaries; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
and a person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner not opposed
to the best interests of the Corporation for purposes of the Statute and
this Agreement.
11. SEPARABILITY. If any provision or provisions of this Agreement shall be
-------------
held to be invalid, illegal or unenforceable for any reason whatsoever (i)
the validity, legality and enforceability of the remaining provisions of
this Agreement (including without
Indemnification Agreement
page 4
<PAGE>
limitation, all portions of any paragraphs of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby, and (ii) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, all portions
of any paragraph of this Agreement containing any such provision to be
invalid, illegal or unenforceable) shall be construed to give effect to the
intent of the parties that the Corporation provide protection to Indemnitee
to the fullest enforceable extent.
12. GOVERNING LAW; SUCCESSOR; AMENDMENT AND TERMINATION; ETC.
---------------------------------------------------------
(A) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Nevada, but without reference to the
conflicts of laws principles of that jurisdiction.
(B) This Agreement shall be binding upon the Corporation, its successors
and assigns (including, without limitation, any transferee of all or
substantially all of its assets and any successor by merger or
operation of law), and shall inure to the benefit of Indemnitee, his
heirs, personal representatives and assigns.
(C) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
(D) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one document.
(E) Nothing herein shall be deemed to diminish or otherwise restrict the
Indemnitee's right to indemnification or advancement of expenses under
any provision of the Articles or Bylaws of the Corporation or under
Nevada law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
INDEMNITEE: NACO FINANCE CORPORATION
s/Donald W. Hair s/Robert M. Galecke
- ---------------------------------- -------------------------------------
Donald W. Hair Robert M. Galecke
Its: President
Indemnification Agreement
page 5
<PAGE>
EXHIBIT 10.38
SCHEDULE OF SUBSTANTIALLY IDENTICAL INDEMNIFICATION AGREEMENTS
--------------------------------------------------------------
Indemnification Agreement dated as of May 8, 1991, between USTrails Inc. (the
"Company"), a Nevada corporation (formerly known as NACO Finance Corporation),
and William F. Herzog, a director of the Company.
Indemnification Agreement dated as of May 8, 1991, between the Company and
Charles C. Davis, a director of the Company.
Indemnification Agreement dated as of May 8, 1991, between the Company and
Robert M. Galecke, a director of the Company.
<PAGE>
Member Name:______________________________________ Member #:__________________
EXHIBIT 10.52
-------------
MEMBERSHIP AGREEMENT
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. and its subsidiaries ("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 as it now exists and as it may from time to
time be reasonably amended by us for the benefit of our membership as a whole.
The Member Rules 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.
A. TYPE OF MEMBERSHIP. You are purchasing the membership indicated below
(CHECK ONLY ONE AND INITIAL):
_____________ [_] NATIONAL MEMBERSHIP (entitles you to use all Trails
and NACO preserves).
(Buyer's Initials)
_____________ [_] WESTERN ZONE MEMBERSHIP (entitles you to use all
Trails and NACO preserves in the Western Zone).
(Buyer's Initials)
_____________ [_] EASTERN ZONE MEMBERSHIP (entitles you to use all
Trails and NACO preserves in the Eastern Zone).
(Buyer's Initials)
_____________ [_] SINGLE REGION MEMBERSHIP (entitles you to use all
Trails and NACO preserves in the
(Buyer's Initials) ____________________ region). [INSERT NAME OF REGION]
_____________ [_] THREE PRESERVE MEMBERSHIP (entitles you to use the
following three preserves: (i) ____________________,
(Buyer's Initials) (ii) ____________________, (iii) ___________________).
[INSERT NAME OF PRESERVES]
_____________ [_] ONE PRESERVE MEMBERSHIP (entitles you to use the
___________________ preserve).
(Buyer's Initials) [INSERT NAME OF PRESERVE]
The preserves that are currently available for use by members, and the
boundaries of the Western Zone, the Eastern Zone, and the five regions, are
described in the Disclosure Statement. You may use only the preserves that
are specifically included in the type of membership you purchase.
The initial term of your membership will begin on the date of your purchase
and continue through December 31 of the year after the year in which your
purchase is made. For example, if you purchase on February 15, 1996, this
initial term will be from February 15, 1996 to December 31, 1997. 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.
B. UPGRADE PRIVILEGES. You may upgrade your membership at any time to
a new membership entitling you to use a greater number of preserves. To
upgrade your membership, you must pay the purchase price of the new
membership, and agree to accept the rate of preservation fees and use fees,
charged by us for the new membership at the time of upgrade. When you
upgrade your membership, we will deduct from the purchase price of the new
membership the full amount of the purchase price that you paid for this
membership.
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
notification 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) 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; (h) 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 modify, amend 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
Page 1 of 4
<PAGE>
Member Name:____________________________________ Member #:_____________________
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 preservation
fees, 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. Unless you purchase a National Membership, your
membership is not transferable in any manner, and any transfer in violation of
---
this prohibition shall be null and void. If you purchase a National Membership,
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 preservation fees are current at the
time of transfer; and (c) may be transferred only if your transferee agrees to
accept the rate of preservation fees 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. The transfer fee 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 preservation fees. 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 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 purchase price,
finance charge, and preservation fees, 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 preservation fees
accrued to the date of default, immediately due and payable. Moreover, we may
continue to collect annual preservation fees 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 9 and 10. 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.
Page 2 of 4
<PAGE>
Member Name:_____________________________________ Member #:____________________
9. PURCHASE PRICE. The purchase price for your membership is $_______________,
plus applicable taxes. (CHECK ONLY ONE AND INITIAL)
_______________ [_] I desire to pay the purchase price for my membership
(Buyer's Initials) of $_______________ in full on the day of purchase.
_______________ [_] I desire to pay the purchase price for my membership
(Buyer's Initials) in installments, as follows:
(IF CHECKED, COMPLETE THE BALANCE OF SECTION 9)
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 twelve (12) 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 accured interest thereon are paid in full. All payments
are stated and must be made in U.S. Dollars.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FINANCE AMOUNT FINANCED TOTAL OF TOTAL SALE PRICE
PERCENTAGE CHARGE PAYMENTS
RATE
<S> <C> <C> <C> <C>
The cost of your credit The dollar amount the The amount of credit The amount you will The total cost of your
as a yearly rate. credit will cost you. provided to you or on have paid after you have purchase on credit
your behalf. paid all payments as including your down
scheduled. payment of
$______________
______________% $ ______________ $_______________ $________________ $______________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Your payment schedule will be: Number of Payments: 12
-------------------
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.
________________________________________________________________________________
ITEMIZATION OF THE AMOUNT FINANCED:
(1) Cash Sale Price of Your Membership $_______________
(2) Less Down Payment $_______________
(3) Amount Financed (Difference between items 1 & 2) $_______________
10. PRESERVATION FEES. During the initial term and each renewal term of your
membership, you agree to pay us annual preservation fees in the amount set forth
below for the preservation fee option ("Preservation Fee Option") you select
(CHECK ONLY ONE AND INITIAL). Applicable taxes, if any, will be added to your
annual preservation fees. You may change from one Preservation Fee Option to
another Preservation Fee 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.
_____________ [_] GETAWAY: 15 NIGHTS FOR $198 PER YEAR (entitles you to
(Buyer's Initials) camp overnight at the preserves included in your
membership for a total of 15 nights in a calendar
year. Day use of these preserves is only permitted
with an overnight stay.
_____________ [_] ADVENTURER: 30 NIGHTS FOR $298 PER YEAR (entitles you
(Buyer's Initials) to camp overnight at the preserves included in 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 $439 PER YEAR (entitles you
(Buyer's Initials to camp overnight at the preserves included in your
membership for a total of 50 nights in a calendar
year and also includes unlimited day use of these
preserves).
_____________ [_] TRAILBLAZER: 90 NIGHTS FOR $698 PER YEAR (entitles you
(Buyer's Initials) to camp overnight at the preserves included in your
membership for a total of 90 nights in a calendar
year and also includes unlimited day use of these
preserves).
_____________ [_] ON THE ROAD: UNLIMITED USE FOR $998 PER YEAR (entitles
(Buyer's Initials) you to unlimited overnight camping at the preserves
included in your membership (subject to length of stay
restrictions for any one preserve) and to unlimited day
use of these preserves).
[NOT AVAILABLE FOR SINGLE PRESERVE MEMBERSHIP]
Your annual preservation fees are payable in advance. As a convenience, you may
pay the annual preservation fees 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. Your annual preservation
fees 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 preservation fees must be paid in full on or before January 1 of each
year. If payment of your annual preservation fees 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 preservation fees are stated and must be paid in U.S.
Dollars.
Page 3 of 4
<PAGE>
Member Name:____________________________________ Member #:______________________
PRESERVATION FEE INCREASES. The amount of annual preservation fees payable
under each Preservation Fee 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 Preservation Fee 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 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, 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
____________________________________ ____________________________________
Purchaser's Signature Membership Campground Operator:
____________________________________ ______________________________________
Purchaser's Name (please print) 2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
____________________________________ ______________________________________
Purchaser's Signature Authorized Signature
Purchaser's Name (please print) Preserve
Page 4 of 4
<PAGE>
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 each of these corporations in regular type are its wholly owned
subsidiaries.
UST WILDERNESS MANAGEMENT CORPORATION
SHOREWOOD CORPORATION (D/B/A RESORT PARKS INTERNATIONAL)
THOUSAND TRAILS (CANADA) INC.
TT OFFSHORE, LTD.
YUBA INVESTMENT COMPANY
NATIONAL AMERICAN CORPORATION
Beech Mountain Lakes Corporation
Quail Hollow Village, Inc.
Carriage Manor Corporation
Cherokee Landing Corporation
Chief Creek Corporation
Dixie Resort Corporation
Resort Land Corporation
Western Fun Corporation
Westwind Manor Corporation
Foxwood Corporation
Carolina Landing Corporation
The Kinston Corporation
G.L. Land Development Corporation
Lake Royale Corporation
Lake Tansi Village, Inc.
Tansi Resort, Inc.
L.M.L. Resort Corporation
Natchez Trace Wilderness Preserve Corporation
Quail Hollow Plantation Corporation
Recreation Land Corporation
Wolf Run Manor Corporation
Recreation Properties, Inc.
The Villas of Hickory Hill, Inc.
<PAGE>
Exhibit 23.1
------------
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated September 12, 1996, included in the USTrails Inc.
(the "Company") Form 10-K for the year ended June 30, 1996, 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 and 1993 Director Stock Option Plan.
s/ Arthur Andersen LLP
Dallas, Texas
September 12, 1996
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
<PERIOD-START> JUL-01-1995 JUL-01-1994
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> $37,403 $50,596
<SECURITIES> 0 0
<RECEIVABLES> 13,219 18,698
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 46,867 61,342
<PP&E> 27,130 32,039
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 109,754 135,886
<CURRENT-LIABILITIES> 67,259 62,899
<BONDS> 95,452 120,243
0 0
0 0
<COMMON> 37 37
<OTHER-SE> (27,902) (29,739)
<TOTAL-LIABILITY-AND-EQUITY> 109,754 135,886
<SALES> 3,987 4,228
<TOTAL-REVENUES> 91,996 91,546
<CGS> 193 667
<TOTAL-COSTS> 91,508 103,214
<OTHER-EXPENSES> 73,622 81,587
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 17,693 20,960
<INCOME-PRETAX> 488 (11,668)
<INCOME-TAX> 41 255
<INCOME-CONTINUING> 447 (11,923)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 1,390 0
<CHANGES> 0 0
<NET-INCOME> 1,837 (11,923)
<EPS-PRIMARY> $.50 ($3.22)
<EPS-DILUTED> $.50 ($3.22)
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