FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] AMENDMENT NO 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-27270
VACATION BREAK U.S.A., INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2581811
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
6400 N. ANDREWS AVENUE
PLAZA SUITE 200
FT. LAUDERDALE, FL 33309
Registrant's telephone number: (954) 351-8500
------------------------------
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
NONE
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, $ .01 PAR VALUE
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 [ ]
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. [ ]
As of March 21, 1997, the aggregate market value of the Common Stock of
the Registrant held by non-affiliates was $20,246,643 based on a closing price
of $9.00 for the Common Stock, par value $ .01 per share (the "Common Stock"),
as reported on the NASDAQ National Market on such date.
As of March 21, 1997, the number of outstanding shares of Common Stock
was 8,610,225.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
a.) Identification of Directors
The following table sets forth certain information with respect
to the Company's directors.
NAME AGE POSITION WITH COMPANY
- -------------------------------------------------------------------------------
Ralph P. Muller 56 Chairman of the Board of Directors and
Chief Executive Officer
Kevin Sheehan 38 President and Director
Joyce North 54 Executive Vice President - Sales and
Director
Henry M. Cairo 49 Chief Financial Officer and Chief
Operating Officer and Director
Richard Adrey 50 Director
Ronald J. Korn 55 Director
Arthur Weinstein 40 Director
Allen C. Harper 50 Director
Michael J. Kollender 31 Director
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RALPH MULLER co-founded the Company, and he has been serving the
Company full-time since its inception in 1985 as Chairman of the Board and Chief
Executive Officer, and served as President of the Company from its inception
until May 1995. Mr. Muller is also the President, Chief Executive Officer and
Director of each of Serenity Homes, Inc., a company engaged in the business of
purchasing and developing for sale residential real property, Sea America, Inc.,
a company engaged in the business of owning and administering a fleet of fishing
and recreational boats as part of a 400-member boat club, and USA Today Realty,
a full-service real estate brokerage firm. Mr. Muller has over 25 years of
experience in the vacation/leisure industry. Mr. Muller has served on the South
Florida Better Business Bureau.
KEVIN M.SHEEHAN co-founded the Company and has served as
President and a director of the Company since May 1995. Mr. Sheehan served as
Executive Vice President of the Company from January 1991 until May 1995. From
October 1987 to January 1991, Mr. Sheehan served as the Company's Vice President
- - Marketing. Prior to joining the Company in 1987, Mr. Sheehan served in various
positions in the vacation interval ownership industry.
JOYCE NORTH has served as the Executive Vice President - Sales of
the Company since January 1991 and as a director of the Company since May 1995.
From 1980 to 1990, Ms. North marketed and sold vacation interval ownership
interests for independent developers in the Pocono Mountains in Pennsylvania,
Williamsburg, Virginia and French Lick, Indiana.
HENRY M. CAIRO, a certified public accountant and an
attorney-at-law, has served as Chief Financial Officer and Chief Operating
Officer of the Company since June 1995 and has been a director of the Company
since the consummation of the Company's initial public offering in December
1995. From December 1990 to May 1995, Mr. Cairo was a partner with the certified
public accounting firm of Checker Simon & Rosner, where he specialized in the
hospitality and real estate industries. Prior to joining Checker Simon & Rosner,
Mr. Cairo was a partner with Laventhol & Horwath, an accounting firm. Mr. Cairo
has over 14 years of experience in the vacation interval ownership industry,
representing developers, lenders, marketing and management companies and
homeowner associations. Mr. Cairo is a member of ARDA, where he has spoken at
numerous conferences on subjects relating to the vacation interval ownership
industry, including developer profitability and operational matters. Mr. Cairo
currently serves as a member of the ARDA Resort Development Forum, and formerly
served as the Chairman of the ARDA Accounting and Taxation Committee and Finance
Committee.
RICHARD ADREY, the President of Coastline Financial Group, Inc.,
a firm which serves as principal or advisor in the placement of debt or equity
securities, has been a director of the Company since the consummation of the
Company's initial public offering in December 1995. Prior to joining Coastline
Financial Group, Inc. in 1992, from 1986 until 1991, Mr. Adrey served as the
Senior Vice President of Associated Investment Company, a company engaged in
arranging for the financing, syndication and sale of real estate.
RONALD J. KORN, a certified public accountant and an
attorney-at-law, has been a director of the Company since the consummation of
the Company's IPO in December 1995. Since July 1991, Mr. Korn has served as
President of Ronald Korn Consulting, a business consulting firm, and as Chairman
of the Board of Carole Korn Interiors, Inc., an interior design firm. Since
March 1995, Mr. Korn has also served as Executive Distributor of Interior Design
Nutritionals, a company engaged in the distribution and marketing of personal
care and nutritional products. From 1961 to 1991, Mr. Korn was a partner with
the certified public accounting firm of KPMG Peat Marwick, including six years
in which Mr. Korn served as Managing Partner of KPMG Peat Marwick's Miami,
Florida office. Since October 1991, Mr. Korn has served as a director and
Chairman of the Compensation and Audit Committees of the Board of Directors of
Engle Homes, Inc., a company whose common stock is traded on the NASDAQ National
Market.
ARTHUR WEINSTEIN, PH.D., an Associate Professor of Marketing at
Nova Southeastern University, has been a director of the Company since the
consummation of the Company's IPO in December 1995. Dr. Weinstein has taught
graduate courses in managerial and international marketing at Nova Southeastern
University since 1993. Prior to joining Nova Southeastern University, from 1991
until 1993, Dr. Weinstein was an Assistant Professor of Marketing and
International Business at Hofstra University and, from 1982 until 1991, was as
an Adjunct Professor
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at Florida International University and a consultant to the university's Small
Business Development Center. Dr. Weinstein is member of the American Marketing
Association and the Academy of Marketing Science.
ALLEN C. HARPER, the Chairman of the Board and Chief Executive
Officer of First American Railways, Inc., a railroad development company, has
been a director of the Company since the consummation of the Company's IPO in
December 1995. Mr. Harper has over 30 years experience, principally in the areas
of real estate management and development and rail transportation. Since 1984 he
has been principally employed as the Chairman, President and principal
shareholder of First Reserve, Inc., the holding company for
Esslinger-Wooten-Maxwell, Inc., a residential and commercial real estate
brokerage and management firm based in Coral Gables. Since September 1989, Mr.
Harper has been a director, and from October 1992 to October 1993 he was
Chairman of the Board, of the Tri-County Rail Authority, which operates a
67-mile mass transit railroad service known as "Tri-Rail" between the
metropolitan areas of Miami, Ft. Lauderdale and West Palm Beach, Florida, and
carries approximately 10,000 passengers daily. From June 1993 to September 1994,
he has served as Co-Chairman of the High-Speed sub-committee of the Citizens
Board, Metro-Dade Marketplace: Destination 2001, a committee created by the
Metropolitan Dade County Board of Commissioners. Since May 1994, Mr. Harper has
served as a director of Florida East Coast Railway Co., a railroad and real
estate company based in St. Augustine, Florida.
MICHAEL J. KOLLENDER has been a director of the Company since
August 1996. Mr. Kollender is a Senior Vice President, Investment Banking, at
Josephthal Lyon & Ross Incorporated ("Josephthal"), an investment banking firm.
Prior to joining Josephthal, from 1987 to 1994 Mr. Kollender was a Senior
Manager at BDO Seidman, a national certified public accounting firm. Mr.
Kollender is a member of both the American Institute of Certified Public
Accountants and the New York State Society of Certified Public Accountants.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
During the Company's fiscal year ended December 31, 1996, the
Company's Board of Directors held 10 meetings and took certain actions by
written consent once. No director attended fewer than 75% of the meetings of the
Board of Directors or any committee thereof held during 1996 during the period
of such director's service.
The only committees of the Board of Directors are the Audit
Committee and the Compensation Committee. The Board does not have a nominating
or similar committee.
Messrs. Adrey, Korn and Harper are the current members of the
Audit Committee, which held 4 meetings during the 1996 fiscal year. The duties
and responsibilities of the Audit Committee include (a) recommending to the
Board of Directors the appointment of the Company's auditors and any termination
of engagement, (b) reviewing the plan and scope of audits, (c) reviewing the
Company's significant accounting policies and internal controls and (d) having
general responsibility for all related auditing matters.
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Messrs. Weinstein, Korn and Harper are the current members of the
Compensation Committee, which held 3 meetings during the 1996 fiscal year. The
Compensation Committee reviews and approves the compensation of the Company's
executive officers and administers the Company's 1995 Stock Option Plan.
DIRECTORS' FEES AND COMPENSATION
Directors who are not employees of the Company each receive an
annual retainer of $10,000. In addition, in March 1997 the Board of Directors
approved, and the non-employee directors of the Company received, an additional
$10,000 to cover additional expenses incurred by each such director during 1996.
No director of the Company receives any director's fees for attendance at
meetings of the Board of Directors or committees thereof, although members of
the Board do receive reimbursement for actual travel-related expenses incurred
in connection with their attendance at meetings of the Board of Directors.
Directors of the Company who are also employees of the Company do not receive
additional compensation for their services as directors.
b.) Identification of Executive Officers
See "Item 1 - Business" for a discussion regarding the Company's executive
officers.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth, for the years ended December 31,
1996, 1995 and 1994, the aggregate compensation awarded to, earned by or paid to
the Named Executive Officers. The Company did not grant any restricted stock
awards or stock appreciation rights or make any long-term incentive plan payouts
during such fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARD
-----------------------------------------------------------------------------
ALL OTHER
ANNUAL
NAME ND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#)(1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Ralph Muller
Chairman of the Board and 1996 $375,000 - -0- -0-
Chief Executive Officer 1995 $1,297,643 $ 75,000 -0- -0-
1994 -0- $1,351,547 $266,344(2) -0-
Kevin Sheehan
President 1996 $365,000 - -0- -0-
1995 $1,105,215 $ 75,000 -0- 75,000
1994 $1,205,597 -0- -0-
Joyce North 1996 $350,000 $330,000 -0- -0-
Executive Vice President - 1995 $175,564 $858,072 -0- 100,000
Sales 1994 -0- $992,500 -0- -0-
Henry M. Cairo 1996 $250,000 - -0- -0-
Chief Financial Officer and 1995 $138,640 $ 75,000 -0- 50,000
Chief Operating Officer(3) 1994 -0- -0- -0- -0-
Marco Manzie 1996 $166,000 $170,000 -0- -0-
Vice President - Resort 1995 $184,462 $ 75,000 -0- 35,000
Services 1994 $141,254 -0- -0- -0-
</TABLE>
- ------------------
(1) The amounts in this column represent options granted pursuant to
the Company's 1995 Stock Option Plan.
(2) Represents premiums paid by the Company under insurance policies
on the lives of Mr. Muller and his spouse.
(3) Mr. Cairo joined the Company in June 1995. Therefore,
compensation information for the fiscal year 1995 represents
the period from June 1995 through December 1995, and no
compensation information is presented for Mr. Cairo for 1994.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into employment agreements, effective as
of January 1, 1996, with Ralph Muller, Chairman of the Board and Chief Executive
Officer of the Company, Kevin Sheehan, President, Joyce North,
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Executive Vice President - Sales, Henry M. Cairo, Chief Financial Officer and
Chief Operating Officer, and Marco Manzie, Vice President - Resort Operations.
In the case of Messrs. Muller, Sheehan, Cairo and Ms. North, these agreements
will expire in December 1997, subject to automatic one-year renewal periods
unless 60 days prior written notice is given by the Company or such executive.
These agreements provide for an annual base salary to Mr. Muller, Mr. Sheehan,
Ms. North, Mr. Cairo and Mr. Manzie of $375,000, $365,000, $350,000, $250,000,
and $166,000, respectively. The employment agreements of Messrs. Muller, Sheehan
and Cairo also provide for an annual bonus as determined by a majority of
disinterested members of the Company's Board of Directors, subject to a maximum
bonus during the first two years of each such agreement of $375,000, $365,000
and $250,000, respectively. The employment agreement of Ms. North provides for
an annual bonus equal to (A) 3.0% of the Company's income before taxes, and (B)
an additional amount equal to $100,000 if the Company's net income before taxes
exceeds $12.5 million, and an additional $100,000 for each incremental increase
of $5 million of net income before taxes in excess of $12.5 million, subject to
a maximum bonus during the first two years of her employment agreement
commencing January 1, 1996 of $625,000. Upon the Company's termination of the
employment of any of the executives for any reason other than for cause, as
specified in their respective employment agreements, each of the executives
shall be entitled to receive a payment equal to (A) 12 months' base salary at
the then prevailing rate plus (B) 100% of the most recent annual bonus paid to
the executive under his or her employment agreement. Upon termination for
"cause" or upon voluntary resignation, each of these executives shall be
entitled to receive his or her base salary through the date of such termination
and, in the case of voluntary resignation, subject to the approval of the
Company's Board of Directors, his or her bonus, reduced, PRO RATA, to reflect
the duration of his or her employment by the Company prior to such resignation.
In addition, upon the actual or constructive termination of employment of Ms.
North, Mr. Cairo or Mr. Manzie following the occurrence of a change in effective
control of the Company, each of Ms. North and Mr. Cairo shall be entitled to
receive a payment equal to (A) 200% of his or her base salary at the rate
prevailing at the time of such change in control plus (B) 200% of the most
recent annual bonus paid to him or her under his or her employment agreement and
Mr. Manzie shall be entitled to receive a payment equal to (A) 100% of his base
salary at the rate prevailing at the time of such change in control plus (B)
100% of the bonus paid to him under his employment agreement. Each of these
executives is prohibited from competing with the Company for the duration of
their respective employment agreements and, if terminated for cause or upon
voluntary resignation, for a period of one year thereafter.
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1996. No stock options were exercised by the Named Executive Officers during
the year ended December 31, 1996. No stock appreciation rights have been granted
or are outstanding.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
SHARES VALUE REALIZED NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
ACQUIRED ON UNEXERCISED OPTIONS AT FY-END MONEY OPTIONS AT FY-END (1)
(#)
--------------------------------
NAME EXERCISE (#) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
- --------------------- ----------- ------------- --------------- -------------- ------------- --------------
Kevin Sheehan 0 $0 37,500 37,500 553,125 $553,125
Joyce North 0 $0 50,000 50,000 762,500 $762,500
Henry M. Cairo 0 $0 25,000 25,000 381,250 $381,250
Marco Manzie 0 $0 17,500 17,500 266,875 $266,875
</TABLE>
- --------------------
(1) The closing price for the Common Stock as reported on the
NASDAQ National Market System on December 31, 1996 was $20.25.
Value is calculated by multiplying (i) the difference between
$20.25 and the option price of $5.00 (with the exception of
Kevin Sheehan, as to whom such option price is $5.50) by
(ii) the number of shares of Common Stock underlying the option.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ralph P. Muller, the Chairman of the Board of Directors and Chief
Executive Officer of the Company, and Kevin Sheehan, the President of the
Company, participated in deliberations of the Company's Board of Directors
concerning executive compensation during 1996.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
PHILOSOPHY. The Compensation Committee's executive compensation
philosophy is to provide competitive levels of compensation, integrate the
compensation of its executive officers with the achievement of the Company's
annual and long-term performance goals, reward above average corporate
performance, recognize individual initiative and achievement and assist the
Company in attracting and retaining qualified management. To meet these
objectives, the Compensation Committee attempts to set the compensation of its
executive officers at levels that it believes are competitive with other
companies of the same size in the Company's industry, in light of the Company's
then current and anticipated performance. The Compensation Committee endorses
the position that equity interest in the Company by management is beneficial in
aligning executive officers' and shareholders' interests in the enhancement of
shareholder value.
COMPONENTS OF EXECUTIVE COMPENSATION. Compensation of the
Company's executive officers consists of both cash payments and grants of stock
options. The annual cash compensation consists of a base salary and a bonus.
Long-term incentives are provided through the grant of stock options under the
Company's 1995 Stock Option Plan.
BASE SALARIES AND BONUSES. The Compensation Committee attempts to
set base salaries and bonuses of its executive officers at levels that it
believes are competitive with other companies of the same size in the Company's
industry. Information about appropriate salary and bonus levels has been
determined by reviewing the public disclosure of the Company's competitors and
through the Company's recruiting activities. Except as described below, salaries
and bonuses are reviewed annually, and any adjustments are based on competitive
practices as well as the performance of the Company and the executive officer.
STOCK OPTIONS. The Compensation Committee grants stock options to
the Company's executive officers pursuant to the Company's 1995 Stock Option
Plan. The Compensation Committee has the authority to determine the individuals
to whom stock options are awarded, the terms at which option grants are made,
the duration of the options and the number of shares subject to each option. The
size of the option grants are generally based on the position level of the
recipient. Through the award of stock options, the objective of aligning
executive officers' long range interests with those of the shareholders is met
by providing the executive officers with the opportunity to build a meaningful
stake in the Company.
It is the Compensation Committee's intention that, over time,
compensation opportunities from option grants will constitute a significant
portion of each executive officer's total compensation. However, there are not
automatic grants to each executive officer every year. Instead, the Compensation
Committee reviews the performance of the Company overall and of each individual
executive officer, as well as past option grants to each executive officer, and
makes decisions about recipients and grant sizes for the year.
In December 1994, the Internal Revenue Service issued amendments
to the proposed regulations previously issued under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended. In general, Section
162(m) disallows a public company's deduction for compensation to any employee
in excess of $1.0 million per year, unless such compensation is paid in
connection with the attainment of performance goals established by the
compensation committee of the board of directors and approved by the
shareholders of such company in advance of the period during which services
relating to such compensation were rendered. None of the executive officers of
the Company presently receives, and the Compensation Committee does not
anticipate that such persons will receive, annual cash compensation in excess of
the $1 million cap provided in Section 162(m). The Compensation Committee
intends to take the necessary steps to ensure compliance with Section 162(m).
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information, as of the Record Date
and after giving effect to the Acquisition Transactions, with respect to the
beneficial ownership of shares of the Common Stock by (i) each person known by
the Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) the Company's Chief Executive
Officer and each named executive officer listed in the Summary Compensation
Table below (collectively, the "Named Executive Officers") and (iv) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS OF OF BENEFICIAL SHARES OWNED
BENEFICIAL OWNER(1) OWNERSHIP(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ralph P. Muller .......................................... 5,172,026(3) 60.1%
Kevin Sheehan............................................. 1,316,072(4) 15.1%
Joyce North............................................... 450,000(5) 5.2%
Henry M. Cairo............................................ 37,500(6) *
Marco Manzie.............................................. 17,500(7) *
Richard Adrey............................................. 4,000(8) *
Ronald J. Korn............................................ 5,500(9) *
Arthur Weinstein.......................................... 2,500(10) *
Allen C. Harper........................................... 2,200(11) *
Michael J. Kollender...................................... 8,000(12) *
All directors and executive officers as a group
(__ persons)(13)....................................... 6,615,298 76.5%
</TABLE>
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* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial
owners identified above is c/o Vacation Break U.S.A., Inc., 6400
N. Andrews Avenue, Park Plaza - Suite 200, Ft. Lauderdale,
Florida 33309.
(2) A person is deemed to be the beneficial owner of securities that
can be acquired by such person within 60 days upon the exercise
of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that
are held by such person (but not those held by any other person)
and that are exercisable within 60 days have been exercised.
Unless otherwise noted, the Company believes that all persons
named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(3) Includes 5,150,526 shares of Common Stock held by R & A
Partnership, Ltd., a Texas limited partnership (the
"Partnership"). RPM Investments, Inc., a Texas corporation
wholly-owned by Mr. Muller, is the sole general partner of the
Partnership. Mr. Muller along with his wife and children hold
limited partnership interests in the Partnership. Also includes
(i) 21,500 shares of Common Stock owned by Ralph P. Muller and
Alice Muller, his wife, as joint tenants with rights of
survivorship and (ii) 350,000 shares of Common Stock subject to
an option granted to Joyce North. See Note (5) below. Does not
include 165,902 shares of Common Stock beneficially owned by The
Ralph Muller Irrevocable Trust established for the benefit of Mr.
Muller's children.
(4) Includes 37,500 shares of Common Stock issuable at $5.50 per
share and 25,000 shares of Common Stock issuable at $8.625 per
share upon the exercise of currently exercisable options. Also
includes 50,000 shares subject to an option granted to Joyce
North. See note (5) below.
(5) Includes: (1) 50,000 shares of Common Stock issuable at $5.00
per share upon the exercise of currently exercisable options;
(ii) 350,000 outstanding shares of Common Stock purchasable at
$5.00 per share upon the exercise of a currently exercisable
option granted to Ms. North by Mr. Muller; and (iii) 50,000
outstanding shares of Common Stock purchasable at $5.00 per
share upon the exercise of a currently exercisable option
granted to Ms. North by Mr. Sheehan.
(6) Represents 25,000 shares of Common Stock issuable at $5.00 per
share and 12,500 shares of Common Stock issuable at $8.625 per
share upon the exercise of currently exercisable options.
(7) Represents shares of Common Stock issuable at $5.00 per share
upon the exercise of currently exercisable options.
(8) Includes 2,000 shares of Common Stock issuable at $6.50 per
share upon the exercise of currently exercisable options granted
under the Directors' Option Plan.
(9) Includes 2,000 shares of Common Stock issuable at $6.50 per
share upon the exercise of currently exercisable options granted
under the Directors' Option Plan.
(10) Includes 2,000 shares of Common Stock issuable at $6.50 per
share upon the exercise of currently exercisable options granted
under the Directors' Option Plan.
(11) Includes 2,000 shares of Common Stock issuable at $6.50 per
share upon the exercise of currently exercisable options granted
under the Directors' Option Plan.
(12) Includes currently exercisable options to purchase 2,000 shares
of Common Stock at $10.00 per share that were granted pursuant
to the Company's Directors' Option Plan and currently exercisable
warrants to purchase 5,000 shares of Common Stock at $6.00 per
share that were granted in connection with the Company's initial
public offering.
(13) SEE FOOTNOTES (3) - (12) ABOVE.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
COCONUT BAY RESORT
Ralph Muller, the Chairman of the Board, Chief Executive Officer
and the majority shareholder of the Company, owns 49% of the issued and
outstanding capital stock of Coconut Bay Resort Properties, Inc. ("Coconut
Bay"). In 1992, Coconut Bay developed the COCONUT BAY RESORT, located in Fort
Lauderdale, Florida, consisting of 52 units which were sold as approximately
2,300 VOIs. The Company serves as exclusive sales agent for the sale of VOIs at
this resort, for which it receives a net commission equal to 45% of the purchase
price of each VOI sold. During the year ended December 31, 1996, the Company
received sales commissions from Coconut Bay of approximately $54,000.
Substantially all VOIs in this resort were sold as of December 1993. However,
the Company may in the future serve as sales agent with respect to VOIs which
are re-acquired by Coconut Bay upon foreclosure or otherwise, although it does
not anticipate that the revenues from such activities will be significant. The
Company believes that the marketing fees it receives in connection with sales of
VOIs in the COCONUT BAY RESORT are at rates which are no less favorable than the
rates it receives in connection with sales of VOIs in properties owned by
unaffiliated developers.
SURFSIDER AND SURFRIDER RESORTS
Mr. Muller also owns approximately 33% of the issued and
outstanding capital stock of Intracoastal Resorts, Inc. ("Intracoastal"). In
1993, Intracoastal developed the SURFSIDER resort, in Pompano, Florida,
consisting of 17 units for sale as 884 VOIs. The Company serves as exclusive
sales and marketing agent for the sale of VOIs at this resort, for which it
receives a commission equal to 46% of the purchase price of each VOI sold. The
Company did not receive any sales commissions from Intracoastal from sales of
VOIs at the Surfsider resort during the year ended December 31, 1996. As of
December 31, 1993, substantially all of the VOIs had been sold at this resort.
In addition to SURFSIDER resort, in 1994 Intracoastal developed
the SURFRIDER resort, in Pompano Beach, Florida. SURFRIDER consists of 15 units
for sale as 780 VOIs. As with the SURFSIDER resort, the Company serves as
exclusive sales and marketing agent for the sale of VOIs at this resort, for
which it receives a net commission equal to 46% of the purchase price of each
VOI sold. For the year ended December 31, 1996, the Company received sales
commissions from Intracoastal of approximately $20,000 from sales of VOIs at the
SURFRIDER resort. As of December 31, 1995, substantially all of the VOIs had
been sold at this resort.
The Company believes that the commissions it receives in
connection with sales of VOIs in the SURFSIDER and SURFRIDER resorts are at
rates which are no less favorable than the rates it receives in connection with
sales of VOIs in properties owned by unaffiliated developers.
COCONUT BAY LOAN
During 1993, Coconut Bay loaned the Company an aggregate
principal amount of $1,250,000. This loan was evidenced by a promissory note,
bearing interest at an annual rate of prime plus 3.25% and is due and payable in
August 1998. In August 1996, the Company made principal payments of $125,000
to Coconut Bay on account of this loan. As of December 31, 1996, $435,000 of the
principal amount of this loan remained outstanding. The Company believes that
the loan from Coconut Bay is on terms which are no less favorable than the
Company could obtain from an unaffiliated lender.
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DIRECTOR'S FEE
During the years ended December 31, 1993, 1994 and 1995, the
Company paid Alice Muller, Ralph Muller's wife, an annual director's fee of
approximately $104,000, $104,000 and $76,000, respectively. Mrs. Muller resigned
as a director of the Company in June 1995 and no longer receives any
compensation from the Company.
LOAN TO EXECUTIVE OFFICER
In 1994, the Company made a loan to Kevin Sheehan, the Company's
President, in the principal amount of $440,000, bearing interest at an annual
rate of approximately 10%. The entire amount of this loan, together with all
accrued interest, was paid by Mr. Sheehan in March 1995.
SEA AMERICA OPTION
In March 1995, Mr. Muller granted the Company an option,
exercisable at any time during the three-year period following the consummation
of the Company's initial public offering, to purchase all of the outstanding
capital stock of Sea America, Inc. for $10,000.
TAX INDEMNIFICATION AGREEMENTS
Mr. Muller has entered into Tax Allocation and Indemnification
Agreements with certain affiliates of the Company which were S corporations
prior to the consummation of the Company's initial public offering. These
agreements generally provide that Mr. Muller will be indemnified by each of the
S Companies for any taxes due from Mr. Muller with respect to income derived by
the S Companies during periods covered thereby, and the S Companies will be
indemnified by Mr. Muller with respect to any overpayment to Mr. Muller in
connection with estimated tax obligations of the S Companies. The amount of Mr.
Muller's obligation to indemnify any of the S Companies, however, is limited to
the amount of any corresponding reduction in Mr. Muller's liability for tax,
interest or penalties (reduced by any related costs he incurs), while the S
Companies are obligated to indemnify Mr. Muller by paying him an amount that,
after taking into account the tax effects to Mr. Muller of his payment of tax,
interest or penalties and of his receipt of the indemnification payment made to
him, equals the increase in Mr. Muller's liability for tax, interest and
penalties. In addition, Mr. Muller need not make any indemnification payment to
any of the S Companies until he receives a refund or credit in respect of his
corresponding liability for tax, interest or penalties, although the S Companies
are obligated to indemnify Mr. Muller at the time he pays tax, interest or
penalties, irrespective of when the S Companies receive a corresponding refund
or credit. Finally, if Mr. Muller receives a refund or credit of tax, interest
or penalties in respect of which he has been indemnified, he is obligated to
repay the entity that indemnified him, upon receipt of the refund or credit, but
the amount of his repayment cannot exceed an amount that, after giving effect to
the tax consequences to Mr. Muller of the repayment and of the refund or credit
he received (together with any interest or other amounts received), does not
exceed the amount of that refund or credit (together with any interest or other
amounts received), while the corresponding obligation of the S Companies is to
repay Mr. Muller the amount of the indemnification payment it received from him
(together with any interest or other amounts received), irrespective of the
amount of the refund or credit or the tax consequences of the refund or credit
or of the repayment to Mr. Muller.
In 1995, the Company adopted a policy that it will not enter
into any transaction with any officer, director or principal shareholder of the
Company or any entity controlled by such persons other than transactions which
have been approved by a majority of the then outstanding shares of Common Stock
held by shareholders who do not have an interest in such transaction, excluding
shares owned by Ralph P. Muller, the Company's Chairman of the Board and Chief
Executive Officer.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized on April
30, 1997
VACATION BREAK U.S.A., INC.
By: /S/ RALPH P. MULLER
--------------------------------------
Ralph P. Muller, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ RALPH P. MULLER Chairman of the Board and April 30, 1997
- -------------------- Chief Executive Officer
Ralph P. Muller (principal executive officer)
/S/ KEVIN SHEEHAN President and Director April 30, 1997
- -------------------
Kevin Sheehan
/S/ HENRY M. CAIRO Chief Financial Officer, April 30, 1997
- ------------------- Chief Operating Officer
Henry M. Cairo and Director
(principal financial officer and
principal accounting officer)
/S/ JOYCE NORTH Vice-President - Sales and April 30, 1997
- ---------------- Director
Joyce North
/S/ RONALD J. KORN Director April 30, 1997
- -------------------
Ronald J. Korn
/S/ RICHARD ADREY Director April 30, 1997
- ------------------
Richard Adrey
/S/ ALLEN C. HARPER Director April 30, 1997
- --------------------
Allen C. Harper
/S/ ARTHUR WEINSTEIN Director April 30, 1997
- ---------------------
Arthur Weinstein
/S/ MICHAEL J. KOLLENDER Director April 30, 1997
- -------------------------
Michael J. Kollender
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