<PAGE>
Filed pursuant to Rule 424(b)(3)
SEC File No. 333-43045
PROSPECTUS
8,197,006 SHARES
FAIRFIELD COMMUNITIES, INC.
COMMON STOCK
This Prospectus relates to an aggregate of up to 8,197,006 shares (the
"Shares") of Common Stock, par value $0.01 per share ("Common Stock"), of
Fairfield Communities, Inc. (the "Company" or "Fairfield") that may be offered
by the selling stockholders listed herein (collectively, the "Selling
Stockholders") from time to time. Up to 212,626 Shares are issuable to Kevin
Sheehan upon the exercise of options (the "Assumed Options") previously granted
by Vacation Break U.S.A., Inc. ("Vacation Break") under the Vacation Break
U.S.A., Inc. 1995 Stock Option Plan, as amended (the "Plan") and up to 145,812
Shares are issuable to certain Selling Stockholders upon the exercise of
warrants (the "Supplemental Warrants") previously granted by Vacation Break
pursuant to several warrant agreements, as amended and supplemented (the
"Supplemental Warrant Agreements"). The Company assumed the Assumed Options and
the Supplemental Warrants in connection with the merger (the "Merger") of FCVB
Corp., a wholly owned subsidiary of the Company ("Merger Sub"), with and into
Vacation Break. In addition, this Prospectus relates to such indeterminate
number of additional shares of Common Stock as may become subject to Assumed
Options or Supplemental Warrants as a result of the antidilution provisions
contained in the Plan and the Supplemental Warrant Agreements, respectively.
The Shares are listed on the New York Stock Exchange (the "NYSE") under the
trading symbol "FFD."
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK.
---------------------------------------------
The Shares will be sold either directly by the Selling Stockholders or
through brokers, dealers, or agents. The Company will not receive any part of
the proceeds from sales of the Shares by the Selling Stockholders. At the time
any particular offer of Shares is made, if and to the extent required, the
specific number of Shares offered, the offering price, and the other terms of
the offering, including the names of any brokers, dealers, or agents involved in
the offering and the compensation, if any, of such brokers, dealers, or agents,
will be set forth in a supplement to this Prospectus (a "Prospectus
Supplement"). Any statement contained in this Prospectus will be deemed to be
modified or superseded by any inconsistent statement contained in any Prospectus
Supplement delivered herewith.
Unless this Prospectus is accompanied by a Prospectus Supplement stating
otherwise, offers and sales may be made pursuant to this Prospectus only in
ordinary broker's transactions made on the NYSE in transactions involving
ordinary and customary brokerage commissions.
The Company will bear all expenses in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act"), and the listing
on the NYSE of the Shares. The Selling Stockholders will bear all other
expenses in connection with sales of the Shares. The Company and each of the
Selling Stockholders have agreed to indemnify each other against certain
liabilities including liabilities under the Securities Act. See "Selling
Stockholders."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is March 18, 1998.
<PAGE>
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
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the public reference facilities maintained by the Commission at The
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such materials may also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission and that is located at http://www.sec.gov.
Documents filed by the Company may also be inspected at the offices of the NYSE,
20 Broad Street, New York, New York 10005, on which exchange the Common Stock
is listed.
The Company has filed a Registration Statement on Form S-3, as amended (the
"Registration Statement") under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Fairfield (Commission
File No. 1-8096) pursuant to the Exchange Act are incorporated by reference into
this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1997; and
(ii) the description of the Company's Common Stock contained in the
Company's Registration Statements on Form 8-A (Commission File No. 1-8096)
filed December 8, 1995.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
made hereby, shall be deemed incorporated by reference in this Prospectus and to
be a part of this Prospectus from the date of the filing of such reports. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
(other than the exhibits expressly incorporated in such documents by reference).
Requests should be directed to: Fairfield Communities, Inc., 11001 Executive
Center Drive, Little Rock, Arkansas 72211, Attention: Investor Relations
(telephone: (501) 228-2700).
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risks and investment considerations should be carefully considered in
evaluating the Company and its business before purchasing any of the Shares
offered hereby. Each of the following factors may have a material adverse
effect on the Company's operations, financial results, financial condition,
liquidity, market valuation or market liquidity in future periods.
TIMESHARE INDUSTRY OPERATING RISKS
The Company's business is subject to all of the operating risks inherent in
the timeshare industry. These risks include an oversupply of timeshare units, a
reduction in demand for timeshare units, changes in travel and vacation
patterns, changes in governmental regulations of the timeshare industry and
increases in construction costs or taxes, as well as negative publicity
concerning the industry. The timeshare industry is highly fragmented,
containing a large number of developers. In the past, the timeshare industry as
a whole has experienced a negative image as a result of various developers
employing high pressure sales and marketing tactics, constructing low quality
units and engaging in other potentially misleading practices. Consequently,
negative publicity with respect to any one or more developers in the timeshare
industry could have a disproportionate effect on all of the developers in the
industry.
RISKS RELATED TO VACATION BREAK MERGER
On December 19, 1997, the Company acquired Vacation Break U.S.A., Inc., a
Florida corporation ("Vacation Break"), pursuant to a merger of a wholly owned
subsidiary of the Company with and into Vacation Break. The Company believes
that the Vacation Break Merger will offer opportunities for long-term
efficiencies in operations that should positively affect future results of the
combined operations of the Company and Vacation Break. However, the Vacation
Break Merger may adversely affect the Company's financial performance in 1998
and future years until such time as the Company is able to realize the positive
effect of opportunities for long-term efficiencies in operations. In addition,
the combined companies will be more complex and diverse than the Company
individually, and the combination and continued operation of their distinct
business operations will present difficult challenges for the Company's
management due to the increased time and resources required in the management
effort. While the Company's management and Board of Directors believe that the
combination may be effected in a manner which will realize the value of the
companies, there can be no assurances as to the effect of the Vacation Break
Merger.
In order to maintain and increase profitability, the combined companies will
need to successfully integrate and streamline overlapping functions. The
Company and Vacation Break have different systems and procedures in many
operational areas which must be rationalized and integrated. There can be no
assurance that integration will be successfully accomplished. The difficulties
of such integration may be increased by the necessity of coordinating
geographically separate organizations. The integration of certain operations
will require the dedication of management resources which may temporarily
distract attention from the day-to-day business of the combined companies.
Failure to effectively accomplish the integration of the companies' operations
could have an adverse effect on the Company's results of operations and
financial condition.
The Attorney General of Vermont has filed litigation against Vacation Break
relating to its marketing of vacation packages alleging that Vacation Break
violated the consumer protection or telemarketing laws of Vermont. Vacation
Break is actively attempting to settle that proceeding and is engaged in
settlement discussions. The marketing practice in question involves a prior
direct mail campaign and telemarketing. The issues raised concern whether the
solicitations of a vacation package properly disclosed that the offers required
the vacation package to be purchased, or whether, if applicable, a tour of a
timeshare resort was required in connection with the purchase of the vacation
package. The Company does not anticipate that the legal and settlement costs it
expects to incur will have a material impact on its results of operations,
liquidity or financial condition. However, there can be no assurance that
settlement of the pending proceeding can be reached on terms acceptable to the
Company, or at all, or that additional states will not commence similar
proceedings. Accordingly, future legal and settlement costs incurred, or fines
assessed if settlement cannot be reached, could be substantially greater than
expected.
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RISKS ASSOCIATED WITH ACQUISITIONS AND NEW DEVELOPMENT OF RESORTS
A principal component of the Company's strategy is to acquire and develop
new destination resorts. The Company's future growth and financial success will
depend upon a number of factors, including its ability to identify attractive
resort acquisition and development opportunities, consummate the acquisition or
development of such resorts on favorable terms, profitably sell vacation
ownership interests ("VOIs") at such resorts, and successfully integrate the
newly acquired or developed resorts into the Company's sales and marketing
programs. The Company's ability to execute its growth strategy depends to a
significant degree on the existence of attractive resort acquisition and
development opportunities and its ability to obtain additional debt and equity
capital and to fund such acquisitions and development. There can be no assurance
that the Company will be successful with respect to such factors.
REGULATION OF MARKETING AND SALES OF VOIS
The Company's marketing and sales of VOIs and other operations are subject
to extensive regulation by the federal government and by the states in which the
Company's resorts are located and in which its VOIs are marketed and sold. The
federal government and many states have adopted specific laws and regulations
regarding the sale of timeshares, telemarketing and certain of the Company's
other activities. The Company believes that it is in substantial compliance
with all laws and regulations to which it is currently subject. However, there
is no clear guidance regarding the scope and interpretation of the registration
requirements of various state laws regulating certain types of timeshare
marketing and sales programs.
No assurance can be given that the cost of complying with laws and
regulations in all jurisdictions in which the Company desires to conduct sales
would not be significant, would not impair the cost-effectiveness of its
marketing programs, or that the Company is in fact in compliance with all
applicable laws and regulations. If the Company is not in substantial
compliance with applicable laws and regulations, among other consequences, it
could be subject to regulatory actions and purchasers of VOIs could have certain
rescission rights. In addition, there can be no assurance that laws and
regulations (including existing interpretations thereof) applicable to the
Company in any specific jurisdiction will not be revised or that other laws or
regulations will not be adopted which could increase the Company's cost of
compliance or prevent the Company from selling VOIs or conducting other
operations in a jurisdiction. In particular, the Company has become more
reliant on telemarketing based marketing programs. Regulation of and laws
governing the use of telemarketing have grown in the recent past and additional
laws and regulations governing these activities may be adopted in the future.
Any failure to comply with any applicable law or regulation, or any increases in
the costs of compliance could have a material adverse effect on the Company.
PENDING LITIGATION
The Company and its subsidiaries have certain lawsuits pending against them,
as described in Note 17 of the Notes to Consolidated Financial Statements
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997, incorporated by reference herein. There can be no assurance that those
lawsuits or any other litigation pending against the Company or its subsidiaries
previously disclosed will not be decided adversely and, if decided adversely,
will not have a material adverse effect on the financial condition, liquidity or
results of operations of the Company.
RISKS ASSOCIATED WITH FINANCING; HEDGING ACTIVITIES
The Company offers financing to buyers of VOIs at the Company's resorts,
which bears interest at fixed rates and is collateralized by a first mortgage
on, or retention of title under an installment sales contract for, the
underlying VOI. The Company and its wholly owned finance subsidiary, Fairfield
Acceptance Corporation ("FAC"), have revolving credit
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facilities to finance the Company's contracts receivable. The Company's current
credit facilities which finance contracts receivable are, and are expected to
continue to be, at variable interest rates. The Company presently believes it
has adequate borrowing availability under its credit facilities, however, any
significant increase in interest rates on the Company's financing or prepayment
rates on the contracts receivable could have an adverse effect on the
profitability of the Company's portfolio of contracts receivable or the future
availabilities under its credit facilities or its ability to obtain future
financing. The Company attempts to retain borrowing availability under its
revolving credit facility by periodically selling contracts receivable to FAC.
The Company uses the proceeds from these sales to reduce the outstanding balance
under its revolving credit facility. FAC and its subsidiaries periodically
securitize such receivables through financings with third parties. The proceeds
from the securitization transactions are then used to reduce the balances of
FAC's revolving credit facility. However, there can be no assurance that the
Company and FAC will be able to successfully continue such securitizations, and
any failure to continue such securitizations could result in the Company and FAC
having insufficient borrowing availability under their credit facilities to
maintain their operations at current levels. In connection with certain of FAC's
securitization transactions issued with variable interest rates, FAC has sought
to limit its exposure to possible future increases in interest rates by
purchasing interest rate caps. No assurance can be given that FAC will be able
to obtain interest rate caps or other hedging instruments in connection with
future securitization transactions or that the cost associated with interest
rate caps or other hedging instruments will not increase FAC's operating
costs.
IMPACT OF ECONOMIC CYCLES
Any substantial downturn in economic conditions or any significant price
increases related to the travel and tourism industry could significantly depress
discretionary consumer spending and have a material adverse effect on the
Company's business. Any such economic conditions, including inflation, may also
affect the future availability of attractive financing rates for the Company or
its customers and may materially adversely affect the Company's business.
Inflation may also affect the Company's income derived from sales of vacation
packages to the extent that the Company's costs of providing vacation packages
increases from the time the vacation package is sold until the time the vacation
is taken. Furthermore, adverse changes in general economic conditions may
adversely affect the collectability of the Company's loans to VOI purchasers.
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RISKS ASSOCIATED WITH CUSTOMER DEFAULT
The Company bears the risk of defaults by purchasers of VOIs. Because VOIs
are vacation homes and not primary residences, purchasers of VOIs who finance a
portion of the purchase price present a greater risk of default than typical
borrowers under home mortgages. Private mortgage insurance or its equivalent is
not readily available to cover VOIs. If a purchaser of a VOI defaults on the
loan made by the Company to finance the purchase of such interest during the
early part of the repayment schedule, the associated marketing costs other than
certain sales commissions are not recoverable and they must be incurred again
after the VOI has been returned to the Company's inventory for resale.
Commissions paid in connection with the sale of VOIs may be recoverable from
sales personnel upon default in accordance with contractual arrangements with
the Company, depending upon the amount of time that has elapsed between the sale
and the default and the number of payments made prior to such default. Although
the Company in many cases may have recourse against sales agents for commissions
paid, no assurance can be given that any commissions will be fully recovered in
the event of purchaser defaults.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local laws, ordinances and regulations, the
current or previous owner, manager or operator of real property may be liable
for the costs of removal or remediation of certain hazardous or toxic substances
located on or in, or emanating from, such property, as well as related costs of
investigation and property damage. Such laws often impose such liability
without regard to whether the owner, manager or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
Company believes that it is in compliance in all material respects with all
federal, state and local ordinances and regulations regarding hazardous or toxic
substances, but no assurance can be given that hazardous or toxic substances
will not be found on its properties or properties that it previously owned or
may acquire.
COMPLIANCE WITH LAWS GOVERNING ACCESS
A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act, impose requirements related to access and use
by disabled persons of a variety of public accommodations and facilities.
Although the Company believes that its resorts are substantially in compliance
with these laws, the Company may incur additional costs of complying with such
laws. The ultimate amount of the cost of compliance with such legislation is
not currently ascertainable, and, while such costs are not expected to have a
material effect on the Company, such costs could be substantial.
UNINSURED LOSS; NATURAL DISASTERS
There are certain types of losses (such as losses arising from acts of war)
that are not generally insured because they are either uninsurable or not
economically insurable and for which the Company does not have insurance
coverage. Should an uninsured loss or a loss in excess of insured limits occur,
the Company could lose its capital invested in a resort, as well as the
anticipated future revenues from such resort, and would continue to be obligated
on any mortgage indebtedness or other obligations related to the resort.
Moreover, if the property owners association fails to adequately insure the
units, any uninsured or underinsured casualty may affect the collectability of
the contracts receivable related to those units. In addition, the Company's
resorts could suffer significant damage as a result of hurricanes, earthquakes,
floods and other natural disasters. Any such damage, as well as adverse weather
conditions generally, could reduce the Company's ability to sell VOIs at its
resorts.
COMPETITION
As the Company develops destination resorts, the Company may experience
significant competition for qualified personnel, favorable sites and customers
at those resorts from other entities engaged in the business of resort
development, sales and operation, including VOI ownership, condominiums, hotels
and motels. Many well-known lodging, hospitality and entertainment companies
have begun to develop and sell VOIs in resort properties. While many of those
companies have targeted a more narrow market segment than the Company's
historical market segment, there can be no assurance
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that the Company and those companies will not compete more broadly at
destination locations. In such event, the Company will be required to compete
with companies that may have significantly greater resources.
CONCENTRATION IN FLORIDA MARKET
As a result of the Merger, the Company will operate twenty-five resorts
and anticipates approximately one-half of the VOI revenues will be concentrated
in the Florida market. The Company believes that certain fundamental aspects of
Florida as a location for resort properties (including climate, quality of life,
and opportunities for sports and leisure activities) have contributed and will
continue to contribute to the Company's abilities to sell VOIs in the Florida
market. The Florida market is one of the largest markets for VOI sales in the
United States. However, Florida is also one of the most competitive markets for
VOI sales. In addition, historically, natural disasters and media coverage of
crimes committed in Florida have had significant adverse effects on tourism in
Florida. Accordingly, there can be no assurance that the Florida market will
continue to be favorable for VOI sales or that the business of the Company will
not be adversely affected by the concentration in the Florida market.
APPLICABILITY OF FEDERAL SECURITIES LAWS TO THE SALE OF VOIS
It is possible that the VOIs sold by the Company may be deemed to be
securities as defined in Section 2(1) of the Securities Act. If the VOIs were
determined to be securities for that purpose, their sale would require
registration under the Securities Act. The Company has not registered the sale
of VOIs under the Securities Act and does not intend to do so in the future. If
the sales of VOIs were found to have violated the registration provisions of the
Securities Act, purchasers of VOIs would have the right to rescind their
purchases of those VOIs. If a substantial number of purchasers sought
rescission and were successful, the Company's business, results of operations
and financial conditions could be materially adversely affected.
ANTI-TAKEOVER MATTERS
The Company is subject to various factors that could have the effect of
making it more difficult for a party to acquire control of the Company, which
could adversely affect the market price of the Common Stock. The Company's
Certificate of Incorporation grants the Company's Board of Directors (the
"Board") the authority to issue up to 5,000,000 shares of preferred stock, par
value $0.01 per share ("Preferred Stock"), having such rights, preferences and
privileges as designated by the Board without stockholder approval. The rights
of the holders of the Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. In addition, the Company has adopted a Rights Agreement which
provides for the issuance of a 1/3 right (a "Right") for each outstanding share
of Common Stock. The Rights entitle the holder to purchase, under certain
circumstances, one one-hundredth of a share of the Company's Series A Junior
Participating Preferred Stock at $25.00 per share. The Rights may have the
effect of discouraging an unsolicited takeover proposal. Section 203 of the
Delaware General Corporation Law is also applicable to the Company and contains
provisions that restrict certain business combinations with interested
stockholders. Section 203 may have the effect of inhibiting a non-negotiated
merger or other business combination involving the Company.
THE COMPANY
The Company is one of the largest vacation ownership companies in the United
States in terms of property owners and vacation ownership units constructed. The
Company's 25 resorts are located in 11 states and the Bahamas; 15 resorts are in
destination areas with popular vacation attractions and 10 regional resorts are
in scenic locations. The Company's principal business is selling VOIs, commonly
known as timeshares, primarily through its innovative points-based vacation
system, Fair share Plus(R). The Company also offers financing for VOI purchasers
through its wholly owned subsidiary, FAC.
The Company's principal executive offices are located at 11001 Executive
Center Drive, Little Rock, Arkansas 72211 and its telephone number is
(501) 228-2700.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Shares
by the Selling Stockholders.
SELLING STOCKHOLDERS
Effective upon consummation of the Merger on December 19, 1997, Vacation
Break became a wholly owned subsidiary of the Company. As a result of the
conversion of shares of Vacation Break Common Stock, the assumption of Vacation
Break options in the Merger, the payment of the Company's two-for-one Common
Stock split in the form of a 100% stock dividend paid January 30, 1998 (the
"Stock Split"), and the adjustments made to the Assumed Options to reflect the
Stock Split, the Company (i) issued 6,315,480 shares of Common Stock that are
beneficially owned by Ralph P. Muller, which includes 6,245,738 shares of Common
Stock owned of record by R&A and beneficially by Mr. Muller, 56,742 shares of
Common Stock owned of record by Mr. Muller and 13,000 shares of Common Stock
owned of record by Alice Muller, Mr. Muller's wife, (ii) issued 1,523,088 shares
of Common Stock to Kevin Sheehan, and (iii) assumed options exercisable by Mr.
Sheehan which are deemed Assumed Options to purchase 212,626 shares of Common
Stock. Of the shares of Common Stock issued to Mr. Muller and R&A, Joyce North,
the former Executive Vice President - Sales of Vacation Break, has an option to
acquire 425,250 shares. Of the shares of Common Stock issued to Kevin Sheehan,
Joyce North has an option to acquire 60,750 shares. If Ms. North exercises
these options to acquire an aggregate of 486,000 Shares, she has the right to
sell those Shares pursuant to this Prospectus. Ralph P. Muller is the former
Chairman of the Board and Chief Executive Officer of Vacation Break and,
effective upon consummation of the Merger, became a director of the Company.
Kevin Sheehan is the former President of Vacation Break and is a consultant to
the Company.
As a result of the assumption of Vacation Break warrants in the Merger, the
payment of the Stock Split and the adjustments made to the Supplemental Warrants
to reflect the Stock Split, the Company assumed warrants exercisable by each of
the Selling Stockholders named below other than Ralph P. Muller, R&A
Partnership, Ltd., Kevin Sheehan and Joyce North (collectively, such other
Selling Stockholders are referred to as the "Supplemental Warrant holders")
which are deemed Supplemental Warrants to purchase an aggregate of up to 145,812
shares of Common Stock. The Vacation Break warrants assumed by the Company were
originally granted by Vacation Break to Josephthal, Lyon & Ross Incorporated
("Josephthal) and were subsequently transferred by Josephthal to each of the
Supplemental Warrantholders. Josephthal was one of two lead underwriters in
Vacation Break's initial public offering in December 1995, served as Vacation
Break's principal financial advisor and investment banker thereafter and served
as co-advisor to Vacation Break in connection with the Merger. Vacation Break
warrants which represented the right to acquire 90,000 shares of Vacation Break
Common Stock prior to the Merger were granted to Josephthal in consideration of
its services as a lead underwriter in Vacation Break's initial public offering.
The remaining Vacation Break warrants assumed by the Company, which represented
the right to acquire 30,000 shares of Vacation Break Common Stock prior to the
Merger, were granted to Josephthal in consideration of its financial advisory
services in connection with a proposed merger (which was not consummated) with
various companies owned or controlled by James E. Lambert. All of the
Supplemental Warrantholders are affiliates of Josephthal. In addition, Michael
J. Kollender, a Senior Vice President - Investment Banking of Josephthal, was a
director of Vacation Break prior to the Merger.
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The Shares offered by this Prospectus may be offered from time to time by
the Selling Stockholders.
<TABLE>
<CAPTION>
COMMON STOCK NUMBER OF COMMON STOCK
OWNERSHIP SHARES OF OWNERSHIP
PRIOR TO OFFERING (1)(2) COMMON STOCK AFTER OFFERING(2)
-------------------------- -------------- ---------------------------
NAME AND POSITION NUMBER PERCENTAGE OFFERED HEREBY NUMBER PERCENTAGE
- ------------------------ -------------- ---------- -------------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Ralph P. Muller, and 6,315,480 (3) 14.01% 6,315,480 0 *
R&A Partnership, Ltd.
Kevin Sheehan 1,746,164 (4) 3.85% 1,735,714 10,450 *
Joyce North 607,500 (5) 1.34% 486,000 121,500 *
Matthew Balk 5,326 (6) * 5,326 0 0%
Franklin Berger 110 (6) * 110 0 0%
Lawrence Borgman 110 (6) * 110 0 0%
Dennis Burke 110 (6) * 110 0 0%
Estate of Peter Sheib 4,370 (6) * 4,370 0 0%
Paul Fitzgerald 6,450 (6) * 6,450 0 0%
Anthony Guzzi 48 (6) * 48 0 0%
Alan Jacobs 6,076 (6) * 6,076 0 0%
Josephthal Holdings 15,796 (6) * 15,796 0 0%
Michael J. Kollender 36,448 (7) * 18,226 18,222 *
Steve Kowitski 110 (6) * 110 0 0%
Sherwood P. Larkin 5,158 (6) * 5,158 0 0%
Michael Loew 1,404 (6) * 1,404 0 0%
Raymond Mando 32 (6) * 32 0 0%
Dennis McAlpine 3,038 (6) * 3,038 0 0%
Dan Purjes 56,706 (6) * 56,706 0 0%
James Raphalian 1,216 (6) * 1,216 0 0%
Lawrence Rice 5,286 (6) * 5,286 0 0%
Charles Roden 3,740 (6) * 3,740 0 0%
WBM, LLC 2,320 (6) * 2,320 0 0%
Scott A. Weisman 11,392 (8) * 10,180 1,212 *
</TABLE>
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*Less than 1% of class.
(1) Based on ownership of Common Stock as of March 13, 1998.
(2) Based on 45,091,505 shares of Common Stock outstanding as of March 13, 1998
and assuming all Shares offered hereby are sold.
(3) Includes 6,245,738 shares of Common Stock owned of record by R&A. RPM
Investments, Inc., a Texas corporation wholly-owned by Mr. Muller, is the
sole general partner of R&A. Also includes (i) 13,000 shares of Common
Stock owned of record by Alice Muller, Mr. Muller's wife, and (ii) 425,250
shares of Common Stock subject to an option to purchase such shares granted
to Joyce North.
(4) Includes (i) 212,626 shares of Common Stock issuable upon exercise of
Assumed Options, (ii) 10,450 shares issuable upon exercise of Assumed
Options which are exercisable by Jennifer Gelet-Sheehan, Mr. Sheehan's wife,
and (iii) 60,750 shares of Common Stock subject to an option to purchase
such shares granted to Joyce North.
(5) Includes (i) 121,500 shares of Common Stock issuable upon exercise of
Assumed Options, (ii) 425,250 shares of Common Stock beneficially owned by
Ralph Muller which are purchasable by Joyce North upon exercise of an
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option granted by Mr. Muller, and (iii) 60,750 shares of Common Stock
beneficially owned by Kevin Sheehan which are purchasable by Joyce North
upon exercise of an option granted by Mr. Sheehan.
(6) Consists of shares of Common Stock issuable upon exercise of Supplemental
Warrants.
(7) Includes (i) 18,226 shares of Common Stock issuable upon the exercise of
Supplemental Warrants, (ii) 17,010 shares of Common Stock issuable upon the
exercise of Assumed Options, and (iii) 1,212 shares of Common Stock, all of
which are beneficially owned by Mr. Kollender.
(8) Includes (i) 606 shares of Common Stock owned of record by Scott A. Weisman
Profit Sharing Plan C and (ii) 10,180 shares of Common Stock issuable upon
exercise of Supplemental Warrants.
The Company agreed to register the offering and sale of the Shares, other
than the Shares issuable upon exercise of the Supplemental Warrants, under the
Securities Act pursuant to the terms of a Registration Rights Agreement into
which the Company and Messrs. Muller and Sheehan and R&A entered at the
effective time of the Merger. Ms. North has been assigned the rights, and has
assumed the duties, of Messrs. Muller, Sheehan and R&A, under such Registration
Rights Agreement to the extent of any Shares she may acquire. The Company
agreed to register the offering and sale of the Shares subject to the
Supplemental Warrants under the Securities Act pursuant to the terms of the
separate Supplemental Warrant Agreements between the Company and each of the
Supplemental Warrantholders. The Company has agreed to bear all expenses
incurred in connection with the registration under the Securities Act and the
listing on the NYSE of the Shares. The Selling Stockholders will bear all other
expenses in connection with sales of the Shares.
Pursuant to the Registration Rights Agreement and each of the Supplemental
Warrant Agreements, each of the Selling Stockholders has agreed to indemnify the
Company, and its directors, officers and any controlling person of the Company
against certain liabilities based on information furnished for use in this
Prospectus, and the Registration Statement of which this Prospectus is a part,
by the Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders and any controlling persons of the Selling Stockholders against
certain liabilities based on information contained in this Prospectus, and the
Registration Statement of which this Prospectus is a part, which was not
furnished by the Selling Stockholders.
PLAN OF DISTRIBUTION
Offers and sales of Shares pursuant to this Prospectus may be effected by the
Selling Stockholder from time to time in one or more transactions through any
one or more of the following: (i) through brokers, acting as principal or
agent, in transactions (which may involve block transactions) on one or more
exchanges on which the securities are then listed, including the NYSE, in
special offerings, exchange distributions pursuant to the rules of the
applicable exchanges or in the over-the-counter market, or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or at fixed prices, (ii) directly or through
brokers or agents in private sales at negotiated prices; (iii) by any other
legally available means; or (iv) the pledge of the Shares as security for any
loan or obligation, including pledges to brokers or dealers who may, from time
to time, themselves effect distributions of the Shares or interests therein.
In effecting sales, brokers or dealers may arrange for other brokers or
dealers to participate. The Selling Stockholder or any successor in interest,
and any brokers, dealers or agents that participate in the distribution of the
Shares, may be deemed to be "underwriters" within the meaning of the Securities
Act, and any profit on the sale of the Shares by them and any discounts,
commissions or concessions (which discounts, commissions, or concessions will
not exceed those customary for the types of transactions involved) received by
any such brokers, dealers or agents may be deemed to be underwriting commissions
or discounts under the Securities Act.
In addition, any of the Shares covered by this Prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus.
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LEGAL MATTERS
Certain legal matters in connection with the validity of the Common Stock
offered hereby have been passed upon for the Company by Jones, Day, Reavis &
Pogue, Dallas, Texas.
EXPERTS
The consolidated financial statements and schedule of the Company
incorporated by reference in the Company's Annual Report (Form 10-K) for the
year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated balance sheet of Vacation Break at December 31, 1996 and
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1996, incorporated by
reference in this Prospectus, are incorporated by reference in reliance on the
report of Coopers & Lybrand, L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents incorporated by reference herein)
contains certain forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995), including (without
limitation) statements with respect to anticipated future operating and
financial performance, growth and acquisition opportunities and other similar
forecasts and statements of expectation relating to the Company. When used in
this Prospectus, words such as "anticipates," "believes," "estimates,"
"expects," "intends," "should" and variations of these words and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Forward-looking statements made by the
Company and its management are based on estimates, projections and beliefs of
the management of the Company, as well as assumptions made at the time of such
statements by and information then currently available to the management of the
Company, as applicable, and are not guarantees of future performance. The
Company disclaims any obligation to update or revise any forward-looking
statement based on the occurrence of future events, the receipt of new
information or otherwise.
Actual future performance, outcomes and results may differ materially from
those expressed in forward-looking statements made by the Company and its
management as a result of a number of risks, uncertainties and assumptions
relating to the operations and results of operations of the Company following
the Merger. Representative examples of these factors include (without
limitation) general industry and economic conditions; interest rate trends;
regulatory changes; cost of capital and capital requirements; availability of
real estate properties; competition from national hospitality companies and
other competitive factors and pricing pressures; shifts in customer demands;
changes in operating expenses, including employee wages, commission structures,
benefits and training; economic cycles; the continued availability of financing
in the amounts and at the terms necessary to support the Company's future
business, assumed cost savings and other synergistic benefits of the Merger; the
success achieved or problems encountered in integrating the operations of
Vacation Break into the Company and each of the factors identified in the
section "Risk Factors" set forth in this Prospectus. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results or outcomes may vary materially from those described
herein as anticipated, believed, estimated, expected or intended.
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NO PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH THE OFFERING HEREBY
TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION 8,197,006 SHARES
MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION FAIRFIELD
WHERE SUCH OFFER OR SOLICITATION WOULD COMMUNITIES, INC.
BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT
TO THE DATE HEREOF.
------------------------ COMMON STOCK
TABLE OF CONTENTS --------------------------------
PROSPECTUS
---------------------------------
PAGE
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Available Information.......... 2
Incorporation of Certain
Documents by Reference...... 2
Risk Factors................... 3
The Company.................... 7
Use of Proceeds................ 7
Selling Stockholders........... 7
Plan of Distribution........... 9
Legal Matters.................. 10
Experts........................ 10
Forward-Looking Statements..... 10 March 18, 1998
