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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
HOMEFREE VILLAGE RESORTS, INC.
HOMEFREE INVESTORS L.P.
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(Names of the Issuers)
HOMEFREE VILLAGE RESORTS, INC.
HOMEFREE INVESTORS L.P.
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(Names of the Persons Filing Statement)
COMMON STOCK, $.001 PAR VALUE
ASSIGNEE LIMITED PARTNERSHIP INTERESTS
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(Titles of Classes of Securities)
437 393 101 (Common Stock)
437 393 200 (Assignee Limited Partnership Interests)
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(CUSIP Numbers of Classes of Securities)
Craig M. Bollman, Jr., c/o Homefree Village Resorts, Inc.
1400 S. Colorado Boulevard, Suite 410, Denver, Colorado 80222; (303) 757-3002
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(Name, Address, and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Persons Filing Statement
This statement is filed in connection with (check appropriate box):
a. [X] The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3 under the Securities Exchange
Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies.[X]
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Calculation of Filing Fee
Transaction Valuation Amount of Filing Fee
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$208,000* $42
*Calculated based on the maximum aggregate number of fractional shares of Common
Stock to be repurchased in connection with the proposed Reverse Stock Split, at
a valuation of $0.05 per fractional share, the price to be paid for such
fractional shares as described in the attached filing.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
Amount previously paid: Filing parties: Homefree Village Resorts, Inc.;
------- Homefree Investors L.P.
Form or registration no.: Date filed:
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CROSS-REFERENCES
The information required to be contained in this Schedule 13e-3 is
incorporated herein by reference from the attached Information Statement. The
following cross-references indicate where the information called for by each
Item of this Schedule 13e-3 is contained in the enclosed Information Statement.
ITEM SECTION TITLE(S) IN INFORMATION STATEMENT PAGE(S)
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO
THE TRANSACTION.
(a) Cover page of the Information Statement. 1
(b) The Company--Organization. 11
(c) Fairness of the Reverse Stock Split--Factors Considered 26
in Fairness Determination--Current and Historical
Market Prices for the Common Stock.
(d) Fairness of the Reverse Stock Split--Factors Considered 26
in Fairness Determination--Current and Historical
Market Prices for the Common Stock.
(e) Not applicable.
(f) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND.
Cover page of the Information Statement. 1
(a)-(f) Not applicable.
ITEM 3. PAST CONTACTS, TRANSACTIONS, OR NEGOTIATIONS.
(a) Not applicable.
(b) Not applicable.
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ITEM SECTION TITLE(S) IN INFORMATION STATEMENT PAGE(S)
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ITEM 4. TERMS OF THE TRANSACTION. 17
(a) The Reverse Stock Split; --Exchange of,
Stock Certificates; Cash Payments in Lieu of Shares. 22-23
(b) Not applicable.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(e) Not applicable.
(f)-(g) Reasons for the Reverse Stock Split--Going-Private 18, 20
Transaction; Conduct of the Company's Business
after the Reverse Stock Split--Termination of
Reporting Company Status.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER
CONSIDERATION.
(a) Financing of the Reverse Stock Split. 23-24
(b) Financing of the Reverse Stock Split. 23-24
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a) Reasons for the Reverse Stock Split. 18-19
(b) Reasons for the Reverse Stock Split--Form 18-19
of Transaction.
(c) Reasons for the Reverse Stock Split. 18-19
(d) Reasons for the Reverse Stock Split; Conduct 18-21;
of the Company's Business after the Reverse 22-23;
Stock Split; Exchange of Stock Certificates; Cash 29-30
Payments in Lieu of Shares; Certain Federal Income
Tax Consequences.
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ITEM SECTION TITLE(S) IN INFORMATION STATEMENT PAGE(S)
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ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) Fairness of the Reverse Stock Split. 24
(b) Fairness of the Reverse Stock Split. 24-28
(c) Further Stockholder Approval Not Required. 21
(d) Fairness of the Reverse Stock Split--Absence 28
of Independent Third-Party Valuation or
Arms'-Length Negotiation.
(e) Fairness of the Reverse Stock Split--Potential 28
Conflicts of Interest.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) Fairness of the Reverse Stock Split--Absence 28
of Independent Third-Party Valuation or
Arms'-Length Negotiation.
(b) Not applicable.
(c) Not applicable.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) Security Ownership of Certain Beneficial Owners 31
and Management.
(b) Not applicable.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS
WITH RESPECT TO THE ISSUER'S SECURITIES.
Not applicable.
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ITEM SECTION TITLE(S) IN INFORMATION STATEMENT PAGE(S)
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ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF
CERTAIN PERSONS WITH RESPECT TO THE
TRANSACTION.
(a) Fairness of the Reverse Stock Split--Potential 28
Conflicts of Interest.
(b) Fairness of the Reverse Stock Split. 24
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) Lack of Appraisal Rights. 21
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) Incorporated by reference to the Issuer's Annual (N/A)
Report on Form 10-K for the year ended
December 31, 1994, and its Quarterly Reports
on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1995.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) Financing of the Reverse Stock Split. 23-24
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
Not applicable.
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ITEM SECTION TITLE(S) IN INFORMATION STATEMENT PAGE(S)
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ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Drafts of the Information Statement and Letter (N/A)
of Transmittal to be sent to stockholders of the
Issuer (enclosed herewith).
(e) Not applicable.
(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated March 15, 1996
HOMEFREE VILLAGE RESORTS, INC.
By /s/ CRAIG M. BOLLMAN, JR.
----------------------------
Craig M. Bollman, Jr.
Chairman and President
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Stockholders Should Carefully Read This Information Statement
and the Accompanying Materials in their Entirety
Before Making any Investment Decision.
INFORMATION STATEMENT
REGARDING THE PROPOSED
ONE-FOR-100,000 REVERSE STOCK SPLIT
AND RELATED TRANSACTIONS
BY
HOMEFREE VILLAGE RESORTS, INC.
This Information Statement and the accompanying materials are being
provided by Homefree Village Resorts, Inc. (the "Company") to its stockholders
in connection with a proposed one-for-100,000 reverse stock split approved by
the Company's Board of Directors on March 12, 1996. This Information
Statement and such accompanying materials were first sent or given to
stockholders on or about ____________, 1996.
The Company will bear all of the costs of the preparation and
dissemination of this Information Statement and the accompanying materials,
which are estimated to be approximately $50,000. No consideration has been or
will be paid to any officer, director, or employee of the Company in connection
with the proposed Reverse Stock Split or the preparation and dissemination of
this Information Statement and the accompanying materials or otherwise in
connection with the proposed Reverse Stock Split.
Correspondence with respect to the proposed Reverse Stock Split should
be addressed to the Secretary of the Company at the Company's principal
executive office at 1400 S. Colorado Boulevard, Suite 410, Denver, Colorado
80222.
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TABLE OF CONTENTS
Page
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SUMMARY OF THE REVERSE STOCK SPLIT....................................3
SPECIAL FACTORS......................................................11
The Company.....................................................11
The Reverse Stock Split.........................................17
Reasons for the Reverse Stock Split.............................18
Conduct of the Company's Business
after the Reverse Stock Split.................................19
Further Stockholder Approval Not Required.......................21
Lack of Appraisal Rights........................................21
Postponement or Abandonment.....................................21
Effective Time..................................................21
Exchange of Stock Certificates;
Cash Payments in Lieu of Shares...............................22
Financing of the Reverse Stock Split............................23
Fairness of the Reverse Stock Split.............................24
Certain Federal Income Tax Consequences.........................29
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT...................................31
FINANCIAL INFORMATION................................................32
OTHER INFORMATION;
DOCUMENTS INCORPORATED BY REFERENCE................................32
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SUMMARY OF THE PROPOSED REVERSE STOCK SPLIT
AND RELATED TRANSACTIONS
The following is a summary of certain information set forth in greater
detail elsewhere in this Information Statement. It does not purport to be
complete, and is qualified in its entirety by the more detailed information set
forth elsewhere in this Information Statement.
THE COMPANY
Homefree Village Resorts, Inc. (the "Corporation") is a Delaware corporation.
Homefree Investors L.P. (the "Partnership") is a Delaware limited partnership
formed by the Corporation in 1987 and which has not commenced operations and has
no assets or properties. The shares of common stock, $0.001 par value per share,
of the Corporation, and the assignee limited partnership interests, $0.001 par
value per unit, of the Partnership, are "paired" on a one-for-one basis and may
only be transferred in units consisting of one share of common stock of the
Corporation and one unit of assignee limited partnership interest in the
Partnership. As of September 30, 1995, the Company had outstanding 10,483,982
shares of common stock and an equal number of "paired" assignee limited
partnership units, which were held of record by approximately 550 holders.
Unless expressly otherwise stated, or unless the context requires otherwise,
references in this Information Statement to the Company include the Corporation
and its wholly owned subsidiaries and the Partnership, and references to shares
of the Company's common stock include the assignee limited partnership interests
in the Partnership that are paired with such shares.
The Company is engaged primarily in the development and operation of
adult recreational communities containing rental sites for manufactured homes
and recreational homes. In recent years, the Company has also focused on the
development of recreational resort communities in Mesa, Arizona that offer
extensive recreational facilities and social activities designed to appeal to
active pre-retirement and retirement age people. During 1995, the Company
operated and had interests in one community containing a total of approximately
832 rental sites located in Arizona. The Company also has interests in two
communities containing approximately 2,300 rental sites located in Arizona. The
Company has interests in such communities through Aristek Properties, Ltd.,
Aristek Western Properties Limited Partnership, and other affiliated
partnerships in which the Corporation is the General Partner. The Company's
objectives are to create and participate, through such partnerships, in the cash
flow from these communities and to share in appreciation in the value of such
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properties. The Company also receives income from development, management,
and administrative services.
See "Special Factors -- The Company."
THE REVERSE STOCK SPLIT
On March 12, 1996, the Company's Board of Directors approved a proposal
authorizing:
(1) An amendment to the Company's Certificate of Incorporation
effecting a one-for-100,000 reverse stock split of the Company's existing
Common Stock, $0.001 par value per share ("Old Common Stock"), reducing the
authorized number of shares of common stock from 15,000,000 shares to 10,000
shares ("New Common Stock"); and
(2) The payment of cash in the amount of $0.05 per share of Old
Common Stock in lieu of the issuance of fractional shares of New Common Stock
to persons who would hold less than one full share of New Common Stock after
the proposed reverse stock split, and to other stockholders who desire to
liquidate their investment in the Company (together with the amendment
described in the preceding paragraph, the "Reverse Stock Split").
REASONS FOR THE REVERSE STOCK SPLIT
The Company authorized the proposed Reverse Stock Split in order to "go
private," i.e., to reduce the number of its record stockholders to less than
300, which would permit the Company to discontinue the registration of its
Common Stock under the Securities Exchange Act of 1934 (the "Exchange Act"). The
Board of Directors believes that neither the Company nor its stockholders derive
any material benefit from the continued registration of the Company's Common
Stock under the Exchange Act. The Company incurs significant direct and indirect
costs, however, as a result of the requirement that it comply with the filing
and reporting requirements applicable to public companies. Accordingly, the
Board of Directors believes that the continued expense and burden to the Company
of continued registration, including the requirement to file annual and
quarterly reports, proxy statements, and other documents with the SEC,
significantly outweigh any benefits to the Company or its stockholders as a
result of such registration. The Board of Directors has determined that the
proposed Reverse Stock Split is the most expeditious and efficient method of
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changing the Company's status from that of a publicly held reporting company
to that of a privately held non-reporting company.
In making this determination, the Board of Directors, considered other
means of achieving this result, but rejected these alternatives were rejected
because the Board of Directors believed that the proposed Reverse Stock Split
would be simpler and less costly.
The proposed Reverse Stock Split has been structured so as to permit
stockholders who would otherwise hold less than one full share of New Common
Stock after the Reverse Stock Split to elect to remain as stockholders of the
Company by increasing their stockholdings to at least one whole share of New
Common Stock. See "Special Factors--Exchange of Stock Certificates; Cash
Payments in Lieu of Shares." It is therefore possible that even if the Reverse
Stock Split is effected, the Company will not achieve its objective of reducing
the number of record stockholders following the Reverse Stock Split, to below
300 stockholders, in which case the Company would still be a reporting company
for purposes of the Exchange Act and would not realize the cost-savings that
would result from ceasing to be a publicly held reporting company.
See "Special Factors--Reasons for the Reverse Stock Split."
TERMINATION OF REPORTING COMPANY STATUS
If the proposed Reverse Stock Split is effected, it is anticipated that the
Company will cease to be a reporting company under the Exchange Act. As a
result, the Company would no longer file annual and quarterly reports, proxy
statements, and other documents with the SEC. In addition, the Company
would no longer be required to comply with the proxy rules of Regulation 14A
promulgated under Section 14 of the Exchange Act, and its officers, directors,
and 10%-or-greater stockholders would no longer be subject to the reporting
requirements and "short-swing" security trading restrictions under Section 16 of
the Exchange Act. Continuing stockholders will no longer be entitled to receive
annual reports and proxy statements and will no longer have the benefit of a
public market for their shares of the Company's stock.
See "Special Factors--Conduct of the Company's Business after the Reverse
Stock Split."
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FURTHER STOCKHOLDER APPROVAL NOT REQUIRED
The proposed Reverse Stock Split has been approved by the written consent of
Craig M. Bollman, Jr., the Company's majority stockholder. Such consent is
sufficient to approve the Reverse Stock Split under the Delaware General
Corporation Law, and no other vote or consent of stockholders is required or
will be sought in connection with the proposed Reverse Stock Split. ACCORDINGLY,
THE COMPANY IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND THE
COMPANY A PROXY.
POSTPONEMENT OR ABANDONMENT OF THE REVERSE STOCK SPLIT
The Company's Board of Directors may postpone or abandon the proposed
Reverse Stock Split at any time prior to its consummation, for any reason,
including without limitation if in the Directors' sole judgment, consummation of
the Reverse Stock Split would unduly deplete the Company's working capital.
LACK OF APPRAISAL RIGHTS
Pursuant to the Delaware General Corporation Law, dissenting stockholders will
not have appraisal rights if the proposed Reverse Stock Split is effected.
Stockholders who believe that they may be aggrieved by the proposed Reverse
Stock Split may have other rights under federal law or common law, such as
rights relating to the fairness of the proposed Reverse Stock Split and the
fiduciary responsibilities of corporate officers, directors, and stockholders.
The nature and extent of such rights, if any, may vary depending upon the facts
and circumstances.
EXCHANGE OF STOCK CERTIFICATES; CASH PAYMENTS IN LIEU OF SHARES
If the proposed Reverse Stock Split is effected, the stock certificates
formerly representing shares of Old Common Stock will cease to represent such
shares and thereafter will represent the shares of New Common Stock into which
they have been converted, or the right to receive a cash payment in lieu of such
shares, as the case may be, all as described below. Enclosed is a Letter of
Transmittal for use in exchanging old stock certificates for a new stock
certificate or cash payment. Note that Letters of Transmittal should not be sent
to the Company, but rather should be sent to American Stock Transfer & Trust
Company, the transfer agent and registrar for Old Common Stock.
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Each stockholder who holds of record less than 100,000 shares of Old
-------------------------------
Common Stock (the equivalent of one whole share of New Common Stock)
- ------------
should use the enclosed Letter of Transmittal to elect one of the following
options:
(i) To surrender his old stock certificate(s) and the shares of Old
Common Stock represented thereby for a cash payment in an amount equivalent to
$0.05 per share of Old Common Stock represented by such certificate(s);
(ii) If the stockholder has purchased additional shares of Old
Common Stock in the open market, in an amount that, when added to his current
stockholdings, equals at least 100,000 shares of Old Common Stock (the
equivalent of one whole share of New Common Stock), to surrender the stock
certificates representing such shares for a new stock certificate representing
New Common Stock; or
(iii) To surrender his stock certificate(s) representing shares of
Old Common Stock, and a check for the purchase of additional shares of Old
Common Stock (at a purchase price of $0.05 per share, and subject to
availability on a first-come, first-served basis as described below) in an
amount that, together with his current stockholdings, will equal 100,000
shares of Old Common Stock (the equivalent of one whole share of New Common
Stock), for exchange for a new stock certificate representing New Common
Stock. Note that it is possible that stockholders who wish to purchase
additional shares of Old Common Stock will not be able to do so, since the
Company will not issue any additional shares of stock but instead will act as
a clearinghouse to match would-be sellers and purchasers of shares, on a
first-come, first-served basis. Accordingly, the shares of Old Common Stock
available for purchase will be limited to those available from stockholders
wishing to receive cash payments for their shares and such available shares
will be allocated on a first-come, first-served basis to stockholders desiring
to purchase them. The Company anticipates, however, that a quantity of shares
of Old Common Stock sufficient to meet stockholder demand will be available.
In the event that a stockholder who has requested to purchase additional
shares of Old Common Stock in this manner is not allocated sufficient
additional shares to bring his aggregate stockholdings to 100,000 shares of
Old Common Stock, the Company will return his check together with a cash
payment for his shares of Old Common Stock, and such stockholder will not
continue as a stockholder of the Company.
PLEASE NOTE THAT ALL STOCK CERTIFICATES SENT TO THE TRANSFER AGENT SHOULD BE
DULY INDORSED FOR TRANSFER TO THE COMPANY, WITH A MEDALLION SIGNATURE GUARANTY,
WHICH MAY BE OBTAINED FROM MOST BANKS AND BROKERAGE
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-8-
FIRMS. DO NOT SEND IN YOUR STOCK CERTIFICATES WITHOUT A MEDALLION SIGNATURE
--------------------------------------------------------------------
GUARANTY, AS IT WILL BE RETURNED TO YOU.
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Each stockholder who holds of record at least 100,000 shares of Old Common
-------------------------------------
Stock (the equivalent of one whole share of New Common Stock) should use the
- -----
enclosed Letter of Transmittal to elect one of the following options:
(i) To surrender his old stock certificate(s) and the shares of Old
Common Stock represented thereby for a cash payment in an amount equivalent to
$0.05 per share of Old Common Stock represented by such stock certificate(s);
or
(ii) To exchange his old stock certificate(s) for a new certificate
representing the shares of New Common Stock into which the shares of Old
Common Stock formerly represented by the old stock certificate are converted
pursuant to the Reverse Stock Split.
AGAIN, PLEASE NOTE THAT ALL STOCK CERTIFICATES SENT TO THE TRANSFER AGENT SHOULD
BE DULY INDORSED FOR TRANSFER TO THE COMPANY, WITH A MEDALLION SIGNATURE
GUARANTY, WHICH MAY BE OBTAINED FROM MOST BANKS AND BROKERAGE FIRMS. DO NOT SEND
-----------
IN YOUR STOCK CERTIFICATES WITHOUT A MEDALLION SIGNATURE GUARANTY, AS THEY WILL
- -------------------------------------------------------------------------------
BE RETURNED TO YOU.
- -------------------
See "Special Factors--Exchange of Stock Certificates; Cash Payments in
Lieu of Shares."
FINANCING OF THE REVERSE STOCK SPLIT
The Company estimates that the maximum cost that the Company will incur in
connection with the proposed Reverse Stock Split will be approximately $258,000,
consisting of estimated cash payments in lieu of shares of New Common Stock of
approximately $208,000 and estimated transactional expenses of approximately
$50,000. The Company intends to finance such costs from its working capital.
See "Special Factors--Financing of the Reverse Stock Split."
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POTENTIAL CONFLICTS OF INTEREST
The directors of the Company are Craig M. Bollman, Jr., the Company's
President, Chairman of the Board of Directors, and majority stockholder, Phyllis
A. Bollman, Mr. Bollman's spouse, and Taylor M. Bollman, Mr. Bollman's son.
Craig M. Bollman, Jr., who owns or controls approximately 67% of the outstanding
shares of Common Stock, has advised the Company that he intends to elect to
retain all such shares of New Common Stock after the Reverse Stock Split.
The Board of Directors did not retain either an investment bank or other
financial adviser to render a report or opinion with respect to the fairness of
the proposed Reverse Stock Split to the Company or its stockholders or an
unaffiliated representative to represent the unaffiliated stockholders of the
Company in negotiating the terms of the Reverse Stock Split.
See "Special Factors--Fairness of the Reverse Stock Split."
FAIRNESS OF THE REVERSE STOCK SPLIT
The Board of Directors has fully reviewed and considered the terms and
conditions of the proposed Reverse Stock Split and has unanimously determined
that the proposed Reverse Stock Split, taken as a whole, is fair to and in the
best interests of the Company and its stockholders.
The Board of Directors believes that the payment of cash in the amount of
$0.05 per share of Old Common Stock in lieu of the issuance of shares of New
Common Stock to persons who would hold less than one full share of New Common
Stock after the Reverse Stock Split, and to other stockholders who desire to
liquidate their investment in the Company, will enable stockholders to liquidate
their shares easily and at a fair price. Depending upon a particular
stockholders' tax basis in his shares of Common Stock, this may enable the
stockholder to obtain a tax benefit by recognizing a loss for federal income tax
purposes. See "Special Factors--Certain Federal Income Tax Consequences."
Moreover, by having their shares of the Company's stock repurchased by the
Company, stockholders will be able to liquidate their investments in the Company
without incurring brokerage costs that, especially in the case of small
stockholdings, would otherwise sharply decrease or even eliminate the actual net
proceeds of sale to the stockholder.
The Board of Directors also believes that the proposed Reverse Stock Split is
fair to the Company and to stockholders who remain as stockholders of the
Company following the consummation of the Reverse Stock Split because, as
described above, the Board of Directors believes that the price to be paid to
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stockholders who receive cash in lieu of shares of New Common Stock is fair and
that the Company will realize cost-savings if as a result of the Reverse Stock
Split it ceases to be a reporting company under the Exchange Act.
The proposed Reverse Stock Split has been structured so as to permit
stockholders who would otherwise hold less than one full share of New Common
Stock after the Reverse Stock Split to elect to remain as stockholders of the
Company by increasing their stockholdings to at least one whole share of New
Common Stock. The Board of Directors determined to structure the proposed
Reverse Stock Split in this way because the directors believed that it was
fairer to stockholders to permit them this option to remain as stockholders of
the Company than to guarantee that the Reverse Stock Split would achieve the
Company's objective of terminating its obligations under the Exchange Act.
See "Special Factors--Fairness of the Reverse Stock Split."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The proposed Reverse Stock Split is not expected to have any material federal
income tax consequence to the Company, or to stockholders who receive shares of
New Common Stock in exchange for their shares of Old Common Stock. In general,
for federal income tax purposes stockholders who receive cash in exchange for
their shares of Old Common Stock will recognize taxable capital gain or loss as
a result of the transaction, provided they hold their Old Common Stock as a
capital asset on the date of exchange. Any such capital gain or loss will be
long-term capital gain or loss if the Old Common Stock had been held for more
than one year, and otherwise will be short-term capital gain or loss. THE
COMPANY HAS NOT SOUGHT, AND DOES NOT INTEND TO SEEK, A RULING OF THE INTERNAL
REVENUE SERVICE OR AN OPINION OF COUNSEL AS TO ANY TAX CONSEQUENCES OF THE
PROPOSED REVERSE STOCK SPLIT. EACH STOCKHOLDER IS ADVISED TO CONSULT HIS OWN TAX
ADVISOR AS TO THE LIKELY TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT IN THAT
STOCKHOLDER'S PARTICULAR CIRCUMSTANCES.
See "Special Factors--Certain Federal Income Tax Consequences."
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SPECIAL FACTORS
THE COMPANY
ORGANIZATION. Homefree Village Resorts, Inc. (the "Corporation") is a Delaware
corporation. Homefree Investors L.P. (the "Partnership") is a Delaware limited
partnership formed by the Corporation in 1987 and which has not commenced
operations and has no assets or properties. The shares of common stock, $0.001
par value per share, of the Corporation, and the assignee limited partnership
interests, $0.001 par value per unit, of the Partnership, are "paired" on a one-
for-one basis and may only be transferred in units consisting of one share of
common stock of the Corporation and one unit of assignee limited partnership
interest in the Partnership. As of September 30, 1995, the Company had
outstanding 10,483,982 shares of common stock and an equal number of "paired"
assignee limited partnership units, which were held of record by approximately
550 holders. Unless expressly otherwise stated, or unless the context requires
otherwise, references in this Information Statement to the Company include the
Corporation and its wholly owned subsidiaries and the Partnership, and
references to shares of the Company's common stock include the assignee limited
partnership interests in the Partnership that are paired with such shares.
BUSINESS. The Company is engaged primarily in the development and operation of
adult recreational communities containing rental sites for manufactured homes
and recreational homes. In recent years, the Company has also focused on the
development of recreational resort communities in Mesa, Arizona that offer
extensive recreational facilities and social activities designed to appeal to
active pre-retirement and retirement age people. During 1995, the Company
operated and had interests in one community containing a total of approximately
832 rental sites located in Arizona. The Company also has interests in two
communities containing approximately 2,300 rental sites located in Arizona. The
Company has interests in such communities through Aristek Properties, Ltd.,
Aristek Western Properties Limited Partnership, and other affiliated
partnerships in which the Corporation is the General Partner. The Company's
objectives are to create and participate, through such partnerships, in the cash
flow from these communities and to share in appreciation in the value of such
properties. The Company also receives income from development, management, and
administrative services.
THE CORPORATION. The Corporation is a Delaware corporation which was organized
in February 1972. The Corporation has been engaged in the business of operating
manufactured home communities since its organization. In 1977, the Corporation,
then called Metrix, Inc., acquired all of the capital stock of Aristek Real
Estate Corporation in exchange for 6,230,000 shares of Common
<PAGE>
-12-
Stock of the Company which were issued to the stockholders of that corporation,
including 4,449,600 shares to Craig M. Bollman, Jr. and Phyllis A. Bollman. The
name of the Corporation was changed to "Aristek Corporation," and subsequently
changed to "Aristek Communities, Inc." and then to "Homefree Village Resorts,
Inc." Aristek Real Estate Corporation itself was engaged in the development and
operation of manufactured home communities from 1974 to 1977. Since 1977, the
business of the Corporation has continued to consist primarily of the
development and operation of such communities. However, in recent years, the
Corporation has refocused its business on adult recreational communities
containing rental sites for manufactured homes. The Corporation conducts
substantially all of its business through the affiliated limited partnerships
described below.
RESORTPARKS. The Corporation owns 100% of the capital stock of Resortparks of
America, Inc. ("Resortparks"), a Delaware corporation organized in September
1982 to engage in the design, development and management of adult recreational
communities offering extensive recreational facilities and social activities to
pre-retirement and retirement age people. References herein to the Corporation
or the Company include Resortparks.
THE PARTNERSHIP. In July 1987, the Corporation formed the Partnership as a
Delaware limited partnership for the purpose of engaging in certain aspects of
future business opportunities of the type presently conducted by the
Corporation. The general partner of Homefree Investors L.P. is Homefree General
Partners, a Delaware general partnership, comprised of the Corporation and
Bollman Associates, Inc., a Delaware corporation, all of the capital stock of
which is owned by Craig M. Bollman, Jr., President and Chairman of the Board of
the Company.
When it formed the Partnership, the Corporation intended to conduct its
business in conjunction with the Partnership. However, the Partnership never
commenced operations. The Company anticipates that, where possible, in future
real estate acquisitions the Partnership will acquire an ownership interest and
the Corporation will manage operations. The Corporation has no plans to transfer
the Corporation's assets to the Partnership.
The Partnership's Agreement of Limited Partnership (the "Partnership
Agreement") provides that it may engage in virtually any business activity,
although the primary focus of its business is intended to be investment in real
estate related activities, which may include, for example, investing in
securities of other real estate companies and participating in condominium
conversion programs. If the Partnership generates capital to invest, Homefree
General Partners, the general partner of the Partnership, anticipates making
investments in such areas. Although the Partnership has the power under state
law to make investments in securities of other entities, the Partnership cannot
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be engaged primarily in the business of investing, reinvesting or trading in
securities without subjecting itself to regulation under the Investment Company
Act of 1940. In such event, the Partnership would be subject to the limitations
and disclosure requirements of such act. The Partnership has no present
intention to engage in activities which would cause it to become subject to
regulation under the Investment Company Act of 1940 or to engage in non-real
estate related activities.
The Partnership currently has no employees. The Partnership intends to utilize
employees of the Corporation on an as-needed basis, and to contribute to the
compensation of such persons on a pro-rata basis.
AFFILIATED PARTNERSHIPS
ARISTEK PROPERTIES, LTD. The principal affiliated partnership of the
Company is Aristek Properties, Ltd. ("Aristek Properties"). Aristek Properties
was formed as a Colorado limited partnership in June 1976. The Corporation holds
a 1% interest in Aristek Properties as sole General Partner and an additional 1%
interest as a limited partner. Resortparks also owns a 1.3% interest as a
limited partner. The remaining 96.7% of limited partnership interests is held by
individual limited partners. The Corporation also held a 30% residual interest
in Aristek Properties, which it relinquished in 1994. See "Residual Interests in
Affiliated Partnerships" below.
Although Aristek Properties has provided significant income tax benefits to
its limited partners, its primary objective is to create significant long-term
capital appreciation that may be realized by the limited partners and the
Corporation, as General Partner, through net proceeds from refinancing of the
properties, and ultimately, net proceeds from the sale of such properties or the
conversion of such properties to other residential or commercial uses and the
distribution of the resulting cash to the partners. The Corporation, as General
Partner of Aristek Properties, is also entitled to receive an annual
administrative fee (currently an amount equal to 2.5% of the capital
contributions of the partners), leasing commissions, management fees and
development fees. However, this fee has not been paid since 1993.
Aristek Properties has a 99% interest in Monte Vista I Joint Venture ("MV-I"),
an Arizona joint venture. The remaining interest in MV-I is owned by the
Corporation. Previously, Aristek Properties owned 60% and Aristek Western
Properties Limited Partnership (see "Aristek Western Properties Limited
Partnership" below) owned 40% of MV-I. Aristek Western transferred to Aristek
Properties and to the Corporation its 40% interest in MV-I, 39% to Aristek
Properties, and 1% to the Corporation.
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The interests in MV-I were modified again in connection with a restructuring
of certain loans owed by Aristek Properties and MV-I to the Corporation. The
obligors on such loans were not able to make principal and interest payments.
With the consent of most of the limited partners of Aristek Properties, the
Corporation agreed to extend these loans until June 30, 1998 in return for a 7%
annual interest rate and a 75% participation in MV-I's operating cash flow, and
in its net sale or refinancing proceeds after all liabilities (including those
payable to the Corporation) are satisfied. At the time of the restructuring, the
net amounts owed to the Corporation by MV-I were approximately $4,053,341. The
Corporation believes that such amount exceeded the value of the net assets of
MV-I, after payment of MV-I's other liabilities. Aristek Properties has no
material assets other than its interest in MV-I. Since the Corporation is a
creditor of both Aristek Properties and MV-I as described above, the Corporation
expects to be entitled to substantially all of the equity value of MV-I in
excess of MV-I's existing first mortgage.
In connection with obtaining such consent of the limited partners of Aristek
Properties, such consenting limited partners granted to the Corporation, or its
designee, an option to purchase their limited partnership interests in Aristek
Properties. This option may be exercised between January 1, 1997 and November
30, 1998; in any event, the Corporation is required to exercise the option by
November 30, 1998. The purchase price will be equal to the greater of $20,000
per limited partner Unit (an original $100,000 investment) or the fair market
value (based on appraisal) of such limited partnership unit. Holders of twenty-
six and one-half (26.5) Units granted the above described option, which would
result in a minimum total purchase price for all such Units of $530,000.
ARISTEK WESTERN PROPERTIES LIMITED PARTNERSHIP. The Corporation formed Aristek
Western Properties Limited Partnership ("Aristek Western"), a Massachusetts
limited partnership, in October 1984 for the purpose of acquiring, financing,
and developing or redeveloping adult recreational communities with affordable
rental homesites for manufactured homes, located primarily in the western and
southwestern United States. The Corporation has a 1% interest in Aristek Western
as the General Partner and a 1.625% limited partnership interest and has
residual equity interests as the General Partner and as a Special Limited
Partner. See "Residual Interests in Affiliated Partnerships" below.
Aristek Western purchased a 50% interest in a joint venture with an
unaffiliated third party in July 1985. The joint venture purchased two adult
recreational communities in Mesa, Arizona, named Good Life and Towerpoint. See
"Properties" below. In September 1985, Aristek Western acquired from the
Partnership a 30% interest in MV-I. This interest was increased to 40% in July
1986. This 40% interest was transferred to Aristek Properties and the
Corporation. See "Aristek Properties, Ltd." above.
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RESIDUAL INTERESTS IN AFFILIATED PARTNERSHIPS
ARISTEK PROPERTIES, LTD. Prior to the restructuring described above, as
General Partner of Aristek Properties, the Corporation had a residual interest
in Aristek Properties that entitled it to receive 30% of all excess cash flow
from operations and net proceeds from the refinancing and sale of properties
after distributions have been made to the limited partners in an amount equal to
their initial capital investments. The Corporation relinquished its residual
interest in Aristek Properties as part of the loan restructuring described
above. As a result, the limited partners of Aristek Properties will be entitled
to all distributions, but only after the Corporation receives its loan repayment
and participating interest as described above.
ARISTEK WESTERN PROPERTIES LIMITED PARTNERSHIP. The Corporation has a direct
residual interest in Aristek Western that entitles the Corporation to 30% of the
excess cash flow from operations, refinancings, and sales of properties when
Aristek Western has made cash distributions to the limited partners of at least
$65,000 per unit and the sum of the cash distributions per unit plus the product
of the highest marginal federal income tax rate in effect for each year times
the aggregate net tax losses allocated per unit in each year equal the initial
capital investment. Aristek Western has not yet made any cash distributions to
its limited partners. The Corporation cannot presently predict whether
distributions will be made to the limited partners.
DEVELOPMENT ACTIVITIES. The Corporation, through Aristek Properties and in
conjunction with Resortparks, developed a community for recreational homes and
park model travel trailers in Mesa, Arizona, a city 20 miles east of Phoenix.
The community, called Monte Vista, is designed to appeal to active adults in the
pre-retirement and retirement age groups and is recreation-oriented.
The Corporation planned a two-stage development process for Monte Vista.
During the first stage, the Corporation developed 832 recreational home rental
sites and extensive common facilities, including a 35,600 square foot social and
recreation complex. This first stage is on 80 acres owned by MV-I. Construction
began in 1983 and was substantially completed in December 1984. Monte Vista
opened for occupancy in January 1985.
During the second stage, the Corporation plans to develop additional
manufactured home sites on a portion of 80 acres conveyed by Aristek Properties
to MV-I. Assuming that market conditions permit, the Corporation intends to
pursue in the future the funding necessary to develop this second stage. See
"Properties" below.
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COMPETITION. The Corporation competes generally with all companies
engaged in community development and home construction.
The three properties in Mesa, Arizona compete in what is regarded as a
competitive market for adult recreational manufactured housing communities.
The Corporation continues to compete in this market by offering special
amenities and adult recreational and educational services.
Each of the Corporation's geographic markets includes competitors which
are larger and have greater financial and other resources than the Corporation.
PERSONNEL. During 1995 the Company employed two full-time employees.
PROPERTIES. The Corporation, through Aristek Properties and other related
limited partnerships, has ownership interests in the properties described below.
The Corporation operates the Monte Vista property described below.
MONTE VISTA. Monte Vista is an adult recreational community located in Mesa,
Arizona containing 832 sites for recreational homes. Most sites are leased on an
annual basis to residents who leave their homes at the site year-round.
Remaining sites are reserved for monthly and weekly rentals. Most residents and
guests stay at the community during the months from November through April.
During the peak months of January through March, Monte Vista reached
approximately 90% occupancy for the past five years. The effective average
occupancy based on annual rental income was approximately 95% during 1995. Monte
Vista is owned by the Monte Vista I Joint Venture ("MV-I"), which is owned 99%
by Aristek Properties and 1% by the Corporation. At December 31, 1995, the Monte
Vista property was subject to a mortgage in the amount of approximately
$5,015,345 held by a commercial lender.
MONTE VISTA II. In December 1983, the Company sold to Resortparks an 80-acre
parcel on which the development of Monte Vista II is planned. See "Development
Activities" below. This land was transferred to Aristek Properties in April
1990, and then to Monte Vista in October 1991, and is subject to the mortgage
described under the caption "Monte Vista" above.
GOOD LIFE TRAVEL TRAILER RESORT. Good Life is an adult recreational community
located in Mesa, Arizona containing 1,198 sites for recreational vehicles. Most
sites are rented on an annual basis with the remainder rented on a monthly or
weekly basis. Most residents stay at the community during the months from
November through April. Good Life is owned by H-H Resorts Joint Venture, which
is owned 50% by Aristek Western and 50% by Hankins Enterprises, an unaffiliated
third party. Good Life is managed by Hankins Enterprises and has historically
been 100% occupied from January through
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April and its effective average occupancy based on annual rental income was
97% in 1995. At December 31, 1995, Good Life, together with the Towerpoint
property described below, was subject to a mortgage in the amount of
approximately $9,113,071 held by a commercial lender.
TOWERPOINT TRAVEL TRAILER RESORT. Towerpoint is an adult recreational
community located in Mesa, Arizona containing 1,115 sites for recreational
vehicles. Most sites are rented on an annual basis with the remainder rented on
a monthly or weekly basis. Most residents stay at the community during the
months from November through April. Towerpoint is owned by H-H Resorts Joint
Venture and is managed by Hankins Enterprises. Towerpoint has historically been
100% occupied from November through April and its effective average occupancy
based on annual rental income was 98% in 1995. At December 31, 1995, Towerpoint,
together with the Good Life property described above, was subject to a mortgage
in the amount of approximately $9,113,071 held by a commercial lender.
FURTHER INFORMATION. For further information with respect to the Company and
its business and operations, see the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 and its Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, copies of which are enclosed for your
reference, and which are incorporated herein by reference.
THE REVERSE STOCK SPLIT
On March 12, 1996, the Company's Board of Directors approved a proposal
authorizing:
(1) An amendment to the Company's Certificate of Incorporation
effecting a one-for-100,000 reverse stock split of the Company's existing
Common Stock, $0.001 par value per share ("Old Common Stock"), reducing the
authorized number of shares of common stock from 15,000,000 shares to 10,000
shares ("New Common Stock"); and
(2) The payment of cash in the amount of $0.05 per share of Old
Common Stock in lieu of the issuance of fractional shares of New Common Stock
to persons who would hold less than one full share of New Common Stock after
the proposed reverse stock split, and to other stockholders who desire to
liquidate their investment in the Company (together with the amendment
described in the preceding paragraph, the "Reverse Stock Split").
REASONS FOR THE REVERSE STOCK SPLIT
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GOING-PRIVATE TRANSACTION. The Board of Directors determined to effect the
proposed Reverse Stock Split in order to "go private," i.e., to reduce the
number of record stockholders of the Company to fewer than 300, which would
permit the Company to discontinue the registration of its Common Stock under the
Securities Exchange Act of 1934 (the "Exchange Act"). The Board of Directors
believes that neither the Company nor its stockholders derive any material
benefit from the continued registration of the Company's Common Stock under the
Exchange Act. The Company does not intend to raise capital in the public
securities markets, to use registered stock to effect acquisitions, or to avail
itself of other advantages of being a public company. Its Common Stock has been
de-listed by NASDAQ, and is thinly traded. The Company incurs significant direct
and indirect costs, however, as a result of the requirement that it comply with
the filing and reporting requirements applicable to public companies: The
Company annually incurs direct costs, including legal and accounting expenses,
of approximately $50,000 in years in which the minimum filings with the
Securities and Exchange Commission (the "SEC") are required. It also incurs
indirect costs as a result of, among other things, the management time required
to prepare and review such filings. Because the Company has only one executive
officer, the indirect costs caused by the diversion of this officer's time from
the Company's business can be substantial.
Accordingly, the Board of Directors believes that the continued expense and
burden to the Company of continued registration, including the requirement to
file annual and quarterly reports, proxy statements, and other documents with
the SEC, significantly outweigh any benefits to the Company or its stockholders
as a result of such registration. The proposed Reverse Stock Split is being
undertaken at this time because the sooner the transaction can be consummated,
the sooner the Company will cease to incur such expenses and burdens and the
sooner stockholders who elect to receive cash in lieu of shares of New Common
Stock will receive and be able to reinvest or otherwise make use of such cash
payments.
FORM OF TRANSACTION. The Board of Directors has determined that the proposed
Reverse Stock Split is the most expeditious and efficient method of changing the
Company's status from that of a publicly held reporting company to that of a
privately held non-reporting company. In making this determination, the Board of
Directors, considered other means of achieving this result, such as making
privately or publicly negotiated purchases of outstanding shares of its Common
Stock (including making a public tender offer for such shares) or effecting a
merger in which the Company's public stockholders would receive cash instead of
stock in the surviving corporation. These alternatives were rejected because the
Board of Directors believed that the proposed Reverse Stock Split would be
simpler to effect as well as less costly. In addition, the
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Board of Directors considered that in the case of a merger, the Delaware General
Corporation Law would afford dissenting stockholders appraisal rights that they
would not be entitled to in the case of the proposed Reverse Stock Split. The
Board of Directors believes that the availability of appraisal rights could
unduly increase the complexity and potential cost of going private without
materially benefiting the Company's stockholders.
POTENTIAL BENEFITS OF GOING-PRIVATE TRANSACTION MAY Not BE REALIZED. The
proposed Reverse Stock Split has been structured so as to permit stockholders
who would otherwise hold less than one full share of New Common Stock after the
Reverse Stock Split to elect to remain as stockholders of the Company by
increasing their stockholdings to at least one whole share of New Common Stock.
See "Special Factors--Exchange of Stock Certificates; Cash Payments in Lieu of
Shares." It is therefore possible that even if the proposed Reverse Stock Split
is effected, the Company will not achieve its objective of reducing the number
of record stockholders following the Reverse Stock Split, to below 300
stockholders, in which case the Company would still be a reporting company for
purposes of the Exchange Act and would not realize the cost-savings that would
result from ceasing to be a publicly held reporting company. The Board of
Directors determined to structure the proposed Reverse Stock Split in this way
because the directors believed that it was fairer to stockholders to permit them
this option to remain as stockholders of the Company than to guarantee that the
Reverse Stock Split would achieve the Company's objective of terminating its
obligations under the Exchange Act.
RULE 13e-3 TRANSACTION STATEMENT. In connection with the proposed Reverse
Stock Split, the Company has filed with the SEC a Rule 13e-3 Transaction
Statement on Schedule 13e-3. See "Other Information; Documents Incorporated by
Reference."
CONDUCT OF THE COMPANY'S BUSINESS AFTER THE REVERSE STOCK SPLIT
NO EFFECT ON CONTINUING BUSINESS AND OPERATIONS. The Company believes that the
proposed Reverse Stock Split will not have any effect on its business and
operations, and expects to continue to conduct such business and operations as
they are currently being conducted. If the Reverse Stock Split is effected,
stockholders who elect to receive cash payments in lieu of shares of New Common
Stock will not remain as stockholders of the Company and therefore will not
participate in any future earnings or growth of the Company. Stockholders who
elect to remain as stockholders will retain all of the rights and benefits
possessed by a stockholder prior to the Reverse Stock Split except (as discussed
below) those that result from the Company's status as a publicly held reporting
company under the Exchange Act.
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TERMINATION OF REPORTING COMPANY STATUS. If the proposed Reverse Stock Split
is effected, it is anticipated that the Company will cease to be a reporting
company under the Exchange Act. As a result, the Company would no longer file
annual and quarterly reports, proxy statements, and other documents with the
SEC. In addition, the Company would no longer be required to comply with the
proxy rules of Regulation 14A promulgated under Section 14 of the Exchange Act,
and its officers, directors, and 10%-or-greater stockholders would no longer be
subject to the reporting requirements and "short-swing" security trading
restrictions under Section 16 of the Exchange Act. Continuing stockholders will
no longer be entitled to receive annual reports and proxy statements and will no
longer have the benefit of a public market for their shares of the Company's
stock.
CHANGES TO AUTHORIZED CAPITAL STOCK; TERMS OF STOCK UNCHANGED. If the proposed
Reverse Stock Split is effected, the number of authorized shares of the
Company's Common Stock will be reduced from 15,000,000 shares to 10,000 shares.
Apart from such change, the terms of the New Common Stock will remain the same
as those of the Old Common Stock.
CHANGES IN PROPORTIONATE STOCK OWNERSHIP AND SHARE VALUES. Stockholders who
remain stockholders of the Company after the Reverse Stock Split are likely to
experience an increase in their percentage stock ownership in the Company as a
result of the repurchase of shares formerly held by stockholders who elect to
receive cash payments in lieu of shares of New Common Stock. The extent of this
increase will vary depending on the number of shares so repurchased and the
number of such shares, if any, that are purchased by other stockholders. The use
of Company funds to finance the repurchase of shares and to pay transactional
costs of the Reverse Stock Split will cause a slight decrease in the Company's
assets.
ABSENCE OF PLANNED EXTRAORDINARY TRANSACTIONS. Other than as described in this
Information Statement, the Company has no current plan to effect any
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, sale or transfer of a material amount of assets, change in its
present Board of Director or management, or change in dividend rate or policy,
indebtedness, or capitalization, or otherwise to effect any material change in
its corporate structure or business. The Company also has no current plan to
engage in any public offering of shares of Common Stock or other securities.
There is no assurance, however, that the Company will not form an intention to
engage in any of the foregoing transactions in the future. Stockholders who
elect to receive cash payments in lieu of shares of New Common Stock will not
continue as stockholders of the Company and will not participate in the benefits
of any such transaction.
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FURTHER STOCKHOLDER APPROVAL NOT REQUIRED
The proposed Reverse Stock Split has been approved by the written consent of
Craig M. Bollman, Jr., the Company's majority stockholder. Such consent is
sufficient to approve the Reverse Stock Split under the Delaware General
Corporation Law, and no other vote or consent of stockholders is required or
will be sought in connection with the Reverse Stock Split. ACCORDINGLY, THE
COMPANY IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND THE
COMPANY A PROXY.
LACK OF APPRAISAL RIGHTS
Pursuant to the Delaware General Corporation Law, dissenting stockholders will
not have appraisal rights if the proposed Reverse Stock Split is effected.
Stockholders who believe that they may be aggrieved by the Reverse Stock Split
may have other rights under federal law or common law, such as rights relating
to the fairness of the Reverse Stock Split and the fiduciary responsibilities of
corporate officers, directors, and stockholders. The nature and extent of such
rights, if any, may vary depending upon the facts and circumstances.
POSTPONEMENT OR ABANDONMENT
The Company's Board of Directors may postpone or abandon the proposed Reverse
Stock Split at any time prior to its consummation, for any reason, including
without limitation if in the Directors' sole judgment, consummation of the
Reverse Stock Split would unduly deplete the Company's working capital.
EFFECTIVE TIME
Subject to the rights of the Board of Directors to postpone or abandon the
proposed Reverse Stock Split, the Reverse Stock Split will be effected by filing
an amendment to the Company's Certificate of Incorporation with the Delaware
Secretary of State and will be effective upon such filing. The form of the
proposed amendment to the Company's Certificate of Incorporation is set forth as
Exhibit A to this Information Statement.
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EXCHANGE OF STOCK CERTIFICATES; CASH PAYMENTS IN LIEU OF SHARES
LETTERS OF TRANSMITTAL. If the proposed Reverse Stock Split is effected, the
stock certificates formerly representing shares of Old Common Stock will
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cease to represent such shares and thereafter will represent the shares of New
Common Stock into which they have been converted, or the right to receive a cash
payment in lieu of such shares, as the case may be, all as described below.
Enclosed is a Letter of Transmittal for use in exchanging old stock certificates
for a new stock certificate or cash payment.
Each stockholder who holds of record less than 100,000 shares of Old Common
--------------------------------------
Stock (the equivalent of one whole share of New Common Stock) should use the
- -----
enclosed Letter of Transmittal to elect one of the following options:
(i) To surrender his old stock certificate(s) and the shares of Old
Common Stock represented thereby for a cash payment in an amount
equivalent to $0.05 per share of Old Common Stock represented by such
certificate(s);
(ii) If the stockholder has purchased additional shares of Old
Common Stock in the open market, in an amount that, when added to his current
holdings of Old Common Stock, is sufficient to equal at least 100,000 shares
of Old Common Stock (the equivalent of one whole share of New Common Stock),
to surrender the stock certificates representing such shares for a new stock
certificate representing New Common Stock; or
(iii) To surrender his stock certificate(s) representing shares of
Old Common Stock, and a check for the purchase of additional shares of Old
Common Stock (at a purchase price of $0.05 per share, and subject to
availability on a first-come, first-served basis as described below) in an
amount that, together with his current stockholdings of Old Common Stock, will
equal 100,000 shares of Old Common Stock (the equivalent of one whole share of
New Common Stock), for exchange for a new stock certificate representing New
Common Stock. Note that it is possible that stockholders who wish to purchase
additional shares of Old Common Stock will not be able to do so, since the
Company will not issue any additional shares of stock but instead will act as
a clearinghouse to match would-be sellers and purchasers of shares, on a
first-come, first-served basis. Accordingly, the shares of Old Common Stock
available for purchase will be limited to those available from stockholders
wishing to receive cash payments for their shares and such available shares
will be allocated on a first-come, first-served basis to stockholders desiring
to purchase them. The Company anticipates, however, that a quantity of shares
of Old Common Stock sufficient to meet stockholder demand will be available.
In the event that a stockholder who has requested to purchase additional
shares of Old Common Stock in this manner is not allocated sufficient
additional shares to bring his aggregate stockholdings to 100,000 shares of
Old Common Stock, the Company will return his
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check together with a cash payment for his shares of Old Common Stock,
and such stockholder will not continue as a stockholder of the Company.
PLEASE NOTE THAT ALL STOCK CERTIFICATES SENT TO THE COMPANY SHOULD BE DULY
INDORSED FOR TRANSFER TO THE COMPANY, WITH A MEDALLION SIGNATURE GUARANTY, WHICH
MAY BE OBTAINED FROM MOST BANKS AND BROKERAGE FIRMS. DO NOT SEND IN YOUR STOCK
-------------------------
CERTIFICATES WITHOUT A MEDALLION SIGNATURE GUARANTY, AS THEY WILL BE RETURNED TO
- --------------------------------------------------------------------------------
YOU.
- ----
Each stockholder who holds of record at least 100,000 shares of Old Common
-------------------------------------
Stock (the equivalent of one whole share of New Common Stock) should use the
- -----
enclosed Letter of Transmittal to elect one of the following options:
(i) To surrender his old stock certificate(s) and the shares of Old
Common Stock represented thereby for a cash payment in an amount equivalent to
$0.05 per share of Old Common Stock represented by such stock certificate(s);
or
(ii) To exchange his old stock certificate(s) for a new certificate
representing the shares of \New Common Stock into which the shares of Old
Common Stock formerly represented by the old stock certificate are converted
pursuant to the Reverse Stock Split.
AGAIN, PLEASE NOTE THAT ALL STOCK CERTIFICATES SENT TO THE COMPANY SHOULD BE
DULY INDORSED FOR TRANSFER TO THE COMPANY, WITH A MEDALLION SIGNATURE GUARANTY.
DO NOT SEND IN YOUR STOCK CERTIFICATES WITHOUT A MEDALLION SIGNATURE GUARANTY,
- ------------------------------------------------------------------------------
AS THEY WILL BE RETURNED TO YOU.
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FINANCING OF THE REVERSE STOCK SPLIT
The Company estimates that the maximum cost that the Company will incur in
connection with the proposed Reverse Stock Split will be approximately $258,000
consisting of estimated cash payments in lieu of shares of New Common Stock of
approximately $208,000 and estimated transactional expenses of approximately
$50,000 (consisting primarily of legal and accounting expenses of approximately
$35,000, printing and mailing expenses of approximately $10,000, and
miscellaneous expenses of approximately $5,000 (including SEC filing fees of
approximately $50). Such estimated cash payments in lieu of shares of New Common
Stock have been estimated based on the assumptions that all stockholders (other
than Craig M. Bollman, Jr., who has advised the Company that he intends to elect
to retain all shares of New Common Stock
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presently owned or controlled by him) will elect to receive cash in lieu of
shares of New Common Stock. To the extent that stockholders elect to retain or
increase their holdings of New Common Stock after the Reverse Stock Split, the
costs to the Company would be reduced. The Company intends to finance such costs
from its working capital, and does not intend to finance any part of such costs
through borrowings. The Company's Board of Directors may, however, postpone or
abandon the Reverse Stock Split at any time prior to its consummation, for any
reason, including without limitation if in the Directors' sole judgment,
consummation of the Reverse Stock Split would unduly deplete the Company's
working capital.
FAIRNESS OF THE REVERSE STOCK SPLIT
The Board of Directors has fully reviewed and considered the terms and
conditions of the proposed Reverse Stock Split and has unanimously determined
that the Reverse Stock Split, taken as a whole, is fair to and in the best
interests of the Company and its stockholders.
FAIRNESS OF CASH PAYMENTS IN LIEU OF SHARES. The Board of Directors believes
that the payment of cash in the amount of $0.05 per share of Old Common Stock in
lieu of the issuance of shares of New Common Stock to persons who hold less than
one full share of New Common Stock after the Reverse Stock Split, and to other
stockholders who desire to liquidate their investment in the Company, will
enable stockholders to liquidate their shares easily and at a fair price.
Depending upon a particular stockholders' tax basis in his shares of Common
Stock, this may enable the stockholder to obtain a tax benefit by recognizing a
loss for federal income tax purposes. See "Special Factors--Certain Federal
Income Tax Consequences." Moreover, by having their shares of the Company's
stock repurchased by the Company, stockholders will be able to liquidate their
investments in the Company without incurring brokerage costs that, especially in
the case of small stockholdings, would otherwise sharply decrease or even
eliminate the actual net proceeds of sale to the stockholder.
FAIRNESS TO THE COMPANY AND CONTINUING STOCKHOLDERS. The Board of Directors
also believes that the proposed Reverse Stock Split is fair to the Company and
to stockholders who remain as stockholders of the Company following the
consummation of the Reverse Stock Split because, as described above, the Board
of Directors believes that the price to be paid to stockholders who receive cash
in lieu of shares of New Common Stock is fair and that the Company will realize
cost-savings if as a result of the Reverse Stock Split it ceases to be a
reporting company under the Exchange Act.
STOCKHOLDERS' OPTION. The proposed Reverse Stock Split has been structured so
as to permit stockholders who would otherwise hold less than one
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full share of New Common Stock after the Reverse Stock Split to elect to remain
as stockholders of the Company by increasing their stockholdings to at least one
whole share of New Common Stock. See "Special Factors--Exchange of Stock
Certificates; Cash Payments in Lieu of Shares--Potential Benefits of Going-
Private Transaction May Not Be Realized." The Board of Directors determined to
structure the proposed Reverse Stock Split in this way because the directors
believed that it was fairer to stockholders to permit them this option to remain
as stockholders of the Company than to guarantee that the Reverse Stock Split
would achieve the Company's objective of terminating its obligations under the
Exchange Act.
FACTORS CONSIDERED IN FAIRNESS DETERMINATION. In reaching its determination
that the proposed Reverse Stock Split is fair to the Company and its
stockholders, the Board of Directors considered, among other things, each of the
directors' knowledge of and familiarity with the Company's own business,
financial condition, operating results, cash flows, assets, liabilities, and
prospects, as well as general economic, industry, and market conditions and
prospects. The Board of Directors also considered the absence of a liquid market
for shares of its Common Stock; the fact that Craig M. Bollman, Jr., the
Company's President, Chairman of the Board of Directors, and majority
stockholder, owns or controls approximately 67% of the outstanding shares of
Common Stock; the opportunity that the Reverse Stock Split would afford
stockholders to liquidate their investments in the Company without incurring
brokerage costs; the opportunity that the Reverse Stock Split would afford
stockholders to obtain tax benefits by recognizing losses for federal income tax
purposes (see "Special Factors--Certain Federal Income Tax Consequences"); and
the future cost-savings that the Company and its continuing stockholders will
enjoy if as a result of the Reverse Stock Split the Company ceases to be a
reporting company under the Exchange Act. Given the wide variety of factors
considered in reaching its conclusion as to fairness (including those described
below), the Board of Directors did not deem it practicable to assign precise
relative weights to the factors considered, and all factors were considered as a
totality.
In addition to the foregoing, other factors considered by the Board of
Directors in making its determination included the following:
Current and Historical Market Prices for the Common Stock. The Company's
Common Stock is not listed on any stock exchange or quoted in the National
Association of Securities Dealers Automated Quotation (NASDAQ) system, and the
Company does not receive information with respect to trading in Common Stock.
The Company does not know of any market makers with respect to the Common Stock.
The Common Stock is thinly traded: According to the records of the Company's
stock transfer agent, American Stock Transfer & Trust
<PAGE>
-26-
Company, an aggregate of 75,148 shares of Common Stock were transferred during
1995. The Company made inquiry of the initiating brokers with respect to a
number of such trades, but was not able to obtain any information with respect
to the prices at which these transfers were effected.
In September 1995, the Company received an inquiry from a stockholder who
wished to dispose of 9,900 shares of Common Stock in order to recognize a loss
for federal income tax purposes. The Company put this stockholder in touch with
a Company employee who had previously expressed an interest in acquiring shares
of Common Stock, which resulted in this stockholder selling these shares to this
employee for cash consideration of $0.05 per share.
The Company has not paid any dividends on its Common Stock within the last two
years.
In view of the low volume of trading of the Common Stock and the
unavailability of any reasonably current information with respect to market
prices, the Board of Directors did not assign any material weight to this factor
in determining the fairness of the proposed Reverse Stock Split.
Net Book Value. As of September 30, 1995, the net book per share of Common
Stock was approximately $0.12 (the Company's financial statements as of December
31, 1995, and for the year then ended, have not yet been prepared). The
Company's primary asset consists of net receivables from Aristek Properties and
MV-I. Because of significant uncertainties with respect to the collectibility of
these receivables, for financial accounting purposes, as of December 31, 1994
the Company suspended recording interest income on receivables from Aristek
Properties, interest expense on amounts payable by the Company to Aristek
Properties (which may be set off against amounts owing to the Company by Aristek
Properties), and management fees payable by Aristek Properties to the Company,
the net amount of which, as of September 30, 1995, was $1,707,000. The face
amount of these net receivables (including accrued interest) as of September 30,
1995, was $4,339,000 Because of the uncertainties as to their collectibility,
however, they are reflected in the Company's books and financial statements at
$1,600,000, net of a $1,032,000 allowance for doubtful accounts and the
$1,707,000 net amount not reflected in the Company's books and financial
statements.
The audit report of the Company's independent public accountants, Hein +
Associates, LLP, with respect to the Company's financial statements included in
its Annual Report to Stockholders for the year ended December 31, 1994, included
a "going-concern" qualification, and the Company anticipates that its
independent public accountants' audit report with respect to its financial
statements to be included in its Annual Report to Stockholders for the year
<PAGE>
-27-
ended December 31, 1995 will be similarly qualified. The Company's financial
statements are prepared on the assumption that the Company will continue as a
going concern, i.e., that it will realize its assets and liquidate its
liabilities in the normal course of business. Given that the Company has
suffered losses of over $2,000,000 since the end of 1989, and that it is
anticipated that it will need additional investment of cash to fund its
operations, the Company's independent public accountants have stated that there
is substantial doubt as to the ability of the Company to continue as a going
concern.
Given this substantial doubt as to the ability of the Company to continue as a
going concern, the Board of Directors does not believe that book value, which is
computed on the basis the assumption that the Company will continue as a going
concern, provides a reliable measure of the fair value of the Common Stock.
Accordingly, the Board of Directors did not assign any material weight to this
factor in determining the fairness of the proposed Reverse Stock Split.
Going-Concern Value. As noted under the caption "Book Value" above, there is
substantial doubt as to the ability of the Company to continue as a going
concern. Accordingly, the Board of Directors did not assign any weight to this
factor in determining the fairness of the proposed Reverse Stock Split.
Liquidation Value. The Company has no current plan to effect any liquidation
of the Company. See "Special Factors--Conduct of the Company's Business after
the Reverse Stock Split--Absence of Planned Extraordinary Transactions." As
described above under the caption "Book Value," the Company's primary asset
consists of net receivables from Aristek Properties and MV-I. The Board of
Directors believes that the Company would not be able to realize the full value
of these receivables through liquidation, because it is unlikely that any buyer
would purchase these receivables except at a steep discount from their face
value, and that to realize the full value of the Aristek Properties and MV-I net
receivables, it is necessary that MV-I successfully complete the second stage of
the development process with respect to the Monte Vista. See "Special Factors--
The Company--Development Activities" above.
<PAGE>
-28-
ABSENCE OF INDEPENDENT THIRD-PARTY VALUATION OR ARMS'-LENGTH NEGOTIATION. The
Company has not received any report, opinion, or appraisal from any outside
party that is materially related to the proposed Reverse Stock Split. In light
of the circumstances, including the directors' knowledge of and familiarity with
the Company's own business, financial condition, operating results, cash flows,
assets, liabilities, and prospects, as well as with general economic, industry,
and market conditions and prospects, the wide variety of factors considered in
connection with its evaluation of the fairness of the proposed Reverse Stock
Split, the Board of Directors did not consider it necessary to retain either an
investment bank or other financial adviser to render a report or opinion with
respect to the fairness of the proposed Reverse Stock Split to the Company or
its stockholders or an unaffiliated representative to represent the unaffiliated
stockholders of the Company in negotiating the terms of the Reverse Stock Split.
The primary factor considered by the Board of Directors in determining not to
retain the services of such a financial adviser or unaffiliated representative
was its belief that the cost of such services would be excessive relative to the
size of the transaction and the potential benefits to the Company and its
stockholders.
ABSENCE OF FIRM OFFERS FOR ALTERNATIVE TRANSACTIONS. The Company is not aware
of any firm offers made by any unaffiliated persons during the preceding
eighteen months for the merger or consolidation of the Company with or into such
person or of such person with the Company, for the sale or other transfer of all
or any substantial portion of the Company's assets, or for securities of the
Company that would enable the holder thereof to exercise control of the Company.
POTENTIAL CONFLICTS OF INTEREST. The directors of the Company are Craig M.
Bollman, Jr., the Company's President, Chairman of the Board of Directors, and
majority stockholder, Phyllis A. Bollman, Mr. Bollman's spouse, and Taylor M.
Bollman, Mr. Bollman's son. Craig M. Bollman, Jr., who owns or controls
approximately 67% of the outstanding shares of Common Stock, has advised the
Company that he intends to elect to retain all such shares of New Common Stock
after the Reverse Stock Split.
As noted above, the Board of Directors did not retain either an investment
bank or other financial adviser to render a report or opinion with respect to
the fairness of the proposed Reverse Stock Split to the Company or its
stockholders or an unaffiliated representative to represent the unaffiliated
stockholders of the Company in negotiating the terms of the Reverse Stock Split.
<PAGE>
-29-
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE COMPANY HAS NOT SOUGHT, AND DOES NOT INTEND TO SEEK A RULING FROM THE
INTERNAL REVENUE SERVICE OR AN OPINION OF COUNSEL AS TO ANY TAX CONSEQUENCES OF
THE PROPOSED REVERSE STOCK SPLIT. THE FOLLOWING DISCUSSION SUMMARIZES CERTAIN
FEDERAL INCOME TAX CONSEQUENCES THAT THE COMPANY BELIEVES WOULD RESULT TO
STOCKHOLDERS WHO ARE RESIDENTS OF THE UNITED STATES AS A CONSEQUENCE OF THE
REVERSE STOCK SPLIT. THIS DISCUSSION IS BASED ON CURRENT LAW AS OF THE DATE OF
THIS PROXY STATEMENT AND DOES NOT TAKE INTO ACCOUNT ANY SPECIAL RULES THAT MAY
AFFECT THE TREATMENT OF PARTICULAR STOCKHOLDERS, SUCH AS DEALERS IN SECURITIES,
TAX-EXEMPT ENTITIES, NON-RESIDENT ALIENS, OR FOREIGN CORPORATIONS. THIS
DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY, WITHOUT REFERENCE TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF ANY SPECIFIC STOCKHOLDER. EACH STOCKHOLDER
SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL INCOME TAX
CONSEQUENCES IN HIS OWN CIRCUMSTANCES, AND WITH RESPECT TO THE EFFECTS OF
APPLICABLE STATE, LOCAL, AND FOREIGN TAX LAWS AS TO WHICH NO INFORMATION IS
PROVIDED HERE.
TAX CONSEQUENCES TO THE COMPANY. The proposed Reverse Stock Split is intended
to qualify for federal income tax purposes as a tax-free reorganization of the
Company pursuant to Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Company does not expect that it will
experience any tax consequences as a result of the Reverse Stock Split.
TAX CONSEQUENCES TO STOCKHOLDERS. The following discussion assumes each
stockholder holds his shares of Old Common Stock as a capital asset.
Exchange of Old Common Stock Solely for New Common Stock. A stockholder who
exchanges all of his Old Common Stock solely for New Common Stock will not
recognize any gain or loss on the exchange. The aggregate tax basis of the New
Common Stock received will be equal to the aggregate tax basis of the Old Common
Stock exchanged, and the holding period of the New Common Stock received will
include the holding period of the Old Common Stock exchanged.
Exchange of Old Common Stock Solely for Cash. A stockholder who exchanges all
of his Old Common Stock (or full or fractional shares of New
<PAGE>
-30-
Common Stock received in respect of Old Common Stock as a result of the Reverse
Stock Split) received in the transaction for cash will, assuming he is not
treated as owning any other New Common Stock immediately after the Reverse Stock
Split, recognize capital gain or loss equal to the difference between the basis
of the Old Common Stock surrendered and the cash received. Such capital gain or
loss will be long-term capital gain or loss, if the stockholder's holding period
for his Old Common Stock exceeds one year, and otherwise will be short-term
capital gain or loss.
For this purpose, stock "owned" immediately after the Reverse Stock Split will
include stock actually owned as well as stock constructively owned pursuant to
the rules of Section 318 of the Code (which in general attributes to a taxpayer
stock owned by certain related individuals and entities and stock that the
taxpayer has the right to acquire upon the exercise of options). In the event
such a stockholder actually or constructively owns shares of New Common Stock
immediately after the Reverse Stock Split, it is unclear whether the holder will
automatically recognize capital gain or loss or instead be required to treat the
entire amount of the cash received as a dividend. Such a holder may be required
to treat the entire amount of the cash received as a dividend unless the
redemption of the stockholder's shares is a substantially disproportionate
redemption of stock with respect to such stockholder or is not essentially
equivalent to a dividend, in each case under rules similar to the rules of
Sections 356(a)(2) and 302 of the Code.
BACKUP WITHHOLDING. Each stockholder who receives cash in lieu of shares of
New Common Stock will be required to provide the Company with a correct Taxpayer
Identification Number on the Form W-9 or substitute Form W-9 included with the
Letters of Transmittal and to certify that he is not subject to backup
withholding. FAILURE TO PROVIDE THE INFORMATION AND CERTIFICATION ON THE FORM W-
9 (OR SUBSTITUTE FORM W-9) MAY SUBJECT THE STOCKHOLDER TO 31% FEDERAL INCOME TAX
BACKUP WITHHOLDING WITH RESPECT TO ANY CASH PAYMENT FOR THE STOCKHOLDER'S SHARES
OF NEW COMMON STOCK.
<PAGE>
-31-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to beneficial
ownership of shares of Old Common Stock as of September 30, 1996 by (i) each
person or group who is known by the Company to own beneficially more than 5% of
the issued and outstanding shares of Common Stock as of that date, (ii) each
director and each executive officer of the Company, and (iii) all directors and
executive officers of the Company, as a group. Except as otherwise indicated
below, to the best of the Company's knowledge each person listed below has sole
voting and investment power with respect to his shares of Common Stock, except
to the extent that such power may be with his or her spouse under applicable
law.
<TABLE>
<CAPTION>
Shares Beneficially Owned
--------------------------
Name Number Percent of Class
- ---- ------ ----------------
<S> <C> <C>
Craig M. Bollman, Jr. 7,036,940* 67.1*
c/o Homefree Village
Resorts, Inc.
1400 S. Colorado Boulevard, Suite 410
Denver, Colorado 80222
Phyllis A. Bollman 7,036,940* 67.1*
c/o Homefree Village
Resorts, Inc.
1400 S. Colorado Boulevard, Suite 410
Denver, Colorado 80222
All directors and executive 7,036,940* 67.1*
officers, as a group
</TABLE>
* Includes 6,325,288 shares held by Craig M. Bollman, Jr. Also includes 711,652
shares held by the Aristek Foundation, with respect to which Mr. Bollman has
sole voting and investment power, but in which he has no pecuniary interest.
Mrs. Bollman disclaims beneficial ownership of the shares held by Mr. Bollman,
and each of Mr. and Mrs. Bollman disclaims beneficial ownership of the shares
held by the Aristek Foundation.
<PAGE>
-32-
FINANCIAL INFORMATION.
The financial information required herein is hereby incorporated by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1994, and its Quarterly Reports on Form 10-Q for the quarters ended March, 31,
June 30, and September 30, 1995, copies of which are enclosed herewith.
OTHER INFORMATION; DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to the Exchange Act, the Company files with the SEC periodic reports
and other documents relating to its business, financial condition, and other
matters. In connection with the Reverse Stock Split, the Company has filed with
the SEC a Rule 13e-3 Transaction Statement on Schedule 13e-3. The Schedule 13e-
3, including exhibits, and other filings made by the Company as described above,
may be inspected without charge, and copies may be obtained at prescribed rates,
at the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Schedule 13e-3 is
also available for inspection and copying during normal business hours at the
principal executive offices of the Company at 1400 S. Colorado Boulevard, Suite
410, Denver, Colorado 80222.
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF HOMEFREE VILLAGE RESORTS, INC.
Incorporated under the name "Metrix, Inc."
pursuant to a Certificate of Incorporation
filed with the Secretary of State of the State of Delaware
on February , 1972
---------------------
Homefree Village Resorts, Inc. (the "Company"), a Delaware corporation,
hereby certifies as follows:
FIRST. The total number of shares of Common Stock, $0.001 par value per share,
that the Company is authorized to issue is hereby reduced from 15,000,000 shares
to 10,000 shares.
SECOND. Upon filing of this Certificate of Amendment, each share of the
Company's Common Stock, $.001 par value per share, issued and outstanding or
held in treasury immediately prior to such filing ("Old Common Stock") shall be
combined into and reclassified as, and shall become, one hundred thousandth
(1/100,000) of one fully paid and non-assessable share of the Company's Common
Stock, $0.001 par value per share ("New Common Stock"). Until surrendered, the
certificates formerly representing the shares of Old Common Stock, that have
been combined and recla ssified in accordance with the foregoing shall
thereafter represent the shares of New Common Stock that they have been combined
into and reclassfied as in accordance with the foregoing.
THIRD. The Company in its discretion may, but shall not be required to, issue
fractional shares of New Common Stock (whether as a result of the combination
and reclassification of shares hereby effected or otherwise). If the Company
determines not to issue fractional shares to any person or entity who would
otherwise be entitled thereto, it may in lieu thereof pay in cash the fair value
of such fractional shares, as determined by the Company's Board of Directors,
whose determination shall be conclusive and binding on all persons and entities.
Without limiting the generality of the foregoing, the Company in its discretion
may, but shall not be required to, issue fractional shares to any person or
entity holding at least one whole share of New Common Stock after such reverse
stock split and may pay cash in lieu of fractional shares to any person or
entity holding less than one whole share of New Common Stock.
<PAGE>
-2-
The foregoing amendments were duly adopted in accordance with Sections 228 and
242 of the Delaware General Corporation Law, and written notice thereof has been
given as provided in Section 228(d) thereof.
Executed on ____________, 19___.
HOMEFREE VILLAGE RESORTS, INC.
By____________________________
Authorized Officer
<PAGE>
LETTER OF TRANSMITTAL
To Accompany Certificates Representing Shares
of the Old Common Stock of Homefree Village Resorts, Inc.
to be Exchanged for Certificates representing Shares
of New Common Stock or Cash Payments in Lieu of Shares
STOCKHOLDERS: PLEASE READ CAREFULLY THE IMPORTANT INSTRUCTIONS ON THE LAST PAGE
OF THIS LETTER OF TRANSMITTAL.
List of Certificates Enclosed
and Number of Shares of Old
Name and Address Common Stock Represented
of Registered Owner by Each Certificate
- ------------------- -------------------
Cert. No. No. Shares
--------- ----------
To: American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Tammy Davis
<PAGE>
-2-
Pursuant to the Information Statement dated ____________, 1996, of Homefree
Village Resorts, Inc. (the "Company") with respect to the one-for-100,000
Reverse Stock Split described therein, enclosed are the above-listed stock
certificates, to be exchanged for stock certificates representing shares of New
Common Stock or cash payments in lieu of such shares, in accordance with the
following.
PART I STOCKHOLDERS OF RECORD OF LESS THAN 100,000 SHARES OF OLD COMMON STOCK,
------------------------
PLEASE COMPLETE THE FOLLOWING, AND DO NOT COMPLETE PART II BELOW:
---
I, the undersigned stockholder of the Company, holding of record less than
100,000 shares of the Old Common Stock of the Company, hereby irrevocably elect
as follows (check one box only):
[ ] To surrender my old stock certificate(s) and the shares of Old Common Stock
represented thereby for a cash payment in an amount equivalent to $0.05 per
share of Old Common Stock represented by such certificates. (Note: To avoid
back-up withholding for federal income tax purposes, you must also enclose a
Form W-9 or substitute Form W-9.)
[ ] I have purchased additional shares of Old Common Stock in the open market,
in an amount that, when added to my current stockholdings of record, equals
at least 100,000 shares of Old Common Stock (equivalent to one whole share
of New Common Stock), and I am herewith surrendering the stock
certificate(s) representing my Old Common Stock for a new stock certificate
representing at least one whole share of New Common Stock.
(NOTE: Stockholders electing to purchase additional shares of Old Common
Stock in the open market should enclose their stock certificate(s)
representing all shares of Old Common Stock owned by them (including newly
purchased shares), for exchange for a new stock certificate representing New
Common Stock.)
[ ] To surrender my stock certificate(s) representing shares of Old Common
Stock, and a check for the purchase of additional Old Common Stock (at a
purchase price of $0.05 per share of Old Common Stock, and subject to
----------
availability on a first-come, first-served basis as described in the
------------
Information Statement) in an amount that, together with my current
stockholdings of record, will equal 100,000 shares of Old Common Stock (the
equivalent of one whole share of New Common Stock), for exchange for a new
stock certificate representing New Common Stock.
<PAGE>
-3-
(NOTE: Stockholders so electing to purchase additional shares of Old Common
Stock should enclose all of their stock certificate(s) representing shares
of Old Common Stock, for exchange for a new stock certificate representing
New Common Stock.)
PART II STOCKHOLDERS OF RECORD OF AT LEAST 100,000 SHARES OF OLD COMMON STOCK,
-----------------------
PLEASE COMPLETE THE FOLLOWING, AND DO NOT COMPLETE PART I ABOVE:
---
I, the undersigned stockholder of the Company, holding of record at least
100,000 shares of the Old Common Stock of the Company, hereby irrevocably elect
as follows (check one box only):
[ ] To surrender my old stock certificate(s) and the shares of Old Common Stock
represented thereby for a cash payment in an amount equivalent to $0.05 per
share of Old Common Stock represented by such certificate(s). (Note: To
avoid back-up withholding for federal income tax purposes, you must also
enclose a Form W-9 or substitute Form W-9.)
[ ] To exchange my old stock certificate(s) for a new certificate representing
the shares of New Common Stock into which the shares of Old Common Stock
represented by my old stock certificate(s) are converted pursuant to the
Reverse Stock Split.
Please sign below exactly as your name appears on your stock certificate(s).
If acting as attorney, executor, trustee, or in other representative capacity,
please give full title as such. If stock is held jointly, both owners should
sign.
Dated:_______________, 1996 _____________________________________
(Signature)
Print name:
Dated:_______________, 1996 _____________________________________
(Signature of joint owner, if any)
Print name:
<PAGE>
-4-
STOCKHOLDER: PLEASE NOTE THE FOLLOWING IMPORTANT INSTRUCTIONS:
* ALL STOCK CERTIFICATES SUBMITTED SHOULD BE DULY INDORSED FOR TRANSFER TO THE
COMPANY, WITH A MEDALLION SIGNATURE GUARANTY, WHICH MAY BE OBTAINED FROM MOST
BANKS AND BROKERAGE FIRMS. DO NOT SEND IN YOUR STOCK CERTIFICATES WITHOUT A
MEDALLION SIGNATURE GUARANTY, AS THEY WILL BE RETURNED TO YOU.
* THE COMPANY'S BOARD OF DIRECTORS MAY POSTPONE OR ABANDON THE PROPOSED REVERSE
STOCK SPLIT AT ANY TIME PRIOR TO ITS CONSUMMATION, FOR ANY REASON, INCLUDING
WITHOUT LIMITATION IF IN THE DIRECTORS' SOLE JUDGMENT, CONSUMMATION OF THE
REVERSE STOCK SPLIT WOULD UNDULY DEPLETE THE COMPANY'S WORKING CAPITAL. IN
SUCH EVENT, YOUR ENCLOSED STOCK CERTIFICATE(S) WILL BE RETURNED TO YOU.
* TO AVOID BACK-UP WITHHOLDING WITH RESPECT TO ANY CASH PAYMENT IN LIEU OF
SHARES OF NEW COMMON STOCK, PLEASE COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED FORM W-9 OR SUBSTITUTE FORM W-9.
