SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 3, 1997
RESORT INCOME INVESTORS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-10084 36-3593298
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(State of or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
150 South Wacker Drive, Suite 2900, Chicago, Illinois 60606
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 683-3323
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
As management of Resort Income Investors, Inc. (the "Company")
previously announced, a Stipulation of Settlement was filed by the parties
in the class action and derivative litigation involving the Company pending
in Colorado. On December 3, 1997, the Federal District Court in Colorado
held a hearing at which it granted preliminary approval of the settlement
and authorized the Plaintiffs to distribute and publish notice of the
settlement. The Court also scheduled hearings for March 13, 1998, to
consider final approval of the settlements. The hearing on the settlement
of the derivative action is set at 2:00 p.m., Mountain Standard Time, and
for the class action settlement at 3:00 p.m., Mountain Standard Time, on
March 13, 1998.
The Company's Board of Directors believes that the settlements are
beneficial to the Company because its liquidation will be more readily
accomplished once the Company is unencumbered by the expense and
uncertainty of defending the lawsuit.
Notices which thoroughly address the settlement terms and the process
for filing claims will be sent to the Company's stockholders, as of
November 18, 1997, and class members from the Clerk of the Court.
Stockholders and class members should address all questions pertaining to
the administration of claims and the process for submitting proof of claim
forms to:
FRG Information Systems Corp.
Re: Resort Income Investors, Inc. Litigation
823 United National Plaza - Suite 500
New York, NY 10017
Telephone: (212) 490-3500
On December 3, 1997, the Company filed preliminary proxy materials
with the Securities and Exchange Commission, outlining the Company's
proposed plan of liquidation. In arriving at the determination to continue
the Company's original plan to liquidate, the Company's Board of Directors
evaluated alternatives to enhance stockholder value. One alternative
considered by the Directors was a sale of all or substantially all of the
assets of the Company to a single buyer. In the second and third quarters
of calendar year 1997, the Company received unsolicited informal
indications of interest from third parties concerning possible acquisition
of substantially all of the Company's assets. The Board has not, however,
received a written offer, proposal or other commitment that would provide
for a greater distribution to the stockholders than that which is currently
anticipated under the terms of a liquidation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
C. Exhibits
10.1 Order of Preliminary Approval of Settlement and
Proceedings in Connection Therewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RESORT INCOME INVESTORS, INC.
(Registrant)
DATE: December 17, 1997 By: /s/ John R. Young
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Name: John R. Young
Title: Chairman of the Board of
Directors,
Chief Executive Officer,
President and
Chief Financial Officer
EXHIBIT 10.1
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Master File No. 95-B-1665
IN RE: RESORT INCOME INVESTORS, INC., SECURITIES LITIGATION
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THIS DOCUMENT RELATES TO: ALL ACTIONS
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Case No.: 97-B-2252
PHILIP FRANK, as Trustee for the Trust Under the Will of Helen Frank, and
JOSEPH E. ALPERT, derivatively on behalf of RESORT INCOME INVESTORS, INC.,
Plaintiffs,
vs.
CHRISTOPHER HEMMETER, MARK HEMMETER,
DANIEL D. LANE, and JOHN R. YOUNG,
Defendants,
and
RESORT INCOME INVESTORS, INC.,
Nominal Defendant.
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ORDER OF PRELIMINARY APPROVAL OF SETTLEMENT
AND PROCEEDINGS IN CONNECTION THEREWITH
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WHEREAS, the above-captioned consolidated class action and the
derivative action are pending before the Court (collectively, the
"Litigation");
WHEREAS, the Parties having made application for an order
preliminarily approving the Settlement of this Litigation, in accordance
with a Stipulation of Settlement dated November 18, 1997 (the
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"Stipulation"), which, together with the exhibits attached thereto, sets
forth the terms and conditions for a proposed Settlement of the Litigation
and for dismissal of the Litigation on the merits and with prejudice; and
the Court having considered the Stipulation and the exhibits thereto and
the Parties having consented to the entry of this Order;
WHEREAS, Class Counsel and Derivative Counsel (as defined in the
Stipulation) believe the Settlement to be fair, reasonable, and adequate
and in the best interests of the Class Members (as defined in the
Stipulation), Resort Income Investors, Inc. ("Resort") and all Persons who
were shareholders of Resort on the date of the Stipulation ("Current
Shareholders");
WHEREAS, the Settlement contemplates the compromise and resolution of
the claims asserted in the Litigation and, ultimately, the dismissal of the
Litigation;
WHEREAS, Fed. R. Civ. P. 23(e) provides that a class action shall not
be dismissed or compromised without the approval of the Court following a
hearing held pursuant to notice to Class Members; and
WHEREAS, Fed. R. Civ. P. 23.1 provides that a derivative action shall
not be dismissed or compromised without the approval of the Court following
notice to shareholders;
NOW, on the basis of the Stipulation and all the files, records and
proceedings herein,
IT IS HEREBY ORDERED THAT:
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1. For purposes of this Order, all capitalized terms herein
shall have the meaning as defined in the Stipulation .
2. The Settlement of the Class Action and Colorado
Derivative Action Litigation on the terms and conditions set forth in the
Stipulation is preliminarily approved as fair, reasonable and adequate to
the Class and Resorts.
3. A Hearing shall be held before this Court on
March 13, 1998 at 2:00 p.m., in Courtroom C502, of the United
States Courthouse, 1929 Stout Street, Denver, Colorado 80294 to: (i)
determine whether the proposed Settlement of the Colorado Derivative Action
on the terms and conditions provided for in the Stipulation is fair,
reasonable and adequate and should be approved by the Court; (ii) determine
whether an order approving the Settlements and a final judgment and order
of Dismissal with prejudice, as provided in the Stipulation, should be
entered; (iii) determine whether the application of Derivative Counsel for
the payment of the Derivative Fee and Expense Award is reasonable and
should be approved; and (iv) rule upon such other matters as the Court
deems appropriate.
4. A Hearing shall be held before this Court on
March 13, at 3:00 p.m., in Courtroom C502, of the United
States Courthouse, 1929 Stout Street, Denver, Colorado 80294 to: (i)
determine whether the proposed Settlement of the Class Action on the terms
and conditions provided for in the Stipulation is fair, reasonable and
adequate and should be approved by the Court; (ii) determine whether the
Class was adequately represented by the named Class Action Plaintiffs and
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by Class Counsel; (iii) determine whether an order approving the Settlement
and a Final Judgment and Order of Dismissal with Prejudice, as provided in
the Stipulation, should be entered herein; (iv) determine whether the
application of Class Counsel for the payment of the Class Fee and Expense
Award is reasonable and should be approved; and (v) rule upon such other
matters as the Court deems appropriate.
5. The Court reserves the right to approve either of the
settlements with or without modification and with or without further notice
of any kind.
6. In connection with consideration of the Settlement, and
solely for that purpose, the Court hereby provisionally certifies, pursuant
to Fed. R. Civ. P. 23(b)(3), a class (the "Class") comprised of:
all persons who purchased or otherwise acquired
Resort stock during the period from March 31, 1993 through June 29, 1995
inclusive, excluding (i) the Class Action Defendants, (ii) any entity in
which any Class Action Defendant has a controlling interest, (iii) the
partners, corporate officers and directors of any of the Class Action
Defendants, and (iv) the legal representatives, heirs, successors or
assigns of any such excluded party.
7. The Court finds that the prerequisites to a class action
under Federal Rule of Civil Procedure 23(a) have been satisfied in that
(a) the number of class members is so numerous that joinder of all members
thereof is impracticable; (b) there are questions of law and fact common to
the Class; (c) the claims of the name representatives are typical of the
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claims of the class they see to represent; (d) the Plaintiffs fairly and
adequately represent the interest of the class; (e) the questions of law
and fact common to the members of the class predominate over questions
affecting not only individual members of the class; and (f) a class action
superior to other available methods for the fair, efficient adjudication of
the controversy.
8. Pursuant to Rule 23 of the Federal Rules of Civil
Procedure, Edward and Ethel Sarnoff, as trustees for the benefit of the
Sarnoff Irrevocable Trust, and Sheldon L. Contract, as trustee for the
benefit of the Sheldon L. Contract DDSPA Employee Profit Sharing Plan and
Trust are certified as class representatives for purposes of the
settlement.
9. Pursuant to Rule 23 of the Federal Rules of Civil
Procedure, Zachary Alan Starr of Starr & Holman, LLP, and Jonathan M.
Plasse of Goodkind Labaton Rudoff & Sucharow LLP, are designated as counsel
for the Class for purposes of settlement.
10. Pursuant to Rule 23.1 of the Federal Rules of Civil
Procedure, Jeffrey G. Smith of Wolf Haldenstein Adler Freeman & Herz LLP
and Joshua N. Rubin of Abbey Gardy & Squitieri are designated counsel for
the Plaintiffs in the Colorado Derivative Actions for purposes of
settlement.
11. Within five (5) days of the date of this Order, Resort
shall provide to Class Counsel and Derivative Counsel, to the extent that
it has not already done so, all information obtainable by reasonable
efforts, including information held by its present and former transfer
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agents, identifying by name and address: (a) the Persons who purchased
shares of Resort stock during the Class Period, including banks, brokerage
firms, institutions, and other nominees; and (b) the Persons who are or
were Resort Shareholders as of November 18, 1997, including banks,
brokerage firms, institutions and other nominees.
12. The Notice, Summary Notice and the Proof of Claim
attached as Exhibits B, C and D to the Stipulation, reasonably inform the
Class and Current Shareholders of the pendency and nature of the
Litigation, the terms of the proposed Settlements, the Plan of
Distribution, and the rights of Class Members and Current Shareholders with
respect to the Settlements.
13. The Notice, Summary Notice and Proof of Claim are
approved by the Court as to their form, content and requirements.
14. Plaintiffs' Counsel is authorized to issue the Notices
and Proofs of Claim and publish the Summary Notice, in substantially their
present form, to those members of the Class and Current Shareholders that
can be identified through reasonable effort. Plaintiffs' Counsel are
hereby authorized to take reasonable steps and to utilize reasonable
procedures in connection with the dissemination of the Notice and the
administration of the Settlement which are consistent with this Order and
the terms and conditions of the Settlement.
15. Plaintiffs' Counsel are hereby authorized to retain the
firm of FRG Information Systems Corp. to supervise and administer the
dissemination of the Notice and Proof of Claim as well as the processing of
claims as more fully set forth below:
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a. Not later than 10 days from the date hereof,
Plaintiffs' Counsel shall cause a copy of the Notice and the Proof of Claim
to be mailed by first-class mail to: (i) all Persons who can be identified
through reasonable efforts by the parties to have purchased Resort Stock
during the period from March 31, 1993 through June 29, 1995, inclusive; and
(ii) all Current Shareholders who can be identified through reasonable
efforts by the parties to own stock in Resort as of November 18, 1997. The
date of such initial mailing shall be referred to as the "Notice Date."
b. Plaintiffs' Counsel shall use reasonable efforts to
give notice to nominee owners, such as brokerage firms or other Persons who
held shares of Resort stock as record owner, but not as beneficial owner,
during the period from March 31, 1993 through June 29, 1995, inclusive, and
as of November 18, 1997, as part of these efforts. A Notice to Banks,
Brokers, Institutions, and Other Nominees ("Notice to Nominees") shall be
included in the mailing described in paragraph (a) above, and all Persons
to whom the Notice to Nominees is addressed are hereby directed to comply
with the directions contained therein. If any Nominee submits to Class
Counsel or Derivative Counsel a list of beneficial owners, Class Counsel or
Derivative Counsel shall send a copy of the Notice to each such beneficial
owner within ten (10) days after receipt of such list. Alternatively, upon
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request by a Nominee, Class Counsel or Derivative Counsel shall send to the
Nominee, within ten (10) days of receipt of such request, a sufficient
number of additional copies of the Notice to permit mailing to all
beneficial owners for whom the Nominee acted.
c. Not later than 20 days after the Notice Date,
Plaintiffs' Counsel shall cause to be published the Summary Notice once in
the national edition of THE WALL STREET JOURNAL.
d. Plaintiffs' Counsel shall also cause the Notice to
be mailed as soon as practicable after the Notice Date to all Persons who,
in response to the Summary Notice, represent that they are Class Members or
Current Shareholders and request a copy of the Notice.
16. The Court finds that the mailing and publication of
notice of the Settlement ordered herein meets the requirements of due
process and Rules 23 and 23.1 of the Federal Rules of Civil Procedure and
is the best notice practicable under the circumstances and constitutes due
and sufficient notice to all Persons entitled to receive notice.
17. No later than seven days before the Settlement Hearing,
Plaintiffs' Counsel shall cause to be served on Defendants' Counsel and
filed with the Clerk of this Court one or more affidavits or declarations
of the person or persons under whose direction the mailing of the Notice
and Proof of Claim and the publication of the Summary Notice shall have
been accomplished substantially in accordance with this Order.
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18. Members of the Class who wish to participate in the Class
Action Fund shall complete and submit Proofs of Claim in accordance with
the instructions contained therein. All Proofs of Claim must be received
by the Claims Administrator no later than 90 days from the Notice Date.
19. All members of the Class shall have the option to be
excluded from the Class and thereby elect not to participate in the Class
Action Fund. Such exclusion shall be exercisable by mailing a timely and
valid written Request for Exclusion to Class Counsel on behalf of
Plaintiffs, to George Curtis of Gibson, Dunn & Crutcher LLP on behalf of
D&T and to Allan T. Slagel of Shefsky & Froelich Ltd. on behalf of the
remaining Defendants. To be effective, the Request for Exclusion must be
in writing and received no later than 25 business days before the date of
the Hearing set forth in the Notice. No Person may exclude themselves from
the Class after that date. Such Request for Exclusion must set forth: (i)
the name, address, telephone number and social security or taxpayer
identification number of the Person requesting to be excluded from the
Class; (ii) the name and address of the Person in whose name the shares of
Resort stock for which exclusion is being requested was registered, if
different from the foregoing; (iii) the number of shares of Resort stock
for which exclusion is being requested; (iv) the number of shares of Resort
stock as to which losses are claimed, and the losses claimed; and (v) the
date(s) of purchase or acquisition, the number of shares of Resort stock
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purchased or acquired, and the price(s) paid for all shares of Resort stock
purchased or otherwise acquired during the Class Period by the Person
requesting to be excluded from the Class; if the Resort stock is no longer
owned, the date(s) of sale or other disposition, the number of shares sold
and the proceeds received. All Requests for Exclusion must be signed by or
on behalf of the Person or entity so requesting exclusion and must include
proof of purchase of the shares for which exclusion is requested. If a
Request for Exclusion is not timely submitted, or does not include all the
information set forth above, or is not signed, it shall not be a valid
Request for Exclusion and the Person filing an invalid Request for
Exclusion shall remain a member of the Class. All Persons who file valid
and timely Request for Exclusion from the Class shall have no rights with
respect to the Class Action Settlement and have no interest in the Class
Action Fund.
20. Pending final determination of whether the Settlement
should be approved, neither the Plaintiffs, Class Member or Current
Shareholder nor any Released Party shall commence, maintain or prosecute
against any Defendant, any action or proceeding in any court or tribunal
asserting any Released Claim.
21. All members of the Class may enter appearances in the
Class Action, at their own expense, individually or through counsel of
their own choice. If they do not enter an appearance, they will continue
to be represented by Class Counsel. Similarly, all Current Shareholders
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may enter appearances in the Derivative Actions, at their own expense,
individually or through counsel of their own choice. If they do not enter
an appearance, they will continue to be represented by Derivative Counsel.
Neither class members or Current Shareholders need to appear at the
respective hearings or take any other action to indicate their approval.
22. Any member of the Class who has not requested exclusion
may appear and show cause, if any, why the proposed Settlement should or
should not be approved as fair, reasonable and adequate; why a final
judgment and order of dismissal should or should not be entered thereon;
why Attorneys' Fees and Expenses should or should not be awarded to Class
Counsel in the amount requested; or why the Plan of Distribution should or
should not be approved as fair. However, in order to appear, be heard or
entitled to contest any of these issues, a Class Member must file, by at
least 25 business days prior to the Hearing, evidence of their being a
Class Member and a written statement of position or objection together with
any briefs or supporting documents, with the Clerk of the United States
District Court for the District of Colorado, The United States Courthouse,
1929 Stout Street, Denver, Colorado 80294, and serve copies of such papers
by hand or first-class mail upon Class Counsel; and Allan T. Slagel of
Shefsky & Froelich Ltd. Any statement of position or objection shall
identify any and all witnesses, documents and other evidence of any kind to
be presented at the Hearing in support of the statement of position or
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objection, as well as the substance of the testimony to be given by any
such witnesses and of any other evidence to be presented. Any member of
the Class who does not object in this manner shall be deemed to have waived
such objection and shall forever be foreclosed from making any objection to
the fairness or adequacy of the proposed Settlement to any Final Order and
Judgment that may be entered, to the award of Attorneys' Fees and Expenses
to Class Counsel, and to the Plan of Distribution.
23. Any Current Shareholder may appear and show cause, if
any, why the proposed Settlement should or should not be approved as fair,
reasonable and adequate; why a final judgment and order of dismissal should
or should not be entered thereon; or why Attorneys' Fees and Expenses
should or should not be awarded to Derivative Counsel in the amount
requested. However, in order to appear, be heard or be entitled to contest
any of these issues, a Current Shareholder must file, by at least 25
business days prior to the Hearing, evidence of their being a Current
Shareholder and a written statement of position or objection together with
any briefs or supporting documents, with the Clerk of the United States
District Court for the District of Colorado, The United States Courthouse,
1929 Stout Street, Denver, Colorado 80294, and serve copies of such papers
by hand or first-class mail upon Jeffrey Smith, Esq. of Wolf Haldenstein
Adler Freeman & Herz LLP, Joshua N. Rubin of Abbey Gardy & Squitieri and
Allan T. Slagel of Shefsky & Froelich Ltd. Any statement of position or
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objection shall identify any and all witnesses, documents and other
evidence of any kind to be presented at the Hearing in support of the
statement of position or objection, as well as the substance of the
testimony to be given by any such witnesses and of any other evidence to be
presented. Any Current Shareholder who does not object in this manner
shall be deemed to have waived such objection and shall forever be
foreclosed from making any objection to the fairness or adequacy of the
proposed Settlement to any final judgment and order of dismissal that may
be entered, or to the award of Attorneys' Fees and Expenses to Derivative
Counsel.
24. Only Class Members shall have the right to object to the
settlement of the Class Action or the Class Fee and Expense Award. Only
Current Shareholders shall have the right to object to the settlement of
the Derivative Action or the Derivative Fee and Expense Award.
25. Any memoranda in support or clarification of the
Settlement shall be filed by the Parties at least seven days before the
Hearings.
26. Class Counsel and Derivative Counsel shall file their
respective applications for Attorneys' Fees and Expenses, including the
fees and expenses of experts, and any supporting papers, at least seven
days before the Hearings.
27. In the event that the proposed settlements are not
finally approved by the Court, are terminated in accord with the provisions
of the Stipulation, or for any reason are not consummated and a final
judgment and order of dismissal is not entered, then the Stipulation shall
become null and void and of no further force and effect, except as
specified therein.
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28. Whether or not the settlement is consummated, the
Stipulation and all negotiations and papers relating to it, and any
proceedings in connection with the Settlements, (a) are not and shall not
be construed to be evidence of an admission by any of the Defendants as to
any claim asserted in the Litigation or any other action or proceeding, (b)
are not and shall not be construed to be evidence of an admission by the
Plaintiffs that any claim asserted in the Litigation lacks merit, and (c)
shall not be offered or received in evidence in any action or a proceeding
except a proceeding to enforce the terms of the Stipulation.
29. All proceedings in the Litigation, except those relating
to the Settlements, are hereby stayed and all applicable deadlines are
hereby extended pending the Court's further consideration of the
Settlements. The institution or prosecution by any Class Member or Current
Shareholder of any claim which would be dismissed or released in connection
with the Settlements is hereby stayed pending the Court's further
consideration of the Settlements.
30. The Opt-Out Contingency letters referred to in Section XI
of the Stipulation shall continue to be treated as confidential unless and
until either Resort or Deloitte & Touche exercise their rights pursuant to
the letters.
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31. The Court reserves the right: (a) to approve the
Settlements, with such modification as may be agreed to by counsel for the
Parties consistent with the Stipulation, without further notice to Class
Members and Current Shareholders, and (b) to adjourn the Hearings or any
adjournment thereof without any further notice other than an announcement
at the hearings or any adjournment thereof.
32. The Court retains exclusive jurisdiction over the Actions
to consider all further matters arising out of or connected with the
Settlements, including the enforcement of the Stipulation.
IT IS SO ORDERED.
/s/ LEWIS T. BABCOCK
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Honorable Lewis T. Babcock
United States District Judge
December 3, 1997.
Denver, Colorado
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