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): March 13, 1998
RESORT INCOME INVESTORS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10084 36-3593298
- ------------------ ------------ ---------------
(State of or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
150 South Wacker Drive, Suite 2900, Chicago, Illinois 60606
- ----------------------------------------------------- ----------
(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)
1
<PAGE>
ITEM 5. OTHER EVENTS.
On March 13, 1998, the federal district court in Denver, Colorado
granted final approval to the settlements of both the federal securities
law class action litigation and derivative litigation pending before it
involving Resort Income Investors, Inc. (the "Company") and certain of its
current and former officers, directors and auditors. In approving the
settlement, the court held it was in all respects, fair, reasonable and
adequate to the members of the class, the Company and all of the parties.
The settlements will be effective 30 days after entry of the court's order
granting final approval.
In consideration for the settlement of the litigation, plaintiffs in
the class action litigation on behalf of themselves and all class members
and plaintiffs in the derivative actions on behalf of themselves and
derivatively on behalf of the Company will provide releases to all
defendants on the settlement's effective date. These releases will, among
other things, release the defendants from any claims, whether known or
unknown, that were or could have been asserted in the class action and
derivative litigation, or in any way related to the Company, including, but
not limited to, the sale or purchase of stock issued by the Company.
The Board of Directors of the Company believes that the settlements
are beneficial to the Company because its liquidation will be more readily
accomplished now that the Company is unencumbered by the expense and
uncertainty of defending the litigation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
99.1 Press Release of the Company dated March 16, 1998.
2
<PAGE>
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: March 16, 1998 By: /s/ John R. Young
------------------------------
Name: John R. Young
Title: Chairman of the Board of Directors,
Chief Executive Officer, President and
Chief Financial Officer
3
EXHIBIT 99.1
- ------------
RESORT INCOME INVESTORS, INC.
-----------------------------
FOR IMMEDIATE RELEASE
Contact: Karen Dickelman
Telephone: (312) 683-3323
Fax: (312) 683-3324
RESORT INCOME INVESTORS INC. ANNOUNCES
SETTLEMENT OF CLASS ACTION AND DERIVATIVE LITIGATION
Chicago, Illinois, March 16, 1998 -- Resort Income Investors, Inc.
(NASDAQ EBB: RIIV) today announced that the Federal District Court in
Denver, Colorado, on March 13, 1998, granted final approval to the
settlements of both the federal securities law class action litigation and
derivative litigation pending before it involving the Company and certain
of its current and former officers, directors and auditors. In approving
the settlement, the Court held it was in all respects, fair, reasonable and
adequate to the members of the class, the Company and all of the parties.
The settlements will be effective 30 days after entry of the Court's order
granting final approval.
The Court's order dismisses all claims and causes of action asserted
in the federal securities law litigation and derivative litigation in
Colorado against all of the parties. Furthermore, the Court's order
approving the settlement provides that the fact of the settlement should
not be interpreted or construed as an admission by any of the defendants of
the truth or validity of any claim that was or could have been asserted in
the litigation.
The consolidated federal securities class action lawsuits were
originally filed in July 1995 in the United States District Court for the
District of Colorado against the Company and certain of its current and
former officers and directors and its independent auditors at the time (the
<PAGE>
"Class Action Lawsuits"). The Class Action Lawsuits alleged violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and other
provisions of the federal securities laws, and Rule 10b-5 of the Securities
Act of 1933.
The derivative actions were filed in June 1995 in the Court of
Chancery in the State of Delaware in and for New Castle County against
certain of the directors and officers of the Company (the "Derivative
Actions"). The Company is a nominal defendant in the Derivative Actions.
These complaints allege that the officers and directors breached their
fiduciary duties to the Company, wasted Company assets and that its
chairman of the board and chief executive officer at the time was in a
conflict of interest position.
In October 1997, the plaintiffs in the Derivative Actions filed an
action in the United States District Court in Colorado in order to seek
approval of the settlement of the Derivative Actions in that court
concurrently with the Class Action Lawsuits settlement. The derivative
complaint filed in Colorado alleged substantially the same claims asserted
in the complaints in the Derivative Actions. Based upon the Court's
approval of the settlement of the derivative lawsuit filed in Colorado, the
parties to the Derivative Actions intend to seek dismissal by the Delaware
Court.
The settlement of the Class Action Lawsuits provides for a payment of
at least $5,630,000, plus accrued interest on portions of this amount. The
economic components of the settlement are as follows:
1 $3,630,000 paid by the Company's directors and officers'
insurer, and former auditors.
2 The approximately $1,000,000 left from the Settlement of the
Derivative Actions after attorneys' fees are awarded by the Court.
-- more --
<PAGE>
3 A payment by the Company of an amount equal to the greater of:
(a) 44% of the Company's net assets in liquidation valued as of
December 31, 1997; or (b) $1,000,000.
To date, the Company has paid $500,000 towards the settlement
and will pay the remaining portion of its contribution, if any, within five
business days after receipt of its audited financial statements for the
period ending December 31, 1997, or the filing of its Annual Report on Form
10-KSB for that period, whichever is earlier.
The settlement of the Class Action Lawsuits provides that all
stockholders, other than the defendants, who purchased shares in the
Company between March 31, 1993 and June 29, 1995, will be eligible to
participate in the settlement proceeds.
The Derivative Actions were settled for $1,425,000, contributed by
the Company's directors and officers' insurer, plus accrued interest. As
stated above, this amount, less derivative counsel attorneys' fees, will be
contributed to the settlement of the Class Action Lawsuits. The counsel in
the Derivative Actions filed a request for fee of 30% of the settlement
amount, including expenses. Counsel for the plaintiffs in the Class Action
Lawsuits filed a request for fee of 30% of the recovery, not including the
payment from the settlement of the Derivative Actions, plus expenses. The
Court granted both fee and expense requests.
Notices which thoroughly addressed the settlement terms and the
process for filing claims were previously forwarded to class members and
current Stockholders, as of November 18, 1997, 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, New York 10017
Telephone: (212) 490-3550
-- more --
<PAGE>
In consideration for the settlement of the litigation, plaintiffs in
the Class Action Lawsuits on behalf of themselves and all class members and
plaintiffs in the Derivative Actions on behalf of themselves and
derivatively on behalf of the Company will provide releases to all
defendants on the settlement's effective date. These releases will, among
other things, release the defendants from any claims, whether known or
unknown, that were or could have been asserted in the Class Action Lawsuits
and the Derivative Actions, or in any way related to the Company,
including, but not limited to, the sale or purchase of stock issued by the
Company.
The Board of Directors of the Company believes that the settlements
are beneficial to the Company because its liquidation will be more readily
accomplished now that the Company is unencumbered by the expense and
uncertainty of defending the litigation.
-- end --
