SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
(Amendment 3)
Rule 13e-3 Transaction Statement under Section 13(e)
of the Securities Exchange Act of 1934
DIVERSIFIED REALTY, INC.
(Name of Issuer)
DIVERSIFIED REALTY, INC.
DRI, INC.
M CORP
A.M.MCCANN FAMILY
(Name of Person(s) Filing Statement)
Common Stock, $.10 par value per share
(Title of Class of Securities)
________
(CUSIP Number of Class of Securities)
Dawn Mellinger
128 Second Street South
Great Falls, Montana 59405
Phone: (406) 727-2600
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on
Behalf of Persons Filing Statement)
COPIES TO:
Dwyer & Company, CPA, PC
18 6th Street North, Suite 200
Great Falls, MT 59401
(406) 453-2463
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THIS TRANSACTION, PASSED UPON THE MERITS OR THE
FAIRNESS OF THE TRANSACTION OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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This statement is filed in connection with (check the
appropriate box):
a. [ ] The filing of solicitation materials or an
information statement subject to Regulation 14A, Regulation
14(C) or Rule 13e-3(c) 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. [x] None of the above.
Check the following box if the soliciting materials or
information statement referred to in checking box (a) are
preliminary copies [ ].
Check the following box if the filing is a final amendment
reporting the results of the transaction:
[ ].
CALCULATION OF FILING FEE
Transaction Valuation* Amount of Filing Fee
$180,111.49 $14.41
* Calculated for purposes of determining the filing fee only.
In accordance with Rule 0-11(b)(2) under the Securities
Exchange Act of 1934, as amended, this amount is calculated
by multiplying 290,502.4 (the number of shares of common stock
held by stockholders other than Parent immediately prior to the
proposed transaction) by $0.62, the price to be paid per share.
[ ] Check the 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: N/A
Form or Registration No.: N/A
Filing Party: N/A
Date Filed: N/A
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SUMMARY TERM SHEET
This summary and the remainder of this Transaction Statement
on Schedule 13E-3 include information describing the
"going private" Merger involving Diversified Realty, Inc.,
referred to herein as the Company, and DRI, Inc., referred to
herein as Parent, how it affects you, what your rights are with
respect to the Merger as a stockholder of the Company and the
position of the Company, M Corp, Parent and the A.M. McCann
family (collectively, the "Filing Persons") on the fairness of
the Merger to the stockholders of the Company other than the
Filing Persons.
PURPOSE OF THE MERGER (PAGE 8).
Immediately prior to the Merger, Parent will own approximately
94.6% of the Company's common stock. The purpose of the Merger
is to provide a source of liquidity to the Unaffiliated Security
Holders and to enable Parent to acquire all of the outstanding
equity interests in the Company and eliminate the expenses and
costs associated with operating a public company.
CONTRIBUTION AND MERGER (PAGE 34).
The following steps are expected to be taken prior to the Merger
referred to herein.
Parent is a Montana corporation organized on November 10,
2003 by M Corp to complete the Merger. Prior to the Merger,
M Corp will contribute all of the shares of Company common stock
it owns to the Parent, in exchange for shares of common stock of
Parent. As a result, Parent will continue to be a wholly-owned
subsidiary of M Corp and will own 5,076,708.6 shares of Company
common stock.
It is anticipated that at the time of the Merger the shares
of the Company's common stock transferred to Parent will
represent approximately 94.6% of the Company's outstanding common
stock. M Corp intends to cause the Company to merge with Parent
as a means of acquiring all of the shares of Company common stock
not owned by Parent and to provide a source of liquidity to
holders of those shares.
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PRINCIPAL TERMS OF THE MERGER.
The Merger (Page 34). Parent intends to cause the Company to
merge with Parent pursuant to a merger. As a result of the
Merger, each share of Company common stock not owned by Parent
will be converted into the right to receive $0.70 in cash. The
Merger has been approved by the Directors of the Company, the
Parent, and M Corp.
Merger Consideration (Page 35). The consideration in the Merger
will be $0.70 per share in cash. The Filing Persons set the price
of $0.70 and deem it to be fair to the Unaffiliated Security
Holders. The Filing Persons established this price after
reviewing the various factors considered by Parent's Board of
Directors in determining the fairness of the Merger. See "Special
Factors -- Fairness of the Merger -- Factors Considered in
Determining Fairness."
Company Shares Outstanding (Page 7). As of September 30, 2004, a
total of 5,363,898.6 shares of Company common stock were
outstanding. To the Filing Person's knowledge, there are no
outstanding options to acquire the Company's common stock.
M Corp currently owns 5,076,708.6 shares of the Company's common
stock.
Payment for Shares (Page 35). The Parent will pay for shares of
Company's common stock promptly after the effective date of the
Merger. Instructions for surrendering stock certificates will be
set forth in a Notice of Merger and Dissenters' Rights and a
Letter of Transmittal, which will be mailed to stockholders of
record of the Company within 10 calendar days following the date
the Merger becomes effective and should be read carefully.
Please do not submit your stock certificates before you have
received these documents. Sending your stock certificates with
a properly signed Letter of Transmittal will waive your
dissenters' rights described below.
Source and Amount of Funds (Page 35). The total amount of funds
expected to be required to pay the Merger Consideration for
Company common stock in the Merger and to pay related fees and
expenses, is estimated to be approximately $228,347. We intend
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to pay these costs and expenses and the Merger Consideration
from the Company's existing available cash.
THE FILING PERSONS' POSITION ON THE FAIRNESS OF THE MERGER
(PAGE 16).
The Filing Persons have concluded that the Merger is both
substantively and procedurally fair to the Unaffiliated Security
Holders of the Company. In reaching its conclusion regarding the
fairness, from a financial point of view, of the $0.70 per share
merger consideration the Filing Persons considered a number of
factors including the Company's net book value per share and the
fair market value per share if Company were liquidated. For a
complete discussion of the factors that were considered by the
Filing Persons in determining fairness, see "Special Factors --
Fairness of the Merger -- Factors Considered in Determining
Fairness."
POTENTIAL CONFLICTS OF INTEREST (PAGE 33).
Some of the officers and directors of M Corp, which owns
approximately 94.6% of the Company's outstanding stock, are also
officers and directors of the Company. Individuals affiliated
with M Corp own less than one percent of the Company's
outstanding stock.
For a discussion of other potential conflicts of interest, see
"Information About the Filing Persons -- Conflicts of Interest."
EFFECTS OF THE MERGER (PAGE 12).
Completion of the Merger will have the following consequences:
The Company and Parent will be combined into a single,
privately held entity;
Only the Filing Persons, or entities related to the Filing
Persons will participate in the future earnings and growth,
if any, of the Company. On the other hand, only the Filing
Persons, or entities related to the Filing Persons will
face the risk of losses generated by the Company's
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operations or the decline in value of the Company after the
Merger;
The shares of Company common stock will no longer be
publicly traded. The combined entity will not be subject to
compliance, reporting and other disclosure requirements of
the Securities Exchange Act of 1934, including requirements
to file annual and other periodic reports or to provide the
type of going-private disclosure contained in this Schedule
13E-3; and
Subject to the exercise of statutory dissenters' rights,
each of your shares will be converted into the right to
receive $0.70 in cash, without interest.
DISSENTERS' RIGHTS (PAGE 38).
You have a statutory right to dissent from the Merger
and demand payment of the fair value of your Company shares
as determined in a judicial appraisal proceeding in accordance
with Sections 35-1-826 through 35-1-839 of the Montana Business
Corporation Act. This value may be more or less than the $0.70
per share in cash consideration offered in the Merger. In order
to qualify for these rights, you must make a written demand for
appraisal within 20 days after the date of mailing of the Notice
of Merger and Dissenters' Rights and otherwise comply with the
procedures for exercising appraisal rights set forth in the
Montana Business Corporation Act. The statutory right of dissent
is set out in Sections 35-1-826 through 35-1-839 of the Montana
Business Corporation Act. Failure to comply with its terms will
result in an irrevocable loss of such right. Please read and be
sure you understand Sections 35-1-826 through 35-1-839 of the
Montana Business Corporation Act (Exhibit (f)).
FOR MORE INFORMATION (PAGE 25).
More information regarding the Company is available from its
public filings with the Securities and Exchange Commission.
See "Information About the Company."
If you have any questions about the Merger, please contact
Dawn Mellinger at (406)727-2600.
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INTRODUCTION
This Transaction Statement on Schedule 13E-3
the "Schedule 13E-3") is being filed by Diversified Realty,
Inc., a Montana corporation ("Company"), DRI Inc., a Montana
corporation ("Parent"),M Corp, a Montana corporation, and the
A.M. McCann family (collectively are the "Filing Persons"),
pursuant to Section 13(e) of the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 13e-3
thereunder. Parent is a wholly-owned subsidiary of M Corp.
M Corp currently owns, and intends to transfer to Parent,
common shares of the Company which represents 94.6% of the
Company's common stock prior to the effective date (the
"Effective Date") of the proposed merger (the "Merger") of the
Company and Parent (with the Parent being the surviving entity),
pursuant to Section 35-1-818 of the Montana Business Corporation
Act ("MBCA"). This Schedule 13E-3 is being filed in connection
with the Merger. The Effective Date will be as soon as possible
in accordance with Securities and Exchange Commission rules and
procedures.
The exact title of the class of equity securities subject to the
Merger is: common stock, par value $0.10 per share of the Company
(the "Shares"). As of September 30, 2004, a total of 5,363,898.6
Shares were outstanding. To the Filing Person's knowledge there
are no outstanding options to acquire any Shares. Therefore, it
is anticipated that immediately prior to the Effective Date, there
will be 5,363,898.6 Shares outstanding, of which Parent and
affiliated shareholders will own 5,079,741.6 shares, or 94.7% of
the Shares outstanding, and stockholders of the Company other than
Parent, including all Unaffiliated Security Holders of the Company,
(the "Unaffiliated Security Holders") will own approximately 5.3%
of the Shares outstanding.
Upon the consummation of the Merger, each outstanding Share will be
canceled and each outstanding Share not held by Parent or by
Unaffiliated Security Holders of the Company who properly exercise
statutory dissenters' rights under the MBCA, will be automatically
converted into the right to receive $.070 per Share in cash (the
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"Merger Price"), without interest, upon surrender of the certificate
for such Share to DRI, Inc. (the "Paying Agent"). Instructions with
regard to the surrender of stock certificates, together with a
description of statutory dissenters' rights, will be set forth in a
Notice of Merger and Dissenters' Rights and a Letter of Transmittal,
which documents will be mailed to stockholders of record of the
Company on or about the Effective Date of the Merger and should be
read carefully.
Under the Montana Business Corporation Act, no action is required
by the stockholders of the Company for the Merger to become
effective as the Filing Persons own over 80% of the Company's
common stock. The Parent will be the surviving corporation in
the Merger.
This Schedule 13E-3 and the documents incorporated by reference in
this Schedule 13E-3 include certain forward-looking statements.
These statements appear throughout this Schedule 13E-3 and include
statements regarding the intent, belief or current expectations of
the Filing Persons, including statements concerning the Filing
Persons' strategies following completion of the Merger. Such
forward-looking statements are not guarantees of future performance
and involve risks and uncertainties. Actual results may differ
materially from those described in such forward-looking statements
as a result of various factors.
SPECIAL FACTORS
PURPOSES, ALTERNATIVES, REASONS AND EFFECTS OF THE MERGER
PURPOSES
Immediately prior to the Merger, Parent will own approximately
94.6% of the outstanding Shares. The purpose of the Merger is
to provide a source of liquidity to the minority shareholders
and to enable Parent to acquire all of the outstanding equity
interests in the Company and eliminate the expenses, time and
costs associated with operating a public Company.
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ALTERNATIVES
The Filing Persons believe that effecting the transaction
through the completion of the Merger between the Company and
Parent under Section 35-1-818 of the MBCA is a way to provide
value and liquidity to the Unaffiliated Security Holders and
for Parent to acquire the outstanding shares in the Company
not already owned by the Company. The filing persons also
considered a reverse stock split as a method to take the
Company private. It was considered and rejected by the
Filing Persons, as the Company would still have Unaffiliated
Security Holders as minority shareholders.
A meeting of the Board of Directors, held on November 18,
2004 discussed the updated financial condition of the
Company and the progress of the Merger. The Filing Persons
also considered complete liquidation of the Company, but
rejected the idea due to the fact that the Unaffiliated
Security Holders would benefit more from the Merger due to
the added expenses of additional personnel, legal and other
expenses, the $12,318 already attributable to the Merger, and
the length of time tied to completion of the liquidation.
The Board of Directors were presented with the full
re-appraisal values, updated September 2004 as determined
by the State of Montana along with September 30, 2004
financial statements. The Board agreed that these values,
submitted by the Company's Chief Financial Officer,
represented more accurately, the fair market values of real
property owned by the Company, with the exception of one
property, which was recently purchased. For the new
property, it was resolved that the recent purchase price
represented fair market value.
REASONS
In determining whether to acquire the outstanding
Unaffiliated Security Holders' minority equity interest
in the Company and to effect the Merger, the Filing
Persons considered the following factors to be the principal
benefits of taking the Company private:
the elimination of burdens on management associated
with compliance, reporting and other tasks resulting from
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the Company's public Company status, such as, dedication of
management's time and resources to stockholder inquiries and
investor and public relations; these burdens have
substantially increased because of recent Federal legislation
which has caused audit, compliance, personnel and other
reporting costs to substantially increase. The Filing
Persons first considered taking the Company private at the
board meetings held on November 4, 2003. At this time, the
boards of directors were informed by the accounting firm which
had performed the audits of the Company for the past several
years, that it would no longer be able to perform future
audits of the Company, without a 300% increase in fees. The
Company was forced to look out of town to find a new CPA firm
that was licensed and insured to audit the public Company.
The Company has already incurred additional costs of
approximately $12,318for third party CPA's to help draft
documents to file with the SEC to go private. The Company
with the help of Anderson ZurMuehlen & Co., P.C., estimates
that another 20% of its revenue would be used to become
compliant with SOX-404. Annual printing expenses of $1,958
and annual postage expenses of $1,235 are required to remain
a public Company. The Company's auditors, Anderson ZurMuehlen
& Co., P.C., billed $9,000 in audit fees plus $3,000 in fees
to review the Securities Exchange Commission required quarterly
reports, and have estimated an additional $20,000 per year to
audit and report on SOX-404 compliance. The recruitment, hiring
and training of one full time accounting professional to keep
the Company in compliance with all new regulations is estimated
at $40,000 annually. These costs total well over $75,000
annually. The average net income of the Company for the last
three fiscal years ending December 31, 2001, 2002 and 2003 is
$441. The annual costs associated with remaining public and
compliant with SOX-404 are far greater than the net income of
the Company;
the decreased cost of being a private corporation, could
result in savings of over $75,000.00 per year, including
substantial savings of audit, legal, personnel costs;
the greater flexibility that the Company's management
would have to focus on long-term business goals, as opposed
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to quarterly focusing on short term results, deadlines and
compliance issues;
the fact that the Company's Shares are not listed on any
exchange, trading volume in the Company's Shares is negligible.
There exists no public market for the stock. The stock is not
traded on any securities exchange. During the entire year of
2003 only 567.2 Shares repurchased by the Company and 2004
to-date, only 3,209.6 Shares were repurchased by the Company.
All of these Shares were repurchases by the Company at 50 cents
per share. There were no other trades. This information is
based on the Company's stock records and information provided
by the Company's transfer agent, UAC, Inc;
the reduction in the amount of public information available
to competitors about the Company's business that would result
from the termination of the Company's obligations under the
reporting requirements of the Securities and Exchange Commission
(the "Commission");
recent public capital market trends affecting small-cap
companies, including a perceived lack of interest by institutional
investors, in companies that are not listed on any exchange;
The Filing Persons also considered that there has been no
trading in the Shares other than repurchases by the Company at
the request of Unaffiliated Security Holders and/or their heirs.
The Filing Persons also believe that the Merger would result in
immediate, enhanced liquidity for the Unaffiliated Security
Holders.
The Filing Persons have determined to effect the Merger at this
time because they wish to realize the benefits of taking the
Company private, as discussed above, before the increased costs
of being a public Company would significantly reduce the Company's
earnings. The Company's stock price was not a significant
factor in the timing of the Filing Persons' decision to
ropose the Merger.
This Rule 13e-3 transaction is structured as a merger under
Section 35-1-818 of the MBCA. This form of merger allows the
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Unaffiliated Security Holders to receive cash for their Shares
and allows Parent to acquire all of the outstanding interests
in the Company.
EFFECTS
General
Upon completion of the Merger, the Filing Persons will have
complete control over the conduct of the Company's business,
will receive the benefit of any future increases in the value
of the Company and will bear the complete risk of any losses
incurred in the operation of the Company and any decrease in
the value of the Company. The Filing Persons' beneficial
ownership of the Company immediately prior to the Merger in
the aggregate, amounts to approximately 94.6%. Upon completion
of the Merger, the Filing Persons beneficial interest in the
Company's Net Book Value of $2,778,270 as of September 30,
2004 and Net Income of $251,966 for the Nine Months Ended
September 30, 2004 will increase from approximately 94.6% to
100.0% of those amounts.
The Company will be the beneficiary of the projected savings
of $75,000.00 or more per year after terminating registration
under the Exchange Act (for example, as a privately-held entity,
the Company will no longer be required to file quarterly, annual
and other periodic reports with the Commission or publish and
distribute to its stockholders annual reports and proxy
statements). The projected savings would include savings from
audit, legal, and personnel fees and costs.
Upon completion of the Merger, the Unaffiliated Security Holders
will no longer have any interest in, and the Unaffiliated
Security Holders will not be shareholders of, the Company and,
therefore, will not participate in the Company's future
earnings and potential growth and will no longer bear the risk
of loss from operations or loss from any decreases in the value
of the Company. The Unaffiliated Security Holders will not
share in any distribution of proceeds after any sales of
businesses of the Company or its subsidiaries, whether
contemplated at the time of the Merger or thereafter. All of
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the Unaffiliated Security Holders' incidents of stock ownership,
such as the rights to vote on certain corporate decisions, to
elect directors, to receive distributions upon the liquidation
of the Company and to receive dissenters' rights upon certain
mergers or consolidations of the Company (unless such
dissenters' rights are perfected in connection with the Merger),
as well as the benefit of potential increases in the value of
their holdings in the Company based on any improvements in the
Company's future performance, will be extinguished upon
completion of the Merger. All Unaffiliated Security Holders
will receive the same cash price of $0.70 per share for each
share owned.
Upon completion of the Merger, the Unaffiliated Security Holders
will no longer have any interest in, and will not be shareholders
of, the Company and, therefore, will not participate in the
Company's future earnings and potential growth and will no longer
bear the risk of loss from operations or loss from any decreases
in the value of the Company. The Unaffiliated Security Holders
will not share in any distribution of proceeds after any sales of
businesses of the Company or its subsidiaries, whether
contemplated at the time of the Merger or thereafter. All of the
Unaffiliated Security Holders' incidents of stock ownership, such
as the rights to vote on certain corporate decisions, to elect
directors, to receive distributions upon the liquidation of the
Company and to receive dissenters' rights upon certain mergers or
consolidations of the Company (unless such dissenters' rights are
perfected in connection with the Merger), as well as the benefit
of potential increases in the value of their holdings in the
Company based on any improvements in the Company's future
performance, will be extinguished upon completion of the Merger.
Upon completion of the Merger, the Unaffiliated Security Holders
also will not bear the risks of operations losses or potential
decreases in the value of their holdings in the Company based on
any downturns in the Company's future performance. Instead, the
Unaffiliated Security Holders will have liquidity, in the form
of the Merger Price, in place of an ongoing equity interest in
the Company, in the form of the Shares. In summary, if the
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Merger is completed, the Unaffiliated Security Holders will have
no rights as stockholders of the Company (other than statutory
dissenters' rights in the case of Unaffiliated Security Holders
who perfect such rights under Montana law).
The Shares
Once the Merger is consummated, public trading of the Shares
will cease. The Company will no longer be required under the
federal securities laws to file reports with the Commission
and will no longer be subject to the proxy rules under the
Exchange Act.
Federal Income Tax Consequences of the Merger
The following discussion is a summary of the material United
States federal income tax consequences of the Merger to
beneficial owners of Shares. This summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and the laws, regulations, rulings, and
decisions in effect on the date of this Schedule 13E-3, all
of which are subject to change (possibly with retroactive
effect) and to differing interpretations. In addition, this
discussion only applies to holders that are U.S. persons,
which is defined as a citizen or resident of the United
States, a domestic partnership, a domestic corporation, any
estate (other than a foreign estate), and any trust so long
as a court within the United States is able to exercise
primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all
substantial decisions of the trust. For federal income tax
purposes, an estate is classified as a "foreign estate" based
on the location of the estate assets, the country of the
estate's domiciliary administration, and the nationality and
residency of the domiciliary personal representative.
This discussion does not address all aspects of federal
income taxation that may be relevant to holders in light of
their particular circumstances or to holders who may be
subject to special tax treatment under the Code, including
holders who are brokers, dealers or traders in securities
or foreign currency, traders in securities that elect to
apply a market-to-market method of accounting, foreign
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persons (defined as all persons other than U.S. persons),
insurance companies, tax-exempt organizations, banks,
financial institutions, broker-dealers, real estate
investment trusts, regulated investment companies, grantor
trusts, holders who hold common stock as part of a hedge,
straddle, conversion, or other risk reduction transaction,
or who acquired common stock pursuant to the exercise of
compensatory stock options or warrants or otherwise as
compensation.
The receipt of cash by a stockholder, pursuant to the
Merger or pursuant to the exercise of the stockholder's
statutory dissenter's rights, will be a taxable transaction
for United States federal income tax purposes. A
stockholder will recognize gain or loss for United States
federal income tax purposes equal to the difference between
the amount of cash that the stockholder receives in the
Merger and that stockholder's adjusted tax basis in that
stockholder's shares. Such gain or loss will be a capital
gain or loss if the stockholder holds the Shares as a capital
asset. Such gain or loss will be considered long-term if, at
the effective date of the Merger, the stockholder has held the
Shares for more than one year. The cash payments made to a
stockholder pursuant to the Merger will be subject to backup
United States federal income tax withholding unless the
stockholder provides the Paying Agent with his, her or its
tax identification number (social security number or
employer identification number) and certifies that such
number is correct, or unless an exemption from backup
withholding applies.
Cash received by stockholders who exercise statutory
dissenters' rights ("Dissenting Stockholders") in respect
of dissenter or appraisal rights will result in the
recognition of gain or loss to the Dissenting Stockholder.
Any such Dissenting Stockholder should consult with his,
her, or its tax advisor for a full understanding of the tax
consequences of the receipt of cash in respect of dissenter
or appraisal rights pursuant to the Merger.
None of the Filing Persons or the Company expects to
recognize any gain, loss, or income by reason of the
Merger.
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EACH BENEFICIAL OWNER OF SHARES IS URGED TO CONSULT
SUCH BENEFICIAL OWNER'S TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES TO EACH SUCH BENEFICIAL OWNER OF THE
MERGER, INCLUDING THE APPLICATION OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
FAIRNESS OF THE MERGER
Fairness. On November 4, 2003, The Company's Board of
Directors held a meeting at which the proposed plan to
acquire the shares of the Unaffiliated Shareholders in
the Company through the Merger was presented and
discussed. At this meeting, Company's Board of Directors
resolved to take the Company private by having the Parent
acquire for cash, through the Merger, all of the Shares
held by Stockholders other than the Parent at a purchase
price of $0.60 per share. The Company's Board of
Directors determined that the Merger is both procedurally
and substantively fair to the Unaffiliated Security
Holders. The $0.60 to be paid to those Unaffiliated
Security Holders represented a 15% premium over the net
book value of each share and a 7% premium over the fair
value of each share.
On December 15, 2003, The Company's Board of Directors
held a meeting to discuss increasing the purchase price
for all of the Shares held by Stockholders other than
the Parent to $0.62 per share. At this meeting The
Company's Board of Directors resolved to take the
Company private by having the Parent acquire for cash,
through the Merger, all of the Shares held by
Stockholders other than the Parent at a purchase price
of $0.62 per share. The Company's Board of Directors
determined that the Merger is both procedurally and
substantively fair to the Unaffiliated Security Holders.
The $0.62 to be paid to those Unaffiliated Security
Holders represented a 29% premium over the net book
value of each share and an 11% premium over the fair
value of each share.
On November 18, 2004, The Company's Board of Directors
held a meeting to discuss the updated financial
condition of the Company and the progress of the proposal
to take the Company private. Current financial
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statements and asset values as of September 30, 2004 were
presented by the Chief Financial Officer of the Company.
The Board of Directors considered appointing a special
committee of outside persons to negotiate the terms of the
Merger. After discussion of the nature of the Company's
assets, the ease of valuing the assets, the simplicity of
the transaction, and the cost of paying members of the
Committee, the Board determined that an outside committee
was not necessary. At this time, the Board felt that
fair market value of the real estate assets owned by the
Company were more accurately represented by the full
re-appraisal values as determined by the State of Montana,
and the recent purchase price of the Company's commercial
building. The Board considered commissioning formal
appraisals on the Company's real estate, but felt that
the cost of the appraisals would dilute the Unaffiliated
Security Holders interest and that the formal appraisal
values would be similar to the State of Montana appraisal
values. It was resolved, at the suggestion of Mr. McCann,
the Chief Executive Officer, to proceed with taking the
Company private by having the Parent acquire for cash,
through the Merger, all of the Shares held by Stockholders
other than the Parent at a purchase price of $0.70 per
share. The Company's Board of Directors determined that
the Merger is both procedurally and substantively fair to
the Unaffiliated Security Holders. The $0.70 to be paid
to Unaffiliated Security Holders represents a 35% premium
over the net book value of each share and a 13% premium
over the fair market value of each share. The Fair Value
per share was determined based on an evaluation of the
Company's 10KSB and 10QSB reports for the last three years
and asset values as determined above. Based on Boards
evaluation, it was determined that the Fair Value of the
Company as of September 30, 2004 was $.062 per share.
On November 4, 2003 M Corp's Board of Directors held a
meeting at which the proposed plan to acquire the shares
of the Unaffiliated Shareholders in the Company through
the Merger was presented and discussed. At this meeting,
M Corp's Board of Directors resolved to take the Company
private by having Parent acquire for cash, through the
Merger, all of the Shares held by shareholders other than
the Parent at a purchase price of $0.60 per share.
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M Corp's Board of Directors determined that the Merger is
both procedurally and substantively fair to the
Unaffiliated Security Holders. As the $0.60 to be paid to
those Unaffiliated Security Holders represented a 25%
premium over the net book value of each share and a 7%
premium over the fair value of each share.
On December 15, 2003, M Corp's Board of Directors held a
meeting to discuss increasing the purchase price for all
of the Shares held by Stockholders other than the Parent
to $ 0.62 per share. At this meeting M Corp's Board of
Directors resolved to take the Company private by having
the Parent acquire for cash, through the Merger, all of
the Shares held by Stockholders other than the Parent at
a purchase price of $0.62 per share. M Corp's Board of
Directors determined that the Merger is both procedurally
and substantively fair to the Unaffiliated Security Holders.
The $0.62 to be paid to those Unaffiliated Security Holders
represented a 29% premium over the net book value of each
share and an 11% premium over the fair value of each share.
On November 18, 2004, M Corp's Board of Directors held a
meeting to consider increasing the purchase price for all
of the Shares held by Stockholders other than the Parent
to $0.70 per share. The Chief Financial Officer of the
Company presented financial statements and updated fair
market values, net book value and liquidation value of the
Company as of September 30, 2004. At this meeting M Corp's
Board of Directors, at the suggestion of Mr. McCann, the
Chief Executive Officer, resolved to take the Company
private by having the Parent acquire for cash, through the
Merger, all of the Shares held by Stockholders other than
the Parent at a purchase price of $0.70 per share. M Corp's
Board of Directors determined that the Merger is both
procedurally and substantively fair to the Unaffiliated
Security Holders. The $0.70 to be paid to those
Unaffiliated Security Holders represents a 35% premium over
the net book value of each share and a 13% premium over the
fair market value of each share.
On November 4, 2003, Parent's Board of Directors held a
meeting at which the proposed plan to acquire the shares
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of the Unaffiliated Shareholders in the Company through the
Merger was presented and discussed. At this meeting,
Parent's Board of Directors resolved to take the Company
private by having Parent acquire for cash, through the
Merger, all of the Shares held by persons other than those
owed by the parent at a purchase price of $0.60 per share.
Parent's Board of Directors determined that the Merger is
both procedurally and substantively fair to the Unaffiliated
Security Holders. As the $0.60 to be paid to Unaffiliated
Security Holders represented a 25% premium over the net book
value of each share and a 7% premium over the fair value of
each share.
On December 15, 2003, Parent's Board of Directors held a
meeting to discuss increasing the purchase price for all of
the Shares held by Stockholders other than the Parent to
$ 0.62 per share. At this meeting Parent's Board of
Directors resolved to take the Company private by having
the Parent acquire for cash, through the Merger, all of the
Shares held by Stockholders other than the Parent at a
purchase price of $0.62 per share. Parent's Board of
Directors determined that the Merger is both procedurally
and substantively fair to the Unaffiliated Security Holders.
The $0.62 to be paid to those Unaffiliated Security Holders
represented a 29% premium over the net book value of each
share and an 11% premium over the fair value of each share.
On November 18, 2004, Parent's Board of Directors held
a meeting to consider increasing the purchase price for all
of the Shares held by Stockholders other than the Parent to
$0.70 per share. At this meeting, it was suggested by Mr.
McCann, the Chief Executive Officer, and resolved that the
Parent's Board of Directors take the Company private by
having the Parent acquire for cash, through the Merger,
all of the Shares held by Stockholders other than the
Parent at a purchase price of $0.70 per share. Parent's
Board of Directors determined that the Merger is both
procedurally and substantively fair to the Unaffiliated
Security Holders. The $0.70 to be paid to those
Unaffiliated Security Holders represents a 35% premium of
the net book value of each share and a 13% premium over
the fair value of each share. The Fair Value per share
was based on information provided by the Company
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as of September 30, 2004, consisting of updated financial
statements and fair market values of the Company's real
estate assets.
Factors Considered in Determining Fairness. In
reaching its determination that the terms of the Merger
are both procedurally and substantively fair to the
Unaffiliated Security Holders, Parent's Board of
Directors considered the factors set forth below in
making its determination. Parent's Board of Directors
determined that each of the following factors supported
its belief that the Merger is fair to the Unaffiliated
Security Holders.
Current and Historical Market Prices. No
established market exists for the Company's common
stock. The Company's common stock is not traded on
any established securities exchange. To the Filing
Persons' knowledge, neither bid nor asked quotations
or prices for the Company's common stock have
appeared in any established quotation system or have
appeared in any newspaper or publication for over
fifteen years.
Lack of Liquidity. The Filing Persons also
noted that Shares of the Company's common stock are
not quoted on any exchange and are not listed on the
"Pink Sheets". With approximately 287,190 Shares
being held by entities other than the Filing Persons,
the Parent's Board of Directors believes that any
effort to sell a material portion of such Shares in
the open market or otherwise would materially depress
the then trading price.
Net Book Value. The Company's estimated net
book value at September 30, 2004 was approximately
$2.7 million, which equates to a per Share valuation
of approximately $0.52 per share. The Merger Price
represents a premium of 19% over the net book value
per Share.
Liquidation Value. The Company's Liquidation
Value at September 30, 2004 was approximately 3.3
million, which equates to a per Share valuation of
approximately $0.62 per share. The liquidation value
represents the estimated cash value of the Company as
if all its assets were liquidated. The Merger Price
represents a premium of 13% over the Liquidation value
per Share. The Fair Value represents the current value
of the Company's assets based on the September 2004
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full reappraisal value of property as determined by
the State of Montana.
Earnings Value. The Company's losses for the
Year Ended December 31, 2003, were approximately
$0.0059 per Share.
Repurchase Price. Over the past two years,
the Company has repurchased 3,776.8 shares from
Unaffiliated Security Holders at a share price of
$0.50 per share. The Merger Price of $.70 per share
represents a premium of 40% over the repurchase
price.
Going Concern Value. Parent's Board of
Directors did not consider "shopping" the Company
to prospective buyers, as the Parent has indicated
that it intends to retain its majority holdings in
the Company. It is estimated that if the Company
were sold to another party, it would bring
approximately the liquidated value of its assets.
There are no intangible assets associated with the
operations of the business. This is based on the
Company's net income from operations in relation to
its assets. The Company's major assets consist of
cash and commercial and residential rental
properties. Upon sale of the Company as a whole, the
Board determined that the Company would be valued
based on the Fair Market Value of it's assets. The
Board determined that the Fair Market Value of the
rental real estate takes into account it's Going
Concern Value. The Company would be worth
substantially less to an outside entity because the
Company's management costs have been paid by M Corp.
An outside entity would incur these management costs
in addition to the other operating costs of the
Company. The Company's annual average net income over
the past three years has been $441, and excluding the
effect of the sale of the Company's Florida property,
net income through September 30, 2004 was actually a
loss of $756.
Financial Performance, Condition, Business
Operations and Prospects of the Company. The Merger
would shift the risk of the future financial performance
of the Company from the Shareholders, who do not have
the power to control decisions made as to the Company's
business, entirely to Parent, who does have the power
to control the Company's business and who will bear
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the risks inherent in the business in the future.
Other Factors.
Parent's Board of Directors believed that the
liquidity that would result from the Merger would be
beneficial to the Unaffiliated Security Holders because
the Filing Persons' ownership of approximately 94.6% of
the outstanding Shares results in an extremely small
public float that limits the amount of trading in the
Shares.
( The Merger represents an opportunity for the
Unaffiliated Security Holders to realize cash for their
Shares, which would otherwise be extremely difficult
given the lack of liquidity of the market for shares of
the Company's common stock. The only action is the
repurchasing of stock at the request of the Unaffiliated
Security Holders. A stockholder desiring to liquidate
his, her or its entire position under the Company's recent
trading volumes prior to such announcement would have
found that demand for such shares was nearly non-existent
and that persistent attempts to sell such Shares could
have led to a reduction in the price to be paid for such
Shares.
Certain Negative Considerations. Parent's Board of
Directors also considered the following factors, which
some shareholders may consider negative, in their
deliberations concerning the fairness of the terms of
the Merger and its procedural fairness:
Termination of participation in the future growth
of the Company. Following the successful completion of
the Merger, the Unaffiliated Security Holders would
cease to participate in the future earnings or growth,
if any, of the Company or benefit from increases, if any,
in the value of their shares in the Company.
Perceived Conflicts of Interest. The financial
interests of the Filing Persons could be adverse to the
financial interests of the Unaffiliated Security Holders.
Officers and directors of the Company may have potential
conflicts of interest with the Merger as certain
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officers and directors of the Filing Persons are also
officers and directors of the Company. See Schedule 1
for details concerning the relationships between the
various parties.
Board of Director Approval Only Required. The
Merger does not require stockholder approval, only the
approval of the Board of Directors of the Company per
Montana Business Corporation Act Section 35-1-818.
No Unaffiliated Representatives or Independent
Director Approval. The Company's Board of Directors has
not retained an unaffiliated representative to act solely
on behalf of the Unaffiliated Security Holders for the
purpose of negotiating the terms of the Merger.
Procedural Fairness. Notwithstanding the
considerations set out in this section under the heading
"--Certain Negative Considerations," Parent's Board of
Directors believes that the Merger is fair to the
Unaffiliated Security Holders. In making such
determination, Parent's Board of Directors considered
and relied on the fact that Unaffiliated Security
Holders who believe that the terms of the Merger are
not fair can pursue dissenters' rights in the Merger
under Montana law. Parent's Board of Directors did
not appoint a special committee of its members since
all of its members have an interest in the Company and
that Parent's Board of Directors believed that any
special committee that was appointed would need to
retain its own independent legal counsel and financial
advisors to help the special committee evaluate the
fairness of the proposed transaction. Parent's Board
of Directors also believed that, based on the factors
described herein, the terms of the proposed Merger are
fair to the Unaffiliated Security Holders, and that
the potential financial cost of hiring such advisors
and the diversion of management resources that would
be caused by the negotiations between the special
committee and Parent would outweigh any benefit that
would be derived from the appointment of a special
committee.
Conclusions of the Parent's Board of Directors,
M Corp's Board of Directors and the Company's Board
of Directors. The Parent's Board of Directors, M Corp's
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Board of Directors and the Company's Board of Directors
concluded that, given the estimated fair value, net book
value, liquidation value, past repurchase price per share
and the limited trading market for shares, the 70 cents
per share is fair treatment of Unaffiliated Security
Holders. In determining that the Merger is fair to the
Unaffiliated Security Holders, the Parent's Board of
Directors, M Corp's. Board of Directors and the
Company's Board of Directors considered the above
factors as a whole and did not assign specific or
relative weights to them. Notwithstanding the
considerations set out in the section under the
heading "Certain Negative Considerations", the Parent's
Board of Directors, M Corp's Board of Directors and the
Company's Board of Directors believe that the Merger is
procedurally fair to the Unaffiliated Security Holders.
In determining that the Merger is fair to the
Unaffiliated Security Holders, Parent's Board of
Directors considered the above factors as a whole and
did not assign specific or relative weights to them.
APPROVAL OF SECURITY HOLDERS
The Board of Directors of the Company approved the
Merger in accordance with Montana Business Corporation
Act Section 35-1-818. As the Parent owns over 80% of
the outstanding shares of the Company, only approval
of the Board of Directors is required.
APPROVAL OF DIRECTORS OF THE COMPANY
In a meeting held on November 4, 2003 the Company's
oard of Directors approved the Merger in accordance
with Montana Business Corporation Act Section
35-1-818.
OTHER OFFERS
No other firm offers have been made in the last two
years for:
the Merger or consolidation of the Company
with or into another Company, or vice versa;
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the sale or other transfer of all or any
substantial part of the assets of the Company; or
a purchase of the Company's securities that
would enable the holder to exercise control of the
subject Company.
REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS
The Filing Persons have engaged a third party CPA
to perform advisory functions with the drafting and
reviewing of documents prior to filing with the
Securities Exchange Commission.
INFORMATION ABOUT THE COMPANY
The Company is named Diversified Realty, Inc.
The principal executive offices of the Company
are located at 128 Second Street South, Great
Falls, Montana 59401, and its telephone number
is (406) 727-2600.
The Company's common stock is not traded on any
securities exchange, nor are records kept of any
quotations by securities dealers or Pink Sheets,
LLC. To the best knowledge of the Filing Persons,
bid and asked quotations for the Company's common
stock are not reported in any newspapers.
No dividends on the Company's common stock were
declared or paid in 2004, 2003 or 2002. Other
than the requirements of Montana law, there are
no legal or contractual restrictions on the
Company's ability to declare dividends.
There are approximately 2,158 holders of record
of the Company's common stock.
The Company is subject to the disclosure
requirements of the Exchange Act and in
accordance therewith is required to file
reports, proxy statements and other information
with the Commission relating to its business,
financial condition and other matters. Such
reports, proxy statements and other information
are available for inspection at the Commission's
public reference facilities at 450 Fifth
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Street, N.W., Washington, D.C. 20549. Copies may
be obtained at prescribed rates from the
Commission's principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also
maintains a web site that contains reports, proxy
and information statements and other information
regarding registrations that file electronically
with the Commission at http://www.sec.gov.
FINANCIAL INFORMATION
The audited financial statements for the fiscal
years ended December 31, 2002 and 2003 are
incorporated herein by reference from Item 8 of
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 ("Form 10-K").
The unaudited financial statements for the nine
month periods ended September 30, 2004 and
September 30, 2003 are incorporated herein by
reference to the Company's Quarterly Report on
Form 10-Q for the period ended September 30,
2004 (the "Form 10-Q").
The Company's net book value per share as of
September 30, 2004 is approximately $0.52 per
Share. The Company has not made an underwritten
public offering of its securities in the last
three years. The Company purchased 3,776.8
shares of the Company's stock from estates and
persons who request the Company to purchase
their shares in the past two years at $0.50 per
share.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
Set forth below is certain selected consolidated
financial information with respect to the Company
excerpted or derived by the Filing Persons from the
audited consolidated financial statements of the
Company contained in the Form 10-K and the unaudited
financial statements contained in the Company's Form
10-Q. More comprehensive financial information is
included in the Form 10-K, the Form 10-Q and in other
documents filed by the Company with the Commission,
and the following financial information is qualified
in its entirety by reference to the Form 10-K, the
Form 10-Q and other documents and all of the
financial information (including any related notes)
contained therein or incorporated therein by
reference. The selected financial information
presented below as of and for the fiscal years ended
December 31, 2002 and 2003, has been derived from the
Company's audited Consolidated Financial Statements.
The results of operations for the nine months ended
September 30, 2004 and 2003 have not been audited.
The results of operations for the nine months ended
September 30, 2004 are not necessarily indicative of
results for the entire year.
For the Nine Months For the Twelve Months
Ended Ended
September 30, December 31,
2004 2003 2003 2002
Income
Statement
Data:
Operating
Revenues $ 499,507 $ 63,537 $ 86,385 $ 95,758
Operating
Expenses 84,425 59,964 115,749 72,053
Income (Loss)
Before Taxes 415,082 3,573 (29,364) 23,705
Income
Tax Expense
(Benefit) (163,116) 3,372 (2,336) 10,850
Net
Income(Loss)$ 251,966 $ 6,945 $(31,700)$ 34,555
Other Comprehensive
Income (Loss)
Net of Income
Taxes:
Unrealized
Holding Gains
(Losses) (50) 234 271 1,678
Comprehensive
Income $ 251,916 $ 7,179 $(31,429)$ 36,233
Earnings (Loss)
per Share $ .0469 $ .0013 $ (.0059) $ .0067
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As of As of
September 30, December 31,
Balance Sheet Data:
2004 2003 2003 2002
Current
Assets $2,309,219 $2,408,639 $2,364,929 $2,366,198
Property, Plant
and Equipment,
Net 808,458 177,310 173,618 188,384
Long Term
Deferred
Income Taxes -0- -0- 4,052 16,450
Total Assets $3,117,677 $2,585,949 $2,542,599 $2,571,032
Current
Liabilities $ 170,107 $ 19,329 $ 14,640 $ 11,361
Long Term
Deferred Tax
Liabilities $ 169,300 $ -0- $ -0- $ -0-
Total Stockholder's
Equity $2,778,270 $2,566,620 $2,527,959 $2,559,671
Total Liabilities
and Stockholder's
Equity $3,117,677 $2,585,949 $2,542,599 $2,571,032
Other Data:
Book Value Per Share $ 0.52 $ 0.48 $ 0.47 $ 0.48
Ratio of Earnings to Fixed Charges: The Company has no fixed
charges as of September 30, 2004.
INFORMATION ABOUT THE FILING PERSONS
COMPANY
(a) NAME AND ADDRESS.
Company's principal offices are located at 128 Second Street
South, Great Falls, Montana, Attention: Dawn Mellinger, and
her telephone number is (406)-727-2600. Immediately prior to
the Merger, after contribution of Shares beneficially owned by
M Corp to Parent, 5,076,708.6 Shares or approximately 94.6% of
the Company's common stock will be owned by the Parent.
(b) BUSINESS AND BACKGROUND OF ENTITY.
Company is a Montana corporation which primarily deals in real
estate. During the last five years, Company has not been
convicted in a criminal proceeding and Company was not a party
to any civil proceeding of a judicial or administrative body
of competent jurisdiction as a result of which Parent was or
is subject to a judgement, decree or final order enjoining
future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of
such laws.
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(c) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
The name, business address, position with Company, principal
occupation, five-year employment history and citizenship of
each of the officers of Parent, together with the names,
principal businesses and addresses of any corporations or
other organizations in which such principal occupations are
conducted, are set forth on Schedule I hereto. During the
last five years, to the best knowledge of Parent, none of
the persons listed in Schedule I has been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, to the best
knowledge of Company, none of the persons listed in Schedule
I was a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of
which any of such persons was or is subject to a judgement,
decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
PARENT
(a) NAME AND ADDRESS.
Parent's principal offices are located at 128 Second Street
South, Great Falls, Montana and its telephone number is
(406)-727-2600. Immediately prior to the Merger, after
contribution of Shares beneficially owned by M Corp to
Parent, Parent will own 5,076,708.6 Shares or
approximately 94.6% of the Company's common stock.
(b) BUSINESS AND BACKGROUND OF ENTITY.
Parent, a Montana corporation, was formed for the sole
purpose of merging with the Company. During the last
five years, Parent has not been convicted in a criminal
proceeding and Parent was not a party to any civil
proceeding of a judicial or administrative body of
competent jurisdiction as a result of which Parent was
or is subject to a judgement, decree, or final order
enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding
any violation of such laws.
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(c) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
The name, business address, position with Parent,
principal occupation, five-year employment history and
citizenship of each of the officers of Parent, together
with the names, principal businesses and addresses of any
corporations or other organizations in which such principal
occupations are conducted, are set forth on Schedule I
hereto. During the last five years, to the best knowledge
of Parent, none of the persons listed in Schedule I has
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors). During the last five
years, to the best knowledge of Parent, none of the persons
listed in Schedule I was a party to any civil proceeding of
a judicial or administrative body of competent jurisdiction
as a result of which any of such persons was or is subject
to a judgement, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal
or state securities laws or finding any violation of such
laws.
M CORP
(a) NAME AND ADDRESS.
The address of M Corp is 128 Second Street South, Great
Falls, Montana, and its telephone number is (406)-727-2600.
M Corp owns 5,076,708.6 Shares or 94.6% of the Company's
common stock. Immediately prior to the Merger all of these
shares will be contributed to Parent and M Corp will own
100% of the outstanding stock of Parent.
(b) BUSINESS AND BACKGROUND OF ENTITY.
M Corp is a holding Company of entities principally engaged
in the business of title insurance and the ownership and
rental of real properties. During the last five years, M
Corp has not been convicted in a criminal proceeding, and
M Corp was not a party to any civil proceeding of a judicial
or administrative body of competent jurisdiction as a result
of which M Corp was or is subject to a judgement, decree, or
final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or
finding any violation of such laws.
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(c) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
Information with respect to each of the officers of
M Corp is set forth on Schedule I hereto. During the
last five years, to the best knowledge of M Corp, none
of the persons listed in Schedule I has been convicted
in a criminal proceeding (excluding traffic violations
or similar misdemeanors). During the last five years,
to the best knowledge of M Corp, none of the persons
listed in Schedule I was a party to any civil proceeding
of a judicial or administrative body of competent
jurisdiction as a result of which any of such persons was
or is subject to a judgement, decree or final order
enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding
any violation of such laws.
A.M. MCCANN FAMILY
(a) NAME AND ADDRESS
The A.M. McCann family's address is 1265
Yellowstone Avenue, Billings, Montana. Their phone
number is (406) 245-9000. The A.M. McCann family holds
a 94.3% beneficial ownership interest in M Corp. M Corp
owns 94.6% of Diversified Realty, Inc.
(b) BUSINESS AND BACKGROUND OF ENTITY.
A. M. McCann and family are United States citizens. For
the past five years, A.M. McCann has been a retired
businesswoman and investor. During the last five years,
A.M. McCann and family have not been convicted in a
criminal proceeding and A.M. McCann and family were not
a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction as a result
of which the A.M. McCann family was or is subject to a
judgement, decree, or final order enjoining future
violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation
of such laws.
(c) BUSINESS AND BACKGROUND OF NATURAL PERSONS.
During the last five years, to the best knowledge of
A.M. McCann and family, none of the persons listed in
Schedule I has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
During the last five years, to the best knowledge of
the A.M. McCann family, none of the persons listed in
Schedule I was a party to any civil proceeding of a
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judicial or administrative body of competent
jurisdiction as a result of which any of such persons
was or is subject to a judgement, decree or final order
enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding
any violation of such laws.
PRIOR STOCK PURCHASES
Diversified Realty, Inc. repurchased 3,776.8 shares
of the stock during the past two years at $0.50 per
share.
TRANSACTIONS
Except as noted below, there have been no transactions
during the past two years between (i) any of the Filing
Persons or, to the best knowledge of the Filing Persons,
any of the persons listed on Schedule I and (ii) the
Company or any of its affiliates that are not natural
persons where the aggregate value of such transactions
is more than one percent of the Company's consolidated
revenues for (1) the fiscal year in which the
transaction occurred, or (2) with respect to the current
year, the past portion of the current fiscal year,
except as described in the following paragraph.
During the past two years there have been no
transactions between any of the Filing Persons or, to
the best knowledge of the Filing Persons, any of the
persons listed on Schedule I and any executive officer,
director, or affiliate of the Company that is a natural
person where the aggregate value of the transaction or
series of similar transactions with such person
exceeded $60,000.
SIGNIFICANT CORPORATE EVENTS
During the past two years there have been no
negotiations, transactions, or material contacts
between (i) any of the Filing Persons or, to the best
knowledge of the Filing Persons, any of the persons
listed in Schedule I, and (ii) the Company and its
affiliates concerning any merger, consolidation,
acquisition, tender offer for any class of the
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Company's securities or sale or other transfer of
a material amount of the Company.
NEGOTIATIONS OR CONTACTS
Other than as described discussions of the
Filing Person's Boards of Directors related to
the approval and consummation of the Merger,
during the past two years there have been no
negotiations or material contacts concerning the
matters referred to above between (i) any
affiliates of the Company or (ii) the Company or
any of its affiliates and any person not
affiliated with the Company who would have a
direct interest in such matters.
CONFLICTS OF INTEREST
The following are all agreements, arrangements,
or understandings, and any actual or potential
conflicts of interest, deemed to be material,
between any of the Filing Persons or their
affiliates and the Company, its executive
officers, directors, or affiliates.
The Filing Persons are in control of the
Company because they currently own 94.6% of
the Company's outstanding common stock.
Sheila M. McCann is the President and a
Director of M Corp and is also a Director of
the Company and the Parent. Ms. McCann's
brother, Paul J. McCann, Jr. owns 1,024.40 shares
of the Company's common stock and her grandmother,
E. F. McCann (deceased) owns 2,008.6 shares of
the Company's common stock. The beneficial owner
of E. F. McCann's shares is her father Paul J.
McCann, Sr. The Shares owned by Ms. McCann's
brother and grandmother will receive $0.70 per
share in the Merger on the same terms and
conditions as are applicable to all other
Unaffiliated Security Holders of the Company.
R. Bruce Robson is President of the Company,
the President of the Parent and a Director of M Corp.
Tyler Arneson is a Director of the Parent and the
Company. Mr. Arneson is a nephew of Sheila McCann.
John Ross is a Director of the Parent and the
Company.
Paul J. McCann is the Chief Executive Officer
of the Company, the Parent and M Corp. Paul J.
McCann is the father of Sheila M. McCann.
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Dawn Mellinger is the Chief Financial Officer
of the Company, the Parent and M Corp.
AGREEMENTS INVOLVING THE SUBJECT COMPANY'S SECURITIES
There are no agreements, arrangements, or
understandings, whether or not legally enforceable,
between any of the Filing Persons or, to the best
knowledge of the Filing Persons, any of the persons
listed on Schedule I hereto and any other person
with respect to any securities of the Company.
SPECIFIC TERMS OF THE MERGER
CONTRIBUTION AND MERGER
Prior to the Effective Date, M Corp plans to
contribute all of the Shares it owns to Parent.
As of September 30, 2004, M Corp beneficially
owned 5,076,708.6 Shares, representing in the
aggregate approximately 94.6% of the outstanding
Shares. Upon receipt of this Contribution, Company
will merge with and into Parent pursuant to Section
35-1-818 of the MBCA, with the Parent to be the
surviving corporation. To so merge, the Board of
Directors of Parent will approve the Merger and
Parent will file a Certificate of Ownership and
Merger with the Secretary of State of Montana.
Upon the Effective Date, each Share issued and
outstanding immediately prior to the Effective
Date (other than Shares owned by Parent or the
Company and Shares held by Unaffiliated Security
Holders, if any, who properly exercise their
statutory dissenters' rights under the MBCA) will
be cancelled and extinguished and be converted
into and become a right to receive the Merger
Price. As a result of the Merger, the Filing
Persons will own all of the outstanding equity
interests in the Company.
Under the MBCA, because Parent holds at least 80%
of the outstanding Shares of the Company, the
Parent has the authority in accordance MONTANA
BUSINESS CORPORATION ACT Section 35-1-818 to
effect the Merger with a vote of the Company's
Board of Directors only. The Company's Board of
Directors approved the Merger on November 4, 2003.
The Parent intends to take all necessary and
appropriate action to cause the Merger to become
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effective on the Effective Date. The Merger Price
will be $0.70 in cash per Share.
MERGER PRICE
Upon completion of the Merger, in order to receive
the cash merger Price of $0.70 per Share, each
stockholder or a duly authorized representative
must (1) deliver a Letter of Transmittal,
appropriately completed and executed, to M Corp
(the "Paying Agent"), and (2) surrender such Shares
by delivering the stock certificate or certificates
that, prior to the Merger, had evidenced such Shares
to the Paying Agent, as set forth in a Notice of
Merger and Dissenters' Rights and Letter of
Transmittal which will be mailed to stockholders of
record on the Effective Date. Stockholders are
encouraged to read the Notice of Merger and
Dissenters' Rights and Letter of Transmittal
carefully when received.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds expected to be required
to pay the Merger Price for the Shares in the Merger
and to pay related fees and expenses, is estimated
to be approximately $221,047. We intend to pay the
Merger consideration and these costs and expenses
from the Company's existing available cash.
ACCOUNTING
The Merger will be accounted for as the acquisition
of a minority interest using the purchase method of
accounting.
FUTURE OPERATIONS
It is currently expected that, following the
onsummation of the Merger, the business and operations
of the Company will, except as set forth in this
Schedule 13E-3, be conducted by the Company
substantially as they are currently being conducted.
The Filing Persons intend to continue to evaluate the
business and operations of the Company with a view to
maximizing the Company's potential. As such, the
Filing Persons will take such actions as they deem
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appropriate under the circumstances and market
conditions then existing. The Filing Persons intend
to cause the Company to terminate the registration of
the Shares under Section 12(g) of the Exchange Act
following the Merger, which would result in the
suspension of the Company's duty to file reports
pursuant to the Exchange Act. For additional
information see "Special Factors - Purposes
Alternatives, Reasons and Effects of the Merger -
Effects."
The Filing Persons do not currently have any
commitment or agreement for, and are not currently
negotiating, the sales of any of the Company's
businesses.
Except as otherwise described in this Schedule
13E-3, the Company has not, and the Filing Persons
have not, as of the date of this Schedule 13E-3,
approved any specific plan or proposals for, or
negotiated:
any extraordinary transaction, such as a merger,
reorganization or liquidation involving the
surviving Company or any of its subsidiaries after
the completion of the Merger;
any purchase, sale, or transfer of a material amount
of assets of the surviving Company or any of its
subsidiaries after the completion of the Merger;
any material change in the Company's dividend rate
or policy, or indebtedness or capitalization;
any change in the present Board of Directors or
management of the Company, including, but not
limited to, any plans or proposals to change the
number or the term of directors or to fill any
existing vacancies on the board or to change any
material term of the employment contract of any
officer; or
any other material change in the Company's
corporate structure or business.
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Unaffiliated Security Holders of the Company
will have access to the Company's records in
accordance with the Montana Corporation Business
Act. None of the Filing Persons intends to obtain
counsel or appraisal services for the
Unaffiliated Security Holders.
FEES AND EXPENSES
None of the Filing Persons will pay any fees
or commissions to any broker or dealer in
connection with the Merger. Brokers, dealers,
commercial banks and trust companies will, upon
request, be reimbursed by the Company for
customary mailing and handling expenses incurred
by them in forwarding materials to their customers.
The Paying Agent will be reimbursed for certain
reasonable out-of-pocket expenses and will be
indemnified against certain liabilities in
connection with the Merger, including certain
liabilities under the U.S. federal securities
laws.
The following is an estimate of fees and expenses
to be incurred by the Filing Persons and Parent
in connection with the Merger:
Legal fees and expenses $ 5,000.00
Accounting fees and expenses $ 15,000.00
Paying Agent expenses $ 2,500.00
Printing and Postage expenses $ 3,800.00
Filing Fees $ 14.41
Miscellaneous fees and expenses $ 1,000.00
Total $ 27,314.41
Such fees, to the extent not paid by the Effective
Date, will be paid from the resources of the
combined entity resulting from the Merger of Parent
into the Company. Such fees paid prior to the
Effective Date will be paid by the Company.
For a discussion of the reasons for the Merger, see
"Special Factors -- Purposes, Alternatives Reasons
and Effects -- Reasons." For federal income tax
purposes, in general, a stockholder will recognize
gain or loss for United States federal income tax
purposes equal to the difference between the amount
of cash that the stockholder receives in the Merger
and that stockholder's adjusted tax basis in that
stockholder's Shares.
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DISSENTERS' OR APPRAISAL RIGHTS
Any Public Stockholder may, as an alternative to
receiving the Merger Consideration, dissent from the
Merger and obtain payment of the fair value of such
stockholder's Shares pursuant to Sections 35-1-826
through 35-1-839 of the Montana Business Code
Annotated ("MCA"). The following is a summary of the
rights of the Company's stockholders who dissent from
the Merger. This summary does not purport to be
complete and is qualified in its entirety by reference
to Sections 35-1-826 through 35-1-839 of the MCA, a
copy of which is attached as Exhibits (f) to this
Statement.
When the Merger is completed, the Company is required
to deliver a written dissenters' notice to all
stockholders. The notice must be sent by the Company
no later than 10 days after the Effective Date
(January 15, 2005) and must:
state where the payment demand must be sent and where
and when certificates for certificated shares must be
deposited;
inform shareholders of uncertificated shares to what
extent transfer of the shares will be restricted after
the payment is received;
supply a form for demanding payment that includes the
date of the first announcement to the news media or to
shareholders of the terms of the proposed corporate
action and that requires the person asserting
dissenters' rights to certify whether or not such
shareholder acquired beneficial ownership of the shares
before that date;
set a date by which the Company must receive the
payment demand, which may not be fewer than 30 nor more
than 60 days after the date the required dissenters'
notice is delivered; and
be accompanied by a copy of Sections 35-1-826 through
35-1-839 of the MCA.
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If you exercise dissenters' rights, once you receive
a written dissenters' notice as described above, you
must within the time set forth in the dissenters'
notice:
demand payment;
certify whether you acquired beneficial ownership of
your shares for which dissenters' rights are demanded
before the date set forth in the dissenters' notice;
and
deposit your certificates in accordance with the terms
of the dissenters' notice.
A shareholder who does not demand payment or deposit
certificates where and when required is not entitled
to payment for such shareholder's shares under the
dissenters' rights statutes. A shareholder who timely
demands payment and deposits his certificates as
requested by the dissenters' notice retains all other
rights of a shareholder until such rights are canceled
by the consummation of the Merger.
The Company may restrict the transfer of uncertificated
shares from the date of the demand for payment until
the Merger is consummated; however, the holder of
uncertificated shares retains all other rights of a
shareholder until those rights are canceled by the
consummation of the Merger.
Except as provided in the following paragraph, as soon
as the Merger is effectuated or upon receipt of the
demand for payment, the Company must pay each dissenter
who complied with the foregoing requirements the amount
the Company estimates to be the fair value of the
dissenters' shares plus accrued interest. The payment
must be accompanied by certain financial information
concerning the Company, a statement of the Company's
estimate of the fair value of the shares, an explanation
of how the interest was calculated, a statement of the
dissenter's right to demand payment if the dissenter is
dissatisfied with the payment offer, and a copy of
Sections 35-1-826 through 35-1-839 of the MCA.
If the Merger does not occur within 60 days after
the date set in the dissenters' notice for demanding
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payment and depositing certificates, the Company must
return the deposited certificates and release the
transfer restrictions imposed on uncertificated
shares. Notwithstanding the foregoing, the Company
may elect to withhold payment from any dissenter with
respect to shares of which the dissenter or the person
on whose behalf the dissenter acts was not the
beneficial owner before November 1, 2004. If the
Company elects to withhold such payments, after the
consummation of the Merger, the Company must estimate
the fair value of the shares plus accrued interest
and pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The
Company must send with its offer a statement of its
estimate of fair value of the shares, an explanation
of how interest was calculated and a statement of
the dissenter's right to demand payment if he is
dissatisfied with the offer.
A dissenter may notify the Company in writing of the
dissenter's own estimate of the fair value of the
dissenter's shares and the amount of interest due
with respect thereto and may demand payment of the
dissenter's estimate, less any previous payment, or
reject the Company's offer and demand payment of the
fair value of the dissenter's shares and the interest
due if (i) the dissenter believes that the amount
paid or offered is less than the fair value of the
dissenter's shares or that the interest due is
incorrectly calculated, (ii) the Company fails to
make payment within 60 days after the date set for
demanding payment, or (iii) the Company fails to
effectuate the Merger and does not return the
deposited certificates or release the transfer
restrictions on uncertificated shares within 60 days
after the date set for demanding payment. A dissenter
waives the right to demand payment of the dissenter's
own estimate of the fair value of the dissenter's
shares or of the fair value of the dissenter's shares
unless the dissenter notifies the Company of his
demand in writing within 30 days after the Company
made or offered payment for the dissenter's shares.
Within 60 days after any such subsequent demand
is submitted by a shareholder, if such demand remains
unsettled, the Company is required to file in an
appropriate court in Montana, a petition to determine
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the fair value of the shares and accrued interest. If
the Company does not commence the proceeding within
the 60-day period, it is to pay each dissenter whose
demand remains unsettled, the amount demanded. The
court may appoint an appraiser to assist in
determining the fair value of the shares. Each
dissenter made a party to the proceeding is entitled
to judgment for the amount, if any, by which the
court finds the fair value of the dissenter's shares
plus interest exceeds the amount paid by the Company
or for the fair value plus accrued interest of his
after-acquired shares for which the Company elected
to withhold payment. The costs of any such court
proceedings (including the compensation and expenses
of any appraiser appointed by the court) will be
assessed against the Company except that the court
may assess any part of those costs as an expense
against all or some dissenters who are parties to
the proceeding and whose action in demanding a
payment in addition to that offered by the Company
the court finds to be arbitrary, vexatious or not in
good faith. The court may also assess the fees and
expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, (1)
against the Company and in favor of any or all
dissenters if the court finds that the Company
failed to comply substantially with the dissenters'
rights statutory requirements, or (2) against either
the Company or a dissenter, in favor of any other
party, if the court finds that the party against
whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith. If
the court finds that the services of counsel for
any dissenter were of substantial benefit to other
dissenters similarly situated and should not be
assessed against the Company, it may award to the
counsel reasonable fees to be paid out of the amount
awarded to the dissenters who were benefited.
The Company shareholders considering exercising
dissenters' rights should bear in mind that the fair
value of their shares determined under Sections
35-1-826 through 35-1-839 could be more than, the
same as or less than the value of the consideration
they will receive pursuant to the Merger if they
do not exercise dissenters' rights.
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Any shareholder contemplating the exercise of
dissenters' rights is urged to review the full
text of the dissenters' rights statutes, Sections
35-1-826 through 35-1-839 of the MCA. The
procedures set forth in the dissenters' rights
statutes must be followed exactly or dissenters'
rights may be lost.
The foregoing summary does not purport to be a
complete statement of the procedures to be
followed by stockholders desiring to exercise
their dissenters' rights and is qualified in
its entirety by express reference to the Sections
35-1-826 through 35-1-839 of the MBCA, the full
text of which is attached hereto as Exhibit (f).
Stockholders should read Exhibit (f) in its
entirety because failure to comply with the
procedure set forth therein will result in loss
of Dissenters' Rights.
TRANSACTION STATEMENT
ITEM 1. SUMMARY TERM SHEET.
See "Summary Term Sheet."
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) NAME AND ADDRESS.
See "Information About the Company."
(b) SECURITIES.
See "Introduction".
(c) TRADING MARKET AND PRICE.
See "Information about the Company."
(d) DIVIDENDS.
See "Information about the Company."
(e) PRIOR PUBLIC OFFERINGS.
The Filing Persons have not made an underwritten
public offering of the Company's securities
during the past three years.
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(f) PRIOR STOCK PURCHASES.
See "Information about the Filing Persons."
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
See "Information about the Filing Persons."
ITEM 4. TERMS OF THE TRANSACTION.
(a) MATERIAL TERMS.
See "Specific Terms of the Merger."
(b) PURCHASES.
None of the Filing Persons or the Company will be
purchasing any Shares from any officer, director
or affiliate of the Company prior to the Merger.
Any such officer, director or affiliate who is
the holder of any Shares (other than Shares
contributed to Parent) will be entitled to
receive the Merger Price just as any other
stockholder of the Company.
(c) DIFFERENT TERMS.
Stockholders of the Company will be treated
as described in "Specific Terms of the Merger."
(d) APPRAISAL RIGHTS.
See "Dissenter and Appraisal Rights."
(e) PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS.
Neither of the Filing Persons intends to grant
the Unaffiliated Security Holders special access
to the Company's records in connection with the
Merger. Neither of the Filing Persons intends
to obtain counsel to or appraisal services for
the Unaffiliated Security Holders.
(f) ELIGIBILITY FOR LISTING OR TRADING.
Not applicable.
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ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS
AND AGREEMENTS.
(a) TRANSACTIONS.
See "Information about the Filing Persons --
Transactions."
(b) SIGNIFICANT CORPORATE EVENTS.
See "Information about the Filing Persons --
Significant Corporate Events."
(c) NEGOTIATIONS OR CONTACTS.
See "Information about the Filing Persons --
Negotiations or Contracts."
(d) CONFLICTS OF INTEREST.
See "Information about the Filing Persons --
Conflicts of Interest."
(e) AGREEMENTS INVOLVING THE SUBJECT COMPANY'S
SECURITIES.
See "Information about the Filing Persons --
Agreements Involving the Subject Company's
Securities."
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR
PROPOSALS.
(a) USE OF SECURITIES ACQUIRED.
The Shares acquired in the Merger from the
Unaffiliated Security Holders will be cancelled.
(b) PLANS.
See "Specific Terms of the Merger."
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
See "Special Factors -- Purposes, Alternatives,
Reasons and Effects."
ITEM 8. FAIRNESS OF THE TRANSACTION
See "Special Factors -- Fairness of the Merger."
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ITEM 9. REPORTS, OPINIONS, APPRAISALS AND
NEGOTIATIONS.
See "Special Factors -- Reports, Opinions,
Appraisals and Negotiations."
ITEM 10. SOURCE AND AMOUNT OF FUNDS OR
OTHER CONSIDERATION.
(a) SOURCE OF FUNDS.
See "Specific Terms of the Merger --
Source and Amount of Funds."
(b) CONDITIONS.
There are no conditions to the Merger.
(c) EXPENSES.
See "Specific Terms of the Merger --
Fees."
(d) BORROWED FUNDS.
See "Specific Terms of the Merger -- Source
and Amount of Funds."
ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT
COMPANY.
(a) SECURITIES OWNERSHIP.
On the Effective Date, immediately prior to the
Merger, Parent is expected to be the owner of
5,076,708.6 Shares, representing 94.6% of the
outstanding Shares. See also "Information
About the Filing Persons."
(b) SECURITIES TRANSACTIONS.
M Corp will contribute the Shares held by it to
Parent on the Effective Date immediately prior
to the Merger. None of the Shares acquired by
the Filing Persons that will be contributed to
Parent immediately prior to the Effective Date
were acquired by such Filing Person in the past
60 days.
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ITEM 12. THE SOLICITATION OR RECOMMENDATION.
Not applicable.
ITEM 13. FINANCIAL STATEMENTS.
(a) FINANCIAL INFORMATION.
See "Information About the Company --
Selected Consolidated Financial Information."
(b) PRO FORMA INFORMATION.
Not applicable.
(c) SUMMARY INFORMATION.
See "Information About the Company --
Financial Information."
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED,
COMPENSATED OR USED.
(a) SOLICITATIONS OR RECOMMENDATIONS.
There are persons who are directly or
indirectly employed, retained, or to be
compensated to make recommendations in
connection with the Merger.
(b) EMPLOYEES AND CORPORATE ASSETS.
No employees of the Company will be used by
the Filing Persons in connection with the
Merger, except that certain employees may
perform administrative acts in assisting
shareholders in connection with the Merger.
The combined assets of the Company and Parent
will be used to fund the Merger consideration
and pay all expenses of the Merger. See
"Specific Terms of the Merger."
ITEM 15. ADDITIONAL INFORMATION
None.
ITEM 16. EXHIBITS
(f) Montana Business Corporation Act
Sections 35-1-826 through 35-1-839.
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SIGNATURES
After due inquiry and to the best of my
knowledge and belief, I certify that the
information set forth in this amended
statement is true, complete and correct.
Dated: December 3, 2004
DIVERSIFIED REALTY, INC.
By: s/ R. Bruce Robson
R. Bruce Robson,
President
DRI, INC.
By: s/R. Bruce Robson
R. Bruce Robson,
President
M CORP
By: s/S. M. McCann
S. M. McCann,
President
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SCHEDULE 1
COMPANY
Directors and Executive Officers
The name, business address, position with
Company, present principal occupation or
employment and five-year employment history
of the directors and executive officers of
Company, together with the names, principal
businesses and addresses of any corporations
or other organizations in which such principal
occupation is conducted, are set forth below.
Each of the directors and executive officers
of Parent is a United States citizen. To the
knowledge of the Filing Persons, no director
or executive officer of Parent has been
convicted in a criminal proceeding during the
last five years (excluding traffic violations
or similar misdemeanors) and no director or
executive officer of Parent has been a party
to any judicial or administrative proceeding
during the last five years (except for any
matters that were dismissed without sanction
or settlement) that resulted in a judgment,
decree or final order enjoining him from
future violations of, or prohibiting
activities subject to, federal or state
securities laws, or a finding of any violation
of federal or state securities laws.
The principal business address for each
executive officer and director is 128 Second
Street South, Great Falls, Montana 59401.
R. Bruce Robson, 62, is the President of the
Company. For the past five years Mr. Robson
has been Data Processing Manager for a
construction company in Great Falls, Montana.
Mr. Robson is also the President of the Parent
and a Director of M Corp. R. Bruce Robson is
not related to any other Directors or
Executive Officers of the Filing Person.
S.M. McCann, 41, has been a Director of the
Company for the past seven years and
President of M Corp. S.M. McCann has been
an attorney at law, a private investor and
a corporate executive for the past five years.
S.M. McCann is the daughter of Anne Marie
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McCann and the aunt of Tyler Arneson. Ms.
McCann is also a Director of M Corp and the
Parent.
Tyler Arneson, 25, has been a Director of the
Company since the beginning of 2003 and is
also a Director of the Parent. Tyler Arneson
has been a self employed carpenter for the
past five years. Tyler Arneson is the nephew
of S.M. McCann. Tyler Arneson is not directly
affiliated with M Corp.
John Ross, 51, has been a Director of the
Company since 2001 and is a Director of the
Parent. John Ross has been a sales
representative for the Maytag Corporation for
the past five years. John Ross is not related
to any other Directors or Executive Offices of
the Filing Persons.
Paul J. McCann, 83, is Chief Executive Officer
of the Company. Mr. McCann is a retired
businessman and has managed several companies
during the past several years. Mr. McCann is
also the Chief Executive Officer of M Corp and
the Parent.
Dawn Mellinger, 51, has been the Chief Financial
Officer of the Company since 2002. Dawn Mellinger
is an accountant and has done work for various
businesses in the past five years. Dawn Mellinger
is the Chief Financial Officer of M Corp and the
Parent.
PARENT
Directors and Executive Officers.
The name, business address, position with Parent,
present principal occupation or employment and
five-year employment history of the directors and
executive officers of Parent, together with the
names, principal businesses and addresses of any
corporations or other organizations in which such
principal occupation is conducted, are set forth
below. Each of the directors and executive
officers of Parent is a United States citizen.
To the knowledge of the Filing Persons, no
director or executive officer of Parent has been
convicted in a criminal proceeding during the
last five years (excluding traffic violations or
similar misdemeanors) and no director or executive
officer of Parent has been a party to any judicial
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or administrative proceeding during the last five
years (except for any matters that were dismissed
without sanction or settlement) that resulted in a
judgment, decree or final order enjoining him from
future violations of, or prohibiting activities
subject to, federal or state securities laws, or a
finding of any violation of federal or state
securities laws.
The principal business address for each executive
officer and director is 128 Second Street South,
Great Falls, Montana 59401.
R. Bruce Robson, 62, is the President of the Parent.
For the past five years Mr. Robson has been Data
Processing Manager for a construction company in
Great Falls, Montana. Mr. Robson is also the
President of the Company and a Director of M Corp.
R. Bruce Robson is not related to any other
Directors or Executive Officers of the Filing
Person.
S.M. McCann, 41, has been a Director of the
Parent since its inception and President of
M Corp. S.M. McCann has been an attorney at
law, a private investor and a corporate executive
for the past five years. S.M. McCann is the
daughter of Anne Marie McCann. Ms. McCann is
also a Director of M Corp and a Director of the
Company.
Tyler Arneson, 25, has been a Director of the
Parent since its inception. Tyler Arneson has
been a self employed carpenter for the past
five years. Tyler Arneson is the nephew of
S.M. McCann and a Director of The Company.
Tyler Arneson is not directly affiliated with
M Corp.
John Ross, 51, has been a Director of the
Parent since its inception and is a Director
of The Company. John Ross has been a sales
representative for the Maytag Corporation for
the past five years. John Ross is not related
to any other Directors or Executive Officers of
the Filing Persons.
Paul J. McCann, 83, is Chief Executive Officer
of the Company. Mr. McCann is a retired
businessman and has managed several companies
during the past several years. Mr. McCann is
also the Chief Executive Officer of the Company
and M Corp.
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Dawn Mellinger, 51, has been the Chief Financial
Officer of the Company since 2002. Dawn Mellinger
is an accountant and has done work for various
businesses in the past five years. Dawn Mellinger
is the Chief Financial Officer of M Corp and the
Company.
M CORP
Directors and Executive Officers.
The name, business address, position with M Corp,
present principal occupation or employment and
five-year employment history of the directors
and executive officers of M Corp, together with
the names, principal businesses and addresses of
any corporations or other organizations in which
such principal occupation is conducted, are set
forth below. Each of the directors and executive
officers of M Corp is a United States citizen.
To the knowledge of the Filing Persons, no
director or executive officer of M Corp has been
convicted in a criminal proceeding during the
last five years (excluding traffic violations or
similar misdemeanors) and no director or
executive officer of M Corp has been a party to
any judicial or administrative proceeding during
the last five years (except for any matters that
were dismissed without sanction or settlement)
that resulted in a judgment, decree or final
order enjoining him from future violations of, or
prohibiting activities subject to, federal or
state securities laws, or a finding of any
violation of federal or state securities laws.
The principal business address for each executive
officer and director is 128 Second Street South,
Great Falls, Montana 59401.
Anne Marie McCann, 82, has been a Director of
M Corp since 1999. Ms. Anne Marie McCann has
been a homemaker and investor for the past five
years. Anne Marie McCann is the mother of
S.M. McCann and the grandmother to Tyler
Arneson.
S.M. McCann, 41, has been a Director of M Corp
since 1994 and is President of M Corp. S.M.
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McCann has been an attorney at law, a private
investor and a corporate executive for the past
five years. S.M. McCann is the daughter of
Anne Marie McCann and the aunt to Tyler Arneson.
Ms. McCann is also a Director of the Company
and the Parent.
R. Bruce Robson, 62, has been a director of
M Corp since 1994. For the past five years
Mr. Robson has been Data Processing Manager
for Sletton Construction Co. in Great Falls,
Montana. Mr. Robson is also the President of
the Company and the President of the Parent.
R. Bruce Robson is not related to any other
Directors or Executive Officers of the Filing
Persons.
Paul J. McCann, 83, is Chief Executive Officer
of the Company. Mr. McCann is a retired
businessman and has managed several companies
during the past several years. Mr. McCann
is also the Chief Executive Officer of the
Company and the Parent.
Dawn Mellinger, 51, has been the Chief
Financial Officer of the Company since 2002.
Dawn Mellinger is an accountant and has done
work for various businesses in the past five
years. Dawn Mellinger is the Chief Financial
Officer of the Parent and the Company.
Stock Ownership. The following table sets
forth the aggregate numbers and percentage
of the Company's Common Stock owned by each
director and executive officer of M Corp as
of September 30, 2004.
Name Number of Shares Percentage
Anne Marie McCann(1) 5,076,708 94.6%
S.M. McCann - -
R. Bruce Robson - -
(1) Members of Anne Marie McCann's family
own or control entities which own
approximately 94% of M Corp's common
stock. M Corp owns 5,076,708 shares of
the Company's Common Stock. Neither Anne
Marie McCann or her daughter S.M. McCann
own any shares of the Company's common
stock directly and disclaim beneficial
ownership of the shares of Company Common
Stock owned by M Corp.
To the knowledge of the Filing Persons none
of the individuals listed above have engaged
in any transactions involving the Company's
common stock in the past sixty days.
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Exhibit (f)
Sections 35-1-826 through 35-1-839 of the
Montana Business Corporation Act
35-1-826 Definitions.
As used in 35-1-826 through 35-1-839, the
following definitions apply:
(1) "Beneficial shareholder" means the
person who is a beneficial owner of shares
held in a voting trust or by a nominee as
the record shareholder.
(2) "Corporation" includes the issuer of
the shares held by a dissenter before the
corporate action, or the surviving or
acquiring corporation by merger or share
exchange of that issuer.
(3) "Dissenter" means a shareholder who
is entitled to dissent from corporate
action under 35-1-827 and who exercises
that right when and in the manner required
by 35-1-829 through 35-1-837.
(4) "Fair value", with respect to a
dissenter's shares, means the value of
the shares immediately before the
effectuation of the corporate action to
which the dissenter objects, excluding
any appreciation or depreciation in
anticipation of the corporate action
unless exclusion would be inequitable.
(5) "Interest" means interest from the
effective date of the corporate action
until the date of payment at the average
rate currently paid by the corporation
on its principal bank loans or, if the
corporation has no loans, at a rate that
is fair and equitable under all the
circumstances.
(6) "Record shareholder" means the
person in whose name shares are
registered in the records of a
corporation or the beneficial
shareholder to the extent of the rights
granted by a nominee certificate on
file with a corporation.
(7) "Shareholder" means the record
shareholder or the beneficial
shareholder.
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35-1-827 Right to dissent.
(1) A shareholder is entitled to
dissent from and obtain payment of the
fair value of the shareholder's shares
in the event of any of the following
corporate actions:
(a) consummation of a plan of merger
to which the corporation is a party if:
(i) shareholder approval is required for
the Merger by 35-1-815 or the articles of
incorporation and the shareholder is
entitled to vote on the Merger; or
(ii) the corporation is a subsidiary that
is merged with its parent corporation under
35-1-818;
(b) consummation of a plan of share
exchange to which the corporation is a
party as the corporation whose shares will
be acquired if the shareholder is entitled
to vote on the plan;
(c) consummation of a sale or exchange
of all or substantially all of the property
of the corporation other than in the usual
and regular course of business if the
shareholder is entitled to vote on the
sale or exchange, including a sale in
dissolution but not including a sale
pursuant to court order or a sale for
cash pursuant to a plan by which all or
substantially all of the net proceeds of
the sale will be distributed to the
shareholders within 1 year after the date
of sale;
(d) an amendment of the articles of
incorporation that materially and
adversely affects rights in respect of
a dissenter's shares because it:
(i) alters or abolishes a preferential
right of the shares;
(ii) creates, alters, or abolishes a
right in respect of redemption, including
a provision with respect to a sinking fund
for the redemption or repurchase of the
shares;
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(iii) alters or abolishes a preemptive
right of the holder of the shares to acquire
shares or other securities;
(iv) excludes or limits the right of the
shares to be voted on any matter or to
cumulate votes, other than a limitation by
dilution through issuance of shares or other
securities with similar voting rights; or
(v) reduces the number of shares owned by
the shareholder to a fraction of a share if
the fractional share created is to be
acquired for cash under 35-1-621; or
(e) any corporate action taken pursuant
to a shareholder vote to the extent the
articles of incorporation, bylaws, or a
resolution of the Board of Directors
provides that voting or nonvoting
shareholders are entitled to dissent and
to obtain payment for their shares;
(2) A shareholder entitled to dissent
and to obtain payment for shares under
35-1-826 through 35-1-839 may not
challenge the corporate action creating
the shareholder's entitlement unless the
action is unlawful or fraudulent with
respect to the shareholder or the
corporation.
35-1-828 Dissent by nominees and
beneficial owners.
(1) A record shareholder may assert
dissenters' rights as to fewer than all
the shares registered in his name only
if he dissents with respect to all shares
beneficially owned by any one person and
notifies the corporation in writing of
the name and address of each person on
whose behalf he asserts dissenters'
rights. The rights of a partial
dissenter under this subsection are
determined as if the shares as to which
he dissents and his other shares were
registered in the names of different
shareholders.
(2) A beneficial shareholder may assert
dissenters' rights as to shares held on
his behalf only if:
(a) he submits to the corporation the record
shareholder's written consent to the dissent
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not later than the time the beneficial
shareholder asserts dissenters' rights; and
(b) he does so with respect to all shares
of which he is the beneficial shareholder
or over which he has power to direct the
vote.
35-1-829 Notice of dissenters' rights.
(1) If a proposed corporate action creating
dissenters' rights under 35-1-827 is submitted
to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are
or may be entitled to assert dissenters' rights
under 35-1-826 through 35-1-839 and must be
accompanied by a copy of 35-1-826 through
35-1-839.
(2) If a corporate action creating dissenters'
rights under 35-1-827 is taken without a vote
of shareholders, the corporation shall give
written notification to all shareholders
entitled to assert dissenters' rights that
the action was taken and shall send them the
dissenters' notice described in 35-1-831.
35-1-830 Notice of intent to demand payment.
(1) If proposed corporate action creating
dissenters' rights under 35-1-827 is
submitted to a vote at a shareholders'
meeting, a shareholder who wishes to
assert dissenters' rights:
(a) shall deliver to the corporation before
the vote is taken written notice of his intent
to demand payment for his shares if the
proposed action is effectuated; and
(b) may not vote his shares in favor of the
proposed action.
(2) A shareholder who does not satisfy the
requirements of subsection (1)(a) is not
entitled to payment for his shares under
35-1-826 through 35-1-839.
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35-1-831 Dissenters' notice.
(1) If proposed corporate action creating
dissenters' rights under 35-1-827 is authorized
at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to
all shareholders who satisfied the requirements
of 35-1-830.
(2) The dissenters' notice must be sent no
later than 10 days after the corporate action
was taken and must:
(a) state where the payment demand must be sent
and where and when certificates for certified
shares must be deposited;
(b) inform shareholders of uncertificated shares
to what extent transfer of the shares will be
restricted after the payment is received;
(c) supply a form for demanding payment that
includes the date of the first announcement to
news media or to shareholders of the terms of
the proposed corporate action and that requires
the person asserting dissenters' rights to
certify whether or not he acquired beneficial
ownership of the shares before that date;
(d) set a date by which the corporation must
receive the payment demand, which may not be
fewer than 30 nor more than 60 days after the
date the required notice under subsection (1)
is delivered; and
(e) be accompanied by a copy of 35-1-826
through 35-1-839.
35-1-832 Duty to demand payment.
(1) A shareholder sent a dissenters' notice
described in 35-1-831 shall demand payment,
certify whether the shareholder acquired
beneficial ownership of the shares before
the date required to be set forth in the
dissenters' notice pursuant to 35-1-831(2)(c),
and deposit his certificates in accordance
with the terms of the notice.
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(2) The shareholder who demands payment and
deposits his certificates under subsection (1)
retains all other rights of a shareholder
until these rights are canceled or modified by
the taking of the proposed corporate action.
(3) A shareholder who does not demand payment
or deposit his certificates where required,
each by the date set in the dissenters' notice,
is not entitled to payment for his shares under
35-1-826 through 35-1-839.
35-1-833 Share restrictions.
(1) The corporation may restrict the transfer
of uncertificated shares from the date the
demand for their payment is received until the
proposed corporate action is taken or the
restrictions are released under 35-1-835.
(2) The person for whom dissenters' rights are
asserted as to uncertificated shares retains all
other rights of a shareholder until these rights
are canceled or modified by the taking of the
proposed corporate action.
35-1-834 Payment.
(1) Except as provided in 35-1-836, as soon as
the proposed corporate action is taken or upon
receipt of a payment demand, the corporation shall
pay each dissenter who complied with 35-1-832 the
amount the corporation estimates to be the fair
value of the dissenter's shares plus accrued
interest.
(2) The payment must be accompanied by:
(a) the corporation's balance sheet as of the
end of a fiscal year ending not more than 16
months before the date of payment, an income
statement for that year, a statement of changes
in shareholders' equity for that year, and the
latest available interim financial statements,
if any;
(b) a statement of the corporation's estimate of
the fair value of the shares;
(c) an explanation of how the interest was
calculated;
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(d) a statement of the dissenter's right to
demand payment under 35-1-837; and
(e) a copy of 35-1-826 through 35-1-839.
35-1-835 Failure to take action.
(1) If the corporation does not take the proposed
action within 60 days after the date set for
demanding payment and depositing certificates,
the corporation shall return the deposited
certificates and release the transfer restrictions
imposed on uncertificated shares.
(2) If after returning deposited certificates
and releasing transfer restrictions, the
corporation takes the proposed action, it shall
send a new dissenters' notice under 35-1-831 and
repeat the payment demand procedure.
35-1-836 After-acquired shares.
(1) A corporation may elect to withhold payment
required by 35-1-834 from a dissenter unless the
dissenter was the beneficial owner of the shares
before the date set forth in the dissenters'
otice as the date of the first announcement to
news media or to shareholders of the terms of the
proposed corporate action.
(2) To the extent the corporation elects to
withhold payment under subsection (1), after
taking the proposed corporate action, the
corporation shall estimate the fair value of the
shares plus accrued interest and shall pay this
amount to each dissenter who agrees to accept it
in full satisfaction of his demand. The
corporation shall send with its offer a statement
of its estimate of the fair value of the shares,
an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand
payment under 35-1-837.
35-1-837 Procedure if shareholder dissatisfied
with payment or offer.
(1) A dissenter may notify the corporation in
writing of the dissenter's own estimate of the
fair value of the dissenter's shares and the amount
of interest due and may demand payment of the
dissenter's estimate, less any payment under
35-1-834, or reject the corporation's offer under
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35-1-836 and demand payment of the fair value
of the dissenter's shares and the interest due if:
(a) the dissenter believes that the amount paid
under 35-1-834 or offered under 35-1-836 is less
than the fair value of the dissenter's shares or
that the interest due is incorrectly calculated;
(b) the corporation fails to make payment under
35-1-834 within 60 days after the date set for
demanding payment; or
(c) the corporation, having failed to take the
proposed action, does not return the deposited
certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days
after the date set for demanding payment.
(2) A dissenter waives the right to demand
payment under this section unless he notifies
the corporation of his demand in writing under
subsection (1) within 30 days after the
corporation made or offered payment for his
shares.
35-1-838 Court action.
(1) If a demand for payment under 35-1-837
remains unsettled, the corporation shall
commence a proceeding within 60 days after
receiving the payment demand and shall petition
the court to determine the fair value of the
shares and accrued interest. If the
corporation does not commence the proceeding
within the 60-day period, it shall pay each
dissenter whose demand remains unsettled the
amount demanded.
(2) The corporation shall commence the
proceeding in the district court of the
county where a corporation's principal office
or, if its principal office is not located in
this state, where its registered office is
located. If the corporation is a foreign
corporation without a registered office in
this state, it shall commence the proceeding
in the county in this state where the
registered office of the domestic corporation
merged with or whose shares were acquired by
the foreign corporation was located.
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(3) The corporation shall make all
dissenters whose demands remain unsettled,
whether or not residents of this state,
parties to the proceeding as in an action
against their shares, and all parties must
be served with a copy of the petition.
Nonresidents may be served by certified
mail or by publication as provided by law.
(4) The jurisdiction of the district court
in which the proceeding is commenced under
subsection (2) is plenary and exclusive. The
court may appoint one or more persons as
appraisers to receive evidence and recommend
decision on the question of fair value. The
appraisers have the powers described in the
order appointing them or in any amendment to
it. The dissenters are entitled to the same
discovery rights as parties in other civil
proceedings.
(5) Each dissenter made a party to the
proceeding is entitled to judgment:
(a) for the amount, if any, by which the
court finds the fair value of the dissenter's
shares plus interest exceeds the amount paid
by the corporation; or
(b) for the fair value plus accrued
interest of his after-acquired shares for
which the corporation elected to withhold
payment under 35-1-836.
35-1-839 Court costs and attorney fees.
(1) The court in an appraisal proceeding
commenced under 35-1-838 shall determine all
costs of the proceeding, including the
reasonable compensation and expenses of
appraisers appointed by the court. The court
shall assess the costs against the corporation,
except that the court may assess costs against
all or some of the dissenters, in amounts the
court finds equitable, to the extent the court
finds dissenters acted arbitrarily, vexatiously,
or not in good faith in demanding payment
under 35-1-837.
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(2) The court may also assess the fees and
expenses of counsel and experts for the
respective parties, in amounts the court finds
equitable:
(a) against the corporation and in favor of
any or all dissenters if the court finds the
corporation did not substantially comply with
the requirements of 35-1-829 through 35-1-837;
or
(b) against either the corporation or a
dissenter, in favor of any other party, if
the court finds that the party against whom
the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by
35-1-826 through 35-1-839.
(3) If the court finds that the services of
counsel for any dissenter were of substantial
benefit to other dissenters similarly situated
and that the fees for those services should not
be assessed against the corporation, the court
may award the counsel reasonable attorney fees
to be paid out of the amounts awarded the
dissenters who were benefited.
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