Filed By: Montana Acquisition Corporation
Commission File No. 333-46174
Pursuant to Rule 425
Under the Securities Act of 1933
Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Distribution Management Services, Inc.
Commission File No. 000-27539
Subject: Preliminary Business Combination Communication,
Definitive Letter of Intent,
Dated August 12, 2010
[Montana Acquisition Corporation's Letterhead]
Randolph S. Hudson
Chairman of the Board
(585) 495-6945
[Montana's Logo] MONTANA ACQUISITION CORPORATION
Post Office Box 202
Wyoming, New York 14591-0202
Advice of Delivery;
Facsimile Delivered by Telecopier to (954) 922-0847
(Original Delivered by U. S. Mail)
August 12, 2010
The Board of Directors
DISTRIBUTION MANAGEMENT SERVICES, INC.
2029 Taft Street
Hollywood, Florida 33020
Subject: Prospective Reorganization and Combination of Montana
Acquisition Corporation (DE) with Distribution Management
Services, Inc. (FL)
Gentlemen:
As you are aware, several months ago the acting senior executive officer
of Montana Acquisition Corporation, a United States corporation organized
under the laws of the State of Delaware, Federal Employer Identification No.
14-1824753("Montana"), held preliminary discussions with your President in
connection with a potential combination of our companies. Although Montana
was not able to obligate itself in regard to the consideration that was
offered to the shareholders of Distribution Management Services, Inc., a
Florida corporation, Federal Employer Identification No. 65-0574760 ("DMS").
At that time, I believed that both management teams viewed a combination
of our companies as strategically compelling.
On this date, Montana is prepared to initiate the strategic business
combination by way of a reorganization under Section 252 of Delaware Statutes
(8 Del. Cd. Section 252) between Montana and DMS, on terms that may provide
far greater benefit for DMS' shareholders, in contrast to such as they may be
receiving from DMS' under its present quotation limitations and trading
capability. Consequently, I believe this offer by Montana merits detailed and
serious consideration by you and by DMS' shareholders.
To that extent, Montana proposes to combine with DMS in a stock-for-stock
transaction that would be tax-deferred (in terms of the immediacy of any
assessment for liability under the Internal Revenue Service's capital gains'
regulations) to our now respective, then mutual, shareholders. (The actual
details of the Reorganization are more fully described hereinbelow.)
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By the effect of the share exchange described herein, Montana will be
capable of overcoming one of the principal impediments for potentially having
its common voting equity securities quoted on an electronic or intermediary
quotation system; namely, by its ability to demonstrate that it has a certain
number of shareholders. With Montana's capability to have its common stock
quoted on the Over-the-Counter Bulletin Board, DMS' shareholders will gain
additional comfort from having a significantly enhanced path to liquidity
compared to their existing situation, by virtue of being part of a fully-
reporting company, which will be capable of presenting its shareholders with
full disclosures.
Therefore, Montana is providing you with this preliminary letter of
intent ("Letter of Intent") whereby; Montana is summarizing its preliminary
discussions with you and is formally representing its intent to pursue a
proposed a business combination (the "Reorganization") between Montana and
DMS, in exchange for certain valuable consideration ("Reorganization
Consideration") to be paid by Montana and identified hereunder, and for the
mutual indemnifications, covenants, releases, filings, and the specific
performance respective of and to Montana's and DMS' obligations that may arise
therefrom, all in accordance with the following understandings, provisions,
terms, and conditions. Of course, a definitive share exchange agreement must
be executed by Montana and DMS, in pursuance of the terms and provisions set
forth hereunder (the "Reorganization Agreement"), which will contain many
terms and provisions in addition to those contained in this Letter of Intent,
and, which must be agreed upon by DMS' Directors and shareholders.
Where applicable, this offer succeeds all prior offers, writings,
proposals, and oral communications heretofore delivered or expressed between
the Parties (Montana and DMS, when hereinafter referred to on a collective
basis).
This offer does not intend to corrupt or circumvent any rule or
regulation of the Securities and Exchange Commission ("SEC") or of any state's
securities laws. Moreover, this offer, by itself, does not constitute an
offer to sell or buy or a solicitation to buy or sell securities in the United
States. In addition, a facsimile of this Letter of Intent must be furnished
to the SEC in accordance with the provisions of Rule 425 in accordance with
the applicable provisions of the Securities Act of 1933.
Once accepted, Montana will consider this offer to be a binding
obligation of the Parties that unequivocally confirms their mutual desire to
consummate the transaction set forth herein. To that extent, Montana will
report that event on a current report to the SEC.
Please be advised: This letter contains certain statements that may
suggest the existence of certain risks and uncertainties under the transaction
hereby proposed and are expressed through the language used by Montana to
describe the proposed transaction, and the anticipated results therefrom, and
all to induce DMS' acceptance hereof. DMS' shareholders may be subject to
unidentified adverse risks related to the prospective transaction discussed
herein, which, in some cases, may be concealed by Montana's use of these
certain and ambiguous phrases or terms. These statements may relate to
Montana's stated future actions, objectives, expectations, and intentions
regarding the subject matter hereof, if any. The use of words such as
"contemplate," "anticipate," "intend," "plan," "propose," "may," "could," and
similar terms and expressions may identify these statements. The actual
consequences of Montana's future performance could differ materially from
those delineated herein. Factors
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that could contribute to these differences include those discussed and
elsewhere contained in this Letter of Intent. (In the phraseology of the SEC,
the types of phrases and terms referred to above are sometimes referred to as
"forward-looking" statements.)
Montana's understanding of the proposed transaction with DMS is as
follows:
1. Transaction Overview. In consideration of the mutual representations,
warranties, covenants, and agreements to be contained in the Reorganization
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which will be required to be acknowledged, and, in addition to
additional terms, provisions, covenants, and conditions to be contained in the
Reorganization Agreement, each of Montana and DMS agree to proceed to effect a
share exchange between the Parties; whereby:
1.1 The Reorganization Consideration. Montana will offer Reorganization
Consideration to the holders of DMS' common voting equity securities for the
satisfactory and timely consummation of the Reorganization in an amount
equal to $2 (Two Dollars) per share, to be paid by a negotiable promissory
note, which shall be distributed on a proportionate basis to DMS'
shareholders by a distribution and/or paying agent satisfactory to DMS' Board
of Directors. Montana will be obligated to pay that certain non-interest
bearing note not later than six (6) months from the Closing, unless extended
by Montana's pre-reorganization shareholders. (The ultimate liability and
obligation of the Reorganization Consideration shall remain with Montana, in
its successor form.) Any portion of the Reorganization Consideration, which
remains undistributed to DMS' shareholders for three (3) months beyond the
payment of the note by Montana, shall be returned to Montana and shall be
subject to renewal, redistribution, or cancellation by Montana's
determination. Thereafter, the eligible persons or entities, respectively,
to whom or to which a portion of the Reorganization Consideration was to have
been paid or issued, shall thereafter look only to Montana for final
settlement of their respective claim or claims to the Reorganization
Consideration, to be settled by Montana at its convenience.
1.2 The Reorganization. At the Effective Time and upon the terms and subject
to the conditions set forth in the definitive Agreement and Plan of
Reorganization and to operate not inconsistent with the applicable provisions
of Section 252 of the Delaware General Corporation Law of the State of
Delaware and all amendments and additions thereto ("Delaware Law"), by virtue
of the Reorganization and without any action on the part of Montana or the
holder of any shares of DMS Common Stock, the following shall occur:
1.3 Number of Shares of Montana Common Stock. At the Effective Time, Montana
shall issue and/or cause to be reserved shares of its common stock such that
the shareholders of DMS together will own an aggregate of not less than 51%
(fifty-one percent) of the total issued and outstanding common stock of
Montana at the Effective Time.
1.4 Conversion of DMS Common Stock. Each share of DMS Common Stock issued and
outstanding immediately prior to the Effective Time (other than any
Dissenting
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Shares, as such term is defined in paragraph 1.7 hereinbelow) will
be automatically cancelled and extinguished and each share of DMS Common Stock
that is issued and outstanding immediately prior to the Effective Time shall
be converted automatically into the right to receive shares of Montana Common
Stock proportionate to the sum of the total number of shares of DMS Common
Stock issued and outstanding immediately prior to the Effective Time (the
"Fully Diluted Shares"). The foregoing rate of exchange of the DMS Common
Stock shall be referred to as the "Reorganization Ratio."
1.5 Effective Time. The Reorganization will become effective upon the proper
filing of the requisite documents with the Secretary of State of the State of
Delaware, and with such other jurisdictions as may be required, and, in
accordance with the applicable provisions of Regulation 14C, on the date
following 20 calendar days from the date Montana's shareholders approve the
Reorganization and after Montana files a Schedule 14C with the SEC (17 CFR
240.14c-2) that will evidence the definitive agreement by DMS' shareholders of
the Reorganization (the "Effective Time").
1.6 Fractional Shares. No fraction of a share of Montana Common Stock will be
issued upon such exchange of shares of DMS Common Stock. Instead amounts of
shares will be rounded up to the nearest whole number.
1.7 Reservation of Shares. Montana will reserve sufficient shares of Montana
Common Stock for issuance pursuant to paragraph 1.3 hereinabove.
1.8 Dissenting Shares.
(a) Notwithstanding any provision of the Reorganization Agreement to the
contrary, any shares of DMS Common Stock held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with Delaware Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("Dissenting Shares") shall not be converted
into or represent a right to receive Montana Common Stock pursuant to
paragraphs 1.2 and 1.3 hereinabove, but the holder thereof shall only be
entitled to such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of paragraph 1.7, if any holder of shares
of DMS Common Stock who demands appraisal of such shares under Delaware Law
shall effectively withdraw or lose (through failure to perfect or otherwise)
the right to appraisal, then, as of the later of (i) the Effective Time or
(ii) the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Montana Common Stock as
hereinabove provided in paragraphs 1.2 and 1.3, without interest thereon, in
accordance with said paragraphs 1.2 and 1.3.
(c) DMS shall give Montana (i) prompt notice of its receipt of any written
demands for appraisal of any shares of Montana Common Stock, withdrawals of
such demands, and any other instruments relating to the Reorganization
received by
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DMS and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Delaware Law.
1.9 Exchange of Certificates. At Closing, or as soon as practicable
thereafter, Montana's transfer agent shall issue a letter of transmittal to
each DMS Shareholder of record. After having received a completed letter of
transmittal and certificates representing such DMS Shareholder's DMS Common
Stock, the transfer agent shall deliver certificates representing the whole
number of shares of Montana Common Stock into which such DMS Shareholder's
shares of DMS Common Stock shall have been exchanged as set forth herein.
Each respective Montana and DMS shareholder must pay the sum of $15.35 (to
cover the cost to issue a new certificate and mail it to the shareholder) at
such time he delivers his certificate to Montana's stock transfer agent.
1.10 No Further Ownership Rights in DMS Common Stock. All shares of Montana
Common Stock issued upon the surrender for exchange of shares of DMS Common
Stock in accordance with the terms contained in the Reorganization Agreement
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of DMS Common Stock, and there shall be no further
registration of transfers on the records of DMS of shares of DMS Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates are presented to Montana for any reason, they
shall be canceled and exchanged as provided in the Reorganization Agreement.
1.11 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of DMS Common Stock shall have been lost, stolen or
destroyed, the transfer agent for Montana shall issue certificates
representing such shares of Montana Common Stock in exchange for such lost,
stolen or destroyed certificates; upon (a) the making of an affidavit of that
fact by the holder thereof and (b) the payment to Montana's transfer agent of
$15.35 (to cover the cost to issue a new certificate and mail it to the
shareholder).
1.12 Registered Securities. The shares of Montana Common Stock to be issued to
DMS' shareholders in connection with the exchange and discussed hereinabove in
paragraphs 1.2 and 1.3 will be considered to be registered under the
Securities Act of 1933, as amended, including the rules and regulations
promulgated thereunder (the "Securities Act").
1.13 Reporting of Reorganization. For Federal, state, and local income tax
return reporting purposes, all Parties agree to treat the Reorganization as a
nontaxable reorganization under paragraph 368 of the Internal Revenue Code
(the "Code"). DMS and Montana shall take no action with respect to the capital
stock, assets, or liabilities of Montana that could reasonably be expected
to cause the Reorganization to fail to qualify as a nontaxable exchange
within the meaning of paragraph 368 of the Code; provided, however, that the
Parties' obligations pursuant to this provision will be subject to their
respective right to terminate the definitive Reorganization Agreement pursuant
to the termination provisions thereof. Neither Montana nor DMS will take any
action which could reasonably be expected to preclude the
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exchange from qualifying as a nontaxable exchange under paragraph 368 of the
Code.
1.14 Board of Directors and Officers of Montana. Simultaneously at Closing all
of the existing directors of DMS shall resign and all of the existing officers
of DMS shall resign.
1.15 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such further action will be necessary or desirable to
carry out the purposes of the definitive Reorganization Agreement, the
officers and directors of Montana are fully authorized to take, and will use
their reasonable efforts to take, all such lawful and necessary action.
2. The Closing.
2.1 Time and Place of Closing. Montana expects the closing of the
Reorganization (the "Closing") to take place at a time and place to be
determined by the Parties, on September 4, 2010, provided that the definitive
conditions precedent to Closing have been satisfied, unless otherwise agreed
to in the definitive Reorganization Agreement, or unless an objection or
comment to Montana's Schedule 14C in this regard by the SEC will delay the
Closing.
2.2 Obligations of DMS and the DMS Shareholders at or Prior to the Closing.
At or prior to Closing, and subject to the satisfaction by Montana of its
obligations under the definitive Reorganization Agreement, DMS and the DMS
Shareholders expect to deliver to Montana the following:
(a) A copy of the Articles of Incorporation of DMS, as amended, certified as
of a date within 10 days of the Closing by the Secretary of State of the State
of Floridaa and certified by the corporate secretary of DMS as to the absence
of any amendments between the date of certification by the Secretary of State
and the Closing;
(b) A certificate from the Secretary of State of the State of Delaware as to
the existence and good standing of DMS, as foreign corporation qualifed to
transact business in Delaware, as of a date within 10 days of the Closing;
(c) A certificate of the corporate secretary of DMS attaching thereto true and
correct copies of the bylaws of DMS;
(d) An opinion by DMS' counsel that DMS was duly formed and is validly
existing, and has all requisite corporate authority to enter into the
Reorganization Transaction;
(e) A current list of DMS' shareholders;
(f) A current unaudited statement of financial condition prepared by DMS for
its fiscal year ended May 31, 2010;
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(g) The certificates evidencing the shares of DMS Common Stock owned by the
DMS Shareholders, duly endorsed for transfer to Montana;
(h) Such other documents as are required pursuant to the definitive
Reorganization Agreement or as may reasonably be requested from DMS by Montana
or its counsel.
2.3 Obligations of Montana at or Prior to the Closing. At or prior to
Closing, and subject to the satisfaction by DMS of its obligations under the
definitive Reorganization Agreement, Montana expects to deliver to DMS and to
the DMS Shareholders the following:
(a) A copy of the Certificate of Incorporation of Montana certified as of a
date within ten days of the Closing by the Secretary of State of the State of
Delaware and certified by the corporate secretary of Montana as to the
absence of any amendments between the date of certification by the Secretary
of State and the Closing;
(b) A certificate from the Secretary of State of the State of Delaware as to
the existence and good standing of Montana as of a date within ten days of
the Closing;
(c) A certificate of the corporate secretary of Montana attaching thereto
true and correct copies of the bylaws of Montana and the corporate resolutions
duly adopted by the board of directors of Montana authorizing the consummation
of the transactions contemplated by the Reorganization;
(d) Such other documents as are required pursuant to the Reorganization
Agreement or as may reasonably be requested from Montana by DMS or its
counsel; and
(e) Certificates evidencing the Montana Common Stock to be issued to the DMS
Shareholders pursuant to the provisions set forth in the Reorganization
Agreement.
3. Reasons for Termination of the Reorganization. The Reorganization may be
terminated at any time prior to the Closing as follows:
3.1 by mutual written consent of Montana and DMS;
3.2 by Montana or DMS by written notice to the other party hereto, if the
Closing shall not have occurred on or prior to the close of business on
September 15, 2010 (unless such event has been caused by a breach of the
Reorganization Agreement by the party that is seeking such termination);
3.3 by Montana or by DMS if a Governmental or Regulatory Body has permanently
enjoined or prohibited consummation of the Share Reorganization and such court
or government action is final and nonappealable;
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3.4 by Montana if it is not in material breach of its obligations under the
Reorganization Agreement if DMS has failed to comply in any material respect
with any of its covenants or agreements under the Reorganization Agreement
that are required to be complied with prior to the date of such termination;
or
3.5 by DMS if it is not in material breach of its obligations under the
Reorganization Agreement if Montana has failed to comply in any material
respect with any of its covenants or agreements under the Reorganization
Agreement that are required to be complied with prior to the date of such
termination.
3.6 by Montana if DMS fails to obtain approval of the Reorganization by DMS
Shareholders;
3.7 by DMS if Montana fails to obtain approval of the Reorganization by the
Montana shareholders;
3.8 by DMS if there is an action pending or threatened against Montana by the
SEC with respect to the revocation of the registration of Montana's Common
Stock; and
3.9 by either Montana or DMS in the event that such other party is the
subject of any litigation, claim, suit, action or proceeding, or to such
party's Knowledge is aware of the threat of such litigation, claim, suit,
action or proceeding, the subject of which are the transactions contemplated
in the Reorganization Agreement.
Should DMS terminate the Reorganization Agreement for any reason other
than a default by Montana as described in the Reorganization Agreement, DMS
shall be liable for all damages caused by the failure to close. Similarly, if
Montana should terminate the Reorganization Agreement for any reason other
than a default by DMS as described in the Reorganization Agreement, Montana
shall be liable for all damages caused by the failure to close.
In the event of termination of the Reorganization Transaction, the
Reorganization Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Montana or DMS, or their respective
officers, directors or Shareholders; provided, that each party shall remain
liable for any willful breaches of the Reorganization Agreement prior to its
termination.
In the event of termination of the Reorganization Agreement for any
reason, Montana shall record as liabilities payable to itself any funds
advanced by DMS or by any of DMS' individual shareholders or direct
affiliates.
4. Conditions Precedent to the Reorganization Closing.
4.1 Conditions Precedent to the Obligations of Montana to Complete the
Closing. To be contained in the definitive Reorganization Agreement, the
obligations of Montana to enter into and complete the Closing will be subject
to the fulfillment of the following conditions, any one or more of which may
be waived by Montana:
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(a) (i) All of the terms, covenants, and conditions of the Reorganization
Agreement to be complied with or performed by DMS at or before the Closing
shall have been duly complied with and performed in all material respects,
(ii) the representations and warranties of DMS set forth in Article III
shall be true in all material respects on and as of the Closing Date with
the same force and effect as if such representations and warranties had been
made on and as of the Closing, and
(iii) Montana shall have received a certificate to such effect from DMS.
(b) All consents, waivers, approvals, licenses, authorizations of, or
filings or declarations with third parties or governmental or regulatory
bodies required to be obtained by DMS in order to permit the transactions
contemplated by the Reorganization Agreement to be consummated in accordance
with agreements and court orders applicable to DMS and applicable governmental
laws, rules, regulations and agreements shall have been obtained and any
waiting period thereunder shall have expired or been terminated, and Montana
shall have received a certificate from DMS to such effect.
(c) All actions, proceedings, instruments, and documents in connection with
the consummation of the transactions contemplated by the Reorganization
Agreement, including the forms of all documents, legal matters, opinions,
and procedures in connection therewith, shall have been approved in form and
substance by Montana or its counsel, which approval shall not be unreasonably
withheld.
(d) DMS shall have furnished such certificates to evidence compliance with
the conditions, as may be reasonably requested by Montana or its counsel.
(e) DMS shall not have suffered any negative or adverse material effect
unknown to Montana.
(f) No material information or data provided or made available to Montana
by or on behalf of DMS shall be incorrect in any material respect.
(g) No investigation and no suit, action, or proceeding before any court or
any governmental or regulatory authority shall be pending or threatened by any
state or Federal governmental or regulatory authority, against DMS or any of
its affiliates, associates, officers, or directors seeking to restrain,
prevent, or change in any material respect the transactions contemplated
hereby or seeking damages in connection with such transactions that are
material to DMS in connection with the Reorganization.
(h) DMS shall have received the necessary approvals from at least 51% of its
shareholders to proceed with the transactions contemplated herein; and
(i) DMS shall have submitted its unaudited financial statements so as to
allow Montana to comply with its reporting requirements to the SEC in
connection with the proposed transaction.
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4.2 Conditions Precedent to the Obligations of DMS to Complete the Closing.
To be contained in the definitive Reorganization Agreement, the obligations of
DMS to enter into and complete the Closing will be subject to the fulfillment
on or prior to the Closing Date, of the following conditions, any one or more
of which may be waived by DMS:
(a) (i) All of the terms, covenants, and conditions of the Reorganization
Agreement to be complied with or performed by Montana at or before the Closing
shall have been duly complied with and performed in all material respects,
(ii) the representations and warranties of Montana set forth in Article IV
shall be true in all material respects on and as of the Closing Date with the
same force and effect as if such representations and warranties had been made
on and as of the Closing, and (iii) DMS shall have received a certificate to
such effect from Montana.
(b) All consents, waivers, approvals, licenses, authorizations of, or
filings or declarations with third Parties or Governmental or Regulatory
Bodies required to be obtained by Montana in order to permit the transactions
contemplated by the Reorganization Agreement to be consummated in accordance
with agreements and court orders applicable to Montana and applicable
governmental laws, rules, regulations and agreements shall have been obtained
and any waiting period thereunder shall have expired or been terminated, and
DMS shall have received a certificate from Montana to such effect.
(c) All actions, proceedings, instruments, and documents in connection with
the consummation of the transactions contemplated by the Reorganization
Agreement, including the forms of all documents, legal matters, opinions, and
procedures in connection therewith, shall have been approved in form and
substance by counsel for DMS, which approval shall not be unreasonably
withheld.
(d) Montana shall have furnished such certificates to evidence compliance
with the conditions set forth in this Article, as may be reasonably requested
by DMS or its counsel.
(e) Montana shall not have suffered any negative or adverse material effect.
(f) No material information or data provided or made available to DMS by or
on behalf of Montana shall be incorrect in any material respect.
(g) No investigation and no suit, action, or proceeding before any court or
any governmental or regulatory authority shall be pending or threatened
against Montana and no investigation and no suit, action, or proceeding
before any court or any governmental or regulatory authority shall be pending
or threatened against any of its affiliates, associates, officers, or
directors seeking to restrain, prevent, or change in any material respect the
transactions contemplated hereby or seeking damages in connection with such
transactions.
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(h) Montana shall not have received notification from the SEC that its
Registration Statement on Form SB-2, dated September 18, 2000, was revoked or
is subject to cancellation under any SEC administrative proceeding.
(i) Montana shall satisfy, in a timely manner within 10 (ten) days after the
Closing, the filing requirements set forth in paragraph 15(d) of the
Securities Act, subject to certain provisions that will be set forth in the
definitive Reorganization Agreement.
(j) DMS shall have obtained shareholder approval of the Share
Reorganization.
(k) Montana shall have discontinued all of its preexisting business
operations, and shall have no assets nor any liabilities.
(l) Montana shall comply with Regulation 14A and Regulation 14C, as may be
applicable, and shall file a Schedule 14A and/or Schedule 14C that contains
the details of the Reorganization shall be prepared and be ready for filing
with the SEC.
(m) The Form 8-K concerning the Reorganization shall be prepared by Montana
and be filed with the SEC upon the execution and delivery by the Parties of
this Letter of Intent.
5. Post-Closing Assurances. Montana and DMS agree to take the following
actions after the Closing Date:
5.1 Further Information. Following the Closing, each party will afford to the
other party, its counsel and its accountants, during normal business hours,
reasonable access to the books, records and other data of DMS or Montana, as
the case may be, relating to the business of DMS or Montana in their
possession with respect to periods prior to the Closing and the right to make
copies and extracts therefrom, to the extent that such access may be
reasonably required by the requesting party (a) to facilitate the
investigation, litigation, and final disposition of any claims which may have
been or may be made against any party or its affiliates and (b) for any other
reasonable business purpose.
5.2 Record Retention. Each party agrees that for a period of not less than
five years following the Closing Date, such party shall not destroy or
otherwise dispose of any of the books and records of DMS or Montana relating
to the business of DMS or Montana in his or its possession with respect to
periods prior to the Closing Date. Each party shall have the right to destroy
all or part of such books and records after the fifth anniversary of the
Closing Date or, at an earlier time by giving each other party hereto 30 days
prior written notice of such intended disposition and by offering to deliver
to the other party or parties, at the other party's or parties' expense,
custody of such books and records as such party may intend to destroy.
Page 11 of 16
5.3 Post-Closing Assistance. DMS and Montana will provide each other with
such assistance as may reasonably be requested in connection with the
preparation of any tax return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for taxes, and each will retain and provide the requesting party with any
records or information that may be reasonably relevant to such return, audit
or examination, proceedings or determination. The party requesting assistance
shall reimburse the other party for reasonable out-of-pocket expenses incurred
in providing such assistance. Any information obtained pursuant to this
provision or pursuant to any other paragraph in the definitive Reorganization
Agreement providing for the sharing of information or the review of any tax
return or other schedule relating to taxes shall be kept confidential by the
Parties thereto, unless any such sharing of information will be required to be
disclosed to Montana's accountants or reported to the SEC by Montana.
5.4 SEC Reporting. With a view to making available the benefits of certain
rules and regulations of the SEC which may at any time permit the sale of the
Montana Common Stock to the public without registration, from and after the
Closing, Montana will use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times; and
(b) file with the SEC in a timely manner all reports and other documents
required of Montana under the Securities Act.
6. Survival of the Reorganization Transaction.
6.1 Survival of Agreements, Representations and Warranties. Notwithstanding
any investigation conducted or notice or knowledge obtained by or on behalf of
any party to the Reorganization Transaction, each agreement of and to the
definitive Reorganization Agreement shall survive the Closing without
limitation as to time until fully performed and each representation and
warranty in the definitive Reorganization Agreement or in any exhibits,
schedules or certificates delivered pursuant to the definitive
Reorganization Agreement shall survive the Closing for a period of two years
(other than certain representations and warranties to be contained in the
definitive Reorganization Agreement, which shall survive the Closing without
limitation as to time, and other than the representations and warranties
contained to be contained in the definitive Reorganization Agreement that
are similar to the provisions hereof , which shall survive the Closing until
the earlier of (i) three and one-half years from the Closing Date and (ii)
three years following the date on which Montana files the tax return relating
to the taxable period from January 1, 2010 through the Closing Date).
If indemnification will be sought, notice must be given to the party from whom
indemnification will be sought of any claim for indemnification under the
applicable termination provisions to be contained in the definitive
Reorganization Agreement prior to the termination of the relevant survival
period.
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6.2 Survival of Indemnification Agreements. As will be set forth in Montana's
Disclosure Schedule to be contained in the definitive Reorganization
Agreement, Montana's agreements to indemnify certain current and former
officers, directors, employees, consultants, and shareholders shall survive
the Reorganization Transaction and shall continue in full force and effect
without limitation as to time.
7. Board Approval. The Reorganization will be subject to the unanimous
approval by DMS' Board of Directors. Montana's Board of Directors has
heretofore approved the Reorganization and the overall transaction suggested
by this Letter of Intent, to become evidenced by its execution of the
Reorganization Agreement, and related documents.
8. Shareholder Approval.
8.1 The Reorganization will be subject to the approval by a majority of DMS'
and Montana's shareholders. At the time of execution of the definitive
Reorganization Agreement, DMS' affiliates will agree to vote in favor of
the Reorganization. DMS' shareholders may vote under a voting trust, through
a voting agreement, by written consent, or by another instrument that will
collectively represent the affirmative votes of the plurality in the total
number of shares of DMS Stock issued and outstanding required to approve the
Reorganization and related matters (discussed hereinbelow), in accordance
with the applicable provisions of Delaware law.
8.2 If DMS' shareholders are unable to consummate the Reorganization, or the
overall transaction suggested by this proposal, by consent in lieu of a
special meeting, then, and in such case, Montana will call a special meeting
of DMS' shareholders as permitted by Delaware law in accordance with the
applicable rules and regulations of the SEC.
9. Disclosure. Montana will be permitted to issue a press release upon the
signing of this preliminary Letter of Intent by an authorized representative
of DMS. Montana and DMS agree to take all reasonable precautions to prevent
any trading in Montana's securities by their respective officers, directors,
employees, and agents having knowledge of the proposed Reorganization until
the proposed Reorganization has been sufficiently publicly disclosed.
10. Professional Fees. DMS will pay the fees of the accountants, attorneys,
investment advisors, stock transfer agents, administrative fees, state filing
expenses and fees, and other professional fees for work required to be
performed in connection with the Reorganization.
11. Confidentiality. The Parties have entered into a confidentiality
agreement of even date herewith, concerning the protection of the confidential
information of the other party received during the negotiations contemplated
by this letter, and each party hereby reaffirms such obligations.
12. Nature of Negotiations. The Parties understand that the negotiations
described in this letter are preliminary Reorganization negotiations. The
overall transaction suggested by this Letter of Intent will be subject to
execution of definitive agreements containing conditions, including, but not
limited to, those referenced in this letter.
Page 13 of 16
13. Effect of This Letter. Except for sections one, two, four, six, seven,
10, 11, and 13 of this Letter of Intent, which create binding obligations on
Montana and DMS as indicated, this Letter of Intent creates no liability or
obligation on the part of either DMS or Montana. Neither party will have
any obligation to consummate the transactions contemplated by this Letter of
Intent unless and until the definitive Reorganization Agreement and all other
definitive contracts and writings concerning the Reorganization and the
overall transaction suggested by this Letter of Intent are executed by
both Parties and the conditions set forth in the definitive Reorganization
Agreement are satisfied. The operative, binding, and contractual agreements
set forth in this Letter of Intent shall be governed by the laws of the State
of Delaware.
14. Remedies. In the event of a breach by either party of the compulsory
terms and provisions contained in this Letter of Intent, including the breach
by either party of any of the binding provisions relating to the
Reorganization and the agreements relative to the binding obligations
hereinunder, the other party may be entitled to any remedy for such breach
available at law or in equity.
15. No Negative Inference against Preparer. This Letter of Intent is the
result of negotiations between the Parties, each of which is represented by
counsel and other professionals of their own choosing. All Parties shall be
deemed to have drawn the operative and binding terms of this Letter of Intent
and no negative inference or interpretation shall be made by a court of
competent jurisdiction, by an arbitrator, or by a mediator, against the party,
whose counsel drafted this document.
16. No Admission of Liability. Neither this Letter of Intent nor the
negotiation, preparation, or submission hereof, shall be, or shall be deemed
or construed to be (i) an admission of (a) any liability by any of the
Parties, or (b) the validity of any claims; or (ii) the basis for any lawsuit,
arbitration, or mediation, other than an action to enforce, or to seek
damages, for the breach of the operative and binding provisions of this
Letter of Intent.
As I previously mentioned, Montana's Board of Directors and principal
shareholder believe that a combination of our companies is compelling from a
strategic perspective and will create a superior platform to establish and
continue growth. In conclusion, I would like to highlight, what I believe to
be, the principal and substantial benefit from our proposed transaction: To
provide a more substantial base for developing further capabilities. I
believe that market conditions and newly enacted Federal and state regulations
are inevitably compelling substantial integration of small, struggling
companies, that either previously registered their securities under the
Securities Act of 1933, as in Montana's case, or the securities of which were
exempt from registration under an applicable exemption from registration, as
in DMS' case. Of course, in the absence of the use of these companies for
fraudulent purposes or to circumvent SEC registration requirements, I firmly
believe that microcap public companies are essential to the backbone for the
development and growth of start-up business in this nation. Moreover, the
development of the combined company will rely on the availability of capital
from public markets, which is not available to non-public companies. Again, I
believe that Montana's proposal is substantially more attractive to your
shareholders than your other prospects. I believe that your shareholders will
enthusiastically embrace our proposal, once they learn of it. In light of the
fiduciary responsibilities of DMS' Board of Directors to its shareholders, we
believe that you have a legal duty to facilitate the receipt by your
shareholders of our proposal
Page 14 of 16
in order that they may freely choose what we believe is a favorable
transaction. Our proposal provides your shareholders with the prospect of an
immediate and significant increase in their liquidity by offering a compelling
long term opportunity to participate as shareholders in an emerging growth
company in the development stage.
We propose that you timely provide Montana with the opportunity to
perform confirmatory bring-down, accounting, and legal due diligence. We
believe that time is of the essence, and, in order to expedite the process,
we are prepared to move forward expeditiously by committing all of our
resources, although limited, to promptly consummate the Reorganization
Transaction suggested by this Letter of Intent. We are immediately prepared
to enter into a confidentiality agreement, to perform our limited, initial due
diligence requirements described hereinabove, and to enter into an
Reorganization Agreement with you on the terms and conditions set forth
hereinabove and to consummate the combination of our companies in the manner
and by the timing set forth hereinabove.
The Board of Directors of Montana has unanimously approved this proposal
and has unanimously authorized Montana to proceed in this matter.
I am prepared to meet with you immediately to answer any questions you
may have and to establish the definitive terms and provisions to be contained
in the Reorganization Agreement. In fact, in that regard, Montana has
prepared a working draft of the proposed Reorganization Agreement, which I am
prepared to deliver to you, upon your agreement with our statements in this
Letter of Intent and by your overall acceptance of our terms and conditions
related to the proposed Reorganization.
Therefore, if this letter accurately reflects your understanding, kindly
indicate your intent by signing this Letter of Intent, where indicated below.
Upon DMS' acceptance, I will notify you by telephone of the location where you
may transmit the signature page, which acknowledges DMS' acceptance of the
general terms and provisions contained in this Letter of Intent and of DMS'
agreement to proceed in regard to the overall Reorganization Transaction
suggested by this Letter of Intent.
Very truly yours,
MONTANA ACQUISITION CORPORATION
/s/ Randolph S. Hudson
Randolph S. Hudson
Chairman of the Board
President
Chief Executive Officer
|
Page 15 of 16
ACCEPTED AND AGREED TO:
DISTRIBUTION MANAGEMENT SERVICES, INC.
("DMS")
By: Leo Greenfield
Chairman of the Board
President
Chief Executive Officer
Date Approved: _________________________
Attachment/Enclosure, Due-Diligence Information Schedule
Page 16 of 16
[REPRODUCTION OF TELECOPIER TRANSMISSION NOTIFICATION]
[Telecopier Endorsement: Received from Leo Greenfield
at 0938 Hours, Pacific Time, on August 16, 2010]
ACCEPTED AND AGREED TO:
DISTRIBUTION MANAGEMENT SERVICES, INC.
("DMS")
/s/ Leo Greenfield
By: Leo Greenfield
Chairman of the Board
President
Chief Executive Officer
|
Date Approved: Aug. 13, 2010
Attachment/Enclosure, Due-Diligence Information Schedule
Page 16 of 16