UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(e)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
TRANSCONTINENTAL REALTY INVESTORS, INC.
(Name of the Issuer)
AMERICAN REALTY INVESTORS, INC.
BASIC CAPITAL MANAGEMENT, INC.
GENE E. PHILLIPS
TRANSCONTINENTAL REALTY INVESTORS, INC.
TRANSCONTINENTAL REALTY ACQUISITION CORPORATION
INCOME OPPORTUNITY ACQUISITION CORPORATION
INCOME OPPORTUNITY REALTY INVESTORS, INC.
(Names of Persons Filing Statement)
COMMON STOCK, PAR VALUE .01 PER SHARE
(Title of Class of Securities)
893617-20-9
(CUSIP Number of Class of Securities)
ROBERT A. WALDMAN
1800 VALLEY VIEW LANE, SUITE 300
DALLAS, TEXAS 75234
(469) 522-4200
(469) 522-4360 (FAX)
----------
With copies
to:
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STEVEN C. METZGER, ESQ. JEFFREY M. SONE, ESQ.
PRAGER METZGER & KROEMER, PLLC JACKSON WALKER L.L.P.
2626 COLE AVENUE, SUITE 900 901 MAIN STREET, SUITE 6000
DALLAS, TEXAS 75204 DALLAS, TEXAS 75202
(214) 969-7600 (214) 953-6000
(214) 523-3838 (FAX) (214) 953-5822(FAX)
(Name, Address, and Telephone Numbers of Person Authorized to Receive
Notices and Communications on Behalf of the Persons Filing Statement)
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 (Sections 240.14a-1 through 240.14b-2),
Regulation 14C (Sections 240.14c-1 through 240.14c-101) or Rule
13e-3(c) (Section 240.13e-3(c)) under the Securities Exchange Act of
1934 ("the Act").
b. [X] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]
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
---------------------- --------------------
$8,050,688 $740.66
*Filing fee determined by multiplying: (i) 4,025,344 shares of 10%
Series G Cumulative Redeemable Convertible preferred stock, par value $2.00 per
share, which represents the maximum number of shares of Series G Redeemable
Convertible preferred stock to be issued in connection with the merger of
Transcontinental Realty Investors, Inc. ("TCI") described herein at the exchange
ratio of one share of Series G Redeemable Convertible preferred stock for each
share of TCI common stock outstanding (other than shares owned by American
Realty Investors, Inc. ("ARL") or its subsidiaries), by (ii) $2.00, the par
value of the Series G Cumulative Redeemable Convertible preferred stock, by
(iii) .000092.
[X] Check the box if any part of the fee is offset as provided by Section
240.0-11(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: $11,786.96 Filing Party: American Realty Investors, Inc.
Form or Registration No.: 333-83292 Date Filed: February 22, 2002
RULE 13E-3 TRANSACTION STATEMENT
Introduction
This Amendment No. 1 to Transaction Statement on Schedule 13E-3 (this
"Transaction Statement") is filed pursuant to Section 13(e) of the Securities
Exchange Act of 1934, as amended, and is part of business combination being
proposed as part of a court approved settlement (the "Settlement Agreement") of
a lawsuit styled Jack Olive, et. al. v. National Income Realty Trust, et al,
Case No. C89 4331 MHP pending in the United States District Court for the
Northern District of California (the "Olive Litigation"). The claims in the
Olive Litigation related to the operation and management of TCI and Income
Opportunity Realty Investors, Inc. ("IOT"). Defendants in the lawsuit included,
among others, American Realty Trust, Inc. ("ART") (a subsidiary of ARL), TCI,
IOT, Basic Capital Management, Inc. ("BCM") and Gene E. Phillips ("Mr.
Phillips"). BCM is a contractual advisor that is responsible for managing the
affairs of ARL, TCI and IOT and for advising the respective boards on setting
the policies which guide ARL, TCI and IOT.
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TCI and IOT Mergers
As a result of the Settlement Agreement, ARL has agreed to acquire all
of the outstanding common stock of TCI and IOT through the merger of TCI and IOT
with two newly formed wholly-owned subsidiaries of ARL, with TCI and IOT each
being the surviving corporations (the "Business Combination").
Structure of the Transactions
As part of the mergers, stockholders (other than Mr. Phillips, BCM, ARL
and ART (collectively the "Affiliated Entities") or their affiliates) are to
receive $17.50 per share in cash for TCI common stock or $19.00 per share in
cash for IOT common stock, which amounts shall be reduced by any dividends paid
after January 2, 2002 on the TCI or IOT common stock, respectively. In the
mergers, the stockholders of TCI and IOT not affiliated with the Affiliated
Entities have the opportunity (but no obligation) to affirmatively elect to
receive shares of 10% Series G redeemable convertible preferred stock of ARL
having a liquidation value of $20 per share in exchange for TCI common stock or
shares of 10% Series H redeemable convertible preferred stock of ARL having a
liquidation value of $21.50 per share in exchange for IOT common stock, which
amounts shall be reduced by any dividends paid after January 2, 2002 on the TCI
or IOT common stock, respectively. In the mergers, the Affiliated Entities will
receive shares of the ARL preferred stock for the shares of common stock of TCI
and IOT held by them, provided, however, that shares of TCI and IOT common stock
held by ARL and its subsidiaries will be cancelled. The purchase prices and
liquidation values have been established under the Settlement Agreement. The
cash consideration to be paid to the nonaffiliated TCI and IOT stockholders is
to be guaranteed by and become an obligation of the Affiliated Entities.
The mergers are to occur only after the satisfaction of certain
conditions, including the approval of each merger by a majority of the shares
held by the nonaffiliated TCI and IOT stockholders, as applicable, who vote by
in person or by proxy at meetings of stockholders called for that purpose. ARL
does not currently have enough cash to pay the cash consideration that will be
due to stockholders of TCI and IOT as a result of the mergers. The ARL board of
directors has determined that it will not enter into the TCI and IOT mergers
until, in each case, sufficient cash is available to ARL, either from its own
resources or from TCI or IOT immediately after the mergers, to pay the cash
merger consideration due as a result of the mergers.
Filing Persons
The filing persons for this Transaction Statement are ARL, BCM,
Mr. Phillips, Transcontinental Acquisition Corporation ("TCI Merger Sub"), TCI,
Income Opportunity Acquisition Corporation ("IOT Merger Sub") and IOT.
Joint Proxy Statement/Prospectus
The Olive Litigation, Settlement Agreement and TCI and IOT merger
transactions are further described in the preliminary Joint Proxy
Statement/Prospectus dated as of _____ __, 2002. The Joint Proxy
Statement/Prospectus is part of the Registration Statement on Form S-4 (Reg. No.
333-83292), as amended by pre-effective Amendments Nos. 1, 2, 3 and 4 thereto,
filed by ARL with the Securities and Exchange Commission. As of the date of the
filing of this Transaction Statement, the Joint Proxy Statement/Prospectus is in
preliminary form and is subject to completion. This Transaction Statement will
be amended to reflect the completion of, or amendment to, the Joint Proxy
Statement/Prospectus.
All information in this Transaction Statement concerning ARL, TCI
Merger Sub and IOT Merger Sub has been provided by ARL, all information
concerning TCI has been provided by TCI, all information concerning IOT has been
provided by IOT, all information concerning BCM has been provided by BCM, and
all information concerning Mr. Phillips has been provided by Mr. Phillips.
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The responses and cross-references presented in the following table are
supplied pursuant to the General Instruction F to Schedule 13E-3 and show the
locations in the Joint Proxy Statement/Prospectus (including all appendices
thereto) of the information required to be included in response to the items of
this Transaction Statement. The information in the Joint Proxy
Statement/Prospectus and Registration Statement on Form S-4, as amended,
including all appendices and exhibits thereto, are expressly incorporated herein
by reference and the responses to each item in this Transaction Statement are
qualified in their entirety by the information contained in the Joint Proxy
Statement/Prospectus and Registration Statement of Form S-4, as amended and the
exhibits thereto.
ITEM 1. SUMMARY TERM SHEET.
Item 1001 of Regulation M-A.
Item 1001. The information is set forth in the "SUMMARY" of the Joint
Proxy Statement/Prospectus and is incorporated herein by
reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
Item 1002 of Regulation M-A.
(a) TCI is the subject company. The information is set forth in
the "SUMMARY" of the Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
(b) The subject class of equity securities are Common Stock, par
value $.01 per share, of TCI. The information is set forth in
the "SUMMARY" of the Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
(c) and (d) The information is set forth in the "SUMMARY - Market Prices
and Dividend Information" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(e) None
(f) The information is set forth in the "CERTAIN INFORMATION
REGARDING TCI COMMON STOCK AND IOT COMMON STOCK" of the Joint
Proxy Statement/Prospectus and is incorporated herein by
reference.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
Item 1003 of Regulation M-A.
(a) - (c) The filing persons for this Transaction Statement are ARL,
BCM, Mr. Phillips, TCI Merger Sub, TCI, IOT Merger Sub and
IOT. TCI is the subject company. ARL, TCI Merger Sub, TCI, IOT
Merger Sub, are parties to the Business Combination. BCM is a
contractual advisor that is responsible for managing the
affairs of ARL, TCI and IOT and for advising the respective
boards on setting the policies which guide ARL, TCI and IOT.
Mr. Phillips is a business man with substantial experience in
the real estate development industry. A trust for Mr.
Phillips's children, namely the May Trust (the "May Trust"),
indirectly owns BCM. For more than the last five years, Mr.
Phillips has served as a representative of the May Trust. As a
representative of the May Trust, Mr. Phillips is actively
involved in consultation with the officers of BCM, and thus
the officers of ARL, TCI and IOT, on a daily basis. As a
result, although Mr. Phillips does not own any stock of BCM,
ARL, TCI or IOT, he has
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significant influence over the conduct of their respective
business affairs and is involved in substantially all of their
respective material business decisions. Except as set forth
below, the name, business address and business telephone
number of each filing person and each other person or entity
set forth below is 1800 Valley View Lane, Suite 300, Dallas,
Texas 75234. The telephone number for each corporation is
469-522-4200.
Each of the individuals set forth below is a citizen of the
United States. Mr. Mizrachi is a citizen of the United States
and Israel. During the last five years, (i) neither ARL, TCI
Merger Sub, TCI, IOT Merger Sub, IOT, BCM, Mr. Phillips or any
of the reported persons in this Transaction Statement, nor
their executive officers or directors has been convicted in a
criminal proceeding (excluding traffic violations and/or
similar misdemeanors) and (ii) except as set forth below,
neither ARL, TCI Merger Sub, TCI, IOT Merger Sub, IOT, BCM,
Mr. Phillips or any of the reported persons in this
Transaction Statement, nor any of their respective executive
officers or directors has been a party to any civil proceeding
of a judicial or administrative body of competent jurisdiction
which resulted in a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any
violation with respect to such laws.
In August, 2002, Mr. Phillips and five corporations, including
BCM, affiliated with Mr. Phillips or the trust for his
children that indirectly owns BCM, agreed in negotiations with
the staff of the Securities and Exchange Commission to enter
into an Order Instituting Proceedings Pursuant to Section 21C
of the Securities Exchange Act of 1934, as amended, in an
administrative proceeding brought by the Securities and
Exchange Commission and pay a substantial civil penalty in
connection therewith. Although the Order has been agreed to by
Mr. Phillips, the five corporations affiliated with Mr.
Phillips or the trust and the staff of the SEC, it has not
been formally approved by the Securities and Exchange
Commission. The Order in its current form finds, among other
things, that Mr. Phillips and each of the five corporations,
including BCM, had violated Section 13(d) and 10(b) of the
Securities Exchange Act of 1934, as amended, and Rules 10b-5,
13d-1 and 13d-2 promulgated thereunder, by failing to file
reports required under Section 13(d) with respect to the
securities of Greenbriar Corporation. The Order further
determines that Mr. Phillips had substantial contact with the
management of BCM and had a significant influence on its
advisory services and investment decisions as well as the
investment decisions of the five other entities that are the
subject of the Order. The Order also determines that Mr.
Phillips exercised the same influence over the management and
investment decisions of ART, currently a subsidiary of ARL.
The Order requires Mr. Phillips and the five corporations,
including BCM, to cease and desist from committing or causing
any violation of Sections 10(b) and 13(d) of the Exchange Act
and Rules 10b-5, 13d-1 and 13d-2 promulgated thereunder.
FILING PERSONS
1. ARL (FILING PERSON)
The information is set forth in the "MANAGEMENT OF ARL" and
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF ARL", "MANAGEMENT OF ARL", "THE PLANS OF THE
MERGER - Management and Board of Directors after the Mergers"
and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF ARL" of the Joint Proxy Statement/Prospectus and
is incorporated herein by reference.
2. BCM (FILING PERSON)
The information is set forth in the "RISK FACTORS - Control by
BCM and Related Conflicts of Interest", "THE ADVISOR-BCM" and
"THE ADVISOR-BCM - Directors and
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Principal Officers of Advisor" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
3. GENE E. PHILLIPS (FILING PERSON)
The information is set forth in the "SUMMARY - The Parties -
Gene E. Phillips", "RISK FACTORS - Control by BCM and Related
Conflicts of Interest", "THE ADVISOR-BCM", "THE ADVISOR-BCM -
Directors and Principal Officers of Advisor", "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS OF BCM, ARL, TCI AND
IOT - Certain Business Relationships", "INFORMATION ABOUT ARL
- BUSINESS OF ARL - Management of the Company", "MANAGEMENT
OF ARL - Directors and Executive Officers", "INFORMATION ABOUT
TCI - Management of Company", "MANAGEMENT OF TCI - Directors
and Executive Officers of TCI", INFORMATION ABOUT IOT -
Management of Company" and "MANAGEMENT OF IOT - Directors and
Executive Officers of IOT" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
4. TCI MERGER SUB (FILING PERSON)
The information is set forth in the "SPECIAL FACTORS -
General" and "MANAGEMENT OF ARL" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
Ronald E. Kimbrough is the President and Secretary of TCI
Merger Sub and is also the sole director of TCI Merger Sub.
TCI Merger Sub is a wholly owned subsidiary of ARL.
5. TCI (FILING PERSON)
The information is set forth in the "MANAGEMENT OF TCI",
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF TCI", "MANAGEMENT OF TCI", "THE PLANS OF THE
MERGER - Management and Board of Directors after the Mergers"
and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF TCI" of the Joint Proxy Statement/Prospectus and
is incorporated herein by reference.
6. IOT MERGER SUB (FILING PERSON)
The information is set forth in the "MANAGEMENT OF ARL" of the
Joint Proxy Statement/Prospectus and is incorporated herein by
reference. Ronald E. Kimbrough is the President and Secretary
of IOT Merger Sub and is also the sole director of IOT Merger
Sub. ARL is the sole shareholder of IOT Merger Sub.
7. IOT (FILING PERSON)
The information is set forth in the "MANAGEMENT OF IOT",
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF IOT", "MANAGEMENT OF IOT", "THE PLANS OF THE
MERGER - Management and Board of Directors after the Mergers"
and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF IOT" of the Joint Proxy Statement/Prospectus and
is incorporated herein by reference.
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CONTROLLING PERSONS
1. BCM (CONTROLLING PERSON OF ARL AND TCI)
The information is set forth in the "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ARL" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI"
and is incorporated herein by reference. See the disclosures
set forth above under the caption "BCM (Filing Person)" with
respect to the executive officers and directors of BCM.
2. ONE REALCO CORPORATION AND NEW STARR CORPORATION
(CONTROLLING PERSON OF ARL)
The information is set forth in the "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ARL" and is
incorporated herein by reference. According to the Schedule
13D/A-1 filed by One Realco and New Starr filed with the SEC
on October 10, 2001, (i) One Realco has its principal place
executive offices located at 555 Republic Drive, Suite 490,
Plano, Texas 75074 and New Starr has its principal executive
offices located at 1750 Valley View Lane, Suite 130, Farmers
Branch, Texas 75234. The name, business address, and capacity
of each of the executive officers and directors of One Realco
and New Starr are set forth below.
NAME POSITION WITH REALCO BUSINESS ADDRESS
---- -------------------- ----------------
Ronald F. Akin Director and President 555 Republic Drive
Suite 490
Plano, Texas 75074
F. Terry Shumate Director, Vice President, 555 Republic Drive
Secretary and Treasurer Suite 490
Plano, Texas 75074
NAME POSITION WITH NEW STARR BUSINESS ADDRESS
---- ----------------------- ----------------
Ronald F. Akin Director, President and 1750 Valley View Lane
Treasurer Suite 130
Farmers Branch, Texas 75234
F. Terry Shumate Director and Vice President 1750 Valley View Lane
Suite 130
Farmers Branch, Texas 75234
Mary K. Willet Secretary 1750 Valley View Lane
Suite 130
Farmers Branch, Texas 75234
3. EQK HOLDINGS, INC. (CONTROLLING PERSON OF TCI AND IOT)
The information is set forth in the "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF IOT"
and is incorporated herein by reference. EQK Holdings, Inc.
("EQK Holdings"), a wholly owned subsidiary of ART. EQK
Holdings is a real estate investment company. The name and
capacity of each of the executive officers and directors of
EQK Holdings is set forth below. See the
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disclosures set forth above under the captions "ARL (Filing
Person)", "TCI (Filing Person)" and "IOT (Filing Person)"with
respect to the executive officers and directors of EQK
Holdings.
NAME POSITION
---- --------
Ronald E. Kimbrough Director and Vice President
Mark W. Branigan Vice President
Louis J. Corna Vice President
Robert A. Waldman Director and Secretary
John Cook Vice President
Thomas Bell Vice President
4. ART (CONTROLLING PERSON OF EQK HOLDINGS)
The information is set forth in the "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI" and "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF IOT"
and is incorporated herein by reference. EQK Holdings is a
wholly owned subsidiary of ART. ART is a wholly owned
subsidiary of ARL. ART is a real estate investment company
engaged in the business of investing in and originating
mortgage loans and investing in real estate. The name and
capacity of each of the executive officers and directors of
ART is set forth below. See the disclosures set forth above
under the captions "ARL (Filing Person)", "TCI (Filing
Person)" and "IOT (Filing Person)"with respect to the
executive officers and directors of ART.
NAME POSITION
---- --------
Ronald E. Kimbrough Director, and Executive Vice President and
Chief Financial Officer
Mark W. Branigan Executive Vice President - Residential
David W. Starowicz Executive Vice President - Commercial Asset
Management
Louis J. Corna Executive Vice President - Tax
Robert A. Waldman Director, Senior Vice President, Secretary and
General Counsel
5. THE MAY TRUST (CONTROLLING PERSON OF BCM)
BCM is wholly owned by Realty Advisors, Inc. ("Realty
Advisors"). Realty Advisors is wholly owned by the May Trust.
The trustees of the May Trust are Donald W. Phillips, brother
of Mr. Phillips, Mickey Ned Phillips, brother of Mr. Phillips,
and Ryan Phillips, son of Mr. Phillips. Mr. Donald W.
Phillips' business address is 1800 Valley View Lane, Suite
200, Dallas, Texas 75234. Mr. Donald W. Phillips' present
principal occupation is Vice President - Construction of Regis
Property Management, Inc. and has served in such capacity
since 1995. Mickey Ned Phillips and Ryan Phillips are also
directors of BCM. See the disclosures set forth above under
the caption "BCM (Filing Person)" with respect to information
concerning Mickey Ned Phillips and Ryan Phillips. Mr. Phillips
is a representative of the May Trust. See the disclosures set
forth above under the caption "Gene E. Phillips (Filing
Person)".
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6. TCI (CONTROLLING PERSON OF IOT)
The information is set forth in the "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF IOT". See the
disclosures set forth above under the caption "TCI (Filing
Person)" with respect to the executive officers and directors
of TCI.
ITEM 4. TERMS OF THE TRANSACTION.
Item 1004 of Regulation M-A.
(a) The information is set forth in the "SUMMARY", "SPECIAL
FACTORS - Federal Income Tax Considerations" and "THE PLANS OF
MERGER" of the Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
(c) The information is set forth in the "SUMMARY" and "THE PLANS
OF MERGER" of the Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
(d) The information is set forth in the "SUMMARY" and "THE SPECIAL
MEETINGS - Appraisal Rights" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(e) None
(f) The information is set forth in the "SUMMARY" and "RISK
FACTORS - Risks Related to the ARL Preferred Stock" of the
Joint Proxy Statement/Prospectus and is incorporated herein by
reference.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Item 1005 of Regulation M-A.
(a) The information is set forth in the "CERTAIN RELATIONS AND
RELATED TRANSACTIONS OF BCM, ARL, TCI AND IOT - Certain
Business Relationships" "CERTAIN RELATIONS AND RELATED
TRANSACTIONS OF BCM, ARL, TCI AND IOT - Related Party
Transactions" and "CERTAIN RELATIONS AND RELATED TRANSACTIONS
OF BCM, ARL, TCI AND IOT - Indebtedness of Management" of the
Joint Proxy Statement/Prospectus and is incorporated herein by
reference.
(b) and (c) The information is set forth in the "SPECIAL FACTORS -
Background of the Business Combination" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(e) The information is set forth in the "SPECIAL FACTORS -
Background of the Business Combination", "CERTAIN RELATIONS
AND RELATED TRANSACTIONS OF BCM, ARL, TCI AND IOT - Certain
Business Relationships" "CERTAIN RELATIONS AND RELATED
TRANSACTIONS OF BCM, ARL, TCI AND IOT - Related Party
Transactions" and "CERTAIN RELATIONS AND RELATED TRANSACTIONS
OF BCM, ARL, TCI AND IOT - Indebtedness of Management" and
"THE PLANS OF MERGER" of the Joint Proxy Statement/Prospectus
and is incorporated herein by reference.
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ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Item 1006 of Regulation M-A.
(b) The information is set forth in the "SUMMARY" and "THE PLANS
OF MERGER - Exchange of Certificates" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(c)(1)-(7) The information is set forth in the "SPECIAL FACTORS - Effects
of the Mergers; ARL after the Mergers" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(c)(8) Not applicable
ITEM 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
Item 1013 of Regulation M-A.
(a) The information is set forth in the "SPECIAL FACTORS - TCI's
Purpose and Reasons for the TCI Merger", "SPECIAL FACTORS -
IOT's Purpose and Reasons for the IOT Merger" and "SPECIAL
FACTORS - ARL's Purpose and Reasons for the Merger" of the
Joint Proxy Statement/Prospectus and is incorporated herein by
reference.
(b) The information is set forth in the "SPECIAL FACTORS -
Background of the Business Combination" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(c) The information is set forth in the "SPECIAL FACTORS - TCI's
Purpose and Reasons for the TCI Merger", "SPECIAL FACTORS -
IOT's Purpose and Reasons for the IOT Merger" and "SPECIAL
FACTORS - ARL's Purpose and Reasons for the Merger" of the
Joint Proxy Statement/Prospectus and is incorporated herein by
reference.
(d) The information is set forth in the "RISK FACTORS - Risks
Related to the Combined Business", "SPECIAL FACTORS - TCI's
Purpose and Reasons for the TCI Merger", "SPECIAL FACTORS -
IOT's Purpose and Reasons for the IOT Merger", "SPECIAL
FACTORS - ARL's Purpose and Reasons for the Merger", "SPECIAL
FACTORS - Effects of the Mergers; ARL after the Mergers",
"SPECIAL FACTORS - Conduct of Business of Either or Both TCI
or IOT if Either Merger is Not Consummated", "SPECIAL FACTORS
- Federal Income Tax Considerations" and "INTERESTS OF
DIRECTORS AND OFFICERS OF ARL, TCI AND IOT IN THE BUSINESS
COMBINATION" of the Joint Proxy Statement/Prospectus and is
incorporated herein by reference and "UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION" of the Registration
Statement of Form S-4 and is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
Item 1014 of Regulation M-A.
(a) and (b) The information is set forth in the "SPECIAL FACTORS -
Background of the Business Combination", "SPECIAL FACTORS -
Determination of Merger Consideration", "SPECIAL FACTORS -
ARL's Purpose and Reasons for the Merger", "SPECIAL
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FACTORS - TCI's Purpose and Reasons for the TCI Merger",
SPECIAL FACTORS - IOT's Purpose and Reasons for the IOT
Merger", "SPECIAL FACTORS - Determination and Recommendation
of the TCI Board of Directors", "SPECIAL FACTORS -
Determination and Recommendation of IOT Board of Directors",
"SPECIAL FACTORS - Fairness Determination of ARL" and "SPECIAL
FACTORS - Fairness Determination of BCM and Mr. Phillips" of
the Joint Proxy Statement/Prospectus and is incorporated
herein by reference.
(c) The information is set forth in the "THE SPECIAL MEETINGS -
Record Date; Votes Required" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(d) The information is set forth in the "SPECIAL FACTORS -
Determination and Recommendation of the TCI Board of
Directors", "MANAGEMENT OF TCI - Directors and Executive
Officers", "SPECIAL FACTORS - Determination and Recommendation
of the TCI Board of Directors" and "MANAGEMENT OF IOT -
Directors and Executive Officers" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(e) The information is set forth in the SPECIAL FACTORS -
Background of the Business Combination", "SPECIAL FACTORS -
Determination of Merger Consideration", "SPECIAL FACTORS -
TCI's Purpose and Reasons for the TCI Merger", SPECIAL FACTORS
- IOT's Purpose and Reasons for the IOT Merger", "SPECIAL
FACTORS - ARL's Purpose and Reasons for the Merger" of the
Joint Proxy Statement/Prospectus and is incorporated herein by
reference.
(f) The information is set forth in the "SPECIAL FACTORS -
Background of the Business Combination" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.
Item 1005 of Regulation M-A.
(a) and (b) The information is set forth in the "SPECIAL FACTORS - Opinion
of Financial Advisor", "SPECIAL FACTORS - Analyses", "SPECIAL
FACTORS - Net Asset Value Approach-Income Producing Property",
SPECIAL FACTORS - Portfolio (Market)-Income Producing
Property", "SPECIAL FACTORS - ARL Valuation", "SPECIAL FACTORS
- IOT Valuation", "SPECIAL FACTORS - TCI Valuation", "SPECIAL
FACTORS - Exchange Ratio Analysis" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(c) The Fairness Opinion prepared by Houlihan Lokey pertaining to
TCI is set forth in the Proxy Statement/Prospectus at Appendix
E and is incorporated herein by reference.
(d) The information is set forth in the "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS OF ARL, TCI AND IOT" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(e) The information is set forth in the "SUMMARY - Olive
Settlement" "SPECIAL FACTORS - Background of the Business
Combination" of the Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
11
ITEM 10. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.
Item 1007 of Regulation M-A.
(a) and (b) The information is set forth in the "SPECIAL FACTORS -
Financing of the Business Combination" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(c) The information is set forth in the "THE PLANS OF MERGER -
Expenses of the Mergers" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
(d) The information is set forth in the "SPECIAL FACTORS -
Financing of the Business Combination" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
ITEM 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Item 1008 of Regulation M-A.
(a) and (b) The information is set forth in the "SUMMARY - Overview", "THE
ADVISOR - BCM", "CERTAIN INFORMATION REGARDING TCI COMMON
STOCK AND IOT COMMON STOCK", "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF ARL", "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI" and
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF IOT" of the Joint Proxy Statement/Prospectus and
is incorporated herein by reference.
ITEM 12. THE SOLICITATION OR RECOMMENDATION.
Item 1012(d) and (e) of Regulation M-A.
(d) and (e) The information is set forth in the "SPECIAL FACTORS -
Background of the Business Combination", "SPECIAL FACTORS -
Determination of Merger Consideration", "SPECIAL FACTORS -
ARL's Purpose and Reasons for the Merger", "SPECIAL FACTORS -
TCI's Purpose and Reasons for the TCI Merger", SPECIAL FACTORS
- IOT's Purpose and Reasons for the IOT Merger", "SPECIAL
FACTORS - Determination and Recommendation of the TCI Board of
Directors", "SPECIAL FACTORS - Determination and
Recommendation of IOT Board of Directors", "SPECIAL FACTORS -
Fairness Determination of ARL", "SPECIAL FACTORS - Fairness
Determination of BCM and Mr. Phillips" and "SPECIAL FACTORS -
Intent to Vote in Merger Transactions" of the Joint Proxy
Statement/Prospectus and is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS.
Item 1010(a) through (b) of Regulation M-A.
(a) The information is set forth in TCI's Annual Report on Form
10-K for the Year Ended December 31, 2001, TCI's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002 and
TCI's Quarterly Report on Form 10-Q for the quarter ended June
30, 2002, and "SUMMARY-Ratio of Earnings to Fixed Charges",
"SUMMARY-Summary of Financial
12
Data of TCI", "SELECTED FINANCIAL DATA OF TCI", Exhibit 12.1
and Exhibit 12.2 of the Joint Proxy Statement/Prospectus and
is incorporated herein by reference.
(b) "UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION" of
the Registration Statement of Form S-4 and is incorporated
herein by reference.
ITEM 14. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
Item 1009 of Regulation M-A.
(a) The information is set forth in the "THE SUMMARY - The Olive
Settlement", "THE SPECIAL MEETINGS - Solicitation of the
Proxies" and "SPECIAL FACTORS - Opinion of Financial Advisor"
of the Joint Proxy Statement/Prospectus and is incorporated
herein by reference.
(b) None
ITEM 15. ADDITIONAL INFORMATION.
11 Item 1011 of Regulation M-A.
(b) Reference is made to the Joint Proxy Statement/Prospectus
which is incorporated herein by reference.
ITEM 16. EXHIBITS.
Item of 1016 Regulation M-A.
(a)(2) and (4) ARL's Registration Statement on Form S-4 (Reg. No. 333-83292),
filed by ARL with the Securities and Exchange Commission as
amended by pre-effective Amendments Nos. 1, 2, 3, and 4
thereto and the Joint Proxy Statement/Prospectus, part of the
Registration Statement on Form S-4 (Reg. No. 333-83292) are
incorporated herein by reference.
(a)(5) (i) TCI's Annual Report on Form 10-K for the Year Ended
December 31, 2001, TCI's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002 and TCI's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2002 are incorporated
herein by reference. (ii) IOT's Annual Report on Form 10-K for
the Year Ended December 31, 2001, IOT's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002 and IOT's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2002 are incorporated herein by reference.
(b) Not Applicable
(c) (i) The Fairness Opinion of Houlihan Lokey pertaining to TCI
is set forth in the Proxy Statement/Prospectus at Appendix E
is incorporated herein by reference. (ii) ARL/IORI/TCI Merger:
Board Presentation - Executive Summary, January 31, 2002,
prepared by Houlihan Lokey Howard & Zukin. The Board
Presentation is attached to this Transaction Statement as
Exhibit 99.1. (iii) ARL/IORI/TCI Merger: Exhibits to Board
Presentation, January 2002, prepared by Houlihan Lokey Howard
& Zukin. The Exhibits to Board Presentation are attached to
this Transaction Statement as Exhibit 99.2. (iv) Discounted
Cash Flow Analysis - Detail prepared by Houlihan Lokey Howard
& Zukin. The Analysis - Detail is attached to this Transaction
Statement as Exhibit 99.3.
(d) (i) Agreement and Plan of Merger among ARL, TCI Merger Sub,
and TCI included as part of Appendix A of the Joint Proxy
Statement/Prospectus is incorporated herein by reference. (ii)
The Second Amendment to the Modification of Stipulation of
Settlement dated October 17, 2001 to the Olive Litigation
included as Exhibit 10.1 of the Form 8-K filed by TCI on
January 29, 2002 is incorporated herein by reference.
13
(f) Not Applicable
(g) Not Applicable
14
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information is set forth in this statement is true, complete and
correct.
AMERICAN REALTY INVESTORS, INC.
Date: August 30, 2002 By: /s/ RONALD E. KIMBROUGH
--------------------------------------
Printed Name: Ronald E. Kimbrough
Title: Executive Vice President and Chief
Financial Officer
BASIC CAPITAL MANAGEMENT, INC.
Date: August 30, 2002 By: /s/ RONALD E. KIMBROUGH
--------------------------------------
Printed Name: Ronald E. Kimbrough
Title: Executive Vice President and Chief
Financial Officer
Date: August 30, 2002 /s/ GENE E. PHILLIPS
--------------------------------------
Printed Name: Gene E. Phillips
TRANSCONTINENTAL REALTY
INVESTORS, INC.
Date: August 30, 2002 By: /s/ RONALD E. KIMBROUGH
--------------------------------------
Printed Name: Ronald E. Kimbrough
Title: Executive Vice President and Chief
Financial Officer
TRANSCONTINENTAL REALTY
ACQUISITION CORPORATION
Date: August 30, 2002 By: /s/ RONALD E. KIMBROUGH
--------------------------------------
Printed Name: Ronald E. Kimbrough
Title: Director and President
INCOME OPPORTUNITY ACQUISITION
CORPORATION
Date: August 30, 2002 By: /s/ RONALD E. KIMBROUGH
--------------------------------------
Printed Name: Ronald E. Kimbrough
Title: Director and President
INCOME OPPORTUNITY REALTY
INVESTORS, INC.
Date: August 30, 2002 By: /s/ RONALD E. KIMBROUGH
--------------------------------------
Printed Name: Ronald E. Kimbrough
Title: Executive Vice President and Chief
Financial Officer
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.1 ARL/IORI/TCI Merger: Board Presentation -- Executive Summary, January 31, 2002, prepared by
Houlihan Lokey Howard & Zukin.
99.2 ARL/IORI/TCI Merger: Exhibits to Board Presentation, January 2002, prepared by Houlihan Lokey
Howard & Zukin.
99.3 Discounted Cash Flow Analysis - Detail prepared by Houlihan Lokey Howard & Zukin.