[GRAPHIC OMITED]
GRAYSTONE FINANCIAL SERVICES, INC.
INFORMATION STATEMENT
RELATING TO THE
REINCORPORATION IN DELAWARE
BY THE MERGER OF
GRAYSTONE FINANCIAL SERVICES, INC.
(A FLORIDA CORPORATION)
INTO
GS FINANCIAL SERVICES, INC.
(A DELAWARE CORPORATION)
GRAYSTONE FINANCIAL SERVICES, INC.
1101 POST OAK BLVD., SUITE 9
HOUSTON, TEXAS 77056
(713) 903-3788
[GRAPHIC OMITED]
NOVEMBER 10, 1997
DEAR SHAREHOLDER:
The following materials relate to a reincorporation of Graystone
Financial Services, Inc., a Florida corporation (the "Company"), in Delaware
through a merger of the Company into GS Financial Services, Inc., a newly
formed wholly-owned Delaware subsidiary of the Company ("GS Financial") with
GS Financial surviving the merger. The reincorporation is intended to be
effected on December 9, 1997 and will result in (i) the Company's name being
changed to "GS Financial Services, Inc.," (ii) your shares of common stock of
the Company being converted into the right to receive one share of common
stock of GS Financial for each 100 shares of common stock of the Company owned
by you as of the date of reincorporation (iii) the persons serving presently
as officers and directors of GS Financial Services, Inc. to serve in their
respective capacities after the reincorporation; and (iv) the Articles of
Incorporation of the Company being changed to (A) increase the number of
shares of common stock the Company is authorized to issue from 10,000,000 to
25,000,000, and (B) authorizing the Company to issue 10,000,000 preferred
shares with a par value of $.001 per share.
The Board of Directors of the Company and shareholders owning
approximately 82.5% of the outstanding common stock of the company as of
October 15, 1997 carefully considered means to reorganize the Company into an
attractive acquisition candidate and concluded the reincorporation to be an
integral part of the process and in the best interests of the Company and its
shareholders.
The Company urges you to follow the instructions set forth in the
enclosed Information Statement under the section entitled "Reincorporation in
Delaware -- How to Exchange Company Common Stock for GS Financial Common
Stock" if you elect to surrender the Company Certificate(s) representing your
shares for certificates representing shares of common stock of GS Financial.
If you wish to dissent from the reincorporation and seek a judicial
determination of the value of your shares, you may do so by following the
instructions in the Information Statement section entitled "Reincorporation in
Delaware -- Rights of Dissenting Shareholders."
Sincerely,
/s/Thomas V. Ackerly
----------------------
Thomas V. Ackerly, President
GRAYSTONE FINANCIAL SERVICES, INC.
1101 POST OAK BLVD., SUITE 9
HOUSTON, TEXAS 77056
(713) 903-3788
[GRAPHIC OMITED]
November 10, 1997
INFORMATION STATEMENT
This Information Statement is being furnished to holders of the common
stock, par value $.0001 per share (the "Company Common Stock"), of Graystone
Financial Services, Inc., a Florida corporation (the "Company"), to inform the
holders that the board of directors of the Company (the "Board of Directors")
and holders of shares representing approximately 82.5% (the "Majority
Holders") of the outstanding shares of Company Common Stock (the "Company
Common Stock") have authorized, by written consent dated October 15, 1997, the
reincorporation of the Company in Delaware (the "Reincorporation") and the
change of the Company's name to GS Financial Services, Inc., all to be
effected December 9, 1997 or as soon as practicable thereafter (the "Effective
Date"). The close of business on November 10, 1997 has been fixed by the
Board of Directors as the record date for determining the stockholders of the
Company entitle to notice of the Reincorporation.
MANAGEMENT IS NOT ASKING FOR YOUR PROXY AND YOU ARE
REQUESTED NOT TO SEND US YOUR PROXY
The Reincorporation will be accomplished by a merger (the "Merger"), on
the Effective Date, of the Company into GS Financial Services, Inc., a newly
formed wholly owned Delaware subsidiary of the Company ("GS Financial"),
pursuant to an Agreement and Plan of Merger (the "Plan of Merger") between the
Company and GS Financial dated October 15, 1997, with GS Financial surviving
the merger (upon the effectiveness of the Merger, "GS Financial").
In the Merger, holders of Company Common Stock will receive one share of
common stock of GS Financial, par value $.001, ("GS Financial Common Stock")
for each 100 shares of Company Common Stock owned by each such holder as of
the day preceding the Effective Date of the Merger with any resulting
fractional GS Financial Common Stock interests being canceled in exchange for
cash in an amount (without interest) equal to the product of $.002 and the
number of shares of Company Common Stock represented by any such fraction (the
"Cancellation Price"). No certificates for fractional shares of GS Financial
Common Stock will be issued and all such fractional shares of GS Financial
Common Stock interests will be canceled. Holders of such fractional interests
will have only the right to receive the Cancellation Price in cash for such
interests.
Enclosed herewith is a form letter of transmittal with instructions for
effecting the surrender of the certificate or certificates which immediately
prior to the Effective Date represented issued and outstanding shares of
Company Common Stock ("Company Certificates"), in exchange for certificates
representing GS Financial Common Stock ("GS Financial Certificates"). Upon
surrender of a Company Certificate for cancellation to GS Financial together
with a duly executed letter of transmittal, the holder of such Company
Certificate will, subject to the restrictions applicable to fractional shares,
be entitled to receive, as soon as practicable after the Effective Date, in
exchange therefor a GS Financial Certificate representing that number of
shares of GS Financial Common Stock into which the shares of Company Common
Stock theretofore represented by the Company Certificate so surrendered will
have been converted pursuant to the provisions of the Plan of Merger, and the
Company Certificate so surrendered will forthwith be canceled.
The Reincorporation will also result in (i) GS Financial being governed
by Delaware law, which may grant officers and directors greater protection
from personal liability than Florida law and provides anti-takeover
protections that may not be available under Florida law and (ii) the officers
and directors of GS Financial as constituted immediately prior to the Merger
becoming the officers and directors of GS Financial, which will result in the
persons who are currently directors of the Company being on the board of
directors of GS Financial (the "New Board of Directors") and the officers of
GS Financial being the persons who are currently officers of the Company. See
"Reincorporation in Delaware--Officers and Directors."
In addition to authorizing the Reincorporation, the Majority Holders
indicated to the Board of Directors that they intended, immediately upon
effectiveness of the Merger, to authorize by written consent, as majority
stockholders of GS Financial, the adoption of the GS Financial Services, Inc.
Stock Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan
will permit the New Board of Directors or a special committee of the New Board
of Directors to award three types of stock incentives to directors, officers
and certain key employees of GS Financial. Such discretionary stock
incentives could include stock options, stock appreciation rights, and
"restricted" stock. See "The GS Financial Services, Inc. Stock Incentive
Plan."
The purpose of this Information Statement is to inform holders of Company
Common Stock who have not given the Company their written Consent to the
foregoing corporate actions of such actions and their effects and, as required
by Florida law, to give any holder of Company Common Stock who so desires the
right to dissent from the Merger and Reincorporation and to receive the "fair
value" of his Company Common Stock in lieu of GS Financial Common Stock and
any cash for canceled GS Financial fractional share interests to which such
holder would otherwise be entitled in the Merger. See "Reincorporation in
Delaware--Rights of Dissenting Shareholders."
As of October 24, 1997, 9,849,118 shares of Company Common Stock were
issued and outstanding.
Enclosed herewith is a copy of the Company's Annual Report on Form 10-K
for the year ending May 31, 1997.
REINCORPORATION IN DELAWARE
The following discussion summarizes certain aspects of the
Reincorporation of the Company in Delaware. This summary is not intended to
be complete and is subject to, and qualified in its entirety by reference to
the Plan of Merger between the Company and GS Financial, a copy of which is
attached hereto as Exhibit "A," and the Certificate of Incorporation of GS
Financial (the "Delaware Certificate"), a copy of which is attached hereto as
Exhibit "B." Copies of the Articles of incorporation and the By-Laws of the
Company (the "Florida Articles" and the "Florida By-Laws," respectively) and
the By-Laws of GS Financial (the "Delaware By-Laws") are available for
inspection at the principal office of the Company and copies will be sent to
shareholders upon request.
PRINCIPAL REASONS FOR REINCORPORATION
The Board of Directors believes that the Reincorporation will give the
Company a greater measure of flexibility and simplicity in corporate
governance than is available under Florida law and will increase the
marketability of the Company's securities.
The State of Delaware is recognized for adopting comprehensive modern and
flexible corporate laws which are periodically revised to respond to the
changing legal and business needs of corporations. For this reason, many
major corporations have initially incorporated in Delaware or have changed
their corporate domiciles to Delaware in a manner similar to that proposed by
the Company. Consequently, the Delaware judiciary has become particularly
familiar with corporate law matters and a substantial body of court decisions
has developed construing Delaware law. Delaware corporate law, accordingly,
has been, and is likely to continue to be, interpreted in many significant
judicial decisions, a fact which may provide greater clarity and
predictability with respect to the Company's corporate legal affairs. For
these reasons, the Board of Directors believes that the Company's business and
affairs can be conducted to better advantage if the Company is able to operate
under Delaware law. see "Certain Significant Differences between the
Corporation Laws of Delaware and Florida."
PRINCIPAL FEATURES OF THE REINCORPORATION
The Reincorporation will be effected by the merger of the Company, a
Florida corporation, with and into, GS Financial, a wholly-owned subsidiary of
the Company that was incorporated on September 9, 1997 under the General
Corporation Laws of the State of Delaware (the "Delaware GCL") for the sole
purpose of effecting the Reincorporation. The Reincorporation will become
effective upon the filing of the requisite merger documents in Delaware and
Florida, which filings will occur on the Effective Date, October 24, 1997 or
as soon as practicable thereafter. Following the Merger, GS Financial will be
the surviving corporation and will operate under the name "GS Financial
Services, Inc."
On the Effective Date, (i) each 100 outstanding shares of Company Common
Stock, $.0001 par value, shall be converted into one share of GS Financial
Common Stock, $.001 par value, except for those shares of Company Common Stock
with respect to which the holders thereof duly exercise their dissenters'
rights under Florida law, (ii) any fractional shares of GS Financial Common
Stock that a holder of shares of Company Common stock would otherwise be
entitled to receive upon exchange of his Company Common Stock will be canceled
with the holder thereof being entitled to receive the Cancellation Price;
$.002 per share of Company Common Stock not convertible into a whole share of
GS Financial Common Stock, and (iii) each outstanding share of GS Financial
Common Stock held by the Company shall be retired and canceled and shall
resume the status of authorized and unissued GS Financial Stock.
No certificates or scrip representing fractional shares of GS Financial
Common Stock will be issued upon the surrender for exchange of Company Common
Stock no dividend or distribution of GS Financial shall relate to any
fractional share, and no fractional GS Financial Common Stock interest will
entitle the owner thereof to vote or to any right of a stockholder of GS
Financial. In lieu thereof, the Exchange Agent will pay to each holder
otherwise entitled to a fractional share of GS Financial Common Stock the
Cancellation Price. The Board of Directors believes that the Cancellation
Price is a fair price at which to cancel Company Common Stock that are
otherwise convertible into fractional shares of GS Financial Common Stock.
The Cancellation Price is equal to the most recent bid quotations for Company
Common Stock, and is above the current book value of a share of Company Common
Stock. See "Market For The Company Common Stock."
At the Effective Date, GS Financial will be governed by the Delaware
Certificate, the Delaware By-Laws and the Delaware GCL, which include a number
of provisions that are not present in, the Florida Articles, the Florida
By-Laws or the Florida Business Corporation Act (the "Florida BCA").
Accordingly, as described below, a number of significant changes in
shareholders' rights will be effected in connection with the Reincorporation,
some of which may be viewed as limiting the rights of shareholders. In
particular, the Delaware Certificate includes a provision authorized by the
Delaware GCL that would limit the liability of directors to GS Financial and
its stockholders for breach of fiduciary duties. The Delaware Certificate
will provide directors and officers with modern limited liability and
indemnification rights authorized by the GCL of Delaware. The Board of
Directors believes that these provisions will enhance its ability to attract
and retain qualified directors and encourage them to continue to make
entrepreneurial decisions on behalf of GS Financial. Accordingly,
implementation of these provisions has been included as part of the
Reincorporation. The Company believed that the Reincorporation will
contribute to the long-term quality and stability of the Company's governance.
The Board of Directors has concluded that the benefit to shareholders of
improved corporate governance from the Reincorporation outweighs any possible
adverse effects on shareholders of reducing the exposure of directors to
liability and broadening director indemnification rights.
Upon consummation of the Merger, the daily business operations of GS
Financial will continue as they are presently conducted by the Company, at the
Company's principal executive offices at 1101 Post Oak Blvd., Suite 9,
Houston, Texas 77056 and its telephone number is (713) 903-3788. The
authorized capital stock of GS Financial will consist of 25,000,000 shares of
GS Financial Common Stock, par value $.001 per share, and 10,000,000 shares of
preferred stock, $.001 par value per share (the "Preferred Stock"). The
Preferred Stock will be issuable in series by action of the New Board of
Directors. The New Board of Directors will be authorized, without further
action by the stockholders, to fix the designations, powers, preferences and
other rights and the qualifications, limitations or restrictions of the
unissued Preferred Stock including shares of Preferred Stock having
preferences and other terms that might discourage takeover attempts by third
parties.
The New Board of Directors will consist of those persons presently
serving on the board of directors of the Company. The individuals who will
serve as executive officers of GS Financial are those who currently serve as
executive officers of the Company. Such persons and their respective terms of
office are set forth below under the caption "Reincorporation in Delaware -
Officers and Directors."
Pursuant to the terms of the Plan of Merger, the Merger may be abandoned
by the Board of Directors of the Company and GS Financial at any time prior to
the Effective Date. In addition, the Board of Directors of the Company may
amend the Plan of Merger at any time prior to the Effective Date provided that
any amendment made may not, without approval by the Majority Holders, alter or
change the amount or kind of GS Financial Common Stock to be received in
exchange for or on conversion of all or any of the Company Common Stock, alter
or change any term of the Delaware Certificate or alter or change any of the
terms and conditions of the Plan of Merger if such alteration or change would
adversely affect the holders of Company Common Stock.
HOW TO EXCHANGE COMPANY CERTIFICATES FOR GS FINANCIAL CERTIFICATES
Enclosed are (i) a form letter of transmittal and (ii) instructions for
effecting the surrender of the Company Certificates in exchange for GS
Financial Certificates. Upon surrender of a Company Certificate for
cancellation to GS Financial, together with a duly executed letter of
transmittal, the holder of such Company Certificate shall, as soon as
practicable following the Effective Date, be entitled to receive in exchange
therefor a GS Financial Certificate representing that number of whole shares
of GS Financial Common Stock into which the Company Common Stock theretofore
represented by the Company Certificate so surrendered have been converted in
the Merger and the Cancellation Price for any Company Common Stock not
convertible into a whole share of GS Financial Common Stock in the Merger, and
the Company Certificate so surrendered will be canceled.
Because of the reincorporation in Delaware as a result of the Merger,
holders of Company Common Stock are not required to exchange their Company
Certificates for GS Financial Certificates. Dividends and other distributions
declared after the Effective Date with respect to GS Financial Common Stock
and payable to holders of record thereof after the Effective Date will be paid
to the holder of any unsurrendered Company Certificate with respect to the
shares of GS Financial Common Stock, which by virtue of the Merger are
represented thereby and such holder will be entitled to exercise any right as
a holder of GS Financial Common Stock, until such holder has surrendered the
Company Certificate.
CAPITALIZATION
The authorized capital of the Company, prior to the Effective Date,
consisted of 10,000,000 shares of Company Common Stock. The authorized
capital of GS Financial, which will be the authorized capital of GS Financial,
presently consists of 25,000,000 shares of GS Financial Common Stock and
10,000,000 shares of Preferred Stock. After the Merger (assuming no exercise
of dissenters' rights), GS Financial will have outstanding approximately
96,000 shares of GS Financial Common Stock and no shares of Preferred Stock.
2,500,000 shares will be reserved for issuance under the Stock Incentive Plan.
Accordingly, the New Board of Directors will have available approximately
22,404,000 shares of GS Financial Common Stock, and 10,000,000 shares of
Preferred Stock which are authorized but presently unissued and unreserved,
and which will be available for issuance from time to time in connection with,
acquisitions of other companies and other corporate purposes. The
Reincorporation will not affect total stockholder equity or total
capitalization of the Company.
The New Board of Directors may in the future authorize, without further
stockholder approval, the issuance of such shares of GS Financial Common Stock
or Preferred Stock to such persons and for such consideration upon such terms
as the New Board of Directors determines. Such issuance could result in a
significant dilution of the voting rights and, possibly, the stockholders'
equity of then existing stockholders.
There are no present plans, understandings or agreements, and the Company
is not engaged in any negotiations that will involve the issuance of the
Preferred Stock to be authorized. However, the New Board of Directors
believes it prudent to have shares of Preferred Stock available for such
corporate purposes as the New Board of Directors may from time to time deem
necessary and advisable including, without limitation, acquisitions, the
raising of additional capital and assurance of flexibility of action in the
future.
It should be recognized that the issuance of additional authorized GS
Financial Common Stock (or Preferred Stock, the terms and conditions of which
including voting and conversion rights, may be set at the discretion of the
Board of Directors) may have the effect of deterring or thwarting persons
seeking to take control of GS Financial through a tender offer, proxy fight or
otherwise or to bring about removal of incumbent management or a corporate
transaction such as merger. For example, the issuance of GS Financial Common
Stock or Preferred Stock could be used to deter or prevent such a change of
control through dilution of stock ownership of persons seeking to take control
or by rendering a transaction proposed by such persons more difficult.
SIGNIFICANT CHANGES IN THE COMPANY'S CHARTER AND BY-LAWS TO BE IMPLEMENTED BY
THE REINCORPORATION
Change of Corporate Name. The Reincorporation will effect a change in
the Company's name to "GS Financial Services, Inc." The Board of Directors
believes that this corporate name is in the best interests of the Company and
its shareholders and that the name continues to reflect the nature of the
Company's present intention to merge with an operating business.
Limitation of Liability. The Delaware Certificate contains a provision
limiting or eliminating, with certain exceptions, the liability of directors
to GS Financial and its shareholders for monetary damages for breach of their
fiduciary duties. The Florida Articles contains no similar provision. The
Board of Directors believes that such provision will better enable GS
Financial to attract and retain as directors responsible individuals with the
experience and background required to direct GS Financial's business and
affairs. It has become increasingly difficult for corporations to obtain
adequate liability insurance to protect directors from personal losses
resulting from suits or other proceedings involving them by reason of their
service as directors. Such insurance is considered a standard condition of
directors' engagement. However, coverage under such insurance is no longer
routinely offered by insurers and many traditional insurance carriers have
withdrawn from the market. To the extent such insurance is available, the
scope of coverage is often restricted, the dollar limits of coverage are
substantially reduced and the premiums have risen dramatically.
At the same time directors have been subject to substantial monetary
damage awards in recent years. Traditionally, courts have not held directors
to be insurers against losses a corporation may suffer as a consequence of
directors' good faith exercise of business judgment, even if, in retrospect
the directors' decision was an unfortunate one. In the past, directors have
had broad discretion to make decisions on behalf of the corporation under the
"business judgment rule." The business judgment rule offers protection to
directors who, after reasonable investigation, adopt a course of action that
they reasonably and in good faith believe will benefit the corporation, but
which ultimately proves to be disadvantageous. Under those circumstances,
courts have typically been reluctant to subject directors' business judgments
to further scrutiny. Some recent court cases have, however, imposed
significant personal liability on directors for failure to exercise an
informed business judgment with the result that the potential exposure of
directors to monetary damages has increased. Consequently legal proceedings
against directors relating to decisions made by directors on behalf of
corporations have significantly increased in number, cost of defense and level
of damages claimed. Whether or not such an action is meritorious, the cost of
defense can be well beyond the personal resources of a director.
The Delaware General Assembly considered such developments a threat to
the quality and stability of the governance of Delaware corporations because
of the unwillingness of directors, in many instances, to serve without the
protection which insurance traditionally has provided and because of the
deterrent effect on entrepreneurial decision making by directors who do serve
without the protection of traditional insurance coverage. In response, in
1986 the Delaware General Assembly adopted amendments to the Delaware GCL
which permit a corporation to include in its charter a provision to limit or
eliminate, with certain exceptions, the Personal liability Of Directors to a
corporation and its shareholders for monetary damages for breach of their
fiduciary duties. Similar charter provisions limiting a director's liability
are not permitted under Florida law.
The Board of Directors believes that the limitation on directors'
liability permitted under Delaware law will assist GS Financial in attracting
and retaining qualified directors by limiting directors' exposure to
liability. The Reincorporation proposal will implement this limitation on
liability of the directors of GS Financial, inasmuch as Article XVI of the
Delaware Certificate provides that to the fullest extent that the Delaware GCL
now or hereafter permits the limitation or elimination of the liability of
directors, no director will be liable to GS Financial or its stockholders for
monetary damages for breach of fiduciary duty. Under such provision, GS
Financial's directors will not be liable for monetary damages for acts or
omissions occurring on or after the Effective Date of the Reincorpora-tion,
even if they should fail through negligence or gross negligence, to satisfy
their duty of care (which requires directors to exercise informed business
judgment in discharging their duties). Article XVI would not limit or
eliminate any liability of directors for acts or omissions occurring prior to
the Effective Date. As provided under Delaware law, Article XVI cannot
eliminate or limit the liability of directors for breaches of their duty of
loyalty to GS Financial; acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, paying a dividend or
effecting a stock repurchase or redemption which is illegal under the Delaware
GCL, or transactions from which a director derived an improper personal
benefit. Further, Article XVI would not affect the availability of equitable
remedies, such as an action to enjoin or rescind a transaction involving a
breach of a director's duty of care. Article XVI pertains to breaches of duty
by directors acting as directors and not to breaches of duty by directors
acting as officers (even if the individual in question is also a director).
In addition, Article XVI would not affect a director's liability to third
parties or under the federal securities laws.
Article XVI is worded to incorporate any future statutory revisions
limiting directors' liability. It provides, however, that no amendment or
repeal of its provision will apply to the liability of a director for any acts
or omissions occurring prior to such amendment or repeal, unless such
amendment has the affect of further limiting or eliminating such liability.
The Company has not received notice of any lawsuit or other proceeding to
which Article XVI might apply. In addition, Article XVI is not being included
in the Delaware Certificate in response to any director's resignation or any
notice of an intention to resign. Accordingly, the Company is not aware of
any existing circumstances to which Article XVI might apply. The Board of
Directors recognizes that Article XVI may have the effect of reducing the
likelihood of derivative litigation against directors, and may discourage or
deter stockholders from instituting litigation against directors for breach of
their duty of care, even though such an action, if successful, might benefit
GS Financial and its shareholders. However, given the difficult environment
and potential for incurring liabilities currently facing directors of publicly
held corporations, the Board of Directors believes that Article XVI is in the
best interests of GS Financial and its stockholders, since it should enhance
GS Financial's ability to retain highly qualified directors and reduce a
possible deterrent to entrepreneurial decision making. In addition, the Board
of Directors believes that Article XVI may have a favorable impact over the
long term on the availability, cost, amount and scope of coverage of
directors' liability insurance, although there can be no assurance of such an
effect.
Article XVI may be viewed as limiting the rights of stockholders, and the
broad scope of the indemnification provisions of GS Financial's could result
in increased expense to GS Financial. The Company believes, however, that
these provisions will provide a better balancing of the legal obligations of,
and protections for, directors and will contribute to the quality and
stability of GS Financial's governance. The Board of Directors has concluded
that the benefit to stockholders of improved corporate governance outweighs
any possible adverse effects on stockholders of reducing the exposure of
directors to liability and broad-ening indemnification rights. Because
Article XVI deals with the potential liability of directors, the members of
the Board of Directors may be deemed to have a personal interest in effecting
the Reincorporation.
Indemnification. As part of the 1986 legislation permitting a
corporation to limit or eliminate the liability of directors, the Delaware
General Assembly, for the reasons noted under "Limitation of Liability" above
also amended the provisions of the Delaware GCL governing indemnification to
clarify and broaden the indemnification rights which corporations may provide
to their directors, officers and other corporate agents. The Florida BCA also
contains broad indemnification provisions. The Delaware Certificate reflects
the provisions of Delaware law, as recently amended, and, as discussed below,
provides broad rights to indemnification.
In recent years, investigations, actions, suits and proceedings,
including actions, suits and proceedings by or in the right of a corporation
to procure a judgment in its favor (referred to together as "proceedings"),
seeking to impose liability on, or involving as witnesses, directors and
officers of publicly-held corporations have become increasingly common. Such
proceedings are typically very expensive, whatever their eventual outcome. In
view of the costs and uncertainties of litigation in general it is often
prudent to settle proceedings in which claims against a director or officer
are made. Settlement amounts, even if material to the corporation involved
and minor compared to the enormous amounts frequently claimed, often exceed
the financial resources of most individual defendants. Even in proceedings in
which a director or officer is not named as a defendant he may incur
substantial expenses and attorneys' fees if he is called as a witness or
otherwise becomes involved in the proceeding. Although the Company's
directors and officers have not incurred any liability or significant expense
as a result of any proceeding to date the potential for substantial loss does
exist. As a result, an individual may conclude that the potential exposure to
the costs and risks of proceedings in which he may become involved may exceed
any benefit to him from serving as a director or officer of a public
corporation. This is particularly true for directors who are not also
officers of the corporation. The increasing difficulty and expense of
obtaining directors' and officers' liability insurance discussed above has
compounded the problem.
The broad scope of indemnification now available under Delaware law will
permit GS Financial to continue to offer its directors and officers greater
protection against these risks. The Board of Directors believes that such
protection is reasonable and desirable in order to enhance GS Financial's
ability to attract and retain qualified directors as well as to encourage
directors to continue to make good faith decisions on behalf of GS Financial
with regard to the best interests of GS Financial and its stockholders.
The Delaware Certificate is quite different from the Florida Articles and
require indemnification of GS Financial's directors and officers to the
fullest extent permitted under applicable law as from time to time in affect,
with respect to expenses, liability or loss (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) actually and reasonably incurred by any
person in connection with any actual or threatened proceeding by reason of the
fact that such person is or was a director or officer of GS Financial or is or
was serving at the request of GS Financial as a director or officer of another
corporation or of a partnership, joint venture; trust, employee benefit plan
or other enterprise at the request of GS Financial. The right to
indemnification includes the right to receive payment of expenses in advance
of the final disposition of such proceeding; consistent with applicable law
from time to time in effect; provided, however, that if the Delaware GCL
requires the payment of such expenses in advance of the final disposition of a
proceeding, payment shall be made only if such person undertakes to repay GS
Financial if it is ultimately determined that he or she was not entitled to
indemnification. Directors and officers would not be indemnified for lose,
liability or expenses incurred in connection with proceedings brought against
such persons otherwise than in the capacities in which they serve GS
Financial. Under the Delaware GS Financial may, although it has no present
intention to do so, by action of the New Board of Directors, provide the same
indemnification to its employees, agents, attorneys and representatives as it
provides to its directors and officers. The Delaware Certificate provides
that such practices are not exclusive of any other rights to which persons
seeking indemnification may otherwise be entitled under any agreement or
otherwise.
The Delaware Certificate specifies that the right to indemnification is a
contract right. The Delaware Certificate also provides that a person seeking
indemnification from GS Financial may bring suit against GS Financial to
recover any and all amounts entitled to such person provided that such person
has filed a written claim with GS Financial has failed to pay such claim
within thirty days of receipt thereof. In addition, GS Financial authorize GS
Financial to purchase and maintain indemnity insurance, if it so chooses to
guard against future expense.
The Delaware Certificate provides for payment of all expenses incurred,
including those incurred to defend against a threatened proceeding.
Additionally, the Delaware Certificate provides that indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person. The Delaware also provide that to the extent any director or officer
who is, by reason of such a position, a witness in any proceeding, he or she
shall be indemnified for all reasonable expenses incurred in connection
therewith.
Under Delaware law, as with Florida law, rights to indemnification and
expenses need not be limited to those provided by statute. As a result, under
Delaware law and the Delaware Certificate, GS Financial will be permitted to
indemnity its directors and officers, within the limits established by law and
public policy, pursuant to an express contract, a by-law provision, a
stockholder vote or otherwise, any or all of which could provide
indemnification rights broader than those currently available under the
Florida Articles or expressly provided for under Florida or Delaware law.
Insofar as the Delaware Certificate provides indemnification to directors
or officers for liabilities arising under the Securities Act of 1933, it is
the position of the Securities and Exchange Commission that such
indemnification would be against public policy as expressed in such statute
and, therefore, unenforceable.
The Board of Directors recognizes that GS Financial may in the future be
obligated to incur substantial expense as a result of the indemnification
rights conferred under the Delaware Certificate, which are intended to be as
broad as possible under applicable law. Because directors of GS Financial may
personally benefit from the indemnification provisions of GS Financial , the
members of the Board of Directors may be deemed to have a personal interest in
the effectuation of the Reincorporation.
DEFENSES AGAINST HOSTILE TAKEOVERS
Introduction. While the following discussion summarizes the reasons for,
and the operation and effects of, certain provisions of GS Financial's
Certificate of Incorporation which management has identified as potentially
having an anti-takeover effect, it is not intended to be a complete
description of all potential anti-takeover effects, and it is qualified in its
entirety by reference to GS Financial's Certificate of Incorporation and By
Laws. A copy of the Certificate of Incorporation is included as an exhibit to
this Information Statement which should be reviewed for more detailed
information and the By Laws are available upon request.
In general, the anti-takeover provisions in Delaware law and GS
Financial's Certificate of Incorporation are designed to minimize GS
Financial's susceptibility to sudden acquisitions of control which have not
been negotiated with and approved by GS Financial's Board of Directors. As a
result, these provisions may tend to make it more difficult to remove the
incumbent members of the Board of Directors. The provisions would not
prohibit an acquisition of control of GS Financial or a tender offer for all
of GS Financial's capital stock. The provisions are designed to discourage
any tender offer or other attempt to gain control of GS Financial in a
transaction that is not approved by the Board of Directors, by making it more
difficult for a person or group to obtain control of GS Financial in a short
time and then impose its will on the remaining stockholders. However, to the
extent these provisions successfully discourage the acquisition of control of
GS Financial or tender offers for all or part of GS Financial's capital stock
without approval of the Board of Directors, they may have the effect of
preventing an acquisition or tender offer which might be viewed by
stockholders to be in their best interests.
Tender offers or other non-open market acquisitions of stock are usually
made at prices above the prevailing market price of a company's stock. In
addition, acquisitions of stock by persons attempting to acquire control
through market purchases may cause the market price of the stock to reach
levels which are higher than would otherwise be the case. Anti-takeover
provisions may discourage such purchases, particularly those of less than all
of GS Financial's stock, and may thereby deprive stockholders of an
opportunity to sell their stock at a temporarily higher price. These
provisions may therefore decrease the likelihood that a tender offer will be
made, and, if made, will be successful. As a result, the provisions may
adversely affect those stockholders who would desire to participate in a
tender offer. These provisions may also serve to insulate incumbent
management from change and to discourage not only sudden or hostile takeover
attempts, but any attempts to acquire control which are not approved by the
Board of Directors, whether or not stockholders deem such transactions to be
in their best interests.
Authorized Shares of Capital Stock. GS Financial's Certificate of
Incorporation authorizes the issuance of up to 10,000,000 shares of serial
preferred stock. Shares of GS Financial's serial preferred stock with voting
rights could be issued and would then represent an additional class of stock
required to approve any proposed acquisition. This preferred stock, together
with authorized but unissued shares of Common Stock (the Certificate of
Incorporation authorizes the issuance of up to 25,000,000 shares), could
represent additional capital stock required to be purchased by an acquiror.
Issuance of such additional shares may dilute the voting interest of GS
Financial's stockholders. If the Board of Directors of GS Financial
determined to issue an additional class of voting preferred stock to a person
opposed to a proposed acquisition, such person might be able to prevent the
acquisition single-handedly.
Stockholder Meetings. Delaware law provides that the annual stockholder
meeting may be called by a corporation's board of directors or by such person
or persons as may be authorized by a corporation's certificate of
incorporation or By Laws. GS Financial's Certificate of Incorporation
provides that annual stockholder meetings may be called only by GS Financial's
Board of Directors or a duly designated committee of the Board. Although GS
Financial believes that this provision will discourage stockholder attempts to
disrupt the business of GS Financial between annual meetings, its effect may
be to deter hostile takeovers by making it more difficult for a person or
entity to obtain immediate control of GS Financial between one annual meeting
as a forum to address certain other matters and discourage takeovers which are
desired by the stockholders. GS Financial's Certificate of Incorporation also
provides that stockholder action may be taken only at a special or annual
stockholder meeting and not by written consent.
Classified Board of Directors and Removal of Directors. GS Financial's
Certificate of Incorporation provides that GS Financial's Board of Directors
is to be divided into three classes which shall be as nearly equal in number
as possible. The directors in each class serve for terms of three years, with
the terms of one class expiring each year. Each class currently consists of
approximately one-third of the number of directors. Each director will serve
until his successor is elected and qualified.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of GS Financial's outstanding
stock, to force an immediate change in the composition of a majority of the
Board of Directors. Since the terms of only one-third of the incumbent
directors expire each year, it requires at least two annual elections for the
stockholders to change a majority, whereas a majority of a non-classified
Board may be changed in one year. In the absence of the provisions of GS
Financial's Certificate of Incorporation classifying the Board, all of the
directors would be elected each year. The provision for a staggered Board of
Directors affects every election of directors and is not triggered by the
occurrence of a particular event such as a hostile takeover. Thus a staggered
Board of Directors makes it more difficult for stockholders to change the
majority of directors even when the reason for the change would be unrelated
to a takeover.
GS Financial's Certificate of Incorporation provides that a director may
not be removed except for cause by the affirmative vote of the holders of 75%
of the outstanding shares of capital stock entitled to vote at an election of
directors. This provision may, under certain circumstances, impede the
removal of a director and thus preclude the acquisition of control of GS
Financial through the removal of existing directors and the election of
nominees to fill in the newly created vacancies. The supermajority vote
requirement would make it difficult for the stockholders of GS Financial to
remove directors, even if the stockholders believe such removal would be
beneficial.
Restriction of Maximum Number of Directors and Filling Vacancies on the
Board of Directors. Delaware law requires that the board of directors of a
corporation consist of one or more members and that the number of directors
shall be set by the corporation's By Laws, unless it is set by the
corporation's certificate of incorporation. GS Financial's Certificate of
Incorporation provides that the number of directors (exclusive of directors,
if any, to be elected by the holders of preferred stock) shall not be less
than one or more than 15, as shall be provided from time to time in accordance
with GS Financial By Laws. The power to determine the number of directors
within these numerical limitations and the power to fill vacancies, whether
occurring by reason of an increase in the number of directors or by
resignation, is vested in GS Financial's Board of Directors. The overall
effect of such provisions may be to prevent a person or entity from quickly
acquiring control of GS Financial through an increase in the number of GS
Financial's directors and election of nominees to fill the newly created
vacancies and thus allow existing management to continue in office.
Stockholder Vote Required to Approve Business Combinations with Related
Persons. GS Financial's Certificate of Incorporation generally requires the
approval of the holders of 75% of GS Financial's outstanding voting stock (and
any class or series entitled to vote separately), and a majority of the
outstanding stock not beneficially owned by a related person (as defined) (up
to a maximum requirement of 85% of the outstanding voting stock), to approve
business combinations (as defined) involving the related person, except in
cases where the business combination has been approved in advance by
two-thirds of those members of GS Financial's Board of Directors who were
directors prior to the time when the related person became a related person.
Under Delaware law, absent these provisions, business combinations generally,
including mergers, consolidations and sales of substantially all of the assets
of GS Financial must, subject to certain exceptions, be approved by the vote
of the holders of a majority of GS Financial's outstanding voting stock. One
exception under Delaware law to the majority approval requirement applies to
business combinations (as defined) involving stockholders owning 15% of the
outstanding voting stock of a corporation for less than three years. In order
to obtain stockholder approval of a business combination with such a related
person, the holders of two-thirds of the outstanding voting stock, excluding
the stock owned by the 15% stockholder, must approve the transaction.
Alternatively, the 15% stockholder must satisfy other requirements under
Delaware law relating to (i) the percentage of stock acquired by such person
in the transaction which resulted in such person's ownership becoming subject
to the law, or (ii) approval of the board of directors of such person's
acquisition of the stock of the Delaware corporation. Delaware law does not
contain price criteria. The supermajority stockholder vote requirements under
the Certificate of Incorporation and Delaware law may have the effect of
foreclosing mergers and other business combinations which the holders of a
majority of GS Financial's stock deem desirable and place the power to prevent
such a transaction in the hands of a minority of GS Financial's stockholders
Under Delaware law, there is no cumulative voting by stockholders for the
election of GS Financial's directors. The absence of cumulative voting rights
effectively means that the holders of a majority of the stock voted at a
stockholder meeting may, if they so choose, elect all directors of GS
Financial, thus precluding a small group of stockholders from controlling the
election of one or more representatives to GS Financial's Board of Directors.
Advance Notice Requirements for Nomination of Directors and Proposal of
New Business at Annual Stockholder Meetings. GS Financial's Certificate of
Incorporation generally provides that any stockholder desiring to make a
nomination for the election of directors or a proposal for new business at a
stockholder meeting must submit written notice not less than 30 or more than
60 days in advance of the meeting. This advance notice requirement may give
management time to solicit its own proxies in an attempt to defeat any
dissident slate of nominations, should management determine that doing so is
in the best interests of stockholders generally. Similarly, adequate advance
notice of stockholder proposals will give management time to study such
proposals and to determine whether to recommend to the stockholders that such
proposals be adopted. In certain instances, such provisions could make it
more difficult to oppose management's nominees or proposals, even if the
stockholders believe such nominees or proposals are in their interests.
Making the period for nomination of directors and introducing new business a
period not less than 30 days prior to notice of a stockholder meeting may tend
to discourage persons from bringing up matters disclosed in the proxy
materials furnished by GS Financial and could inhibit the ability of
stockholders to bring up new business in response to recent developments.
Supermajority Voting Requirement for Amendment of Certain Provisions of
the Certificate of Incorporation. GS Financial's Certificate of Incorporation
provides that specified provisions contained in the Certificate of
Incorporation may not be repealed or amended except upon the affirmative vote
of the holders of not less than seventy-five percent of the outstanding stock
entitled to vote. This requirement exceeds the majority vote that would
otherwise be required by Delaware law for the repeal or amendment of the
Certificate of Incorporation. Specific provisions subject to the
supermajority vote requirement are (i) Article X, governing the calling of
stockholder meetings and the requirement that stockholder action be taken only
at annual or special meetings, (ii) Article IX, requiring written notice to GS
Financial of nominations for the election of directors and new business
proposals, (iii) Article X, governing the number and terms of GS Financial's
directors, (iv) Article XI, governing the removal of directors, (v) Article
XIII, governing approval of business combinations involving related persons,
(vi) Article XIII, relating to the consideration of various factors in the
evaluation of business combinations, (vii) Article XIV, providing for
indemnification of directors, officers, employees and agents, (ix) Article
XVIII, limiting directors' liability, and (x) Articles XVI and XVII, governing
the required stockholder vote for amending the By Laws and Certificate of
Incorporation, respectively. Article XVII is intended to prevent the holders
of less than 75% of GS Financial's outstanding voting stock from circumventing
any of the foregoing provisions by amending the Certificate of Incorporation
to delete or modify one of such provisions. This provision would enable the
holders of more than 25% of GS Financial's voting stock to prevent amendments
to the Certificate of Incorporation or By Laws even if they were favored by
the holders of a majority of the voting stock.
OFFICERS AND DIRECTORS
Upon the Effective Date the present officer and director of the Company
will continue to be the officer and director of GS Financial. This will
result in the following person holding the positions indicated below in GS
Financial until GS Financial's next annual meeting or until his respective
successor is elected and qualified:
<TABLE>
<CAPTION>
Name Age Mailing Address
- ---------------------------- --- ---------------
<S> <C> <C>
Thomas V. Ackerly 49 P.O. Box 28
Glen Ridge, New Jersey 07028
</TABLE>
THOMAS V. ACKERLY joined the Board of Directors on September 30, 1988 at
which time he was appointed President. Mr. Ackerly holds the same offices in
Harp Investments, Inc., the controlling shareholder of the Company. He
presently devotes a substantial amount of his time to the Company's business.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF FLORIDA AND
DELAWARE
Although it is impractical to compare all of the differences between the
corporation laws of Florida and Delaware the following is a summary of certain
significant differences between the provisions of Florida law applicable to
the Company and those of Delaware law which will be applicable to GS
Financial.
Dividends. A Florida corporation may not make distributions to
shareholders if, after giving it effect, in the judgment of the board of
directors: (a) The corporation would not be able to pay its debts as they
become due in the usual course of business; and (b) The corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed,
if the corporation were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. In
contrast, a Delaware corporation may pay dividends either out of surplus or,
if there is no surplus, and except in very limited circumstances, out of net
profits for the fiscal year in which the dividend is declared or out of net
profits for the preceding fiscal year. In any event, GS Financial does not
anticipate paying dividends in the foreseeable future.
Right to Inspect Books and Records. Under Florida law, any shareholder
upon written demand at least five business days before the date on which the
shareholder wishes to inspect and copy, made "in good faith and for a proper
purpose," may examine the corporation's books and records, including minutes
of meetings, accounting records and the record of shareholders that are
directly connected with the shareholder's purpose. Under Delaware law, any
stockholder of a corporation, regardless of his percentage of ownership, has
the right to inspect the corporation's stock ledger, list of stockholders and
its other books and records, upon a written demand under oath in which the
stockholder states a "proper purpose" for such inspection.
Interested Director Transactions. Under both Florida and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors have an interest are not void or voidable because of such interest
if the contract or transaction is fair to the corporation when authorized or
if it is approved in good faith by the shareholders or by the directors who
are not interested therein after the material facts as to the contract or
transaction and the interest of any interested directors are disclosed. With
certain exceptions, Florida and Delaware law are the same in this area. Under
Florida law, if approval of the Board of Directors is to be relied upon for
this purpose, the contract or transaction may be approved by a majority vote
of a quorum of the directors without counting the vote of the interested
director or directors (except for purposes of establishing quorum). Under
Delaware law, the approval of the board of directors can be obtained for the
contract or transaction by the vote of a majority of the disinterested
directors, even though less than a majority of a quorum. Accordingly, it is
possible that certain transactions that the Board of Directors of the Company
currently might not be able to approve itself because of the number of
interested directors could be approved by a majority of the disinterested
directors of GS Financial, although less than a majority of a quorum. The
Company is not aware of any plans to propose any transaction involving
directors of the Company which could not be approved by the Board of Directors
under Florida law but could be approved by the New Board of Directors under
Delaware law.
Special Meetings of Shareholders. Under Florida law, a special meeting
of shareholders may be called by the Board of Directors or by the holders of
at least 10% of the shares entitled to vote at the meeting or by such other
persons or groups as may be authorized in the articles of incorporation or the
by-laws. Under Delaware law, a special meeting may be called by the board of
directors and only such other persons as are authorized by the certificate of
incorporation or the by-laws. The Certificate of Incorporation of GS
Financial, unlike the Company's By-Laws, provides that a special meeting of
stockholders may be called only by the board of directors or by a committee of
the board of directors which has been duly delegated such authority by the
board of directors and by no other person.
Sequestration of Shares. Delaware law provides that the shares of any
person in a Delaware corporation may be attached or "sequestered" for debts or
other demands. Such provision could be used to assert jurisdiction against a
non-resident holder of the Delaware corporation's shares, thereby compelling
the non-resident holder to appear in an action brought in a Delaware court.
Florida law has no comparable provision.
Certain Actions. Delaware law provides that stockholders have six years
in which to bring an action against directors responsible for the payment of
an unlawful dividend. Under Florida law, all directors voting for or
assenting to an unlawful distribution are jointly and severally liable to the
corporation for the excess of the amount of dividend over what could have been
distributed lawfully. Florida law requires that any action be commenced
within two (2) years after the date of the distribution. Florida law and
Delaware law require that the plaintiff held stock at the time when the
transaction complained of occurred. Under Florida law a successful
shareholder has a statutory right to expenses, including attorney's fee, if
the court so directs. Under Delaware law recovery of fees and expenses by a
successful shareholder is governed by case law.
Tender Offer and Business Combination Statutes. Florida law regulates
tender offers and business combinations involving Florida corporations as well
as certain corporations incorporated outside Florida that conduct business in
Florida. The Florida law provides that any acquisition by a person, either
directly or indirectly, of ownership of, or the power to direct the voting of,
20% or more ("Control Shares") of the outstanding voting securities of a
corporation is a "Control Share Acquisition." A Control Share Acquisition
must be approved by a majority of each class of outstanding voting securities
of such corporation excluding the shares held or controlled by the person
seeking approval before the Control Shares may be voted. A special meeting of
shareholders must be held by the corporation to approve a Control Share
Acquisition within 50 days after a request for such meeting is submitted by
the person seeking to acquire control. If the Control Shares are accorded
full voting rights and the acquiring person has acquired Control Shares with a
majority or more of the voting power of the Corporation, all shareholders
shall have dissenter's rights as provided by applicable Florida law.
Florida law regulates mergers and other business combinations between a
corporation and a shareholder who owns more than 10% of the outstanding voting
shares of such corporation ("Interested Shareholder"). Specifically, any such
merger between a corporation and an Interested Shareholder must be approved by
the vote of the holders of two-thirds of the voting shares of such corporation
excluding the shares beneficially owned by such shareholder. The approval by
shareholders is not required, however, if (i) such merger or business
combination is approved by a majority of disinterested directors, (ii) such
Interested Shareholder is the beneficial owner of at least 90% of the
outstanding voting shares excluding the shares acquired directly from the
subject corporation in a transaction not approved by a majority of
disinterested directors, or (iii) the price paid to shareholders in connection
with a merger or a similar business combination meets the statutory test of
"fairness."
Delaware law regulates hostile takeovers by providing that an "interested
stockholder," defined as a stockholder owning 15% or more of the corporation's
voting stock or an affiliate or associate thereof, may not engage in a
"business combination" transaction, defined to include a merger, consolidation
or a variety of self-dealing transactions with the corporation for a period of
three years from the date on which such stockholder became an "interested
stockholder" unless (a) prior to such date the corporation's board of
directors approved either the "business combination" transaction or the
transaction in which the stockholder became an "interested stockholder', (b)
the stockholder, in a single transaction in which he became an "interested
stockholder," acquires at least 85% of the voting stock outstanding at the
time the transaction commenced (excluding shares owned by certain employee
stock plans and persons who are directors and also officers of the
corporation) or (c) on or subsequent to such date, the "business combination"
transaction is approved by the corporation's board of directors and authorized
at an annual or special meeting of the corporation's stockholders, by the
affirmative vote of at least two-thirds of the outstanding voting stock not
owned by the "interested stockholder."
Thus, the effect of such provision of Delaware law is to prevent any
attempted hostile takeover of a Delaware corporation from being completed for
three years unless (a) at least 85% of the voting shares of the target are
acquired in a single transaction; (b) at least two-thirds of the voting shares
of the target, excluding the shares held by the bidder, vote in favor of the
acquisition; or (c) the corporation opts out of the statutory protection.
Dissenters' Rights. Under Florida laws shareholders may dissent from,
and demand cash payment of the fair value of their shares in respect of, (i) a
merger or consolidation of the corporation, and (ii) a sale or exchange of all
or substantially all of a corporation's assets, including a sale in
dissolution.
Under Delaware law, dissenters' rights are not available with respect to
a sale, lease, exchange or other disposition of all or substantially all of a
corporation's assets or any amendment of its charter, unless such
corporation's charter expressly provides for dissenters' rights in such
instances. The Delaware Certificate contains no such provision. Stockholders
of a Florida corporation have no dissenters' rights in the case of a merger or
consolidation if their shares are either listed on a national securities
exchange or quoted on the NASDAQ National Market System. Stockholders of a
Delaware corporation have no dissenters' rights in the case of a merger or
consolidation if their shares are either listed on a national securities
exchange or held of record by more than 2,000 stockholders or the corporation
is the survivor of a merger that did not require the stockholders to vote for
its approval; provided, however, that dissenters' rights will be available in
such instances, if stockholders are required under the merger or.
consolidation to accept for their shares anything other than shares of stock
of the surviving corporation, shares of stock of a corporation either listed
on a national securities exchange or held of record by more than 2,000
stockholders, cash, in lieu of fractional shares, or any combination of the
foregoing.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Company believes that for federal income tax purposes no gain or loss
will be recognized by the Company, GS Financial or the shareholders of the
Company who receive GS Financial Common Stock for their Company Common Stock
in connection with the Reincorporation. The adjusted tax basis of each whole
share of GS Financial Common Stock received by a shareholder of the Company as
a result of the Reincorporation will be the same as the shareholder's
aggregate adjusted tax basis in the shares of Company Common Stock converted
into such shares of GS Financial Common Stock. A shareholder who holds
Company Common Stock will include in his holding period for the GS Financial
Common Stock that he receives as a result of the Reincorporation his holding
period for the Company Common Stock converted into such GS Financial Common
Stock.
The receipt of cash for any fractional shares of GS Financial Common
Stock or pursuant to the exercise of dissenters' rights, as the fair value for
shares of the Company Common Stock will be a taxable transaction for federal
income tax purposes to shareholders receiving such cash. A shareholder who
receives cash in lieu of fractional shares or in exercise of dissenters rights
will recognize gain of loss measured by the differences between the cash so
received and such shareholder's adjusted tax basis in the shares of the
Company Common Stock exchanged therefor. Such gain or loss will be treated as
a capital gain or loss if the shares of the Company Common Stock are capital
assets in the hands of such shareholders, and will be long-term capital gain
or loss if such shareholder has held shares for more than six months.
BECAUSE OF THE COMPLEXITY OF THE CAPITAL GAINS AND LOSS PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986 AND BECAUSE OF THE UNIQUENESS OF EACH
INDIVIDUALS CAPITAL GAIN OR LOSS SITUATION, SHAREHOLDERS CONTEMPLATING
EXERCISING STATUTORY APPRAISAL RIGHTS SHOULD CONSULT THEIR OWN TAX ADVISOR
REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF EXERCISING SUCH RIGHTS.
STATE, LOCAL OR FOREIGN INCOME TAX CONSEQUENCES TO SHAREHOLDERS MAY VARY FROM
THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE, AND SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISOR AS TO THE CONSEQUENCES TO THEM OF THE
REINCORPORATION UNDER ALL APPLICABLE TAX LAWS.
RIGHTS OF DISSENTING SHAREHOLDERS
Shareholders who have not consented to the Reincorporation and who comply
with the dissenters' rights provisions of the Florida Business Corporation Act
will have the right to be paid in cash the fair value of their Company Common
Stock. Such fair value will be determined as of the close of business on
October 14, 1997, the day before the Majority Holders approved the
Reincorporation by written consent excluding any appreciation or depreciation
directly or indirectly induced by the Reincorporation or the authorization of
it.
In order to receive cash payment for his Company Common Stock, a
dissenting shareholder must comply with the procedures specified by Sections
607.1302 to 607.1320 of the Florida BCA, which are attached as Exhibit "C" to
this information Statement. Any shareholder considering exercising his
dissenters' rights is urged to review Sections 607.1302 and 607.1320
carefully. The following summary of the principal provisions of Sections
607.1302 to 607.1320 is qualified in its entirety by reference to the text
thereof. Further, the following discussion is subject to the possibility that
the Company may abandon the Reincorporation if the Board of directors
determines that in light of the potential liability of the Company that might
result from the exercise of dissenters' rights, the Reincorporation would be
impracticable, undesirable or not in the best interests of the Company's
shareholders. If the Company abandons the Reincorporation, the rights of
dissenting shareholders would terminate and such dissenters would be
reinstated to all of their rights as shareholders.
Any shareholder who wishes to dissent from the Reincorporation and
receive a cash payment for his Company Common Stock, (a) must file with the
Company, prior to the Effective Date, a written objection to the
Reincorporation demanding payment for his Company Common Stock if the
Reincorporation is consummated and setting forth his name, address and the
number of shares of Company Common Stock held by him and (b) must not be one
of the Majority Holders who consented to the Reincorporation.
FAILURE TO FILE THE REQUIRED NOTICE OR DEMAND PRIOR TO THE EFFECTIVE DATE
WILL NOT SATISFY THE NOTICE REQUIREMENTS OF SECTION 607.1320 AND WILL RESULT
IN THE FORFEITURE OF DISSENTERS RIGHTS.
COMMUNICATIONS WITH RESPECT TO DISSENTERS' RIGHTS SHOULD BE ADDRESSED TO
THE COMPANY AT 1101 POST OAK BLVD., SUITE 9, HOUSTON, TEXAS 77056 AND ITS
TELEPHONE NUMBER IS (713) 903-3788.
Upon filing a notice of election to dissent a dissenting shareholder will
cease to have any of the rights of a shareholder except the right to be paid
the fair value of his Company Common Stock pursuant to Section 607.1320. If a
shareholder loses his dissenters' rights, either by withdrawal of his demand,
abandonment of the Reincorporation by the Company or otherwise, he will not
have the right to receive a cash payment for his Company Common Stock and will
be reinstated to all of his rights as a shareholder as they existed at the
time of the filing of his demand.
AT THE TIME OF DEMANDING PAYMENT FOR HIS SHARES OF COMPANY COMMON STOCK,
EACH SHAREHOLDER DEMANDING PAYMENT SHALL SUBMIT THE CERTIFICATE OR
CERTIFICATES REPRESENTING HIS SHARES OF COMPANY COMMON STOCKS FOR NOTATION
THEREON THAT SUCH DEMAND HAS BEEN MADE. FAILURE TO DO SO SHALL, AT THE OPTION
OF THE COMPANY, TERMINATE HIS DISSENTER'S RIGHTS UNLESS A COURT, FOR GOOD
CAUSE, DETERMINES OTHERWISE.
Within 60 days after the Effective Date of the Reincorporation, GS
Financial, as successor to the Company, will give written notice thereof to
each dissenting shareholder who timely filed a demand and will make a written
offer to each such shareholder to pay for his Company Common Stock at a
specified price determined by the Company to be the fair value thereof. If,
within 30 days after the Reincorporation, GS Financial and a dissenting
shareholder agree upon the price to be paid for his Company Common Stock; GS
Financial shall make such payment within 90 days following the effective date
of the Reincorporation, upon surrender by such shareholder to GS Financial of
the certificates representing his Company Common Stock. Upon payment, the
dissenting shareholder shall cease to have any interest in the Company Common
Stock.
If GS Financial and any dissenting shareholder fail to agree upon the
price to be paid for his Company Common Stock within the aforementioned 30-day
period, then within 30 days after receipt of written demand from any
dissenting shareholder given within 60 days after the date the Reincorporation
is effected, GS Financial shall, or at any time within such 60 day period GS
Financial may, file an action in any court of general civil jurisdiction in
the county in Florida where the registered office, of the Company is located,
requesting that the fair value of such Company Common Stock be found and
determined. If GS Financial fails to institute the proceeding within such
60-day period, any dissenting shareholder may institute such proceeding. All
dissenting shareholders, except those who have agreed on the price to be paid
for their Company Common Stock, are required to be made parties to such a
proceeding.
In any such proceeding, the court, at GS Financial's request, will
determine whether or not any particular dissenting shareholder is entitled to
receive payment for his Company Common Stock. If GS Financial does not
request such a determination or if the court finds that a dissenting
shareholder is so entitled, the court, directly or through an appraiser, will
fix the value of the Company Common Stock as of the day prior to the date the
Majority Holders consented to the Reincorporation, excluding any appreciation
or depreciation directly or indirectly induced by the Reincorporation or the
proposal to authorize it. The expenses of any such proceeding, as determined
by the court, shall be assessed against GS Financial, except that the court
may apportion costs to any dissenting shareholder whom it finds to have been
acting arbitrarily, vexatiously or otherwise not in good faith in refusing an
offer by GS Financial.
THE PROVISIONS OF SECTIONS 607.1302 TO 607.1320 ARE TECHNICAL AND
COMPLEX. IT IS SUGGESTED THAT ANY SHAREHOLDER WHO DESIRES TO EXERCISE HIS
RIGHT TO DISSENT CONSULT HIS LEGAL COUNSEL, AS FAILURE TO COMPLY STRICTLY WITH
SUCH PROVISIONS MAY LEAD TO A LOSS OF DISSENTERS RIGHTS.
THE GS FINANCIAL SERVICES, INC. STOCK INCENTIVE PLAN
The board of directors of GS Financial Services, Inc. has approved and
the Majority Holders, who following the Merger and Reincorporation will own a
majority of the outstanding voting stock of GS Financial, have indicated their
intention to, immediately following the Effective Date, approve and adopt by
written consent, the GS Financial Services, Inc. Stock Incentive Plan (the
"Stock Incentive Plan"). The purpose of the Stock Incentive Plan is to
provide deferred stock incentives to certain key employees and directors of GS
Financial and its subsidiaries who contribute significantly to the long-term
performance and growth of GS Financial. The following description of the
Stock Incentive Plan is qualified by the Stock Incentive Plan itself, attached
hereto as Exhibit "D."
GENERAL PROVISIONS OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan will be administered by the New Board of
Directors or a committee of the New Board of Directors duly authorized and
given authority by the New Board of Directors to administer the Stock
Incentive Plan (the New Board of Directors or such designated Committee as
administrator of the Stock Incentive Plan shall be hereinafter referred to as
the "Board"). The Board will have exclusive authority to administer the Stock
Incentive Plan including without limitation, to select the employees to be
granted awards under the Stock Incentive Plan, to determine the type, size and
terms of the awards to be made, to determine the time when awards will be
granted, and to prescribe the form of instruments evidencing awards made under
the Stock Incentive Plan. The Board will be authorized to establish, amend
and rescind any rules and regulations relating to the Stock Incentive Plan as
may be necessary for efficient administration of the Stock Incentive Plan.
Any Board action will require a majority vote of the members of the Board.
Three types of awards are available under the Stock Incentive Plan: (i)
nonqualified stock options or incentive stock, (ii) stock appreciation rights
and (iii) restricted stock. An aggregate of 2,500,000 shares of GS Financial
Common Stock may be issued pursuant to the Stock, subject to adjustment to
prevent dilution dud to merger, consolidation, stock split or other
recapitalization of GS Financial.
The Stock Incentive Plan will not affect the right or power of GS
Financial or its stockholders to make or authorize any major corporate
transaction such as a merger, dissolution or sale of assets. If GS Financial
is dissolved liquidated or merged out of existence, each participant will be
entitled to a benefit as though he became fully vested in all previous awards
to him immediately prior to or concurrently with such dissolution, liquidation
or merger. The Board may provide that an option or stock appreciation right
will be fully exercisable, or that a share of restricted stock will be free of
such restriction upon a change in control of GS Financial.
The Stock Incentive Plan may be amended at any time and from time to time
by the New Board of Directors but no amendment which increases the aggregate
number of shares of GS Financial Common Stock that may be issued pursuant to
the Stock Incentive Plan will be effective unless it is approved by the
stockholders of GS Financial. The Stock Incentive Plan will terminate upon
the earlier of the adoption of a resolution by the New Board of Directors
terminating the Stock Incentive Plan, or ten years from the date of the Stock
Incentive Plan's approval by the Majority Holders.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Stock options are rights to purchase shares of GS Financial Common Stock.
Stock appreciation rights are rights to receive, without payment to GS
Financial, cash and/or shares of GS Financial Common Stock in lieu of the
purchase of shares of GS Financial Common Stock under the stock option to
which the stock appreciation right is attached. The Board may grant stock
options in its discretion under the Stock Incentive Plan. The option price
shall be determined by the Board at the time the option is granted and shall
not be less than the par value of such shares.
The Board will determine the number of shares of GS Financial Common
Stock to be subject to any option awarded. The option will not be
transferable by the recipient except by the laws of descent and distribution.
The option period and date of exercise will be determined by the Board and may
not exceed ten years. The option of any person who dies may be exercised by
his executors, administrators, heirs or distributors if done so within one
year after the date of that person's death with respect to any GS Financial
Common Stock as to which the decedent could have exercised the option at the
time of this death. Upon exercise of an option, the participant may pay for
the GS Financial Common Stock so acquired in cash, with GS Financial Common
Stock (the value of which will be the fair market value at the date of
exercise), in a combination of both cash and GS Financial Common Stock, or, in
the discretion of the Board, by promissory note. For purposes of determining
the amount, if any, of the purchase price satisfied by payment with GS
Financial Common Stock, fan market value in the mean between the highest and
lowest sales price per share of the GS Financial Common Stock on a given day
on the principal exchange upon which the stock trades or some other quotation
source designated by the Board.
The Board may, in its discretion, attach a stock appreciation right to an
option awarded under the Stock Incentive Plan. A stock appreciation right in
exercisable only to the extent that the option to which it is attached is
exercisable. A stock appreciation right entitles the optionee to receive a
payment equal to the appreciated value of each share of GS Financial Common
Stock under option in lieu of exercising the option to which the right is
attached. The appreciated value is the amount by which the fair market value
of a share of GS Financial Common Stock exceeds the option exercise price for
that share of GS Financial Common Stock. A holder of a stock appreciation
right may receive cash, GS Financial Common Stock or a combination of both
upon surrendering to GS Financial the unexercised option to which the stock
appreciation right is attached. The GS Financial must elect its method of
payment within fifteen business days after the receipt of written notice of
an intention to exercise the stock appreciation fight.
Any person granted an incentive stock option under the Stock Incentive
Plan who makes a disposition, within the meaning of 425(c) of the Internal
Revenue Code of 1986, as amended ("Code"), and the regulations promulgated
thereunder, of any shares of GS Financial Common Stock issued to him pursuant
to his exercise of an option within two years from the date of the granting of
such option or within one year after the date any shares are transferred to
him pursuant to the exercise of the incentive stock option must within ten
days of the disposition notify GS Financial and immediately deliver to GS
Financial any amount of federal income tax withholding required by law.
A person to whom a stock option or stock appreciation right is awarded
will have no rights as a stockholder with respect to any shares of GS
Financial Common Stock issuable pursuant to the stock option or stock
appreciation rights until actual issuance of a stock certificate for the GS
Financial Common Stock.
RESTRICTED STOCK
The Board may in its discretion award GS Financial Common Stock that is
subject to certain restrictions on transferability. This restricted stock
issued pursuant to the Stock Incentive Plan may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by the
laws of descent and distribution, for a period of time as determined by the
Board, from the date on which the award is granted. The GS Financial will
have the option to repurchase the shares of restricted GS Financial Common
Stock at such price as the Board shall have fixed, in its sole discretion,
when the award was made, which option will be exercisable at such times and
upon the occurrence of such events as the Board shall establish when the
restricted stock award is granted. The GS Financial may also exercise its
option to repurchase the restricted GS Financial Common Stock if prior to the
expiration of the restricted period, the participant has not paid to GS
Financial amounts required to be withhold pursuant to federal, state or local
income tax laws, Certificates for restricted stock will bear an appropriate
legend referring to the restrictions. A holder of restricted stock may
exercise all rights of ownership incident to such stock including the right to
vote and receive dividends, subject to any limitations the Board may impose.
TAX INFORMATION
A recipient of an incentive stock option or a non-qualified stock option
will not recognize income at the time of the grant of the option. On the
exercise of a non-qualified stock option, the amount by which the fair market
value of the GS Financial Common Stock on the date of exercise exceeds the
option price will generally be taxable to the holder as ordinary income, and
will be deductible for tax purposes by GS Financial. The disposition of GS
Financial Common Stock acquired upon exercise of a non-qualified option will
ordinarily result in capital gain or loss. In the case of officers who are
subject to the restrictions of Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the date for measuring the amount of
ordinary income to be recognized upon the exercise of a non-qualified stock
option will generally be six months after exercise rather than the date of
exercise.
On the exercise of an option that qualifies as an "incentive stock
option" within the meaning of the Code, the holder will not recognize any
income and GS Financial will not be entitled to a deduction for tax purposes.
However, the difference between the exercise price and the fair market value
of the GS Financial Common Stock received on the date of the exercise will be
treated as an "item of tax preference" to the holder that may be subject to
the alternative minimum tax. The disposition of GS Financial Common Stock
acquired upon exercise of an incentive stock option will ordinarily result in
capital gain or loss, however if the holder disposes of GS Financial Common
Stock acquired upon the exercise of an incentive stock option within two years
after the date of grant or one year after the date of exercise (a
"disqualifying disposition"), the holder will recognize ordinary income, and
GS Financial will be entitled to a deduction for tax purposes in the amount of
the excess of the fair market value of the shares of GS Financial Common Stock
on the date the option was exercised over the option price (or, in certain
circumstances, the gain on sale, if less). Otherwise, GS Financial will not
be entitled to any deduction for tax purposes upon disposition of such GS
Financial Common Stock. Any excess of the amount realized by the holder on
the disqualifying disposition over the fair market of the GS Financial Common
Stock on the date of exercise of the option will be capital gain.
If an incentive option is exercised through the use of GS Financial
Common Stock previously owned by the holder, such exercise generally will not
be considered a taxable disposition of the previously owned GS Financial
Common Stock and thus no gain or loss will be recognized with respect to such
GS Financial Common Stock upon exercise. However, if the previously owned GS
Financial Common Stock was acquired by the exercise of an incentive stock
option or other tax qualified stock option and the holding period requirements
for the GS Financial Common Stock were not satisfied at the time the
previously owned GS Financial Common Stock was used to exercise the incentive
option, such use would constitute a disqualifying disposition of such
previously owned GS Financial Common Stock resulting in the recognition of
ordinary income (but, under proposed Treasury regulations, not any additional
gain in capital gain) in the amount described above.
The amount of any cash or the fair market value of any GS Financial
Common Stock received upon the exercise of stock appreciation fights under the
Stock Incentive Plan will be subject to ordinary income tax in the year of
receipt and GS Financial will be entitled to a deduction for such amount.
However, if the holder receives GS Financial Common Stock upon the exercise of
stock appreciation rights and is then subject to the restrictions of Section
16(b) of the Exchange Act; unless the holder elects otherwise, the amount of
Ordinary income and deduction will be measured at the time such restrictions
lapse.
Generally, a grant of restricted stock under the Stock Incentive Plan
will not result in taxable income to the employee or deduction to GS Financial
in the year of the grant. The value of the GS Financial Common Stock will be
taxable to the employee and compensation income in the years in which the
restrictions on the GS Financial Common Stock lapse. Such value will be the
fair market value of the GS Financial Common Stock on the dates the
restrictions terminate, less any amount the recipient may have paid for the GS
Financial Common Stock at the time of the issuance. An employee, however, may
elect to treat the fair market value of the GS Financial Common Stock on the
date of such grant (less restricted stock, provided the employee makes the
election within thirty days after the date of the grant. If such an election
is made and the employee later forfeits the GS Financial S hares to GS
Financial, the employee will not be allowed to deduct at a later date the
amount he had earlier included as compensation income. In any case, GS
Financial will receive a deduction corresponding in amount and time to the
amount of compensation included in the employee's income in the year in which
that amount is so included.
VIEW OF THE NEW BOARD OF DIRECTORS
The New Board of Directors views adoption of the Stock Incentive Plan as
essential to attract and retain qualified persons as employees, officers and
directors of GS Financial and to motivate such employees, officers and
directors to exert their best efforts on behalf of GS Financial. Each of the
directors of GS Financial will be eligible to receive awards under the Stock
Incentive plan and may participate in the granting of such awards.
MARKET FOR THE GRAYSTONE FINANCIAL SERVICES, INC. COMMON STOCK
The Company Common Stock has been thinly traded on a limited and sporadic
basis in the over-the-counter market since November 18, 1986. The last known
high and low bid price was $1.75 as of August 31, 1988. As far as it is known
there has not been any high and low bid price for the years ended May 31, 1997
and May 31, 1996. The following table sets forth the high and low bid price
of the Company Common Stock for the period indicated.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997
------------ ------------
BID ASKED BID ASKED
--- ----- --- -----
LOW HIGH LOW HIGH LOW HIGH LOW HIGH
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First quarter Unknown Unknown Unknown Unknown Unknown Unknown Unknown Unknown
Second quarter Unknown Unknown Unknown Unknown Unknown Unknown Unknown Unknown
Third quarter Unknown Unknown Unknown Unknown Unknown Unknown Unknown Unknown
Fourth quarter Unknown Unknown Unknown Unknown Unknown Unknown Unknown Unknown
</TABLE>
MISCELLANEOUS
The Company requests brokers, custodians, nominees and fiduciaries to
forward this Information Statement to the beneficial owners of Company Common
Stock and the Company will reimburse such holders for their reasonable
expenses in connection therewith. Additional copies of this Information
Statement may be obtained at no charge from the Company by writing to it at
the following address: 1101 Post Oak Blvd., Suite 9, Houston, Texas 77056 and
its telephone number is (713) 903-3788.
EXHIBITS INDEX
A. PLAN AND AGREEMENT OF MERGER
B. DELAWARE CERTIFICATE OF INCORPORATION
C. FLORIDA STATUTES
D. STOCK INCENTIVE PLAN
E. ANNUAL REPORT ON FORM 10-K
A - EXHIBIT A
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (hereinafter referred to as this
"Agreement") dated as of October 15, 1997, is made and entered into by and
between Graystone Financial Services, Inc. a Florida corporation ("Company")
and GS Financial Services, Inc., a Delaware corporation ("GS Financial").
W-I-T-N-E-S-S-E-T-H:
WHEREAS, the Company is a corporation organized and existing under the
laws of the State of Florida; and
WHEREAS, GS Financial is a wholly-owned subsidiary corporation of the
Company, having been incorporated on September 9, 1997; and
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that
the Company shall be merged into GS Financial (the "merger") upon the terms
and conditions hereinafter set forth.
ARTICLE I
Merger
On December 9, 1997 as soon as practicable thereafter (the "Effective
Date"); the Company shall be merged into GS Financial, the separate existence
of the Company shall cease and GS Financial (following the Merger referred to
as "GS Financial") shall continue to exist under the name of "GS Financial
Services, Inc.," by virtue of, and shall be governed by, the laws of the State
of Delaware. The address of the registered office of GS Financial in the
State of Delaware will be The Corporation Trust Company, 1209 Orange Street,
in the City of Wilmington, County of Newcastle, State of Delaware.
ARTICLE II
Certificate of Incorporation of GS Financial
The Certificate of Incorporation of GS Financial Services, Inc. shall be
the Certificate of Incorporation of GS Financial as in effect on the date
hereof without change unless and until amended in accordance with applicable
law.
ARTICLE III
By-Laws of GS Financial
The By-Laws of GS Financial shall be the By-Laws of GS Financial as in
effect on the date hereof without change unless and until amended or repealed
in accordance with applicable law.
ARTICLE IV
Effect of Merger on Stock of Constituent Corporation
4.01 On the Effective Date, (i) each 100 outstanding shares of Company
common stock, $.0001 par value ("Company Common Stock") shall be converted
into one share of GS Financial common stock, $.001 par value, ("GS Financial
Common Stock"), except for those shares of Company Common Stock with respect
to which the holders thereof duly exercise their dissenters' rights under
Florida law, (ii) any fractional GS Financial Common Stock interests to which
a holder of Company Common Stock would be entitled will be canceled with the
holder thereof being entitled to receive $.002 per share of Company Common
Stock not convertible into a whole share of GS Financial Common Stock (the
"Cancellation Price") and (iii) each outstanding share of Company Common Stock
held by the Company shall be retired and canceled and shall resume the status
of an authorized and unissued GS Financial Common Stock.
4.02 All options and rights to acquire Company Common Stock under or
pursuant to any options or warrants which are outstanding on the Effective
Date of the Merger will automatically be converted into equivalent options and
rights to purchase that whole number of GS Financial Common Stock into which
the number of Company Common Stock subject to such options or warrants
immediately prior to the Effective Date would have been converted in the
merger had such rights been exercised immediately prior thereto (with any
fractional GS Financial Common Stock interest resulting from the exercise
being settled in cash in the amount such holder would have received for any
such fraction in the merger had he exercised such warrants or options
immediately prior to the Merger). The option price per share of GS Financial
Common Stock shall be the option price per share of Company Common Stock in
affect prior to the Effective Date. All plans or agreements of the Company
under which such options and rights are granted or issued shall be continued
and assumed by GS Financial unless and until amended or terminated in
accordance with their respective terms.
4.03 (a) Continental Stock Transfer and Trust Company shall act as
exchange agent in the Merger.
(b) Prior to, or as soon as practicable, after the Effective Date, GS
Financial shall mail to each person who was, at the time of mailing or at the
Effective Date, a holder of record of issued and outstanding Company Common
Stock (i) a form letter of transmittal and (ii) instructions for effecting the
surrender of the certificate or certificates, which immediately prior the
Effective Date represented issued and outstanding shares of Company Common
Stock ("Company Certificates"), in exchange for certificates representing GS
Financial Common Stock. Upon surrender of a Company Certificate for
cancellation to GS Financial, together with a duly executed letter of
transmittal, the holder of such Company Certificate shall subject to paragraph
(f) of this section 4.03 be entitled to receive in exchange therefor a
certificate representing that number of GS Financial Common Stock into which
the Company Common Stock theretofore represented by the Company Certificate so
surrendered shall have been converted pursuant to the provisions of this
Article IV; and the Company Certificate so surrendered shall forthwith be
canceled.
(c) No dividends or other distributions declared after the Effective Date
with respect to GS Financial Common Stock and payable to holders of record
thereof after the Effective Date shall be paid to the holder of any
unsurrendered Company Certificate with respect to GS Financial Common Stock
which by virtue of the Merger are represented thereby, nor shall such holder
be entitled to exercise any right as a holder of GS Financial Common Stock;
until such holder shall surrender such Company Certificate. Subject to the
effect, if any, of applicable law and except as otherwise provided in
paragraph (f) of this Section 4.03, after the subsequent surrender and
exchange of a Company Certificate, the holder thereof shall be entitled to
receive any such dividends or other distributions, without any interest
thereon, which became payable prior to such surrender and exchange with
respect to GS Financial Common Stock represented by such Company Certificate.
(d) If any stock certificate representing GS Financial Common Stock is to
be issued in a name other than that in which the Company Certificate
surrendered with respect thereto is registered, it shall be a condition of
such issuance that the Company Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance to a person other than the registered holder of the
Company Certificate surrendered or shall establish to the satisfaction of GS
Financial that such tax has been paid or is not applicable.
(a) After the Effective Date, there shall be no further registration of
transfers on the stock transfer books of the Company of the Shares of Company
Common Stock, or of any other shares of stock of the Company, which were
outstanding immediately prior to the Effective Date. If after the Effective
Date certificates representing such shares are presented to the "GS Financial"
they shall be canceled and, in the case of Company Certificates, exchanged for
certificates representing GS Financial Common Stock and, as appropriate, cash
as provided in this Article IV.
(f) No certificates or scrip representing fractional GS Financial Common
Stock shall be issued upon the surrender for exchange of Company Certificates,
no dividend or distribution of GS Financial shall relate to any fractional GS
Financial Common Stock interest, and no such fractional share interest will
entitle the owner thereof to vote or to any right of a stockholder of GS
Financial. In lieu thereof, GS Financial shall pay to each holder of Company
Common Stock convertible into a fractional interest in GS Financial Common
Stock the Cancellation Price.
ARTICLE V
Corporate Existence, GS Financial and Liabilities of GS Financial
5.01 On the Effective Date, the separate existence of the Company shall
cease. The Company shall be merged with and into GS Financial, GS Financial,
in accordance with the provisions of this Agreement. Thereafter, GS Financial
shall possess all the rights, privileges, powers and franchises as well of a
public as of a private nature, and shall be subject to all the restrictions,
disabilities and duties of each of the parties to this Agreement and all and
singular; the rights, privileges, powers and franchises of the Company and GS
Financial, and all property, real, personal and mixed, and all debts due to
each of them on whatever account, shall be vested in GS Financial; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter an effectually the property of GS Financial, as
they were of the respective constituent entities, and the title to any real
estate whether by deed or otherwise vested in the Company and GS Financial or
either of them, shall not revert to be in any way impaired by reason of the
Merger; but all rights of creditors and all liens upon any property of the
parties hereto, shall be preserved unimpaired, and all debts, liabilities and
duties of the respective constituent entities, shall thenceforth attach to GS
Financial, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
5.02 The Company agrees that it will execute and deliver, or cause to be
executed and delivered, all such deeds, assignments and other instruments, and
will take or cause to be taken such further or other action as GS Financial
may deem necessary or desirable in order to vest in and confirm to GS
Financial title to and possession of all the property, rights, privileges,
immunities, powers, purposes and franchises, and all and every other interest,
of the Company and otherwise to carry out the intent and purposes of this
Agreement.
ARTICLE VI
Officers and Directors of GS Financial
6.01 Upon the Effective Date, the officers and directors of GS Financial
shall be officers and directors of GS Financial in office at such date, and
such persons shall hold office in accordance with the By-Laws of GS Financial
or until their respective successors shall have been appointed or elected.
6.02 If, upon the Effective Date, a vacancy shall exist in the Board of
Directors of GS Financial, such vacancy shall be filled in the manner provided
by its By-Laws.
ARTICLE VII
Approval by Shareholders; Amendment; Effective Date
7.01 This Agreement and the Merger contemplated hereby are subject to
approval by the requisite vote of shareholders in accordance with applicable
Florida law. As promptly as practicable after approval of this Agreement by
shareholders in accordance with applicable law, duly authorized officers of
the respective parties shall make and execute Articles of Merger and a
Certificate of Merger and shall cause such documents to be filed with the
Secretary of State of Florida and the Secretary of State of Delaware,
respectively, in accordance with the laws of the States of Florida and
Delaware. The Effective Date of the Merger shall be the date on which the
Merger becomes effective under the laws of Florida or the date on which the
Merger becomes effective under the laws of Delaware, whichever occurs later.
7.02 The Board of Directors of the Company and GS Financial may amend
this Agreement at any time prior to the Effective Date, provided that an
amendment made subsequent to the approval of the merger by the shareholder of
Company shall not (1) alter or change the amount or kind of shares to be
received in exchange for or on conversion of all or any of the Company Common
Stock (2) alter or change any term of the Certificate of Incorporation of GS
Financial, or (3) alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of
Company Common Stock.
ARTICLE VIII
Termination of Merger
This Agreement may be terminated and the Merger abandoned at any time
prior to the filing of this Agreement with the Secretary of State of Florida
and the Secretary of State of Delaware, whether before or after shareholder
approval of this Agreement, by the consent of the Board of Directors of the
Company and GS Financial.
ARTICLE IX
Miscellaneous
In order to facilitate the filing and recording of this Agreement, this
Agreement may be executed in counterparts, each of which when so executed
shall be deemed to be an original and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, all as of the day and year first above
written.
GRAYSTONE FINANCIAL SERVICES, INC.
A FLORIDA CORPORATION
By:/s/Thomas V. Ackerly
----------------------
Thomas V. Ackerly, President
GS FINANCIAL SERVICES, INC.
A DELAWARE CORPORATION
By:/s/Thomas V. Ackerly
----------------------
Thomas V. Ackerly, President
B - EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
GRAYSTONE FINANCIAL SERVICES, INC.
ARTICLE I
NAME
The name of the Corporation is Graystone Financial Services, Inc.
ARTICLE II
DURATION
The Corporation is to have perpetual existence.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is the
Corporation Trust Center at 1209 Orange Street, in the City of Wilmington,
County of New Castle, State of Delaware. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE IV
PURPOSES
The purpose for which the Corporation is organized is to transact all
lawful business for which corporations may be incorporated pursuant to the
laws of the State of Delaware. The Corporation shall have all the powers of a
corporation organized under the General Corporation Law of the State of
Delaware.
ARTICLE V
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 35,000,000 of which 25,000,000 are to be
shares of common stock, $.001 par value per share, and of which 10,000,000 are
to be shares of serial preferred stock, $.001 par value per share. The shares
may be issued by the Corporation from time to time as approved by the board of
directors of the Corporation without the approval of the stockholders except
as otherwise provided in this Article V or the rules of a national securities
exchange if applicable. The consideration for the issuance of the shares
shall be paid to or received by the Corporation in full before their issuance
and shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the
transaction, the judgment of the board of directors as to the value of such
consideration shall be conclusive. Upon payment of such consideration such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, the part of the surplus of the Corporation which is
transferred to stated capital upon the issuance of shares as a stock dividend
shall be deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series
(if any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Except as provided in this Certificate, the holders
------------
of the common stock shall exclusively posses all voting power. Subject to the
provisions of this Certificate, each holder of shares of common stock shall be
entitled to one vote for each share held by such holders.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class or series of
stock having preference over the common stock as to the payment of dividends,
the full amount of dividends and sinking fund or retirement fund or other
retirement payments, if any, to which such holders are respectively entitled
in preference to the common stock, then dividends may be paid on the common
stock, and on any class or series of stock entitled to participate therewith
as to dividends, out of any assets legally available for the payment of
dividends, but only when and as declared by the board of directors of the
Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having
preference over the common stock in any such event, the full preferential
amounts to which they are respectively entitled, the holders of the common
stock and of any class or series of stock entitled to participate therewith,
in whole or in part, as to distribution of assets shall be entitled, after
payment or provision for payment of all debts and liabilities of the
Corporation, to receive the remaining assets of the Corporation available for
distribution, in cash or in kind.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all
the other shares of common stock of the Corporation.
B. Serial Preferred Stock. Except as provided in this Certificate,
----------------------
the board of directors of the Corporation is authorized, by resolution or
resolutions from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of
the shares of each such series, and the qualifications, limitation or
restrictions thereof, including, but not limited to determination of any of
the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
(2) the rights in respect of dividends, if any, to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment or date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(3) the voting powers, full or limited, if any, of the shares of such
series;
(4) whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions upon which such
shares may be redeemed;
(5) the amount or amounts payable upon the shares of such series in
the event of voluntary or involuntary liquidation, dissolution or winding up
of the Corporation;
(6) whether the shares of such series shall be entitled to the
benefits of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and, if so entitled, the amount of such fund and
the manner of its application, including the price or prices at which such
shares may be redeemed or purchased through the application of such funds;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(8) the subscription or purchase price and form of consideration for
which the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series,
except the times from which dividends on shares which may be issued from time
to time of any such series may begin to accrue.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive
right to purchase or subscribe for any unissued stock of any class or series,
or any unissued bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right to
purchase stock may be issued pursuant to resolution of the board of directors
of the Corporation to such persons, firms, corporations or associations,
whether or not holders thereof, and upon such terms as may be deemed advisable
by the board of directors in the exercise of its sole discretion.
ARTICLE VII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences or indebtedness, or other securities
of the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or
acquisition in question or as are imposed by law.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS; CUMULATIVE VOTING
A. No action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of
stockholders may be effected by written consent of stockholders in lieu of a
meeting of stockholders, unless the action to be effected by written consent
of stockholders and the taking of such action by such written consent have
expressly been approved in advance by the board of directors of the
Corporation.
B. Special meeting of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the board of directors of the
Corporation, or by a committee of the board of directors which as been duly
designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the bylaws of the
Corporation, include the power and authority to call such meetings but such
special meetings may not be called by another person or persons.
C. There shall be no cumulative voting by stockholders of any class
or series in the election of directors of the Corporation.
D. Meetings of stockholders may be held at such place as the bylaws
may provide.
ARTICLE IX
NOTICE FOR NOMINATIONS AND PROPOSALS
A. Nominations for the election of directors and proposals for any
new business to be taken up at any annual or special meeting of stockholders
may be made by the board of directors of the Corporation or by any stockholder
of the Corporation entitled to vote generally in the election of directors.
In order for a stockholder of the Corporation to make any such nominations
and/or proposals at an annual meeting or such proposals at a special meeting,
he or she shall give notice thereof in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary of the Corporation
of less than thirty days nor more than sixty days prior to any such meeting;
provided, however, that if less than forty days' notice of the meeting is
given to stockholders, such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later than the close of
the tenth day following the day on which notice of the meeting was mailed to
stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors shall set forth (1) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (2) the principal occupation or employment of each such nominee,
and (3) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee. In addition, the stockholder making
such nomination shall promptly provide any other information reasonably
requested by the Corporation.
B. Each such notice given by a stockholder to the Secretary with
respect to business proposals to bring before a meeting shall set forth in
writing as to each matter: (1) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting; (2) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business; (3) the class and number of
shares of the Corporation which are beneficially owned by the stockholder; and
(4) any material interest of the stockholder in such business.
Notwithstanding anything in this Certificate to the contrary, no business
shall be conducted at the meeting except in accordance with the procedures set
forth in this Article.
C. The Chairman of the annual or special meeting of stockholders may,
if the facts warrant, determine and declare to such meeting that a nomination
or proposal was not made in accordance with the foregoing procedure, and, if
he should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the
next succeeding adjourned, special or annual meeting of the stockholders
taking place thirty days or more thereafter. This provision shall not require
the holding of any adjourned or special meeting of stockholders for the
purpose of considering such defective nomination or proposal.
ARTICLE X
DIRECTORS
A. Number; Vacancies. The number of directors of the Corporation
-----------------
shall be such number, not less than one nor more than 15 (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation), as shall be provided from time to time in a resolution adopted
by the board of directors, provided that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director, and provided further that no action shall be taken to decrease or
increase the number of directors from time to time unless at least two-thirds
of the directors then in office shall concur in said action. Exclusive of
directors, if any, elected by holders of preferred stock, vacancies in the
board of directors of the Corporation, however caused, and newly created
directorships shall be filled by a vote of two-thirds of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
the class to which the director has been chosen expires and when the
director's successor is elected and qualified. The board of directors shall
be classified in accordance with the provisions of Section B of this Article
X.
B. Classified Board. The board of directors of the Corporation
-----------------
(other than directors which may be elected by the holders of preferred stock),
shall be divided into three classes of directors which shall be designated
Class I, Class II and Class III. The members of each class shall be elected
for a term of three years and until their successors are elected and
qualified. Such classes shall be as nearly equal in number as the then total
number of directors constituting the entire board of directors shall permit,
exclusive of directors, if any, elected by holders of preferred stock, with
the terms of office of all members of one class expiring each year. Should
the number of directors not be equally divisible by three, the excess director
or directors shall be assigned to Classes I or II as follows: (1) if there
shall be an excess of one directorship over the number equally divisible by
three, such extra directorship shall be classified in Class I; and (2) if
there be an excess of two directorships over a number equally divisible by
three, one shall be classified in Class I and the other in Class II. At the
organizational meeting of the Corporation, directors of Class I shall be
elected to hold office for a term expiring at the first annual meeting of
stockholders, directors of Class II shall be elected to hold office for a term
expiring at the second succeeding annual meeting of stockholders and directors
of Class III shall be elected to hold office for a term expiring at the third
succeeding annual meeting thereafter. Thereafter, at each succeeding annual
meeting, directors of each class shall be elected for three year terms.
Notwithstanding the foregoing, the director whose term shall expire at any
annual meeting shall continue to serve until such time as his successor shall
have been duly elected and shall have qualified unless his position on the
board of directors shall have been abolished by action taken to reduce the
size of the board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the position(s)
to be abolished. Notwithstanding the foregoing, no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Should the number of directors of the Corporation be increased,
other than directors which may be elected by the holders of preferred stock,
the additional directorships shall be allocated among classes as appropriate
so that the number of directors in each class is as specified in the
immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the board of directors shall include
said directors so elected and not be in addition to the number of directors
fixed as provided in this Article X. Notwithstanding the foregoing, and
except as otherwise may be required by law, whenever the holders of any one or
more series of preferred stock of the Corporation elect one or more directors
of the Corporation, the terms of the director or directors elected by such
holders shall expire at the next succeeding annual meeting of stockholders.
ARTICLE XI
REMOVAL OF DIRECTORS
Notwithstanding any other provision of this Certificate or the bylaws of
the Corporation, any director or all the directors of a single class (but not
the entire board of directors) of the Corporation may be removed, at any time,
but only for cause and only by the affirmative vote of the holders of at least
75% of the voting power of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose. Notwithstanding the foregoing, whenever
the holders of any one or more series of preferred stock of the Corporation
shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the preceding provisions of this Article XI
shall not apply with respect to the director or directors elected by such
holders of preferred stock.
ARTICLE XII
ACQUISITION OF CAPITAL STOCK
A. For the purpose of this Article:
(1) The term "Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor statute.
(2) The term "acting in concert" shall mean (i) knowing participation
in a joint activity or conscious parallel action towards a common goal whether
or not pursuant to an express agreement, and (ii) a combination or pooling of
voting or other interest in the Corporation's outstanding shares of capitol
stock for a common purpose, pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
(3) The term "acquire," "acquisition" or "acquiring" with respect to
the acquisition of any security of the Corporation shall refer to the
acquisition of such security by any means whatsoever, including without
limitation, an acquisition of such security by gift, by operation of law, by
will or by intestacy, whether voluntarily or involuntarily.
(4) The term "Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute.
(5) The term "Common Stock" means all Common Stock of the Corporation
and any other securities issued by the Corporation (other than the Warrants)
which are treated as stock for purposes of Section 382 of the Code.
(6) The term "Fair Market Value" of the Common Stock shall mean the
average of the daily closing prices of the Common Stock for 15 consecutive
trading days commencing 20 trading days before the date of such computation
The closing price is the last reported sale price on the principal securities
exchange on which the Common Stock is listed or, if the Common Stock is not
listed on any national securities exchange, the NASDAQ National Marked System,
or, if the Common Stock is not designated for trading on the NASDAQ National
Market System, the average of the closing bid and asked prices as reported on
NASDAQ or, if not so reported, as furnished by the National Quotation Bureau
Incorporated. In the absence of such a quotation, the Corporation shall
determine the current market rice on a reasonable and appropriate basis of the
average of the daily closing prices for 15 consecutive trading days commencing
20 trading days before the date of such computation.
(7) The term "own," "owing," "ownership" or "owning" refer to the
ownership of securities within the meaning of Section 382 of the Code after
taking into account the attribution rules of Section 382(l)(3) of the Code and
the regulations promulgated hereunder (except insofar as such attribution
would be inconsistent with provisions of this Article XII relating to
Warrants).
(8) The term "Person" shall mean any individual, firm, corporation,
partnership, joint venture or other entity and shall include any group
composed of such person and any other person with whom such person or any
Affiliate or Associate (as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Act) of such person has any agreement,
arrangement or understanding, directly or indirectly, for the purposes of
acquiring, holding, voting or disposing of Common Stock or Warrants, and any
other person who is a member of such group.
(9) The term "Transfer Agent" shall mean the transfer agent with
respect to the Common Stock nominated and appointed by the Board of Directors
from time to time.
(10) The term "Warrant" shall mean any securities issued or assumed
by the Corporation, or any securities issuable by the Corporation in respect
to issued securities which are convertible into, or which include the right to
acquire, shares of Common Stock, whether or not the right to make such
conversion or acquisition is subject to any contingencies, including, without
limitation, warrants, options, calls, contracts to acquire securities,
convertible debt instruments or any other interests treated as an option
pursuant to Section 382(l)(3) of the Code.
(11) The term "Warrant Agent" shall mean any warrant agent for any
Warrants nominated and appointed by the Board of Directors from time to time.
B. (1) If, at any time during the ten years from the effective
date of this Certificate, any Person shall acquire the beneficial ownership
(as determined pursuant to Rules 13d-3 and 13d-5 under the Act) of more than
20% of any class of Common Stock, then the record holders of Common stock
beneficially owned by such acquiring Person shall have only the voting rights
set forth in this paragraph B on any matter requiring their vote or consent.
With respect to each vote in excess of 20% of the voting power of the
outstanding shares of Common Stock which such record holders would otherwise
be entitled to cast without giving effect to this paragraph B, the record
holders in the aggregate shall be entitled to cast only one-hundredth of a
vote. A Person who is a record owner of shares of Common Stock that are
beneficially owned simultaneously by more than one person shall have, with
respect to such shares, the right to cast the least number of votes that such
person would be entitled to cast under this paragraph B by virtue of such
shares being so beneficially owned by any of such acquiring Persons. The
effect of the reduction in voting power required by this paragraph B shall be
given effect in determination the presence of a quorum for purposes of
convening a meeting of the stockholders of the Corporation
(2) The limitation on voting rights prescribed by this paragraph B
shall terminate and be of no force and effect as of the earliest to occur of:
(i) the date that any person becomes the beneficial owner of shares
of stock representing at least 75% of the total number of votes entitled to be
cast in respect of all outstanding shares of stock, before giving effect to
the reduction in votes prescribed by this paragraph B; or
(ii) the date (the "Reference Date") one day prior to the date on
which, as a result of such limitation of voting rights, the Common Stock will
be delisted from (including by ceasing to be temporarily or provisionally
authorized for listing with) the New York Stock Exchange (the "NYSE") or the
American Stock Exchange (the "AMEX"), or be no longer authorized for inclusion
(including by ceasing to be provisionally or temporarily authorized for
inclusion) on the National Association of Securities Dealers, Inc. Automated
Quotation System/National Market System ("NASDAQ/NMS"); provided, however,
that (a) such termination shall not occur until the earlier of (x) the 90th
day after the Reference Date or (y) the first day on or after a Reference Date
that there is not pending a proceeding under the rules of the NYSE, the AMEX
or the NASDAQ/NMS or any other administrative or judicial proceeding
challenging such delisting or removal of authorization of the Common Stock, an
application for listing of the Common stock with the NYSE or the AMEX or for
authorization for the Common Stock to be including on the NASDAQ/NMS, or an
appeal with respect to any such application, and (b) such termination shall
not occur by virtue of such delisting or lack of authorization if on or prior
to the earlier of the 90th day after the Reference Date or the day on which no
proceeding, application or appeal of the type described in (y) above is
pending, the Common Stock is approved for listing or continued listing on the
NYSE or the AMEX or authorized for inclusion or continued inclusion on the
NASDAQ/NMS (including any such approval or authorization which is temporary or
provisional). Nothing contained herein shall be construed so as to prevent
the Common Stock from continuing to be listed with the NYSE or AMEX or
continuing to be authorized for inclusion on the NASDAQ/NMS in the event that
the NYSE, AMEX or NASDAQ/NMS, as the case may be, adopts a rule or is governed
by an order, decree, ruling or regulation of the Securities and Exchange
Commission which provides in whole or in part that companies having common
stock with differential voting rights listed on the NYSE or the Amex or
authorized for inclusion on the NASDAQ/NMS may continue to be so listed or
included.
C. The restrictions contained in this Article XII shall not apply to
(1) any underwriter or member of an underwriting or selling group involving a
public sale or resale of securities of the Corporation or a subsidiary
thereof; provided, however, that upon completion of the sale or resale of such
securities, no such underwriter or member of such selling group is a
beneficial owner of more than 4.9% of any class of equity security of the
Corporation, (2) any revocable proxy granted pursuant to a proxy solicitation
in compliance with section 14 of the Act by a stockholder of the Corporation
or (3) any employee benefit plans of the Corporation. In addition, the
Continuing Directors of the Corporation, the officers and employees of the
Corporation and its subsidiaries, the directors of subsidiaries of the
Corporation, the employee benefit plans of the Corporation and its
subsidiaries, entities organized or established by the Corporation or any
subsidiary thereof pursuant to the terms of such plans and trustees and
fiduciaries with respect to such plans acting in such capacity shall not be
deemed to be a group with respect to their beneficial ownership of voting
stock of the Corporation solely by virtue of their being directors, officers
or employees of the Corporation or a subsidiary thereof or by virtue of the
Continuing Directors of the Corporation, the officers and employees of the
Corporation and its subsidiaries and the directors of subsidiaries of the
Corporation being fiduciaries or beneficiaries of an employee benefit plan of
the Corporation or a subsidiary of the Corporation. Notwithstanding the
foregoing, no director, officer or employee of the Corporation or any of its
subsidiaries or group of any of them shall be exempt from the provisions of
this Article XII should any such person or group become a beneficial owner of
more than 20% of any class of equity security of the Corporation.
D. A majority of the Continuing Directors, as defined in Article
XIII, shall have the power to construe and apply the provisions of paragraphs
B, C and D of this Article XII and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (1) the number of shares beneficially owned by any person, (2)
whether a person has an agreement, arrangement or understanding with another
as to the matters referred to in the definition of beneficial ownership, (3)
the application of any other definition or operative provision of this Article
XII to the given facts or (4) any other matter relating to the applicability
or effect of paragraphs B, C and D of this Article XII. Any constructions,
applications, or determinations made by the Continuing Directors pursuant to
paragraphs B, C and D of this Article XII in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Corporation and its
stockholders.
E. All certificates evidencing ownership of Common Stock or ownership
of Warrants of the Corporation shall bear a conspicuous legend in compliance
with the General Corporation Law of Delaware describing the restrictions on
transfers set forth in this Article XII.
F. If any provision of this Article XII or any application of any
such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be
affected only to the extent necessary to comply with the determination of such
court.
ARTICLE XIII
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. (1) Except as otherwise expressly provided in this Article
XIII, and in addition to any other vote required by law, the affirmative vote
required by law, the affirmative vote of the holders of (i) at least 75% of
the voting power of the outstanding shares entitled to vote thereon (and, if
any class or series of shares is entitled to vote thereon separately the
affirmative vote of the holders of at least 75% of the outstanding shares of
each such class or series), and (ii) at least a majority of the outstanding
shares entitled to vote thereon, not including shares deemed beneficially
owned by a Related Person (as hereinafter defined), shall be required in order
to authorize any of the following:
(a) any merger or consolidation of the Corporation or a subsidiary of
the Corporation with or into a Related person (as hereinafter defined);
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or pledge, of all or any Substantial
Part (as hereinafter defined) of the assets of the Corporation (including
without limitation any voting securities of a subsidiary) or of a subsidiary,
to a Related Person;
(c) any merger or consolidation of a Related Person with or into the
Corporation or a subsidiary of the Corporation;
(d) any sale, lease, exchange, transfer or other disposition of all
or any Substantial Part of the assets of a Related Person to the Corporation
or a subsidiary of the Corporation;
(e) the issuance of any securities of the Corporation or a subsidiary
of the Corporation to a Related Person other than on a pro rata basis to all
holders of capital stock of the Corporation of the same class or classes held
by the Related person, pursuant to a stock split, stock dividend or
distribution or warrants or rights, and other than in connection with the
exercise or conversion of securities exercisable for or convertible into
securities of the Corporation or any of its subsidiaries which securities have
been distributed pro rata to all holders of capital stock of the Corporation;
(f) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities of a Related Person;
(g) any reclassification of the common stock of the Corporation, or
any recapitalization involving the common stock of the Corporation or any
similar transaction (whether or not with or into or otherwise involving a
Related Person) that has the effect directly or indirectly, of increasing by
more than 1% the proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any subsidiary that are
directly or indirectly owned by any Related Person; and
(h) any agreement, contract or other arrangement providing for any of
the transactions described in this Article XIII.
(2) Such affirmative vote shall be required notwithstanding any other
provision of this Certificate, any provision of law, or any agreement with any
regulatory agency or national securities exchange which might otherwise permit
a lesser vote or no vote; provided, however, that in no instance shall the
provisions of this Article XIII require the vote of greater than 85% of the
voting power of the outstanding shares entitled to vote thereon for the
approval of a Business Combination.
(3) The term "Business Combination" as used in this Article XIII
shall mean any transaction which is referred to in any one or more of
subparagraphs A(1)(a) through (h) above.
B. The provisions of paragraph A shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by any other provision of this
Certificate, any provision of law, or any agreement with any regulatory agency
or national securities exchange, if the Business Combination shall have been
approved in advance by a two-thirds vote of the Continuing Directors (as
hereinafter defined; provided, however, that such approval shall only be
effective if obtained at a meeting at which a continuing Director Quorum (as
hereinafter defined) is present.
C. For the purposes of this Article XIII the following definitions
apply:
(1) The term "Related Person" shall mean and include (i) any
individual, corporation, partnership or other person or entity which together
with its "affiliates" or "associates" (as those terms are defined in the Act)
"beneficially owns" (as that there is defined in the Act) in the aggregate 10%
or more of the outstanding shares of the common stock of the Corporation; and
(ii) any "affiliate" or "associate" (as those terms are defined in the Act) of
any such individual, Corporation, partnership or other person or entity;
provided, however, that the term "Related Person" shall not include the
Corporation, any subsidiary of the Corporation, any employee benefit plan,
employee stock plan of the Corporation or of any subsidiary of the
Corporation, or any trust established by the Corporation in connection with
the foregoing, or any person or entity organized, appointed, established or
holding shares of capital stock of the Corporation for or pursuant to the
terms of any such plan, nor shall such term encompass shares of capital stock
of the Corporation held by any of the foregoing (whether or not held in a
fiduciary capacity or otherwise). Without limitation, any shares of the
common stock of the Corporation which any Related Person has the right to
acquire pursuant to any agreement, or upon exercise or conversion rights,
warrants or options, or otherwise, shall be deemed "beneficially owned" by
such Related Person.
(2) The term "Substantial Part" shall mean more than 25% of the total
assets of the entity at issue, as of the end of its most recent fiscal year
ending prior to the time the determination is made.
(3) The term "Continuing Director" shall mean any member of the board
of directors of the Corporation who is unaffiliated with and who is not the
Related Person and was a member of the board prior to the time that the
Related Person became a Related Person, and any successor of a Continuing
Director who is unaffiliated with and who is not the Related Person and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the board.
(4) The term "Continuing Director Quorum" shall mean two-thirds of
the Continuing Directors capable of exercising the powers conferred on them.
ARTICLE XIV
EVALUATION OF BUSINESS COMBINATIONS
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and of the stockholders, when evaluating
a Business Combination (as defined in Article XIII) or a tender or exchange
offer, the board of directors of the Corporation shall, in addition to
considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant; (A) the social and economic effects of the transaction on
the Corporation and its subsidiaries, employees and customers, creditors and
other elements of the communities in which the Corporation and its
subsidiaries operate or are located; (B) the business and financial condition
and earnings prospects of the acquiring person or entity, including, but not
limited to, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the acquisition and other likely
financial obligations of the acquiring person or entity and the possible
effect of such conditions upon the Corporation and its subsidiaries and the
other elements of the communities in which the Corporation and its
subsidiaries operate or are located; and (C) the competence, experience, and
integrity of the acquiring person or entity and its or their management.
ARTICLE XV
INDEMNIFICATION
Any person who was or is a party or is threatened to be made a party to
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (whether or not by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, incorporator, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
incorporator, employee, partner, trustee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise (including an employee
benefit plan), shall be entitled to be indemnified by the corporation to the
full extent then permitted by law against expenses (including counsel fees and
disbursements), judgments, fines (including excise taxes assessed on a person
with respect to an employee benefit plan), and amounts paid in settlement
incurred by him in connection with such action, suit, or proceeding. Such
right of indemnification shall inure whether or not the claim asserted is
based on matters which antedate the adoption of this Article XV. Such right
of indemnification shall continue as to a person who has ceased to be a
director, officer, incorporator, employee, partner, trustee, or agent and
shall inure to the benefit of the heirs and personal representatives of such a
person. The indemnification provided by this Article XV shall not be deemed
exclusive of any other rights which may be provided now or in the future under
any provision currently in effect or hereafter adopted of the bylaws, by any
agreement, by vote of stockholders, by resolution of disinterested directors,
by provisions of law, or otherwise.
ARTICLE XVI
LIMITATIONS ON DIRECTORS' LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (A) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (B) for acts or omissions that
are not in good faith or that involve intentional misconduct or a knowing
violation of law, (C) under Section 174 of the General Corporation Law of the
State of Delaware, or (D) for any transaction from which the director derived
any improper personal benefit. If the General Corporation law of the State of
Delaware is amended after the date of filing of this Certificate to further
eliminate or limit the personal liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as
so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
ARTICLE XVII
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of the Corporation by a vote of
two-thirds of the board of directors. Notwithstanding any other provision of
this Certificate or the bylaws of the Corporation, and in addition to any
affirmative vote required by law (and notwithstanding the fact that some
lesser percentage may be specified by law), the bylaws shall be adopted,
repealed, altered, amended or rescinded by the stockholders of the Corporation
only by the vote of the holders of not less than 75% of the voting power of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting), or, as set forth above,
by the board of directors.
ARTICLE XVIII
AMENDMENT OF CERTIFICATE OF INCORPORATION
Subject to the provisions hereof, the Corporation reserves the right to
repeal, alter, amend or rescind any provision contained in this Certificate in
the manner now or hereafter prescribed by law, and all rights conferred on
stockholders herein are granted subject to this reservation. Notwithstanding
the foregoing at any time and from time to time, the provisions set forth in
Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI, XVII and this Article XVIII
may be repealed, altered, amended or rescinded in any respect only if the same
is approved by the affirmative vote of the holders of not less than 75% of the
voting power of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as a single class) cast at a meeting of the stockholders called for
that purpose (provided that notice of such proposed adoption, repeal,
alteration, amendment or rescission is included in the notice of such
meeting).
ARTICLE XIX
The name and address of the incorporator is:
Danyel Owens
770 South Post Oak Lane
Suite 435
Houston, Texas 77056
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation pursuant to the General Corporation Law of Delaware, does make and
file this Certificate of Incorporation, hereby declaring and certifying that
the facts herein stated are true, and accordingly have hereunto set my hand
this 8th day of September, 1997.
/s/Danyel Owens
----------------
Danyel Owens
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
GRAYSTONE FINANCIAL SERVICES, INC.
FIRST: That Article I of the Certificate of Incorporation be and it hereby
is amended to read as follows:
RESOLVED, that the Certificate of Incorporation of Graystone Financial
Services, Inc. be amended by changing the First Article thereof so that, as
amended, said Article shall be and read as follows:
The name of the Corporation is GS Financial Services, Inc.
SECOND: That the corporation has not received any payment for any of its
stock.
THIRD: That the amendment was duly adopted in accordance with the
provisions of section 241 of the General Corporation Law of the State of
Delaware.
EXECUTED this 15th day of October, 1997.
/s/Danyel Owens
- ----------------
Danyel Owens, Incorporator
C - EXHIBIT C
FLORIDA STATUTES
607.1301. DISSENTERS' RIGHTS; DEFINITIONS
The following definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value" with respect to a dissenter's shares, means the
value of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on
which the corporation received written consents without a meeting from the
requisite number of shareholders in order to authorize the action, or, in the
case of a merger pursuant to s. 607.1104, the day prior to the date on which a
copy of the plan of merger was mailed to each shareholder of record of the
subsidiary corporation.
607.1302. RIGHT OF SHAREHOLDERS TO DISSENT
(1) Any shareholder of a corporation has the right to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its parent
under s. 507.1104, and the shareholders would have been entitled to vote on
action taken, except for the applicability of s. 607.1104;
(b) 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
pursuant to s. 607.1202, 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;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his shares;
2. Altering or abolishing the voting rights pertaining to any of his
shares, except as such rights may be affected by the voting rights of new
shares then being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification of any of
his shares, when such exchange, cancellation, or reclassification would alter
or abolish his voting rights or alter his percentage of equity in the
corporation, or effecting a reduction or cancellation of accrued dividends or
other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking fund for
the redemption or purchase of any of his shares, or making any of his shares
subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any of his
preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his preferred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in
paragraph (1)(e) has the right to dissent only as to those of his shares which
are adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares
registered in his name. In that event, his rights shall be determined as if
the shares as to which he has dissented and his other shares were registered
in the names of different shareholders.
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share exchange or a
proposed sale or exchange of property, to the holders of shares of any class
or series which, on the record date fixed to determine the shareholders
entitled to vote at the meeting of shareholders at which such action is to be
acted upon or to consent to any such action without a meeting, were either
registered on a national securities exchange or held of record by not fewer
than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his
shares under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
(1)(a) If a proposed corporate action creating dissenters' rights under
s. 607.1302 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights and be accompanied by a copy of ss. 607.1301, 607.1302, and
607.1320. A shareholder who wishes to assert dissenters' rights shall:
1. 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
2. Not vote his shares in favor of the proposed action. A proxy or
vote against the proposed action does not constitute such a notice of intent
to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the corporation
shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each
shareholder simultaneously with any request for his written consent or, if
such a request is not made, within 10 days after the date the corporation
received written consents without a meeting from the requisite number of
shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to
paragraph (1)(a) or, in the case of action authorized by written consent, to
each shareholder, excepting any who voted for, or consented in Writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder
who elects to dissent shall file with the corporation a notice of such
election, stating his name and address, the number, classes, and series of
shares as to which he dissents, and a demand for payment of the fair value of
his shares. Any shareholder failing to file such election to dissent within
the period set forth shall be bound by the terms of the proposed corporate
action. Any shareholder filing an election to dissent shall deposit his
certificates for certificated shares with the corporation simultaneously with
the filing of the election to dissent. The corporation may restrict the
transfer of uncertificated shares from the date the shareholder's election to
dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder
shall thereafter be entitled only to payment as provided in this section and
shall not be entitled to vote or to exercise any other rights of a
shareholder. A notice of election may be withdrawn in writing by the
shareholder at any time before an offer is made by the corporation, as
provided in subsection (5), to pay for his shares. After such offer, no such
notice of election may be withdrawn unless the corporation consents thereto.
However, the right of such shareholder to be paid the fair value of his shares
shall cease, and he shall be reinstated to have all his rights as a
shareholder as of the filing of his notice of election, including any
intervening preemptive rights and the right to payment of any intervening
dividend or other distribution or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu
thereof, at the election of the corporation, the fair value thereof in cash as
determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder who has made demand
as provided in this section to pay an amount the corporation estimates to be
the fair value for such shares. If the corporate action has not been
consummated before the expiration of the 90-day period after the shareholders'
authorization date, the offer may be made conditional upon the consummation of
such action. Such notice and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was not
in existence throughout such 12-month period. for the portion thereof during
which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after
the making of such offer or the consummation of the proposed action, whichever
is later. Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any
dissenting shareholder or shareholders fail to accept the same within the
period of 30 days thereafter, then the corporation, within 30 days after
receipt of written demand from any dissenting shareholder given within 60 days
after the date on which such corporate action was effected, shall, or at its
election at any time within such period of 60 days may, file an action in any
court of competent jurisdiction in the county in this state where the
registered office of the corporation is located requesting that the fair value
of such shares be determined. The court shall also determine whether each
dissenting shareholder, as to whom the corporation requests the court to make
such determination, is entitled to receive payment for his shares. If the
corporation fails to institute the proceeding as herein provided, any
dissenting shareholder may do so in the name of the corporation. All
dissenting shareholders (whether or not residents of this state), other than
shareholders who have agreed with the corporation as to the value of their
shares, shall be made parties to the proceeding as an action against their
shares. The corporation shall serve a copy of the initial pleading in such
proceeding upon each dissenting shareholder who is a resident of this state in
the manner provided by law for the service of a summons and complaint and upon
each nonresident dissenting shareholder either by registered or certified mail
and publication or in such other manner as is permitted by law. The
jurisdiction of the court is plenary and exclusive. All shareholders who are
proper parties to the proceeding are entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may,
if it so elects, appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The appraisers shall
have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each
dissenting shareholder the amount found to be due him within 10 days after
final determination of the proceedings. Upon payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair
rate of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined
by the court and shall be assessed against the corporation, but all or any
part of such costs and expenses may be apportioned and assessed as the court
deems equitable against any or all of the dissenting shareholders who are
parties to the proceeding, to whom the corporation has made an offer to pay
for the shares, if the court finds that the action of such shareholders in
failing to accept such offer was arbitrary, vexatious, or not in good faith.
Such expenses shall include reasonable compensation for, and reasonable
expenses of, the appraisers, but shall exclude the fees and expenses of
counsel for, and experts employed by, any party. If the fair value of the
shares, as determined, materially exceeds the amount which the corporation
offered to pay therefor or if no offer was made, the court in its discretion
may award to any shareholder who is a party to the proceeding such sum as the
court determines to be reasonable compensation to any attorney or expert
employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the
agreed value thereof or pursuant to payment of the judgment entered therefor,
as provided in this section, may be held and disposed of by such corporation
as in the case of other treasury shares, except that, in the case of a merger,
they may be held and disposed of as the plan of merger otherwise provides.
The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the
surviving corporation.
D - 8 EXHIBIT D
GS FINANCIAL SERVICES, INC.
STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this Stock Incentive Plan (the "Plan") is to advance the
interests of GS Financial Services, Inc. (the "Company") and its stockholders
by providing deferred stock incentives in addition to current compensation to
certain key executives and certain directors of the Company and of its
subsidiaries who contribute significantly to the long-term performance and
growth of the Company and such subsidiaries. As used in this Plan, subsidiary
includes parent of the Company and any subsidiary of the Company within the
meaning of Sections 425(e) and (f) of the Internal Revenue Code of 1986, as
amended ("Code"), respectively.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company (the
"Board of Directors") or a committee of the Board of Directors duly authorized
and given authority by the Board of Directors to administer the Plan (the
Board of Directors or such duly authorized committee hereinafter referred to
as the "Board"), as such is from time to time constituted.
The Board shall have all the powers vested in it by the terms of the Plan,
such powers to include exclusive authority (within the limitation described
herein) to select the employees to be granted Awards under the Plan, to
determine the type, size and terms of the Awards to be made to each employee
selected, to determine the time when Awards will be granted, and to prescribe
the form of the instruments evidencing Awards made under the Plan. The Board
shall be authorized to interpret the Plan and the Awards granted under the
Plan, to establish, amend and rescind any rules and regulations relating to
the Plan, and to make any other determinations which it believes necessary or
advisable for the administration of the Plan. The Board may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Award in the Manner and to the extent the Board deems desirable to carry
it into effect. Any decision of the Board in the administration of the Plan,
as described herein, shall be final and conclusive. The Board may act only by
a majority of its members in office, except that the members thereof may
authorize any one or more of their number of any officer of the Company to
execute and deliver documents on behalf of the Board. No member of the Board
shall be able for anything done or omitted to be done by him or by any other
member of the Board in connection with the Plan, except for his own willful
misconduct or as expressly provided by statute.
3. PARTICIPATION
Subject to the provisions of the Plan, the Board shall have exclusive power to
select the directors and officers and other key employees of the Company and
its subsidiaries participating in the Plan to be granted Awards under the
Plan.
4. AWARDS UNDER THE PLAN
(a) TYPE OF AWARDS.Awards under the Plan may be of three types: (i)
---------------
"Non-qualified Stock Options" or "Incentive Stock Options," (ii) "Stock
Appreciation Rights" attached to Stock Options, or (iii) "Restricted Stock."
Stock Options are rights to purchase shares of Common Stock of the Company
having a par value of $.001 per share (the "Common Stock"). Stock
Appreciation Rights are rights to receive, without payment to the Company,
cash and/or shares of Common Stock in lieu of the purchase of shares of Common
Stock under the Stock Option to which the Stock Appreciation Rights are
subject to the terms, conditions and restrictions specified in Paragraph 5.
Restricted Stock is a share of Common Stock which is subject to the repurchase
option and the other terms, conditions and restrictions described in Paragraph
6.
(b) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED.There may be issued
----------------------------- --------------
under the Plan (as Restricted Stock or pursuant to the exercise of Stock
Options or Stock Appreciation Rights) an aggregate of not more than 2,500,000
shares of Common Stock, subject to adjustment as provided in Paragraph 8. In
addition to Common Stock actually so issued, there shall be deemed to have
been issued pursuant to the Plan (and therefore no longer available in
connection with Awards) a number of shares equal to the aggregate of the
number of shares of Common Stock under option in respect of which Stock
Appreciation Rights granted pursuant to subparagraph 5(f) shall have been
exercised minus the number of shares of Common Stock, if any, issued upon
exercise of such Stock Appreciation Rights. Common Stock issued pursuant to
the Plan may be either authorized but unissued shares or reacquired shares, or
both. If any Common Stock issued as Restricted Stock shall be repurchased
pursuant to the option described in Paragraph 6 below, or if any Common Stock
issued under the Plan shall be reacquired pursuant to restrictions imposed at
the time of issuance, such shares may again be issued under the Plan.
(c) RIGHTS WITH RESPECT TO COMMON STOCK
----------------------------------------
(i) An employee to whom an Award of Restricted Stock has been made
shall have, after issuance to him of a certificate for the number of shares of
Common Stock awarded and prior to the expiration of the Restricted Period or
the earlier repurchase of such shares of Common Stock as herein provided,
ownership of such shares of Common Stock, including the right to vote the same
and to receive dividends thereon, subject however, to the options,
restrictions and limitations imposed thereon pursuant to the Plan.
(ii) An employee to whom an Award of Stock Option or Stock
Appreciation Rights is made (and any person succeeding to such an employee's
rights pursuant to the Plan) shall have no rights as a stockholder with
respect to any shares of Common Stock issuable pursuant to any such Stock
Option or Stock Appreciation Rights until the date of the issuance of a stock
certificate to him for such shares. Except as provided in Paragraph 8, no
adjustment shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities or other property)
for which the record date is prior to the date such stock certificate is
issued.
(d) EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS: EXPIRATION OF
----------------------------------------------------------------
RESTRICTIONS APPLICABLE TO RESTRICTED STOCK.Options and Stock Appreciation
- ------------------------------------------------
Rights shall be subject to such terms and conditions upon exercisability as
the Board may determine consistent with the provisions of this Plan.
Repurchase and other restrictions applicable to Restricted Stock shall be such
as are determined in the discretion of the Board consistent with the
provisions of the Plan. The Board may determine to permit any Option granted
hereunder to be exercisable immediately upon the date of grant or any time
thereafter. The Board may determine to permit any Stock Appreciation Right
granted hereunder to be exercisable not less than six months after the initial
award of the Option containing, or the amendment or supplementation of any
existing Option Agreement adding the Stock Appreciation Right; provided,
however, that this limitation shall not apply in the event of death or
disability. The Board may determine that there shall be no restrictions
applicable to Restricted Stock awarded under the Plan.
5. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Board may grant Stock Options (to which may but need not be attached Stock
Appreciation Rights as specified in subparagraph 5(f). Each Stock Option
(referred to herein as an "Option") granted under the Plan shall be evidenced
by an instrument in such form as the Board shall prescribe from time to time
in accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions, including but not
limited to restrictions upon the Option or the shares of Common Stock issuable
upon exercise thereof, as the Board, in its discretion, shall establish):
(a) The Option price shall be determined by the Board at the time the
Option is granted and shag not be less than the par value of such shares of
Common stock.
(b) The Board will determine the number of shares of Common Stock to
be subject to each Option. The number of shares of Common Stock subject to an
outstanding Option will be reduced on a share for share basis to the extent
that shares of Common Stock under such Option are used to calculate the cash
and/or shares of Common Stock received pursuant to exercise of a Stock
Appreciation Right attached to such Option.
(c) The Option shall not be transferable by the optionee otherwise
than will or the laws of descent and distribution, and shall be exercisable
during his lifetime only to him.
(d) The Board will determine the conditions and terms governing the
exercise of granted Options; provided, however that no Option shall be
exercisable:
(i) after the expiration of ten years from the date it is granted and
may be exercised during the period prior to its expiration only at such time
or times as the Board may establish;
(ii) unless payment in United States dollars by cash or check is made
for the shares being acquired thereby in frill at the time of exercise, or at
the option of the holder of such Option, in Common Stock theretofore owned by
such holder (or any combination of cash and Common Stock).
For purposes of determining the amount, if any, of the purchase price
satisfied by payment of Common Stock under clause (ii) above, such Common
Stock shall be valued at its fair market value on the date of exercise. Fair
market value means the fair market value of one share of Common Stock on the
date in question, which is deemed to be the mean between the highest and
lowest sales prices per share of Common Stock on any national stock exchange
upon which Common Stock is listed, or if Common Stock is not listed on any
national stock exchange, the mean between the highest closing bid and lowest
closing asked prices for Common Stock as reported by the National Association
of Securities Dealers NASDAQ System, or if not reported by such system, the
mean between the closing bid and asked prices as quoted by such quotation
source as shall be designated by the Board on that date. If there shall have
been no sale on the date in question, fair market value shall be determined by
reference the last preceding date on which such a sale or sales were so
reported. Any Common Stock delivered in satisfaction of all or a portion of
the purchase price shall be appropriately endorsed for transfer and assigned
to the Company. The Board may, in its discretion and to the extent permitted
by the laws of the State of Delaware determine to permit the holder of an
Option to satisfy the purchase price of the shares as to which an Option is
exercised by delivery of the Option holder's promissory note, such note to be
subject to such terms and conditions as the Board may determine. The Board
may, in its discretion and to the extent permitted by the laws of the State of
Delaware, determine to cause the Company to lend to be holder of an Option,
funds on such terms and conditions as the Board may determine to be
appropriate, sufficient for the holder of an Option to pay the purchase price
of the shares as to which an Option is to be exercised.
(e) If any person to whom an Option has been granted shall die
holding an Option which has not been fully exercised, his executors,
administrators, heirs or distributees, as the case may be, may, at any time
within one year after the date of such death (but in no event after the Option
has expired under the provisions of subparagraph 5(d)(i) hereon, exercise the
Option with respect to any shares as to which the decedent could have
exercised the Option at the time of his death.
(f) If the Board, in its discretion, so determines, there may be attached
to the Option a Stock Appreciation Right which shall be subject to such terms
and conditions, not inconsistent with the Plan, as the Board shall impose,
including the following.
(i) A Stock Appreciation Right may be exercised only to the extent
that the option to which it is attached is at the time exercisable. However,
if the option to which the Stock Appreciation Right is attached is exercisable
and if the optionee is at the relevant time an officer or director of the
Company who is required to file reports pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") ("Covered
Participant") - the Stock Appreciation Right may, subject to the approval of
the Board, be exercised, under such terms and conditions as may be specified
by the Board;
(ii) A Stock Appreciation Right shall entitle the optionee (or any
person entitled to act under the provisions of subparagraph 5(e) hereon to
surrender unexercised the Option to which the Stock Appreciation Right is
attached (or any portion of such Option) to the Company and to receive from
the Company in exchange therefor that number of shares of Common Stock having
an aggregate value equal to (or, in the discretion of the Board, less than)
the excess of the value of one share over the option price per share times the
number of shares subject to the option, or portion thereof, which is so
surrendered. The Company shall be entitled to elect to settle its obligation
arising out of the exercise of a Stock Appreciation Right, by the payment of
cash equal to the aggregate value of the shares it would otherwise be
obligated to deliver or partly by the payment of cash and partly by the
delivery of shares of Common Stock. Any such election shall be made within 15
business days after the receipt by the Board of written notice of the exercise
of the Stock Appreciation Right. The value of a share of Common Stock for
this purpose shall be the fair market value thereon on the last business day
next preceding the date of the election to exercise the Stock Appreciation
Right;
(iii) No fractional shares shall be delivered under this subparagraph
5(f) but in lieu thereof a cash adjustment shall be made.
(g) The Option agreement evidencing any incentive stock option
granted under this Plan shall provide that if the optionee makes a
disposition, within the meaning of Section 425(c) of the code and the
regulations promulgated thereunder, of any share or shares of Common Stock
issued to him pursuant to his exercise of an Option granted under this Plan
within the two-year period commencing on the day after the date of the
granting of such Option or within a one-year period commencing on the day
after the date of transfer of the share or shares to him pursuant to the
exercise of such Option, he shall, within ten days of such disposition, notify
the Company thereof and immediately deliver to the Company any amount of
federal income tax withholding required by law.
6. RESTRICTED STOCK
Each Award of Restricted Stock under the Plan shall be evidenced by an
instrument in such form as the Board shall prescribe form time to time in
accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions as the Board, in its
discretion, shall establish):
(a) The Board shall determine the number of shares of Common Stock to
be issued to a participant pursuant to the Award.
(b) Shares of Common Stock issued to a participant in accordance with
the Award may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and distribution,
for such period as the Board shall determine, from the date on which the Award
is granted (the "Restricted Period"). The Company will have the option to
repurchase the shares subject to the Award at such price as the Board shall
have fixed, in its sole discretion, when the Award was made, which option will
be exercisable at such times and upon the occurrence of such events as the
Board shall establish when the Award is granted or if, on or prior to the
expiration of the Restricted Period or the earlier lapse of the Option, the
participant has not paid to the Company an amount equal to any Federal, State
or local income or other taxes which the Company determines is required to be
withheld in respect of such shares. Such option shall be exercisable on such
terms, in such manner and during such period as shall be determined by the
Board when the Award is made. Certificates for shares of Common Stock issued
pursuant to Restricted Stock Awards shall bear an appropriate legend referring
to the foregoing Option and other restrictions and to the fact that the shares
are partly paid. Any attempt to dispose of any such shares of Common Stock in
contravention of the foregoing Option and other restrictions shall be null and
void and without effect. If shares of Common Stock issued pursuant to a
Restricted Stock Award shall be repurchased pursuant to the Option described
above, the participant, or in the event of his death, his personal
representative, shall forthwith deliver to the Secretary of the Company the
certificates for the shares of Common Stock awarded to the participant,
accompanied by such instruments of transfer, if any, as may reasonably be
required by the Secretary of the Company. If the Option described above is
not exercised by the company during such period as is specified by the Board
when the Award is made, such Option and the restrictions imposed pursuant to
the first sentence of this subparagraph 6(b) shall terminate and be of no
further force and effect.
7. STOCK DIVIDENDS, STOCK SPLITS, REORGANIZATIONS AND CERTAIN OTHER
CORPORATION TRANSACTIONS
(a) EXERCISE OR CORPORATE POWERS.The existence of outstanding awards
-----------------------------
of Options, Stock Appreciation Rights or Restricted Stock shall not effect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalization, reorganization or other
changes in the Company's capital structure or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures preferred or
prior preference stocks ahead of or affecting the Company's shares of Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding whether of a similar character or otherwise.
(b) RECAPITALIZATION OF THE COMPANY.If, while there are Options, Stock
--------------------------------
Appreciation Rights or Restricted Stock outstanding, the Company shall effect
any subdivision or consolidation of shares of Common Stock or other capital
readjustment, the payment of a stock dividend, stock split, combination of
shares or recapitalization or other increase or reduction in the number of
shares of Common Stock outstanding, without receiving compensation therefor in
money, services or property, then the number of shares of Common Stock
available under the Plan and the number of Options, Stock Appreciation Rights
or Restricted Stock which may thereafter be exercised shall (i) in the event
of an increase in the number of shares outstanding, be proportionately
increased and the fair market value of the Options, Stock Appreciation Rights
or Restricted Stock awarded as of the date of the award shall be
proportionately reduced; and (ii) in the event of a reduction in the number of
shares outstanding, be proportionately reduced, and the fair market value of
the Options, Stock Appreciation Rights or Restricted Stock awarded as of the
date of the Award shall be proportionately increased.
(c) REORGANIZATION OF THE COMPANY.If the Company is reorganized, or
------------------------------
merged or consolidated or a party to a plan of exchange with another
corporation pursuant to which reorganization, member, consolidation or plan of
exchange stockholders of the Company receive any shares of Common Stock or
other securities, or if the Company shall distribute securities of another
corporation to its stockholders, each Participant shall be entitled to receive
in lieu of the number of unexercised Options, Stock Appreciation Rights at the
date of award, to which such holder would have been entitled pursuant to the
terms of the agreement of merger of consolidation, if immediately prior to
such merger or consolidation such holder had been the holder of record of a
number of shares of Common Stock equal to the number of the unexercised
Options or Stock Appreciation Rights previously awarded to him, and Restricted
Stock shall be treated the same as unrestricted outstanding shares of Common
Stock; provided, that, anything herein contained to the contrary
notwithstanding, upon the dissolution or liquidation of the Company or upon
any merger or consolidation of the Company where it is not the surviving
corporation, each Participant shall be entitled to a benefit as though he had
become fully vested in all Options, Stock Appreciation Rights and Restricted
Stock previously awarded to him and then outstanding under this Plan, and had
terminated employment with the Company immediately prior to or concurrently
with such dissolution or liquidation or merger or consolidation.
(d) ISSUE OF COMMON STOCK BY THE COMPANY.Except as hereinabove
---------------------------------------
expressly provided, the issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon any conversion
of shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of, or fair market value of, any Options or
Stock Appreciation Rights then outstanding under previous awards but holders
of Restricted Stock shall be treated the same as the holders of outstanding
unrestricted shares of Common Stock
(e) CHANGE IN CONTROL.The Board may, in its sole discretion, provide that
------------------
an Option or Stock Appreciation Right shall become fully exercisable or that a
share of Restricted Stock shall be free of any restrictions upon a Change in
Control of the Company (as defined in the next sentence). "Change in Control"
of the Company shall be conclusively deemed to have occurred if (and only if)
any of the following shall have taken place: (i) a change in control is
reported by the Company in response to either Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act or Item 1 of Form 8-K
promulgated under the Exchange Act; (ii) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing forty percent or more of
the combined voting power of the company's then outstanding securities; or
(iii) following the election or removal of directors, a majority of the Board
of Directors consists of individuals who were not members of the Board of
Directors two years before such election or removal, unless the election of
each director who was not a director at the beginning of such two-year period
has been approved in advance by directors representing at least a majority of
the directors then in office who were directors at the beginning of the
two-year period.
8. DESIGNATION OF BENEFICIARY BY PARTICIPANT
A participant may name a beneficiary to receive any payment to which he may be
entitled in respect of Awards under the Plan in the event of his death, on a
form to be provided by the Board. A participant may change his beneficiary
from time to time in the same manner. If no designated beneficiary is living
on the date on which any amount becomes payable to a participant's
beneficiary, such payment will be made to the participant's executors or
administrators, and the term "beneficiary" as used in the Plan shall include
such person or persons.
9. TAXES
(a) The Company may make such provisions as it may deem appropriate
for the withholding of any taxes which it determines is required in connection
with any Options or Stock Appreciation Rights or Restricted Stock granted
under this Plan.
(b) Notwithstanding the terms of subparagraph 9(a), any participant
may pay all or any portion of the taxes required or allowed to be withheld by
the Company if paid to him in connection with the exercise of an Option, Stock
Appreciation Right or vesting of any Award of Restricted Stock by electing to
have the Company withhold shares of Common Stock, or by delivering previously
owned shares of Common Stock, having a fair market value, determined in
accordance with subparagraph 5(d), equal to the amount required to be withheld
or paid. A Participant must take the foregoing election on or before the date
(bat the amount of tax to be withheld is determined ("Tax Date"). Such
elections are irrevocable and subject to disapproval by the Board. Elections
by Covered Participants are subject to the following additional restrictions:
(i) such election may not be made within six months of the grant of the Award,
provided that this limitation shall not apply in the event of death or
disability, and (ii) such election must be made either six months or more
prior to the Tax Date or in a Window Period (as defined herein). Where the
Tax Date in respect of an Award is deferred until after exercise or expiration
of restrictions and the Covered Participant elects share withholding, the full
amount of shares of Common Stock will be issued or transferred to him upon
exercise of the Option or exercise of the Stock Appreciation Right or
expiration of restrictions of the Restricted Stock, as the case may be, but
the Covered Participant shall be unconditionally obligated to tender back to
the Company the number of shares necessary to discharge the Company's
withholding obligation or his estimated tax obligation on the Tax Date. As
used herein, Window Period means the period commencing on the third business
day following the Company's release of a quarterly or annual summary statement
of sales and earnings and ending on the twelfth business day following such
release.
10. MISCELLANEOUS PROVISIONS
(a) No employee or other person shall have any claim or right to be
granted an Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained
in the employ of the Company or any subsidiary.
(b) A participant's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of law or
otherwise (except in the event of a participant's death), including but not by
way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner and not such right or interest of any
participant in the Plan shall be subject to any obligation or liability of
such participant.
(c) No shares of Common Stock shall be issued hereunder unless
counsel for the Company shall be satisfied that such issuance will be in
compliance with applicable federal and state securities laws.
(d) The expenses of the Plan shall be home by the Company.
(e) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund to make any other segregation of assets
to assure the payment of any Award under the Plan and payment of Awards shall
be subordinate to the claims of the Company's general creditors.
By accepting any Award or other benefit under the Plan, each participant and
each person claiming under or through him shall be conclusively deemed to have
indicated his acceptance and ratification of, and consent to, any action taken
under the Plan by the Company, the Board or the Board.
11. AMENDMENT OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board of
Directors but no amendment which increases the aggregate number of shares of
Common Stock which may be issued pursuant to the Plan shall be effective
unless and until the same is approved by the stockholders of the, Company. No
amendment of the Plan shall adversely affect any right of any participant with
respect to any Award theretofore granted without such participant's written
consent.
12. TERMINATION
This Plan shall terminate upon the earlier of the following dates or events to
occur:
(a) upon the adoption of a resolution of the Board of Directors
terminating the Plan; or
(b) ten years from the date hereof
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award theretofore
granted under the Plan.
13. STOCKHOLDER ADOPTION
The Plan shall be submitted to the stockholders of the Company for their
approval and adoption on or before October 15, 1997. The Plan shall not be
effective and any Award made hereunder shall be void and of no effect if the
Plan is not so approved. The stockholders shall be deemed to have approved
the Plan only if it is approved at a meeting of the stockholders duly held on
or before that date by vote or by written consent in the manner required by
the laws of the State of Delaware.
E - 1 EXHIBIT E
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Year ended May 31, 1997 Commission File Number 33-0878-A
GRAYSTONE FINANCIAL
-------------------
SERVICES, INC.
--------------
(Exact name of registrant as specified in charter)
Florida 59-2686448
------------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
P.0. Box 615, Glen Ridge, NJ 070028-0615
----------------------------------------
(Address of principal executive offices)
1. 201-746-7818
(Registrant's telephone number)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
Yes X No ___
---
The number of shares of Common Stock outstanding as of May 31, 1997 was
3,999,118.
E - 7 EXHIBIT E
PART I
ITEM 1. BUSINESS
HISTORY AND ORGANIZATION
Graystone Financial Services, Inc. (The Company), formerly known as Capital
Investment Development Corp. was incorporated under the laws of the State of
Florida on June 24, 1986 with a authorized capital of 100,000,000 shares of
common stock with a par value of $.0001. On October 10, 1988 the Company
amended its Articles of Incorporation changing its name to Graystone Financial
Services, Inc.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. Bradford-Taylor Clearinghouse, Inc. has
been inactive from inception through July 31, 1995. Bradford-Taylor
Clearinghouse, Inc. entered into a licensing agreement with Nico Electric,
A.G. on August 1, 1995 in exchange for 11.3% of the common stock of
Bradford-Taylor Clearinghouse, Inc. The licensing agreement allows
Bradford-Taylor Clearinghouse, Inc.'s use of Nico Electric, A.G. technology
for alarms and security devices up to 6Mhz and lMv for commercial use only.
An additional 75.4% of the common stock of Bradford-Taylor Clearinghouse, Inc.
was issued to complete the transaction. This reduces the Company's ownership
in Bradford-Taylor Clearinghouse, Inc. to 13.3%.
On June 24, 1986, the Company issued 20,000,000 shares of its common stock to
private investors for a total cash consideration of $20,000.
In connection with a public offering in September, 1986, the Company sold
5,500,000 shares of its common stock for $.05 per share. Expenses incurred in
connection with the public offering of $62,458 were charged against additional
paid in capital. Net proceeds from the offering were $212,542.
Each share of common stock issued in connection with the public offering
included one class A warrant and one class B warrant. The purchase warrants
were exercisable over an eight month period ending May 18, 1987. Each
redeemable warrant entitled the holder to purchase one share of common stock
at a price of $.075 per share in the case of class A warrants and a price of
$.10 per share of class B warrants.
During the period ended May 31, 1987, 5,500,000 of class A warrants were
exercised at $.075 per share for a total cash consideration of $412,500. On
May 18, 1987, the class B warrants were extended for a six months period.
In addition, in connection with the public offering 550,000 warrants were
issued to the underwriter, which were exercised commencing September, 1987 at
a price of $.055 per share or an aggregate of $30,250. The remaining
5,500,000 class B warrants were exercised during the year ended May 31, 1988
for an aggregate of $550,000.
On September 30, 1988, the Stock Purchase Agreement dated April 4, 1988 by and
between the Company and Harp Investments, Inc., a privately held New Jersey
corporation, was approved by the stockholders. The agreement provided for the
Company to acquire 100% of the outstanding shares of capital stock of
Graystone Nash, Incorporated and 70% of the outstanding shares of Outwater and
Wells, Inc., (Graystone Nash owned 30% of the outstanding shares prior to the
exchange), in exchange for 59,675,000 shares of the Company's common stock.
Additionally, 11,475,000 shares of the Company's common stock was required to
be returned to the Company by certain original shareholders. The transaction
was handled as a reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc.
censured Graystone Nash, incorporated and its President, Thomas V. Ackerly.
The Association fined Graystone Nash, Incorporated and Thomas V. Ackerly
$1,325,000, jointly and severely, and expelled Graystone Nash, Incorporated
from membership in the Association and barred Thomas V. Ackerly from
association with a member of the Association.
Additionally, the Securities and Exchange Commission brought an action against
Graystone Nash, Incorporated and Thomas V. Ackerly, its President, and on
April 21, 1993, a judgment was entered against the Company and Thomas V.
Ackerly in the amount of $60,565,581.00 plus interest beginning January 1,
1989. The action was appealed and on June 1, 1994, the judgment was reversed.
Graystone Nash, Incorporated was not represented by counsel in the new review
ordered and the judgment still stands against it. Thomas V. Ackerly, acting
as his own counsel, presented to the Court additional information to review.
Upon review by the Court, on July 10, 1995, the judgment and prejudgment
interest was waived as to Thomas V. Ackerly. As a result of the above
actions, the subsidiary Graystone Nash, Incorporated was forced to close and
cease operations.
Also, the subsidiary Outwater and Wells, Inc. was forced to close and cease
operations in accordance with the lockup rules of the SEC.
On April 16, 1990, the shareholders approved a 50:1 reverse split of the
Company's common stock. The reverse split reduced the authorized shares of
common stock to 4,000,000. An additional 118 Factional shares were issued in
connection with the reverse split.
On June 8, 1995, the Company issued 2,294,000 shares of its common stock to
its controlling stockholder for a total cash consideration of $75,000.
On September 19, 1996, the Company incorporated G.S. Television Productions,
Inc. (The Corporation) in the State of Delaware. On October 3, 1996, the
Corporation received authority to do business in the State of New Jersey. The
Corporation is a wholly owned subsidiary of the Company and has been inactive
since its date of inception.
ITEM 2. PROPERTIES
CORPORATE OFFICES
The Company presently maintains its executive offices at 39 Lackawanna Plaza,
Room 8, Bloomfield, NJ 07003. The Company's office space consists of
approximately 500 square feet, on a month to month basis, at the rate of
$1,000 per month. There is no written agreement.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Shareholders of the Company during the
three months period ended May 31, 1997.
PART 11
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, $.0001 par value (Common Stock) has been traded in
the over-the-counter market on a limited and sporadic basis since November 18,
1986. The last known high and low bid price was $1.75 as of August 31, 1988.
As far as is known there has not been any high and low bid price for the years
ended May 31, 1997 and May 31, 1996. The following table sets forth the high
and low bid price of the Common Stock for the period indicated as quoted from
the over-the-counter listing.
<TABLE>
<CAPTION>
Fiscal 1997 Low Bid High Bid
- ----------- ------- --------
<S> <C> <C>
1st Quarter Unknown Unknown
2nd Quarter Unknown Unknown
3rd Quarter Unknown Unknown
4th Quarter Unknown Unknown
Fiscal 1996 Low Bid High Bid
- ----------- ------- --------
1st Quarter Unknown Unknown
2nd Quarter Unknown Unknown
3rd Quarter Unknown Unknown
4th Quarter Unknown Unknown
</TABLE>
As of May 31, 1997 there were 6,061 shareholders of record of the Company's
Common Stock.
Holders of common shares are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on the common
shares have been paid by the Company, nor does the Company anticipate that
dividends will be paid in the foreseeable future. Rather, the Company has
determined to utilize any earnings in the expansion of its business. Such
policy is subject to change based on current industry and market conditions,
as well as other factors beyond the control of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data on the Company conveying the three
months period ended May 31, 1997 and 1996, should be read in conjunction with
the Financial Statements and related notes included in Item 8 of this Form
10-K. (See "Financial Statements and Notes Thereto")
<TABLE>
<CAPTION>
For Quarter Ended May 31,
1997 1996
----------- ----------
<S> <C> <C>
Income Statement Data:
Revenues $ 108,154 $ 36,000
Other Income and (Loss) $ (204,076) $2,182,696
Net Income (Loss) $ (385,304) $2,110,631
Net Income (Loss) per share $ (0.09) $ 0.53
Dividends per share $ 0 $ 0
Weighted average shares outstanding: 3,999,118 3,999,118
Balance Sheet Data:
Total Assets $2,104,978 $2,467,845
Retained Earnings (Deficit) $ 607,163 $ 992,467
Stockholders Equity $1,913,423 $2,298,727
</TABLE>
ITEM 7. MANAGEMENT'S DECISIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following is management's discussion and analysis of significant factors
which have affected registrant's financial position and operations.
OVERALL SITUATION
On September 30, 1988, the Company entered into a stock purchase agreement
dated April 4, 1988 with Harp Investments, Inc., a privately held New Jersey
corporation. The agreement provided for the Company to acquire 100% of the
outstanding shares of capital stock of Graystone Nash, Incorporated and 70% of
the outstanding shares of Outwater and Wells, Inc. (Graystone Nash,
Incorporated owned 30% of the outstanding shares prior to the exchange), in
exchange for 59,675,000 shares of the Company's Common Stock.
Additionally, 11,475,000 shares of the Company's Common Stock was required to
be returned to the Company by certain original shareholders. The transaction
was handled as a reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc.
censured Graystone Nash, Incorporated and its President, Thomas V. Ackerly.
The Association fined Graystone Nash, Incorporated and Thomas V. Ackerly S
1,325,000, jointly and severely, and expelled Graystone Nash, Incorporated
from membership in the Association and barred Thomas V. Ackerly from
association with a member of the Association.
Additionally, the Securities and Exchange Commission brought an action against
Graystone Nash, Incorporated and Thomas V. Ackerly, its President, and on
April 21, 1993 a judgment was entered against the Company and Thomas V.
Ackerly in the amount of $60,565,581.00 plus interest beginning January 1,
1989. The action was appealed and on June 1, 1994, the judgment was reversed.
Graystone Nash, Incorporated was not represented by counsel in the new review
ordered and the judgment stands against it. Thomas V. Ackerly, acting as his
own counsel, presented to the Court additional information to review. Upon
review by the Court on July 10, 1995, the judgment and pre-judgment interest
was waived as to Thomas V. Ackerly. As a result of the above actions, the
subsidiary Graystone Nash, Incorporated was forced to close and cease
operations.
Also, the subsidiary Outwater and Wells, Inc. was forced to close and cease
operations in accordance with the lockup rules of the SEC.
The Company's business plan is to seek potential businesses that may, in the
opinion of Management, warrant the Company's involvement. The Company
acknowledges that as a result of its limited financial resources, acquiring a
suitable business will be extremely difficult; however, the Company's
principal business objective will be to seek long term growth potential in the
business in which it participates, rather than immediate, short term earnings.
In seeking to attain its business objectives, the Company will not restrict
its search to any particular industry. Management has no assurance that it
will be successful in its attempt to raise such capital.
LIQUIDITY AND CAPITAL RESOURCES
The Company has increased its assets principally by the increase market value
of trading securities of stocks that had little or no value in the prior year
and continues to have a very small amount of liabilities. It is the intent of
Management to seek potential businesses in which to acquire through the
issuance of the Company's common stock. In addition, to make private
placement of common stock as a means of raising capital to propel the Company
into new arenas of high earnings potential. Additional funding will be
necessary in order to achieve these goals.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTAL DATA
The financial statements are attached hereto commencing on Page F-1:
Audit report, May 31, 1997 and 1996.
Consolidated Balance Sheet at May 31, 1997 and 1996.
Consolidated Statements of Operations for the Year ended May 31, 1997 and
1996.
Consolidated Statement of Changes in Stockholders' Equity from Inception
through May 31, 1997.
Consolidated Statement of Cash Flows for the nine months period ended May 31,
1997 and 1996.
Notes to Financial Statements as of May 31, 1997 and 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME: AGE: POSITION: TERM:
<S> <C> <C> <C>
Thomas V. Ackerly 49 President, and Director September 30, 1988 - Present
Robert A. Spira 45 Director February 1, 1996 - Present
Joseph Ben-Dak 40 Director September 26, 1996 - Present
</TABLE>
Mr. Thomas V. Ackerly, was elected to the Board of Directors on September 30,
1988 at which time he was appointed as President. Mr. Ackerly held the same
offices in Bradford-Taylor Clearinghouse, Inc., a subsidiary of the Graystone
Financial Services, Inc., until July 31, 1995. Mr. Ackerly holds the same
offices in Harp Investments, Inc., the controlling shareholder of Graystone
Financial Services, Inc. and G.S. Television Productions, Inc. He currently
devotes a substantial amount of his time to the Company's business. Mr.
Robert A. Spira was appointed as a Director on February 1, 1996. Mr. Joseph
Ben-Dak was appointed as a Director on September 26, 1996.
ITEM 11. EXECUTIVE COMPENSATION
During the year ended May 31, 1997 and 1996, Thomas V. Ackerly received
remuneration in the amount of $9,000 and $60,500, respectively. For the
fiscal year ended May 31, 1995, no officer, director, employee, or affiliate
of the Registrant received any remuneration. Moreover, for these periods the
Company has had no bonus, profit sharing plan, or other compensation plan in
which the executive officers or director are participants. The Company's
directors receive no fees for their services.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Section 16(a) of the Securities Exchange of Act of 1934 (Exchange Act)
requires the Company's directors, officers and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Directors, officers and persons with greater than five percent
beneficial owners are required by applicable regulations to furnish the
Company with copies of all forms they file with the Commission pursuant to
Section (16a).
At May 31, 1997 and 1996, there were issued and outstanding common shares of
the Company stock to beneficial owners and management, the Company's only
class of voting securities. The Company has no knowledge of any arrangements
which could affect the company.
The following table will identify, as of May 31, 1997 and 1996, the number and
percentage of outstanding shares of common stock owned by (i) each person
known to the Company who owns more than five percent of the outstanding common
stock, (ii) each officer and director of the Company, and (iii) officers and
directors of the Company as a group:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER AMOUNT OF OWNERSHIP PERCENT OF CLASS
- ------------------------------------------- ------------------- -----------------
<S> <C> <C>
Harp Investments, Inc. 3,362,500 84%
NAME OF BENEFICIAL OWNER AMOUNT OF OWNERSHIP PERCENT OF CLASS
- ------------------------------------------- ------------------- -----------------
All Executive Officers/Directors as a Group 3,362,500 84%
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Thomas V. Ackerly, President of the Company, has loaned money to and
borrowed money from the Company. Currently, Mr. Ackerly has a demand note in
the amount of $115,000, dated January 1, 1991, with balances at May 31, 1997
and 1996, of $448,647 and $149,996, and includes interest at the rate of 9%
per annum. By agreement between the parties, interest did not begin to accrue
on this note till January 1, 1996.
ITEM 14. SUBSEQUENT EVENTS
none
PART IV
ITEM 15. EXHIBITS AND REPORTS ON FORM S-K
Exhibits:
- --------
Statement Name
Page No.
Report of Independent Certified Public Accountant --------- F-1
Consolidated Balance Sheet ------------------------ F-2 F-3
Consolidated Statement of Income and Loss -------------- F-4
Consolidated Statement of Stockholders' Equity ----------- F-5 F-6
Consolidated Statement of Cash Flows ---------------- F-7 F8
Notes To Financial Statements ----------------------- F-9 F14
Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the
Registrant and in capacities and on the dates indicated.
GRAYSTONE FINANCIAL SERVICES, INC.
/s/Thomas V. Ackerly
- ----------------------
By: Thomas V. Ackerly, President and Director
8/28/97
- -------
Date
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Independent Auditors' Report ------------------------------ F-1
Consolidated Balance Sheets at May 31, 1997 and May 31, 1996 ------ F-2 F-3
Consolidated Statement of Operations for the Years Ended May 31, 1997, 1996 and 1995 - F-4
Consolidated Statement of Changes in Stockholders' Equity from Inception through May 31, 1997 - F-5 F-6
Consolidated Statement of Cash Flows for the Years Ended May 31, 1997,1996 and 1995 -- F-7 F-8
Notes to Consolidated Financial Statements ---------------------- F-9 F-14
</TABLE>
F - 8 EXHIBIT E
CLANCY & CO, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
26TH PLACE
2601 E. THOMAS RD.
SUITE 110
PHOENIX, AZ 85016
TEL: (602) 266-2646
FAX: (602) 224-9496
E-MAIL: [email protected]
INDEPENDENT AUDITORS REPORT
Board of Directors
Graystone Financial Services, Inc.
Glen Ridge, New Jersey
We have audited the accompanying consolidated balance sheet of Graystone
Financial Services, Inc. as of May 31, 1997 and 1996 and the related
consolidated statement of operations, stockholders' equity and cash flows for
the periods then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit of the financial statements
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Graystone Financial Services, Inc. as of May 31, 1997 and 1996, in
conformity with generally accepted accounting principles.
/c/Clancy and Co.
- -------------------
Clancy and Co., P.L.L.C.
Phoenix, Arizona
August 28, 1997
<TABLE>
<CAPTION>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
MAY 31,1997 AND 1996
ASSETS
MAY 31, May 31,
1997 1996
<S> <C> <C>
Current Assets
Cash $ 60,870 $ 130,448
Accounts Receivable 13,644 0
Marketable Securities - Trading - Note 4 1,514,986 2,180,735
---------- ----------
Total Current Assets 1,589,500 2,311,183
Property and Equipment Net - Note 3 0 0
Other Assets
Receivables - Related Companies - Note 5 448,647 149,996
Accrued Interest Receivable 48,974 6,166
Security Deposits 16,060 0
Organization Costs 1,297 0
Investment - Digital Acoustic Systems Inc. - Note 1 500 500
---------- ----------
Total Other Assets 515,478 156,662
---------- ----------
Total Assets $2,104,978 $2,467,845
========== ==========
</TABLE>
The accompanying notes are integral part of these financial statements.
<TABLE>
<CAPTION>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
MAY 31,1997 AND 1996
LIABILITIES AND STOCKHOLDERS EQUITY
MAY 31, May 31,
1997 1996
<S> <C> <C>
Current Liabilities
Accounts Payable $ 6,600 $ 122,791
Accounts Payable - Related Company - Note 5 29,955 46,327
Notes Payable 155,000 0
---------- ----------
Total Current Assets 191,555 169,118
Stockholders' Equity
Preferred Stock: No Par Value, Authorized 10,000,000
Shares; Issued and Outstanding, NONE 0 0
Common Stock: Par Value $0.0001, Authorized 4,000,000;
Issued and Outstanding, 3,999,118 Shares at May 31, 1997
and May 31, 1996 400 400
Additional paid in capital 1,305,860 1,305,860
Deficit Accumulated During the Development State 607,163 992,467
---------- ----------
Total Stockholders' Equity 1,913,423 2,298,727
---------- ----------
Total Liabilities and Stockholders' Equity $2,104,978 $2,467,845
========== ==========
</TABLE>
The accompanying notes are integral part of these financial statements.
<TABLE>
<CAPTION>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31,1997 AND 1996 AND FROM
INCEPTION (JUNE 24,1986) THROUGH MAY 31,1997
RETAINED
EARNINGS
ACCUMULATED
FOR THE YEAR FOR THE YEAR FOR THE YEAR DURING THE
ENDED ENDED ENDED DEVELOPMENT
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 STAGE
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues
Consulting Income $ 108,154 $ 36,000 $ 0 $ 144,154
Interest Income 0 0 0 232,032
Miscellaneous Income 0 0 0 45,049
-------------- -------------- -------------- -------------
Total Revenues 108,154 36,000 0 421,234
Expenses
General and Administrative 289,382 108,065 0 834,818
-------------- -------------- -------------- -------------
Total Expenses 289,382 108,065 0 834,818
-------------- -------------- -------------- -------------
Operating Loss (181,228) (72,065) 0 (413,584)
Other Income and (Loss)
Gain or (Loss) on Sale of
Securities 490,849 165,855 0 500,293
Dividends and Interest Income 42,886 6,213 0 49,099
Other Income - Judgment 0 0 0 371,094
Loss on Disposal of Discontinued
Subsidiaries -
Graystone Nash, Incorporated
and Outwater & Wells, Inc. 0 (5,250) (1,172,556) (1,177,806)
Temporary Increase (Decrease)
in Marketable Securities (737,811) 2,015,878 0 1,278,067
Total Other Income and (Loss) (204,076) 2,182,696 (1,172,556) 1,020,747
Net Income or (Loss) $ (385,304) $ 2,110,631 $ (1,172,556) $ 607,163
============== ============== ============== =============
Net Income or (Loss) Per Share of
Common Stock $ (0.09) $ 0.53 $ (0.69) $ 0.15
============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 24,1986)
THROUGH MAY 31,1997
RETAINED
EARNINGS
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK COMMON STOCK PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Sale of shares of cash in private $
placement at $.001 20,000,000 $ 2,000 $ 18,000 $ 20,000
Issuance of common stock public
offering for cash (net of
expenses) 5,500 550 211,992 212,542
Issuance of common stock in
connection with the exercise
of stock warrants 5,500,000 550 411,950 412,500
Net loss year ended
May 31, 1987 (29,350) (29,350)
------------- -----------
Balance - May 31, 1987 31,000,000 3,100 641,942 (29,350) 615,692
Issuance of common stock in
connection with the exercise
of stock warrants 6,050,000 605 579,645 580,250
Net loss year ended
May 31, 1988 (55,625) (55,625)
------------- -----------
Balance - May 31, 1988 37,050,000 $ 3,705 $ 1,221,587 $ (84,975) $1,140,317
Shares returned in connection
with stock purchase agreement
September 30, 1988 (11,475,000) (1,148) 1,148 0
Issuance of shares in connection
with acquisition of Graystone/
Nash, Inc. and Outwater and
Wells, Inc. on
Sept. 30, 1988 59,675,000 5,968 5,968
Net loss year ended
May 31, 1989 (115,097) 115,097
------------- -----------
Balance - May 31, 1989 85,250,000 8,252 1,222,735 (200,072) 1,031,188
50:1 reverse split on
April 16, 1990 (83,545,000) (8,354) 8,354 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 24,1986)
THROUGH MAY 31,1997
RETAINED
EARNINGS
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK COMMON STOCK PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------------ ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Fractional shares issued in
connection with 50:1 reverse
split 118 $ 0 $ $ $ 0
Net loss year ended
May 31, 1990 (24,240) (24,240)
------------- ------------
Balance - May 31, 1990 1,705,118 171 1,231,089 (224,312) 1,006,948
Net loss year ended
May 31, 1991 302,842 302,842
------------- ------------
Balance - May 31, 1991 1,705,118 171 1,231,089 78,530 1,309,970
Net loss year ended
May 31, 1992 (13,256) (13,256)
------------- ------------
Balance - May 31, 1992 1,705,118 171 1,231,089 65,274 1,296,534
Net loss year ended
May 31, 1993 (8,343) (8,343)
------------- ------------
Balance - May 31, 1993 1,705,118 171 1,231,089 56,931 1,288,191
Net loss year ended
May 31, 1994 (2,539) (2,539)
------------- ------------
Balance - May 31, 1994 1,705,118 171 1,231,089 54,392 1,285,652
Net loss year ended
May 31, 1995 (1,172,556) (1,172,556)
------------- ------------
Balance - May 31, 1995 1,705,118 171 1,231,089 (1,118,164) 113,096
Issuance of shares for cash,
June 8, 1995 2,294,000 229 74,771 75,000
Net loss year ended
May 31, 1996 0 2,110,631 2,110,631
------------- ------------- ------------
Balance - May 31, 1996 3,999,118 400 1,305,860 992,467 2,297,727
Net loss year ended
May 31, 1990 (385,304) (385,304)
Balance - May 31, 1990 3,999,118 $ 400 $ 1,305,860 $ 607,163 $ 1,193,423
============ ============= =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MAY 31,1997 AND 1996 AND 1995
AND FROM INCEPTION (JUNE 24,1986)
THROUGH MAY 31,1997
FOR THE YEAR FOR THE YEAR FOR THE YEAR FROM INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1997
============== ============== ============== ================
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Income or Loss $ (385,304) $ 2,110,631 $ (1,172,556) $ 607,163
Temporary (Increase) or Decrease in
Marketable Securities 737,811 (2,015,878) 0 (1,278,067)
Loss on Disposal of Subsidiaries 0 0 1,172,556 1,203,788
Gain on Sale of Subsidiaries (490,849) 0 0 (490,849)
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities
Depreciation 0 0 0 41,931
Changes in Operating Asses and
Liabilities
(Increase) Decrease in Accounts
Receivable (14,206) 0 0 (14,206)
(Increase) Decrease in Accrued
Interest Receivable (42,808) (6,166) (48,974
(Increase) Decrease in Security
Deposits (16,060) 0 0 (16,060)
(Increase) Decrease in Organization
Costs (1,297) 0 (1,297)
Increase (Decrease) in Accounts
Payable (116,191) 83,687 0 6,600
Total Adjustments 56,4391 (1,938,357) (1,172,556) (597,134)
-------------- -------------- -------------- ----------------
Net Cash Provided (Used) by
Operating Activities (328,913) 172,274 10,029
Cash Flows from Investing Activities
Purchase of Office Equipment 0 0 0 (41,931)
Advances to Subsidiaries 0 0 0 (1,203,788)
Investment in Related Company 0 (500) 0 (500)
Purchases of Marketable Securities (645,218) (164,857) 0 (711,849)
Proceeds from Sales of Marketable
Securities 1,031,814 0 0 1,031,814
-------------- -------------- -------------- ----------------
Net Cash Flows from Investing
Activities 386,596 (165,357) 0 (925,849)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
GRAYSTONE FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MAY 31,1997 AND 1996 AND 1995
AND FROM INCEPTION (JUNE 24,1986)
THROUGH MAY 31,1997
FROM
FOR THE YEAR FOR THE YEAR FOR THE YEAR INCEPTION
ENDED ENDED ENDED THROUGH
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1997
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Cash Flows from Financing Activities
Sale of Common Stock 0 75,000 0 1,300,292
Loan Proceeds 155,000 0 0 155,000
Advances to and from Related
Companies (298,651) 2,204 0 (448,647)
Advances to and from Related
Company 16,390 46,327 0 (29,955)
Net Cash Provided by Financing
Activities (127,261) 123,531 0 (29,955)
-------------- ------------- ------------- --------------
Increase (Decrease in Cash and Cash
Equivalents (69,578) 130,448 0 60,870
Cash and Cash Equivalents at Beginning
of Period 130,448 0 0 0
Cash and Cash Equivalents at End of
Period $ 60,870 $ 130,448 $ 0 $ 60,870
============== ============= ============= ==============
Supplemental Information
Assets Purchased in Exchange
for Common Stock $ 0 $ 0 $ 0 $ 5,968
============== ============= ============= ==============
Cash Paid for:
Interest $ 0 $ 0 $ 0 $ 121,310
Income Taxes $ 0 $ 0 $ 0 $ 0
============== ============= ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
E - F - 12
GRAYSTONE FINANCIAL SERVICES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31,1997 AND 1996
NOTE I - ORGANIZATION
Graystone Financial Services, Inc. (The Company), formerly known as Capital
Investment Development Corp. was incorporated under the laws of the State of
Florida on June 24, 1986 with an authorized capital of 100,000,000 shares with
a par value of $.0001. On October 10, 1988 the Company amended its Articles of
Incorporation changing its name to Graystone Financial Services, Inc.
On March 16, 1987, the Company formed a wholly-owned subsidiary,
Bradford-Taylor Clearinghouse, Inc. Bradford-Taylor Clearinghouse, Inc. has
been inactive from inception through July 31, 1995. Bradford-Taylor
Clearinghouse, Inc. entered into a licensing agreement with Nico Electric,
A.G. and/or overseas assignees on August 1, 1995 in exchange for 82.67% of the
common stock of Bradford-Taylor Clearinghouse, Inc. The licensing agreement
allows Bradford-Taylor Clearinghouse, Inc.'s use of Nico Electric, A.G.
technology for alarms and security devices up to 6Mhz and 1Mv for commercial
use only. This reduced the Company's ownership in Bradford-Taylor
Clearinghouse, Inc. (now Digital Acoustic System Inc.) to 13.3%.
On June 24, 1986, the Company issued 20,000,000 shares of its common
stock to private investors for a total cash consideration of $20,000.
In connection with a public offering in September 1986, the Company sold
5,500,000 shares of its common stock for $.05 per share. Expenses incurred in
connection with the public offering of $62,458 were charged against additional
paid in capital. Net proceeds from the offering were $212,542.
Each share of common stock issued in connection with the public offering
included one class A warrant and one class B warrant. The purchase warrants
were exercisable over an eight month period ending May 18, 1987. Each
redeemable warrant entitled the holder to purchase one share of common stock
at a price of $.075 per share in the case of class A warrants and a price of
$.10 per share of class B warrants.
During the period ended May 31, 1987, 5,500,000 of class A warrants were
exercised at $.075 per share for a total cash consideration of $412.500. On
May 18, 1987, the class B warrants were extended for a six months period.
In addition, in connection with the public offering 550,000 warrants were
issued to the underwriter, which were exercised commencing September, 1987 at
a price of $.055 per share or an aggregate of $30,250. The remaining
5,500,000 Class B warrants were exercised during the year ended May 31, 1988
for an aggregate of $550,000.
On September 30, 1988, the Stock Purchase Agreement dated April 4, 1988
by and between the Company and Harp Investments, Inc., a privately held New
Jersey corporation, was approved by the stockholders. The agreement provided
for the Company to acquire 100% of the outstanding shares of capital stock of
Graystone Nash, Incorporated, a New Jersey corporation engaged in securities
brokerage, trading and research, investment banking activities and related
financial services, and 70% of the outstanding shares of Outwater and Wells,
Inc. (Graystone Nash owned 30% of the outstanding shares prior to the
exchange), a New Jersey corporation engaged in providing a full range of
securities clearance services to Graystone Nash, Incorporated, in exchange for
59,675,000 shares of the Company's common stock.
Additionally, 11,475,000 shares of the Company's common stock was
required to be returned to the Company by certain original shareholders. The
transaction was handled as a reverse merger.
On April 20, 1990, the National Association of Securities Dealers, Inc.
censured Graystone Nash, Incorporated and its President, Thomas V. Ackerly.
The Association fined Graystone Nash, Incorporated and Thomas V. Ackerly
$1,325,000, jointly and severely, and expelled Graystone Nash, Incorporated
from membership in the Association and barred Thomas V. Ackerly from
association with a member of the Association.
Additionally, the Securities and Exchange Commission brought an action
against Graystone Nash, Incorporated and Thomas V. Ackerly, its President, and
on April 21, 1993 a judgment was entered against the Company and Thomas V.
Ackerly in the amount of $60,565,581 plus interest beginning January 1, 1989.
The action was appealed and on June 1, 1994, the judgment was reversed.
Graystone Nash, Incorporated was not represented by counsel in the new review
ordered and the judgment still stands against it. Thomas V. Ackerly, acting as
his own counsel, presented to the Court additional information to review.
Upon review by the Court, on July 10, 1995, the judgment and pre-judgment
interest was waived as to Thomas V. Ackerly. As a result of the above
actions, the subsidiary Graystone Nash, Incorporated was forced to close and
cease operations. Graystone Nash, Incorporated discontinued its operations as
of May 31, 1991, and the subsidiary was disposed of on July 31, 1994. the date
the corporation was dissolved by the State of New Jersey.
Also, the subsidiary Outwater and Wells, Inc., was forced to close and
case operations in accordance with the lockup rules of the SEC. Outwater and
Wells, Inc. discontinued its operations as of May 31, 1991, and the subsidiary
was disposed of August 31, 1994, the date the corporation was dissolved by the
State of New Jersey.
On April 16, 1990, the shareholders approved a 50:1 reverse split of the
Company's common stock. The reverse split reduced the authorized shares of
common stock to 4,000,000. An additional 118 fractional shares were issued in
connection with the reverse split.
On June 8, 1995, the Company issued 2,294,000 shares of its common stock
to its controlling stockholder for a total cash consideration of $75,000.
On September 19, 1996, the Company incorporated G.S. Television
Productions, Inc. (The Corporation) in the State of Delaware. On October 3,
1996, the Corporation received authority to do business in the State of New
Jersey. The Corporation is a wholly owned subsidiary of the Company and has
been inactive since its date of incorporation.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Financial Statement Presentation
---------------------------------------------
The records of the Company (A Corporation) are maintained using the
accrual method of accounting.
B. Cash and Cash Equivalents
----------------------------
The Company considers all highly liquid debt instruments with a maturity
of three months or less to be cash and cash equivalents.
C. Principles of Consolidation
-----------------------------
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, G.S. Television Productions,
Inc. (Inactive since its date of incorporation September 19, 1996).
Intercompany transactions and balances have been eliminated in consolidation.
D. Earnings or (Loss) Per Share
--------------------------------
Earnings or (loss) per share is computed using the weighted average
number of shares of common stock outstanding.
E. Provision for Taxes
---------------------
At May 31, 1997, 1996 and 1995, the Company had net operating loss
carryforwards of approximately $2,257,794, $2,175,722, and $2,169,005 that may
bc offset against future taxable income through the years 2012, 2011 and 2009.
Additionally, the Company has available capital loss carryovers of $776,317,
$1,267,166 and 265,715 that may be offset against future capital gains.
F. Use of Estimates
------------------
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the estimates
that were assumed in preparing the financial statements.
G. Pending Accounting Pronouncements
-----------------------------------
It is anticipated that current pending accounting pronouncements will not
have an adverse impact on the financial statements of the Company.
NOTE 3 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
May 31, May 31,
1997 1996
<S> <C> <C>
Machinery and Equipment $ 25,002 $ 25,002
Furniture and Fixtures 16,929 16,929
-------- --------
41,931 41,931
Less Accumulated Depreciation 41,931 41,931
-------- --------
Net Book Value $ 0 $ 0
</TABLE>
Expenditures for repairs and maintenance and minor renewal and
betterments are charged to operations in the year incurred. Major renewals
and betterments are capitalized. Depreciation is recorded under the straight
line method, utilizing a 5 year estimated useful life.
NOTE 4 - OTHER CURRENT ASSETS
The following is a summary of Trading Securities owned as of May 31,
1997:
<TABLE>
<CAPTION>
Number of Cost Market
Shares Value
<S> <C> <C> <C>
Trading Securities owned
NJS Acquisitions Corp. 261,877 $ 0 $1,473,058
Reed Systems, Inc. 19,444 0 0
Great American Lumber Co. 8,695 0 0
G L Intelligent Systems, Inc. 20,000 46,253 32,500
XO Systems Corp. 200,000 100,005 9,400
Cash Account 28 28
---------- ----------
Total $ 146,286 $1,514,986
========== ==========
</TABLE>
The following is a summary of trading securities owned as of May 31,
1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NJS Acquisitions Corp. 397,677 $ 0 2,087,804
Reed Systems, Inc. 19,444 0 0
E Data Corp. 5,000 46,187 48,125
Great American Lumber Co., Inc. 8,695 0 0
Classic International Entertainment, Inc. 20,630 9,554 9,036
Ambase Corporation 10,000 18,200 20,200
BNN Corporation 2,500 0 14,335
Evans Environmental Corp. 700 240 1,203
Money Market Funds 24 24 24
Cash Account 18 18
-------- ----------
Total $ 74,223 $2,180,745
======== ==========
</TABLE>
NOTE 5 -.TRANSACTIONS WITH RELATED PARTIES
Receivables - Related Companies represent advances to Harp Investment,
Inc., the controlling shareholder of the Company in the original amount of
$37,200, dated March 31, 1995, with a balance of $40,636 and $37,200 as of May
31, 1997 and 1996. Thomas V. Ackerly, President of the Company, represents a
note dated January 1, 1991 in the original amount of $115,000, with a balance
of $448,647 and $149,996 as of May 31, 1997 and 1996. The notes are payable
on demand and include interest at the rate of 9% per annum. By agreement with
the parties, interest did not begin to accrue on these notes till January 1,
1996. Interest is accrued on the above in the amount of $48,974 and $6,166 as
of May 31, 1997 and 1996. Additionally, the Company has advanced 0 and
$28,600 to Kali Trading Co., a related company, at May 31, 1997 and 1996.
Accounts Payable - Related Companies represents advances to and from
related companies in the amounts of $29,955 and $46,327, respectively as of
May 31, 1997 and 1996.
NOTE 6 - LEASES
The Company presently maintains its executive offices at 39 Lackawanna
Plaza, Room 8, Bloomfield, NJ 07003. the Company's office space consists of
approximately 500 square feet, on a month to month basis, at the rate of
$1,000 per month. There is no written agreement. The Company leases an
additional office located at 45 Wall Street, New York, NY and consist of
approximately 1,000 square feet. The lease is for a one year period ending
August 31, 1998, at the rate of $2,400 per month.
NOTE 7- OTHER MATTERS
Effective February 1, 1996, the Company entered into a consulting
agreement with Chapman Spira and Carson LLC to provide assistance in
developing clients who are seeking access to public markets through the merger
or acquisition of a public company or entry to trading markets through the
introduction to financing institutions or broker/dealers. The contract is for
one year and the fee for services was $108,000.
LETTER OF TRANSMITTAL
---------------------
TO ACCOMPANY CERTIFICATES REPRESENTING
SHARES OF COMMON STOCK OF
GRAYSTONE FINANCIAL SERVICES, INC.
(A FLORIDA CORPORATION)
CUSIP: 389805 20 1
CONVERTED INTO A RIGHT TO RECEIVE SHARES OF COMMON STOCK OF
GS FINANCIAL SERVICES, INC.
(A DELAWARE CORPORATION)
PURSUANT TO THE REINCORPORATION, NAME CHANGE AND REDUCTION IN
COMMON STOCK OF GRAYSTONE FINANCIAL SERVICES, INC.
SURRENDER CERTIFICATES FOR SHARES OF COMMON STOCK
OF GRAYSTONE FINANCIAL SERVICES, INC. TO:
CONTINENTAL STOCK TRANSFER & STOCK COMPANY
By Mail: By Hand:
Continental Stock Transfer & Stock Company Continental Stock Transfer
& Stock Company
2 Broadway 2 Broadway
New York, New York 10004 New York, New York 10004
Attention: Mr. Roger Bernhammer Attention: Mr. Roger Bernhammer
For information call:
(212) 509-4000, ext. 212
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed. If Company
Certificates are registered in different names, a separate Letter of
Transmittal must be submitted for each different registered owner.
DESCRIPTION OF COMPANY CERTIFICATES SURRENDERED
-----------------------------------------------
ame(s) and Address(es) of Company Certificate(s) Enclosed
Registered Owner(s) (Attach additional
(Please fill in, if blank) list if necessary)
- ------------------------------
Total Number
of Shares
Company Certificate Represented by
Number(s) Company Certificate(s)
Total Shares:
SIGNATURES MUST BE PROVIDED AND GUARANTEED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
Gentlemen:
The undersigned hereby surrenders the certificate(s) listed above (the
"Company Certificates") representing shares of common stock, par value $.0001
per share of Graystone Financial Services, Inc. (the "Company Common Stock"),
for cancellation in exchange for shares of common stock, par value $.001 ("GS
Financial Common Stock"), of GS Financial Services, Inc. ("GS Financial") at
the exchange ratio of one share of GS Financial Common Stock for each 100
shares of Company Common Stock surrendered hereby, as well as a cash payment,
if applicable, in lieu of any fractional shares of GS Financial Common Stock
to which the undersigned would otherwise be entitled upon conversion of his
Company Common Stock, determined by multiplying the number of shares of
Company Common Stock surrendered hereby that are not convertible into a whole
share of GS Financial Common Stock by $.002 without interest (the
"Cancellation Price"), pursuant to a merger of the Company into GS Financial
(the "Merger") effective December 9, 1997 (the "Effective Date"). The terms
and conditions of the Merger are set forth in a Agreement and Plan of Merger
dated October 15, 1997 by and between the Company and GS Financial (the "Plan
of Merger"), which Plan of Merger has been approved by persons holding
approximately 82.5% of the Company Common Stock. The undersigned understands
that the exchange of Company Common Stock is subject to the terms and
conditions set forth in the accompanying Instruction. The undersigned hereby
waives any right to demand appraisal of the fair value of the Company Common
Stock surrendered hereby.
The undersigned understands that a certificate representing GS Financial
Common Stock and, if applicable, a check for any amount payable to the
undersigned for canceled fractional share interests (less any amount required
to be withheld pursuant to federal income tax law) will be sent by mail as
soon as practicable following the receipt of the Company Common Stock and this
Letter of Transmittal or delivered by other reasonable procedure requested by
the undersigned and agreed to by GS Financial.
Please issue and deliver the certificate representing the number of
shares of GS Financial Common Stock to which the undersigned is entitled in
exchange for the Company Common Stock surrendered pursuant to this Letter of
Transmittal and, if applicable, the check in payment of any canceled
fractional interests to the undersigned at the address specified under
"Description of Company Certificates Surrendered" above unless otherwise
indicated under "Special Registration and Payment Instructions" or "Special
Delivery Instructions" below.
F- EXHIBIT F
SPECIAL REGISTRATION AND PAYMENT
INSTRUCTIONS (See Instruction 2 below)
COMPLETE ONLY if the GS Financial Certificates are to be registered in the
name of, and any check for cash payment is to be made payable to, and both are
to be sent to, a person OTHER than the name(s) of the registered holder(s)
appearing under "DESCRIPTION OF COMPANY CERTIFICATES SUBMITTED."
Issue and mail certificate and check to:
Name ______________________________
(Please Print)
Address ___________________________
___________________________________
(Include Zip Code)
___________________________________
(Signature)
___________________________________
(Tax Identification or Social
Security Number)
(See Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 2 below)
COMPLETE ONLY if the GS Financial Certificates are to be issued in the name of
, and any check is to be made payable to, the undersigned, but are to be sent
OTHER than to the address of the registered holder(s) appearing under
"DESCRIPTION OF COMPANY CERTIFICATES SUBMITTED" or, if the box immediately to
the left is filled in, OTHER THAN to the address appearing therein.
Mail or deliver to:
Name _____________________________
(Please Print)
Address __________________________
__________________________________
(Include Zip Code)
__________________________________
(Tax Identification or Social
Security Number)
(See Substitute Form W-9)
The undersigned hereby warrants to GS Financial that the undersigned has
full power and authority to submit, sell, assign and transfer the Company
Certificates described above, free and clear of all liens, charges and
encumbrances and not subject to any adverse claim. The undersigned will, upon
request, execute any additional documents necessary or desirable to complete
the transfer of the Company Certificates.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned, and all obligations of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
<PAGE>
SIGN HERE AND, IF REQUIRED, HAVE SIGNATURES GUARANTEED (If Special
Registration and Payment Instructions are given, or if signature is by other
than the registered holder, signature(s) must be guaranteed. See Instruction
2.)
(Signature(s) of Shareholder(s)
Dated: ,1997
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
the Company Certificates or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please set forth full title and see
Instructions 2 and 3)
Name(s):
(Please Type or Print)
Capacity (Full Title)
Address
(include Zip Code)
Area Code and Tel. No.
Tax Identification or
Social Security No.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTION 2)
Authorized Signature
Name
(Please Type or Print)
Name of Firm
Address
(Include Zip Code)
Area Code and Tel. No.
Dated: , 1997
IMPORTANT: Failure to complete the Substitute Form W-9 on the back page of
this Letter of Transmittal may result in backup withholding of 31% of any cash
payments made pursuant to the Merger. Please review the Instructions and the
information provided under "Important Tax Information" in this Letter of
Transmittal.
INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND COMPANY CERTIFICATES. Company
Certificates, together with a signed and completed Letter of Transmittal and
any required supporting documents, should be sent or delivered to Continent
Stock Transfer & Trust Company at the address shown on the face of this Letter
of Transmittal. If any of the Company Certificates are registered in
different names, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
Company Certificates. The method of delivery of this Letter of Transmittal,
the Company Certificates and all other required documents is at the option and
risk of the shareholder(s) and the delivery will be deemed made only when
actually received by Continent Stock Transfer & Trust Company. A Letter of
Transmittal, the Company Certificates and any other required documents must be
properly received by Continent Stock Transfer & Trust Company, in form
satisfactory to it, in order for the delivery and surrender to be effective
and the risk of loss of the Company Certificates to pass to GS Financial. If
delivery is by mail, registered or certified mail with return receipt
requested, properly insured, is recommended.
2. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
United States (an "Eligible Institution"), unless the Company Certificate(s)
are surrendered (i) by the registered holder of Company Common Stock who has
not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (ii)
for the account of an Eligible Institution.
3. SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Company Certificates, the signature(s) must
correspond exactly with the name(s) as written on the face of the Company
Certificates without alteration, enlargement or any change whatsoever.
If any Company Certificate is held of record by two or more joint owners,
all such owners must sign this Letter of Transmittal.
If this Letter of Transmittal or any Company Certificates or stock powers
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
submit evidence satisfactory to GS Financial of such person's authority so to
act.
4. VALIDITY OF SURRENDER; IRREGULARITIES. All questions as to validity,
form and eligibility of any surrender of Company Certificates hereunder will
be determined by GS Financial as the successor to the Company. GS Financial
reserves the right to waive any irregularities or defects in the surrender of
any Company Certificates, and its interpretations of the terms and conditions
of the reclassification and of this Letter of Transmittal (including these
Instructions) with respect to such irregularities or defects shall be final
and binding on all parties. A surrender will not be deemed to have been made
until all irregularities have been cured or waived.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Indicate the name and
address of the person(s) to which GS Financial Certificates are to be issued
or to which any applicable payment for the Company Common Stock is to be made
or sent if different from the name and address of the person(s) signing this
Letter of Transmittal.
6. ADDITIONAL COPIES. Additional copies of this Letter of Transmittal
and of the Information Statement may be obtained from Mr. Roger Bernhammer at
Continent Stock Transfer & Trust Company located at: 2 Broadway, New York,
New York 10004.
7. INADEQUATE SPACE. If the space provided on this Letter of
Transmittal is inadequate, the Company Certificate numbers and numbers of
Company Common Stock should be listed on a separate signed schedule affixed
hereto.
8. LETTER OF TRANSMITTAL REQUIRED; SURRENDER OF COMPANY CERTIFICATES;
LOST COMPANY CERTIFICATES. A shareholder will not receive any GS Financial
Common Stock or cash for Company Common Stock unless and until this Letter of
Transmittal or a facsimile hereof, duly completed and signed, is delivered to
Continent Stock Transfer & Trust Company, together with the Company
Certificates representing such Company Common Stock and any required
accompanying evidences of authority in form satisfactory to Continent Stock
Transfer & Trust Company. If the Company Certificates have been lost or
destroyed, such should be indicated on the face of this Letter of Transmittal.
In such event, GS Financial will forward additional documentation necessary to
be completed in order to effectively surrender such lost or destroyed Company
Certificates. No interest will be paid on any amount due for Company
Certificates.
9. SUBSTITUTE FORM W-9. Each shareholder is required to provide GS
Financial with a correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9, which is provided under "Important Tax Information" below, and to
indicate that he is not subject to backup withholding by checking the box in
Part 2 of the Substitute Form W-9. Failure to provide the information on the
Substitute Form W-9 may subject the shareholder to 31% federal income tax
withholding on the payment. The box in Part 3 of the Substitute Form W-9 may
be checked if the shareholder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future. If the box in
Part 3 is checked and GS Financial is not provided with a TIN within 60 days,
GS Financial will, withhold 31% of all payments of such cash thereafter until
a TIN is provided to GS Financial.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder is required to provide GS
Financial with his correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is his Social Security number. If GS
Financial is not provided with the correct TIN, the shareholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such shareholder may be subject to backup
withholding.
Certain shareholders (including, among others, all corporations and
certain foreign individuals) are not subject to backup withholding and
reporting requirements and should indicate their exempt status on Substitute
Form W-9.
If backup withholding applies, GS Financial is required to withhold 31%
of any payments made to the shareholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INSTRUCTIONS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder,
the shareholder is required to notify GS Financial of his correct TIN by
completing the form below certifying that the TIN provided on the Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN) and that (1)
the shareholder has not been notified by the Internal Revenue Service that he
is subject to backup withholding as a result of failure to report all interest
or dividends or (2) the Internal Revenue Service has notified the shareholder
that he is no longer subject to backup withholding.
WHAT NUMBER TO GIVE GS FINANCIAL
The shareholder is required to give GS Financial the Social Security
number or employer identification number of the record owner of the Company
Certificates. If the Company Certificates are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidelines on which number to report.
PAYER'S NAME: GS FINANCIAL SERVICES, INC.
G- Exhibit G
<TABLE>
<CAPTION>
<S> <C>
SUBSTITUTE FORM W-9 PART 1 PLEASE PROVIDE YOUR TIN IN THE
SPACE BELOW AND CERTIFY BY SIGNING
AND DATING PART 3.
Social Security Number _______________________
OR
Employer Identification Number
DEPARTMENT OF THE TREASURY INTERNAL PART 2 Check the box if you are NOT subject to
REVENUE SERVICE back up withholding under the provisions of Section
3406(a)(1)(C) of the Internal Revenue Code because
(1) you have not been notified that you are subject to
backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue
Service has notified you that you are no longer
subject to backup withholding +-+
+-+
+-+
PAYERS REQUEST FOR TAXPAYER PART 3 CERTIFICATION - Under penalties of
IDENTIFICATION NUMBER ("TIN") perjury, I certify that the information provided on
this form is true, correct and complete.
</TABLE>
Signature:
Date:
Awaiting TIN? +-+
+-+
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF
31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE AMENDMENT. PLEASE REVIEW
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
