SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. 2)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
LUCOR, INC.
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(Name of Registrant as Specified In Its Charter)
Lucor, Inc., Stephen P. Conway and Jerry B. Conway
------------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and
0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined.) :
4. Proposed maximum aggregate value of transaction:
5. Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
LUCOR, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on _______________
TO THE SHAREHOLDERS
OF LUCOR, INC.
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders
of Lucor, Inc., a Florida corporation (the "Company"), will be held at
2:00 PM, local time, on __________, at the Company's headquarters at
790 Pershing Road, Raleigh, North Carolina, 27608 to approve an
amendment to the Company's Amended and Restated Articles of
Incorporation (the "Articles") which will effect a 20 to 1 reverse
stock split of the Company's Class A Common Stock and Class B Common
Stock.
The Board of Directors has fixed the close of business on
________________ as the record date for determining those shareholders
entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and
return the proxy form sent to you as promptly as possible.
By Order of the Board of Directors,
/s/ Stephen P. Coway
-----------------------------------
Stephen P. Conway
Chairman and Chief Executive Officer
Raleigh, North Carolina
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE URGED TO EXECUTE AND RETURN
THE PROXY FORM AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A
PROXY FORM MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND
VOTE THEIR SHARES IN PERSON.
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
OF LUCOR, INC.
____________________
PRELIMINARY PROXY STATEMENT
____________________
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Lucor, Inc., a Florida
corporation (the "Company"), of proxies from the holders of the
Company's Class A Common Stock (the "Class A Stock") for use at the
Special Meeting of Shareholders of the Company to be held at the
corporate headquarters of Lucor, Inc, 790 Pershing Road, Raleigh, NC
27608 at 2:00 PM, local time, on _______________ or at any
adjournments or postponements thereof (the "Special Meeting"). The
approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent or given to holders of Class A Stock is
__________________. The Company's principal executive offices are
located at its corporate offices at 790 Pershing Road, Raleigh, North
Carolina 27608, and its telephone number is (919) 828-9511.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board
of Directors (the "Board"). The cost of preparing, assembling and
mailing this Proxy Statement, the Notice of Special Meeting of
Shareholders and the enclosed proxy will be borne by the Company. The
Company may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy material to their
principals and to request authority for the execution of proxies.
PURPOSE OF THE MEETING
At the Special Meeting, the Company's shareholders will consider
and vote to approve an amendment to the Company's Amended and Restated
Articles of Incorporation (the "Articles") which will effect a 20 to 1
reverse stock split of the Company's Class A Stock and Class B Common
Stock (the "Class B Stock").
Unless contrary instructions are indicated on the enclosed proxy,
all shares represented by valid proxies received pursuant to this
solicitation will be voted in favor of the amendment to the Articles
as described herein. In the event a shareholder specifies a different
choice by means of the enclosed proxy, his or her shares will be voted
in accordance with the specifications so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on
_______________ as the record date (the "Record Date") for determining
shareholders of the Company entitled to notice of and to vote at the
Special Meeting. As of the Record Date, there were 2,333,133 shares
of Class A Stock outstanding and 502,155 shares of Class B Stock
outstanding, all of which are entitled to one vote on the proposed
amendment to the Articles.
REQUIRED VOTE
Pursuant to the Articles and the Florida General Corporation law,
the affirmative vote of the holders of a majority of the common shares
that are present in person or by proxy at the Special Meeting is
required to approve the proposed amendment. The representation in
person or by proxy of a majority of the issued and outstanding shares
of Class A Stock and Class B Stock (collectively, the "Common Stock")
entitled to be cast is necessary to provide a quorum at the Special
Meeting. Broker non-votes are treated as shares as to which voting
power has been withheld by the beneficial owners thereof and,
therefore, as shares not entitled to be cast thereon. Thus, although
broker non-votes have no effect on the vote, they have the practical
effect of reducing the number of affirmative votes required to approve
the proposed amendment to the Articles by reducing the total number of
shares entitled to vote thereon. Proxies sent to the Company that are
marked "abstain" with respect to the approval of the proposed
amendment will be counted for the purpose of determining the number of
common shares represented at the Special Meeting, but will have no
effect in determining whether the requisite vote has been obtained for
approval of the proposed amendment other than the practical effect of
reducing the number of affirmative votes required to approve the
proposed amendment to the Articles by reducing the total number of
shares entitled to vote thereon.
<PAGE>
Messrs. Stephen P. Conway and Jerry B. Conway, each of whom are
directors and executive officers of the Company, directly or
indirectly own all of the 502,155, outstanding shares of Class B
Stock, and directly or indirectly own or by irrevocable proxy control
the voting rights of 975,707 shares of the Class A Stock eligible to
be cast on the approval of the proposed amendment to the Articles.
These individuals have advised the Company that they intend to be
present at the meeting, and to vote their shares for the approval of
the Reverse Stock Split proposal. Since the number of shares of
Common Stock held or controlled by these two shareholders represents a
majority of the votes that may be cast at the Special Meeting, these
shareholders will be able to approve the proposed amendment to the
Articles, regardless of how the other holders of Class A Stock vote
their shares.
REVOCATION OF PROXY
The giving of a proxy does not preclude the right to vote in
person should any shareholder giving the proxy so desire.
Shareholders have a right to revoke their proxy at any time prior to
the exercise thereof, either in person, at the Special Meeting, or by
filing with the Company's Secretary at the Company's principal
executive offices a written revocation or duly executed proxy bearing
a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or
prior to the Special Meeting.
<PAGE>
REVERSE STOCK SPLIT PROPOSAL
Summary of Reverse Stock Split Proposal
On February 9, 2000, the Board discussed the mechanics and
anticipated effects of a possible reverse stock split of the Company's
Class A Stock and the Class B Stock (the "Reverse Stock Split"). On
September 28, 2000, the Board adopted a resolution, subject to
shareholder approval, that the Articles be amended to effect an 20 to
1 reverse stock split of the Company's common stock, such that each 20
shares of existing Class A Stock and Class B Stock will be
respectively combined into one share of "new" Class A Stock and one
share of "new" Class B Stock. There are no material differences
between the respective rights, preferences or limitations of the
existing Class A Stock and Class B Stock and the "new" Class A Stock
and the "new" Class B Stock. The form of amendment to the Articles to
effect this transaction is attached hereto as Appendix A (the
"Amendment").
In order to complete the Reverse Stock Split, a majority of the
stockholders entitled to vote at the Special Meeting must approve an
amendment to the Articles. By approving this proposal, the
stockholders authorize the Board to implement the Reverse Stock Split
by filing the Amendment with Florida Secretary of State's office
within ten (10) business days following the proposal's approval at the
Special Meeting (hereinafter referred to as the "Effective Date").
The stockholders may not rescind their vote even if the timing of the
Amendment may adversely affect any particular stockholder.
The following table presents a summary of the effect of the
Reverse Stock Split proposal on the Company's stockholders. Please
note that we refer herein to our shareholders whose shares are
registered in their own names as "Registered Stockholders."
Stockholders as of Net Effect After Reverse Stock
Effective Date Split
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Registered Stockholders Shares of Class A Stock will
holding 20 shares of Class A be converted into one whole
Stock. There are no holders share of new Class A Stock.
of Class B Stock in this
category.
Registered Stockholders Shares of Class A Stock and
holding more than 20 shares of Class B Stock will be
Class A Stock or Class B respectively converted into
Stock. one or more shares of new
Class A Stockand Class B
Stock on a 20-for-1 basis,
with a cash payment for any
shares that would otherwise
result in fractional new
shares.
Registered Stockholders Shares ofClass A Stock will
holding fewer than 20 shares be exchanged for a cash
of Class A Stock. There are payment.
no holders of Class B Stock in
this category.
Stockholders holding Class A Nominees (such as a bank or
Stock in street name through a broker) may have required
nominee, such as a bank or procedures, and the Company
broker. There are no holders stockholder holding Class A
of Class B Stock in this Stock in street name should
category. contact their nominees to
determine how the Reverse
Stock Split will affect them.
<PAGE>
In lieu of the issuance of any fractional shares, the Company
will pay the fair value for those shares of Class A Stock and Class B
stock that would otherwise be converted into fractional shares as a
result of the Reverse Stock Split. The Board has determined that the
fair value of such stock shall the greater of (i) the average closing
price of Class A Stock for the twenty (20) trading days immediately
preceding the initial preliminary filing of this Proxy Statement, and
(ii) the average closing price of Class A Stock for the twenty (20)
trading days immediately preceding the Effective Date (the "Cash
Payment"). Payment in lieu of issuance of a fractional new share will
be made promptly after receipt of a properly completed letter of
transmittal and stock certificates (see also the information under the
caption "Exchange of Stock Certificates and Payment of Fractional
Shares" contained in this Proxy Statement).
There will be no service charge payable by stockholders in
connection with the exchange of certificates or in connection with the
payment of cash in lieu of the issuance of a fractional new share.
Background
The Company has approximately 459 Registered Stockholders holding
Class A Stock. Approximately 349 of such stockholders hold 10 shares
or less of the Class A Stock (the "Small Stockholders"). In the
aggregate, the Small Stockholders hold less than 0.15% of the Class A
Stock. The large majority of these Small Stockholders are former
employees of the Company that were granted a small number of shares in
1994 as a bonus to their regular compensation in connection with their
employment with the Company. In early December 1999, management
recognized the importance of being able to contact these Small
Stockholders in a reasonable time period in order to adopt certain
corporate strategies, including the ability of the Company to cease
public registration of its Class A Stock.
At the Board's February 2000 meeting, management expressed the
above-stated views to the Board and presented a proposal for a 11 to 1
reverse stock split as a strategy for eliminating the Small
Stockholders. Management also noted that the reverse stock split
would have the probable effect of reducing the number of registered
shareholders below 300, which would provide the Company the option to
cease public registration of its Class A Stock. The Board discussed
the advantages and disadvantages of eliminating the Small
Stockholders. The Board also discussed the advantages and
disadvantages of ceasing public registration of its Class A Stock.
The Board agreed with the necessity to reduce or eliminate these Small
Stockholders and approved the implementation of the 11 to 1 reverse
stock split. The Board acknowledged that this action may grant the
Company the option to terminate public registration of such stock, but
directed management to complete the reverse stock split regardless of
the issue regarding public registration the Class A Stock. The Board
deferred the decision on ceasing public registration of the Class A
Stock until a review of the market situation for the Class A Stock
could be made following completion of the 11 to 1 reverse stock split.
At the Board's May 2000 meeting, management informed the Board
of a notice from Nasdaq stating that the Company was not in compliance
with the continuing listing requirements of Nasdaq's SmallCap Market.
Management also informed the Board that the Company had responded to
Nasdaq with a plan for compliance and proposed that the Board delay
implementation of the reverse stock split until it received Nasdaq's
response to the plan. The Board delayed implementation of the Reverse
Stock Split proposal, as well as the decision to cease public
registration until it received Nasdaq's response to the plan.
In August 2000, Nasdaq denied the Company's plan for compliance
and terminated registration of the Class A Stock from Nasdaq's
SmallCap Market. At the next Board meeting, on September 28, 2000,
management proposed completing implementation of a reverse stock
split, but with an increased ratio of 20 to 1. Management stated that
the reason for the recommended increase in the split ratio was to
minimize the number of fractional shares that would be created by the
transaction, not to raise the number of eliminated shareholders (no
more registered shareholders were projected to be eliminated by the
increase). The Board approved completion of the Reverse Stock Split
proposal, and implementation of a termination of public registration
of the Class A Stock, if the Reverse Stock Split reduced the number of
registered stockholders of this class to fewer than 300.
Following the initial preliminary filing of this Proxy Statement
and a Schedule 13E-3 contemporaneously filed pursuant to Rule 13e-3
under the 1934 Act, the Board met on December 12, 2000 to reconsider
the factors concerning the fairness of the Reverse Stock Split,
primarily focusing on the various factors for establishing a fair
value of the Class A Stock for determining the Cash Payment in lieu of
issuance of a fractional share of new stock. The results of this
discussion are noted later in this discussion.
<PAGE>
Purpose and Reasons for the Reverse Stock Split
The purpose of the Reverse Stock Split proposal is to reduce the
number of Small Stockholders and permit the Company to cease
registration of the Class A Stock under the 1934 Securities and
Exchange Act (the "1934 Act"). The Board recommends that the Company
stockholders approve the Reverse Stock Split proposal to achieve this
purpose for the reasons set forth below.
For the Small Stockholders, typical transaction costs for public
sale of Class A Stock significantly reduce the liquidity of the
shares, since in most cases these transaction costs represent a large
percentage of the value of their holdings (at current stock pricing
trends). The Reverse Stock Split proposal will allow such
stockholders to liquidate their holdings at a fair value without these
transaction costs.
For stockholders of the Company other than the Small
Stockholders, reducing such a large number of small stockholders (over
75% of the existing stockholders) will result in savings to the
Company by reducing the administrative costs of providing annual
reports, proxy information and other shareholder services. In
addition, since it is important in certain corporate transactions to
be able to quickly communicate with its company stockholders, reducing
such a large number of Company stockholders that cannot be readily
located reduces delays in implementing corporation strategies. For
example, the Company considered an issuer tender offer to reduce the
number of shareholders to below 300 and allow it to cease public
registration of its Class A Stock, but because of the difficulty in
locating the Small Stockholders, it determined that such a strategy
would not be practical.
Another intended effect of the Reverse Stock Split is to position
the Company for terminating registration of its class A stock under
the 1934 Act. As a registered company, the Company is subject to the
periodic reporting and proxy solicitation requirements of the
Securities and Exchange Commission (the "SEC"). There is a
significant likelihood that the purchase of the fractional shares
following the Reverse Stock Split will reduce the number of Registered
Stockholders of Class A Stock to fewer than 300. We estimate that the
number of Registered Stockholders of Class A Stock would be reduced to
110 following the completion of the Reverse Stock Split. If this
occurs, the Company will be in a position to elect to cease
registration of its Class A Stock under the 1934 Act.
As part of its 1934 Act registration, the Company incurs direct
and indirect costs associated with compliance with the filing and
reporting requirements imposed on public companies. Examples of
direct costs savings from terminating registration of the Class A
Stock include lower printing and mailing costs, less complicated
disclosure due to the Company's private status; reduction in direct
miscellaneous clerical and other expenses (e.g., the word processing,
EDGARizing, telephone and fax charges associated with SEC filings) and
elimination of the charges of brokers and transfer agents in
forwarding materials to beneficial holders. The Company's auditors
have also informed the Company, informally, that there will be a
reduction in auditing fees.
The Company also incurs substantial indirect costs due to 1934
Act registration as a result of the executive time expended to prepare
and review such filings. Ceasing registration of the Class A Stock
will reduce or eliminate these costs, as well as lower the risk of
liability that typically attends public (as distinguished from
private) company status.
Based on its experience in prior years, the Company's direct
costs, which include the fees and expenses of independent auditors,
SEC legal counsel, printing, mailing, and SEC filing fees are
estimated at approximately $50,000 annually. This amount, however, is
just an estimate, and the actual savings to be realized may be higher
or lower than such estimate. It is expected that the majority of the
estimated savings will be not be realized until the fiscal year ending
December 31, 2001.
Another aspect of public registration is the disclosure of
proprietary information, such as material contracts, acquisitions,
growth strategies, and financial information regarding overall
operations. Ceasing registration of the Class A Stock will increase
the confidentiality of such proprietary information, which the Company
believes can be analyzed by its competitors to place the Company at a
competitive disadvantage.
<PAGE>
There are many advantages to being a publicly-traded company,
including stock value, stock liquidity, and use of company stock to
raise capital or make acquisitions. In the opinion of the Board,
however, the pricing trends and trading volume of the Class A Stock
has not allowed the Company to effectively take advantage of these
benefits, at least to the extent of justifying the continuing direct
and indirect costs of public registration. Furthermore, the Board
does not believe that there will be a significant change in this
equation in the near term.
Another factor which has impaired the Company's ability to
effectively take advantage of the benefits of public registration is
the August 2000 de-listing of the Company's Class A Stock from trading
on Nasdaq's SmallCap Market. Although the Class A Stock continues to
be traded in the Electronic Bulletin Board Market, management believes
that the de-listing has had detrimental effects on the trading volume
and pricing of the Class A Stock, which contributes to the failure to
realize some of the benefits of the Company's continued registration
of the Class A Stock under the 1934 Act.
The Company believes that size, revenue performance (current and
projected), strategic partnering, earnings, cash flow and product mix
are among the key factors considered by the investment community in
valuing the stock of a public company. One of the Company's goals
over the next several years is to enhance one or more of these factors
so that the Company can consider whether to register its common stock
for a public offering to effectively take advantage of a public market
for its stock. The Board intends to evaluate these factors, and
should the Board determine that the benefits of a public offering will
likely outweigh the costs at that time, it intends to register the
Company's stock in connection with a new public offering. There is,
however, no assurance when or if such an offering will occur.
Stockholders should note that the decision by the Board to
terminate 1934 Act registration does not require stockholder approval
and will not be voted on at the Special Meeting. Further, there is no
assurance that the number of such stockholders will be fewer than 300
following the Effective Date. While the Company intends to cease
public registration of its Class A Stock following the Reverse Stock
Split, the Board may choose not to implement this strategy if the
Board determines that it is not then in the best interests of the
Company and its stockholders given the then existing market
conditions.
Fairness of Reverse Stock Split Proposal
The Board believes that the Reverse Stock Split proposal, taken
as a whole, is fair to and in the best interests of the Company and
its stockholders, including unaffiliated stockholders, those
stockholders who will receive the Cash Payment and those stockholders
who will receive shares of new Class A Stock. The Board also believes
that the process by which the Reverse Stock Split is to be approved is
also fair. Stephen P. Conway and Jerry B. Conway, individually,
believe that the Reverse Stock Split is fair to the shareholders of
the Company and considered the same factors as the Board considered in
reaching that conclusion. All references to considerations and
conclusions by the Board as to fairness and to factors considered by
the Board apply as well to Stephen P. Conway and Jerry B. Conway. The
Board unanimously approved the Reverse Stock Split proposal and
recommends that the stockholders vote for its approval and adoption.
Each member of the Board who owns shares of Class A Stock and Class B
Stock has indicated that he intends to vote in favor of the Reverse
Stock Split proposal, including the Board members who are not
employees of the Company.
The Board considered a number of factors in determining the
fairness of the Reverse Stock Split prior to approval of the proposed
transaction. It recognized the existing liquidity concerns of the
Small Stockholders. It recognized that by reducing the number of
small stockholders would decrease (but not necessarily eliminate) the
problems associated with not being able to readily communicate with a
large portion of its stockholders. It also recognized that the
Reverse Stock Split will also likely enable the Company to cease
public registration of the Class A Stock, so in making its
determination of the fairness the Reverse Stock Split proposal, the
Board also factored in the added administrative costs and resources
involved in providing annual reports, proxy information and other
shareholder services to such a large proportion of stockholders
holding twenty shares or less. However, even if termination of 1934
Act registration is not implemented, the Board still concluded that
the elimination of the Small Stockholders is in the best interests of
the Company and its stockholders, when taken as a whole.
The Board did not retain either an investment bank or other
financial adviser to render a report or opinion with respect to the
fairness of the Reverse Stock Split proposal to the Company or its
stockholders. Management estimated that the cost of such report or
opinion would exceed $80,000. The Board determined that this expense
was unwarranted since it concluded that the Board itself could
adequately establish the fairness of the Reverse Stock Split proposal,
without such report or opinion, by addressing the factors and
considerations described in this section.
<PAGE>
The Board did not establish an unaffiliated representative to
represent the unaffiliated stockholders of the Company in determining
the terms of the Reverse Stock Split proposal because the Board
concluded that there was sufficient representation in the decision-
making at the Board level to protect the interests of unaffiliated
stockholders. This decision was based on the fact that four of the
six Board members are not controlled by, or under common control with
the Company, and three of these Board members are not employees of the
Company. In addition, no independent committee of the Board has
reviewed the fairness of the Reverse Stock Split proposal because the
Board concluded that such unaffiliated Board members could adequately
convey their opinions and concerns to the entire Board without the
need for the establishment of such a committee.
The Board determined that the Reverse Stock Split proposal was
substantively fair to all unaffiliated stockholders. In reaching this
determination, the Board considered of the following supporting
factors:
- The Small Stockholders will be allowed to liquidate their
holdings in a cost effective manner, a task that they could not
otherwise accomplish since all of the Small Stockholders own ten
shares of Class A Stock or less (one Small Stockholder owns one
share), with a total estimated market value for each ten shares of
less than $17.50 (calculated at $1.75 price per share - the highest
closing price for Class A Stock during the third calendar quarter of
2000). On December 1, 2000, Management conducted a summary review of
the current pricing of transaction fees, and found that the lowest
transaction fee for a stock trade was approximately $20.00 per trade.
(The sole purpose of identifying estimated transaction fees ten share
was to provide a context for establishing the approximate low-end cost
of selling small stock holdings of Class A Stock in the public market
relative to the estimated value of such holdings; its purpose was not
to identify the absolute lowest cost or the best value with regard to
brokerage services.)
- The Reverse Stock Split will not change the rights, preferences
or limitations of unaffiliated stockholders, with the exception of the
Small Stockholders.
- No stockholder, whether affiliated or unaffiliated (other than
the Small Stockholders), will have a material decrease in their
percentage of ownership interest of the Company following the Reverse
Stock Split and any decrease that will occur will equally apply to
affiliated and unaffiliated stockholders. Any stockholder whose
holdings are not in even multiples of 20 shares will experience a
slight relative decrease in their percentage of interest after the
split, but the maximum number of shares that could be affected would
be nineteen. As an example, the percentage ownership interest of a
stockholder with 2,019 shares would experience a relative decrease of
0.0005722% of his or her interest following the Reverse Stock Split
due to the cancellation of the nineteen odd lot shares in return for a
Cash Payment. We have qualified the foregoing statements as
"relative decreases" because the percentage of ownership of the
remaining shareholders following the split, affiliated and
unaffiliated, will be slightly increased to the extent of the
cancellation of the Small Stockholders' holdings and any other odd-lot
holdings that are not in an even multiple of 20 shares.
- Small Stockholders can retain their ownership in the Company by
increasing their number of shares to 20. All Small Stockholders, but
one own 10 shares of Class A Stock, so all but one Small Stockholder
wishing to remain a stockholder of the Company may do so by purchasing
10 shares of stock. The highest closing price for Class A Stock in
November 2000 on the OTC Electronic Bulletin Board was $1.031 per
share and the lowest closing price during such period was $0.563 per
share. Consequently, using the forgoing pricing, a Small Stockholder
could remain a stockholder of the Company for a price estimated at or
between $10.31 and $5.63, plus transaction fees.
<PAGE>
- Only the Small Stockholders will cease to be stockholders of the
Company following the split and they are the only stockholders who
will lose a significant percentage of their existing ownership
interest in the Company. As generally described in the information
contained herein in the sections captioned "Background" and "Purpose
and Reasons for the Reverse Stock Split," locating and communicating
with the Small Stockholders has not been feasible despite efforts to
do so. Conditioning the approval of the Reverse Stock Split
transaction on the affirmative by majority vote of the unaffiliated
stockholders would not reflect the collective judgment of the Small
Stockholders because the Board determined that it would be unlikely
that large number of such stockholders would vote (in person or by
proxy) due to the historical difficulties in communicating with the
Small Stockholders. The Board therefore concluded that the interests
of the unaffiliated stockholders who were directly impacted by the
split would not be represented because they would not likely be aware
of the importance of the vote and, even if they were aware, their
interests would represent a minority of the unaffiliated stockholders.
Since, unlike the Board, the unaffiliated shareholders have no
fiduciary duty to fellow stockholders, the Board decided that it
should not grant the veto on the Reverse Stock Split to the
unaffiliated stockholders. Even if the Small Stockholders could be
effectively communicated with, so as to allow such stockholders to
convey the interests of the majority of this group, the holdings of
the Small Stockholders represent less than 0.15% of the ownership
interests of the Company. Since the Board has a fiduciary duty to the
Company and its stockholders in toto, it determined that an abrogation
of the responsibility for the decision to move forward on the Reverse
Stock Split transaction to group holding such a small interest in the
Company would also be incorrect.
- The Board ascertained to its satisfaction that this transaction
was not the typical Rule 13e-3 "going private" transaction, which
involves the involuntary or threat of involuntary purchase of all of
the ownership interests of the unaffiliated stockholders. In the
Reverse Stock Split transaction the unaffiliated stockholders, other
than the Small Stockholders, will retain their percentage ownership in
the Company in all material respects . The ownership interests of the
Small Stockholders will be terminated as a result of the Reverse Stock
Split (unless they purchase additional shares as described above), but
the Board concluded that the completion of the split will be an
overall benefit to the Small Stockholders because of the illiquidity
issues discussed above.
As part of its considerations, the Board took note of potential
liquidity concerns of certain minority stockholders should the
Company, as expected, cease public registration of the Class A Stock.
Excluding the holdings of the Board, approximately 40% of the
outstanding shares of Class A Stock are publicly registered . While
this issue relates to the ceasing of public registration, rather than
the Reverse Stock Split, the Board acknowledged that the split
facilitates this action and therefore the Board identified it as a
contradicting factor. The Board weighed this contradicting factor
against what it had determined were the overall benefits to the
stockholders and the Company for this Reverse Stock Split and
concluded that this concern was insufficient to outweigh such benefits
in light of the considerations and conclusions stated in this section.
The Board believes that the Reverse Stock Split is also
substantively fair because the Board determined in good faith that
the Cash Payment to be paid for stock in lieu of issuance of
fractional shares constitutes a fair value. Section 607.0604 (5) of
the Florida Statutes states that, "when a corporation is to pay in
money the value of fractions of a share, the good faith judgment of
the board of directors as to the fair value shall be conclusive."
The Board adopted the current market price methodology as the
most appropriate measure of Payment in lieu of issuance of fractional
shares, and therefore this methodology was given the maximum weight.
The Company has been implementing an aggressive growth plan since the
initial public registration of the Class A Stock at the end of 1994.
Since 1995, the Company has made major acquisitions of services center
in each year and increased its operating service centers by a factor
of five. In order to accurately value a company, the Board reasoned
that the valuation must reflect its current operating characteristics.
Consequently, the Board concluded that the current market price was
the best reflection of the value of such stock because any historical
measure would not reflect the company that is being valued in
connection with the Reverse Stock Split. After reviewing reverse
stock splits by other publicly-traded companies, management informed
the Board that using current market pricing of a publicly traded stock
prior to the effective date of a reverse stock split is an accepted
method of valuation for payment of fractional shares resulting from a
reverse stock split. The Board also considered other valuation
methods and factors, but rejected each as discussed below:
- Historical market prices - The Board gave no weight to this
factor because it did not feel that historical market pricing
accurately reflected the current value of the Class A Stock due to the
aggressive growth nature of the Company (as described in the foregoing
paragraph). Based on the foregoing, the Board decided against further
analysis of this factor in determining the fair value for the Cash
Payment.
- Net book value - Management recommended that the Board give no
weight to this factor because it maintained that book value is not any
appropriate measure for establishing the fair value for the Cash
Payment as it is an accounting methodology that is based on the
historical cost of the Company's assets, and therefore does not
reflect current value. The Board concurred with management's
recommendation and did not give any weight to this factor.
<PAGE>
- Going concern value - Management described to the Board that a
going concern valuation is an attempt to establish the present value
of future earnings of a company in the context of what returns an
investor could expect to receive on his or her investment over a
future period. Two key factors in using this methodology valuation
are establishing a reasonably accurate forecast of earnings and
identifying an appropriate discount rate to establish the present
value of such future earnings. To establish a reasonably accurate
forecast of earnings, management suggested that the Board would need
to review (i) historical earnings, (ii) the Company's current
financial condition, and (iii) any future earnings projections.
However, management recommended, and the Board agreed, that a going
concern value could not be established with reasonable accuracy
because of the changing nature of the Company due to recent
acquisition growth which would make it too difficult to arrive at a
reasonable forecast of earnings for this purpose. The Board reasoned
that the Company was still assimilating the significant store
acquisitions in 1999 (which nearly doubled the number of stores
operated by the Company) and therefore, management could not predict
the Company's future performance with the accuracy necessary for this
purpose. A majority of these acquired stores were formerly
competitors of the Company or the "Jiffy Lube" franchise, and the
Board noted the uncertainty of accurately predicting final patronage
decisions by customers formerly loyal to such competitors. The Board
also noted that the effects on the Company's financial and human
resources in assimilating such a large number of stores was still in
process and this would add to the uncertainty in forecasting earnings.
The Board concluded that each of these uncertain factors was
sufficient to reject going concern value in determining the fair value
for the Cash Payment. For more information on the acquisitions
described in this paragraph, please refer to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, which
is incorporated herein by reference.
- Liquidation value - Following discussions with management, the
Board determined that the usefulness of this method of valuation
requires the existence of a viable market for sale of the Company's
assets. The Board then determined that there is no ready market for
the sale of the Company's assets, which represent the largest number
of franchised quick oil change and lubrication centers in the United
States, and therefore decided not to give weight to this valuation
method as a factor in establishing the fair value of the Cash Payment.
The Board decided further analysis of this factor was unnecessary
for determining the fair value of the Cash Payment because of the
foregoing conclusion and the considerations and conclusions described
in the foregoing discussion on book value.
- Comparative Company Analysis - The Company is the only publicly-
traded owner and operator of franchised quick oil change and
lubrication centers. The Board did not believe that a company could
be identified with sufficient similar characteristics to the Company
for use in establishing the fair value of the Cash Payment using this
methodology. Consequently, the Board decided further analysis of this
valuation method was unwarranted.
- The Company has not purchased any of its stock so the Board did
not consider this factor in establishing the fair value of the stock
for the Cash Payment.
- The Company and its affiliates are not aware of any firm offers
to purchase the Company that have been made during the past two years
by any unaffiliated person. Consequently, the Board did not consider
this factor in establishing the fair value of the stock for the Cash
Payment.
- The Company has not engaged in a merger or consolidation with
another company or in the sale or other transfer of a substantial part
of its assets in the last two years, so the Board did not consider
this factor in establishing the fair value of the stock for the Cash
Payment.
- There have not been any purchases of the Company's stock that
would enable the holder to exercise control of the Company.
Therefore, the Board did not consider this factor in establishing the
fair value of the stock for the Cash Payment.
<PAGE>
After establishing current market pricing of the Class A Stock as
the method of calculating in the Cash Payment, the Board focused on
identifying the appropriate date or time period in which to apply to
this method. After reviewing reverse stock splits by other publicly-
traded companies, management informed the Board that five to ten
trading days is the typical period used to minimize temporary
fluctuations in pricing which do not reflect the true market valuation
of the stock. The Board noted that the historic volatility of the
Class A Stock, due to its low trading volume, dictated that a longer
period should be adopted to minimize these effects and chose 20 days
as a fairer measure.
The Board further considered the possible adverse effect on stock
pricing caused by the disclosure of the Company's intention to
terminate public registration of the Class A Stock. Consequently, the
Board adopted the 20-day period immediately prior to the initial
preliminary filing of this Proxy Statement because this would reflect
market valuation prior to the disclosure. The Board also concluded
that the Cash Payment should not be less than the market value
immediately prior to the Effective Date since this date constitutes
the date of purchase of the stock and hence the purchase price should
at least reflect the market valuation as close to this time as
practical given the stock volatility issues described in the foregoing
paragraph. Because of the uncertainty inherent in any valuation, the
Board also concluded that the Cash Payment should constitute the
greater value of the two established periods to ensure maximum
fairness to the Small Stockholders, since their ownership interest in
the Company would be terminated (absent any action on their behalf to
remain stockholders by purchasing additional shares). Therefore, the
Board determined that the Cash Payment should be determined by the
greater of (i) the average closing prices of Class A Stock for the
twenty (20) trading days immediately preceding the initial preliminary
filing of this Proxy Statement, and (ii) the average of bid and asked
prices of Class A Stock for the twenty (20) trading days immediately
preceding the Effective Date.
The Company's Chief Executive Officer and it's President are the
only holders the shares of Class B Stock. The total number of shares
of Class B stock to be purchased by the Company in lieu of issuance of
fractional shares will be 15 shares, with a total estimated Cash
Payment equal to less than $17.00. The holders of the Class B Stock
have greater voting rights than the holders of the Class A Stock since
under the Articles the holders of Class B Stock have the right to
elect a majority of the directors of the Company. The Board
determined that the amount of the potential Cash Payment for Class B
Stock for purchase in lieu of issuance of fractional shares will be
too small to warrant further discussion or expenditures of resources
for determining the fairness of such consideration. Consequently, the
Board has determined that the cash payment for the Class B Stock shall
be the same as the cash payment for of the Class A Stock for purposes
of this transaction (as determined using the above established
method).
The Board considered an independent analysis and evaluation of
the fair market value of the Class A Stock and Class B Stock that
would be converted into a fractional share, but, as noted earlier,
determined that the time and expense of an independent analysis and
evaluation was unjustified in the circumstances because the Board
concluded that the method of valuation chosen by the board was a fair
representation of value of the stockholdings for the reasons stated
above.
The Board discussed two alternative transactions for reducing or
eliminating the Small Stockholders, a tender offer and open market
purchases. The Board, however, determined that either of these
alternatives would not result in shares being tendered by a sufficient
number of record stockholders so as to accomplish the Company's
objectives. It was thought unlikely that many holders of small
numbers of shares would be aware of the offer to tender since a large
percentage of these stockholders cannot be located to provide them
with the tender materials, and even if they were aware of the offer it
is unlikely that they would make the effort to tender their shares in
sufficient numbers to accomplish the Company's objective. The Board
ultimately determined that the Reverse Stock Split proposal was the
preferred method.
After consideration of all the forgoing factors, all of the
directors, including those who are not employees of the Company, have
determined that the Reverse Stock Split proposal is procedurally and
substantially fair to the stockholders of the Company, including the
unaffiliated stockholders and the Small Stockholders.
The Board also considered the timing of implementation of the
Reverse Stock Split proposal and the intended termination of the
Company's 1934 Act registration for the Class A Stock. The Board
concluded that the continued monetary and human resource expense of
such registration was unjustified given the Company's inability to
effectively take advantage of many of the benefits of public
registration. To achieve the savings from termination, the Board
instructed management to implement the Reverse Stock Split proposal
and termination of registration of the Class A Stock as soon as
practicable. Please see the section contained herein captioned
"Purpose and Reason for the Reverse Stock Split Proposal" for further
discussion of the expenses of registration and the Company's
experiences with respect to the benefits of such registration.
<PAGE>
With respect to its intent to terminate the Company's 1934 Act
registration, the Board has considered and will continue to consider
the effect that terminating the registration of the new Class A Stock
might have on the market for the holders of the Class A Stock and the
ability of those stockholders to buy and sell their shares. The Board
also has considered and will continue to consider whether the value of
the Class A Stock is being fully recognized in the public market, and
as a result, whether the Company can effectively take advantage of a
public market for its stock The Board also has considered and will
continue to consider the need to protect the confidentiality of the
Company's proprietary information, along with the potential direct
cost savings and savings related to the time and effort currently
required of management to comply with the reporting and other
requirements associated with a reporting company. After taking into
account all of the considerations and conclusions described herein
with respect to the benefits and disadvantages of registration of the
Class A Stock under the 1934 Act at the present time, the Board has
determined that it will terminate registration of Class A Stock under
the 1934 Act as soon as practical following the Reverse Stock Split
absent any significant changes in the foregoing considerations that
would result in the Board determining that the benefits of continued
registration would outweigh the disadvantages. The Board does not
foresee any such change in circumstance in the reasonably near future.
See also the section contained herein captioned "Purpose and Reason
for the Reverse Stock Split Proposal."
Potential Detriments of Reverse Stock Split Proposal to Stockholders;
Accretion in Ownership and Control of Certain Stockholders
The potential detriments to stockholders who remain as holders of
new Class A Stock after effecting the Reverse Stock Split and
termination of registration under the 1934 Act include decreased
liquidity and decreased access to information about the Company. Upon
termination of registration of the Class A Stock, the Company will no
longer be subject to the periodic reporting requirements and the proxy
rules of the 1934 Act. Since there will no longer be a public market
for the purchase and sale of the stock, the liquidity and market value
of the shares of Class A Stock will be adversely affected.
If the Reverse Stock Split proposal is effected, the Company
believes that 110 Registered Stockholders of new Class A Stock will
remain (based on the Company's current stockholder records). In
addition, individuals who are members of the Board and executive
officers of the Company now owning approximately 24% of the Class A
Stock will own approximately 25% of the new Class A Stock after the
Reverse Stock Split (the proportionate holdings of the Class B Stock
will not be affected). Control of the Company by Messrs. Stephen P.
Conway and Jerry B. Conway as generally described in the information
contained herein in the section captioned "Security Ownership and
Certain Beneficial Owners and Management," will not be materially
affected by the Reverse Stock Split.
Conduct of the Company's Business after Reverse Stock Split
The Company expects its business and operations to continue as
they are currently being conducted and, except as disclosed below, the
Reverse Stock Split is not anticipated to have any effect upon the
conduct of its business.
Other than as described in this Proxy Statement, neither the
Company nor its management has any current plans or proposals to
effect any extraordinary corporate transaction, such as a merger,
reorganization or liquidation; to sell or transfer any material amount
of its assets; to change its Board or management; to change materially
its indebtedness or capitalization; or otherwise to effect any
material change in its corporate structure or business. See also the
information contained herein in the section captioned "Purpose and
Reasons for the Reverse Stock Split."
As a result of the Reverse Stock Split, the Company plans to
become a privately held company by termination of registration of the
Class A Stock under the 1934 Act, if the number of Registered
Stockholders is fewer than 300. In addition, because the new Class A
Stock will be held by fewer than 300 registered holders, the Company
will be relieved of the obligation to comply with the proxy rules of
Regulation 14A under Section 14 of the 1934 Act, its officers and
directors and stockholders owning more than 10% of the Class A Stock
will be relieved of certain reporting obligations under the 1934 Act,
and the Company will cease filing periodic reports under the 1934 Act.
<PAGE>
Structure of Reverse Stock Split
The Reverse Stock Split is of the Class A Stock and the Class B
Stock. If the Reverse Stock Split proposal is approved and occurs,
the Reverse Stock Split will occur on the Effective Date. Assuming
stockholder approval of the Reverse Stock Split proposal is obtained,
the Company will file the Amendment within 10 business days of the
proposal's approval at the Special Meeting. The structure of the
Reverse Stock Split, for each stockholder is as follows:
1. Registered Stockholders with Fewer Than 20 Shares. If the
Reverse Stock Split proposal is implemented and you are a Registered
Holder of fewer than 20 shares of Class A Stock of the Effective Date,
you will receive a Cash Payment instead of a fractional share of new
Class A Stock. After the reverse split, you will have no further
interest in the new Class A Stock. You will not have to pay any
service charges or brokerage commissions in connection with the
Reverse Stock Split or the Cash Payments. There are no holders of
Class B Stock in this category.
2. Registered Holder With 20 or More Shares. If the Reverse Stock
Split proposal is implemented and you are a Registered Holder of 20 or
more shares of Class A Stock or Class B Stock as of the Effective
Date, we will convert your shares into 1/20 of the number of shares
you held immediately prior to the reverse split, with a Cash Payment
for any shares that would otherwise result in fractional new shares.
For example, if you are a Registered Holder of 2,010 shares of Class A
Stock immediately prior to the Effective Date, your shares will be
converted to 100 shares of new Class A Stock and you will receive a
Cash Payment for 10 shares.
3. Beneficial Owners of the Company Stock. Nominees (such as a bank
or broker) may have required procedures, and stockholders holding
Class A Stock in street name should contact their nominees to
determine how they will be affected by the Reverse Stock Split. NOTE:
If you are a beneficial owner of fewer than 20 shares of Class A Stock
or the beneficial owner of more than 20 shares of Class A Stock, but
not in an even multiple of 20, and you want to have your shares
exchanged for Cash Payment, you should instruct your nominee to
transfer your shares into a record account in your name in a timely
manner so that you will be considered a holder of record immediately
prior to the Effective Date.
In the event any certificate representing shares of Class A Stock
or Class B Stock is not presented for exchange or Cash Payment upon
request by the Company, the new Class A Stock, Class B Stock, or the
Cash Payment, as applicable, will be administered in accordance with
the relevant abandoned property laws. Until new Class A Stock, Class
B Stock or Cash Payments have been delivered to the public official
pursuant to the abandoned property laws, such Cash Payments or
certificates will be paid to the holder thereof or his designee,
without interest, at such time as the stock certificate has been
properly presented for exchange or Cash Payment.
The Reverse Stock Split is structured to be a "going private"
transaction as defined in Rule 13e-3 promulgated under the 1934 Act
because it is intended to, and, if completed, will likely terminate
the Company's reporting requirements under the 1934 Act. In
connection with the Reverse Stock Split proposal, the Company has
filed with the SEC a Schedule 13E-3 pursuant to Rule 13e-3 under the
1934 Act.
Exchange of Stock Certificates and Payment of Fractional Shares
Oxford Transfer and Registrar have been appointed the exchange
agent (the "Transfer Agent") to carry out the exchange of certificates
for new Class A Stock. Registered Stockholders will receive a letter
of transmittal after the Reverse Stock Split is completed. These
stockholders must complete and sign the letter of transmittal and
return it with their stock certificate(s) to the Transfer Agent before
they can receive new Class A Stock, Class B Stock and/or the Cash
Payment for those shares. You should not submit any certificates
until requested to do so.
<PAGE>
If the Reverse Stock Split is effected, each Registered
Stockholder who holds fewer than 20 common shares immediately prior to
the effectiveness of the Reverse Stock Split will cease to have any
rights with respect to such common shares and will only have the right
to receive the Cash Payment cash in lieu of the fractional share to
which such shareholder of record would otherwise be entitled. No
service charges will be payable by stockholders in connection with the
exchange of certificates or the issuance of new stock or Cash
Payments, all the expenses of which will be borne by the Company.
Promptly following the Effective Date, you will be furnished the
necessary materials and instructions to effect such exchange (and to
receive the Cash Payment, if applicable). Certificates representing
shares of Class A Stock and Class B Stock subsequently presented for
transfer to a third party will not be transferred on the books and
records of the Company until the certificates representing the shares
have been exchanged for the Cash Payment or certificates representing
shares of new Class A Stock or new Class B Stock (as applicable).
Company Stock Options and Warrants
At the Effective Date, each option outstanding of Class A Stock
shall be adjusted to reflect the right to receive one or more shares
of new Class A Stock on a 20-for-1 basis. There are no outstanding
warrants.
Certain Effects of Reverse Stock Split Proposal on the Company's
Stockholders
1. Rights, Preferences and Limitations. There are no material
differences between the respective rights, preferences or limitations
of the existing Class A Stock and Class B Stock and the "new" Class A
Stock and the "new" Class B Stock.
2. Financial Effect. The Reverse Stock Split and the expenditures
for professional fees and other expenses related to the transaction
will not have a material effect on the Company's balance sheet,
statement of income, earnings per share, ratio of earnings to fix
charges or book value per share. The expenditures have been estimated
as follows: cash payment for fractional shares - $5,000; fees and
expenses of legal counsel - $8,000; fees and expenses of accountants -
$3,500; printing and postage - $2,000; and miscellaneous - $1,000.
The only consideration to be paid will be the Cash Payment, to be paid
for shares that would otherwise be converted into fractional shares.
We will use the Company's cash-on-hand as the sole source of funds for
the expenditures for professional fees and other expenses related to
the transaction.
3. Effect on Market for Shares. The Company estimates that the
number of shares of new Class A Stock and new Class B Stock
outstanding after the Reverse Stock Split, if effected, will be as
follows:
Class Number of Shares Number of Shareholders
------- ------------------ ------------------------
Class A 116,385 110
Class B 25,107 2
The new Class A Stock will continue to be traded on the OTC Electronic
Bulletin Board under the symbol "LUCR." However, if the Board
terminates registration of the new Class A Stock under the 1934 Act,
which is its intention, there will no longer be a public market for
the new Class A Stock. See also the information contained below in
the subsection captioned "Termination of 1934 Act Registration of
Class A Stock."
The Company has no current plans to issue additional shares of
stock, but the Company reserves the right to do so at any time and
from time to time at such prices and on such terms as the Board
determines to be in the best interests of the Company and its then
stockholders. Persons who continue as stockholders following
implementation of the Reverse Stock Split proposal will not have any
preemptive or other preferential rights to purchase any of the
Company's stock that may be issued by the Company in the future,
unless such rights are currently specifically granted to such
stockholder.
<PAGE>
4. Securities Laws Relating to the New Class A Stock. The Com-
pany has not filed with the SEC a registration statement under the
Securities Act of 1933 (the "1933 Act") for the registration of the
new Class A Stock to be issued and exchanged pursuant to the Reverse
Stock Split proposal. Instead, the new Class A Stock will be issued
in reliance on exemptions contained in Section 3(a)(9) and Rule
145(a)(1) under the 1933 Act. Upon consummation of the Reverse Stock
Split, the new Class A Stock are expected to be freely transferable
under the 1933 Act by those stockholders of the Company not deemed to
be "affiliates" of the Company. Shares of new Class A Stock acquired
by persons who are "affiliates" of the Company will be subject to the
resale restrictions of Rule 144 under the 1933 Act.
5. Termination of 1934 Act Registration of Class A Stock. The
Reverse Stock Split proposal will affect the public registration of
the new Class A Stock with the SEC under the 1934 Act, as the Company
intends to terminate this registration as soon as practicable after
approval of the Reverse Stock Split proposal by the stockholders.
Registration under the 1934 Act may be terminated by the Company if
the Class A Stock is no longer held by 300 or more stockholders of
record. Termination of registration of the Class A Stock under the
1934 Act would substantially reduce the information required to be
furnished by the Company to its stockholder and to the SEC and would
make certain provisions of the 1934 Act, such as proxy statement
disclosure in connection with stockholder meetings and the related
requirement of an annual report to stockholders, no longer applicable
to the Company.
With respect to the executive officers and directors of the
Company, in the event of the intended termination of registration of
the Class A Stock under the 1934 Act: (a) executive officers,
directors and other affiliates would no longer be subject to many of
the reporting requirements and restrictions of the 1934 Act, including
without limitation the reporting and short-swing profit provisions of
Section 16 of, and (b) executive officers, directors and other
affiliates of the Company may be deprived of the ability to dispose of
shares of Class A Stock pursuant to Rule 144 under the 1933 Act. Upon
termination of 1934 Act registration, the Company will continue to be
subject to the general anti-fraud provisions of federal and applicable
state securities laws. See also the information contained above in
the section captioned "Securities Laws Relating to the New Class A
Stock."
Material Federal Income Tax Consequences
We summarize below the material federal income tax consequences
to the Company and stockholders resulting from the Reverse Stock Split
proposal. This summary is based on existing U.S. federal income tax
law, which may change, even retroactively. This summary is not
binding on the Internal Revenue Service (the "IRS"). There can be no
assurance and none is given that the IRS or the courts will not adopt
a position that is contrary to the statements contained in this
summary. This summary does not discuss all aspects of federal income
taxation which may be important to you in light of your individual
circumstances, and many stockholders may be subject to special tax
rules. In addition, this summary does not discuss any state, local,
foreign, or other tax considerations. You should consult your tax
advisor as to the particular federal, state, local, foreign, and other
tax consequences, in light of your specific circumstances.
This summary also assumes that you are a one of the following:
(i) a citizen or resident of the United States; (ii) a corporation or
other entity taxable as a corporation created or organized under U.S.
law (federal or state); (iii) an estate the income of which is subject
to U.S. federal income taxation regardless of its sources; (iv) a
trust if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more U.S. persons have
authority to control all substantial decisions of the trust; or (v)
any other person whose worldwide income and gain is otherwise subject
to U.S. federal income taxation. This summary also assumes that you
have held and will continue to hold your shares as capital assets for
investment purposes under the Internal Revenue Code of 1986, as
amended.
We believe that the Reverse Stock Split proposal should be
treated as a tax-free "recapitalization" for federal income tax
purposes. This should result in no material federal income tax
consequences to the Company. If you continue to hold new Class A
Stock after the Reverse Stock Split, you should not recognize any gain
or loss in the Reverse Stock Split, and you should have the same
adjusted tax basis and holding period in your new stock as you had in
your stock immediately prior to the Reverse Stock Split.
<PAGE>
The receipt by a stockholder of a Cash Payment in lieu of a
fractional new share pursuant to the Reverse Stock Split will be a
taxable transaction for federal income tax purposes. Accordingly, a
stockholder who receives cash in lieu of a fractional new share should
recognize gain or loss equal to the difference between the amount of
cash received and the portion of the aggregate tax basis in his or her
shares of common stock allocable to the fractional new share interest
for which he or she received cash. If the shares of your stock were
held as a capital asset on the Effective Date, then the stockholder's
gain or loss will be a capital gain or loss. Such capital gain or
loss will be a long-term capital gain or loss if the stockholder's
holding period for the shares of common stock is longer than one year.
Appraisal Rights; Escheat Laws
There are no appraisal rights for any stockholder who dissents
from approval of the Reverse Stock Split proposal under the Company's
governance documents. Also, the Company concluded that there are no
appraisal rights for any stockholder who dissents from approval of the
Reverse Stock Split proposal under Florida General Corporation law.
We refer you, however, to Sections 607.1302 and 607.0604 of the
Florida Statutes which respectively proscribe the rights of
shareholders to dissent and general treatment of fractional shares.
Section 607.0604 (5) of the Florida Statutes states that, "when a
corporation is to pay in money the value of fractions of a share, the
good faith judgment of the board of directors as to the fair value
shall be conclusive." There may exist other rights or actions under
state law for stockholders who are aggrieved by reverse stock splits
generally. Although the nature and extent of such rights or actions
are uncertain and may vary depending upon the facts or circumstances,
stockholder challenges to corporate action in general are related to
the fiduciary responsibilities of corporate officers and directors and
to the fairness of corporate transactions.
Stockholders whose shares are eliminated and whose addresses are
unknown to the Company, or who do not return their stock certificates
and request payment, generally have a certain number of years from the
date of the Reverse Stock Split to claim the Cash Payment payable to
them. If no claim is made within this period, state law generally
provides that these payments are deemed abandoned and forfeit to the
state. The state law of the state of the last known residence of the
stockholder, as shown on Company records, usually governs. In
Florida, this holding period is 5 years, but the exact number of years
may vary from state to state.
Intention to Terminate Public Registration
The Company intends to terminate public registration of the new
Class A Stock with the SEC under the 1934 Act as soon as practicable
after approval of the Reverse Stock Split proposal by the
stockholders. Stockholders should note that the decision by the Board
to terminate 1934 Act registration does not require stockholder
approval and will not be voted on at the Special Meeting. Further,
there is no assurance that the number of such stockholders will be
fewer than 300 following the Effective Date. While the Company
intends to cease public registration of its Class A Stock following
the Reverse Stock Split, the Board may choose not to implement this
strategy if the Board determines that it is not then in the best
interests of the Company and its stockholders given the then existing
market conditions. See also the discussion of this issue in the
section contained herein captioned "Fairness of Reverse Stock Split
Proposal."
The Board recommends that you vote FOR the Reverse Stock Split
proposal. Proxies solicited by the Board will be voted FOR this
Reverse Stock Split proposal, unless you specify otherwise in your
proxy.
<PAGE>
MANAGEMENT
David M. Barnett has served as Vice President of Marketing since
October 1993. Prior to his appointment as a Vice President, he served
as the director of sales and marketing from February 1991. Before
joining the Company, Mr. Barnett was employed in the advertising
industry in several positions and left as an account service
executive. Mr. Barnett is a graduate of North Carolina State
University in 1988.
Anthony J. Beisler, III has been a director of the Company since
1991. He practices law, specializing in insurance defense, with
Beisler & Beisler, Fort Lauderdale, Florida and has practiced law in
excess of twenty years. He is not actively engaged in the day to day
operations of the Company.
Kendall A. Carr is the Vice President of Finance and Chief
Financial Officer for the Company. He started with the Company in
January 1996 at which time he was appointed to his current position.
Mr. Carr served as Controller for Limitorque Corporation from 1988
until 1993. From 1993 through 1994, Mr. Carr served as the Chief
Financial Officer for Walter Kidde Portable Equipment, Inc. and in
1995 he served as the Controller of Precision Concepts, Inc. He
graduated summa cum laude from SUNY at Buffalo in 1978, and received
his MBA from James Madison University in 1988. He is a licensed CPA.
Jerry B. Conway is co-founder of the Company and has been the
President, Chief Operating Officer, and Director of the Company since
the Company was organized in 1990. He is an executive officer and
director of each of the Company's subsidiaries, as well as President
and principal shareholder of CFA Management Inc. and Navigator. Mr.
Conway oversees and directs the management of the Company. He has
worked in the retail service industry for over twenty-six years, and
has been involved specifically with Jiffy Lube since 1986. Mr. Conway
is a high honor graduate, Beta Gamma Sigma, of Michigan State
University in 1977. He also chairs several committees as well as
serves on the Board of Directors of JLAF (Jiffy Lube Association of
Franchisees). Mr. Conway is also President of OH Distributors, Inc.
Stephen P. Conway is co-founder of the Company and has served as
Chairman of the Board and Chief Executive Officer since the Company
was organized in 1990. He is an executive officer and director of
each of the Company's subsidiaries as well as the Vice President and a
principal shareholder of CFA Management, Inc. and Navigator, which
provide management services to the Company's subsidiaries. Mr. Conway
is a shareholder and officer of Fiduciary Asset Management, Inc., Boca
Raton, Florida, a Registered Investment Adviser, and a principal of
Financial Assets Corporation, a securities broker-dealer in Boca
Raton. Mr. Conway is also Vice President of OH Distributors, Inc.
Michael D. Davis has served the Company as the Vice President of
Administration since July 1998. Prior to his appointment as Vice
President he served as Director of Administration for the Company from
January 1996. Prior to joining the Company Mr. Davis served as the
Assistant Controller for Hooters of America, Inc. from 1991 through
1994. Mr. Davis graduated magna cum laude from Berry College in 1990
and received his MBA from the University of Georgia in 1995.
D. Fredrico Fazio has been a director of the Company since 1991.
He is the managing partner of the civil trial law firm of Fazio,
Dawson, DiSalvo, Cannon, Abers & Podrecca, in Fort Lauderdale, Florida
and has practiced law in excess of twenty years. Mr. Fazio is also
involved in real estate development in Fort Lauderdale, Florida. He
is not actively engaged in the day to day operations of the Company.
Martin Kauffman has served the Company as the Controller since
1987. He has had extensive financial experience during his previous
twenty-year employment with Exxon Corporation. Mr. Kauffman is a
licensed CPA, and is a graduate of Rutgers University.
<PAGE>
James D. Ridout has served as the Vice President of Operations
since 1993. Prior to his appointment as Vice President, he served as
Director of Operations, Regional Sales and Operations Manager,
District Sales and Operations Manager and Store Manager for the
Company. Mr. Ridout has been with the Company since 1987, and has
worked in the quick lube industry since 1983.
Douglas W. Roan has served as the Vice President of Development
and Purchasing since October 1993. Prior to his appointment as Vice
President he served as Director of Development for the Company from
1987. Mr. Roan has worked in the construction, development and
purchasing industries for over twenty-seven years in various regions
of the United States.
Richard L. Rubin was appointed director on April 6, 1999. He is
a sales and marketing specialist for a telecommunications company,
ArtSelect, Inc. Prior to his experience in telecommunications, Mr.
Rubin was involved in sales and marketing of commercial real estate
and real estate private placements. He is not actively engaged in the
day to day operations of the Company.
R. Lewis Stanford was appointed director on April 6, 1999. He is
the Vice President and General Counsel for the Company since September
1995. From 1992 until joining the Company, Mr. Stanford was
associated with the law firm of Moore & Van Allen, PLLC, where he had
a general corporate practice. Mr. Stanford graduated with highest
honors and highest distinction from the University of North Carolina
at Chapel Hill and received his JD with honors from the University of
North Carolina School of Law in 1992. Mr. Stanford has worked in the
auto industry and legal profession for eighteen years.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect
to beneficial ownership of the Common Stock as of December 31, 2000
by: (i) each person known to the Company to beneficially own more that
5% of the Class A Stock and Class B Stock; (ii) each director of the
Company; and (iv) all directors and executive officers of the Company
as a group. Except as otherwise indicated, each shareholder named has
sole voting and investment power with respect to such shareholder's
shares.
Class A Common Stock
---------------------
<TABLE>
Numberof Shares Number of Shares Total Percent
Name Directly Owned Beneficially Owned Shares of Class
------ ----------------- -------------------- -------- ----------
<S> <C> <C> <C> <C>
Stephen P. Conway (5) 7,300 828,277 (1) 835,577 35.8%
790 Pershing Road
Raleigh, North Carolina 27608
Jerry B. Conway (5) 150,430 826,277(2) 976,707 41.9%
790 Pershing Road
Raleigh, North Carolina 27608
D. Fredrico Fazio 302,159 0 302,159 13.0%
633 South Andrews Avenue
Suite 500
Fort Lauderdale, Florida 33301
Anthony J. Beisler, III 46,082 39,060 (3) 85,142 3.6%
1001 Northeast 26th Street
Fort Lauderdale, Florida 33305
Pennzoil Products Company 759,477 (4) 0 759,477 (4) 32.6%
Pennzoil Place
Post Office Box 2967
Houston, Texas 77252-2967
Kathleen D. Conway (5) 202,229 0 202,229 8.7%
P.O. Box 2091
Blowing Rock, North Carolina 28605
Richard L Rubin 500 0 500 0.0%
503 East Fillmore
Fairfield, Iowa 52556
R. Lewis Stanford 4,600 0 4,600 0.2%
790 Pershing Road
Raleigh, North Carolina 27608
All directors and executive 520,818 839,337 1,360,155 58.3%
officers as a group (12 persons)
</TABLE>
<PAGE>
Class B Common Stock
---------------------
Number of Shares Percent
Name Directly Owned of Class
---- ----------------- --------
Stephen P. Conway (5) 292,409 58.2%
790 Pershing Road
Raleigh, North Carolina 27608
Jerry B. Conway (5) 209,746 41.8%
790 Pershing Road
Raleigh, North Carolina 27608
All directors and executive 502,155 100.0%
officers as a group (10 persons)
1. Includes (i) 2,000 shares held as custodian for his children;
(ii) 66,800 shares held by Navigator Management, Inc. ("Navigator")
and CFA Management, Inc. both of which are owned 50%; and (iii) the
jointly held irrevocable proxy to vote 759,477 shares of Class A
Stock, as described more fully below in footnote 4.
2. Includes (i) 66,800 shares held by Navigator and CFA Management,
Inc. both of which are owned 50% and (ii) the jointly held irrevocable
proxy to vote 759,477 shares of Class A Stock, as more fully described
below in footnote 4.
3. Includes (i) 45,582 shares held jointly with Mr. Beisler's wife,
(ii) 14,550 shares held by the Anthony J. Beisler, III P.A. Money
Purchase Pension Trust, and (iii) 24,510 shares held by Anthony J.
Beisler, III P.A. Profit Sharing Trust.
4. Pursuant to the grant of an irrevocable proxy dated May 30, 1996,
Messrs. Stephen P. Conway and Jerry B. Conway, or either of them, are
entitled to vote these 759,477 shares of Class A Stock on the proposed
amendment.
5. Stephen P. Conway and Jerry B. Conway are brothers. Kathleen
Conway is the former wife of Stephen P. Conway.
<PAGE>
CERTAIN MARKET INFORMATION
The Class A Common Stock trades on the over-the-counter The
following is the high and low sales prices for the Class A Common
Stock for each quarter during the past two years:
Quarter High Low
Second 1998 6.88 3.88
Third 1998 6.75 4.75
Fourth 1998 6.00 4.00
First 1999 5.00 3.50
Second 1999 4.94 3.94
Third 1999 5.25 3.06
Fourth 1999 4.25 1.75
First 2000 4.13 1.38
Second 2000 3.25 1.53
Third 2000 1.75 .88
Fourth 2000 1.63 .28
FINANCIAL AND OTHER INFORMATION
The information contained in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, including the
financial statements contained under the caption "Selected Financial
Data" on page 7 therein, along with the Company's Quarterly Report on
Form 10-Q for the third fiscal quarter ended September 30, 2000, both
of which have been filed with the Securities and Exchange Commission,
are incorporated herein by reference. You may read and copy any
materials we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains a website at
www.sec.gov that contains information that we file electronically with
the SEC.
By Order of the Board of Directors,
/s/ Stephen P. Conway
------------------------------------
Stephen P. Conway,
Chairman and Chief Executive Officer
Raleigh, North Carolina
<PAGE>
Appendix A
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
LUCOR, INC.
-------------------------------------------------
Pursuant to General Corporation Law of the State of Florida, the
undersigned, being the Chairman of the Board of Directors of Lucor,
Inc., a Florida corporation (the "Corporation"), does hereby execute
these Articles of Amendment to the Amended and Restated Articles of
Incorporation of Lucor, Inc., on behalf of the Corporation, and
certify as follows:
1. The name of the corporation is Lucor, Inc. (the "Corporation").
2. Article III of the Corporation's Amended and Restated Articles of
Incorporation is hereby deleted in its entirety, with the following
substituted in its place:
The aggregate number of shares which this Corporation
shall have the authority to issue is 5,375,000, of which
250,000 shares, at the par value of $.40 each share, will be
designated Class A Common Stock; 125,000 shares at the par
value of $.40 each per share shall be designated Class B
Common Stock; and 5,000,000 shares at the par value of $.02
each per share shall be designated Preferred Shares.
3. Upon the effectiveness of the foregoing amendment, (i) each
twenty outstanding shares of Class A Common Stock of the Corporation,
par value $.02, shall be combined into one share of Class A Common
Stock of the Corporation, par value $.40, and (ii) each twenty
outstanding shares of Class B Common Stock of the Corporation, par
value $.02, shall be combined into one share of Class B Common Stock
of the Corporation, par value $.40. Outstanding shares of Class A
Common Stock and Class B Common Stock, each with a par value of $.02,
which would otherwise be respectively converted into a fractional
share of Class A Common Stock or Class B Common Stock of the
Corporation, each with a par value of $.40, will be cancelled, with
the holders of such shares receiving cash payment equal to such
share's fair value as determined in the good faith judgment of the
Corporation's Board of Directors.
4. The date of adoption of the resolution approving the combination
of shares of this Corporation set forth in the foregoing amendment is
__________________.
5. The foregoing amendment was required to be approved by the
shareholders of the Corporation and the number of votes cast for the
amendment by the shareholders was sufficient for approval in
accordance with Florida General Corporation Law.
IN WITNESS WHEREOF, the undersigned Chairman of the Board of
Directors of the Corporation has cause these Articles of Amendment to
the Amended and Restated Articles of Incorporation of Lucor, Inc., as
of this ____ day of_______________.
LUCOR, INC.
By:____________________________
Stephen P. Conway,
Chairman and
Chief Executive Officer
ATTEST:
By: _______________________________
R. Lewis Stanford
Assistant Secretary
[CORPORATE SEAL]
<PAGE>
LUCOR, INC.
PROXY SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF LUCOR, INC.
The undersigned hereby appoints Stephen P. Conway and Jerry B.
Conway, and each of them, proxies, with power of substitution, to
represent the undersigned at the Special Meeting of Shareholders of
Lucor, Inc. (the "Company"), to be held at 2:00 p.m., local time, on
___________________, at the Company's headquarters located at 790
Pershing Road, Raleigh, North Carolina, 27608, and at any adjournments
thereof, to vote the number of shares which the undersigned would be
entitled to vote if present in person in such manner as such proxies
may determine, and to vote on the following proposals as specified
below by the undersigned.
(1) Reverse Stock Split
_____Vote FOR ____Vote AGAINST ___ABSTAIN
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. IN THE ABSENCE OF
SPECIFIED DIRECTIONS, THIS PROXY WILL BE VOTED IN FAVOR OF THE
APPROVAL OF THE AMENDMENT DESCRIBED IN THIS PROXY. The proxies are
also authorized to vote in their discretion upon such other matters as
may properly come before the meeting or any adjournment thereof.
If signing as attorney, administrator, executor,
guardian, trustee or as a custodian for a minor,
please add your title as such. If a corporation,
please sign in full corporate name and indicate
the signer's office. If a partner, please sign in
the partnership's name.
X_________________________________________________
Printed
Name______________________________________________
X_________________________________________________
Printed
Name______________________________________________
Dated
__________________________________________________
<PAGE>
