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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10 - QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: Commission File Number
September 30, 1996 0-23672
SMART GAMES INTERACTIVE, INC.
-----------------------------
(Exact name of Small Business Issuer as specified in its charter)
Delaware 34-1692323
(State of Incorporation) (IRS Employer Identification Number)
2075 Case Parkway South
(216) 963-0660
(Address of principal executive offices and telephone number)
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.0002 par value
Common Stock Purchase Warrants
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 12,648,244 SHARES OF COMMON STOCK,
$.0002 PAR VALUE, AT NOVEMBER 13, 1996.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 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
-- --
Traditional Small Business Disclosure Format (Check One):
Yes No X
-- --
-----------------------------------
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1
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SMART GAMES INTERACTIVE, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
INDEX
Page
----
<S> <C> <C>
Part 1. Financial Information
Item 1. Financial Statements
Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 3
Statements of Operations for the three and nine month periods ended September 30, 1996
and 1995 (unaudited) 4
Statements of Cash Flows for the nine month period ended September 30, 1996
and 1995 (unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis 7
Part 2. Other Information 9
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Default upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 11
</TABLE>
2
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ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SMART GAMES INTERACTIVE, INC.
BALANCE SHEETS
(UNAUDITED)
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,146 $ 166,944
Accounts receivable, net 75,368 301,634
Prepaid expenses and other current assets 150,021 68,230
Inventories:
Raw Materials 327,141 497,157
Work-in-process 266,069 143,835
Finished Goods 94,579 158,722
----------- -----------
Total inventories 687,789 799,714
----------- -----------
Total current assets 916,324 1,336,522
Property and equipment, net 150,639 206,618
Other noncurrent assets
Trade Credits 672,000 672,000
Other 88,060 74,218
----------- -----------
760,060 746,218
TOTAL ASSETS $ 1,827,023 $ 2,289,358
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable, current portion $ 150,000 $ --
Accounts payable 987,655 1,423,680
Accrued compensation and related liabilities 36,770 41,387
Other accrued expenses 207,143 269,584
----------- -----------
Total current liabilities 1,381,568 1,734,651
SHAREHOLDERS' EQUITY
Preferred stock, at stated value ($0.0002), 5,000,000 shares authorized -- --
Common stock, at stated value ($0.0002), 10,000,000
shares authorized; 5,714,911 shares issued
and outstanding at September 30, 1996 and
5,176,379 issued and outstanding at December 31, 1995 1,143 1,035
Paid in capital 5,174,055 4,803,192
Accumulated deficit (4,693,861) (4,249,520)
Deferred offering costs (35,882) --
----------- -----------
Total shareholders' equity 445,455 554,707
----------- -----------
TOTAL LIABILITIES AND EQUITY $ 1,827,023 $ 2,289,358
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
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SMART GAMES INTERACTIVE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 30,139 $ 238,739 $ 593,145 $ 1,469,418
Cost of goods sold 24,435 253,834 449,830 1,318,183
----------- ----------- ----------- -----------
Gross Margin 5,704 (15,095) 143,315 151,235
19% -6% 24% 10%
Selling, general and administrative costs 193,545 496,739 475,258 1,494,501
Research and Development Costs 32,495 37,924 95,889 158,972
----------- ----------- ----------- -----------
Income (Loss) from operations (220,336) (549,758) (427,832) (1,502,238)
Other expense 9,675 18,890 16,509 71,804
----------- ----------- ----------- -----------
Net loss $ (230,011) $ (568,648) $ (444,341) $(1,574,042)
=========== =========== =========== ===========
Net loss per common share $ (0.04) $ (0.16) $ (0.09) $ (0.50)
=========== =========== =========== ===========
Shares used in calculation of net 5,523,433 3,485,257 5,165,476 3,126,310
loss per common share (Note 2) =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
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SMART GAMES INTERACTIVE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $(444,341) $(1,574,041)
Adjustments to reconcile net loss to net
cash provided (used) in operating activities:
Depreciation and amortization 64,513 67,922
Gain on sale of property and equipment (56) --
Accounts receivable allowances (197,435) (336,806)
Non-recurring charges (24,506) --
Sale of inventory for trade credits, net of allowances -- (672,000)
Cash provided (used) by the change in:
Accounts receivable 423,701 1,262,501
Inventories 136,430 542,951
Prepaid expenses and other assets (99,510) 42,692
Accounts payable (49,918) 490,941
Accrued expenses (67,059) 82,590
--------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (258,181) (93,250)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (4,950) (26,220)
Proceeds from sale of property and equipment 350 --
--------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (4,600) (26,220)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments) proceeds on line of credit -- (469,142)
Issuance of notes payable 456,396 150,000
Repayment of notes payable (306,396) --
Proceeds from issuance of common stock -- 410,008
Expenditures for proposed public offering (51,017) (14,142)
--------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 98,983 76,724
--------- -----------
Net increase (decrease) in cash (163,798) (42,746)
Cash and cash equivalents at beginning on period 166,944 44,719
--------- -----------
Cash and cash equivalents at end of period $ 3,146 $ 1,973
========= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
5
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NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The statements are unaudited but,
in the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. For further information, refer to the financial
statements and footnotes thereto for the year ended December 31, 1995 included
in the registrant's Annual Report on Form 10-KSB filed on April 12, 1996.
NOTE 2. NET LOSS PER COMMON SHARE
Net loss per common share is computed using the weighted average number of
shares of common stock and common equivalent shares outstanding.
NOTE 3. CONSIGNED INVENTORY, WARRANTY AND RIGHT OF RETURN POLICIES
Inventory consigned to customers is included in the Company's finished goods
valuation. Revenue from these consignments is recognized when the consignee
sells the product to individual consumers. All products carry a minimum ninety
day manufacturer's warranty. The warranty period begins on the date of purchase
by the individual consumer. Consumers who purchase products from the Company
have a right to return the product for either merchandise, credit or refund
(within thirty days of purchase) provided the returned product is free of damage
or abuse not consistent with the normal use of the returned product.
NOTE 4. SUBSEQUENT EVENTS
On October 11, 1996, Sports Sciences, Inc. ("SSI"), the predecessor to the
Company, reincorporated from the State of Ohio to the State of Delaware by means
of a merger with and into the Company (the "Merger"), then a wholly-owned
subsidiary of SSI. The Company was the surviving corporation in the Merger.
On October 31, 1996, the Company completed the issuance and sale of 6,933,333
shares of its common stock, $.0002 par value per share, in a private placement.
The Company intends to use the $1,139,000 in net proceeds from the sale to repay
trade payable indebtedness (approximately $400,000) and for working capital
(approximately $739,000).
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended September 30, 1996 Compared to the Three Months Ended
- --------------------------------------------------------------------------
September 30, 1995
- ------------------
Net sales for the three months ended September 30, 1996 were $30,000 as compared
to net sales of $239,000 for the same three month period in 1995. Net consumer
product sales, excluding accessories, were $29,000 for the three months ended
September 30, 1996, a decrease of $207,000 or 88%, over the same three month
period in 1995. This decrease in net sales is attributable to the Company's
inability, due to lack of capital resources, to satisfactorily market its
products and to offer the extended terms that are demanded by retail
distribution channels. International sales, including Canada, for the three
month period ended September 30, 1996 were $10,000 as compared to $85,000 for
the same period in 1995. Product return accruals for the three months ended
September 30, 1996 were $34,000 compared to $129,000 during the same period in
1995.
Gross margin percentage for the three months ended September 30, 1996 was 19% as
compared to -6% for the same three month period in 1995. This improvement in
gross margin percentage was due to a decrease in fixed manufacturing overhead
expenditures, which totalled $33,000 for the three months ended September 30,
1996, a decrease of $100,000 from the same three month period in 1995.
Total operating expenses for the three months ended September 30, 1996 were
$226,000, consisting of selling, general and administrative costs of $194,000
and research and development costs of $32,000 compared to total operating
expenses of $535,000 for the same three month period in 1995 consisting of
selling, general and administrative costs of $497,000, and research and
development costs of $38,000.
For the three months ended September 30, 1996 other expense was $10,000 compared
to $19,000 during the same three month period in 1995. Other expense for the
1995 period consists of primarily interest expense and bank charges relating
to the Company's now expired line of credit with Comerica Bank.
Nine Months Ended September 30, 1996 Compared to the Nine Months Ended September
- --------------------------------------------------------------------------------
30, 1995
- --------
Net sales for the nine months ended September 30, 1996 were $593,000 as
compared to net sales of $1,469,000 for the same nine month period in 1995, a
decrease of approximately 60%. Net consumer product sales, excluding
accessories, decreased $870,000 or 60% during the first nine months of 1996
compared to the first nine months of 1995. This decrease in net sales is
attributable to the Company's inability, due to lack of capital resources, to
satisfactorily market its products and to offer the extended terms that are
demanded by retail distribution channels. International sales, including
Canada, for the nine month period ended September 30, 1996 were $49,000 as
compared to $178,000 over the same nine month period in 1995. Product return
accruals for the nine months ended September 30, 1996 were $48,000 compared to
$323,000 during the same nine month period in 1995.
Gross margin percentage for the nine months ended September 30, 1996 was 24%
compared to a 10% gross margin during the same nine month period in 1995. This
improvement in gross margin percentage was due to the decrease in fixed
manufacturing overhead expenditures, which totaled $123,000 for the nine months
ended September 30, 1996, a decrease of $234,000 over the same nine month
period in 1995.
Total operating expenses for the nine months ended September 30, 1996 were
$571,000, consisting of selling, general and administrative costs of $475,000
and research and development costs of $96,000 compared to total
7
<PAGE> 8
operating expenses of $1,653,000 for the same nine month period in 1995
consisting of selling, general and administrative costs of $1,494,000 and
research and development costs of $159,000.
Other expense for the nine months ended September 30, 1996 was $17,000 as
compared to $72,000 in the same nine month period of 1995. Other expense for
the 1995 period consists of primarily interest expense and bank charges
relating to the Company's now expired line of credit with Comerica Bank.
Financial Condition and Liquidity
- ---------------------------------
Cash flow used by operations was $258,181 for the nine month period ended
September 30, 1996 compared to cash flow used by operations of $93,250 for the
nine month period ended September 30, 1995.
Management believes that cash flow generated from operations during 1996 will
not be sufficient to maintain minimum levels of operations or to effectively
create market awareness for the Company's products. The Company expects that
promotional and marketing expenditures, and as a result expected sales levels,
will be significantly reduced from the levels of previous years until the
Company is able to successfully complete long-term debt financing and/or private
placements of equity and/or debt securities.
On October 31, 1996, the Company completed the issuance and sale of 6,933,333
shares of its common stock, $.0002 par value per share, in a private placement.
The Company intends to use the $1,139,000 in net proceeds from the sale to repay
trade payable indebtedness (approximately $400,000) and for working capital
(approximately $739,000). The Company believes that the additional working
capital provided by the private placement may only be sufficient to maintain the
Company's operations through the first quarter of 1997. The Company intends to
continue operations beyond such period by additional private placements of debt
or equity securities, cash flow from operations and/or a bank line of credit.
There can be no assurance that the Company will be successful in obtaining
working capital from any one or all of these sources.
8
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2. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
On October 11, 1996, Sports Sciences. Inc. ("SSI"), the
predecessor to the Company, reincorporated from the State of Ohio
to the State of Delaware by means of a merger with and into the
Company (the "Merger"), then a wholly-owned subsidiary of SSI.
The Company was the surviving corporation in the Merger.
In the Merger, holders of SSI's common stock received shares of
the Company's common stock. One effect of the Merger was the
modification of the rights of holders of the Company's common
stock, who had been holders of SSI's common stock prior to the
Merger.
A description of such modification is incorporated herein by
reference to pages 9 through 21 of SSI's Proxy Statement dated
August 9, 1996, which pages are appended hereto as Exhibit A.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
9
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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
THE COMPANY'S ANNUAL MEETING OF SHAREHOLDERS WAS HELD ON AUGUST 21,
1996 AND WAS RECONVENED ON OCTOBER 9, 1996.
THE FOLLOWING MATTERS WERE VOTED UPON AT THE MEETING:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN UNVOTED
--- ------- ------- -------
<S> <C> <C> <C> <C>
1. Election of Directors
(a) Nicholas J. Chuma 3,586,931 52,921 0 0
(b) John D. Lipps 3,611,031 28,821 0 0
(c) Donald Miller 3,486,531 153,321 0 0
(d) Gary Taylor 3,486,110 153,742 0 0
(e) Peter Waite 3,486,431 153,421 0 0
2. Amendment of Articles
of Incorporation* 3,487,114 23,460 30,299 98,979
3. Adoption of Amendment to
1993 Non-Qualified and
Incentive Stock
Option Plan** 3,327,063 118,976 94,844 98,979
4. Approval of Saltz, Shamis &
Goldfarb, Inc. as
Independent Accounts 3,531,015 54,221 54,580 0
* To increase the number of authorized shares of Common Stock from 10
million to 50 million shares and to change the state of incorporation
of the Company from Ohio to Delaware by means of a merger of the
Company with and into a wholly-owned Delaware subsidiary.
** To increase the number of shares authorized for issuance under the Plan
from 490,000 shares to 1,000,000 shares.
ITEM 5 OTHER INFORMATION
NONE
ITEM 6 REPORTS ON FORM 8-K
NONE
</TABLE>
10
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized:
SMART GAMES INTERACTIVE, INC.
-----------------------------
<TABLE>
<S> <C>
Date: November 13, 1996 /S/ John D. Lipps
----------------- --------------------------------------------------
John D. Lipps, Chairman of the Board, President, Chief
Executive Officer
/S/ Nicholas J. Chuma
--------------------------------------------------
Nicholas J. Chuma, Executive Vice President, Treasurer,
Chief Financial Officer and Secretary
</TABLE>
11
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APPROVAL OF PROPOSAL TO
CHANGE THE STATE OF INCORPORATION OF THE COMPANY
On July 25, 1996, the Board approved, subject to shareholder approval,
a proposal to change the Company's state of incorporation from Ohio to Delaware
by means of a merger (the "Merger") of the Company with and into Smart Games
Interactive, Inc. ("Merger Co."), a newly formed wholly-owned Delaware
subsidiary of the Company (the "Reincorporation Proposal"). The principal office
of Merger Co. is 2075 Case Parkway South, Twinsburg, Ohio 44087, telephone (216)
963-0660. Merger Co. will be the surviving corporation (the "Surviving
Corporation") of the Merger, an effect of which will be a change in the law
applicable to the Company's corporate affairs from the Ohio General Corporation
Law ("Ohio Law") to Delaware General Corporation Law ("Delaware Law"), including
certain differences in shareholders' rights. See "Comparison of Shareholders'
Rights under Ohio Law and Delaware Law."
The following discussion summarizes certain aspects of the
Reincorporation Proposal, including certain material differences between Ohio
Law and Delaware Law. This summary does not purport to be a complete description
of the Reincorporation Proposal or the differences between shareholders' rights
under Ohio Law and Delaware Law and is qualified in its entirety by reference to
(i) the Agreement of Merger dated as of July 25, 1996 between the Company and
Merger Co. (the "Merger Agreement") attached hereto as Exhibit A, (ii) the
Certificate of Incorporation of Merger Co. (the "New Certificate") attached
hereto as Exhibit B, and (iii) the By-Laws of Merger Co. (the "New By-Laws")
attached hereto as Exhibit C. Copies of the Company's Amended and Restated
Articles of Incorporation, as amended (the "Present Articles"), and Amended and
Restated Code of Regulations (the "Present Regulations"), are available for
inspection at the Company's executive office, and copies will be sent to
shareholders on request.
Approval of the Reincorporation Proposal by the Company's shareholders
will also constitute approval of the Merger and the Merger Agreement, as well as
other matters included in the Reincorporation Proposal described in this Proxy
Statement. Pursuant to the terms of the Merger Agreement, the New Certificate
and New By-Laws will replace the Present Articles and Present Regulations as the
charter documents affecting corporate governance and shareholders' rights. For a
description of the differences between the Present Articles and Present
Regulations of the Company and the New Certificate and New By-Laws, see "Certain
Charter Document Provisions."
The approval of the Reincorporation Proposal will affect certain rights
of shareholders. Accordingly, shareholders are urged to read carefully this
Proxy Statement and the annexes hereto. Shareholders of the Company whose shares
are not voted in favor of the Reincorporation Proposal will have statutory
dissenter's rights. See "Rights of Dissenting Shareholders."
PRINCIPAL FEATURES OF THE REINCORPORATION PROPOSAL
At the Effective Time of the Merger (as defined in the Merger
Agreement), the separate existence of the Company will cease and the Surviving
Corporation, to the (extent permitted by
9
EXHIBIT A
<PAGE> 13
law, will succeed to all business, properties, assets and liabilities of the
Company. Each share of Common Stock of the Company issued and outstanding
immediately prior to the Effective Time will by virtue of the Merger be
converted into one share of Common Stock, $.0002 par value, of the Surviving
Corporation ("Surviving Corporation Common Stock"). At the Effective Time,
certificates which immediately prior to the Effective Time represented shares of
Common Stock of the Company will be deemed for all purposes to represent the
5,714,911 shares of Surviving Corporation Common Stock. IT WILL NOT BE NECESSARY
FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF THE SURVIVING CORPORATION. Approval of the Reincorporation
Proposal will not result in any change in the business, management, assets or
liabilities of the Company, but will result in a change in the name of the
Company from "Sports Sciences, Inc." to "Smart Games Interactive, Inc."
Pursuant to the terms of the Merger Agreement, each option to purchase
Common Stock of the Company outstanding immediately prior to the Effective Time
of the Merger under the Stock Option Plan will become an option to purchase
Surviving Corporation Common Stock, subject to the same terms and conditions as
set forth in the Stock Option Plan or other agreement pursuant to which such
option was granted. All other employee benefit plans and other agreements and
arrangements of the Company will be continued by the Surviving Corporation upon
the same terms and subject to the same conditions.
It is anticipated that the Merger will become effective as soon as
practicable after the Annual Meeting. However, the Merger Agreement provides
that the Merger may be abandoned by the Board of Directors of either the Company
or Merger Co. prior to the Effective Time, either before or after shareholder
approval. In addition, the Merger Agreement may be amended prior to the
Effective Time, either before or after shareholder approval; provided, however,
that the Merger Agreement may not be amended after shareholder approval if such
amendment would (1) alter or change the amount or kind of shares or other
consideration to be received by shareholders in the Merger, (2) alter or change
any term of the New Certificate, (3) alter or change any of the terms and
conditions of the Merger Agreement, if such alteration or change would adversely
affect the shareholders, or (4) otherwise violate applicable law.
PRINCIPAL REASONS FOR THE REINCORPORATION PROPOSAL
For many years Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporation laws which are periodically
updated and revised to meet changing business needs. As a result, many major
corporations have initially chosen Delaware for their domicile or have
subsequently reincorporated in Delaware in a manner similar to that proposed by
the Company. Delaware courts have developed considerable expertise in dealing
with corporate issues, and a substantial body of case law has developed
construing Delaware Law and establishing public policies with respect to
Delaware corporations.
10
<PAGE> 14
The Board of Directors believes that the best interests of the Company
and its shareholders will be served by changing the Company's state of
incorporation from Ohio to Delaware. At the time of the Company's incorporation
in Ohio in 1991, Ohio Law was deemed to be adequate for the conduct of the
Company's business, in part because the business of the Company at that time was
limited. In the intervening years, the Company has become publicly held, and has
needed to raise additional amounts of capital through the sale of equity
securities to foster its growth. The Board of Directors believes that Delaware
Law affords desirable flexibility and simplicity in the exercise of corporate
powers which are not available to corporations that, like the Company, are
organized under Ohio Law, and that the authorization of additional shares of the
Company's capital stock would be less expensive under Delaware Law than under
Ohio Law. It should be noted, however, that shareholders in some instances have
fewer rights and hence less protection under Delaware Law than under Ohio law.
See "Comparison of Shareholders' Rights under Ohio Law and Delaware Law."
CERTAIN CHARTER DOCUMENT PROVISIONS
The New Certificate and New By-Laws are substantially similar to the
Present Articles and Present Regulations of the Company with respect to material
provisions. Differences between the New Certificate and New By-Laws and the
Present Articles and Present Regulations are primarily the result of differences
between Delaware Law and Ohio Law. See "Comparison of Shareholders' Rights under
Ohio Law and Delaware Law." Significant provisions of the New Certificate and
New By-Laws and certain important differences between such new charter documents
and the present charter documents of the Company are discussed below.
Capital Stock. The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, no par value, and 5,000,000 shares of
Preferred Stock, no par value ("Preferred Stock"). No shares of Preferred Stock
of the Company have been issued. The capitalization of the Surviving Corporation
will consist of 50,000,000 shares of Common Stock, $.0002 par value, and
5,000,000 shares of Preferred Stock, $.0002 par value. The provisions of the New
Certificate setting the terms of the Surviving Corporation Common Stock are
unchanged from the Present Articles.
The availability of the additional authorized shares of Surviving
Corporation Common Stock will give the Board of Directors of the Surviving
Corporation flexibility in possible future financings. The Company entered into
a letter agreement dated July 25, 1996 with Taglich Brothers, D'Amato, Wagner &
Company, Incorporated ("Taglich Brothers") pursuant to which Taglich Brothers
will use its best efforts to sell up to $1,500,000 of the Surviving
Corporation's equity securities. There can be no assurance that this proposed
transaction will be consummated. Other than its letter agreement with Taglich
Brothers, the Company has no present plans to issue any of the additional shares
of Surviving Corporation Common Stock which would be authorized by the New
Certificate. Other purposes for which the additional authorized shares could be
used include stock dividends or stock splits, conversions of future issues of
convertible securities, exchanges for outstanding debt, contributions to
employee benefit plans or other corporate purposes not now foreseeable.
11
<PAGE> 15
The Board of Directors of the Surviving Corporation will be able to
authorize the issuance of additional shares for the foregoing purposes without
further shareholder approval, unless required by a particular transaction, by
applicable law or by the rules of national securities exchange on which the
Company's securities may at the time be listed.
With respect to the Company's Preferred Stock, the provisions of the
New Certificate differ from those of the Present Articles with respect to the
manner in which the directors may fix the terms of a series of the Preferred
Stock and the terms which may be so fixed. Under Delaware Law, directors fix the
terms of a series of Preferred Stock by resolution, as opposed to an actual
amendment to a company's articles of incorporation, as under Ohio law. In
addition, under Delaware Law, directors have authority to provide for different
voting rights between series of preferred stock whereas, under Ohio Law,
directors do not have this right. Certain terms of the Company's Preferred Stock
are set forth in the Present Articles, such as dividend and liquidation
preferences and certain terms concerning redemption, conversion and voting
rights of the Preferred Stock. The New Certificate does not contain all of such
terms but instead permits the Board of Directors to exercise broader discretion
in fixing the terms of series of Preferred Stock, subject to Delaware Law and
the terms of the New Certificate.
Preemptive Rights. The Present Articles provide that no shareholder
shall have preemptive rights to purchase shares. The New Certificate also
prohibits preemptive rights to purchase or subscribe for shares of stock of the
Surviving Corporation.
Compromises with Creditors and Shareholders. Delaware Law provides that
a certificate of incorporation may contain a provision allowing for a compromise
or arrangement between a corporation and its creditors or shareholders. Under
such provision, whenever such a compromise or arrangement is proposed, a
Delaware court may order a meeting for the purpose of eliciting an agreement to
the compromise or the arrangement which would be binding on all such creditors
and/or shareholders and the corporation. The New Certificate contains such a
provision, whereas the same is not available under either the Present
Regulations or Ohio Law.
Board of Directors; Committees. Under the Present Regulations, the
number of directors which shall constitute the Board of Directors is determined
by shareholder vote provided that such number of directors shall be not less
than three and not more than twenty-one. Under the New By-Laws, the number of
directors shall be determined by resolution of the Board of Directors, provided
that such number shall not be less than three.
Under the Present Regulations, a majority of directors constitutes a
quorum for the transaction of business by the Board of Directors. The New
By-Laws provide that one-third of the entire Board of Directors, but in no event
less than two directors, shall constitute a quorum for the transaction of
business.
The Present Regulations provide that directors who have a personal or
financial interest in a contract or transaction which is before the Board of
Directors of the Company, or who are common directors of the Company and another
corporation with respect to which a contract or
12
<PAGE> 16
transaction is before the Board of Directors of the Company, may be counted in
determining the presence of a quorum at a meeting of directors, or a committee
thereof, which authorizes such contract or transaction. Delaware Law includes a
similar provision respecting the inclusion of interested directors in the
determination of a quorum; such a provision is not required to be set forth in
the New Certificate or New By-Laws in order to apply to the Surviving
Corporation.
Under the Present Regulations, special meetings of the Board of
Directors of the Company may be called by certain officers of the Company or by
the President or Secretary of the Company on the written request of any two
directors if there are three or more directors on the Board or on the written
request of a single director if there are less than three directors on the
Board. Under the New By-Laws, special meetings of the Board of Directors may be
called by certain officers or at the request of directors constituting one-third
of the directors then in office, but not less than two directors.
The Present Regulations and Ohio Law require that the Board of
Directors designate three or more of its members to constitute any committee of
the Board. Under the New By-Laws, the Executive Committee of the Board of
Directors of the Surviving Corporation shall consist of three or more directors
and any other committee of the Board may consist of one or more such directors.
The Present Regulations expressly permit telephonic meetings of the
Board of Directors or any committee thereof. Under Delaware Law, since the New
Certificate and New By-Laws do not provide otherwise, such telephonic meetings
are also permitted.
Cumulative Voting. Neither the Present Articles nor the Present
Regulations permit cumulative voting in the election of directors. The New
Certificate and New By-Laws also do not provide for cumulative voting in the
election of directors.
Director Liability and Indemnification. Ohio Law provides that, with
certain exceptions, a director shall be liable for monetary damages for actions
or omissions as a director only if it is proved by clear and convincing evidence
that the director acted or failed to act with deliberate intent to cause injury
to the corporation or with reckless disregard for the best interests of the
corporation. Additionally, Ohio Law protects a director for liability for breach
of the director's duty of loyalty to the corporation as well as for breach of
the director's duty of care. The Ohio Law provisions concerning director
liability are self-executing and do not appear in the Present Articles. Under
Delaware Law, subject to certain exceptions, a director is protected from
personal liability for breaches of his or her duty of care. Delaware Law
provides for such a limitation on director liability if the certificate of
incorporation contains a provision to that effect, as does the New Certificate.
Such a provision does not, however, eliminate or limit director liability for a
breach of the director's duty of loyalty to the corporation or its shareholders,
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, for willful or negligent conduct in paying
dividends or repurchasing stock out of other than lawfully available funds, or
for any transaction from which the director derives an improper personal
benefit.
13
<PAGE> 17
The indemnification provisions contained in the Present Regulations and
the New Certificate, as governed by Ohio Law and Delaware Law, respectively, are
similar. These provisions provide that the Company or the Surviving Corporation,
as the case may be, shall indemnify any director, officer, employee or agent of
the Company or the Surviving Corporation and any person serving at the request
of the Company or the Surviving Corporation as a director, officer, employee, or
agent of another corporation, or of a partnership, joint venture, trust or other
enterprise, respectively, against any threatened, pending or completed action
(whether civil, criminal, administrative or investigative), other than an action
by or in the right of the Company or the Surviving Corporation, brought against
such person because he or she holds such position if (i) he or she acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Company or the Surviving Corporation, and (ii) with respect to
a criminal proceeding, he or she had no reasonable cause to believe that such
conduct was unlawful. Under both Ohio Law and Delaware Law, no indemnification
can be made with respect to any matter in which such person is adjudged to be
liable for negligence or misconduct in the performance of his or her duty,
unless a court determines otherwise.
Amendments to Regulations and By-Laws. Under Ohio Law, only the
shareholders have the power to adopt, amend or repeal regulations; such power
may not be conferred upon the directors. A Delaware corporation may in its
certificate of incorporation confer the power to adopt, amend or repeal by-laws
upon the directors. Under the New Certificate, the directors of the Surviving
Corporation are granted such power.
Securities Held By the Company. The New By-Laws, as well as Ohio Law,
contain provisions concerning the voting of securities of other corporations
held by the Surviving Corporation or the Company, respectively. Additionally,
the New By-Laws provide a general authorization for the transfer of such
securities.
Dividends. Under the Present Regulations and Ohio Law, as well as under
the New By-Laws, the record date for the payment of dividends shall not be in
excess of sixty days prior to the dividend payment date. Additionally, the New
Certificate and New By-Laws provide that the Surviving Corporation may, prior to
the payment of any dividend, set aside out of the funds available for dividends
such sum or sums as the directors think proper as reserve to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the
Surviving Corporation, or for such other purpose as directors think conducive to
the interest of the Surviving Corporation, and the directors may modify or
abolish such reserves in the same manner.
COMPARISON OF SHAREHOLDERS' RIGHTS UNDER OHIO LAW AND DELAWARE LAW
Although it is impracticable to compare all of the aspects in which
Ohio Law and Delaware Law differ, the following is a summary of certain
significant differences between the provisions of these laws. See also "Certain
Charter Document Provisions."
14
<PAGE> 18
Anti-Takeover Provisions. Ohio Law prevents a person, under certain
circumstances, from purchasing large amounts of shares of stock of a corporation
without shareholder approval. Under Ohio Revised Code Section 1701.831, unless
the articles or regulations otherwise provide, any "control share acquisition"
of an issuing public corporation can only be made with the prior approval of the
corporation's shareholders. A "control share acquisition" is defined as any
acquisition, directly or indirectly (by tender offer, open market purchase,
private transaction or otherwise) of shares of a corporation which, when added
to all other shares of that corporation owned by the acquiring person, would
entitle that person to exercise specified levels of voting power when electing
directors.
Specifically, unless the provisions of Section 1701.831 have been
satisfied, a person may not purchase additional shares of a corporation if that
purchase would result in such person holding more than 20%, 33-1/3% or 50% of
the voting power. These percentages reflect the Ohio legislature's view that
each such acquisition of shares which results in a person's voting power
exceeding these levels involves an increase in the ability of that person to
control a corporation. These levels of voting power are considered so great that
the transaction involved should be considered and approved or rejected by
shareholders.
Section 1701.831 requires that a person proposing to make a control
share acquisition deliver a statement to the corporation describing, among other
things, the number of shares owned directly or indirectly by such person, the
range of voting power under which the proposed control share acquisition would
fall, a description in reasonable detail of the terms of the proposed
transaction, and reasonable evidence that the proposed control share acquisition
would not be contrary to law and that the person who provided the statement has
the financial capacity to make such acquisition.
Within ten days after receipt of such statement, the directors of the
corporation are required to call a special meeting of shareholders for the
purpose of voting on the proposed control share acquisition. Unless the
acquiring person agrees in writing to another date, such special meeting must be
held within fifty days after receipt by the corporation of the statement. Notice
of this special meeting is given to all shareholders of record as of the record
date.
The acquiring person may make the proposed control share acquisition if
both of the following occur: (i) shareholders of the corporation authorize such
acquisition at the special meeting by an affirmative vote of (A) a majority of
the voting power of the corporation in the election of directors represented at
such meeting in person or by proxy and (B) a majority of the portion of such
voting power, excluding the voting power of shares which may be voted by the
acquiring person, any officer of the corporation elected or appointed by the
directors or any employee of the corporation who is also a director; and (ii)
such acquisition is consummated in accordance with the terms authorized not
later than 360 days following such shareholder authorization of the control
share acquisition. Approval of a control share acquisition would not in and of
itself obligate any shareholder to sell shares or to engage in any other
transaction with the person who receives approval for the control share
acquisition.
15
<PAGE> 19
Delaware's anti-takeover provisions are embodied in Section 203 of the
Delaware General Corporation Law. Section 203 provides that if a person acquires
fifteen percent or more of a corporation's voting stock (thereby becoming an
"interested stockholder") that person may not engage in a wide range of
transactions ("business combinations") with the corporation for a period of
three years following the date the person became an interested stockholder
unless (i) the board of directors approved either the business combination or
the transaction which consummation of the transaction which resulted in the
person becoming an interested stockholder, (ii) that person owned at least 85%
of the corporation's voting stock outstanding at the time excluding shares owned
by persons who are directors and officers and by employee stock plans in which
participants do not have the right to determine confidentially whether shares
will be tendered in a tender or exchange offer or (iii) the business combination
is approved by the board of directors and authorized by the affirmative vote (at
an annual or special meeting and not by written consent) of at least 66-2/3% of
the outstanding voting stock not owned by the interested stockholder.
For purposes of determining whether a stockholder is the "owner" of
fifteen percent or more of a corporation's voting stock for purposes of Section
203, ownership is defined broadly to include beneficial ownership and other
indicia of control. A "business combination" is also defined broadly and
includes (i) mergers and sales or other dispositions of ten percent or more of
the assets of a corporation with or to an interested stockholder, (ii) certain
transactions resulting in the issuance or transfer to the interested stockholder
of any stock of the corporation or its subsidiaries, (iii) certain transactions
which would result in increasing the proportionate share of the stock of the
corporation or its subsidiaries owned by the interested stockholder, and (iv)
receipt in certain instances by the interested stockholder of the benefit
(except proportionately as a stockholder) of any loans, advances, guarantees,
pledges or other financial benefits.
These restrictions placed on interested stockholders do not apply under
certain circumstances, including but not limited to the following: (i) if the
corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by the statute, or (ii) if the
corporation, by action of its shareholders, adopts an amendment to its by-laws
or certificate of incorporation expressly electing not to be governed by Section
203, provided that such an amendment is approved by the affirmative vote or not
less than a majority of the outstanding shares entitled to vote. Such an
amendment will be effective immediately if the Corporation has never had a class
of voting stock that is (i) listed on a national securities exchange, (ii)
authorized for quotation on the NASDAQ Stock Market, or (iii) held of record by
more than 2,000 shareholders, and has not elected in its original certificate of
incorporation or any amendment thereto to be governed by Section 203. In all
other cases an amendment will not be effective until twelve months after its
adoption and will not apply to any business combination with a person who became
an interested stockholder at or prior to such adoption.
The New Certificate does not contain a provision electing not to be
governed by the statute. The Board of Directors of the Company believes that the
provisions of Section 203 will help assure that a change in control of the
Company does not occur without the consent of the Board of Directors and/or
stockholders of the Company and will encourage any person who seeks
16
<PAGE> 20
to acquire control of the Company to do so by a negotiated transaction rather
than through a hostile takeover attempt.
Management of the Company is not aware of any attempt to acquire the
Company by a third party and does not have any plans to propose any other
changes to the charter documents or corporate structure of the Company which
would have an anti-takeover purpose or effect.
Mergers, Acquisitions and Other Transactions. In addition to the
anti-takeover provisions discussed above, Ohio Law generally requires approval
of mergers, dissolutions and dispositions of substantially all of a
corporation's assets by two-thirds of the voting power of the corporation,
unless the articles of incorporation permit a different proportion though never
less than a majority. Under the Present Articles, approval of such matters
requires the affirmative vote of the holders of two-thirds of the voting power
of the Company. Delaware Law does not require shareholder approval in the case
of asset and share acquisitions and, in general, requires approval of mergers
and dispositions of substantially all of a corporation's assets by a majority of
the voting power of the corporation.
Action Without a Meeting. Under Ohio Law, unless the articles or the
regulations provide otherwise, any action which may be taken by shareholders or
directors at a meeting may be taken without a meeting upon the unanimous written
consent of the shareholders or directors, respectively. Delaware Law provides
that, unless the certificate of incorporation provides otherwise, any action
which may be taken at a meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if the holders of stock having not less
than the minimum number of votes otherwise required to approve such action
consent in writing.
Class Voting. Under Ohio Law, holders of a particular class of shares
are entitled to vote as a separate class if the rights of such class are
affected in certain respects by mergers, consolidations or amendments to the
articles of incorporation. Delaware Law requires voting by separate classes only
with respect to amendments to the certificate of incorporation which adversely
affect the holders of such classes or which increase or decrease the aggregate
number of authorized shares or the par value of the shares of any such classes.
Loans to Officers. Under Ohio Law, directors of an Ohio corporation who
vote for or assent to the making of loans (other than in the usual course of
business) to an officer, director or shareholder of the corporation are jointly
and severally liable to the corporation for the amount of the loan, with
interest thereon at the rate of ten percent per annum, until the loan has been
paid. The directors will not be liable if a majority of disinterested directors
voted for the loan and determined that the making of the loan could reasonably
be expected to benefit the corporation. Delaware Law permits a corporation to
lend money to, or to guarantee an obligation of, an officer or other employee of
the corporation or any subsidiary thereof, including an officer or employee who
is also a director of the corporation or of its subsidiaries, whenever such loan
or guarantee may, in the judgment of the directors, reasonably be expected to
benefit the corporation.
17
<PAGE> 21
Appraisal Rights. Under Ohio Law, dissenting shareholders are entitled
to appraisal rights in connection with the lease, sale, exchange, transfer or
other disposition of all or substantially all of the assets of a corporation and
in connection with certain amendments to the corporation's articles of
incorporation In addition, shareholders of an Ohio corporation being merged into
a surviving corporation or being consolidated into a new corporation are also
entitled to appraisal rights. Shareholders of an acquiring corporation are
entitled to appraisal rights in a merger, combination or majority share
acquisition in which such shareholders are entitled to voting rights.
Under Delaware Law, appraisal rights are available only in connection
with certain mergers or consolidations, unless otherwise provided in the
corporation's certificate of incorporation. Even in the event of such mergers or
consolidations, unless the certificate of incorporation otherwise provides,
Delaware Law does not recognize dissenter's rights (i) if the shares of the
corporation are listed on a national securities exchange or designated as a
national market system security or an interdealer quotation system by the
National Association of Securities Dealers, Inc., or (ii) held of record by more
than 2,000 shareholders (as long as the shareholders receive in the merger
shares of the surviving corporation or of any other corporation the shares of
which are listed on a national securities exchange or held of record by more
than 2,000 shareholders) or (iii) if the corporation is the surviving
corporation and no vote of its shareholders is required for the merger.
Dividends. An Ohio corporation may pay a dividend or distribution in
cash, property, or shares of the corporation. The dividend or distribution shall
not exceed the combination of the surplus of the corporation and the difference
between the following: (1) the reduction in surplus that results from the
immediate recognition of the transition obligation under statement of financial
accounting standards no. 106 (SFAS no. 106), issued by the financial accounting
standards board; (2) the aggregate amount of the transition obligation that
would have been recognized as of the date of the declaration of a dividend or
distribution if the corporation had elected to amortize its recognition of the
transition obligation under statement of financial accounting standards no. 106
and must notify its shareholders if a dividend is paid out of capital surplus. A
Delaware corporation may pay dividends out of any surplus and, if it has no
surplus, out of any net profits for the fiscal year in which the dividend was
declared or for the preceding fiscal year (provided that such payment will not
reduce capital below the amount of capital represented by all classes of shares
having a preference upon the distribution of assets).
Repurchase of Stock. Under Ohio Law, a corporation may not purchase or
redeem its own shares unless authorized to do so by its articles of
incorporation and then may not do so if immediately thereafter its assets would
be less than its liabilities plus its stated capital, if any, or if the
corporation is insolvent or would be rendered insolvent by such a purchase or
redemption. Under Delaware Law, a corporation may repurchase or redeem its
shares only out of surplus and only if such purchase does not impair capital.
However, a corporation may redeem preferred stock out of capital if such shares
will be retired upon redemption and the stated capital of the corporation is
thereupon reduced in accordance with Delaware Law.
18
<PAGE> 22
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger will constitute a reorganization under Section 368 of the
Code. Consequently, holders of Common Stock will not recognize any gain or loss
for federal income tax purposes as a result of the conversion of their shares
into shares of Surviving Corporation Common Stock. For federal income tax
purposes, a holder's aggregate basis in the shares of Surviving Common Stock
received in the Merger will equal such holder's adjusted basis in the shares of
Common Stock converted therefor and such holder's holding period for the
Surviving Corporation Common Stock received in the Merger will include his
holding period in the Common Stock converted therefor.
Likewise, the Company will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to the Surviving
Corporation pursuant to the Merger. In addition, the Surviving Corporation will
succeed to and take into account the earnings and profits, accounting methods,
and other tax attributes of the Company specified in Section 381(c) of the Code.
Holders of Common Stock should consult their own tax advisors as to the
application and effect of state, local and foreign income and other tax laws to
the conversion of their shares into shares of stock of the Surviving Corporation
pursuant to the Merger.
RIGHTS OF DISSENTING SHAREHOLDERS
If the Reincorporation Proposal is approved by the Company's
shareholders, a shareholder of the Company objecting to its terms may seek
relief as a dissenting shareholder under Section 1701.85 of the Ohio Revised
Code. An outline of the provisions of Section 1701.85 follows; however, it is
qualified by and reference is made to the full text of that section, which is
attached hereto as Exhibit D. FAILURE TO COMPLY WITH SECTION 1701.85 MAY RESULT
IN A TERMINATION OR WAIVER OF THE RIGHTS OF THE DISSENTING SHAREHOLDER.
1. A shareholder claiming dissenter's rights under Section 1701.85 in
connection with the Reincorporation Proposal must be a record or beneficial
owner of shares of Common Stock (for purposes of this discussion, the "Shares")
of the Company on the record date set for determining those shareholders
entitled to vote on the Reincorporation Proposal. A dissenting beneficial (but
not record) owner (for example, the owner of shares held in "street name" by a
broker) must assert his or her dissenter's rights in coordination with and in
the name of the record owner.
2. If the dissenting shareholder claims dissenter's rights in
connection with the Reincorporation Proposal, he or she must not have voted the
Shares as to which he or she claims dissenter's rights "For" the Reincorporation
Proposal. Failing to vote or abstaining from voting does not waive the
dissenting shareholder's rights. A proxy card returned to the Company signed,
but not marked to specify voting instructions, will be voted "For" the
Reincorporation Proposal and will be deemed a waiver of the dissenter's rights.
19
<PAGE> 23
3. The dissenting shareholder must invoke Section 1701.85 not later
than ten days after the 1996 Annual Meeting of Shareholders (called to be held
on August 21, 1996) and may do so by delivering to the Company (addressed to the
Secretary, Sports Sciences, Inc., 2075 Case Parkway South, Twinsburg, Ohio
44087) a written demand for payment to him or her of the fair cash value of his
or her Shares, stating his or her address, the number and class of Shares as to
which he or she seeks to assert dissenter's rights, and the amount claimed as
the fair cash value of such Shares. Voting against the Reincorporation Proposal
does not constitute a written demand. Although the Company intends to issue a
press release announcing the approval of the Merger, the Company will not notify
shareholders of the expiration of this ten-day period.
4. The Company may request the dissenting shareholder to deliver to it
the certificates representing Shares as to which he or she seeks relief. Such a
request is not an admission by the Company that the shareholder is entitled to
any relief. If the Company makes such a request, the dissenting shareholder must
deliver such certificates to the Company within fifteen days of the date of the
sending of the request. The Company may then legend the certificates to the
effect that the shareholder has demanded the fair cash value of his or her
Shares. The Company must then promptly return the legended certificates to the
shareholder. If the Shares underlying the legended certificate are transferred,
a transferee acquires only the rights the original dissenting shareholder had
immediately after service on the Company of his or her demand for payment of
fair cash value. At the option of the Company, a shareholder failing to deliver
his or her certificate upon request of the Company may have his or her rights as
a dissenting shareholder terminated, unless a court directs otherwise.
5. The Company and the shareholder may come to an agreement as to the
fair cash value of the shares. If the Company and the shareholder do not agree
on the fair cash value of the Shares, either the shareholder or the Company may
file a petition in the Court of Common Pleas of Summit County, Ohio within three
months after demand upon the Company by the shareholder. The complaint shall
contain a brief statement of the facts entitling the dissenting shareholder to
the relief demanded, including the vote. Other dissenting shareholders, within
the period of three months, may join as plaintiffs or be joined as defendants.
Upon the shareholder's motion (or upon the Company's motion, if the Company
should file a petition), the Court will hold a hearing to determine whether the
shareholder is entitled to the fair cash value of the Shares, and, if so, the
number and class of the Shares. If the Court finds the shareholders so entitled,
it may appoint one or more appraisers to recommend the amount of such value. The
fair cash value is to be determined as of the day prior to the date the vote of
the shareholders is taken. The fair cash value is the amount which a willing
seller, under no compulsion to sell, would be willing to accept, and which a
willing buyer, under no compulsion to purchase, would be willing to pay, but in
no event may the fair cash value exceed the amount specified in the
shareholder's demand. In determining this value, any appreciation or
depreciation in the market value of the Shares resulting from the
reincorporation transaction in respect of which dissenter's rights are being
exercised is excluded. The Court is required to make a finding as to the fair
cash value and render a judgment against the Company for the payment thereof.
Interest on the fair cash value as well as costs of the proceedings, including
reasonable compensation to the appraisers, are to be assessed or apportioned as
the Court considers equitable.
20
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0
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