<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
(Amendment No. )
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for the Use of the Commission Only (as permitted by
Rule 14c5(d)(2))
[ ] Definitive Information Statement
THE GREAT AMERICAN BACKRUB STORE, INC.
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(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Check box if any part of the fee is offset as provided by Exchange
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:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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THE GREAT AMERICAN BACKRUB STORE, INC.
4500 140th Avenue North, Suite 221
Clearwater, Florida 33762
February 17, 1998
TO THE SHAREHOLDERS OF THE GREAT AMERICAN BACKRUB STORE, INC.:
The enclosed Notice of Special Meeting and Information Statement
relate to corporate actions approved by the Board of Directors to
reincorporate The Great American BackRub Store, Inc. (the "Company") under the
laws of Delaware through the merger of the Company into a Delaware subsidiary
formed specifically for this purpose and amendments to the Company's
Certificate of Incorporation to (a) change the name of the Company to "Darco
International Corp."; (b) reverse split the outstanding shares of the
Company's common stock one-for-four; (c) increase the number of shares of
common stock the Company is authorized to issue from 20,000,000 to 25,000,000;
and (d) permit shareholders to take action by written consent without a
meeting. Ascot International Corp. ("Ascot"), which holds approximately 69% of
the Company's common stock, has approved these actions and will vote their
shares in favor of these matters at the meeting.
Pursuant to the provisions of New York law and the Company's
certificate of incorporation, the reincorporation by merger requires the
affirmative vote of 2/3 of the Company's outstanding shares of common stock
and the other amendments require the approval of a majority of such shares.
Accordingly, the vote of Ascot is sufficient to approve these matters, which
the Company's management believes is in the best interests of the Company and
its shareholders.
Please refer to the Notice and Information Statement for details
regarding this matter. In addition, please note that you are not being asked
to send a proxy and you are requested not to send one.
Sincerely yours,
David S. Coia
Chairman of the Board
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
4500 140th Avenue North, Suite 221
Clearwater, Florida 33762
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of The Great American BackRub Store, Inc. (the "Company") will be
held at 10:00 a.m. on March 12, 1998 at the Company's offices located at 4500
140th Avenue North, Suite 221, Clearwater, Florida 33762 to consider and act
upon the following:
1. To approve of the re-incorporation of the Company under the laws
of the State of Delaware through the merger of the Company into a Delaware
subsidiary formed specifically for this purpose.
2. To approve amendments to the Company's Certificate of
Incorporation to:
(a) change the Company's name to "Darco International Corp.";
(b) reverse split the issued and outstanding shares of the
Company's Common Stock one-for-four;
(c) increase the number of shares of Common Stock, $.001 par
value, which the Company is authorized to issue from 20,000,000 to 25,000,000;
and
(d) permit shareholders to take action by written consent
without a meeting.
3. Such other matters as may property come before the Meeting.
Shareholders of record of the Company's Common Stock at the close of
business on February 18, 1998, the record date fixed by the Board of Directors
are entitled to notice of and to vote at the Meeting or any adjournment
thereof.
By Order of the Board of Directors
David L. West
Secretary
Clearwater, Florida
February 17, 1998
--------------------------
SEE INFORMATION STATEMENT ENCLOSED
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
4500 140th Avenue North, Suite 221
Clearwater, Florida 33762
----------------
INFORMATION STATEMENT
----------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
----------------
This Information Statement (the "Information Statement") is being
mailed by management on or about February 19, 1998 to the holders of record at
the close of business on February 18, 1998 (the "Record Date"), of the Common
Stock $0.001 par value per share (the "Common Stock"), of The Great American
BackRub Store, Inc., a New York corporation (the "Company") in connection with
a Special Meeting of Shareholders to be held March 12, 1998 (the "Meeting").
At the Meeting, the following matters will be submitted to shareholders for
their approval: The reincorporation the Company under the laws of Delaware
through the merger of the Company into a Delaware subsidiary formed
specifically for this purpose and amendments to the Company's Certificate of
Incorporation to (a) change the name of the Company to "Darco International
Corp."; (b) reverse split the outstanding shares of the Company's Common Stock
one-for-four; (c) increase the number of shares of Common Stock the Company is
authorized to issue from 20,000,000 to 25,000,000; and (d) permit shareholders
to take action by written consent without a meeting. Ascot International Corp.
("Ascot"), which holds approximately 69% of the Company's Common Stock, has
approved these actions and will vote their shares in favor of these matters at
the meeting.
Pursuant to the provisions of New York law and the Company's
certificate of incorporation, the reincorporation by merger requires the
affirmative vote of 2/3 of the Company's outstanding shares of Common Stock
and the other amendments require the approval of a majority of such shares.
Accordingly, the vote of Ascot is sufficient to approve these matters, which
the Company's management believes is in the best interests of the Company and
its shareholders.
The entire cost of furnishing this Information Statement will be
borne by the Company. The Company will request brokerage houses, nominees,
custodians, fiduciaries and other like parties to forward this information
Statement to the beneficial owners of the Common Stock held of record by them
and will reimburse such persons for their reasonable charges and expenses in
connection therewith.
<PAGE>
VOTING SECURITIES AND RECORD DATE
The shares of Common Stock are the only class of voting securities of
the Company outstanding. Shareholders of record as of the close of business on
the Record Date are entitled to Notice and to vote at the Meeting. As of the
close of business on the Record Date there were [15,830,716] shares of Common
Stock outstanding. Since Ascot will vote in favor of the proposals, they will
be approved and no proxies are being solicited.
CHANGE OF CONTROL OF THE COMPANY
On September 30, 1997 the Company entered into a Securities Exchange
Agreement (the "Securities Exchange Agreement"), to acquire (the
"Acquisition") 100% of the issued and outstanding common stock of Caribsun
from Ascot. On October 16, 1997 the Acquisition closed pursuant to the
Securities Exchange Agreement and the Company initially issued 11,000,000
shares of its Common Stock to Ascot in exchange for all of the outstanding
shares of Caribsun's Common Stock. Under the terms of the Securities Exchange
Agreement, the Company is obligated to issue an additional 5,930,752 shares of
Common Stock (which will be 1,482,688 as a result of either the
reincorporation into Delaware or the one-for-four reverse stock split
described herein) upon the approval of the amendment to the Company's
Certificate of Incorporation.
The Securities Exchange Agreement was attached to the Company's Form
8-K dated September 30, 1997 as an exhibit which was filed via EDGAR with the
Securities and Exchange Commission. Further information concerning the
acquisition of Caribsun from Ascot can be found in the Company's Form 8-K
Report dated October 16, 1997. The description in this Information Statement
of the Securities Exchange Agreement and its terms and conditions is qualified
in its entirety by reference to the Securities Exchange Agreement and the
respective exhibits and schedules thereto and is not, and does not purport to
be, complete.
As a result shares issued to Ascot at the Closing of the Acquisition,
Ascot owns approximately 69% of the outstanding Common Stock and all of the
management of the Company now consists of officers and directors (or
individuals nominated by such persons) of Ascot.
INTERESTS OF CERTAIN PERSONS IN OR OPPOSITION
TO MATTERS TO BE ACTED UPON
The matters set forth herein were unanimously approved by the
Company's Board of Directors on January 30, 1998. Each of David Coia and David
L. West, who are directors and officers of the Company, are also directors of
Ascot, which owns approximately 69% of the Company's Common Stock. In
addition, David Coia and David West own approximately 41% of the outstanding
common stock of Ascot. As a result of the matters to be approved at the
meeting (1) Ascot will increase its percentage of ownership of outstanding
shares of the
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Company's Common Stock from approximately 69% to 78%; and (2) Ascot will be
able to cause the Company to take corporate action by written consent without
a meeting.
The acquisition of shares of Common Stock by Ascot under the
Securities Exchange Agreement was approved by the Board of Directors at a time
when none of the present directors sat on the Board. The Securities Exchange
Agreement was negotiated at arms-length with old management and the Board of
Directors that resigned when the Acquisition was completed.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date information
concerning ownership of the Company's securities by (i) each Director, (ii)
each executive officer, (iii) all Directors and executive officers as a group,
(iv) each member of Prior Management; and (v) each person known to the Company
to be the beneficial owner of more than five percent of each class:
<TABLE>
<CAPTION>
Name and Address(1) Amount and Nature Percent of
Title of Class of Beneficial Owner(2) of Beneficial Ownership Class(3)
- -------------- ----------------------- ----------------------- --------------
<S> <C> <C> <C>
Common Stock Ascot International Corp. 11,000,000(4) 69.4%
David S. Coia 150,000(5) less than 1%
1123 Overcash Drive
Dunedin, FL 34698
David Coia 11,000,000(4)(6) 69.4%
David L. West 11,000,000(4)(7) 69.4%
Kevin P. Stone 0 0%
338 Soudan Avenue
Toronto, Ontario, Canada
Waylon E. McMullen 0 0%
P.O. Box 795517
Dallas, TX
All executive officers
and Directors as a Group
(5 persons) 11,150,000(8) 69.8%
</TABLE>
- ---------------------
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
The Great American BackRub Store, Inc., 4500 140th Avenue North, Suite
221, Clearwater, FL 33762.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act and unless otherwise indicated, represents
securities for which the beneficial owner has sole voting and investment
power.
(3) Based upon [15,830,716] shares outstanding on February 18, 1998.
(4) Does not include up to 5,930,752 additional shares issuable to Ascot
under the terms of the Securities Exchange Agreement which is
conditioned upon an amendment to the Company's certificate of
incorporation.
(5) Consists of 150,000 shares of Common Stock which the Company has agreed
to issue to a company controlled by David S. Coia as part consideration
for a one year loan of $250,000. David S. Coia is David Coia's son.
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(6) Mr. Coia is an officer of Ascot and owns approximately 38% of the shares
of Ascot. He disclaims beneficial ownership of shares of the Company
owned by Ascot.
(7) Mr. West is an officer of Ascot and owns approximately 3% of the shares
of Ascot. He disclaims beneficial ownership of shares of the Company
owned by Ascot.
(8) See Notes 4, 5, 6 and 7 above.
APPROVAL OF REINCORPORATION INTO DELAWARE
The Board of Directors has approved the reincorporation of the
Company as a Delaware corporation through the merger by the Company into its
wholly-owned subsidiary, Darco International Corp., a Delaware corporation
("Darco"), subject to shareholder approval (the "Merger").
The Board of Directors recommends the reincorporation of the Company
in Delaware through a Merger into Darco, because, in its opinion, the best
interests of the Company will be served. The change of domicile will not
involve any change in the business, properties or management of the Company.
The proposed Agreement of Merger between the Company and Darco is set forth in
full as Appendix A to this Information Statement. As a result of the Merger,
without any action on the part of the holder thereof, each outstanding share
of common stock, par value $.001 per share, of the Company ("Common Stock")
will be converted into one-fourth (1/4) share of common stock, par value $.001
per share, of Darco ("Delaware Common Stock"); each option or warrant to
purchase shares of common stock of the Company will be converted into an
option or warrant to purchase one-forth (1/4) shares of common stock, par
value $.001 per share, of Darco at an exercise price equal to four times the
prior exercise price; and each option or warrant to purchase shares of Series
A Preferred Stock of the Company will be converted into an option or warrant
to purchase shares of Series A Preferred Stock of Darco, with the same rights,
preferences and privileges. There may be effects of the Merger other than as
described in this Information Statement.
The Board of Directors has unanimously approved the proposal to
change the Company's domicile to Delaware. The Agreement of Merger provides,
however, that the proposed Merger may be abandoned at any time prior to
becoming effective if any circumstance should develop that, in the opinion of
the Boards of Directors of the Company and Darco, makes proceeding with the
Merger inadvisable.
Exchange of Certificates and Elimination of Fractional Share Interests
At the effective time of the Merger (the "Effective Time"), each four
shares of Common Stock of the Company will automatically be combined and
changed into one share of Delaware Common Stock. No additional action on the
part of the Company or any shareholder will be required. Shareholders will be
requested to exchange their certificates representing shares of Common Stock
held prior to the Merger for new certificates representing shares of Delaware
Common Stock. Shareholders will be furnished the necessary materials and
instructions to effect such exchange promptly following the Effective Time.
Certificates representing shares of Delaware Common Stock subsequently
presented for transfer will not be transferred on the books and records of the
Company but will be returned to the tendering person for exchange.
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Shareholders should not submit any certificates until requested to do so. In
the event any certificate representing shares of the Company's Common Stock is
not presented for exchange upon request by the Company, any dividends that may
be declared after the Effective Time with respect to the Company's Common
Stock represented by such certificate will be withheld by the Company until
such certificate has been properly presented for exchange, at which time all
such withheld dividends which have not yet been paid to a public official
pursuant to relevant abandoned property laws will be paid to the holder
thereof or his designee, without interest.
No fractional shares of Delaware Common Stock will be issued to any
shareholder. Accordingly, shareholders of record who would otherwise be
entitled to receive fractional shares of Delaware Common Stock, will, upon
surrender of their certificates representing shares of the Company's Common
Stock, receive a cash payment in lieu thereof equal to the fair value of such
fractional share. Holders of less than four shares of the Company's Common
Stock as a result of the Merger split will at the Effective Time no longer be
shareholders of the Company. The board of directors has determined that the
fair value of the Delaware Common Stock will be based on the closing price of
the Company's Common Stock on OTC Electronic Bulletin Board the Effective
Time, as adjusted for the terms of the Merger, or, if there are no reported
sales on such date, the average of the last reported high bid and low asked
price on such day shall be used.
Reasons for Change in State of Incorporation
The Company was originally incorporated in New York, because the laws
of that State were then deemed to be well adapted for the conduct of the
Company's business. The corporation law of Delaware affords a flexible and
modern basis for corporate action including the ability to grant options to
its directors, officers and employees. Because more than 50,000 corporations
are incorporated in Delaware, including a substantial number of the
corporations whose securities are publicly traded, a large body of case law
has developed, decided by a judiciary of corporate specialists, interpreting
Delaware law in the corporate field.
Organization of Darco
Darco was organized by the Company in Delaware as a wholly-owned
subsidiary of the Company for the sole purpose of the Merger. Upon the Merger
becoming effective, authorized capital stock of Darco will consist of
25,000,000 shares of Preferred Stock, par value $.001 per share, and
25,000,000 shares of common stock, par value $.001 per share.
The current Directors of the Company will become the directors of
Darco upon the Merger becoming effective. The officers of the Company will be
the officers of Darco upon the Merger becoming effective.
Federal Income Tax Consequences
No gain or loss will be recognized to the Company or to Darco as a
result of the Merger, and no gain or loss will be recognized under such law to
the holders of the common stock of the Company as a result thereof.
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Generally, cash received in lieu of fractional shares will be treated
as a sale of the fractional shares (although in unusual circumstances such
cash might possibly be deemed a dividend), and shareholders will recognize
gain or loss based upon the difference between the amount of cash received and
the basis in the surrendered fractional share.
This discussion should not be considered as tax or investment advice,
and the tax consequences of the Merger may not be the same for all
shareholders. Shareholders should consult their own tax advisors to know their
individual Federal, state, local and foreign tax consequences.
Vote Required for Approval
The Merger requires the approval of the holders of two-thirds of the
outstanding shares of Common Stock. Ascot, which owns 69% of the outstanding
shares of common stock, has approved the Merger. Therefore, unless the Merger
is abandoned by the Board of the Company and Darco, it will become effective
as described herein.
Rights of Dissenting Shareholders
Sections 623 and 910 of the New York Business Corporation Law
("NYBCL") give to any shareholder of the Company who wishes to object to the
proposed Merger of the Company into Darco (an "Objecting Shareholder") the
right to receive from the Company in cash, the fair value of his or her
shares, provided that the Merger is not abandoned or fails to be approved and
authorized, and provided, further, that the following procedure is carefully
followed.
(a) The Objecting Shareholder must not vote in favor of the Merger
and, before the plan is submitted to a vote at the Special
Meeting of Shareholders to be held on March 12, 1998, he or she
must file with the Company written objection thereto stating
his or her intention to demand payment for his or her shares.
The written objection should be sent to The Great American
BackRub Store, Inc., 4500 140th Avenue North, Suite 221,
Clearwater, Florida 33762, Attention of Mr. David L. West,
Secretary. Registered Mail, Return Receipt Requested is
recommended. The objection may also be submitted at the
meeting, but before a vote is taken on the reincorporation. A
shareholder may not dissent as to less than all of the shares
as to which he has a right to dissent.
(b) Prior to March 23, 1998, the Company must give written notice
to each Objecting Shareholder that such Merger has been
authorized by the vote of the Company's shareholders.
(c) Within twenty (20) days after such notice is given, the
Objecting Shareholder must make written demand on the Company
in accordance with the method of mailing as set forth in
paragraph (a), for payment of the fair value of his or her
shares indicating his or her name and residence address and the
number of shares owned. Together with the written
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demand or within one month thereafter, the Objecting
Shareholder must submit certificates representing all of his
shares of the Company's stock to the Company or its transfer
agent for the purpose of affixing a notation indicating that a
demand for payment has been made. Otherwise, at the option of
the Company, he or she will lose his objector's rights, unless
a court, for good cause shown, otherwise directs.
(d) Within fifteen (15) days after the later of the date of the
proposed corporate action is consummated, or the period during
which written demand by the objecting shareholder must be made
(but no case later than ninety (90) days from the date of
Shareholder Authorizations, the Company must make a written
offer by registered mail to each Objecting Shareholder to pay
for his or her shares at a specified price which the Company
considers to be their fair value.
(e) If, within thirty (30) days after making such offer, the
Objecting Shareholder and the Company agree upon the price to
be paid for his or her shares, payment must be made by the
Company within sixty (60) days of the date of the making of
such offer upon the surrender of the certificates representing
his or her shares.
(f) If the Company fails to make such offer or if the Objecting
Shareholder and the Company fail to agree upon the price to be
paid, the Company must within twenty (20) days after the
expiration of the time periods set forth in subparagraphs (d)
and (e) (whichever is applicable) institute a special
proceeding in the Supreme Court of the State of New York,
County of New York to determine the rights of the Objecting
Shareholder and to fix the fair value of his or her shares.
(g) If the Company fails to institute such special proceeding the
Objecting Shareholder may do so within thirty (30) days after
the expiration of such twenty (20) day period. Failure of the
Objecting Shareholder to institute such proceedings will result
in the loss of his or her objector's rights unless the court,
for good cause shown, otherwise directs.
(h) Within sixty (60) days after the final determination of the
special proceedings, the Company must pay to each Objecting
Shareholder the amount found to be due him or her, upon
surrender of the certificates representing his or her shares.
The foregoing summary of the rights of Objecting Shareholders does
not purport to be complete and is qualified in its entirety by reference to
Sections 623 and 910 of the NYBCL, a copy of which appears in Appendix B to
this Information Statement.
7
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Comparison of Delaware and New York Law
Set forth below is a brief discussion of certain differences between
NYBCL, under which the Company is incorporated, and the Delaware General
Corporation Law (the "DGCL"), under which Darco is incorporated.
The statements set forth under this heading with respect to the NYBCL
and the DGCL and the respective certificates of incorporation of the Company
and Darco are brief summaries thereof and do not purport to be complete. The
statements relating to the NYBCL and the DGCL are subject to the detailed
provisions of such statutes and the case law and other legal interpretations
relating to such statutes. The information relating to the respective
certificates of incorporation of the Company and Darco are qualified in their
entireties by such documents, copies of which are available from the Company.
Dividend Rights
Under the NYBCL, a corporation is prohibited from making a
distribution to shareholders if, after giving effect thereto: (i) such
corporation would be made insolvent, (ii) the declaration, payment or
distribution would be contrary to any restrictions contained in the
corporation's certificate of incorporation, (iii) such corporation's net
assets remaining after such declaration, payment or distribution is less than
its stated capital. Under the DGCL, a corporation may pay dividends out of
surplus (defined as the excess, if any, of net assets over capital), or, if no
surplus exists, out of its net profits for the fiscal year in which such
dividends are declared and/or for its preceding fiscal year, provided, that
dividends may not be paid out of net profits if the capital of such
corporation is less than the aggregate amount of capital represented by the
outstanding stock of all classes having a preference upon the distribution of
assets.
Holders of common stock of both the Company and Darco are entitled to
receive such dividends as may be declared by the board of directors from
funds, legally available for such purpose after payment of any dividends due
with respect to a series of preferred stock.
Voting Rights
Unless otherwise provided in the certificate of incorporation, the
NYBCL and the DGCL provide that every shareholder of record shall be entitled
at every meeting of shareholders to one vote for every share owned of record
on the record date for determining shareholders entitled to notice of and to
vote at meeting of shareholders. The certificates of incorporation of both the
Company and Darco do not contain any provision which alters this right. The
certificates of incorporation of both the Company and Darco give the board of
directors the power to create series of preferred stock and to provide for
voting rights for the holders of such series. Such rights may include the
right to more than one vote per share.
Directors
Under the NYBCL, the number of directors of a corporation may be (i)
fixed by the by-laws or (ii) by action of the shareholders or the board of
directors under the specific provisions of
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a by-law adopted by the shareholders. If the number is not fixed, there must
be a minimum of three directors. Pursuant to an amendment to the NYBCL, which
will become effective in 1998, the minimum number of directors will be one.
Under the DGCL the number of directors shall be fixed by, or in the manner
provided in, the by-laws unless the certificate of incorporation fixes the
number of directors, in which event, the number of directors can be changed
only by an amendment to the certificate of incorporation. The number of
directors of both the Company and Darco are determined pursuant to the by-laws
of such corporation. Directors of each of the Company and Consolidated
- --Delaware are elected by a plurality of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote in the election.
Ability to Grant Options to Employees and Directors
The NYBCL prohibits the issue of options and rights to purchase
capital stock of a corporation to directors, officers or employees of the
corporation or any subsidiary or affiliate as an incentive to service or
continued service unless authorized at a meeting of shareholders by the vote
of the holders of a majority of all outstanding shares entitled to vote
thereon or authorized by and consistent with a plan adopted by such vote of
shareholders. The DGCL does not include any requirement for obtaining
shareholder approval for the issue of such options or rights.
Fiduciary Duties of Directors
Under the NYBCL, directors owe a fiduciary duty to the corporation
and its shareholders and must perform their duties in good faith and with that
degree of care which an ordinarily prudent person in a like position would use
under similar circumstances. Directors must give reasonable attention to the
corporation's business. New York law presumes that, without evidence to the
contrary, in making a business decision, directors are acting in good faith
and exercising honest judgment. In taking action, directors may consider,
among other things, both the long-term and short-term interests of the
corporation and its shareholders. In addition, directors may consider the
effects that the corporation's actions may have in the short-term or in the
long-term upon: (i) the prospects for potential growth, development,
productivity and profitability of the corporation, (ii) the corporation's
current employees, (iii) the corporation's retired employees and other
beneficiaries who are entitled to receive retirement benefits, (iv) the
corporation's customers and creditors, and (v) the ability of the corporation
to provide, as a going concern, goods, services, employment opportunities and
employment benefits to contribute to the community in doing business. In
performing his duties, a director shall be entitled to rely upon information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared and/or presented by: (i) officers of the
corporation, (ii) legal counsel, public accountants and other professionals,
and (iii) a committee of the corporation.
Under the DGCL, the business and affairs of a corporation are managed
by or under the direction of its board of directors. In exercising their
powers, directors are charged with an unyielding fiduciary duty to protect the
interests of the corporation and to act in the best interests of its
shareholders. Delaware law in general presumes that, in making a business
decision, directors are disinterested and act on an informed basis, in good
faith and in the honest belief that the action taken was in the best interests
of such corporation, which presumption is known as the "business judgment
rule." A party challenging the propriety of a decision of a board of directors
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bears the burden of rebutting the applicability of the presumption of the
business judgment rule by demonstrating that, in reaching their decision, the
directors breached one or more of their fiduciary duties -- good faith,
loyalty and due care. If the presumption is not rebutted, the business
judgment rule attaches to protect the directors and their decisions, and their
business judgments will generally not be judicially second guessed. Where,
however, the presumption is rebutted, the directors bear the burden of
demonstrating the entire fairness of the relevant transaction. Notwithstanding
the foregoing, Delaware courts subject directors' conduct to enhanced scrutiny
in respect of defensive actions taken in response to a threat to corporate
control and approval of a transaction resulting in a sale of such control.
Liability of Directors
Under the NYBCL, a corporation's certificate of incorporation may
eliminate or limit the personal liability of directors to the corporation or
its shareholders for damages in connection with any breach of duty in such
capacity, provided that no such provision may eliminate or limit: (i) the
liability of any director if a judgment or other final adjudication adverse to
him establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of any law or that he personally
gained in fact a financial profit or other advantage to which he was not
legally entitled, (ii) liability which arises from injury suffered by persons
as a result of a declaration of a dividend or other distribution, a purchase
of the corporation's shares, a distribution of assets after dissolution, the
making of a loan, any of which is effected in violation of the NYBCL or (iii)
the liability of any director for any act or omission prior to the adoption of
a provision limiting or eliminating such director's liability.
The DGCL permits a corporation to include in its certificate of
incorporation a provision limiting or eliminating the liability of its
directors to such corporation or its shareholders for monetary damages arising
from a breach of fiduciary duty, except for: (i) a breach of the duty of
loyalty to the corporation; (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) a
declaration of a dividend or the authorization of the repurchase or redemption
of stock in violation of the DGCL or (iv) any transaction from which the
director derived an improper personal benefit. The certificate of
incorporation of Darco eliminates director liability to the maximum extent
permitted by the DGCL, and it also contains broad indemnification provisions.
Call of Special Meetings
The NYBCL permits special meetings of the shareholders to be called
by the board of directors and such persons who may be authorized to do so by
the certificate of incorporation or the by-laws. At any such special meeting,
only such business may be transacted which is related to the purpose or
purposes set forth in the written notice provided to shareholders.
Under the DGCL, a special meeting of the shareholders may be called
by the board of directors or such other person as may be authorized by the
certificate of incorporation or by-laws.
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Amendment to Charter Documents
Under the NYBCL, amendments or changes to the certificate of
incorporation may be authorized by vote of the board of directors, followed by
vote of the holders of a majority of all outstanding shares entitled to vote
thereon at a meeting of the shareholders. In addition, the holders of shares
of a class or series are entitled to vote and to vote as a class or series and
the amendment shall be authorized by vote of the holders of a majority of all
outstanding shares of the class or series when a proposed amendment would: (i)
exclude or limit such shareholders' right to vote on any matter, (ii) change
such shareholders' shares to reduce the par value, (iii) change such shares
into a different number of shares of the same class, or into the same or a
different number of shares of any one or more classes or any series thereof,
(iv) fix, change or abolish the designation of any authorized class, any of
the relative rights, preferences or limitations, including any provisions in
respect of any undeclared dividends, whether or not cumulative or accrued, or
the redemption of any shares, or any sinking fund for the redemption or
purchase of any shares or any preemptive rights to acquire shares or other
securities (v) provide that their shares may be converted into shares of any
other class or into shares of any other series of the same class, (vi) alter
the terms or conditions upon which their shares are convertible or change the
shares issuable upon conversion of their shares, if such action would
adversely affect such holders' rights or (vii) subordinate their rights, by
authorizing shares having preferences which would be in any respect superior
to their rights. For amendments involving mergers, see "Approval of Merger and
Asset Sales."
Under the DGCL, any provision of the certificate of incorporation of
Darco may be amended by approval of the board of directors and the affirmative
vote of a majority of the voting power of the outstanding shares entitled to
vote thereon; provided, that any amendment which affects the rights of the
holders of any class or series of capital stock must be approved by the
holders of a majority of the shares of such class or series.
Approval of Merger and Asset Sales
Under the NYBCL, the board of directors, upon adopting a plan of
merger or consolidation, must submit such plan to a vote of shareholders.
Notice of the meeting to adopt the plan and an outline of the plan must be
given to each shareholder of record, as of the record date, whether or not
such shareholder is entitled to vote. The plan must be adopted at the meeting
of shareholders by vote of the holders of two-thirds of all outstanding shares
entitled to vote thereon. Notwithstanding any provision in the corporation's
certificate of incorporation, the holders of shares of a class or series of
the corporation's stock, shall be entitled to vote and to vote as a class if
the plan contains any provision entitling the holders of such shares to vote
and vote as a class thereon. In such case, in addition to the authorization of
the merger or consolidation by vote of the holders of two-thirds of all
outstanding shares, the merger or consolidation shall be authorized by a vote
of the holders of a majority of all outstanding shares of each such class or
series. Notwithstanding shareholder authorization, the board of directors may
abandon the plan of merger or consolidation at any time prior to the filing of
the certificate of merger or consolidation with the New York Secretary of
State, but only pursuant to a provision for such abandonment contained in the
plan.
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No shareholder authorization, from either the parent corporation or
the subsidiary corporation is required when a parent corporation merges any
subsidiary corporation into itself.
Under the NYBCL, a sale, lease, exchange or other disposition of all
or substantially all of the assets of the corporation, if not made in the
usual or regular course of business conducted by the corporation, shall be
authorized only by the following procedure: (i) the board of directors must
authorize the proposed sale, lease, exchange or other disposition and direct
its submission to a vote of shareholders, (ii) notice of meeting shall be
given to each shareholder of record, whether or not entitled to vote, and
(iii) the shareholders must approve such sale, lease, exchange or other
disposition and may fix, or may authorize the board to fix, any of the terms
and conditions thereof and the consideration to be received by the corporation
therefor, by a vote at a meeting of shareholders of the holders of two-thirds
of all outstanding shares entitled to vote thereon. Notwithstanding
shareholder approval, the board may abandon the proposed sale, lease, exchange
or other disposition without further action by the shareholders, subject to
the rights, if any, of third parties under any contract.
Under the DGCL, unless required by its certificate of incorporation,
and the certificate of incorporation of Darco contains no such requirement, no
vote of the shareholders of a constituent corporation surviving a merger is
necessary to authorize such merger if: (i) the agreement of merger does not
amend the certificate of incorporation of such constituent corporation; (ii)
each share of stock of such constituent corporation outstanding prior to such
merger is to be an identical outstanding or treasury share of the surviving
corporation after such merger; (iii) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible
into such common stock are to be issued under such agreement of merger, or the
number of shares of common stock issued or so issuable does not exceed 20% of
the number thereof outstanding immediately prior to such merger; and (iv)
certain other conditions are satisfied. In addition, the DGCL provides that a
parent corporation that is the record holder of at least 90% of the
outstanding shares of each class of stock of a subsidiary may merge such
subsidiary into such parent corporation without the approval of such
subsidiary's shareholders or board of directors. Whenever the approval of the
shareholders of a corporation is required for an agreement of merger or
consolidation or for a sale, lease or exchange of all or substantially all of
its assets, such agreement, sale, lease or exchange must be approved by the
affirmative vote of the holders of a majority of outstanding shares of such
corporation entitled to vote thereon; provided, that under the DGCL, where a
corporation's certificate of incorporation provides for more or less than one
vote per share on any matter, the required vote is a majority of the combined
voting power of the corporation's stock.
Rights of Appraisal
Procedure to Dissent. Under the NYBCL, a shareholder has a right to
dissent to any plan of merger or consolidation or any sale, lease, exchange or
other disposition of all or substantially all of the assets of the
corporation, provided that this right exists only when the shareholder was
entitled to vote on the proposed corporate action. In order to dissent, a
shareholder must file with the corporation, before the meeting of shareholders
at which the action is submitted to a vote, or at such meeting but before the
vote, written objection to the action. The objection shall include a notice of
his election to dissent, his name and residence address, the number and
classes of shares
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as to which he dissents and a demand for payment of the fair value of his
shares if the action is taken. Upon consummation of the corporate action, the
shareholder shall cease to have any of the rights of a shareholder except the
right to be paid the fair value of his shares.
Right to Receive Fair Value of Shares. Shareholders who properly
dissent to any merger or consolidation under the NYBCL also have the right to
receive payment of the fair value of their shares, if such shareholders were
entitled to vote and did not assent to any plan of merger or consolidation to
which the corporation is a party, except where such shareholders are (i)
holders of shares of the Parent Corporation in a merger of a Parent
Corporation and a Subsidiary Corporation, (ii) holders of shares of the Parent
Corporation in a merger or consolidation of domestic and foreign corporations,
or (iii) holders of shares in a surviving corporation. Notwithstanding the
foregoing, shareholders of a surviving corporation do have the right to
receive payment for their shares if the merger or consolidation alters or
abolishes any preferential rights, redemption or sinking fund rights,
preemptive rights or excludes or limits the rights of such holders to vote on
any matter.
Furthermore, a shareholder has a right to receive payment of the fair
value of his shares in the case of any sale, lease, exchange or other
disposition of all or substantially all of the assets of a corporation which
requires shareholder approval, provided that shareholders do not have the
right to receive such payment in a transaction wholly for cash where the
shareholders' approval thereof is conditioned upon the dissolution of the
corporation and the distribution of substantially all of the corporation's net
assets to the shareholders is made in accordance with their respective
interests within one year after the date of such transaction.
The DGCL provides for appraisal rights on the part of the
shareholders of a corporation only in the case of certain mergers or
consolidations and not (unless the certificate of incorporation of a
corporation so provides, which the certificate of incorporation of Darco does
not) in the case of other mergers, a sale or transfer of all or substantially
all of such corporation's assets or an amendment to such corporation's
certificate of incorporation. In addition, the DGCL denies appraisal rights to
the shareholders of the surviving corporation in a merger if such merger did
not require for its approval the vote of the shareholders of such surviving
corporation.
Indemnification of Directors and Officers
The NYBCL provides in general that a corporation may indemnify any
director or officer made, or threatened to be made, a party to an action or
proceeding (a "Proceeding") (other than one by or in the right of the
corporation to procure a judgment in its favor), whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney fees actually and necessarily incurred. In order to receive
such indemnification, the person must have acted in good faith, for a purpose
which he reasonably believed to be in, or in the case of service for any other
corporation or partnership, joint venture, trust, employee benefit plan or
other enterprise not opposed to the best interests of the corporation and in
addition, in criminal actions or proceedings such person had no reasonable
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cause to believe that his conduct was unlawful. The NYBCL permits similar
indemnification in the case of actions by or in the right of the corporation,
provided that indemnification is not permitted in respect of (i) a threatened
action or a pending action which is settled or otherwise disposed of, or (ii)
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as such court
deems proper. In any case, the NYBCL provides that the indemnification
permitted under the NYBCL is not exclusive of any other rights to which a
director or officer seeking indemnification or advancement of expenses may be
entitled. No indemnification may be provided to a director or officer under
the NYBCL if a judgment or other final adjudication adverse to the director or
officer establishes that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
The DGCL provides in general that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
In addition, the DGCL permits a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in
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view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which that court shall deem
proper.
Furthermore, under the DGCL, the determination of whether
indemnification is proper shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the shareholders of the Corporation.
The DGCL provides that the expenses (including attorneys' fees)
incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by other employees
and agents may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
The DGCL further provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the DGCL shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
The certificate of incorporation of Darco contains broad
indemnification provisions.
Anti-Takeover Provisions
Section 912 of the NYBCL applies to a broad range of business
combinations between a New York corporation and an interested shareholder. The
NYBCL defines a "business combination" to include mergers, consolidations,
sales, leases, exchanges of shares, mortgages, pledges, securities
reclassifications and other transactions. An "interested shareholder" is
defined as any person who (i) is the beneficial owner, directly or indirectly,
of twenty percent or more of the outstanding voting stock of a corporation or
(ii) is an affiliate or an associate of such corporation and at any time
within the five-year period immediately prior to the date in question was a
beneficial owner, directly or indirectly, of twenty percent or more of the
then outstanding voting stock of such corporation. The NYBCL prohibits a
corporation from engaging in a business combination with an interested
shareholder for a period of five years following such interested shareholder's
stock acquisition date except under limited circumstances, including when (i)
such business combination or the purchase of stock made by such interested
shareholder on such interested shareholder's stock acquisition date is
approved by the board of directors of such corporation prior to such
interested shareholder's stock acquisition date, (ii) such business
combination is approved by the affirmative vote of the holders of a majority
of the outstanding voting stock not beneficially owned by such interested
shareholder or any affiliate or associate of such interested shareholder at a
meeting called for such purpose no earlier than five years after such
interested shareholder's stock acquisition date.
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Section 912 does not apply (i) to any business combination of a New
York corporation that does not have a class of voting stock registered with
the Securities and Exchange Commission pursuant to Section 12 of the Exchange
Act ("Registered Voting Stock"), unless the certificate of incorporation
provides otherwise, or under certain circumstances, such as (ii) to any
business combination of a domestic corporation whose amendment certificate of
incorporation provides that Section 912 applies, which did not have a class of
Registered Voting Stock on the effective date of such amendment, and which is
a business combination with an interested shareholder (as defined therein)
whose stock acquisition date is prior to the effective date of such amendment,
or (iii) to any business combination of a domestic corporation the original
certificate of incorporation or an amended by-laws of which contains a
provision expressly electing not to be governed by Section 912, or (iv) to any
business combination of a domestic corporation with an interested shareholder
of such corporation who became an interested shareholder inadvertently.
Section 203 of the DGCL applies to a broad range of business
combinations (as defined in the DGCL) between a Delaware corporation and an
interested shareholder (as defined). The DGCL definition of "business
combination" includes mergers, sales of assets, issuance of voting stock and
certain other transactions. An "interested shareholder" is defined as any
person who owns, directly or indirectly, 15% or more of the outstanding voting
stock of a corporation. The DGCL prohibits a corporation from engaging in a
business combination with an interested shareholder for a period of three
years following the date on which the shareholder became an interested
shareholder, unless (i) the board of directors approved the business
combination before the shareholder became an interested shareholder, or the
board of directors approved the transaction that resulted in the shareholder
becoming an interested shareholder, (ii) upon consummation of the transaction
which resulted in the shareholder becoming an interested shareholder, such
shareholder owned at least 85% of the voting stock outstanding when the
transaction began other than shares held by directors who are also officers
and by certain employee stock plans, or (iii) the board of directors approved
the business combination after the shareholder became an interested
shareholder and the business combination was approved at a meeting by at least
two-thirds of the outstanding voting stock not owned by such shareholder.
Rights of Inspection
Under the NYBCL, every shareholder of record for at least six months
immediately preceding his demand, or any person holding at least five percent
of any class of outstanding shares, upon at least five days written demand,
shall have the right to examine in person or by agent or attorney, during
normal business hours, certain books and records, including the corporation
minutes of the proceedings of its shareholders, a record of shareholders,
balance sheets and profit and loss statements. The shareholder must request
the inspection for a purpose which is in the interest of the corporation or
related to his status as a shareholder.
Under the DGCL any shareholder shall, upon written demand under oath
stating the purpose thereof, have the right during the usual business hours to
inspect for any proper purpose the corporation's stock ledger, list of
shareholders and its other books and records and make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a shareholder.
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Liquidation Rights
The holders of the Company's Common Stock and the common stock of
Darco have substantially the same rights on liquidation, dissolution or
winding up.
APPROVAL OF AMENDMENTS TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
The Company's approved amendments to the Company's Certificate of
Incorporation to (a) change the name of the Company to Darco International
Corp.; (b) reverse split the outstanding shares of the Company's common stock
one-for-four (the "Reverse Split"); (c) increase the number of shares of
common stock the Company is authorized to issued from 20,000,000 to
25,000,000; and (d) to permit shareholders to take action by written consent
without a meeting. Ascot which hold approximately 69% of the Company's common
stock has approved these actions and will vote their shares in favor of these
matters at the meeting.
IF THE MERGER OF THE COMPANY INTO DARCO IS NOT ABANDONED AS A RESULT
OF SIGNIFICANT DEMANDS FOR APPRAISAL OR OTHERWISE, THE CERTIFICATE OF
INCORPORATION WILL NOT BE AMENDED BECAUSE EACH OF THE FOREGOING CHANGES WILL
BE EFFECTED AS A RESULT OF THE MERGER.
Change of Corporate Name
The name "The Great American BackRub Store, Inc." was adopted by the
Company when its only business was the ownership and operation of retail
stores that offer reasonably priced back rubs. Since the time it was adopted,
the Company has developed franchising operations for their stores, and has
acquired Caribsun, which owns and engages in the development of vacant land in
Antigua into a hotel, casino and condominium resort. The Company is exploring
additional franchise concepts, real estate and other business opportunities.
Management believes that a more neutral name will permit it to pursue these
opportunities and will permit the parent company to be associated with more
than one line of business.
One-For Four Reverse Split
As a result of the Reverse Split, each share of Common Stock
outstanding at the effective time of the Reverse Split, will, without any
action on the part of the holder thereof, become one-fourth share of Common
Stock. The par value of the Common Stock will not be affected by the Reverse
Split. For purposes of this description, the Common Stock, as presently
constituted, is referred to as the "Old Common Stock" and the Common Stock
resulting from the Reverse Split is referred to as the "New Common Stock."
The Reverse Split will become effective upon the filing with the
Secretary of State of an amendment to the Company's certificate of
incorporation which states that, upon the filing of the
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Certificate of Amendment, each share of Old Common Stock then issued and
outstanding would automatically become and be converted into one-fourth share
of New Common Stock.
Principal Effects of the Reverse Split
The principal effects of the Reverse Split will be as follows:
1. Based upon the [15,830,716] shares of Old Common Stock outstanding
on the Record Date and the Company's obligation to issue an additional
5,980,752 shares of Old Common Stock to Ascot as a result of the Acquisition,
the Reverse Split would decrease the outstanding shares of Old Common Stock by
75%, and, upon the effectiveness of the Reverse Split and the delivery of
shares to Ascot, approximately 5,452,867 shares of New Common Stock would be
outstanding.
2. There are outstanding as of the Record Date approximately
1,260,500 options and warrants to purchase shares of their Company's Common
Stock at prices ranging from $.375 to $6.00 per share. In addition, the
Company, as part of a financing agreement, agreed to issue 150,000 shares of
its Common Stock to an affiliate of the Company's Chairman. See "Interests of
Certain Persons In or Opposition to Matters to be Acted Upon." Assuming the
Reverse Split is implemented, each option or warrant will be converted into an
option or warrant to purchase one-fourth of a share of New Common Stock at an
exercise price equal to four time the prior exercise price.
The Company will obtain new CUSIP numbers for the New Common Stock
and publicly traded warrants effective at the time of the Reverse Split.
Following the effectiveness of the Reverse Split, the Company will provide
each record holder of Old Common Stock and publicly traded warrants with
information to enable such holder to obtain new stock and warrant
certificates.
Subject to the provisions for elimination of fractional shares, as
described below, consummation of the Reverse Split will not result in a change
in the relative equity position or voting power of the holders of Old Common
Stock.
Assuming the Reverse Split is implemented, the Certificate of
Amendment amending the Certificate of Incorporation will be filed with the
Secretary of State of Delaware as promptly as practicable thereafter. The
Reverse Split would become effective as of the date of such filing (the
"Effective Date").
Purposes of the Reverse Stock Split
The Reverse Split would decrease the number of shares of Old Common
Stock outstanding and presumably increase the per share market price for the
New Common Stock. Theoretically, the number of shares outstanding should not,
by itself, affect the marketability of the stock, the type of investor who
acquires it, or the Company's reputation in the financial community, but in
practice this is not necessarily the case, as many investors look upon a stock
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trading under $1.00 per share as unduly speculative in nature and, as a matter
of policy, avoid investment in such stocks.
Prior to February 1995 the Old Common Stock was traded on the
over-the-counter market. From February 1995 until October 27, 1997, the Common
Stock was traded on The NASDAQ SmallCap Market. Since October 28, 1997, the
Common Stock has been trading on the OTC Electronic Bulletin Board. The Common
Stock was deleted from The NASDAQ SmallCap Market because of the failure of
the Company to meet NASDAQ's capital and surplus and bid price requirements.
The approval and implementation of the Reverse Split are not expected to have
any immediate impact upon the ability of the Company to list its Common Stock
on The NASDAQ SmallCap Market. In order for the Company to have its Common
Stock listed on The NASDAQ SmallCap Market, it will be necessary for the
Company to meet the initial listing requirements for The NASDAQ SmallCap
Market. Based upon recent prices for shares of Old Common Stock, the Company
will not meet the tests for inclusion in The NASDAQ SmallCap Market as a
result of the Reverse Split. No assurance can be given that the Common Stock
will ever be listed on The NASDAQ SmallCap Market or any exchange.
Many leading brokerage firms are reluctant to recommend lower-priced
securities to their clients and a variety of brokerage house policies and
practices currently tend to discourage individual brokers within firms from
dealing in lower-priced stocks. Some of those policies and practices pertain
to the payment of brokers' commissions and to time consuming procedures that
make the handling of lower priced stocks unattractive to brokers from an
economic standpoint. In addition, the structure of trading commissions also
tends to have an adverse impact upon holders of lower priced stocks because
the brokerage commission on a sale of a lower priced stock generally
represents a higher percentage of the sales price than the commission on a
relatively higher priced issue.
The Board of Directors believes that the Reverse Split is in the best
interest of the Company and its shareholders. The price of the Old Common
Stock during the period from January 1, 1997 through February 18, 1998 ranged
from a low closing price of $______ to a high closing price of $_________. On
February 23, 1998, the closing price of the Old Common Stock was $.18 per
share. The Company requires additional capital for its operations and does not
believe that it will be able to raise the necessary capital unless the price
of the Common Stock is higher than the current Common Stock price levels.
However, no assurance can be given that the Reverse Split will result in any
increase in the Common Stock price or that the Company will be able to
complete any financing following the Reverse Split.
Exchange of Certificate and Elimination of Fractional Share Interests
On the Effective Date, each four shares of Old Common Stock will
automatically be combined and changed into one share of New Common Stock. No
additional action on the part of the Company or any shareholder will be
required in order to effect the Reverse Split. Shareholders will be requested
to exchange their certificates representing shares of Common Stock held prior
to the Reverse Split for new certificates representing shares of Old Common
Stock. Shareholders will be furnished the necessary materials and instructions
to effect such exchange promptly following the Effective Date. Certificates
representing shares of Old
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Common Stock subsequently presented for transfer will not be transferred on
the books and records of the Company but will be returned to the tendering
person for exchange. Shareholders should not submit any certificates until
requested to do so. In the event any certificate representing shares of Old
Common Stock is not presented for exchange upon request by the Company, any
dividends that may be declared after the Effective Date of the Reverse Split
with respect to the Common Stock represented by such certificate will be
withheld by the Company until such certificate has been properly presented for
exchange, at which time all such withheld dividends which have not yet been
paid to a public official pursuant to relevant abandoned property laws will be
paid to the holder thereof or his designee, without interest.
No fractional shares of New Common Stock will be issued to any
shareholder. Accordingly, shareholders of record who would otherwise be
entitled to receive fractional shares of New Common Stock, will, upon
surrender of their certificates representing shares of Old Common Stock,
receive a cash payment in lieu thereof equal to the fair value of such
fractional share. Holders of less than four shares of Old Common Stock as a
result of the Reverse Split will on the Effective Date no longer be
shareholders of the Company. The Board of Directors had determined that the
fair value of the Common Stock will be based on the closing price of the
Common Stock on OTC Electronic Bulletin Board the Effective Date (as adjusted
to reflect the Reverse Split) or, if there are no reported sales on such date,
the average of the last reported high bid and low asked price on such day
shall be used.
Federal Income Tax Consequences of the Reverse Split
The combination of each four shares of the Old Common Stock into one
share of New Common Stock should be a tax-free transaction under the Internal
Revenue Code of 1986, as amended, and the holding period and tax basis of the
Old Common Stock will be transferred to the New Common Stock received in
exchange therefor.
Generally, cash received in lieu of fractional shares will be treated
as a sale of the fractional shares (although in unusual circumstances such
cash might possibly be deemed a dividend), and shareholders will recognize
gain or loss based upon the difference between the amount of cash received and
the basis in the surrendered fractional share.
This discussion should not be considered as tax or investment advice,
and the tax consequences of the Reverse Split may not be the same for all
shareholders. Shareholders should consult their own tax advisors to know their
individual Federal, state, local and foreign tax consequences.
Financial Statements
The Company's audited consolidated financial statements,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" with respect to such financial statements, which are included in
the annual report on Form 10-KSB, together with the unaudited financial
statements for the nine months ended September 30, 1997 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" with
respect to such financial statements, which are included in the Company's Form
10-QSB for the
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nine months ended September 30, 1997, are incorporated by reference in this
Information Statement. See "Incorporation by Reference."
Change in Authorized Capital Stock
The Board of Directors has approved an amendment to the Company's
certificate of incorporation which would change the number of authorized
shares of Common Stock, par value $.001 per share. The number of authorized
shares would be increased from 20,000,000 shares to 25,000,000 shares.
Financial Statements
The Company's audited consolidated financial statements for the year
ended December 31, 1996, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" with respect to such financial
statements, which are included in the annual report on Form 10-KSB, together
with the unaudited financial statements for the nine months ended September
30, 1997 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" with respect to such financial statements, which are
included in the Company's Form 10-QSB for the nine months ended September 30,
1997, are incorporated by reference in this Information Statement. See
"Incorporation by Reference."
Discussion of the Amendment
On the Record Date, there were [15,830,716] shares of Common Stock
outstanding. In addition, at such date the Company was obligated to issue
5,930,752 shares of Common Stock to Ascot in connection with the Acquisition
150,000 to a company controlled by the Company's Chairman in connection with
certain financing and 1,260,500 shares upon the exercise of outstanding
options and warrants. There are also warrants outstanding to purchase an
aggregate of 2,000,000 Series A Convertible Preferred Shares ("Series A
Shares"). The warrants permit the holder to purchase Series A Shares for $5.00
per share. The Series A Shares are convertible into shares of Common Stock
determined by dividing $8.00 by the market price of the Company's Common Stock
on the ten days preceding conversion. Accordingly, the Company does not have
sufficient shares of Common Stock available for issuance pursuant to its
existing commitments and for the purpose of raising additional capital. Except
as set forth above, the Company has no agreements or understandings with
respect to the issuance of additional shares of Common Stock.
Under the Company's certificate of incorporation, the Board of
Directors of the Company has authority to issue authorized and unissued shares
of Preferred Stock without obtaining approval from the holders of the Common
Stock. The holders of the Company's Common Stock and Preferred Stock do not
have preemptive rights. The Preferred Stock provisions give the Board of
Directors broad authority to issue shares of Preferred Stock in one or more
series and to determine such matters as the dividend rate and preference,
voting rights, conversion privileges, redemption provisions, liquidation
preferences and other rights of each series. Each share of Common Stock is
entitled to one vote. The holders of any series of preferred stock issued in
the future will be entitled to such voting rights as may be specified by the
Board of Directors.
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Because of the broad powers granted to the Board of Directors to
issue shares of Preferred Stock and determine the rights, preferences and
privileges of the holders of such series, the board has the power to issue
shares of Preferred Stock in a manner which could be used as a defensive
measure against a hostile takeover or to keep the Board of Directors in power.
However, the Board of Directors has no present plans to issue shares for such
purpose.
The Board of Directors of the Company believes it will benefit the
shareholders to have additional unreserved shares available for issuance in
order that adequate shares may be available for the possible issuance of
Common Stock, convertible Preferred Stock or convertible debt securities in
connection with a possible financing of the Company's business or an
acquisition, although, except for its proposed public offering, the Company
has no plans, arrangements, understanding or commitments with respect to the
issuance of such shares.
Action by Written Consent Without a Meeting
The Board of Directors unanimously approved an amendment to the
Company's Certificate of Incorporation to add a provision permitting action to
be taken by shareholders without a meeting upon the written consent of holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at which all shares
entitled to vote were present and voting rather than the written consent of
holders of all outstanding shares. NYBCL requires, in the absence of such a
provision, that action taken by shareholders without a meeting be taken only
if all shareholders entitled to vote on the matter consent to the action in
writing. Because the Company is a public company, the Company could not, on a
timely basis, if at all, contact all shareholders.
This Amendment will permit the shareholders to act expeditiously
without the Company spending the time and incurring the expense of soliciting
proxies and holding special meetings of shareholders. For example, at present,
if the Board of Directors determines to amend the Certificate of Incorporation
to authorize additional shares of common stock or preferred stock, such action
would have to wait until the next annual or special meeting of stockholders of
the Company.
Ascot, which as of the record date beneficially owned 69% of the
outstanding shares of the Company's Common Stock, could approve any
shareholder action without the benefit of a shareholders' meeting. New York
law requires that such actions are not effective until notice is sent to all
stockholders.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Exchange Act and, in accordance therewith, files reports, proxy statements
and other information with the Securities and Exchange Commission
("Commission"). The Company's reports, proxy statements and other information,
can be inspected and copied at the public reference room of the Commission at
450 Fifth Street N.W., Washington, D.C. 20549 and at the Commission's regional
offices at Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Centers, 500 West Madison Street, Suite 1400, Chicago Illinois,
and are available at The Commissions World Wide Site at http:// www.sec.gov.
Copies of
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such material can be obtained from the public reference section of the
Commission at its Washington address at prescribed rates.
INCORPORATION BY REFERENCE
The Company will provide without charge to each person to whom a copy
of this Information Statement is delivered upon the written or oral request of
such person, a copy of any or all of the documents incorporated by reference
herein (including exhibits to such documents). Requests should be directed to:
4500 140th Avenue North, Suite 221, Clearwater, Florida 33762. The Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996, as amended,
(without exhibits) is being delivered to shareholders simultaneously with this
Information Statement.
The following documents filed with the Commission by the Company are
hereby incorporated by reference into this Information Statement:
(1) The Company's Annual Report on Form 10-KSB, as most recently
amended, for the fiscal year ended December 31, 1996;
(2) The Company's Report on Form 10-QSB for the nine months ended
September 30, 1997; and
(3) Each of the Company's Current Reports on Form 8-K, as amended,
as filed since December 31, 1996; and
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Information Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies, supersedes or replaces
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Information
Statement.
OTHER MATTERS
The Board of Directors does not know of any other matters to be
brought before the meeting.
By Order of the Board of Directors
David S. Coia
Chairman of the Board
February 18, 1998
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Plan of Merger") made as of the
_____ day of February, 1998, by and between The Great American BackRub Store,
Inc., a New York corporation ("GAB"), and Darco International Corp., a
Delaware corporation ("Darco"), GAB and Darco being sometimes collectively
referred to as the "Constituent Corporations." Darco will be the surviving
corporation, sometimes hereinafter referred to as the "Surviving Corporation."
W I T N E S S E T H:
WHEREAS, GAB has authorized capital stock consisting of 20,000,000
shares of common stock, $.001 par value, of which 15,830,716 are issued and
outstanding ("GAB Common Stock"); and 15,000,000 shares of preferred stock,
$.001 par value of which 4,000,000 have been designated Series A Convertible
Preferred Stock, none of which are issued and outstanding; and
WHEREAS, Darco has authorized capital stock consisting of 25,000,000
shares of common stock, $.001 par value ("Darco Common Stock") of which 1,000
shares are outstanding and owned by GAB; and 25,000,000 shares of preferred
stock, $.001 par value of which 4,000,000 have been designated Series A
Convertible Preferred Stock, none of which are outstanding; and
WHEREAS, the Board of Directors of each of the Constituent
Corporations deems it advisable and to the advantage and welfare of their
respective Constituent Corporations and shareholders that GAB merge with and
into Darco, with Darco to be the Surviving Corporation, pursuant to the
provisions of Section 907 of the Business Corporation Law of the State of New
York (the "NYBCL") and Section 252 of the General Corporation Law of the State
of Delaware (the "DGCL");
NOW, THEREFORE, subject to the approval of this Plan of Merger by the
shareholders of GAB, the Constituent Corporations hereby agree as follows:
1. At the Effective Time, as hereinafter defined, GAB will be and it
hereby is merged with and into Darco (the "Merger").
2. This Plan of Merger will become effective immediately upon filing.
Such date and time is herein referred to as the "Effective Time."
3. This Plan of Merger constitutes a plan of merger pursuant to
Section 907 of the NYBCL and Section 252 of the DGCL, to be carried out in the
manner, on the terms and subject to the conditions herein set forth.
4. At the Effective Time, the separate existence of GAB will cease,
and Darco, as the surviving corporation of the Merger, will continue to exist
under and be governed by the laws of
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the State of Delaware. The name of the Surviving Corporation will remain Darco
International Corp.
5. At and after the Effective Time, the Surviving Corporation will
succeed to and possess, without further act or deed, all of the estate,
rights, privileges, powers, and franchises, both public and private, and all
of the property, real, personal and mixed, of the Constituent Corporations;
all debts due either of the Constituent Corporations will be vested in the
Surviving Corporation; all claims, demands, property, rights, privileges,
powers and franchises and every other interest of either of the Constituent
Corporations will be the property of the Surviving Corporation; the title to
any real property of either of the Constituent Corporations will not revert or
be in any way impaired by reason of the Merger, but will be vested in the
Surviving Corporation; all rights of creditors and all liens upon any property
of either of the Constituent Corporations will be preserved unimpaired,
limited in lien to the property affected by such lien at the Effective Time;
and all debts, liabilities and duties of the Constituent Corporations will
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if such debts, liabilities and duties had been incurred
or contracted by the Surviving Corporation.
6. At the Effective Time, each outstanding share of GAB Common Stock
shall by operation of law and without further action on the part of the former
holders, automatically be converted into and become the right to receive
one-fourth (1/4) shares of Darco Common Stock, validly issued, fully paid and
non-assessable subject to dissenting shareowner's rights under Sections 910
and 623 of the NYBCL, and each share of Darco Common Stock outstanding
immediately prior to the Effective Time shall be canceled and shall be
restored to the status of an authorized but unissued share of Darco Common
Stock.
7. The By-laws of Darco, as existing at the Effective Time, will
continue in force as the Bylaws of the Surviving Corporation until altered,
amended or repealed as provided therein or as provided by law.
8. The directors and officers of GAB immediately prior to the Merger,
will be the directors and officers of the Surviving Corporation, to hold
office until their respective successors have been elected and shall qualify,
or as otherwise provided in the By-Laws of the Surviving Corporation.
9. This Plan of Merger may be terminated and the Merger abandoned for
any reason whatsoever, by mutual consent of the Boards of Directors of the
Constituent Corporations, at any time prior to the Effective Time,
notwithstanding adoption and approval of this Plan of Merger by the
shareholders of the Constituent Corporations.
10. This Plan of Merger may be amended at any time prior to the
Effective Time by mutual consent of the Boards of Directors of the Constituent
Corporations; provided, however, that no such amendment shall adversely affect
the rights of the shareholders of GAB or Darco subsequent to the adoption and
approval of this Plan of Merger by the shareholders of GAB or Darco, as the
case may be.
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IN WITNESS WHEREOF, the foregoing Plan of Merger, which was duly
adopted by the Board of Directors of each of the Constituent Corporations, has
been executed by the chairman of the board and secretary of each of the
Constituent Corporations on and as of the date first set forth above.
THE GREAT AMERICAN BACKRUB STORE, INC.
a New York Corporation
By:_______________________________________
David S. Coia, Chairman
Attest:___________________________________
David L. West, Secretary
DARCO INTERNATIONAL CORP.
a Delaware Corporation
By:______________________________________
David S. Coia, Chairman
Attest:___________________________________
David L. West, Secretary
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APPENDIX B
EXCERPTS FROM NEW YORK BUSINESS CORPORATION LAW
623 PROCEDURE TO ENFORCE SHAREHOLDER'S RIGHT TO RECEIVE PAYMENT FOR
SHARES. -
(a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate
action referred to herein is taken shall file with the corporation,
before the meeting of shareholders at which the action is submitted
to a vote, or at such meeting but before the vote, written objection
to the action. The objection shall include a notice of his election
to dissent, his name and residence address, the number of shares as
to which he dissents and a demand for payment of the fair value of
his shares if the action is taken. Such objection is not required
from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed
action is authorized by written consent of shareholders without a
meeting.
(b) Within ten days after the shareholders' authorization date which
term as used in the section means the date on which the
shareholders' vote authorizing such action was taken, or the date on
which such consent without a meeting was obtained from the requisite
shareholders, the corporation shall five written notice of such
authorization or consent by registered mail to each shareholder who
filed written objection or from whom written objection was note
required, excepting any shareholder who voted for or consented in
writing to the proposed action and who thereby is deemed to have
elected not to enforce his right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any
shareholder from whom written objection was not required and who
elects to dissent shall file with the corporation a written notice
of such election, stating his name and residence address, the number
and classes of shares as to which he dissents and a demand for
payment of the fair value of his shares. Any shareholder who elects
to dissent from a merger under section 905 (Merger of subsidiary
corporation) or paragraph (c) of section 907 (Merger or
consolidation of domestic. and foreign corporations) or from a share
exchange under paragraph (g) of section 913 (Share exchanges) shall
file a written notice or such election to dissent within twenty days
after the giving to him of a copy of the plan of merger or exchange
or an outline of the material features thereof under section 905 or
913.
(d) A shareholder may not dissent as to less than all of the shares, as
to which he has a right to dissent, held by him of record, that he
owns beneficially. A nominee or fiduciary may not dissent on behalf
of any beneficial owner as to less than all of the shares of such
owner, as to which such nominee or fiduciary has a right to dissent,
held of record by such nominee or fiduciary.
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<PAGE>
(e) Upon consummation of the corporate action, the shareholder shall
cease to have any of the rights of a shareholder except the right to
be paid the fair value of his shares and any other rights under this
section. Notice of election may be withdrawn by the shareholder at
any time prior to his acceptance in writing of an offer made by the
corporation, as provided in paragraph (g), but in no case later than
sixty days from the date of consummation of the corporate action
except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of
election shall be extended until sixty days from the date an offer
is made. Upon expiration of such time, withdrawal of a notice of
election shall requires the written consent of the corporation. In
order to be effective, withdrawal of a notice of election shall
require the written consent of the corporation. On order to be
effective, withdrawal of a notice of election must be accompanied by
the return to the corporation of any advance payment made to the
shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall
determine that the shareholder is not entitled to receive payment
for his shares, or the shareholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment
for his shares and he shall be reinstated to all his rights as a
shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment
of any intervening dividend or other distribution or, if any such
rights have expired or any such dividend or distribution other than
in cash has been completed, in lieu thereof, at the election of the
corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without
prejudice otherwise to any corporate proceedings that may have been
taken in the interim.
(f) At the time of filing notice of election to dissent or within one
month thereafter the shareholder of shares represented by
certificates shall; submit the certificates representing his shares
to the corporation, or to its transfer agent, which shall forthwith
note conspicuously thereon that a notice of election has been filed
and shall return the certificates to the shareholder or other person
who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for
such motions as herein specified shall at the option of the
corporation exercised by written notice to him within forty-five
days from the date of filling of such notice of election to dissent,
lose his dissenter's rights unless a court., for good cause shown,
shall otherwise direct. Upon transfer of a certificate bearing such
notation, each new certificate issued therefor shall bear a similar
notation together with the name, of the original dissenting holder
of the shares and a transferee shall acquire no rights in the
corporation except those which the original dissenting shareholder
had at the time of the transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or
within fifteen days after the proposed corporate action is
consummated, whichever is later (but in no case later than ninety
days from the shareholders' authorization date), the corporation or,
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<PAGE>
in the case of a merger or consolidation, the surviving or new
corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his
shares at a specified price which the corporation considers to be
their fair value. Such offer shall be accompanied by a statement
setting forth the aggregate number of shares with respect to which
notices of election to dissent have been received and the aggregate
number of holders of such shares. If the corporate action has been
consummated, such offer shall also be accompanied by (1) advance
payment to each such shareholder who has submitted the certificates
representing his shares to the corporation, as provided in paragraph
(f), of an amount equal to eighty percent of the amount of such
offer, or (2) as to each shareholder who has not yet submitted his
certificates a statement that advance payment to him of an amount
equal to eighty percent of the amount of such offer will be made by
the corporation promptly upon submission of his certificates. If the
corporate action has not been consummated at the time of the making
of the offer, such advance payment or statement as to advance
payment shall be sent to each shareholder entitled thereto forthwith
upon consummation of the corporate action. Every advance payment or
statement as to advance payment shall include advice to the
shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate
action has not yet been consummated upon the expiration of the
ninety day period after the shareholders' authorization date, the
offer may be conditioned upon the consummation of such action. Such
offer shall be made at the same price per share to all dissenting
shareholders of the same class, or if divided into series, of the
same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the
latest available date, which shall not be earlier than twelve months
before the making of such offer, and a profit and loss statement or
statements for not less than a twelve month period ended on the date
of such balance sheet or, if the corporation was not in existence
throughout such twelve month period, for the portion thereof during
which it was in existence. Notwithstanding the foregoing, the
corporation shall not be required to furnish a balance sheet or
profit and loss statement or statements to any shareholder to whom
such balance sheer or profit and loss statement or statements were
previously furnished, nor if in connection with obtaining the
shareholders authorization for or consent to the proposed corporate
action the \shareholders were furnished with a proxy or information
statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and
Exchange Commission. If within thirty days after the making of such
offer, the corporation making the offer and any shareholder agree
upon the price to be paid for his shares, payment therefor shall be
made within sixty days after making of such offer, or the
consummation of the proposed corporate action, whichever is later,
upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the
offer and any dissenting
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shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon, the price to be paid for their
shares;
(1) The corporation shall, within twenty days after the expiration
of whichever is applicable of the two periods last mentioned,
institute a special proceeding in the supreme court in the
judicial district in which the office of the corporation is
located to determine the rights of dissenting shareholders and
to fix the fair value of their shares. If, in the case of
merger or consolidation, the surviving or new corporation is a
foreign corporation without an office in this state, such
proceeding shall be brought in the county where the office of
the domestic corporation, whose shares are to be valued, was
located.
(2) If the corporation fails to institute such proceeding within
such period of twenty days, any dissenting shareholder may
institute such proceeding for the same purpose not later than
thirty days after the expiration of such twenty day period. If
such proceeding is not instituted within such thirty day
period, all dissenter's rights shall be lost unless the supreme
court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided
in paragraph (g), have agreed with the corporation upon the
price to be paid for their shares, shall be made parties to
such proceeding, which shall have the effect of an action quasi
in rem against their shares. The corporation shall serve a copy
of the petition in such proceeding upon each dissenting
shareholder who is a resident if this sate in the manner
provided by law for the service of a summons, and upon each
nonresident dissenting shareholder either by registered mail
and publication, or any such other manner as is permitted by
law. The jurisdiction of the court shall be plenary and
exclusive.
(4) The court shall determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such
determination, is entitled to receive payment for his shares.
If the corporation odes not request any such determination or
if the court finds that any dissenting shareholder is so
entitled, it shall be the fair value as of the close of
business on the day prior to the shareholders' authorization
date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving rise to the
shareholder's right to receive payment for shares and its
effect on the corporation and its shareholders, the concepts
and methods then customary in the relevant securities and
financial markets for determining fair value of shares of a
corporation engaging in a similar transaction under comparable
circumstances and all other relevant factors. The court shall
determine the fair value of the shares without a jury and
without referral to an appraiser or referee. Upon application
by
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the corporation or by any shareholder who is a party to the
proceeding, the court may, in its discretion, permit pretrial
disclosure, including, but not limited to, disclosure of any
expert's reports relating to the fair value of the shares
whether or nor intend for use at the trial in the proceeding
and notwithstanding subdivisions (d) of section 3101 of the
civil practice law and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a
party to the proceeding and is entitled thereto for the value
of his shares so determined.
(6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the
corporate action was consummated to the date of payment. In
determining the rate of interest, the court shall consider all
relevant factors, including the rate of interest which the
corporation would have had to pay to borrow money during the
pendency of the proceeding. If the court finds that the refusal
of any shareholder to accept the corporate offer of payment for
his shares was arbitrary, vexatious or otherwise not in good
faith, no interest shall be allowed to him.
(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of
any experts employed by it. Notwithstanding the foregoing, the
court may, in its discretion, apportion and assess all or any
part of the costs, expenses and fees incurred by the
corporation against any or all of the dissenting shareholders
who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph
(e), if the court finds that their refusal to accept the
corporate offer was arbitrary, vexatious or otherwise not in
good faith. The court may, in its discretion, apportion and
assess all or any part of the costs,, expenses and fees
incurred by any or all of the dissenting shareholders who are
parties to the proceeding against the corporation if the court
finds any of the following: (A) that the fair value of the
shares as determined materially exceeds the amount which the
corporation offered to pay; (B) that no offer or required
advance payment was made by the corporation; (C that the
corporation failed to institute the special proceeding within
the period specified therefor; or (D) that the action of the
corporation complying with its obligations as provided in this
section was arbitrary, vexatious or otherwise not in good
faith. In making any determination s provided in clause (A),
the court may consider the dollar amount of the percentage, or
both, by which the fair value of the shares as determined
exceeds the corporate offer.
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(8) Within sixty days after the final determination of the
proceeding, the corporation shall pay to each dissenting
shareholder the amount found to be due him, upon surrender of
the certificate for any such shares represented by
certificates.
(i) Shares acquired by the corporation upon the payment of the agreed
value therefor or of the amount due under the final order, as
provided in this section, shall become treasury shares or be
canceled as provided in section 515 (Reacquired shares), except
that, in the case of a merger or consolidation, they may be held and
disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this
section at a time when the corporation is insolvent or when such
payment would make it insolvent. In such event, the dissenting
shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation;
or
(2) Retain his status as a claimant against the corporation and, if
it is liquidated, be subordinated to the rights of creditors of
the corporation, but have rights superior to the non-dissenting
shareholders, and if it is not liquidated, retain his right to
be paid for his shares, which right the corporation shall be
obliged to satisfy when the restrictions of this paragraph do
not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the
corporation within thirty days after the corporation has given
him written notice that payment for his shares cannot be made
because of the restrictions of this paragraph. If the
dissenting shareholder fails to exercise such options as
provided, the corporation shall exercise the option by written
notice given to him within twenty days after the expiration of
such period of thirty days.
(k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided in paragraph (e), and except that
this section shall not exclude the right of such shareholder to
bring or maintain an appropriate action to obtain relief on the
ground that such corporate action will be or is unlawful or
fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice
to be given by a corporation to a shareholder under this section
shall be given in the manner provided in section 605 (Notice of
meetings of shareholders).
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(m) This section shall not apply to foreign corporations except as
provided in sub-paragraph (e)(2) of section 907 (Merger or
consolidation of domestic and foreign corporations). (Last amended
by Ch. 117, L. '86, eff. 9-1-86.)
910 RIGHT OF SHAREHOLDER TO RECEIVE PAYMENT FOR SHARES UPON MERGER OR
CONSOLIDATION, OR SALE, LEASE, EXCHANGE OR OTHER DISPOSITION OF ASSETS, OR
SHARE EXCHANGE.
(a) A shareholder of a domestic corporation shall, subject to and by
complying with section 623 (Procedure to enforce shareholder's right
to receive payment for shares), have the right to receive payment of
the fair value of his shares and the other rights and benefits
provided by such section, in the following cases:
(1) Any shareholder entitled to vote who does not assent to the
taking of an action specified in subparagraphs (A), (B) and
(C).
(A) Any plan of merger or consolidation to which the
corporation is a party; except that the right to receive
payment of the fair value of his shares shall not be
available;
(i) To a shareholder of the 1 parent corporation I a
merger authorized by section 905 (Merger of parent
and subsidiary 2 corporations), or paragraph (c of
section 907 (Merger or consolidation of domestic and
foreign corporations); and
(ii) To a shareholder of the surviving corporation in a
merger authorized by this article, other than a
merger specified in subparagraph (i), unless such
merger effects one or more of the changes specified
in subparagraph (b)(6) of section 806 (Provisions as
to certain proceedings) in the rights of the shares
held by such shareholder.
(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which
requires shareholder approval under section 909 (Sale,
lease, exchange or other disposition of assets) other than
a transaction wholly for cash where the shareholders'
approval thereof is conditioned upon the dissolution of
the corporation and the distribution of substantially all
its net assets to the shareholders in accordance with
their distribution of substantially all its net assets to
the shareholders in accordance with their respective
interests within one year after the date of such
transaction.
(C) Any share exchange authorized by section 913 in which the
corporation is participating as a subject corporation;
except that the
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<PAGE>
right to receive payment of the fair value of his shares
shall not be available to shareholder whose shares have
not been acquired in the exchange.
(2) Any shareholder of the subsidiary corporation in a merger
authorized by section 905 or paragraph (c of section 907, or in
a share exchange authorized by paragraph (g) of section 913,
who files with the corporation a written notice of election to
dissent as provided in paragraph (c of section 623. (Last
amended by Ch. 390, L. '91, eff. 7-15-91.) CH. 390, L. '91,
eff. 7-15-91, added manner in italic and deleted 1 "surviving"
and 2 "corporation".
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