The Board of Directors believes that a decrease in the number of shares of
Common Stock outstanding without any material alteration of the proportionate
economic interest in the Company represented by individual shareholders may
increase the trading price of such shares to a price more appropriate for an
exchange-listed security, although no assurance can be given that the market
price of the Common Stock will rise in proportion to the reduction in the number
of outstanding shares resulting from the Reverse Stock Split.
Additionally, the Board of Directors believes that the current per share
price of the Common Stock may limit the effective marketability of the Common
Stock because of the reluctance of many brokerage firms and institutional
investors to recommend lower-priced stocks to their clients or to hold them in
their own portfolios. Certain policies and practices of the securities industry
may tend to discourage individual brokers within those firms from dealing in
lower-priced stocks. Some of those policies and practices involve time-consuming
procedures that make the handling of lower priced stocks economically
unattractive. The brokerage commission on a sale of lower-priced stock may also
represent a higher percentage of the sale price than the brokerage commission on
a higher priced issue. Any reduction in brokerage commissions resulting from the
Reverse Stock Split may be offset, however, in whole or in part, by increased
brokerage commissions required to be paid by stockholders selling "odd lots"
created by such Reverse Stock Split.
The Board of Directors believes that the decrease in the number of shares
of Common Stock outstanding as a consequence of the proposed Reverse Stock Split
and the resulting anticipated increased price level will encourage greater
interest in the Common Stock by the financial community and the investment
public and possibly promote greater liquidity for the Company's stockholders.
However, it is possible that such liquidity could be affected adversely by the
reduced number of shares outstanding after the Reverse Stock Split. Although
any increase in the market price of the new Common Stock resulting from the
Reverse Stock Split may be proportionately less than the decrease in the number
of shares outstanding, the proposed Reverse Stock Split could result in a market
price for the shares that would be high enough to overcome the reluctance,
policies and practices of brokerage houses and investors referred to above and
to diminish the adverse impact of correspondingly high trading commissions on
the market for the shares.
There can be no assurances, however, that the foregoing effects will occur
or that the market price of the new Common Stock immediately after
implementation of the proposed Reverse Stock Split will be maintained for any
period of time, or that such market price will approximate five times the market
price before the proposed Reverse Stock Split.
The par value of the Common Stock will remain at $0.25 per share following
the Reverse Stock Split, and the number of shares of Common Stock outstanding
will be reduced. As a consequence, the aggregate par value of the outstanding
Common Stock will be reduced, while the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and accounting
purposes will be correspondingly increased. Under Delaware law, the Board of
Directors of the Company will have the authority, subject to certain
limitations, to transfer some or all of such capital in excess of par value from
capital to surplus, which could be distributed to stockholders as dividends or
used by the Company to repurchase outstanding stock. The Company has no plans
to reduce capital at this time.
Subject to the approval of the Reverse Stock Split by the stockholders, the
Board of Directors of the Company has approved a new dividend policy in which
dividends of $0.035 per quarter ($0.14 per year) will be paid on each share of
the Company's Common Stock, after adjustment pursuant to the Reverse Stock
The Common Stock is listed for trading on the New York Stock Exchange. The
number of holders of the Common Stock on the Record Date was 12,648. The
Company does not currently anticipate that the Reverse Stock Split would result
in a reduction in the number of holders large enough to jeopardize continued
listing of the Common Stock on the New York Stock Exchange.