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Neu Industries, Inc. / Mercy Nutraceuticals, Inc.

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Neu/Mercy Reference

 

For a printable PDF version of the report below, with copies of the referenced letters, click here.

 

Forum Report: Neu Industries / Mercy

Defining Issues for Voting Decisions at Special Meeting

Asked to define issues that may be relevant to voting decisions about the proposals presented in a November 19, 2012 Proxy Statement for a December 5, 2012 special meeting of Neu Industries, Inc.,  the Shareholder Forum has found that the only issue we are able to address at this time is management’s failure to provide information prior to the meeting.

The company’s chief executive officer was presented on November 30, 2012 with a request for additional information, in a formal demand as well as in invitations of informal communication. In the absence of any response, the chairman of the company’s board of directors was sent a letter at 8:43amEST this morning recommending consideration of a postponement or adjournment of the meeting, since the company’s failure to provide relevant information would raise questions about the validity of any action taken.[*] (See the December 3, 2012 letter to Richard A. Kimball, Jr., which includes copies of the November 30, 2012 letter and emails to the company’s president.) As of 6:00pmEST today, there has been no response from the chairman, the president or any other representative of the company.

Under these circumstances, shareholders may wish to consider either withholding votes or abstaining for any or all of these reasons:

1.     The information provided in the Proxy Statement is not sufficient to determine whether a shareholder will benefit from the proposals, and no information has been provided that suggests a shareholder benefit from urgent rather than deliberate action.

2.    You have the right to demand information relevant to your voting decisions, and should insist upon management’s respecting that right.

3.   Voting to approve the proposed reincorporation now, in the context of management’s willful failure to provide information relevant to shareholder decisions, would create potentially crippling confusion about corporate authority relating not only to your own investment interests but to any kind of company agreement.

Your questions and comments will be welcomed. The Forum will of course be continuing its efforts to define the substantive issues relating to shareholder decisions about management’s proposed corporate restructuring, and will be posting reports on the private website established for Neu Industries shareholders: www.shareholderforum.com/mercy.

GL – December 3, 2012

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

 


[*] These were the reasons for recommending that the meeting be postponed or adjourned, as presented to the chairman of the company’s board:

Provision of relevant information – The Proxy Statement does not include information that is essential to understanding the proposed changes in the company, and in the rights of its shareholders. Not only does the Proxy Statement lack the usual comparisons of existing and proposed provisions to help investors easily identify what will be changed, but it does not even include the reference information that would allow a professional adviser to analyze what will change. For example, it is not possible to determine how the reincorporation would change the rights of either common or preferred shareholders since you provide copies of only the proposed new certificate of incorporation and bylaws without the existing ones – or even summaries of their provisions – for comparison.

Required responses to information requests – Having determined that the Proxy Statement did not provide the information needed to reasonably consider the proposals, I presented an initial request of additional information to Mr. Tomasino on November 30, sending the attached emails at 11:31am and 3:53pm with both the formal request and invitations of informal discussion. There has been no response of any kind to these communications or to the referenced telephone messages, either from Mr. Tomasino or from anyone else representing the company. I should note that some shareholders have also reported frustrations in their own efforts to obtain information the company is obligated to provide.

Explanation of diminished rights – The Proxy Statement failed to reasonably present changes that most shareholders would consider important. A troubling example is a provision discovered in a careful reading of Exhibit B (“Form of Bylaws of Mercy Nutraeuticals”) that would deprive shareholders of their right to call special meetings. It should be noted that this important shareholder right is clearly supported by the Delaware General Corporation Law that you have praised as the main reason for reincorporation, and is broadly considered a “best practice” by corporate governance experts. Eliminating this widely recognized benefit of the Delaware law requires a deliberate modification of conventional bylaws, and is clearly the intent of this statement found in your proposed new bylaws:

[Article I, paragraph 2.] Special Meetings. Special meetings of stockholders may be called by the Chief Executive Officer, if one is elected, or, if there is no Chief Executive Officer, a President, or by the Board, but such special meetings may not be called by any other person or persons….

Reasons for urgency – The rushed presentation and scheduling suggests that there may be some reason why the proposed reincorporation must be completed immediately. If so, you should certainly explain the reasons so that the company’s shareholders can weigh the benefits of a quick decision against the benefits of a fully informed decision.

 

 

Information requests and suggestions of issues that may be relevant to shareholder interests in Neu Industries, Inc., or its proposed successor Mercy Nutraceuticals, Inc., can be addressed to the Shareholder Forum at mercy@shareholderforum.com.

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