SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant n
Check the appropriate box:
X Preliminary Proxy Statement
n Definitive Proxy Statement
n Confidential for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2)
n Definitive Additional Materials
n Soliciting Material Pursuant to 14a-11(c) or Rule
14a-12
WEBCOR ELECTRONICS, INC.
(Name of Registrant as Specified in its Charter)
Capston Network, Co.
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
n $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-
6(i)(1) or 14a-6(i)(2)
n $500 for each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3)
n Fee computed per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1)Title of each class of securities to which
transaction applies:
(2)Aggregate number of securities to which
transaction applies:
(3)Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was
determined:
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:
n Fee paid previously with preliminary materials.
n Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and
identifying the filing for which the offsetting fee
was paid previously. Identify the previous filing by
registration statement number, or the Form or
Schedule and the date of its filing.
(1)Amount previously paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
Dear Fellow Stockholders;
You are cordially invited to attend a Special Meeting
of the Stockholders (the "Meeting") of WEBCOR ELECTRONICS,
INC., an inactive Delaware corporation ("Webcor" or the
"Company"). The Meeting will be held at 10:00 a.m. on
Tuesday, February 3, 1997, in the Barbados Room of the Adams
Mark Hotel, 430 S. Gulfview, Clearwater Beach, Florida.
Webcor has not engaged in any business activities since
filing a voluntary bankruptcy petition in February 1989. At
present, the Company has no assets, liabilities, management
or ongoing operations. As a result, your Webcor shares have
been worthless for several years. At the Meeting you will
be asked to approve a plan (the "Plan") proposed by Capston
Network Co. ("Capston"), a Stockholder of the Company
whereby the Company will be restructured as a "clean public
shell" for the purpose of effecting a business combination
transaction with a suitable privately-held company that has
both business history and operating assets. If this Plan is
successfully implemented, you should be able to salvage some
of the value that your Webcor shares once represented.
Nevertheless, Capston cannot go forward with the Plan
without first obtaining stockholder approval and if the Plan
is not approved, your Webcor shares will remain worthless.
Therefore it is critically important that you read the
enclosed Proxy Statement and promptly sign and return your
Proxy Card.
While the elements of the Plan will be presented to
Stockholders as separate proposals, the Plan is an
integrated whole and if all elements of the Plan are not
approved, Capston intends to abandon the Plan in its
entirety. The specific matters to be considered by the
Stockholders are:
1. To ratify the actions of Capston in (i) effecting a
renewal, revival and restoration of the Company's
Certificate of Incorporation; (ii) adopting amended by-
laws to govern the business affairs of the Company, and
(iii) filing the reports and other documents necessary
to bring the Company current with respect to its
reporting obligations under the Securities Exchange Act
of 1934;
2. To elect a person designated by Capston to serve as the
sole member of the Board of Directors until the 1998
annual Meeting of stockholders, or until her successor
is elected and qualified;
3. To consider and vote upon proposed a Amendment to the
Company's Certificate of Incorporation that will effect
a reverse split of all issued and outstanding shares of
Common Stock in the ratio of one (1) share of new Common
Stock for each 11.5879 shares presently outstanding so
that immediately thereafter the Company will have a
total of 300,000 shares issued and outstanding;
4. To consider and vote upon a proposal to issue 200,000
shares of Common Stock to persons designated by Capston
as compensation for services rendered in connection with
the implementation of the Plan;
5. Consider and vote upon a proposal that will give the
Board of Directors discretionary authority to (i) change
the Company's name and (ii) issue up to 4,500,000 shares
of Common Stock to unrelated third parties, all without
prior stockholder approval, in connection with a
business combination transaction of the type
contemplated by the Plan; and
6. To consider and vote upon a proposed Amendment to the
Company's Certificate of Incorporation that will
increase the authorized capital stock of the Company to
25,000,000 shares of $0.01 par value Common Stock and
5,000,000 shares of $0.01 par value Preferred Stock.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING
IN PERSON. HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, YOU ARE URGED TO PROMPTLY MARK, SIGN, DATE, AND
RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED, SELF-
ADDRESSED, STAMPED ENVELOPE SO THAT THE PRESENCE OF A QUORUM
MAY BE ASSURED AND YOUR SHARES OF STOCK MAY BE REPRESENTED
AND VOTED IN ACCORDANCE WITH YOUR DESIRES. A STOCKHOLDER may
revoke a proxy by delivering to CAPSTON A written notice of
revocation, delivering to CAPSTON a signed proxy of a later
date or appearing at the SPECIAL Meeting and voting in
person.
_______________________________
Capston Network Co.
Sally A. Fonner,
President
WEBCOR ELECTRONICS, INC.
1612 North Osceola Avenue
Clearwater, Florida 34615
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on February 3, 1997
Pursuant to 312(h) of the General Corporation Law of
Delaware, notice is hereby given that a Special Meeting of
the Stockholders of WEBCOR ELECTRONICS, INC., an inactive
Delaware corporation ("Webcor" or the "Company"), will be
held at 10:00 a.m. on Tuesday, February 3, 1997, in the
Barbados Room of the Adams Mark Hotel, 430 S. Gulfview,
Clearwater Beach, Florida, for the following purposes:
1. To ratify the actions of Capston Network Co. ("Capston")
in (i) effecting a renewal, revival and restoration of
the Company's Certificate of Incorporation; (ii)
adopting amended by-laws to govern the business affairs
of the Company, and (iii) filing the reports and other
documents necessary to bring the Company current with
respect to its reporting obligations under the
Securities Exchange Act of 1934;
2. To elect a person designated by Capston to serve as the
sole member of the Board of Directors until the 1998
annual Meeting of stockholders, or until her successor
is elected and qualified;
3. To consider and vote upon proposed a Amendment to the
Company's Certificate of Incorporation that will effect
a reverse split of all issued and outstanding shares of
Common Stock in the ratio of one (1) share of new Common
Stock for each 11.5879 shares presently outstanding so
that immediately thereafter the Company will have a
total of 300,000 shares issued and outstanding;
4. To consider and vote upon a proposal to issue 200,000
shares of Common Stock to persons designated by Capston
as compensation for services rendered in connection with
the implementation of the Plan;
5. Consider and vote upon a proposal that will give the
Board of Directors discretionary authority to (i) change
the Company's name and (ii) issue up to 4,500,000 shares
of Common Stock to unrelated third parties, all without
prior stockholder approval, in connection with a
business combination transaction of the type
contemplated by the Plan; and
6. To consider and vote upon a proposed Amendment to the
Company's Certificate of Incorporation that will
increase the authorized capital stock of the Company to
25,000,000 shares of $0.01 par value Common Stock and
5,000,000 shares of $0.01 par value Preferred Stock.
A record of stockholders has been taken as of the close
of business on December 31, 1996, and only those
stockholders of record on that date will be entitled to
notice of and to vote at the Meeting. A stockholders' list
will be available commencing January 3, 1997, and may be
inspected during normal business hours prior to the Meeting
at the offices of the Company, 1612 North Osceola Avenue,
Clearwater, Florida 34615.
If you do not expect to be present at the Meeting,
please sign and date the enclosed proxy and return it
promptly in the enclosed stamped envelope which has been
provided for your convenience. The prompt return of proxies
will ensure the presence of a quorum and save the expense of
further solicitation.
By Order of Capston
Network Co.
Sally A. Fonner,
President
Clearwater, Florida
January 13, 1997
PROXY STATEMENT
This proxy statement is being mailed to all known
Stockholders of WEBCOR ELECTRONICS, INC. ("Webcor" or the
"Company") commencing on or about January 14, 1997, in
connection with the solicitation by Capston Network, Co.
("Capston") of proxies to be voted at a Special Meeting of
Stockholders(the "Meeting") to be held in Clearwater Beach,
Florida on Tuesday, February 3, 1997, and at any adjournment
thereof. The Meeting has been called by Capston pursuant to
312(h) of the General Corporation Law of Delaware for the
purpose of considering a plan proposed by Capston (the
"Plan") whereby the Company will be restructured as a "clean
public shell" for the purpose of effecting a business
combination transaction with a suitable privately-held
company that has both business history and operating assets.
Proxies will be voted in accordance with the directions
specified thereon and otherwise in accordance with the
judgment of the persons designated as proxies. Any proxy on
which no direction is specified will be voted in favor of
all proposals. A Stockholder may revoke a proxy by
delivering to Capston written notice of revocation,
delivering to Capston a signed proxy of a later date or
appearing at the Meeting and voting in person.
As of December 31, 1996, there were issued, outstanding
and entitled to vote 3,476,370 shares of common stock of the
Company ("Common Stock"). Each share of Common Stock
entitles the holder to one vote on each matter presented for
consideration by the Stockholders. Under the Company's By-
laws, the presence, in person or by proxy, of shares
entitled to cast a combined total of 1,157,631 votes will
constitute a quorum.
Corporate Background Information
Webcor conducted an initial public offering of its
Common Stock in April of 1982 pursuant to a Form S-1
Registration Statement under the Securities Act of 1933 (the
"Securities Act") that was declared effective by order of
the Securities and Exchange Commission (the "SEC") on May 1,
1982. In connection with an application to list its Common
Stock on the AMS system, the Company also registered its
Common Stock pursuant to Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act"). The Company
remained current with respect to its reporting obligations
under the Exchange Act until 1989, when its last annual
report on Form 10-K was filed with the SEC.
After pursuing its business for several years, Webcor
filed a voluntary petition under Chapter 11 of the
Bankruptcy Act on February 1, 1989. This proceeding was
filed in with the U.S. Bankruptcy Court for the Eastern
District of New York and designated as Case # 89-10328. On
October 1, 1990, the Company's Chapter 11 case was
voluntarily converted to a case in Chapter 7 which resulted
in the orderly liquidation of all corporate assets and the
use of the proceeds to repay the Company's creditors. On
November 13, 1996 the Company's case under Chapter 7 was
closed by an order of the Court. As a result of the
Bankruptcy, the Company has no assets, liabilities,
management or ongoing operations and has not engaged in any
business activities since February 1989.
During the pendancy of the Bankruptcy, the management
of Webcor neglected to file franchise tax returns with and
pay the required franchise taxes to the State of Delaware.
As a result, the Company's corporate charter was revoked by
order of the Secretary of State of the State of Delaware on
March 1, 1991. Similarly, the management of Webcor
neglected to file with the SEC either (a) the regular
reports that are required of all companies that have
securities registered under the Exchange Act, or (b) a
certification on Form 15 terminating its registration under
the Exchange Act. As a result, the Company remained a
Registrant under the Exchange Act but was seriously
delinquent in its SEC reporting obligations. According to
the National Quotation Bureau, the last published quotation
for the Company's Common Stock was posted by Carr
Securities, Inc., one of the Company's market makers, on
October 15, 1996. At that time, the published quote was
$0.00 bid and $0.10 asked. There have been no published
quotations for the Company's Common Stock since October 15,
1996.
Acting in its capacity as a Stockholder of the Company,
and without first receiving any consent, approval or
authorization of any officer, director or other Stockholder
of the Company, Capston effected a renewal, revival and
restoration of the Company's certificate of incorporation
pursuant to Section 312 of the General Corporation Law of
the State of Delaware. In general, Section 312 provides that
any corporation may "procure an extension, restoration,
renewal or revival of its certificate of incorporation,
together with all the rights, franchises, privileges and
immunities and subject to all of its duties, debts and
liabilities which had been secured or imposed by its
original certificate of incorporation" upon compliance with
certain procedural requirements.
After reviewing the applicable files, Capston
determined that the only debt of the Company that was
"secured or imposed by its original certificate" was the
obligation of Webcor to pay its Delaware taxes. Therefore,
Capston paid all past due franchise taxes on behalf of the
Company and then filed a Certificate of Renewal, Revival,
Extension and Restoration of the Company's Certificate of
Incorporation on behalf of the Company under the authority
granted by Section 312(h). This Certificate was filed in the
office of the Secretary of State of the State of Delaware on
December 26, 1996 and at the date of this Proxy Statement
the Company is lawfully incorporated, validly existing and
in good standing under the laws of the State of Delaware.
Proposed Operations
While the Company has no assets, liabilities,
management or ongoing operations and has not engaged in any
business activities since February 1989, Capston believes
that it may be possible to recover some value for the
Stockholders through the adoption and implementation of a
Plan whereby the Company will be restructured as a "clean
public shell" for the purpose of effecting a business
combination transaction with a suitable privately-held
company that has both business history and operating assets.
Capston believes the Company will offer owners of a
suitable privately-held company the opportunity to acquire a
controlling ownership interest in a public company at
substantially less cost than would otherwise be required to
conduct an initial public offering. Nevertheless, Capston is
not aware of any empirical statistical data that would
independently confirm or quantify Capston's beliefs
concerning the perceived value of a merger or acquisition
transaction for the owners of a suitable privately-held
company. The owners of any existing business selected for a
business combination with the Company will incur significant
costs and expenses, including the costs of preparing the
required business combination agreements and related
documents, the costs of preparing the a Current Report on
Form 8-K describing the business combination transaction and
the costs of preparing the documentation associated with any
future reporting under the Exchange Act and registrations
under the Securities Act.
If the Plan is approved by the Stockholders, the
Company will be fully reactivated and then used as a
corporate vehicle to seek, investigate and, if the results
of such investigation warrant, effect a business combination
with a suitable privately-held company or other business
opportunity presented to it by persons or firms that seek
the perceived advantages of a publicly held corporation. The
business operations proposed in the Plan are sometimes
referred to as a "blind pool" because Stockholders will not
ordinarily have an opportunity to analyze the various
business opportunities presented to the Company, or to
approve or disapprove the terms of any business combination
transaction that may be negotiated by Capston on behalf of
the Company. Consequently, the Company's potential success
will be heavily dependent on the efforts and abilities of
Capston and its officers, directors and consultants, who
will have virtually unlimited discretion in searching for,
negotiating and entering into a business combination
transaction. Capston and its officers, directors and
consultants have had limited experience in the proposed
business of the Company. Although Capston believes that the
Company will be able to enter into a business combination
transaction within 12 months after the approval of the Plan
by the Stockholders, there can be no assurance as to how
much time will elapse before a business combination is
effected, if ever. The Company will not restrict its search
to any specific business, industry or geographical location,
and the Company may participate in a business venture of
virtually any kind or nature.
Capston and its officers, directors and consultants
anticipate that the selection of a business opportunity for
the Company will be complex and extremely risky. Because of
general economic conditions, rapid technological advances
being made in some industries, and shortages of available
capital, Capston believes that there are numerous privately-
held companies seeking the perceived benefits of a publicly
traded corporation. Such perceived benefits may include
facilitating debt financing or improving the terms on which
additional equity or may be sought, providing liquidity for
the principals of the business, creating a means for
providing incentive stock options or similar benefits to key
employees, providing liquidity for all stockholders and
other factors.
Potential business opportunities may occur in many
different industries and at various stages of development,
all of which will make the task of comparative investigation
and analysis of such business opportunities extremely
difficult and complex. Capston anticipates that the Company
will be able to participate in only one business venture.
This lack of diversification should be considered a
substantial risk inherent in the Plan because it will not
permit the Company to offset potential losses from one
venture against gains from another. Moreover, due to the
Company's lack of any meaningful financial, managerial or
other resources, Capston believes the Company will not be
viewed as a suitable business combination partner for either
developing companies or established business that are in
need of substantial additional capital.
Acquisition of Opportunities
In implementing a particular business combination
transaction, the Company may become a party to a merger,
consolidation, reorganization, joint venture, franchise or
licensing agreement with another corporation or entity. It
may also purchase stock or assets of an existing business.
After the consummation of a business combination
transaction, it is likely that the present Stockholders of
the Company will only own a small minority interest in the
combined companies. In addition, as part of the terms of the
acquisition transaction, all of the Company's officers and
directors will ordinarily resign and be replaced by new
officers and directors without a vote of the Stockholders.
Capston does not intend to obtain the approval of the
Stockholders prior to consummating any acquisition other
than a statutory merger that requires a Stockholder vote.
Capston and its officers, directors and consultants do not
intend to sell any shares held by them in connection with a
business acquisition.
It is anticipated that any securities issued in a
business combination transaction will be issued in reliance
on exemptions from registration under applicable Federal and
state securities laws. In some circumstances, however, as a
negotiated element of a business combination, the Company
may agree to register such securities either at the time the
transaction is consummated or at some specified time
thereafter. The issuance of substantial additional
securities and their potential sale into any trading market
that may develop may have a depressive effect on such
market. While the actual terms of a transaction to which the
Company may be a party cannot be predicted, it may be
expected that the parties to the business transaction will
find it desirable to avoid the creation of a taxable event
and thereby structure the acquisition in a so called "tax
free" reorganization under Sections 368(a)(1) or 351 of the
Internal Revenue Code of 1986, as amended (the "Code") In
order to obtain tax free treatment under the Code, it may be
necessary for the owners of the acquired business to own 80%
or more of the voting stock of the surviving entity. In such
event, the stockholders of the Company would retain less
than 20% of the issued and outstanding shares of the
combined companies, which could result in significant
dilution in the equity of such stockholders. The Company
intends to structure any business combination in such manner
as to minimize Federal and state tax consequences to the
Company and any target company.
As part of the Company's investigation of potential
business opportunities, Capston and its officers, directors
and consultants will ordinarily meet personally with
management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of
certain information provided, check reference of management
and key personnel, and take other reasonable investigative
measures, to the extent of the Company's limited resources
and Capston's limited expertise. The manner in which the
Company participates in an opportunity will depend on the
nature of the opportunity, the respective needs and desires
of the Company and other parties and the relative
negotiating strength of the Company and such other
management.
With respect to any business combination negotiations,
Capston will ordinarily focus on the percentage of the
Company which target company stockholders would acquire in
exchange for their ownership interest in the target company.
Depending upon, among other things, the target company's
assets and liabilities, the Company's stockholders will in
all likelihood only own a small minority interest in the
combined companies upon completion of the business
combination transaction. Any business combination effected
by the Company can be expected to have a significant
dilutive effect on the percentage of shares held by the
Company's current Stockholders.
Upon completion of a business combination transaction,
there can be no assurance that the combined companies will
have sufficient funds to undertake any significant
development, marketing and manufacturing activities.
Accordingly, the combined companies may be required to
either seek additional debt or equity financing or obtain
funding from third parties, in exchange for which the
combined companies might be required to issue a substantial
equity position. There is no assurance that the combined
companies will be able to obtain additional financing on
terms acceptable to the combined companies.
It is anticipated that the investigation of specific
business opportunities and the negotiation, drafting and
execution of relevant agreements, disclosure documents and
other instruments will require substantial management time
and attention and substantial costs for accountants,
attorneys and others. If a decision is made not to
participate in a specific business opportunity the costs
incurred in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached
for the participation in a specific business opportunity,
the failure to consummate that transaction may result in the
loss of the Company of the related costs incurred.
Exemption from Rule 419
As an existing Registrant under the Exchange Act, the
Company's proposed activities are not subject to SEC Rule
419 which was adopted to strengthen the regulation of "blind
pool" companies which Congress has found to have been common
vehicles for fraud and manipulation in the penny stock
market. The Company is not subject to Rule 419 because it is
not offering stock to the public in an offering registered
under the Securities Act. Accordingly, Stockholders are not
entitled to the substantive protection provided by Rule 419.
Fees to Capston and Others
Expense Reimbursement. No cash compensation has been
paid or accrued to Capston or any of its officers, director
or consultants to date. Under the Plan, Capston and its
officers, directors and consultants will be entitled to
reimbursement for the actual out-of-pocket expenses incurred
in connection with the reinstatement of the Company's
certificate of incorporation, the preparation and filing of
the Company's reports under the Exchange Act and the
negotiation of a business combination transaction, but they
will not be entitled to any cash compensation in connection
with services rendered prior to the closing of a business
combination. Moreover, any such reimbursement will be
subject to the express approval of the owners of the
business opportunity acquired by the Company.
Stock Issuance. Subject to Stockholder approval, the
Company intends file a Form S-8 Registration Statement under
the Securities Act to register 200,000 shares of Common
Stock that will be issuable to persons designated by Capston
as compensation for services rendered in connection with the
implementation of the Plan. Therefore, if Capston is
successful in arranging a business combination for the
Company, approximately forty percent (40%) of the net value
derived by the Company's Stockholders will vest in Capston
and its officers, directors and consultants and the
remaining sixty percent (60%) will inure to the benefit of
the existing Stockholders of the Company.
Finder's Fees. As is customary in the industry, the
Company may pay a finder's fees to unrelated third parties
who introduce the Company to a suitable acquisition
prospect. If any such fee is paid, it will be approved by
the Company's Board of Directors and will be in accordance
with the standards discussed below. Finder's fees are
customarily between 1% and 5% of the total transaction
value, based upon a sliding scale of the amount involved.
The traditional "Lehman Formula" for calculating finder's
fees is 5% of the first $1 million in transaction value,
plus 4% of the second $1 million, plus 3% of the third $1
million, plus 2% of the fourth $1 million plus 1% of any
transaction value in excess of $4 million. In Capston's
opinion, the traditional Lehman Formula finder's fee
minimizes the economic incentive of finder's who are
involved in larger transactions. Therefore, if the Plan is
approved by Stockholders, Capston intends to offer a
"reversed stretched Lehman fee" to unrelated third party
finders who introduce the Company to a suitable acquisition
prospect. Under the reversed stretched Lehman formula
proposed by Capston, the finder will receive 1% of the first
$2 million in transaction value, 2% of the second $2 million
in transaction value, 3% of the third $2 million in
transaction value, 4% of the fourth $2 million in
transaction value and 5% of any transaction value in excess
of $8 million. Since the Company does not have sufficient
financial resources to pay such a finder's fee in cash, it
is anticipated that any finder's fees will be paid with
shares of the Company's Common Stock which may be registered
under the Securities Act prior to issuance. Notwithstanding
the foregoing, no finder's fees will be paid to Capston or
any of its officers, directors, employees, agents or
affiliates without the prior consent of the Stockholders.
RISK FACTORS
The Plan proposed by Capston involves a high degree of
risk. Stockholders should carefully consider the following
factors, among others, before executing the form of Proxy
enclosed herewith.
No Recent Operating History. The Company has no assets,
liabilities, management or ongoing operations and has not
engaged in any business activities since February 1989. Even
if the Capston Plan is approved by the Stockholders, the
Company will be subject to all of the risks inherent in the
commencement of a new business enterprise with new
management. There can be no assurance that the Company will
be able to acquire an operating business or that such
business if acquired, will prove to be profitable. Although
Capston and its officers, directors and consultants have had
experience with respect to business acquisitions, the
Company has no recent operating history to aid stockholders
in making an informed judgment regarding the merits of the
Plan. As of the date of this Proxy Statement, Capston has
not entered into any arrangement for, nor is it presently
negotiating with respect to, an acquisition of any operating
business.
No Specific Acquisition Plans. The Company intends to
engage as soon as is reasonably possible, in the search for
and evaluation of potential acquisition opportunities, but
it will not engage in the business of investing,
reinvesting, owning, holding, or trading securities. Capston
has made no specific acquisition plans and no specific
industry or area of business has been selected for
investment. There is no assurance Capston and its officers,
directors and consultants will possess the experience and
skills necessary to make an informed judgment about any
business or industry that may be chosen. Accordingly, the
nature of the Plan involves an extremely high degree of risk
and the Common Stock is not a suitable investment for anyone
who cannot afford the loss of his entire investment.
Blind Pool. Inasmuch as Capston has not contemplated
the acquisition of any specific operating business, the
Company's proposed business will, in fact, be a Blind Pool
over which Stockholders will have no control. It is
anticipated that under most circumstances stockholders will
not be afforded the opportunity to pass upon the merits of
any business opportunity that the Company may ultimately
acquire and, therefore, Stockholders must rely upon the
abilities of Capston and its officers, directors and
consultants.
Limited Assets of the Company. As of the date of this
Proxy Statement, the Company has no substantial assets and
it is not anticipated that the Company will acquire any
substantial assets other than the assets of any business
opportunity it may acquire. Any business activity the
Company may eventually undertake will require substantial
capital. Since the Company does not know which type of
business it will acquire or the capital requirements for
such business, there can be no representations respecting
the future capital needs of the Company.
Potential Need for Additional Financing. Capston
intends to advance funds from time to time to help defray
the Company's operating costs, including the cost of
professionals retained by the Company, costs associated with
complying with filing requirements of the SEC and costs
associated with investigating and evaluating proposed
acquisitions. These advances will be recorded as liabilities
on the books of the Company and will be reimbursed to
Capston upon successful completion of a business combination
transaction. There is no assurance that Capston will have
sufficient resources to advance all required expenses and if
Capston's resources are insufficient, the Company may be
required to seek capital. No assurance can be given that the
Company will be able to obtain additional capital or, that
any funds will be available on terms acceptable to the
Company.
Intense Competition. The Company is and will continue
to be an insignificant participant in the business of
seeking business opportunities. A large number of
established and well-financed entities, including venture
capital firms, have recently increased their merger and
acquisition activities, especially among companies active in
high technology fields. Nearly all such entities have
significantly greater financial resources, technical
expertise and managerial capabilities than the Company and,
consequently, the Company will be at a competitive
disadvantage in identifying suitable acquisition candidates
and concluding a business combination transaction.
Dependence on Part-Time Management. The Company has no
employees as of the date hereof. Accordingly, the Company's
success will be largely dependent on the decisions made by
Capston and its officers, directors and consultants, none of
whom will devote their full time to the affairs of the
Company.
Experience of Capston. Although Capston and its
officers, directors and consultants have general business,
finance and acquisition experience, Stockholders should be
aware that Capston and its officers, directors and
consultants are not expected to have any significant
experience in operating such business as the Company might
choose to acquire. Accordingly, the Company will be required
to obtain outside professionals to assist them initially in
assessing the merits and risks of any proposed acquisition
and thereafter in operating any acquired business. No
assurance can be made that the Company will be able to
obtain such assistance on terms acceptable to the Company.
No Assurance of Acquisition of Operating Entity.
Although the Company proposes to combine with an existing,
privately held business which may or may not be profitable
but which is believed to have profitable growth potential
(irrespective of the industry in which such company engages)
and although Capston has received inquires from several
companies seeking to combine with publicly held "shells"
and/or blind pools, neither the Company nor Capston has
solicited any proposals regarding the Company's combination
with another business. There are no assurances that Capston
and its officers, directors and consultants will be able to
locate a suitable combination partner or that a combination
can be structured on terms acceptable to the Company.
Control of Combination Procedure by Capston. A
combination of the Company with another entity may be
structured as a merger or consolidation or involve the
direct issuance of the Company's Common Stock in exchange
for the other company's stock or assets. The General
Corporation Law of Delaware requires the affirmative vote of
the holders of at least a majority of the outstanding shares
of a Delaware corporation's capital stock to approve a
merger or consolidation, except in certain situations in
which no vote of the stockholders is necessary. Since
stockholder approval is not required in connection with the
issuance of stock in exchange for stock or assets and since
the Plan will specifically authorize the issuance of up to
4,500,000 shares of Common Stock, without prior Stockholder
approval, in connection with a business combination
transaction, it is anticipated that Capston will have
complete control over the Company's combination policies and
procedures.
Dilution Resulting from Combination. It is anticipated
that any entity which satisfies the Company's combination
suitability standards will possess assets and other indicia
of value substantially greater than those of the Company.
Consequently, any combination will almost certainly result
in a substantial dilution in the percentage of equity
ownership and voting power of holders of the Company's
Common Stock as stockholders of the combined enterprise. In
the aggregate, holders of the Company's Common Stock will
probably own a small minority percentage of the combined
enterprise's voting securities, with a concomitant reduction
in their power to elect directors and otherwise to influence
management policy.
Likely Change in Control. The successful completion of
a merger or acquisition will likely result in a change of
control resulting from the issuance of a large number of
shares of the Company's authorized and unissued Common
Stock. Any such change in control is also likely to result
in the resignation or removal of the Company's present
Officers and Directors. In such an event, no assurance can
be given as to the experience or qualification of such
persons either in the operation of the Company's activities
or in the operation of the business, assets or property
being acquired, although it is likely that successor
management will have greater experience in the business of
the combined companies than Capston and its advisors.
No Market Research. The Company has neither conducted
nor have others made available to it results of market
research concerning the availability of potential business
opportunities. Therefore, Capston and its advisors can offer
no assurances that market demand exists for an acquisition
or merger as contemplated by the Company. Capston and its
advisors have not identified any particular industry or
specific business within an industry for evaluation by the
Company. There is no assurance the Company will be able to
acquire a business opportunity on favorable terms
Lack of Diversification. In the event the Capston and
its advisors are successful in identifying and evaluating a
suitable business opportunity, the Company will in all
likelihood be required to issue its Common Stock in an
acquisition or merger transaction. Inasmuch as the Company's
cash is limited and the issuance of additional Common Stock
will result in a dilution of interest for present
stockholders, it is unlikely the Company will be capable of
negotiating more than one acquisition or merger.
Consequently, the Company's lack of diversification may
subject it to economic fluctuation within a particular
industry in which an acquired enterprise conducts business.
Potential Conflicts of Interest. Capston and its
advisors are all engaged full-time in other business
activities, some of which may be competitive with the
proposed business activities of the Company. In particular,
Capston's principal business involves the restructuring of
defunct public companies as clean public shells for the
purpose of effecting business combination with a suitable
operating companies. To the extent that Capston and its
advisors have fiduciary duties to such other business
activities, possible conflicts of interest may arise or may
appear to exist in respect to the possible diversion of
corporate opportunities to other entities with which they
are or may become associated. No assurance can be given that
any such potential conflicts of interest will not cause the
Company to lose potential opportunities.
No Market Maker. The Company's securities may be quoted
on NASD's Electronic Bulletin Board which reports quotations
by brokers or dealers making a market in particular
securities. The Company has no agreement with any broker or
dealer to act as a market maker for the Company's securities
and there is no assurance Capston and its advisors will be
successful in obtaining a market maker.
No Assurance of Public Market. Prior to this Proxy
Statement, there has been no public market for the Common
Stock and there is no assurance that a public market will
ever develop. If a trading market does in fact develop for
the Common Stock, there is a possibility that it will not be
sustained and Stockholders may have difficulty in selling
their Common Stock in the future at any price.
Possible Issuance of Additional Shares. If the Plan is
approved by the Stockholders, the Company's Certificate of
Incorporation will authorize the issuance of 25,000,000
shares of Common Stock and 5,000,000 shares of Preferred
Stock. Any Preferred Stock that is subsequently issued by
the Company may be subject to conversion into Common Stock
on terms approved by the Board of Directors. If the Plan is
approved by the Stockholders, approximately 98% of the
Company's authorized shares of Common Stock will remain
unissued. The Plan specifically contemplates the issuance of
up to 4,500,000 shares of Common Stock to unrelated third
parties in connection with a business combination
transaction. Moreover, after completion of a business
combination, the Board of Directors of the combined
companies will have the power to issue additional shares of
Common Stock without stockholder approval. Although the
Company currently has no commitments, contracts or
intentions to issue any additional shares, Stockholders
should be aware that any such issuance may result in a
reduction of the book value or market price, if any, of the
outstanding shares of Common Stock. If the Company issues
additional shares, such issuances will also cause a
reduction in the proportionate ownership and voting power of
all other Stockholders. Further, any new issuance of shares
of Common Stock may result in a change of control of the
Company. If any acquisition resulted in a change of control,
there can be no assurance as to the experience or
qualifications of those new persons involved in either the
management of the Company or of the business being acquired.
In that event, future operations of the Company and the
payment of dividends, if any, would be wholly dependent upon
such persons.
No Assurance of Dividends. The Company has not paid any
dividends upon its Common Stock, and by reason of its
present financial status and its contemplated financial
requirements, does not contemplate paying any dividends in
the foreseeable future.
RATIFICATION OF REINSTATEMENT, BY-LAWS AND SEC FILINGS
Acting in its capacity as a Stockholder of the Company,
and without first receiving any consent, approval or
authorization of any officer, director or other Stockholder
of the Company, Capston effected a renewal, revival and
restoration of the Company's certificate of incorporation
pursuant to Section 312 of the General Corporation Law of
the State of Delaware. In general, Section 312 provides that
any corporation may "procure an extension, restoration,
renewal or revival of its certificate of incorporation,
together with all the rights, franchises, privileges and
immunities and subject to all of its duties, debts and
liabilities which had been secured or imposed by its
original certificate of incorporation" upon compliance with
certain procedural requirements.
After reviewing the applicable files, Capston
determined that the only debt of the Company that was
"secured or imposed by its original certificate" was the
obligation of Webcor to pay its Delaware taxes. Therefore,
Capston paid all past due franchise taxes on behalf of the
Company and then filed a Certificate of Renewal, Revival,
Extension and Restoration of the Company's Certificate of
Incorporation on behalf of the Company. This Certificate was
filed in the office of the Secretary of State of the State
of Delaware on December 26, 1996 and at the date of this
Proxy Statement the Company is lawfully incorporated,
validly existing and in good standing under the laws of the
State of Delaware.
In connection with the reinstatement of the Company's
Charter, Capston adopted amended by-laws for the conduct of
the Company's business, subject to the approval and
ratification of the Stockholders. Under the amended by-laws
adopted by Capston, the presence, in person or by proxy, of
one-third (1/3) of the total number of shares entitled to
vote at the Meeting will constitute a quorum.
Acting in its capacity as a Stockholder of the Company,
and without first receiving any consent, approval or
authorization of any officer, director or other Stockholder
of the Company, Capston filed with the SEC an omnibus Annual
Report on Form 10-K for the fiscal years ended March 31,
1988. In connection therewith, Capston advanced all of the
costs and expenses associated with the preparation of
audited financial statements for the Company, together with
all of the filing fees due to the SEC. As a result of these
actions, the Company has been brought current with respect
to its reporting obligations under the Exchange Act and is
once again in compliance with applicable SEC regulations
respecting reporting.
Stockholders Entitled to Vote and Vote Required.
Reinstatement of Charter. Since the actions of Capston
in effecting a renewal, revival and restoration of the
Company's certificate of incorporation were not previously
authorized by the Company's Officers, Directors or
Stockholders, it is necessary for the Stockholders to ratify
and adopt such actions by a majority vote The affirmative
vote of the holders of a majority of all shares of Common
Stock entitled to vote and represented in person or by proxy
at the Meeting is required to ratify Capston's Reinstatement
of the Company's Charter. In conformity with Article II,
Section 11 of the Company's amended by-laws, the failure to
appear in person or by proxy and vote on matters presented
to the Meeting will be treated as a vote FOR all proposals
unless the holders of least 10% of the Company's outstanding
Common Stock appear in person or by proxy and vote AGAINST
the proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
Adoption of By-laws. Since the actions of Capston in
adopting new by-laws for the Company were not previously
authorized by the Company's Officers, Directors or
Stockholders, it is necessary for the Stockholders to ratify
and adopt such actions by a majority vote The affirmative
vote of the holders of a majority of all shares of Common
Stock entitled to vote and represented in person or by proxy
at the Meeting is required to ratify Capston's adoption of
new by-laws for the Company In conformity with Article II,
Section 11 of the Company's amended by-laws, the failure to
appear in person or by proxy and vote on matters presented
to the Meeting will be treated as a vote FOR all proposals
unless the holders of least 10% of the Company's outstanding
Common Stock appear in person or by proxy and vote AGAINST
the proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
Filing of SEC Reports. Since the actions of Capston in
preparing and filing an omnibus Annual Report on From 10-K
for the fiscal years ended March 31, 1988 were not
previously authorized by the Company's Board of Directors or
Stockholders, it is necessary for the Stockholders to ratify
and adopt such actions by a majority vote. The affirmative
vote of the holders of a majority of all shares of Common
Stock entitled to vote and represented in person or by proxy
at the Meeting is required to ratify Capston's filing of an
omnibus Annual Report on From 10-K for the fiscal years
ended March 31, 1988. In conformity with Article II, Section
11 of the Company's amended by-laws, the failure to appear
in person or by proxy and vote on matters presented to the
Meeting will be treated as a vote FOR all proposals unless
the holders of least 10% of the Company's outstanding Common
Stock appear in person or by proxy and vote AGAINST the
proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE EACH OF THE
FOREGOING PROPOSALS. THE PROXY ENCLOSED HEREWITH WILL BE
VOTED FOR EACH PROPOSAL UNLESS THE STOCKHOLDER SPECIFICALLY
VOTES AGAINST ONE OR MORE PROPOSAL OR EXPRESSLY ABSTAINS
FROM VOTING. SINCE CAPSTON HAS PROPOSED THE PLAN AS AN
INTEGRATED WHOLE, CAPSTON INTENDS TO ABANDON THE PLAN IN ITS
ENTIRETY IF ALL ELEMENTS OF THE PLAN ARE NOT APPROVED BY THE
STOCKHOLDERS.
ELECTION OF DIRECTORS
The by-laws of the Company provide that the Company
shall have not less than one (1) nor more than nine (9)
Directors, the exact number to be fixed by the Board of
Directors from time to time. Since Capston only effected a
renewal, revival and restoration of the Company's
certificate of incorporation in December of 1996, there are
presently no members of the Board of Directors and it will
be necessary to appoint at least one person to serve as a
director of the Company to serve, subject to the provisions
of the by-laws of the Company, until the 1998 annual Meeting
of the Stockholders, and until the election and
qualification of a successor board of directors. Capston's
sole nominee for membership on the Board of Directors is Ms.
Sally A. Fonner, the principal stockholder and president of
Capston. A brief account of Ms. Fonner's business experience
and education follows:
Ms. Sally A. Fonner, age 48, has been an independently
employed business consultant for most of the past fifteen
years. She graduated from Stephens University in 1969 with a
Bachelor of Arts Degree in Social Systems. After a stint in
the private sector, Ms. Fonner returned to further her
education and obtained her MBA Degree from the Executive
Program of the University of Illinois in 1979. In many of
her assignments as a business consultant, she is frequently
engaged in dealings which involve financiers and large
monetary transactions. Currently, Ms. Fonner has been
engaged for the last two years in the complex area of
financing rehabilitation providers.
Board and Committee Activity, Structure and
Compensation. As Capston's representative, Ms. Fonner will
receive no compensation for serving on the Board of
Directors, although she will likely be allocated a
substantial portion of the 200,000 compensation shares
provided for in the Plan. After the completion of a business
combination transaction, directors who are not a salaried
employees of the Company will likely receive a cash stipend
for attending Meetings of the Board, together with
reimbursement for expenses incurred in connection with
attending each such Meeting. The Company does not currently
have any standing committees; however, it is expected that
the Board will likely designate an Executive Committee, a
Compensation Committee and an Audit Committee after the
completion of a business combination transaction.
Stockholders Entitled to Vote and Vote Required.
Directors will be elected by a plurality of the votes
cast by the holders of all shares of Common Stock entitled
to vote at the Meeting. Abstentions and broker non-votes
will be disregarded in the tabulation of votes for the
election of Directors.
CAPSTON ASKS ALL STOCKHOLDERS TO VOTE FOR THE ELECTION OF
MS. FONNER TO SERVE AS THE SOLE DIRECTOR OF THE COMPANY
UNTIL THE 1998 ANNUAL MEETING OF STOCKHOLDERS. THE PROXY
ENCLOSED HEREWITH WILL BE VOTED FOR EACH PROPOSAL UNLESS THE
STOCKHOLDER SPECIFICALLY VOTES AGAINST ONE OR MORE PROPOSALS
OR EXPRESSLY ABSTAINS FROM VOTING. SINCE CAPSTON HAS
PROPOSED THE PLAN AS AN INTEGRATED WHOLE, CAPSTON INTENDS TO
ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE PLAN
ARE NOT APPROVED BY THE STOCKHOLDERS.
PROPOSED REVERSE SPLIT
At the date of this Proxy Statement, the Company has an
aggregate of 3,476,370 shares of Common Stock issued and
outstanding. Since (i) Capston believes that the owners of a
suitable target company will ordinarily want to control
between 80% and 90% of the Company's Common Stock upon the
completion of a business combination transaction, and (ii)
Capston believes an ultimate capitalization in the 2,500,000
to 5,000,000 share range is ideal for a small public
Company, Capston believes that it will be in the best
interest of the Company and its Stockholders to reduce the
number of outstanding shares to approximately 300,000 shares
by means of a reverse split. Capston believes such action
will optimize the number of shares issued and outstanding
after a business combination transaction, result in a higher
reported market price for the Common Stock of the combined
companies, and reduce the market volatility of the Common
Stock of the combined companies. These changes, in turn, are
expected to enhance the overall perception of the Common
Stock among institutional investors and larger brokerage
firms. These goals, if achieved, are expected to enhance the
Company's ability to raise additional equity capital, and
attract new market makers and institutional stockholders.
Capston believes that the proposed reverse split will
be beneficial to the Company by significantly reducing the
number of issued and outstanding shares of Common Stock,
reducing the expected level of price volatility, and
otherwise stabilizing the anticipated market price of the
Common Stock. Capston also believes the proposed reverse
split would increase the Company's posture and relative
worth of its shares in the eyes of the investment community,
although there is a risk that the market may not adjust the
price of the Company's Common Stock by the ratio of a
reverse split. Capston is aware of instances where only
modest price appreciation per share has resulted from a
reverse stock split. Trading in the Common Stock thereafter
will be at prices determined by supply and demand and
prevailing market conditions, which will not necessarily
result in the Common Stock of the Company maintaining a
market price in proportion to the reverse split effected.
The Common Stock is currently registered under Section
12(g) of the Exchange Act, and as a result, the Company is
subject to the periodic reporting and other requirements of
the Act. The proposed reverse split will not effect the
registration of the Common Stock under the Act, and the
Company has no present intention of terminating its
registration under the Act in order to become a "private"
company.
Other than the decrease in the total shares to be
outstanding, no substantive changes are being made in the
rights of Common Stock. Accordingly, upon the Effective Date
of a reverse split, each holder of record of new shares
would be entitled to one vote for each new share held at
each Meeting of the Stockholders in respect to any matter on
which Stockholders have the right to vote. Stockholders have
no cumulative voting rights, nor will they have the
preemptive right to purchase any additional shares of Common
Stock. Holders would be entitled to receive, when and as
declared by the Company's Board of Directors, out of
earnings and surplus legally available therefor, any
dividends payable either in cash, in property or in shares
of the capital stock of the Company.
No fractional new shares will be issued. Each holder of
less than 11.5879 shares, after exchange of all other old
shares held by the holder, will be issued one (1) new share
in exchange for such remaining old shares.
As soon as practical after the Effective Date of a
reverse split, the Company will mail letters of transmittal
to each holder of record of a stock certificate or
certificates which represents issued shares of Common Stock
outstanding on the Effective Date. The letter of transmittal
will contain instructions for the surrender of such
certificate or certificates to the Company's transfer agent
in exchange for the certificates representing the number of
whole shares of new Common Stock into which the shares of
Common Stock have been converted as a result of a reverse
split. No payment will be made or new certificate issued to
a stockholder until he has surrendered his outstanding
certificates together with the letter of transmittal to the
Company's transfer agent.
Stockholders Entitled to Vote and Vote Required.
The affirmative vote of the holders of a majority of
all shares of Common Stock entitled to vote and represented
in person or by proxy at the Meeting will be required to
approve the proposed reverse split. Stockholders have no
right under Delaware law or the Certificate of Incorporation
to dissent from a reverse split In conformity with Article
II, Section 11 of the Company's amended by-laws, the failure
to appear in person or by proxy and vote on matters
presented to the Meeting will be treated as a vote FOR all
proposals unless the holders of least 10% of the Company's
outstanding Common Stock appear in person or by proxy and
vote AGAINST the proposal. Executed proxies that are marked
"Abstain" and broker non-votes will be counted as votes
against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
REVERSE SPLIT. THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN
FAVOR OF THE PROPOSED REVERSE SPLIT UNLESS THE STOCKHOLDER
SPECIFICALLY VOTES AGAINST THE PROPOSAL OR EXPRESSLY
ABSTAINS FROM VOTING. SINCE CAPSTON HAS PROPOSED THE PLAN AS
AN INTEGRATED WHOLE, CAPSTON INTENDS TO ABANDON THE PLAN IN
ITS ENTIRETY IF ALL ELEMENTS OF THE PLAN ARE NOT APPROVED BY
THE STOCKHOLDERS.
ISSUANCE OF COMPENSATION SHARES
As part of the Plan, Capston proposes to issue a total
of 200,000 shares of Common Stock ("Compensation Shares") to
individuals designated by Capston as compensation for
services rendered in connection with the implementation of
the Plan. The purpose of this proposed grant of Compensation
Shares is to increase the personal stake of the Grantees in
the Company since the Company's long-term business
objectives will be dependent in large part upon their
efforts, expertise and abilities.
Subject to Stockholder approval, the Company intends
file a Form S-8 Registration Statement to register the
200,000 Compensation Shares under the Securities Act.
Thereafter, the Compensation Shares will be issued from time
to time to individuals designated by Capston who have
materially participated in the implementation of the Plan.
Such shares will not, however, be issued to finders or for
services rendered in a capital raising transaction. If
Capston is successful in arranging a business combination
for the Company, approximately forty percent (40%) of the
net value derived by the Company's Stockholders will vest in
Capston and its officers, directors and consultants and the
remaining sixty percent (60%) will inure to the benefit of
the existing Stockholders of the Company.
A Grantee will recognize income for federal tax
purposes at the time the Compensation Shares are issued. In
general, the amount of ordinary income recognized by a
Grantee will equal the fair market value of the Compensation
Shares on the date of grant. Gain or loss (if any) from a
disposition of Compensation Shares after the Grantee
recognizes ordinary income will generally constitute short
or long-term capital gain or loss. The Company will be
entitled to a tax deduction at the time the Grantee
recognizes ordinary income on the Compensation Shares.
Stockholders Entitled to Vote and Vote Required.
The affirmative vote of the holders of a majority of
all shares of Common Stock entitled to vote and represented
in person or by proxy at the Meeting will be required to
approve the proposed issuance of 200,000 Compensation Shares
to persons designated by Capston. In conformity with Article
II, Section 11 of the Company's amended by-laws, the failure
to appear in person or by proxy and vote on matters
presented to the Meeting will be treated as a vote FOR all
proposals unless the holders of least 10% of the Company's
outstanding Common Stock appear in person or by proxy and
vote AGAINST the proposal. Executed proxies that are marked
"Abstain" and broker non-votes will be counted as votes
against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
ISSUANCE OF 200,000 COMPENSATION SHARES. THE PROXY ENCLOSED
HEREWITH WILL BE VOTED IN FAVOR OF THE PROPOSED ISSUANCE OF
COMPENSATION SHARES UNLESS THE STOCKHOLDER SPECIFICALLY
VOTES AGAINST THE PROPOSAL OR EXPRESSLY ABSTAINS FROM
VOTING. SINCE CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED
WHOLE, CAPSTON INTENDS TO ABANDON THE PLAN IN ITS ENTIRETY
IF ALL ELEMENTS OF THE PLAN ARE NOT APPROVED BY THE
STOCKHOLDERS.
APPROVAL OF FINDER'S FEE FORMULA
As is customary in the industry, the Plan contemplates
the payment of finder's fees to unrelated third parties who
introduce the Company to a suitable acquisition prospect. If
any such fee is paid, it will be approved by the Company's
Board of Directors and will be in accordance with the
standards discussed below.
Finder's fees are customarily between 1% and 5% of the
total transaction value, based upon a sliding scale of the
amount involved. The traditional "Lehman Formula" for
calculating finder's fees is 5% of the first $1 million in
transaction value, plus 4% of the second $1 million, plus 3%
of the third $1 million, plus 2% of the fourth $1 million
plus 1% of any transaction value in excess of $4 million. In
Capston's opinion, however, the traditional Lehman Formula
finder's fee minimizes the economic incentive of finder's
who are involved in larger transactions.
In Capston's opinion, the Company and its Stockholders
will be better served by accepting a relatively small
percentage interest in a relatively large transaction, as
opposed to requiring a relatively large percentage interest
in a relatively small transaction. The reasons for this
belief are numerous. First, Capston believes that the
ongoing costs and expenses associated with reporting under
the Exchange Act can be a significant burden for a small
company. Second, Capston believes that relatively large
companies are more likely to thrive and prosper than smaller
companies. Third, Capston believes that relatively large
companies are better suited to shell transactions than small
companies. Finally, Capston believes that a relatively large
company will be required to satisfy the minimum entry
standards for the NASDAQ Stock Market and the Regional and
National Stock Exchanges. For example, the following table
outlines the newly-adopted Entry Standards for companies
that wish to have their securities listed in the NASDAQ
SamllCap Market:
Net Tangible Assets
(Total Asset less Total Liabilities and Goodwill) $4,000,000, or
Market Capitalization $50,000,000, or
Net Income (2 of last 3 years) $750,000
Total Assets N/A
Total Equity N/A
Public Float (Shares) 1,000,000
Market Value of Float $5,000,000
Bid Price $4.00
Market Makers 3
Stockholders 300
Operating History (years) 1 or
Market Capitalization $50,000,000
Similarly, the following table outlines the newly-adopted
Entry Standards for companies that wish to have their
securities listed in the NASDAQ National Market System:
Net Tangible Assets $6,000,000 $18,000,000 N/A
Market Capitalization N/A N/A $75,000,000
Total Assets N/A N/A $75,000,000
Total Revenue N/A N/A $75,000,000
Pre-tax Earnings
(2 of last 3 years) $1,000,000 N/A N/A
Public Float (shares) 1,100,000 1,100,000 1,100,000
Market Value of Float $8,000,000 $18,000,000 $20,000,000
Bid Price $5.00 $5.00 $5.00
Market Makers 3 3 4
Stockholders 400 400 400
Operating History (years) N/A 2 N/A
Since the size of the business operation acquired by
the Company will, in large part, determine the market where
the securities of the combined companies will qualify for
listing, Capston intends to use all reasonable efforts to
identify and negotiate with the largest possible business
combination partners. In furtherance thereof, Capston
intends to offer a "reversed stretched Lehman fee" to
unrelated third party finders who introduce the Company to a
suitable acquisition prospect. Under the reversed stretched
Lehman formula proposed by Capston, the finder will receive
1% of the first $2 million in transaction value, 2% of the
second $2 million in transaction value, 3% of the third $2
million in transaction value, 4% of the fourth $2 million in
transaction value and 5% of any transaction value in excess
of $8 million. Since the Company does not have sufficient
financial resources to pay such a finder's fee in cash, it
is anticipated that any finder's fees will be paid with
shares of the Company's Common Stock which may be registered
under the Securities Act prior to issuance. Notwithstanding
the foregoing, no finder's fees will be paid to Capston or
any of its officers, directors, employees, agents or
affiliates without the prior consent of the Stockholders.
Stockholders Entitled to Vote and Vote Required.
The affirmative vote of the holders of a majority of
all shares of Common Stock entitled to vote and represented
in person or by proxy at the Meeting will be required to
approve the proposed finder's fee formula. In conformity
with Article II, Section 11 of the Company's amended by-
laws, the failure to appear in person or by proxy and vote
on matters presented to the Meeting will be treated as a
vote FOR all proposals unless the holders of least 10% of
the Company's outstanding Common Stock appear in person or
by proxy and vote AGAINST the proposal. Executed proxies
that are marked "Abstain" and broker non-votes will be
counted as votes against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
FINDER'S FEE FORMULA. THE PROXY ENCLOSED HEREWITH WILL BE
VOTED IN FAVOR OF THE PROPOSED FINDER'S FEE FORMULA UNLESS
THE STOCKHOLDER SPECIFICALLY VOTES AGAINST THE PROPOSAL OR
EXPRESSLY ABSTAINS FROM VOTING. SINCE CAPSTON HAS PROPOSED
THE PLAN AS AN INTEGRATED WHOLE, CAPSTON INTENDS TO ABANDON
THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE PLAN ARE NOT
APPROVED BY THE STOCKHOLDERS.
APPROVAL OF NAME CHANGE AND BUSINESS COMBINATION FORMAT
In general, a business combination may be structured in
the form of a merger, consolidation, reorganization, joint
venture, franchise, licensing agreement or purchase of the
stock or assets of an existing business. Certain business
combination transactions, such a statutory merger, are
complex to negotiate and implement and require stockholder
approval from both parties to the merger. On the other hand,
the simplest form of business combination is commonly known
as a reverse takeover. In a reverse takeover transaction,
the shareholders of the privately-held company exchange
their private company shares for newly issued stock of the
public company. As a result of the transaction, the
privately-held company becomes a wholly-owned subsidiary of
the Public Company and due to the large number of public
company shares that are customarily issued to shareholders
of the privately-held company, those shareholders end up
with a controlling interest in the public company and are
then free to appoint their own slate of officers and
directors.
By using an existing public company, a privately-held
concern that wants to establish a public market for its
stock can start with an existing shareholder base. In
addition, there are usually several brokers who will have an
interest in the newly reorganized company because they have
stock on their books.
There are several potential problems that arise in
connection with a reverse takeover. First, there may be
large blocks of stock in the hands of individuals who are
eager to sell at any price, thereby making it difficult to
support the market during the period immediately after the
reorganization. Second, in addition to inheriting the
shareholders and brokers associated with the public company,
the shareholders of the private company will also inherit
the business history of the public company. Accordingly, a
thorough due diligence investigation of the public company
and its principal shareholders is essential to ensure that
there are no unreported liabilities or other legal problems.
In general, reverse takeovers are viewed with some
skepticism by both the financial community and the
regulatory authorities until the reorganized company has
been active for a sufficient period of time to demonstrate
credible operating performance. Until this performance is
demonstrated, it can be difficult to raise additional money
for a company that went public through a reverse takeover
transaction. Therefore, the reverse takeover strategy is
most appropriate in cases where the purpose for establishing
a public trading market is not related to a perceived short-
term need for additional capital. If a privately-held
company believes that substantial additional capital will be
required within the next 6 to 12 months, a reverse takeover
transaction may not be the best alternative.
While the business combination transaction contemplated
by the Plan may be structured as a merger or consolidation,
Capston believes that the reverse takeover format will be
most attractive to potential acquistion targets.
Accordingly, Capston is seeking prior shareholder
authorization for a reverse takeover transaction that will
involve up to 4,500,000 shares of Common Stock. In the event
that a proposed business combination will involve the
issuance of less than 4,500,000 shares to the owners of the
privately-held company, then Capston will be authorized to
conclude the business combination without first seeking the
approval of the Stockholders. If, on the other hand, the
proposed business combination transaction will involve the
issuance of more than 4,500,000 shares to the owners of the
privately-held company, then Capston will seek prior
shareholder approval of the proposed transaction, without
regard to whether such shareholder approval might be
required under Delaware law.
In connection with a business combination transaction,
it is almost certain that management of the acquistion
target will require the Company to change its name to one
selected by the Board of Directors or stockholders of the
acquisition target. Since it is also almost certain that the
stockholders of the acquisiton target will possess
sufficient voting power to cause the Company to change its
name after the acquisition, Capston is seeking prior
shareholder authorization for a change in the Company's name
that is (i) a negotiated element of a business combination
transaction of the type contemplated by the Plan, and (ii)
communicated to all Stockholders of the Company as soon as
possible following the consummation of the Plan.
Stockholders Entitled to Vote and Vote Required.
Authorization of Stock Issuance. The affirmative vote
of the holders of a majority of all shares of Common Stock
entitled to vote and represented in person or by proxy at
the Meeting is required to authorize the issuance of up to
4,500,000 shares of Common Stock to unrelated third in
connection with a business combination transaction of the
type contemplated by the Plan. In conformity with Article
II, Section 11 of the Company's amended by-laws, the failure
to appear in person or by proxy and vote on matters
presented to the Meeting will be treated as a vote FOR all
proposals unless the holders of least 10% of the Company's
outstanding Common Stock appear in person or by proxy and
vote AGAINST the proposal. Executed proxies that are marked
"Abstain" and broker non-votes will be counted as votes
against the proposal.
Authorization of Name Change. The affirmative vote of
the holders of a majority of all shares of Common Stock
entitled to vote and represented in person or by proxy at
the Meeting is required authorize an amendment to the
Company's Certificate of Incorporation to effect a Change in
the Compnay's name that is (i) a negotiated element of a
business combination transaction of the type contemplated by
the Plan, and (ii) communicated to all Stockholders of the
Company as soon as possible following the consummation of
the Plan. In conformity with Article II, Section 11 of the
Company's amended by-laws, the failure to appear in person
or by proxy and vote on matters presented to the Meeting
will be treated as a vote FOR all proposals unless the
holders of least 10% of the Company's outstanding Common
Stock appear in person or by proxy and vote AGAINST the
proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE EACH OF THE
FOREGOING PROPOSALS. THE PROXY ENCLOSED HEREWITH WILL BE
VOTED FOR EACH PROPOSAL UNLESS THE STOCKHOLDER SPECIFICALLY
VOTES AGAINST ONE OR MORE PROPOSAL OR EXPRESSLY ABSTAINS
FROM VOTING. SINCE CAPSTON HAS PROPOSED THE PLAN AS AN
INTEGRATED WHOLE, CAPSTON INTENDS TO ABANDON THE PLAN IN ITS
ENTIRETY IF ALL ELEMENTS OF THE PLAN ARE NOT APPROVED BY THE
STOCKHOLDERS.
Increase in Authorized Capitalization.
The authorized capitalization of the Company is
presently fixed at 20,000,000 shares of Common Stock and
1,000,000 shares of Preferred Stock. At March 31, 1988, the
Company had 3,476,370 shares of Common Stock issued and
outstanding. Thus, at March 31, 1988, there were
approximately 16,523,630 authorized shares of Common Stock
and 1,000,000 authorized shares of Preferred Stock that were
both unissued and not reserved for future issuance.
Since the Company's business plan contemplates the
issuance of up to 4,500,000 shares of Common Stock to the
current owners of an unidentified business or businesses,
and Capston believes that the Company is likely to need
substantial additional financing in the future, although the
amount and timing of the Company's future financing
requirements is not presently ascertainable, Capston
believes that an increase in the authorized capitalization
of the Company is desirable to facilitate the Company's
future financing activities. Accordingly, Capston proposes
to increase the authorized Preferred Stock of the Company
from 1,000,000 shares to 5,000,000 shares, and increase the
authorized Common Stock of the Company from 20,000,000
shares to 25,000,000 shares. Under this proposal, the
relative rights and limitations of the holders of Preferred
and Common Stock would remain unchanged.
The proposed increase in the authorized capitalization
of the Company has been recommended by Capston to assure
that an adequate supply of authorized and unissued shares is
available to finance the acquisition of suitable business
opportunities and the future growth of the Company. In
addition, the proposed new shares could also be used for
general corporate purposes, such as future stock dividends
or stock splits.
The issuance of additional shares of Common Stock may,
among other things, have a dilutive effect on earnings per
share and on the equity and voting power of existing holders
of Common Stock. Until the Board determines the specific
rights, preferences and limitations of any future series of
Preferred Stock, the actual effect on the holders of Common
Stock of the issuance of such shares cannot be ascertained.
However, such effects might include restrictions on
dividends on the Common Stock if dividends on the Preferred
Stock are in arrears, dilution of the voting power of the
holders of Common Stock to the extent that any series of
Preferred Stock has voting rights, and reduction of amounts
available on liquidation of the Company as a result of any
liquidation preference granted to the holders of any series
of Preferred Stock.
There are no current plans or arrangements relating to
the issuance of any additional shares of Common or Preferred
Stock proposed to be authorized. In addition, the Company
has no present intention to issue shares of Common or
Preferred Stock to any person in connection with any
acquisition of assets, merger, business combination,
exchange of securities or other similar transaction. The
terms of any future offering of Common or Preferred Stock
will be largely dependent on market conditions and other
factors existing at the time of issuance and sale.
If this proposal is approved by the stockholders, the
Board will be authorized to issue additional Common and/or
Preferred Stock, from time to time, within the limits
authorized by the proposal without further stockholder
action, except as may otherwise be provided by law or the
Articles of Incorporation as to holders of Preferred Stock.
Such additional shares may be issued for cash, property or
services, or any combination thereof, and at such price as
the Board deems reasonable under the circumstances. The
increase in authorized shares of Common Stock and Preferred
Stock has not been proposed for an anti-takeover-related
purpose and the Board and management have no knowledge of
any current efforts to obtain control of the Company or to
effect large accumulations of the Company's stock.
Nevertheless, the issuance of additional shares by the
Company may potentially have an anti-takeover effect by
making it more difficult to obtain stockholder approval of
various actions, such as a merger or removal of management.
Stockholders Entitled to Vote and Vote Required.
Increase in Common Stock. The affirmative vote of the
holders of a majority of all shares of Common Stock entitled
to vote and represented in person or by proxy at the Meeting
will be required to approve the proposed increase in the
Company's authorized Common Stock. In conformity with
Article II, Section 11 of the Company's amended by-laws, the
failure to appear in person or by proxy and vote on matters
presented to the Meeting will be treated as a vote FOR all
proposals unless the holders of least 10% of the Company's
outstanding Common Stock appear in person or by proxy and
vote AGAINST the proposal. Executed proxies that are marked
"Abstain" and broker non-votes will be counted as votes
against the proposal.
Increase in Preferred Stock. The affirmative vote of
the holders of a majority of all shares of Common Stock
entitled to vote and represented in person or by proxy at
the Meeting will be required to approve the proposed
increase in the Company's authorized Preferred Stock. In
conformity with Article II, Section 11 of the Company's
amended by-laws, the failure to appear in person or by proxy
and vote on matters presented to the Meeting will be treated
as a vote FOR all proposals unless the holders of least 10%
of the Company's outstanding Common Stock appear in person
or by proxy and vote AGAINST the proposal. Executed proxies
that are marked "Abstain" and broker non-votes will be
counted as votes against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
INCREASES IN THE COMPANY'S AUTHORIZED COMMON AND PREFERRED
STOCK. THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN FAVOR OF
BOTH PROPOSALS UNLESS THE STOCKHOLDER SPECIFICALLY VOTES
AGAINST THE PROPOSALS OR EXPRESSLY ABSTAINS FROM VOTING.
SINCE CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE,
CAPSTON INTENDS TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL
ELEMENTS OF THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
ADDITIONAL INFORMATION
Additional materials enclosed herewith include copies
of the Company's Annual Report on Form 10-K for the year
ended March 31, 1996, as filed with the Securities and
Exchange Commission on December 31, 1996 "Exhibit A" and
the Company's Amended By-laws "Exhibit B." The Form 10-K
and By-laws incorporated herein by this reference and all
disclosures herein relating to the Company and its
management, business and financial condition are qualified
in their entirety by reference to the Form 10-k.
The cost of soliciting proxies in the accompanying form
will be advanced by Capston and reimbursed by the Company
if, as and when a suitable business combination transaction
is effected. In addition to solicitations by mail,
Directors, officers and regular employees of Capston may
solicit proxies by telephone, telegram, fax or personnel
solicitation. Brokers, nominees, fiduciaries and other
custodians will be instructed to forward soliciting material
to the beneficial owners of shares held of record by them,
and such custodians will be reimbursed for their expenses.
The persons designated as proxies to vote shares at the
Meeting intend to exercise their judgment in voting such
shares on other matters that may properly come before the
Meeting. Capston does not expect that any matters other
than those referred to in this proxy statement will be
presented for action at the Meeting.
PROXY WEBCOR ELECTRONICS, INC. PROXY
This Proxy is Solicited by Capston Network Co. for the
Special Meeting of Stockholders to be Held on February 3,
1997
The undersigned hereby appoints John L. Petersen and
Lisa Duncan, and each of them, either one of whom may act
without joinder of the other, each with full power of
substitution and ratification, attorneys and proxies of the
undersigned to vote all shares of common stock of WEBCOR
ELECTRONICS, INC. which the undersigned is entitled to vote
at a special meeting of Stockholders to be held at 10:00
a.m. on Tuesday, February 3, 1997, in the Barbados Room of
the Adams Mark Hotel, 430 S. Gulfview, Clearwater Beach,
Florida, and at any and all adjournments thereof:
1. n FOR the ratification of all actions of Capston
Network Co. ("Capston") in (i) effecting a renewal,
revival and restoration of the Company's Certificate
of Incorporation; (ii) adopting amended by-laws to
govern the business affairs of the Company, and
(iii) filing the reports and other documents
necessary to bring the Company current with respect
to its reporting obligations under the Securities
Exchange Act of 1934
2. n FOR the election of Sally A. Fonner to serve as
the sole member of the Board of Directors until the
1998 annual Meeting of stockholders, or until her
successor is elected and qualified
nFOR nAGAINST nABSTAIN
3. PROPOSED AMENDMENTS TO ARTICLES OF
INCORPORATION.
(a) To effect a reverse split of all issued and
outstanding shares of Common Stock in the ratio of
one (1) share of new Common Stock for each 11.5879
shares presently outstanding so that immediately
thereafter the Company will have a total of
300,000 shares issued and outstanding
nFOR nAGAINST nABSTAIN
(b) To increase the authorized Common Stock of
the Company to 25,000,000 shares.
nFOR nAGAINST nABSTAIN
(c) To increase the authorized Preferred Stock of
the Company to 5,000,000 shares.
nFOR nAGAINST nABSTAIN
4. PROPOSED COMPENSATION SHARE ISSUANCE. To
approve the issuance of 200,000 shares of Common
Stock to persons designated by Capston as
compensation for services rendered in connection
with the implementation of the Plan
nFOR nAGAINST nABSTAIN
5. PROPOSED AUTHORIZATION OF STOCK ISSUANCE. To
authorize the Board of Directors to (i) change the
Company's name and (ii) issue up to 4,500,000 shares
of Common Stock to unrelated third parties, all
without prior stockholder approval, in connection
with a business combination transaction of the type
contemplated by thePlan.
nFOR nAGAINST nABSTAIN
6. In their discretion Upon such other matters
which may properly come before the meeting and any
adjournment thereof.
nFOR nAGAINST nABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. UNLESS OTHERWISE SPECIFIED, THE
SHARES WILL BE VOTED FOR THE DIRECTOR NOMINEE AND FOR ALL
PROPOSALS.
The undersigned hereby revokes any Proxy previously
given in respect of the Annual Meeting.
Dated: _____________________, 1997
___________________________
_____________________________________________
Signature of
Stockholder(s)Note: Signature should agree with the
name on stock certificate as
printed thereon.
Executors, administrators
and other fiduciaries should
so indicate when signing.
nI Plan to personally attend the Special Meeting of the
Stockholders
PLEASE DATE, SIGN AND RETURN THIS PROXY TO CAPSTON
IN THE ENCLOSED ENVELOPE. THANK YOU.
